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The bottom cabinets are sink 33×24 27×24 36×24 15×24 23×24 lazy susan the kitchen was an L shape so there is also a piece 45 inches long which covered the stove and the 15″ cabinet. China cabinet is 23 wide 84 high 13 dept Top cabinets are Height Length Dept 24 33 12 30 33 12 12 33 12 33 15 12 30 18 12 21 3 3 12 corner to cabinet above lazy susan is opening door 17″x 13x13x24x24 The cabinets are very nice need a good cleaning the sink base needs a back board I broke it when taking out. I paid 2500 for these cabinets but need the money now. I also have a nice cast iron sink that matched the cabinets I’ll give you if you want. There is also molding that goes on the told.

The Economic Collapse
Nov 4, 2010

Buckle up and hold on – a new round of quantitative easing is here and things could start getting very ugly in the financial world over the coming months.  The truth is that many economists fear that an out of control Federal Reserve is “crossing the Rubicon” by announcing another wave of quantitative easing.  Have we now reached a point where the Federal Reserve is simply going to fire up the printing presses and shower massive wads of cash into the financial system whenever the U.S. economy is not growing fast enough?  If so, what does the mean for inflation, the stability of the world financial system and the future of the U.S. dollar?  The Fed says that the plan is to purchase $600 billion of U.S. Treasury securities by the middle of 2011.  In addition, the Federal Reserve has announced that it will be “reinvesting” an additional $250 billion to $300 billion from the proceeds of its mortgage portfolio in U.S. Treasury securities over the same time period.  So that is a total injection of about $900 billion.  Perhaps the Fed thought that number would sound a little less ominous than $1 trillion.  In any event, the Federal Reserve seems convinced that quantitative easing is going to work this time.  So should we believe the Federal Reserve?

The truth is that the Federal Reserve has tried this before.  In November 2008, the Federal Reserve announced a $600 billion quantitative easing program.  Four months later the Fed felt that even more cash was necessary, so they upped the total to $1.8 trillion.

So did quantitative easing work then?

No, not really.  It may have helped stabilize the economy in the short-term, but unemployment is still staggeringly high.  Monthly U.S. home sales continue to come in at close to record low levels.  Businesses are borrowing less money.  Individuals are borrowing less money.  Stores are closing left and right.

The Fed is desperate to crank the debt spiral that our economic system is now based upon back up again.  The Fed thinks that somehow if it can just pump enough nearly free liquidity into the banking system, the banks will turn around and lend it out at a markup and that this will get the debt spiral cranking again.

The sad truth is that the Federal Reserve is not trying to build an economic recovery on solid financial principles.  Rather, what the Federal Reserve envisions is an “economic recovery” based on new debt creation.

So will $900 billion be enough to get the debt spiral cranked up again?

No.


If 1.8 trillion dollars didn’t work before, why does the Federal Reserve think that 900 billion dollars is going to work now?  This new round of quantitative easing will create more inflation and will cause speculative asset bubbles, but it is not going to fix what is wrong with the economy.  The damage is just too vast as Charles Hugh Smith recently explained….

Anyone who believes a meager one or two trillion dollars in pump-priming can overcome $15-$20 trillion in overpriced assets and $10 trillion in uncollectible debt may well be disappointed.

In fact, economists over at Goldman Sachs estimate that it would take a staggering $4 trillion in quantitative easing to get the economy rolling again.

Of course that may eventually be what happens.  The Fed may be starting at $900 billion just to get the door open.  With these kinds of bureaucrats, once you give them an inch they usually end up taking a mile.

So why should we be concerned about quantitative easing?  The following are 9 reasons why quantitative easing is bad for the U.S. economy….

#1 Quantitative Easing Will Damage The Value Of The U.S. Dollar

Each time you add a new dollar to the system, it decreases the value of each existing dollar by just a little bit.  Now the Federal Reserve is pumping 900 billion dollars into the system and that is going to have a significant impact.  Bill Gross, the manager of the largest mutual fund in the entire world, said on Monday that he believes that more quantitative easing could result in a decline of the U.S. dollar of up to 20 percent….

“I think a 20 percent decline in the dollar is possible.”

#2 Inflation Is Going To Hit Already Struggling U.S. Consumers Really Hard

Already, investors have been fleeing from the U.S. dollar and other paper currencies and have been flocking to commodities, precious metals and oil.  That means that the price of food is going to go up.  The price of gasoline is also going to go up.  American families are going to find their budgets stretched even more in the months ahead.

#3 Once An Inflationary Spiral Gets Going It Is Really Hard To Stop

The Federal Reserve is playing a very dangerous game by flirting with inflation.  Once an inflationary spiral gets going, it is really difficult to stop.  Just ask anyone who lived through the Weimar Republic or anyone who lives in Zimbabwe today.  If the Federal Reserve is now going to be dumping hundreds of billions of fresh dollars into the system whenever the economy gets into trouble it is inevitable that we will see rampant inflation at some point.

#4 Inflation Is A Hidden Tax On Every American

Tens of millions of Americans have worked incredibly hard to save up a little bit of money.  These Americans are counting on that money to pay for a home, or to pay for retirement or to pay for the education of their children.  Well, inflation is like a hidden tax on all of those savings.  In fact, inflation is a hidden tax on every single dollar that all of us own.  We have been taxed more than enough – we certainly don’t need the Federal Reserve imposing another hidden tax on all of us.

#5 The Solution To The Housing Bubble Is Not Another Housing Bubble

Today, approximately a third of all U.S. real estate is estimated to have negative equity.  The Federal Reserve apparently believes that by flooding the system with gigantic sacks of cash banks will start making home loans like crazy again and home prices will rise substantially once again – thus wiping out most of that negative equity.

But the solution to the housing bubble is not another housing bubble.  The kinds of crazy home loans that were made back in the middle of the decade should never be made again.  Market forces should be allowed to bring the housing market to a new equilibrium where ordinary Americans can actually afford to purchase homes.  But that is not how our system works anymore.  Today, everything has to be manipulated.

#6 More Quantitative Easing Threatens To Destabilize The Global Financial System

We have already entered a time of increasing global financial instability, and the Federal Reserve is not going to help things by introducing hundreds of billions of new dollars into the game.  Over the past two decades, bubble after bubble has caused tremendous economic problems, and now all of this new money could give rise to new bubbles.  Already, we see financial institutions and investors pumping up carry trade bubbles, engaging in currency speculation and driving up commodity prices to ridiculous levels.

#7 Quantitative Easing Is An Aggressive Move In A World Already On The Verge Of A Currency War

Quantitative easing will likely help U.S. exporters by causing the value of the U.S. dollar to sink.  However, this gain by U.S. exporters will come at the expense of foreigners.  It is essentially a “zero sum” game.  So all of those exporting countries that are already upset with us will become even more furious as the U.S. dollar declines.  Could we witness the first all-out “global currency war” in 2011?

#8 Quantitative Easing Threatens The Status Of The Dollar As The World Reserve Currency

As the Federal Reserve continues to play games with the U.S. dollar, quite a few nations around the globe will start evaluating whether or not they want to continue to trade with the U.S. dollar and use it as a reserve currency.

In fact, a recent article on The Market Oracle website explained how this is already happening….

In September, China supported a Russian proposal to start direct trading using the yuan and the ruble rather than pricing their trade or taking payment in U.S. dollars or other foreign currencies. China then negotiated a similar deal with Brazil. And on the eve of the IMF meetings in Washington on Friday, Premier Wen stopped off in Istanbul to reach agreement with Turkish Prime Minister Erdogan to use their own currencies in a planned tripling Turkish-Chinese trade to $50 billion over the next five years, effectively excluding the dollar.

#9 It Is Going To Become More Expensive For The U.S. Government To Borrow Money

Right now, the U.S. government has been able to borrow money at ridiculously low interest rates.  But as the Federal Reserve keeps buying up hundreds of billions in U.S. Treasuries, the rest of the world is going to start refusing to participate in the ongoing Ponzi scheme.

Peter Schiff, the CEO of Euro Pacific Capital, says that one of the big reasons for more quantitative easing is because the U.S. government is already starting to have difficulty finding enough people to borrow from….

At the end of the day, all this deflation talk is a red herring. The true purpose of QE 2 is to disguise the decreasing ability of the Treasury to finance its debts. As global demand for dollar-denominated debt falls, the Fed is looking for an excuse to pick up the slack. By announcing QE 2, it can monetize government debt without the markets perceiving a funding problem.

But the truth is that foreigners are not stupid.  They can see the shell game that is being played.  As Bill Gross noted on Monday, U.S. government debt will soon become a lot less attractive to foreign investors….

QEII not only produces more dollars but it also lowers the yield that investors earn on them and makes foreigners, which is the key link to the currencies, it makes foreigners less willing to hold dollars in current form or at current prices.

As foreigners begin to balk at all of this nonsense, the U.S. government will either have to start paying higher interest rates on government debt in order to attract enough investors, or the Federal Reserve will just have to drop all pretense and permanently start buying up most of the debt.  Either way, once faith has been lost in U.S. Treasuries the financial world will never, ever be the same.

Most Americans have absolutely no idea how fragile the world financial system is right now.  Once the rest of the world loses faith in the U.S. dollar and in U.S. Treasuries this entire thing could completely unravel very quickly.

The Federal Reserve is playing a very dangerous game.  They are openly threatening the delicate balance of the world financial system.

Once the toothpaste is out of the tube, it is really hard to put it back in again.  Cross your fingers and hold on tight, because things are going to get really bumpy ahead.

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The Future is Calling


G. Edward Griffin

(Editors Note: This is Mr. Griffin’s analysis of the War on Terrorism and much more. Terrorism is a distraction for deeper issues. Both hawks and doves are playing into the hands of those who are using the conflict for their own hidden agendas. You will discover the Council on Foreign Relations, an organization that has dominated U.S. public policy since World War I. You will learn about the ideology called collectivism that motivates this group and find that its members believe that the best way to bring about desirable changes in society is to engage in war. Mr. Griffin meticulously documents how these people, working within the American government, plotted to involve the U.S. in both World Wars. They even encouraged enemy attacks so they could claim the status of victim instead of aggressor. The lessons and parallels for the War on Terrorism are chilling. – JSB)

Part 1: The Chasm
Part 2: Secret Organizations and Hidden Agendas
Part 3: Days of Infamy
Part 4: The War on Terrorism
Part 5: An Idea Whose Hour Has Come

G. Edward Griffin is a writer and documentary film producer with many successful titles to his credit. Listed in Who’s Who in America, he is well known because of his talent for researching difficult topics and presenting them in clear terms that all can understand. He has dealt with such diverse subjects as archaeology and ancient Earth history, the Federal Reserve System and international banking, terrorism, internal subversion, the history of taxation, U.S. foreign policy, the science and politics of cancer therapy, the Supreme Court, and the United Nations. His better-known works include The Creature from Jekyll Island, World without Cancer, The Discovery of Noah’s Ark, Moles in High Places, The Open Gates of Troy, No Place to Hide, The Capitalist Conspiracy, More Deadly than War, The Grand Design, The Great Prison Break, and The Fearful Master.

Mr. Griffin is a graduate of the University of Michigan where he majored in speech and communications. In preparation for writing his book on the Federal Reserve System, he enrolled in the College for Financial Planning located in Denver, Colorado. His goal was not to become a professional financial planner but to better understand the real world of investments and money markets. He obtained his CFP designation (Certified Financial Planner) in 1989.

Mr. Griffin is a recipient of the coveted Telly Award for excellence in television production, a Contributing Editor of The New American magazine, the creator of the Reality Zone Audio Archives, and is President of American Media, a publishing and video production company in Southern California. He has served on the board of directors of The National Health Federation and The International Association of Cancer Victors and Friends and is Founder and President of The Cancer Cure Foundation. He is also the founder and president of Freedom Force International.

How Western Powers May Have Blown It


The Daily Bell

QE2 risks currency wars and the end of dollar hegemony … As the US Federal Reserve meets today to decide whether its next blast of quantitative easing should be $1 trillion or a more cautious $500bn, it does so knowing that China and the emerging world view the policy as an attempt to drive down the dollar. The Fed’s “QE2” risks accelerating the demise of the dollar-based currency system, perhaps leading to an unstable tripod with the euro and yuan, or a hybrid gold standard, or a multi-metal “bancor” along lines proposed by John Maynard Keynes in the 1940s. China’s commerce ministry fired an irate broadside against Washington on Monday. “The continued and drastic US dollar depreciation recently has led countries including Japan, South Korea, and Thailand to intervene in the currency market, intensifying a ‘currency war’. In the mid-term, the US dollar will continue to weaken and gaming between major currencies will escalate,” it said. – UK Telegraph

Dominant Social Theme:

The US, especially, must take more care – and grow more responsible.

Free-Market Analysis:

We have been examining in these past few days, the future of money and have offered our clairvoyant feedbackers and larger audience a perspective that is not focused necessarily on an imminent US economic meltdown. That is not to say it won’t happen, but we have detected a certain level of promotional zeal that makes us a tiny bit uncomfortable. Everywhere we look right now, it seems the media – even the mainstream media – are filled with conversation about the untenable situation of the dollar.

We do not deny this, of course. We have spent the better part of two years (and eight years before that) documenting the demise not only of the dollar but of the larger Anglo-American elite that has spent at least a century attempting to create one-world governance through the use of wars, horrible fear-based promotions and corrupt global vehicles of command and control.

Let us begin at the beginning however, with the regime of George W. Bush. (Unhappy thought.) This Republican president could have reduced spending, cut social programs and generally enacted a fiscally conservative administration that would further have enhanced the dollar’s standing in the world. Instead, from the outset, President Bush pushed for expanded social programs and more and more power for the US$3 trillion per year Leviathan; he even tried at one point to extend federal power directly into church programs. After 9/11 and without any precedent or even real justification, the US attacked both Afghanistan and Iraq in wars that will probably cost US$2 trillion or more before they are done – and those are only the direct costs.

Under Bush, the various money schemes of the Anglo-American elite were left strictly alone. The Clinton Democrats had left a “surplus” and it would have been possible, perhaps, to start to undo the entire system, including the Fed’s endless waves of money printing, without crashing it. But this was not Bush’s agenda, nor the agenda of those around him.

As a result, Bush questioned neither the US graduated income tax nor the Federal Reserve which kept rates so absurdly low under Alan Greenspan that an ever-increasing monetary bubble was all-but-assured. When the bubble finally popped, Bush approved of the TARP program of US$700 billion and then, under Ben Bernanke, the Federal Reserve began pumping out trillions and trillions to bail out preferred lenders and chosen bankers not only in the US but abroad as well.

Our point here is not to rehearse the psychotic war-mongering and over-spending of George Bush but to point that Bush was able to do what he did without demure from the establishment wise men in both the US and Britain. This means to us that there was a level of de facto acceptance of his actions. The totality of his insane actions (mirrored in fact by Tony Blair in Britain) may not have been entirely pre-determined but they were not apparently unwelcome either.

And this brings us back to the issue of whether the Anglo-American elite has actively sought a worldwide economic meltdown and, if so, whether they expected what they are now dealing with. We have suggested on many occasions that the elite may have wanted a depression but that the global crisis has spiraled out of control. We base this assumption on what seems to be a high level of desperation affecting elite actions at the moment.

Yes, we can see this mechanism manifested in the lengths that the elite-controlled EU and Federal Reserve are willing to go to try to ensure the viability of the remnants of the current system. In the EU, the leading Eurocrats are willing once again – and in the hot spotlight of euro-condemnation – to revise the Lisbon Treaty without a vote so as to configure it in such a way that it provides necessary leeway to “handle” the ongoing crisis. In the US, the Federal Reserve is preparing to pump yet MORE money into the economy – perhaps trillions more – to try to kick-start employment and entrepreneurship. The elite is seemingly terrified of spiraling frustration in the US and Europe and increased civil unrest.

The Fed’s determination to pump trillions more into the US economy (and thence the world’s) can be seen within this context as a desperate gambit to salvage elite ambitions regarding global governance. It is desperate (and rash) because the dollar remains the world’s reserve currency and US monetary policy thus inevitably has a tremendous impact on other currencies and countries. Whenever the dollar moves (down) other economies, in fact even the largest, have to react.

The US wants to inflate away dollar debts and cannot do so if everyone else joins in the game. Thus it has turned to the G20 and to an expanded and empowered IMF to twist arms and basically intimidate other countries into going along. (See Telegraph article excerpted above.) But as we have pointed out that day is probably long past. China and the rest of the BRIC countries will likely do what they want, though still paying lip-service to the demands of the American behemoths.

The Telegraph article lists several outcomes of the continual debasement of the dollar. The IMF and other countries could agree on an IMF-administered bancor. Alternatively, there is the concept of a “hybrid gold standard” (whatever that means) or merely more of what is taking place now – a continual appreciation of credibility for other currencies, especially the yuan, while the dollar sinks.

Those who stop by the Bell may recognize some of these projections as we have mentioned them from time to time. In fact, an IMF bancor is probably unrealistic because the BRICs won’t tolerate a further Anglo-American presidium. And other “solutions” are not likely to empower the Anglo-American axis, either. Of course we are aware of the argument that money power merely moves along with economic and military power wherever it needs to go. We find this argument dubious. Western money power has a locus: Washington DC, Brussels, Tel Aviv and most importantly London’s City.

The idea that Western elites can merely transfer their operations and headquarters to Beijing and continue business as usual among the Han is dubious from our point of view. There is also the possibility of China’s imminent, or quasi-imminent collapse. The country’s real estate is so inflated that entire CITIES are being built on speculation (as we have noted) and we have long-questioned the staying power of the current Chinese communist governments once the economy inevitably implodes.

We are left with a (tentative) conclusion that we have already enunciated – that the Western elites in their pride, greed and arrogance may have started a conflagration that they cannot control. Perhaps if the Internet had not come on the scene to reveal their machinations, it would have been possible to manipulate the world’s economies more effectively and to intimidate, in secret, those who needed to be brought along. But it’s very hard to run a monetary and military conspiracy under the white-hot glare of a technological and electronic spotlight. Allies shy away and potential enemies are emboldened.

What will happen next? Generally it does not seem to us that the elites will be able to create the necessary global currency they have sought and apparently are seeking, at least not in the short term. To us, anyway, this always seemed a long-term project and the ramifications of speeding it up (as the elite seem to be doing) are puzzling to say the least. Haste does not necessarily increase the potential for success.

Another possibility is that the Anglo-American elite muddles along with an eroding dollar while China and Europe and other BRIC countries gradually attempt to co-opt the dollar’s reserve status. Good luck with this however, as the dollar’s strength is that it purchases oil and Saudi Arabia in particular would have to be “flipped,” which American military power may preclude. Reserve currencies, generally, are treated in academic textbooks as both ancient and amiable. In fact the Anglo-American axis had to level the known world with its murderous military might to impose the hierarchy of the dollar and other Western economic mechanisms (the IMF, etc.). It is not so easy to end this kind of “reserve.”

Is it possible of course that the world returns to a de-facto gold standard and that there is some cooperation here between all the major powers. This may be a possibility, but it would end (at least in the short term) the Anglo-American dream of world dominance. Alternatively, the economic environment may simply continue to unravel. Gold and silver will go much higher in a fairly unconstrained environment as the Anglo-American grasp on events, both monetary and military, continues to erode. This might presage the evolution of a fairly unregulated free-banking environment complete with a privately evolving gold and silver standard (alongside real bills as well).

The last time this sort of economic destabilization occurred (in the 1930s), panic set in as it has now. It was only via World War II that the world’s economies were rescued and set on track for renewed growth. But a world war is infinitely more difficult to come by these days. With that option at least partially precluded (we think it is anyway, though a war with Iran is always a possibility) and with the truth-telling of the Internet continuing to expose every power elite machination literally in real time it is very difficult to tell what is going to happen next. Of course, as we wrote yesterday, we don’t know if there will be a dollar meltdown (and a metals melt up) sooner – or later. Perhaps one will occur after the US elections as the shorts come under increased pressure. Timing is a lot harder to calculate than trends.

Conclusion:

What we do know is that the Western power elite is a stubborn and powerful force and that it has plenty of levers to pull that can still influence economies immensely in the West and around the world. As we were finishing this article, a feedbacker sent us a link to an announcement that the Fed is apparently about to hold a major conference at Jekyll Island, commemorating the secret meeting held 100 years ago that created of the Fed. (This just after initiating its controversial QE2 program.) The elite may be losing control, and may be increasingly panicked about it. But these kinds of tin-eared, self-congratulatory occurrences (such as the reported, upcoming Fed meeting) make us wonder increasingly if the powers-that-be have fully grasped the magnitude of what has been unleashed.

The Left Right Paradigm is Over: Its You vs. Corporations


Barry Ritholtz

I love the article you are about to read because it is very much in line with some of what this site is about.

USAWatchdog.com is neither “Democrat nor Republican, liberal or conservative.” I just want to connect the dots and find out what’s really going on, no matter which party is in power. Guest writer Barry Ritholtz does a great job of laying out real issues Americans need to deal with. His post centers on corporations and how they have corrupted both political parties. For example, Goldman Sachs CEO Lloyd Blankfein gave equally to both political parties this year. Big corporations don’t care who is in power just as long as they get to call the shots. It is a foregone conclusion that the U.S. House of Representatives will change over to Republican control. The folks holding the signs that say “fire Nancy Pelosi” are going to get their wish. But when she is gone as Speaker of the House, I ask, then what? I haven’t heard Republicans (or Democrats vs Republicans for that matter) talk much about the big banks ripping off the country. What is unraveling now is the biggest financial fraud in history, but it is not a campaign discussion. I don’t think it will be addressed when the Republicans take control of the House proving, once again, both Democrats and Republicans are just one body with two heads.

Ritholtz describes himself this way, “I’m Chief Market Strategist for an institutional research firm, and the Chief Economics Commentator for an asset management firm.” I say Ritholtz is a big thinker and a regular commentator in the financial press. I have been holding this article for about a month because I thought it was more appropriate a day away from the mid-term elections. I hope this enhances your perspective. -Greg Hunter-

Every generation or so, a major secular shift takes place that shakes up the existing paradigm. It happens in industry, finance, literature, sports, manufacturing, technology, entertainment, travel, communication, etc.

I would like to discuss the paradigm shift that is occurring in politics.

For a long time, American politics has been defined by a Left/Right dynamic. It was Liberals versus Conservatives on a variety of issues. Pro-Life versus Pro-Choice, Tax Cuts vs. More Spending, Pro-War vs Peaceniks, Environmental Protections vs. Economic Growth, Pro-Union vs. Union-Free, Gay Marriage vs. Family Values, School Choice vs. Public Schools, Regulation vs. Free Markets.

The new dynamic, however, has moved past the old Left Right paradigm. We now live in an era defined by increasing Corporate influence and authority over the individual. These two “interest groups” – I can barely suppress snorting derisively over that phrase – have been on a headlong collision course for decades, which came to a head with the financial collapse and bailouts. Where there is massive concentrations of wealth and influence, there will be abuse of power. The Individual has been supplanted in the political process nearly entirely by corporate money, legislative influence, campaign contributions, even free speech rights.

This may not be a brilliant insight, but it is surely an overlooked one. It is now an Individual vs. Corporate debate – and the Humans are losing.

Consider:

• Many of the regulations that govern energy and banking sector were written by Corporations;

• The biggest influence on legislative votes is often Corporate Lobbying;

• Corporate ability to extend copyright far beyond what original protections amounts to a taking of public works for private corporate usage;

• PAC and campaign finance by Corporations has supplanted individual donations to elections;

• The individuals’ right to seek redress in court has been under attack for decades, limiting their options.

• DRM and content protection undercuts the individual’s ability to use purchased content as they see fit;

• Patent protections are continually weakened. Deep pocketed corporations can usurp inventions almost at will;

• The Supreme Court has ruled that Corporations have Free Speech rights equivalent to people; (So much for original intent!)

None of these are Democrat/Republican [1] conflicts, but rather, are corporate vs. individual issues.

For those of you who are stuck in the old Left/Right debate, you are missing the bigger picture. Consider this about the Bailouts: It was a right-winger who bailed out all of the big banks, Fannie Mae, and AIG in the first place; then his left winger successor continued to pour more money into the fire pit.

What difference did the Left/Right dynamic make? Almost none whatsoever.

How about government spending? The past two presidents are regarded as representative of the Left Right paradigm – yet they each spent excessively, sponsored unfunded tax cuts, plowed money into military adventures and ran enormous deficits. Does Left Right really make a difference when it comes to deficits and fiscal responsibility? (Apparently not).

What does it mean when we can no longer distinguish between the actions of the left and the right? If that dynamic no longer accurately distinguishes what occurs, why are so many of our policy debates framed in Left/Right terms?

In many ways, American society is increasingly less married to this dynamic: Party Affiliation continues to fall, approval of Congress is at record lows, and voter participation hovers at very low rates.

There is some pushback already taking place against the concentration of corporate power: Mainstream corporate media has been increasingly replaced with user created content – YouTube and Blogs are increasingly important to news consumers (especially younger users). Independent voters are an increasingly larger share of the US electorate. And I suspect that much of the pushback against the Elizabeth Warren’s concept of a Financial Consumer Protection Agency plays directly into this Corporate vs. Individual fight.

But the battle lines between the two groups have barely been drawn. I expect this fight will define American politics over the next decade.

Keynes vs Hayek? Friedman vs Krugman? Those are the wrong intellectual debates. Its you vs. Tony Hayward, BP CEO, You vs. Lloyd Blankfein, Goldman Sachs CEO. And you are losing . . .

This short commentary was conceived not to be an exhaustive research, but rather, to stimulate debate. There are many more examples and discussions we can have about this, and I hope readers do so in comments.

But my bottom line is this: If you see the world in terms of Left & Right, you really aren’t seeing the world at all . . .

Are Financials on the Verge of Disaster?


Chart Prophet

The financials got us into this mess…and they may drag us right back into it.

We seem to have to forgotten how bad things were with banks and financials a few years ago. Lehman, Bear Stearns, and a multitude of banks went bankrupt; the problems at the root of this debacle were still not fully dealt with; financial stocks are lagging; and Wall Street bonuses are still setting records!

Financial stocks took such a beating that anyone who bought Bank of America (BAC), Goldman Sachs (GS), Citigroup (C), JP Morgan (JPM), or any among a huge selection of other financials, has seen his or her returns exceed hundreds of percents! With a market that, on average, returns about 8 percent a year, having the largest financial stocks resurrected and returning 200 to 1000 percent is unheard of!

But as financials rebounded, carried the market back up, and eased the economy from its extreme panic of 2008, it did so by sweeping all the problems under the rug. By pushing off many of the issues concerning the lack of transparency, complicated and dangerous derivatives (such as mortgage-backed securities), and the utter disregard for their investors and the economy as a whole, all the financials ended up doing is buying more time. And as that time runs out, and reality starts to set in, the panic will once again follow.

Take a look at a chart of the (XLF), an ETF that measures the financials as a whole. After dropping from over $34 in 2007 to under $6 in 2009 (an over 80 percent drop!), the financial sector rebounded strongly to a high of about $17 in April 2010. Such an almost-perfect rebound gave the market some confidence for a while; but as anxiety sets back in now, there may be a chart-pattern that warns us of potential collapse.

First off, regardless of the pattern we will discuss, it is important to notice that the financials have actually been lagging the overall market over the past few months. While the S&P 500 has seen double-digit gains over September and October, the financials (XLF) have been struggling to break out of their range.

Looking at the chart above, you can see the nice run-up the financials had from their March 2009 low to the April 2010 high. But along the way, and following the April-August downturn, it appears financials have formed an almost-deadly pattern. The head and shoulders pattern now stands in the way of a financial growth period.

The head and Shoulder pattern is a reversal pattern that generally appears at the end of a big market move. In our case, after the huge run-up in financials off of the 2009 panic bottom, the head and shoulders pattern has formed and may be on the verge of confirming a new recession.

Taking a look at the pattern, we can see investor emotions. The first shoulder on the left represents the first instance of investor anxiety within the pattern. As investors realized that financials have had such a huge run from March 2009 up to that point in October 2009, fear about a potential fall prompted some investors to sell their stake. But there were others who ended up buying the dip, which found its low in February 2010. Those who bought the dip in financials helped start another run-up that ended up seeing new highs in April 2010 – This run-up represents increased investor confidence that financials may be recovering and carring the market further.

After the second round of buyers and sellers made their move, however, a new group of sellers came in and realized Finacials may be overbought here again in April 2010. If financials were sold off in October 2009 when the price was even lower, why should they continue to rise in April 2010 at a higher price?

For that reason, along with extreme anxiety concerning the Goldman Sachs case as well as the BP oil spill troubles, sellers came back into the market in droves! If you take a look at the Volume in April and May, you’ll see the bars are much bigger at that point that at any point since around the March 2009 low. Such high volume in selling shows us some capitulation by investors and conviction in the downward move.

And following that capitulating downward move from the top, some investors bought up the financials in hopes of new highs. The emphasis there is on “HOPE”: the right shoulder in a head and shoulders pattern represents the last group of investors who jump into the stock at the end, as the upwards move is on the verge of its termination. Most of these last investors were bullish for the market, optimistic for the financials, and in desperate search for new-found profits. But they may have waited too long, and may have jumped in too late. This last run-up may be the last-ditch-effort in the financials.

So what happens from here? The shoulders (of which we have multiple instances on both sides of the head) are big resistance levels. That said, as price approaches the top of the shoulder now (at around $15 on the XLF), it is projected to fail to break above that level. It will then start falling down toward the bottom of the pattern (called the neckline). If it fails at $15, falls down toward the neckline, and breaks through the bottom – it will signal the confimation of the head and shoulders pattern. The breakthrough of price out of the bottom of the formation will signal a huge upcoming drop in the financials, which will in turn drag the market down with it.

This head and shoulders pattern not only signifies the anxiety and potential panic that may follow as the market unravels, but it helps us examine and understand that human element that has been embedded within the charts. When we understand the circumstances surrounding the economy and the financial sector in particular, and then we see those situations unfold in the charts, we can make a much better bet on the market’s future direction.

In our case, it appears that the financial rebound, although huge and hope-inciting, may be quickly fading. After an almost 600 percent run-up since the March 2009 lows, the problems that were “swept under the rug” are beginning to resurface. And together with a massive head and shoulders pattern that is on the verge of reversing, this market may be setting up for a double-dip back into recession; and this time it won’t be as easy to get out of.

Disclosure: No current positions