Note on egypt revolution

The revolution currently taking place in Egypt is truly spectacular. The implications of its result will have a significant impact on so many different aspects from geopolitical strategy, global economy, islamic fundamentalism, US interests, and the destiny of the entire Middle East. Autocrats, corrupt Middle Eastern dictators, and Mullahs must be keeping a close eye on this. As must as they like to pretend they support the Egyptian protesters in their 'right' to fight against the pro-US Mubarak, they must know deep inside their hearts that a triumph for the demonstrators will mean a green light for all pro-democracy and pro-freedom activists throughout the Middle East. It will set an important precedent. It will be a signal to the suppressed, disillusioned, and disadvantaged populace of the Middle East that they too have a shot at actively campaigning for a change in their destiny no matter how suppressive their leaders may be.

Some Notes from Martin Armstrong's reports

I highly recommend those who seek a true and clear view of the markets to read the writing of jailed cycles expert Martin Armstrong. I will provide more of an in depth opinion and summary of his writing and beliefs, but I just want to mention one important point that he made in one of his recent reports. Markets are very logical. They needn't be efficient, but their movements are complete logical. The problem is with us observers of the market, who fail to interpret market movements. The problem is our interpretation. Markets movements are a reflection of capital movements. Capital is super intelligent. It is able to allocate itself effectively and efficiently, to reflect the most appropriate foundation for future events. Market movements are simply a reflection of this capital allocation. Capital will always move intelligently into an area where it will work best.

GDX + bullish reversal = bullish outlook for gold/silver

GDX bounced off its long term trend line today. I was watching it very carefully, and knew that any breaking of this support line would be someone worrying. Further, gold and silver experienced a textbook intraday reversal. The candlestick formation today was very bullish, rising from a negative base and ending sharply higher for the day. Lets see how things play out. This could be the end of the correction that began at the turn of the year.

Derivatives dangers 101

Am almost done reading Fiasco. The author is a derivatives expert and formerly worked in the coveted Derivatives Products Group (DPG) at Morgan Stanley during the derivative heydays of the 1990's. The book is a true eye opener into the dangers inherent in the derivatives market. In a nutshell, derivatives are a black box which can camouflage the riskiest and most unstable investment and make it look like a AAA government guaranteed bond. Here are a couple of examples Partnoy talks about, regarding specific dirty derivative products that were shuffled by Morgan Stanley at the time.
1) A structured product that was created in such a way as to look like a safe investment. MS managed to get the AAA stamp on it (thus making it more attractive and marketable to investors) and hide the risky aspects of the instrument. It essentially was an investment who's safety was dependent on the horribly unstable Philippines national power company (NPC) that was poorly managed and in terrible financial condition. But the security was painted in a way to look like a safe, highly rated bond. Little did investors (many of whom were public entities such as state pension funds and small time insurance companies) know that they were essentially betting on the survival of a nearly bust corporation thousands of miles away in a developing country.
2) Another structured product Partnoy talks about was one which was marketed as a municipal investment in a US turnpike. Municipal bonds were considered safe investments. In reality, it was nothing of the sort. The instrument was actually a bet on interest rates in the UK.

Innocent and gullible investors who was sucked into the sales pitch of supposedly knowledgeable MS salespeople was holding severely risky investments disguised as safe products that would guarantee a return annually.

The derivatives problem has only magnified over the last couple of decades and notional value now exceeds a quadrillion dollars (far more than the smoke-and-mirrors estimate of the Bank of International Settlment of $500 trillion).

As Jim Sinclair says, the heart of the meltdown in 2008 was based on the derivatives dominoes imploding. The house of cards was saved by massive government intervention. But as the saying goes, what can go wrong will go wrong. So it is only a matter of time before this behemoth of derivatives comes crashing down and obliterating the Western financial system.

Some images to soothe the eyes

France, Faroe Islands, and Germany

Silver at another decisive test of uptrend line

Silver is today testing it's powerful uptrend line that has been intact since August 23rd. It has hit it five different times, going on 6. Let's see if it hold. A failure to hold will mean a relatively strong move to the downside in the next few days

The moto of Western economies today