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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Aubie Baltin
Febuary 26, 2010
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The Derivatives Time Bomb

Back In 2005, when few people even heard of Derivatives, I published a major report warning readers of the Ticking “Derivatives Time Bomb” that was threatening our entire financial system. By 2007, this time bomb began to implode just as predicted, setting off the World’s Financial Crisis. Luckily my readers and I were ready; so that in one of the worst market years on record, the UNCOMMON COMMON SENSE letter and our members earned on average 36% on their portfolios while others watched their savings slashed by over 40%.

The “Unthinkable” DEATH of the Dollar

As far back as 2002, I began speculating about the possible downfall of the U.S. dollar and I began to recommend getting out of dollars. Then, in early 2007, I warned of the impending end of global dollar dominance. I posed and answered the question, “How will you defend your assets should the unthinkable become reality?”  Impossible? Yet two short years later, China and Russia have both called for the dollar to be replaced as the world's reserve currency. Countries throughout Asia and South America have conducted currency swaps to bypass any need for dollars. Now only 8 years later, that 2002 dollar is only worth 58 cents!  The only reason that the US dollar still remains as the worlds only Reserve Currency is because there is nothing else big enough to take its place.

DOLLAR STRENGTH:  It is really not a sign of strength at all, but rather a sign of EURO weakness as investor’s focus on the problems of Greece, Portugal, Spain and Ireland, not to mention most of the countries of Central Europe. Lucky for the US, there is nothing out there today that can replace the US dollar as the world’s Reserve Currency.
The year 2009 saw Wall Street and the FED push the S&P up 60% off its lows in a contrived, drunken orgy fueled by 0% interest rates, trillions of dollars in bailouts and an untold amount of backroom dealings, all topped off with mis-information and manipulated Fantasy Government Statistics.
But reality always eventually sets in. Not even the fact that 78% of this quarter’s (massaged) earnings have beaten expectations can whitewash the lies and deceit (bank earnings, Government deficits, foreclosures, unemployment rate, inflation, derivatives, etc.) that is festering just below the surface of this economy and market.  That is why the real professionals have already begun heading for the EXIT, sparking the latest sell-off. 
Wall Street tells you it's the beginning of a protracted Bull Market and stocks look great. Don't believe it. Why else is the insider buy/sell ratio at the worst levels it has ever been, if the companies are really making so much money, with even rosier profit projections for the 2nd half of the year? Whatever you do, don't bet your bankroll on it.  Look beneath the surface of the so-called recovery and you'll see enough trouble brewing to make the sub-prime market meltdown of 2008 "look good."
That's not just my opinion. That's the conclusion from RealtyTrac, the nation's largest foreclosure tracking firm. Thus far, we have survived the worst years in history for foreclosures, but we may not be so lucky in 2010.  One Federal Reserve member just reported that commercial real estate losses could reach 45% this year. That means $1.54 trillion in commercial loans could default, exposing reality, cratering the markets and plunging the economy back into Recession. But there's more. Option Adjustable Rate Mortgages (ARMS) are teetering on the edge of the abyss with $29 billion recasting higher beginning in 2010, followed by another $67 billion by 2011. In fact, Barclays Capital says, "We expect 81% of the option ARMs originated in 2007 to default." Yet those headlines are buried while Wall Street harps on about corporate earnings that "are not as bad as expected", lower job loss numbers and a drop in the unemployment rate to 9.7% (when in reality it’s closer to 17%).
NOTE:  Bailing out Greece is like bailing out Chrysler, nothing has changed. Besides, what does Greece have to do with the USA to justify a 200 point last hour rally?
Stocks have completed the topping out process that I have been looking for going on 6 months; that should lead to a multi-week, month decline that will drop the averages by about 10%.  This very same type of action is happening not only in the US markets, but the same patterns have formed in Canada’s TSX, England’s FTSE, the German DAX, Australia and all the southeast Asian nations including China and Japan.  In the short run, we have already broken down below the support lines of the rising Bearish wedge formations that have permeated all markets.  Minor Wave 1 down has been completed and we are now completing Wave 2. It’s possible we may need one or two more up days to complete Wave 2 before a devastating Wave 3 of 1 downside thrust resumes. 

World economies as well as Stock and Bond markets are now more inter-dependent than they have ever been in the past.  The massive Bearish patterns showing up across the globe all at the same time is one of the main reasons for believing that the sell-off that we are in the very early stages of could go as low as 1500 on the DOW and take anywhere from 2 to 6 years to complete.

However, the degree of Government and Central Bank manipulation has never existed to the extent it does now, not only here in the US, but throughout the world.  The numbers that come out of Governments, from the unemployment rate to the inflation rate to GDP growth and everything in between can no longer be trusted.  So the question remains – why is the market not yet crashing?  Well I have already mentioned the degree of manipulation which is obvious if you have been watching the markets; daily 100–300 point swing with daily 100 rallies in the last ½ hour into the close.  When, if ever, is the last time you have ever seen this type of action occur on absolutely zero news? 

We also know that there is no such thing as a sure thing.  What that means in plain English is that it is still possible to have one more market POP which would create a Bull Trap to end all Bull Traps.  So, for self preservation purposes and/or just prudent trading practices, maintain your stops (10%) on all positions at all times.  He, who fights and runs away, gets to fight another day. You can increase the size of your short positions and contra ETF’S on a breakdown to new lows (below 9,900).