Canis Ferreus

Reading List from "The Fall of America and the Western World"

2010-07-26T12:01:00.000-07:00

Finance/Investments

Empire of Debt by Addison Wiggin and Bill Bonner
Financial Armageddon by Michael Panzner
Crisis Investing by Douglas Casey
The Coming Collapse of the Dollar and How to Profit From It by James Turk
Economics in One Lesson by Henry Hazlitt
The War on Gold by Antony Sutton
Fiat Money Inflation in France by Andrew Dickson White
The Dollar Crisis by Richard Duncan
What Has Government Done to Our Money by Murray Rothbard
The Battle for Investment Survival by Gerald Loeb
Anatomy of the Bear: Lessons From Wall Streets Four Great Bottoms by Russel Napier
The Monetary Sin of the West by Jacques Rueff
The Creature from Jekyll Island: A Second Look at the Federal Reserve by G. Edward Griffin
Supply-Side Revolution: An Insider's Account of Policymaking in Washington by Paul Craig Roberts

The Decline of America and Western Civilization

Revolution by Ron Paul
Constitutional Chaos by Judge Andrew P. Napolitano
A Nation of Sheep by Judge Andrew P. Napolitano
The War on Freedom by Nafeez Mosaddeq Ahmed
Where Have All the Leaders Gone by Lee Iacocca
The Limits of Power by Andrew Bacevich
The Last Hours of Ancient Sunlight by Thom Hartmann
Ishmael by Daniel Quinn
Day of Reckoning by Patrick J. Buchanan
Screwed by Thom Hartmann
The War on the Middle Class by Lou Dobbs
Independent's Day by Lou Dobbs
The Merchants of Fear by Christopher Catherwood and Joe Divanna
Dark Ages America by Morris Berman
No Logo: No Space, No Choice, No Jobs by Naomi Klein
The Shock Doctrine by Naomi Klein
No Innocent Bystanders: Riding Shotgun in the Land of Denial by Mickey Z
The Seven Deadly Spins: Exposing the Lies Behind War Propaganda by Mickey Z
The Tyranny of Good Intentions: How Prosecutors and Law Enforcement Are Trampling the Constitution in the Name of Justice by Paul Craig Roberts and Lawrence M. Stratton
Crossing the Rubicon by Michael C. Ruppert
The End of America by Naomi Wolf
Give Me Liberty by Naomi Wolf
The Decline and Fall of the American Empire by Gore Vidal
Dreaming War by Gore Vidal
Nemesis -- The Last Days of the American Republic by Chalmers Johnson
Fooled Again by Mark Crispin Miller
Loser Take All: Election Fraud and The Subversion of Democracy, 2000-2008 by Mark Crispin Miller

The Power Elite

Superclass by David Rothkopf
The Power Elite by C. Wright Mills
Tragedy & Hope: A History of the World in Our Time by Carroll Quigley
Anglo-American Establishment by Carroll Quiggley'
The Grand Chessboard: American Primacy And Its Geostrategic Imperatives by Zbigniew Brzezinski

Mickey Z recommends

A People's History of the United States by Howard Zinn
Killing Hope by William Blum
Endgame by Derrick Jensen

David McAlvany recommends

The Law by Frederic Bastiat
The Mainspring of Human Progress by Henry Grady Weaver
The Road to Serfdom by F.A.Hayek
The History of Freedom in Antiquity by Lord Acton
The History of Freedom in Christianity by Lord Acton
Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay
Money of the Mind by James Grant
The Peoples Pottage by Garet Garrett
The Discovery of Freedom by Rose Wilder Lane

Fiction

1984 by George Orwell
Brave New World by Aldous Huxley

The Spiritual

The Power of Now by Eckhart Tolle
The New Earth by Eckhart Tolle
Conversations with God by Neale Donald Walsch
The Man Who Loved Seagulls: Essential Life Lessons from the World's Greatest Wisdom Traditions by Osho
The False Prophet: Evil Architect of the New World Order by Ken Klein
America, Globalism and the False Prophet: The United States in Prophecy by Ken Klein
Infinite Love is the Only Truth: Everything Else is Illusion by David Icke and Neil Hague
What to Do When the Shit Hits the Fan by David Black

The Dark Side of the Economic Crises

2010-07-22T07:19:00.000-07:00

The following is a translation from the Russian of an interview with Andrei Fursov, the leader of the Center for the Russian Studies of the Moscow Humanitarian University, taken by Mikhail Delyagin, Director of the Institute of the Problems of Globalization. The video of the interview (in Russian) can be found on YouTube. I've taken liberty to skip certain parts of the interview, such as a discussion of a Nassim Taleb's book (new in Russia but old news for the English reader) and certain cultural references which are not likely to be understood and fully appreciated by the English reader.

MD: Our guest is Adrei Ilyich Fursov, the leader of the Center for the Russian Studies of the Moscow Humanitarian University and in my opinion (I can be mistaken) one of the best contemporary Russian historians, if not the best one. Andrei, I've got a very interesting subject to discuss with you. When I was a kid, my grandma used to say this trademark phrase of her when she had to put all the dots over the "i"s in an argument with any person of little understanding: "That's what's printed in the newspaper!" And indeed, this is an approach that's very typical of the contemporary analysts. And intelligent stock market analysts have discovered a shocking thing: a forecast, a serious one, the one that's based on the official statistical data, on good, working models, and on the official messages about how this world is set up, is going to almost always turn out to be wrong. So by trial and error, at the expense of those who trust them, they have established that official information is incomplete, insufficient, and describes the reality in such a way that one can not trust this information only. One has to take into account something else in order to have a professional, complex forecast. So what is that "something else" that's missing in the official macroeconomic models, in what's "printed in the newspapers"?

AF: Well, a lot is missing, willingness to tell the truth for one thing. <...> Seriously speaking, one of the tasks of the official media, of the official scientists, is precisely to mislead people, to form a certain opinion, a certain picture. Recall that with naive simplicity, the US analysts and some Nobel Prize winners admitted after the crisis had began: "Yes, we lied, because on the eve of the presidential elections in the US we could not tell the truth in order to not let down the President. Yes, we lied." -- just like Gollum in the Lord of the Rings -- he also said "Yes, I lied!" So in this sense, the official information does perform its main function: to disorient 90% of the populace.

DM: And therefore this is not so much information and analytics, but, using our old language, propaganda, isn't it?

AF: And disinformation. In other words, informational sabotage.

DM: I see. And what is it that this informational sabotage is hiding and what are the key powers at the world's financial markets, in the global economy, besides the official ones? And what is their role in the crisis that is now unfolding?

AF: Well, in addition to the official powers, there are other powers. But the thing is, these powers act as official ones, too. For example, the Rothschilds, the Rockefellers, the Warburgs, the Morgans -- they keep acting in both the official and the unofficial capacity. It's another matter that the structures they created were indeed semi-official. But looking from a different perspective, there is the Trilateral Commission, quite officially, but most of this structure's activities are unofficial. In general I must say that after 1945, activities of most official structures, including the government and the special services, had been gradually drifting into the shadow, and eventually, at the end of the '60s -- beginning of the '70s, the shadow and its owner swapped places. By the way, Samuel Huntington wrote quite well about it in one of his analytical works. He noted, perhaps in 1982, that in the '50s,'60s and '70s, a re-orientation of the western special services from the service of the State to the service of the transnational corporations took place. So, all the institutions are kind of official, but the main focus of their activities is behind the scenes. And what is in the limelight, turns out to be, just how Galich sung, "All that, my dear redhead, is just for the public".

<...>

DM: So you mean, the official institutions which have preserved their appearances, have also changed their contents.

AF: Not even that, they are just functionally subordinate to the unofficial institutions and to their own unofficial activity.

DM: But subordinate to what, what kind of unofficial activity is that?

AF: Well, the thing is that unfortunately, the contemporary social sciences and history are written, using not quite polite an expression, for the sucker. They hide 6/7 of the iceberg and show us only its tip. In reality, one of the main subjects of our world, since the XIX century, remains something which can be called hidden structure of supranational control. I dislike Ivan Ilyin's term "the global behind-the-scenes" -- it's too dramatic, romantic and full of pathos. In reality, there is very little pathos in the activity of these structures. The essence is very simple. The thing is, the capitalist system is unified economically, it's the single global market. But in the political aspect, it's a system of states. It's a sum, not a whole. But all constituents of the global capitalist class, including the burgeoisie as one of the constituents of this class, have interests which are global in nature. And institutions are required to resolve these contradictions. And those institutions did not originally exist in a ready state, they had to be created. Another thing: the more public and democratic was the system of government becoming, the more access was the civil society getting to the process of decision-making (take universal suffrage), the more transparent was politics becoming, the larger was the degree to which the real power was hidden behind the scenes. And already Disraeli in his novel Coningsbi said that the world is ruled quite differently from the way majority thinks it is, and is ruled by very different people. And primarily it is ruled by the financial capital. If we look at the history of the past 200 years, one of the red threads so to speak which becomes more and more red and scarlet, A Study in Scarlet, in the development of the modern world, is the struggle of the financial capital for the political, economical and informational control. And the tipping point was between 1870 and 1950. Starting in the 1870, with the last colonial re-partition of the world, money became necessary and the money could only be provided by the financial capital. And here the financial capital got its hands dirty very actively on the global level. On the level of individual countries, the financial capital of Britain put the country under control in 1846. As soon as the bread laws [Assize of Bread and Ale? CF] were abolished in 1846 [1836? CF], industrial investments became less profitable and by the time of World Exposition of 1867 England was losing the role of the global economy leader, and in the last third of that century the country lost it completely. The financial capital of England, the Rothschilds, sacrificed the industry and agriculture in favor of the financial capital. Same thing happened in the US after Kennedy's death, and to be more precise, after the creeping coup whose first manifestation was Kennedy's death and the last one -- Nixon's impeachment. So here the Americans did a fast-forward of the British scenario. So, starting with 1870, the financial capital begins its struggle for, among other sorts of world power, the political one. And a milestone here is 1913, creation of the Federal Reserve System. To prevent the social resistance, at first a crisis was organized in 1907. To make the society shake they first "induced a spasm", to use Dostoevsky's expression, "to induce a spasm in the masses". And the society was ready to accept the Federal Reserve System, a dozen private banks which began, with the government's agreement, to perform one of the functions of the State.

Even though it may be written "US dollars" on the American money, these are not the dollars of the US Government. The dollars of the US Government had been issued for a very brief time after June 4th, 1963, when Kennedy signed Executive Order allowing the banks to issue money backed by silver. That was a horrible blow to the Federal Reserve System, and I think that was one of the reasons Kennedy lost his life. Nobody abolished this order, but nobody follows it. That was when real American money was issued.

A curious thing: we see American banknotes of various denominations, most frequently $100, but there are American banknotes of $1000, and $5000 and $100,000! And it's very telling whose portrait is shown on the $100,000 banknote: Woodrow Wilson, the man who permitted the Federal Reserve System! He permitted it, and must have gotten a basket of cookies and a barrel of jam [this is an allusion to a certain bad guy from a Soviet children's story The Military Secret by A. Gaidar -- CF], and it is his portrait on the $100,000 banknote.

MD: You put your hand in a pocket, I thought you were about to pull out and show us that banknote.

AF (laughing): Yes, 1913. And note: the Federal Reserve System was created to provide very large loans. And what kind of spending would one need those loans for? War, for one thing. Which is something that happened in 1914.

MD: And nearly happened in 1912.

AF: Nearly indeed.

MD: When Jaurès, French socialist, stopped it.

AF: And by the way note what happened to Jaurès.

MD: Two days before the war broke out, he was shot in a cafe.

AF: One June 30th. And on June 28th, Franz Ferdinand was killed.

MD: Ah-ha...

AF: And on the 28th, there was an assassination attempt on Rasputin and he had to be taken out of the game, he had been absent for a month. And he himself said that had he been in the capital, Dad, Nicolas II, [Rasputin used to call Nicolas II "Dad" -- CF] would have never gotten into this war. Thus during these few days a few individuals who could stop the war, were neutralized. Here is what's interesting: the war broke out, but six months before that, Pilsudski, not an unknown man, speaking at the French Geographical Society, in February of 1914, dropped these words in a very casual manner: "Soon there will be a big was in Europe... Austro-Hungary and Germany will be defeated first, and then it will be Russia's turn." So all this was in the air.

MD: I see. And is there something of that kind in the air now, also based on the interests of large financial capital which has already created this world?

AF: There is, but it wouldn't be right to skip the very important period of the '20s and the crisis of 1929-1933 which people compare with the present crisis. In 1913 the financiers strengthened their economic position, but their next step was a political one. And their plan concerning Europe was very interesting. Why did they support Hitler? In their opinion, Hitler had to create European Union. They called it European Venice, Venice on the scale of Europe. In 1932, when Hitler lost the elections and was going down, Hjalmar Schacht said: "Never mind, in six months Hitler will become the Reichschancelor and he will unify Europe for us". A few months ahead of Germany's defeat, Hitler said: "I was Europe's last hope". So, that particular attempt to unify Europe had failed, but another one was successful, the one directed from overseas. And a very interesting change took place in the global capitalist class which our Soviet analysts overlooked, which cost them dearly, because it was this young predator faction of the capitalist class who broke the spine of the Soviet Union. People have various names for this faction, I prefer to call them Coprporatocracy. This is a layer of bureaucrats, secret service people, representatives of transnational corporations who interlocked and left the state offside.

MD: The new nomads, as Comrade Attali said.

AF: Attali, exactly. It's another thing that in the first thirty years after the war they could not get much room for operations for a very simple reason: they had to pay off the upper part of their national worker class and the middle class. That's because the Soviet Union still existed and they had to buy popular loyalty, and there was welfare state. But by the mid-'70s the welfare state became overly bureaucratic and began demanding more and more funds. And by mid-'70s, the Western elite confronted this problem: a little bit more industrial development and the welfare state becomes completely socialistic and they would lose their privileges and positions. And then the elite confronted two problems: an economic one and a political one. The economic one was to define the vector of the future economic development. Further development of industries would increase the working class and strengthen its positions -- that would not do. Another option was to get into computer technologies. That would lead to science-intensive production and one could kick the workers' asses and transfer the industry into the Third World, organize the South Korean Wonder and pump profits out of there. And most importantly, computing technologies promised, in addition to all that, a way of controlling reality. It's not a coincidence that the term "globalization" as a scientific term and the term "virtual reality" both emerged in 1983. The second problem the elite was solving was the following: further democratic development spelt a danger to the positions of the elite, and not accidentally, in the report "The Crisis of Democracy", created for the Trilateral Commission by three Western sages, Crozier, Watanuki and Huntington, it was written frankly that further development of democracy in the West would weaken the positions of the establishment. It was openly written there that the task of the establishment was to induce apathy in the masses and to un-democratize the society, explaining to the people that democracy is not a value, but an instrument. And if we recall that... it was not a dogma, but an operating manual. Then market fundamentalists came to power...

MD: When was that report released?

AF: In 1975. In 1979, Thatcher came to power, followed by Reagan, and they started demolishing their middle classes and the working people, but again, as long as the Soviet Union exists, they couldn't go into full swing. They could only pound the Latin American middle class in full swing. As a result of the IMF's structural reforms in the '80s, the Latin American middle class collapsed. 92% went into poverty, 8% became, so to speak, the new middle class. And then it was the turn of Eastern Europe. One can come up with different interpretations of the actions of Gorbachev and Yeltsin, but one interpretation which does not contradict the rest of them is to say that this was a pogrom of the communist "middle class". In 1989, 14 million people lived below the poverty line in Eastern Europe, including former Soviet Union. That isn't a lot.
In 1996, the number became 168 million people. In UNESCO poverty report from 2002 this was called the largest destruction of the middle class in history. The wealth of course moved to the West.

MD: And here is a question... If these are new nomads, what is Genghis Khan's family name?

AF (smiling): Temüjin.

MD: No, the name of the present one?

AF: The present one? He's got a collective name. Collective leadership. This leadership is far from being unified. The Rothschilds are ready to sacrifice the US dollar, but the Rockefellers are not. And Obama, who is about to receive a Nobel Prize, will fight tooth and nail to defend the dollar.

MD: He hasn't got many teeth and nails.

AF: He hasn't and the discontent regarding Obama is growing. Our press and TV simply hide a number of facts. For example, on September 12, this year, there was a demonstration in Washington DC which gathered 1,700,000 people. To put this in perspective, in 1990 we had 240,000-280,000 people marching here under the slogan "Let the Communist Party live on the Chernobyl Nuclear Power Plant" -- and that was impressive. They were shouting "Obama, get out of the White House". Obama boarded a helicopter and flew to a meeting of 15,000 supporters. There is information on the net and in press that people in America buy up ammo, because they believe America is moving towards a most serious crisis, a most serious shake-over, and the demand for ammo went through the roof. When Obama became president, there were 11 or 12 states which did not need subsidies, now there is only one, Texas.

MD: It's worse than we have.

AF: It's worse.

MD: We have more than ten. Even if we forget the crisis, we still have 8 non-subsidized regions.

AF: That's again answering the question of what picture the official media paint. They say "there are problems in the West, but in general it's all fine out there". In reality it's not all fine, they face massive problems... <...>

MD: The global crisis is continuing and roughly speaking, there are two rival groups, which form a coherent whole and within that whole there are two rivals, the Rothschilds and the Rockefellers, right? They disagree, among other things, on the US dollar. Which other groups exist there? Equally significant, equally autonomous? Or just these two?

AF: You know, in general we know very little about the structure of the global capitalist class. In the Soviet Union, all serious studies of the capitalist system were discontinued in the mid-'50s. Both academia and the special services. Stalin's personal intelligence service worked quite seriously on the issue of the ruling families of the West. So did Hitler's team by the way. That Hitler's team had 1,936,000 index cards if I am correct and 678,000 dossiers. On the Freemasons, among others. By the way, Freemasonry archives and the Rothschilds' archives ended up in the Soviet Union after WWII.

MD: We must have given them back by now?

AF: Yes, Boris Nikolaevich Yeltsin gave Freemasonry archives back to the Freemasons and the Rothschilds' archives back to the Rothschilds. That was a very elegant story. The Rothschilds bought for $300,000 a thing of tremendous importance for us: correspondence of Alexander II with his morganatic spouse Princess Yurievskaya, 4,500 letters. They presented this as a gift to Russia, and we reciprocated by giving our gold away in exchange for this necklace of glass beads.

MD: Farm land -- to peasants, plants -- to workers, sea water -- to sailors!

AF: Yes, and dossiers -- to the Rothschilds! As one Western analyst noted, the Rothschilds got for money something that no amount of money could have ever bought. The only archive which remains in Russia and which awaits its researchers, unless someone sells it, is the archive of a German institute with no parallel in history -- the Ahnenerbe. [AF is talking here specifically about the so called trophy archives obtained by the USSR in the course of WWII -- CF].

MD: It's still in our hands, isnt' it?

AF: It is.

MD: And of course with seals never touched.

AF: As one person told me, in order to work with that archive, one needs a top security clearance. But people who have that clearance have never heard of Ahnenerbe.

MD: And usually they don't know the language.

AF: They don't know the language. But the problem is, they have never heard of Ahnenerbe. And those who did hear about it, lack the security clearance.

MD: I see. But still, going back to the two powers: all right, but what about the Chinese clans that are rapidly rising on the basis of the Chinese state -- isn't that a global power?

AF: I believe the situation here is not that simple. Of course, China is fighting for a place in the sun. But take one thing into account. Because the Chinese consider themselves the middle of the Earth and the center of the Universe, for them, as one leading China expert noted, to offer a global project to the world is beneath their dignity. They are not a global civilization so to speak. And in reality, they are interested in one important thing. When we talk about China, we have to be mindful of the fact that 1/3 of Chinese history is disintegration, revolts, crashes. And the Chinese leadership knows that only too well. They know very well how to feed somebody a line. When the Chinese leaders tell us that by 2040 or 2050 the country will reach a very good level economically, they know only too well what will come next. Because revolts and disintegration in China always follow good economic times. Especially since that good economic level is only going to be achieved in the coastal provinces and everyone else is going to suck on their own paw. What are the Chinese doing now? All their policy is directed... And they are accurate people, I believe they forecast and understand very well that after 2050 and maybe earlier, China can disintegrate and the disintegrated phase may last 50 to 70 years. So their goal is to weaken their rivals along the perimeter so that for 50 or 70 years those rivals will not be able to take advantage of the situation. The Chinese are acting in a very professional way.

MD: Along the perimeter, in the globalized world, means the entire world.

AF: Along the perimeter means the US, Russia...

MD: Europe and everybody else?

AF: Europe is pretty far from China, and besides, Chinese have always considered Europe as a counterweight to the US.

MD: Yes.

AF: But the task... I do not think that the Chinese clans can seriously play in the global arena on their own. The situation is, in my opinion, very simple. No matter how strong China is economically, it's got a very fragile social structure and a fragile ecology system. These talks of China's brilliant future in the XXIst century resemble to me very much some talks of the early XXth century, both in Russia and in the West, that Russia was about to dominate the world by 1930. But they did not take into account the fragile social structure and that's what broke down. In that respect, one ought not to believe the economists with their forecasts. And great many of our China experts are in fact sponsored by China and work in a certain direction.

MF: And even if they are not sponsored by the Chinese, it's human nature to fall in love with the subject of one's studies.

AF: Yes, quite right. When we had a discord in our relations with Mao Tse Tung, our China experts were saying that it's all very bad out there and they overlooked the economic boom. Now they are saying it's all great out there, they want us to be friends with China in every possible way and they are overlooking the negative stuff.

MF: But regardless of how local their goals are...

AF: Objectively speaking, China is a global player.

MF: Objectively, a global player and the local goals are not that important, in any case they act on the global scale.

AF: The thing is, in the globalized world, the contradiction between the local and the global levels is lifted, and Robertson, who coined the term "globalization" in 1983, said in a couple of years: "You know, this term should be changed, this term is not precise, it should be glocalization". But by that time the term has gained momentum and it could not be stopped.

MF: Will this Chinese group be able to counter the Rockefellers and the Rothschilds in their attempts to mop up all of the middle classes and cut their costs?

AF: The thing is, if that happens to be in the interests of that group, I think... not sure about "counter", but it will be able to help.

MF: It will be able to help, but the Chinese middle class will be unavoidably mopped up too in that case, will it not?

AF: Yes of course, and that's a very big contradiction China is facing. In reality, China has a very limited room to maneuver. I am selling you this story for what I've bought it for, as they say, but the late Alexander Alexandrovich Zinoviev told me that when he lived in the US and worked in a certain closed-doors American institute in the early '80s, he saw all the materials regarding our future Perestroika, how the events would unfold, how the Soviet Union would be destroyed, and saw the materials on how they were going to strike China. And while Perestroika was conceived mainly as an attack in the informational sphere, the plan regarding China involved a sharp increase in the difference of the living standards between the coastal provinces and the heartland. In other words, they were planning to provoke a social conflict.

MF: Well, the general plot is more or less clear...

AF: Clear, yes.

MF: Let's take another look some time down the road, time will show, how we, how the Chinese, the Americans and other nationally divided, nationally oriented people, are going to counter that, whether they we be able to do that at all, and what will come out of that. Good luck.

AF: Time will show, good luck to all of us.

"The Fall of America and the Western World"

2010-07-12T00:51:00.001-07:00

That is the title of a 9-disk survival guide: TheFallOfAmerica.net. In brief, the contents look like:

1. Economic Crisis
2. Financial Armageddon
3. The Police State
4. The End of the World
5. The Power Elite Part I
6. The Power Elite Part II
7. Our American Nightmare
8. America's Collapse
9. Survival Guide

I got this information through one of the Agora Financial e-mail newsletters -- Agora distributes this product as an affiliate. Doug Casey, an author familiar to Agora readers, is among the contributors.

The titles look promising but sadly, only one of the 9 CD's is fully dedicated to survival... I have not watched them yet but intend to do so.

Tim Sykes' APKT trade, Feb 3, 2010

2010-02-27T08:55:00.001-08:00

Here I am puzzled: this was bought as a 1st day break-out, but it was pretty clear to be a break-out from the very beginning of the day, so why wait until $13.96 to buy? Tim sold APKT with a loss at $13.58 later in the day.

Tim Sykes' CNLG trade, Feb 1, 2010

2010-02-27T08:35:00.000-08:00

The stock was sold short as a pump&dump, and you would not be able to tell that from this chart -- need a finer scale data. What is remarkable here is the fact that Tim sold the stock short on the day of a huge break-out. Certainly if there is a technical side to this trade, it does not lie on the day scale. A profitable trade for Tim, he sold short at $4.30, covered at $4.19, according to the log kept on his site.

Tim Sykes' JYHW trade, Jan 27, 2010

2010-02-27T07:59:00.001-08:00

Japanese candlestick pattern known as handing man started this very strong downward trend which lasted for six consecutive days, coming to climax on January 26 -- a belt-hold line day which, despite a downward gap at the opening and an increased volume, failed to accelerate the price decay. Tim went short on the fourth day of this powerful trend. According to the log on his site, he sold at $1.28, covered at $1.10.

Will this go down in history as a contrarian turning point indicator for EUR/USD?

2010-02-27T07:37:00.000-08:00

Investment themes making magazine covers often indicate points when everyone and their grandmother "bought into" the theme, so the trend can not develop any further. Will "Betrüger in der Euro-Familie" headline in Focus magazine confirm the rule?

Tim Sykes' AENY trade, Jan 25, 2010

2010-02-27T06:30:00.001-08:00

This trade must have been a frustrating experience: the stock showed a strong performance the day before; most likely Tim bought near the beginning of the day (the buy price, $4.55 is very close to the price at open, $4.54). The stock went as high as $4.90, but Tim never took profit and eventually sold at $4.27.

Tim Sykes' IDN trade, Jan 22, 2010

2010-02-27T06:01:00.000-08:00

The stock must have been sold short on the previous day, Jan 21, the day with the downside gap at the opening. Covered at or near the previous day's low, although the stock kept moving lower. Speaking of volume, both days look unremarkable. Data from Tim's log at his site: sold at $3.50, covered at $3.28.

Tim Sykes' ICXT trade, Jan 22, 2010

2010-02-12T09:46:00.000-08:00

According to Tim's log entry on his site, the stock was sold (short) at $7.53, covered at $7.33. According to Tim's comments, $7.50 was an important level technically. The $7.33 price does not seem to belong to January 22 though; it's possible that he covered next day or that he covered on January 22 and next day, with average price being $7.33. It's interesting that speaking of volume, there is nothing special about January 22.

Tim Sykes' CDII trade, Jan 21, 2010

2010-02-10T10:06:00.000-08:00

Tim keeps shorting CDII based on fundamental conviction, and this time possibly adding the fact that the previous day was a relatively strong downward move coupled with an up-tick in volume. This is the second CDII trade I record (here is the first one). He sold short at $2.14, covered at $2.16.

Catching up with Tim Sykes: MDCE, January 19, 2010

2010-02-10T09:51:00.000-08:00

Mid-day turn-around pattern. The stock was sold short at $0.43, bought back at $0.34.

Tim Sykes' PEIX trade, Jan 14, 2010

2010-01-20T02:30:00.001-08:00

This is a bet on the continued downward trend in PEIX after the convincing move down the day before and an opening with a gap down. According to Tim's log, he sold at $2.05, bought (to cover) at $1.96. Tim was able to time it accurately on the way up as well as down.

By the way, the longer time-frame chart puts the stock into the stair-stepper category.

Tim Sykes' PEIX trade, Jan 13, 2010

2010-01-19T06:58:00.001-08:00

Predictably, this was a short. The stock had had 4 consecutive days of strong gains. According to Tim's log, the stock was sold at $2.27, covered at $2.19.

Tim Sykes' PEIX trade, Jan 12, 2010

2010-01-19T06:39:00.000-08:00

I understand this was a long, based on strong momentum. Buy the way here a reduction in volume on January 12 is followed by a red candlestick next day. By the way Tim's fraction of the price action (bought at $2.31, sold at $2.35) looks tiny in comparison with the stock moves.

Tim Sykes' LUNA trade, Jan 11, 2010

2010-01-19T06:21:00.000-08:00

This is interesting -- I understand that this was a buy, based on a break-out, but Tim's sell price of $4.78 just does not fit into any of the days prior to January 11. The trade is entered into Tim's log, dated as January 11, with the buy price of $3.36. Tim's comments indicate that the stock was sold in the premarket trading.

Tim Sykes' JYHW trade, Jan 8, 2010

2010-01-15T09:12:00.000-08:00

So I gather this stock was shorted because it was being pumped openly -- by the way this was done, as it happens, with explicit disclaimers: alas, attention spans get shorter and shorter, people do not read the disclaimers. As far as the chart goes, yes there was some selling pressure on Jan 7 but the stock ended the day about where it has began -- it's a doji candle. If one could short these stocks just because somebody paid to promote them, life would have been way too easy. According to his log, Tim sold at $1.41 and had to buy at $1.50.

Tim Sykes' CDII trade, Jan 8, 2010

2010-01-15T08:54:00.000-08:00

This Tim's trade must have been an unsuccessful short trade. In the log on his site, he has dated the trade by Jan 8, with the buy level at $2.24, sell level at $2.12 -- so this was a loss. Now the $2.12 does not fall into Jan 8th range, therefore I conclude this was a short sale made on one of the previous days -- most likely, Jan 7th. It looks like his reasons to short were more fundamental than technical: the stock did not crack on Jan 7th.

Tim Sykes' AHD trade, Jan 7, 2010

2010-01-14T07:59:00.000-08:00

This trade is entered in Tim's log as January 7th, but the actual trade must have taken place the day before. With the buy level $7.15, sell level at $7.01, this trade was a loss. On the day chart, Jan 6th candle certainly does not look bullish and moreover, the $7.15 number is clearly out of Jan 7th day range.

Tim Sykes' AENY trade, Jan 6, 2010

2010-01-14T07:39:00.000-08:00

Another short trade on AENY. The way it is entered in Tim's log (sell at $4.66, buy at $4.31), looks like he was entering the short trades the day before just as he must have been covering the older short trades in the same stock (?). On Jan 6, day's high in AENY was $4.55.

Tim Sykes' AENY trade, Jan 5, 2010

2010-01-12T08:47:00.001-08:00

This looks similar to Tim's IDN trade the day before: the turn-around can be identified in the day chart pattern. He seems to have been able to cover almost at the day's bottom. According to his site, his sell price was $4.71, buy price $4.19.

Tim Sykes' IDN trade, Jan 5, 2010

2010-01-12T08:08:00.000-08:00

The direction of this profitable trade is hard to tell from the chart -- in fact according to the chart one could have made money trading this stock either way that day. I am pretty sure Tim's intention was to continue shorting, following a successful short the previous day. In fact this turned out to be the day stock turned around and continued rallying. Tim's sell price was $3.56, buy price $3.48.

Tim Sykes' IDN trade, Jan 4, 2010

2010-01-12T07:29:00.000-08:00

Here I think I get the trade idea from the progression of the day candles: the day the short trade was entered must have been the first day with high significantly exceeding close (Dec 31, a local turning point) or the next one. Tim sold short at $3.90, covered at $3.57.

Tim Sykes' AWSL trade, Jan 4, 2010

2010-01-12T07:06:00.000-08:00

In this case the direction of Tim's trade is unambiguous from the chart. I am less sure about when the trade was entered. The sell price given in Tim's log is $3.35; on Dec 31, the stock traded between $3.32 (open and high) and $3.27 (close and low). Most likely selling short for $3.35 was impossible on Dec.31. It was also impossible on Dec. 30, but could be possible on Dec. 29 -- in that case, a break-down from the tight range of the previous 8 days (with a higher volume) must have been the signal.

Tim Sykes' EONC trade, Jan 4, 2010

2010-01-12T06:35:00.000-08:00

Again somewhat surprisingly, this trade idea was a short according to what I am gathering from reading Tim's site. Not sure when he entered the short trade. According to his log of recent trades, the buy level was $5.90 and the sell level $6.09. As usual the trade could have been entered not on the day it is shown in the chart. From the day scale chart, and again with the benefit of hindsight, executing this successfully seems hard to do.

Tim Sykes' ICXT trade, Dec 31, 2009

2010-01-11T09:22:00.000-08:00

Amazing but according to Tim, this was a long play. I understand this could be a play on the security paranoia gripping the US following a recent incident (the company has to do with airport security) although perhaps not after three days of gains in a row. Equally amazing, Tim managed to squeeze a profit out of this trade: bought at $9.91, sold at $9.98.

Tim Sykes' VRMLQ trade, Dec 30, 2009

2010-01-11T08:58:00.001-08:00

Tim's previous VRMLQ trades were long trades joining well established rallies after they became well established. This trade is no exception. According to the data on Tim's site, the stock was bought at $26.50, sold at $27.60. Most likely the stock was bought the previous day. With the benefit of hindsight, this looks more like a multi-day short opportunity. My feeling so far is that instances of stocks going Supernova are impressive but rare, while corrections after spikes are commonplace.

"The decline rates of the main macroeconomic indicators in the US are not expected to change..." -- Mikhail Khazin's 2010 economic forecast

2010-01-07T08:34:00.000-08:00

This cheerful forecast appeared on WorldCrisis.ru -- as public domain materials of such quality are hard to find, I've taken time to translate it.

The economic forecast for 2010

As we usually do on this site (WorldCrisis.ru -- CF), we begin by analyzing the previous forecast, the one for the year 2009. It began by stating that 2009 would be the year of write-downs of the losses, incurred, first of all, by the financial institutions and other companies. In particular it was noted that the scale of securitization chains, that is of credits issued by, first of all, financial companies, having derivatives as a collateral, would be reduced considerably.

This forecast came true almost completely. First of all, it was publicly admitted that the financial standing of a major fraction of companies and their securities is at odds with reality. The distortions were so significant that investors and even US functionaries began suing the rating agencies, who kept inflating the credit ratings in the interests of the financial elite.

Second, it has become clear that the system of derivatives in general does not suit the conditions of the financial crisis, those of the dropping GDP, asset depreciation and of the financial risk insurance system falling apart. As a result, to avoid liquidity crisis, the monetary authorities of the US had to replace mutual credits of banks, secured by derivative paper, by direct credits from the FRS. The volume of such programs reached, only officially, a couple trillion dollars, and various rumors raise the estimate to 9 trillions.

Third, the degree of mutual mistrust became so high that the credit portfolio of the US banks began to shrink rapidly, having reached the levels not seen in decades. Shrinking of such a scale had not taken place for at least 40 years -- the volume of credits kept growing all the time. The unique and scary tempo of the decrease in the credit portfolio volume is the main proof that the crisis is continuing.

A special mention was made of the continuing "parade of devaluations", the aim of which, according to the forecast, was to save those enterprises that were about to collapse under the weight of the credit burden, being no longer able to refinance their debts. This phenomenon manifested itself, first of all, in the support of the national banking systems, on which the UK spent over 50% of its GDP, Netherlands -- over 40%, USA -- over 30% (taking the off-the-balance-sheet FRS funds), Germany -- over 20%. A significant fraction of these funds is emissionary in origin (exceptions are Russia and China who used moneys accumulated in the reserves), while the currency devaluation, barely seen in their relative movements, is seen clearly in the growth of gold price. Meanwhile the US authorities are actively pressuring the banking system to increase crediting of the real sector.

For the above-mentioned reason no large bankruptcies took place (even though the destiny of GM is, most likely, still awaiting many American enterprises) but in the US for example, the bankruptcy rate of small enterprises grew up sharply. As it usually happens during the acute phase of the crises, numerous cases of financial fraud were revealed, of which the Madoff case was the most conspicuous. As in other similar cases, it soon became clear that the regulating bodies had all the possibilities and all the information needed to nip this fraud in the bud. The fact that this had not been done undermined faith in the entire system of financial regulation, which, under conditions of the crisis, clearly won't increase stability of the global financial system.

In the forecast, the sovereign defaults were assumed to begin in 2009. The large amount of cash emission prevented these events, even though the problems of Ukraine, Spain, Greece, Dubai were heard about.

In the forecast, a lot of space was dedicated to the choices of government policies, American above all, pursuing economic recovery. In particular, it was stated that since the American economists are not inclined to study interactions between the sectors of the economy, they would not be able to understand exactly how the declining demand and changes in its structure would influence revenues in various sectors, and consequently, they would not be able to formulate a well articulated and adequate recovery policy for the real sector.

That's exactly what has happened -- the US authorities, having no adequate information, limit themselves with supporting the credit system at large (which in fact amounts to the efforts, and not the most successful ones, to prolong the credits) and with targeted support of the largest businesses. In this respect, the forecast came true with such an accuracy that I am going to quote it here: "If Obama indeed wanted a change, under the slogan of which he was elected, then yes. But the entire composition of his administration, which consists almost exclusively of Clinton's era corrupt officials, indicates that they will prolong the current situation to the end. Prolong, extending the pleasure of distributing budget funds and keeping the global financial system in check. Besides that, such a scenario allows them to maintain the living standards in the US and prevent social protests (even though according to some data, the nation's authorities are getting ready for them). Naturally, all this is possible only up to a certain moment, but let me assume that this moment will come after 2009, although some experts expect sharp events to begin this Fall".

As was forecast, the US was busy with propaganda of optimistic expectations, demonstrated the "recovery" (up to and including statistical re-calculations aimed at transferring the growth rates from the past years to the two past quarters of the year 2009), and obstructed public discussion of the real causes of the crisis internationally. Besides, the US manipulated oil prices actively to maintain the optimal shape of its balance sheet.

For Europe, as it was assumed in the forecast, the debates went along the lines of divisions between the individual states and EU at large as well as along the internal division lines within the Euro zone. As we assumed, the North-European countries (Germany and France) who play the main role in determining the ECB policies, are quite happy with the "strong" Euro, while the southern countries, Spain and Greece in particular, suffered great deal from that policy. This is related to the details of the economic model of these countries, under which the main incomes for significant parts of population come from tourism. Under conditions of crises when tourism shrinks, these countries used to increase their social programs, which allowed them to support the population and to devalue their currencies, thus stimulating tourism. The latter became impossible when Euro was introduced, while the former caused the budgets to go out of limits set by the Stability Pact, which by the way everybody just stopped paying attention to. But in any case, the elites of the southern European countries began considering leaving the Euro zone quite seriously.

A weakness of the 2009 forecast was its lack of discussion of China and South-Eastern Asia in general, of the Latin America, and of the selected large markets, such as the oil market. The forecast concluded with macro-economic indicators. The US GDP was forecast to drop 8-12%. Official data do not support such a drop, but there is no particular reason to trust them. The statistical authorities in the US (as elsewhere) are famous for the games they play with numbers, while the very notion of GDP appears to be fairly controversial. But specific numbers which are a lot harder to tamper with, show that the drop of the mentioned scale indeed took place. This is seen from the chart of the bank credits above and from the yearly data on retail sales and aggregate demand, not to mention the real estate market.

For these reasons it's impossible to tell for sure whether the forecast materialized in this part, or not. As for the statement that the dollar had to fall a bit with respect to other currencies in the middle of the year, it turned out to be quite true, but the expected coming of a new wave of crisis by the end of the year did not happen, while the US dollar did begin its rise with respect to the Euro. A few words about that will be said below, and now let me start with the 2010 forecast proper.

The key to describing the economic evolution of the world in the coming year is to make a choice between the deflationary and (hyper)inflationary scenarios. The choice will depend on the interaction of two major parameters of the US economy: the monetary emission and the decline in the aggregate demand. The latter should be of the order of 8-12% a year, unless a way of increasing the consumer crediting is found. This is analogous to the events of 1930-32 in the US. Emission can, if only in part, compensate for this decline, but it causes inflation, which also reduces the demand expressed in real prices. For this reason, the emission rate has to grow continuously in order to compensate for the falling demand. Let's note that pure scenarios materialize rarely (a refusal of a government to support the economy the way it happened in the '30s was unique, and most likely a repetition of such a scenario is impossible -- except for perhaps in Russia), and that means that the scenarios will alternate. But right now we are interested in the events of 2010 and not in the general scenario of the crisis.

If one fails to compensate for the decline in demand, then all companies, producers and middle-men alike, including banks and other financial institutions, get in trouble. Sooner or later they lower the price of their services, cut expenses... And then a chain of bankruptcies begins, in which the very first bankruptcy triggers a chain of other ones, because the reserves are already exhausted, and under the conditions of falling demand, attracting credits is tough. A new deflationary wave begins, the way it happened in Fall 2008, in the beginning of the '30s in the US, or to some extent, in Japan of '90s (but only to some extent because in Japan, the picture is washed out due the monstrous volume of export).

A major difference between these scenarios is that the deflationary one increases the cost of money while the inflationary one, on the contrary, lowers it. Accordingly, those institutions who have priority access to funds (such as the founding banks of the FRS which, at least for now, carries out the dollar emission) are interested in the deflationary scenario, and those who need money (budgets of various levels) -- in the inflationary one. Those with positive balance sheets (banks) need the cost of money to go up, although there are details. The thing is, the fractional reserve banking system, practiced nearly everywhere in the world, leaves the banks unprotected against the runs on the bank (which busted many of them in the '30s in the US), therefore those who can not obtain refinancing in a higher level bank can be afraid of deflation. But in any event, those are not the ones that determine the stance of the financial elite on the issue. And those with negative balance sheets (households, state budgets, corporations) are more interested in an inflationary scenario, which allows their debts to depreciate. And their nominal incomes grow in that case, which makes them feel better.

There is one more circumstance. For the last 30 years, any growth in any sector was linked, one way or another, to inflating financial bubbles. And the US authorities, for whom it is a matter of life or death to crank up the economic engine again, will try (and indeed are trying!) to inflate these bubbles here and there, expecting to create "secondary" demand and restart the entire economic mechanism.

Thus we can note that the balance of interests in the American society (which, up to minor details, is understood to determine the situation in the entire world, since the US is the world's largest consumer) is more or less clear, but the timing of making the decision will be determined by the politics and is therefore outside the scope of purely economic analysis.

Indeed, to carry out the emission, one needs a conscientious decision of the FRS. But within the FRS itself, except for its leader Bernanke, who is not only appointed by the US president but is more of a scientist than a banker, practically nobody supports the inflationary scenario. The banking elite remember their golden 1930s, when the printing press access allowed them to easily buy on the cheap practically all valuable assets in the US and almost everywhere else in the world. The '30s were the time of the most significant redistribution of property in the favor of the financiers, the period which they don't mind repeating. Besides, the entire system of the economic mainstream, that is not only the theory, but its supporting institutions, including the IMF and the World Bank, created in the last 30 years, the period of financial dominance in the economy, is built upon the thesis that high inflation is unacceptable in any event.

However the FRS does not hang in the air and the Washington's pressure on it gets stronger and stronger, the above mentioned example with financial bubbles is an indicator of that. The House has tried already to carry out an independent audit of this body, and the FRS managed to repel the attack, but how much longer is that going to last? Bernanke is desperately fighting for independence of his structure, in particular, for the bankers' right to independently appoint the directors of the regional reserve banks, but it is clear that if the White House's attacks intensify, the FRS will not be able to hold ground. And the White House needs money badly: to increase the social payouts, to support strategically important sectors, for the military programs, and finally, for the recently adopted health care reform.

By the way, there are many people who don't understand why Obama fights for this program so desperately. The answer is obvious: today, tens of millions people in the US are unable to obtain health insurance in principle, while there is no free medicine in the country. As the living standards of the populace there will deteriorate further, about 100 million people (according to the optimistic estimates and 150 million -- half the nation -- according to the pessimistic ones) will become unable to get medical help. No state leader can afford that, which means the reform must be carried out at any cost, which requires money.

FRS has already committed a severe violation of the IMF Statute, having began a direct buy-out of the US Treasuries on the money created by direct emission. How much was bought out off the balance sheet is a secret so far. But in any event, the emission will have to be increased since the FRS can not afford to leave the White House without funding, that would be a catastrophe for the nation's central bank, and the one that will almost inevitably lead to the nationalization of the emissionary functions of this body.

On the other hand, the FRS has a way of decreasing the amount of money in the economy: by stopping the banking stimulus program. At the recent FOMC meeting a plan to begin collection of the funds previously issued to the banks was announced, which will strengthen the deflationary trend. In my opinion, the financiers will win the first round of the fight. That's because they are clearly quicker to react and because Obama's economic policy is to a large degree controlled by Wall Street whose representatives occupy practically all key economy positions in the White House, and because any major decisions in the US government have to go through long and painful discussion in the House. And because the efficiency of jump-starting the economy by inflating new bubbles turned out to be extremely low.

Here we ought to return to the 2009 forecast, or rather that section of it, which discussed the USD growth at the end of the year. In my opinion, a choice between a (hyper)inflationary scenario and a deflationary one -- in favor of the latter -- had to be made back then, which would create a turning point in the markets: up for the dollar, down for the stock markets and oil. However, a number of events, among which was the process of re-electing Bernanke the FRS chairman for the second term, delayed the process. Nevertheless, the second deflationary wave is likely to strike in the first half of the current year. It will carry the Dow down to the level of 6000-7000, oil -- to the level of $35-40 a barrel, and EUR/USD -- to the 1.35 mark or lower. After which for a number of reasons, including the pressure from the White House, the emission will continue, which will stop the decline at a new, lower level.

Let's note one important thing related to the role of China in the modern global economy. China began experiencing serious economic problems: the engine of its economy is export, which is shrinking. As a consequence, the Chinese authorities are beginning to stimulate internal consumption by non-economic means, which will inflate sizable bubbles in the Chinese economy quite quickly. And what to do? The leaders can not seriously count on the growth of internal demand: if the production is reoriented towards internal consumer, the revenues and wages will begin to drop. Otherwise, colossal multi-year programs are needed, for which there is no time. And to issue bad credits would mean to seriously undermine the financial system of the country.

And nevertheless, there is a solution. Let's imagine that today China enters the global financial markets with securities denominated in renminbi. Then only due to a change in the exchange rate (renminbi revaluation), China acquires a powerful source of income, which can offset the export revenue decline and can speed up the process of re-orienting the economy towards internal consumption dramatically. And the global financial market, suffocating in excess cash with no ability to invest it profitably, will rush into these new securities. Moreover, for China this will become a powerful instrument of influencing the global politics, since it will be quite easy to control to whom and in what volume these new papers will be sold.

In order to implement such a program, China needs at least three things: presence of renminbi outside the country (and the programs to accomplish that are already in place and active); convertibility of renminbi (even limited one), and finally, a living global financial system. If the collapse of the SUD-based contemporary system happens before such a Chinese program is launched, the effectiveness of the latter is likely to be reduced considerably. It can't be ruled out that a realization of this fact is what makes the US demand renminbi revaluation from China (since within the export-import framework, such a revaluation will only redistribute the middle-man income from such operations in favor of China). But in any event, Chinese activity is likely to have a considerable stimulating effect on the US elite, causing them to make at least some decisions.

All this means that in 2010 China, amid deteriorating economic indicators and growing bubbles in the internal economy (in that sense the country will make an accelerated march along the US footsteps of the '00 decade) will begin an accelerating expansion into the global financial system and will speed up the formation of a China-centric regional financial cluster.

Thus in 2010 the global financial system will continue moving along the trajectory on which it took off in Summer 2007, and most likely, in the first half of the year, another deflationary episode will take place, which will give way to a new spiral of monetary emission in the Fall. Whether that will cause hyperinflation is an open question, but the most likely answer is no. In this case, serious problems are ahead for the oil exporting countries, therefore it can't be ruled out that the problems like those of Dubai in late 2009 will become familiar. Big troubles are ahead for Europe: even though Euro will head downward, which will make the exporters' life easier, the US demand will continue to decline, and therefore in general the economic position of the EU will weaken.

"Small" countries of Europe will encounter special problems. They won't be able to count on the US help, while the EU leaders too will be out of money. This will spell a sharp decline in the living standards in these countries, which will cause a significant growth of income difference among the EU countries. Besides, a significant fraction of the population of the poorer EU countries will have to migrate back home, since unemployment will grow everywhere and jobs will be reserved for own citizens. Almost certainly, crime will go up, including ethnic crime, which will require authorities of a number of EU countries to demand stronger regulations of cross-border migration. I am not sure whether the process of European integration will recede in 2010, but I am positive that its rate will go down considerably.

One has to take one more thing into account: the second deflationary wave will annihilate all the efforts of the global leaders to maintain optimism among the consumers and companies, which means a sharp rise in savings and a reduction in portfolio investments. Since under deflation, cost of money will grow, more and more potential investors will go into cash and stay that way. By the end of the year, when another inflationary wave strikes, they will be in a rush to invest.

Meanwhile, since falling demand will be the main mechanism for the crisis to continue, and the global demand is expressed mainly in USD, all countries of the world, including China, India and Latin America, will actively support the present model. Meanwhile, as the US share in the global aggregate demand will decline continuously, they will seek alternative sources of demand, and that includes developing national programs of its stimulation. This means that the global financial system, built on the dollar, will remain strong (even though its influence over the regional economic processes will weaken), while the positions of IMF, World Bank and other international financial organizations will weaken. Created within the Bretton-Woods framework and called upon to spread the basic provisions of the "Washington consensus" worldwide, these bodies will lose their positions to other organizations, possibly yet to be created, amid the crisis and incessant economic forecasting errors.

The decline rates of the main macroeconomic indicators in the US are not expected to change and will be around 8-12% a year. This means continuation of serious problems for the South-Eastern Asia and their growing re-alignment towards China and India, as potential sources of demand. China, as has been said, will promote its own currency in the regional markets actively and prepare grounds for their capture through emission of own securities. As far as India is concerned, it will continue its traditional, more conservative policies. Similar processes will unfold in Latin America, except that there, Brazil will be the center, and the formation of a regional currency will accelerate. The competition of the US and Latin America for influence over Mexico will be interesting to watch.

Economic problems and pessimistic sentiment will force the Western governments to search for non-economic factors to blame for the economic difficulties. I mentioned that in the 2009 forecast and the events in Afghanistan, Pakistan, Iran and early in this year even Yemen support such a view point. Most likely, the policy of creating (so far) controlled regional conflicts will continue.

To conclude the forecast, let me note that most likely, no serious collapse of the infrastructure, financial and industrial alike, will take place in 2010, which means that all the trends that began in 2009 will continue their smooth evolution. The key factors for specific businesses will be:

-- difficulties in attracting and deploying investments
-- beginning decay of the middle-class-based social system and respective problems in marketing policies for nearly all producing companies
-- major shifts in management policies
-- growth of bad debts and inaccessibility of credit

Practically any company wishing to continue its business successfully during the crisis, will face these problems, although perhaps the ordering may vary. And only those who solve these problems, will win.

This is the end of the 2010 forecast but I can't rule out having to come back to it later this Summer.

M. Khazin, Moscow, January 1-6, 2010.

Insightful New Year's address on WorldCrisis.ru

2010-01-06T03:12:00.000-08:00

This excerpt from Mikhail Khazin's New Year's address to the readers of his WorldCrisis.ru -- a Russian site I check from time to time -- in my opinion helps to put things into perspective. So I've translated from the Russian what I think might be of interest to the English-reading public.

The start of a New Year calls for the summing up of the previous one. A detailed analysis of 2009 as well as a forecast for 2010 are on my to-do list. Now I am about to say just a few words about the main results of the year. From my point of view, the main result is the categoric refusal of the authorities of most large countries to discuss the causes and consequences of the world economic crisis publicly. That the crisis is not over need not be explained to the readers of this site (WorldCrisis.ru -- CF), but the authorities understand this as well. Take discussions in the US leadership about borrowing stimulation as an example... It is clear that one can not credit the real sector of economy under the conditions of falling household demand (who to sell the new products to?), therefore one will have to start with the households. But here a natural question arises: what's the logic behind this Obama's desire? For the households are in debt up to their eyeballs, their incomes do not allow them to even pay back the previous loans without a dramatic lowering of the living standards. So why does Obama want them to borrow more?

The thing is as follows. Because, thanks to the growing household debt, the demand had been growing quite strongly for the past decade, and the economy had been growing with it, today's situation is a dead-end in a sense. If one lowers the demand to bring it in equilibrium with the income, the demand will drop by $3 billion a year, at least. Since such a decline in demand (a reminder: the entire GDP of the USA is, officially, $14 billion a year, and in reality is less) will unavoidably cause an economic downturn, incomes will fall, which in its turn will necessitate a drop in demand and so on. The equilibrium corresponds to a drop in US demand of about $6 billion a year. This adjustment can be made rapidly -- and then the sociopolitical catastrophe in the country will be stronger, but the compensatory growth following it will begin almost instantly. Or it can be made slowly -- then the downturn will be less painful, but it will last longer.

The first of these economic scenarios is a deflationary one. In that case, the credit emission stops (actually, it is stopping already), the prices begin to drop precipitously, companies go bankrupt (like in Fall 2008), but those financial institutions who have access to liquidity, i.e. to the FRS credits, have a strong advantage. They use the credit money to pay their deposit holders (it is the depositors' runs on the banks that were devastating the US banking system in the early '30s, which is why Roosevelt declared a default in 1933, the one modestly called "banking holiday" today), and then buy all the industry and all profitable assets in general. The '30s -- the age of deflation -- became the time of the largest redistribution of property in favor of the financial elite in the Western world. The industrialists' lucky star descended for good, the XIX century, the age of industrialists, came to a final closure; the next century began -- the one which belongs to bankers.

But if the banks continue crediting, the situation is different. In that case all of them will keep accumulating bad debts which will unavoidably lead them to bankruptcy. The only way to survive will be to escalate credit emission in hope for inflation, that is, the depreciation of debts. The abilities of the FRS will be limited, which is something that keeps Obama busy these days. And the main thing: he will have lots of money in the budget, which will allow him to conduct active social policy, to lower the political tension and (it must be owned) to determine, who and how will bankrupt the financial institutions. In that sense the notorious health care reform (which is practically impossible under the deflationary scenario: there will be no money for it in the budget), the reforms to limit the FRS and the borrowing stimulation -- are all parts of the same policy aimed at lowering the role of the financial sector in the ecomony and at strengthening that of the state.

Let's note one important thing. The choice will be made even before Obama's first (and possibly last) presidential term is over, since, once the hyperinflation is started, it will be practically impossible to stop. Which by the way is true for a real deflation too.

Tim Sykes' ATHX trade, Dec 23, 2009

2009-12-28T04:26:00.001-08:00

This is the ATHX trade as posted on Tim Sykes' front page: Tim bought at $5.88, sold at $6.04. However, based on Tim's posts, it looks like the story was more complex with more individual trades -- but TimAlert subscribes were kept up-to-date.

As is often the case, the time scale of these trades is finer than is resolved on the day chart. The bottom line is that I learn very little here -- except that this is the type of a stock event that triggers a speculative trader's attention -- which is obvious.

Tim Sykes' IFNY trade, Dec 21, 2009

2009-12-23T06:00:00.000-08:00

This is Tim's second trade in this stock in December (see the previous one). Again not sure whether this is a long or short, but judging from the posts on his site (responses from TimAlert subscribers) the sentiment was bullish this time, and the trade idea was out already on Friday. Tim bought at $1.85, sold at $2.17 -- a profitable trade.

Tim Sykes' SNSS trade, Dec 16, 2009

2009-12-23T05:37:00.000-08:00

Another winning trade in SNSS, closed Dec 16. As you see, the trade took advantage of only a fraction of the day's range; most likely this is a short -- but one has to see intra-day data; the scale of price change (sold at $1.71, bought at $1.67) corresponds to the daily scalping time scale, given the overall volatility of the stock.

Tim Sykes' SNSS trade, Dec 15, 2009

2009-12-23T05:25:00.001-08:00

A successful short trade; Tim sold at $1.99, covered at $1.85. The date he publishes on his site is the date the trade is closed; looking at the chart, one can guess when the trade was entered: most likely, the day before. In that case, the decision must have been influenced by the stock's intra-day dynamics the day before, which shows up on the day chart in the peculiarity of the day candle on the day the stock made a top.

Tim Sykes' RWC trade, Dec 10, 2009

2009-12-21T09:47:00.000-08:00

This one just looks like bad luck. Most likely the intention was to short the stock, and the overall trend agrees with that, but the timing looks wrong -- or rather, the stop-loss chosen is too tight for these volatile stocks. Sold at $3.89, bought at $4.12, .

Tim Sykes' LZB trade, Dec 9, 2009

2009-12-21T09:37:00.000-08:00

This trade was a loss. I find some of Tim's losing trades just as instructive as the winning ones to look at. Perhaps I should classify these little posts according to whether the trade was a win or a loss, in addition to ticker and market. Can't think of a reason for a technical, short-term speculator to open a position in this stock around Dec.9 -- which is when the position was closed according to Tim's log on his site. According to his log, the buy level was $10, sell $9.82.

Tim Sykes' BIOF trade, Dec 7, 2009

2009-12-21T09:19:00.000-08:00

This trade was a loss; technically (with the benefit of hind-sight of course) I don't see a compelling reason to short this stock on Dec 7 -- it's not clear though that this when the short position was opened. It's possible that the short was opened the day before. According to Tim's log, the buy level was $3.06, sell $2.92.

Tim Sykes' IFNY trade, Dec 7, 2009

2009-12-21T09:00:00.000-08:00

This is one of those trades where one misses the intra-day data -- the scale of the trade (both time- and dollar-wise) looks lost in the chart. Judging from Tim's comments on his site, this was a short. Sold short at $1.50, bought to cover at $1.47. Nevertheless, the context in which the trade was placed is clear -- it is also clear after the fact that one should have been buying. But Tim managed to extract a bit of a profit out of this trade.

Russian sociologist Andrei Fursov on the "tasks" of the financial crisis

2009-12-15T02:10:00.000-08:00

I've found this recent (appeared yesterday) and thought provoking piece of analysis by Fursov on russia.ru. Translating from the Russian:

The tasks of the financial crisis

In the recent months people say more and more often that the crisis is abating, that the remission has come, that the crisis was not too dangerous, that now one can take a breather and stop worrying.

To me, this resembles one familiar story about a boy and the wolves. The boy used to cry "Wolf!", but there were no wolves, people stopped believing him, and when the real wolves showed up, nobody came and the wolves ate the cattle. This resembles today's situation when people are comforting themselves. At first people cried -- "Crisis, crisis!" -- yes, certain phenomena of a crisis took place. Indeed, there were bank mergers, at the same time with other events. For example, there is a lot of talk about swine flu and I believe that's a good distraction -- it draws people's attention away from the crisis, letting other people make some money, but that's a different problem. The main thing is that despite the fact that many new topics appeared recently in the media and along with the talk about the crisis being "not that strong", the topic of the crisis is fading away -- I agree with those economists who believe that the present calm is temporary and the crisis will strike for real in 2014-2015 and that wave will be a lot more serious. Whether this is so we will see, but another question is interesting. This crisis -- to what extent is it "natural" and to what extent is it man-made? Looking at practically all major economic crises of the XXth century, in particular the Great Depression, we see that they are all man-made. And a very simple question can be asked, the way Romans used to do it: "Qui Bono?" For example, what happened after the '29-33 crisis? As a result of that crisis, the financial capital bancrupted small and medium banks, expropriated their assets, and largely put the political life in the US and in the world at large under its own control. That was the main result of the Great Depression and as Carroll Quigley wrote in his remarkable work on the history of the first half of the XXth century, in '29-33, the march of the financial capital to the political power, the march that began in 1870s and had the formation of the FRS as its milestone, has finished with a triumph -- and Carroll Quigley applauded that.

And if we look back at that crisis, it's all quite clear -- those lines, along which people would benefit, obtain privileges, accumulate wealth and so on. If we look at today's crisis, we see the same process, except for it's not the big fish eating the small ones, but super-large fish eating the large ones; large banks go bankrupt, and who is grabbing them? Well, for example, banks that belong to the Morgan family, who did a very good job in these few months during the crisis. Large banks go bust, but the super-large ones acquire their assets. So in reality it's the process of capital concentration that takes place, and that's one of the tasks of this crisis.

In fact, today's capitalist economy is a planned economy, it's not "free". Indeed, in many parts of today's economy there is no "market" at all. What market can you talk about in the natural gas industry? What market is there in the sphere of arms trade? Well of course a few dozen percent in almost every major sphere belong to "market", but in all other respects there are monopolies. It's for a reason that French historian Baudelle used to say: "Capitalism is the enemy of the free market". That's because in the market, capitalists struggle for the monopoly and one should say that the entire history of capitalism is, however paradoxal this might sound, is the struggle of the capitalist class against the market, in the market. The market is preserved as the battle field, but the goal of the battle is to limit the market and thus to finish its existence.

By the way, Attali wrote quite frankly about that in "A Brief History of the Future" where he wrote that the task of the world government which was going to establish its power over the world in the middle of the XXIst century would be to finish up the financial capital, to put it under control and to introduce the global distribution-based economy. And the shortest path towards the world government is the global currency; the shortest path towards the global currency is the global financial and economic crisis.

Thus the present crisis pursues a number of tasks, the tactical and mid-range ones. For example, I am deeply convinced that one of the tasks of the crisis was to slow down China, but this goal was not accomplished, because even though they did slow down China, the rest of national economies began to feel even worse, it's the non-national economies so to speak, who won. Besides, there is a lot of things we don't know, since the financial capital is a non-transparent thing -- it's known that the Morgans did grab some banks but we don't know exactly what the Rothschilds gained as a result of this shake-over, what the Rockefellers gained, we can only guess about some very serious tensions at the world's top, using a number of indirect indicators.

Obama, the Rockefellers' man, is understandably for the US dollar, while the Rothschilds and the Chinese back some other currency. Thus the world crisis, besides its visible aspects, has a very powerful hidden code and that hidden code has to do with the struggles within the world's capitalist class, about which little is known, which are not discussed in the press and on TV. The main fight is under the carpet. And in great many areas we can only form indirect inferences based on some visible movements, although the general direction of the crisis is completely clear -- it's towards concentration of the capital, the maximal concentration of the capital.

Even given that, the most interesting question is the following: suppose those who planned the crisis fully accomplish their goals, and concentrate the huge capitals in the hands of literally a few families. In such a situation, money stops making sense in general, since when money is concentrated in such a compressed form, it becomes power, pure power.

The character of Robert Penn Warren's novel, Willie Stark (his prototype was Huey Long, the Governor of Louisiana and a Roosevelt's rival, killed in '35) used to say: "Money makes sense up to a certain point, beyond which it's only power that makes sense".

I've got no smoking gun, but based on all I know from the history of the capitalist system, I have no doubt that the final result of the accumulation of enormous funds among very few owners will be an abolishment of those same funds and their transformation into sterile pure power, on the basis of which a completely different society will be formed, which is something Attali blabbed about: the financial capital is being put under control, is abolished, and an economy of distribution is established -- and the economy of distribution applies not only to the tangible goods -- it's information and resources, too. That is, an hierarchical structure of global control is established and in that respect this financial crisis of today is, I believe, one of the steps towards this new system.

Whether anything will come out of that is another question. History is ironic at times: for example, certain people in the early XXth century were planning to break Germany, Austro-Hungary, Russia, the Osman Empire apart as something which stood in the way of the financial capital's progress. Well, they did break apart the Osman Empire, they did break apart Austro-Hungary, they even broke apart Russia -- but in Russia's place a creature even more dangerous to the global financial capital emerged, the Soviet Union, the anti-capitalist camp. In other words, there are no linear moves in history, and quite often the people who start such fine multi-move games, these same people lose. We just have to see how the events will unfold in the future, but in order to understand what's going on, one has to, first, watch the events very carefully and second, to avoid getting fooled and to look at the world with one's own eyes and not with somebody else's.

Tim Sykes' CLWT trade, Dec 2, 2009

2009-12-10T09:21:00.000-08:00

A winning short according to Tim's comments on his site (money could be made that day either way -- look at the day's high for the stock). It's interesting that based on Dec 1st performance, Tim commented that stock did not look tempting after late day collapse. So could it be the opening with the gap down that made it look tempting again next morning?

Tim Sykes' GRO trade, Dec 1, 2009

2009-12-10T08:57:00.000-08:00

Another winning trade; on Tim's site, the trade is dated Dec.1 with buy at $3.20 and sell at $3.60. After looking at the chart, this is obviously a long trade entered most likely the day before. I am guessing but the key could have been intra-day dynamics on the day trade was entered -- most likely Monday, Nov.30. Just look at the volume spike on that day.

Tim Sykes' DRAM trade, Nov 27, 2009

2009-12-04T03:27:00.000-08:00

This is a winning trade; looks like a short trade placed into a bearish trend. Tim sold at $4.17, bought at $3.78. On Nov 27, the stock opened with a gap down after a down day with a decreasing volume, which could have served as a signal -- but that's merely a guess. In that case, the trade was entered and exited on the same day.

Tim Sykes SEED trade, Nov 25, 2009

2009-12-04T01:19:00.000-08:00

This short trade was a loss and I spent some time trying to figure out when exactly this trade could be entered. This definitely didn't work out like the AENY trade, although the pattern of entering the trade could be similar.

IMDS rallied Nov 24, 2009. Looks ripe for another correction.

2009-11-25T03:22:00.000-08:00

IMDS made a second big jump in row; the stock seems to fit what Tim Sykes calls Stair Stepper pattern in his educational video -- although he rarely if ever trades stocks this cheap. It's common for such stocks to pull back after such events. It's interesting that in the 5-min chart, the rally is seen to be basically dominated by the first 15 minutes of trading. In the long range chart, the historical highs for IMDS are still way up, while the slow but steady growth in volume looks promising.

MCLN, Nov 24, 2009

2009-11-24T01:44:00.000-08:00

MCLN made another step so I am adding this event to my database of extreme penny-stock events, with day and intra-day charts for future reference and visual learning. Note the intra-day correction which bottomed around 50% of day's gain. The intra-day pattern resembles EOPI and PLMO on their rally days.

Tim Sykes' AENY trade, Nov 19, 2009

2009-11-20T01:57:00.000-08:00

I continue building a database of Tim's trades on the basis of trade log on his site for research and education purposes. What interests me is not so much when exactly the trade was entered intra-day but rather, the longer time scale context in which it was placed. Since selecting trade ideas is the key to success in penny stocks, the goal here is to reconstruct the selection criteria, not the details of trade execution. The trade was closed Nov 19, with buy level at $2.80, sell level at $3.02. According to public data on Tim's site, this is a long trade entered on Nov 18th -- and that's essential to know. It's interesting again at what price level this break-out was bought, and note that even though the next day opened with a gap upward, the stock was sold -- which in this case proved prudent. So again, ignoring technicals when closing the trade once it's profitable is the thing I take home from this trade -- it could be a chance or it could be a time-tested wisdom.

Tim Sykes' NLST trade, Nov 18, 2009

2009-11-19T02:27:00.001-08:00

According to the log on Tim's site, the buy level was $4.16, sell level $4.40. It is interesting that the stock was going up on the day the trade was reported, but Tim's blog makes one feel he approaches the stock with a short bias. Most likely this is a short trade initiated the day before, Nov 17. If so, the trade was closed early the next day's morning which in this case proved prudent. This is an example illustrating how long to wait before entering a short trade -- waiting for the market to prove one's assessment.

Tim Sykes' IMGG trade, Nov 18, 2009

2009-11-19T01:49:00.000-08:00

On TimothySykes.com, this is entered as a winning trade with sell level at $1.64, buy level at $1.42. There is little doubt that this is a short trade, initiated most likely early in the Nov 17th session. The company filed 10-Q on Nov 13, which triggered a rally. The following day it must have looked like the stock ran out of steam. It is interesting that when closing the trade, a powerful technical indicator (an opening with a downward gap) was ignored -- similarly to the way it was done for AWSL. Does ignoring technicals in the short trades begin to look like a feature of Tim's style? Something to be aware of when analyzing future trades.

Tim Sykes' VRMLQ trade, Nov 13, 2009

2009-11-18T05:48:00.000-08:00

On Thursday morning, Nov 12, VRMLQ announced a patent news, triggering a rally. It's very interesting that, according to the buy and sell figures reported on his site, Tim entered the rally after or near the technical break-out at $21.50 (sold next day at $22.97). Therefore this looks like a technical long trade in a news-driven context -- unlike his recent EOPI trades which were purely fundamental shorts while technical context was ignored. The balance of technical and fundamental vis-à-vis long and short in this market is a food for thought.

Tim Sykes EONC trade, Nov 11, 2009

2009-11-18T05:25:00.001-08:00

I continue collecting a gallery of Tim Sykes' recent trades so that with time it may become a useful educational tool. As I gather from the blog entries on Tim's site, the stock was shorted on fundamentals (misleading earnings report). The strong conviction explains another short trade in EONC (the first one is found here).

MDFI makes another step, Nov 16, 2009

2009-11-17T05:00:00.000-08:00

The news of Medefile's 10-Q became public at 4:27 pm, according to Yahoo. Apparently we are dealing with a news anticipation event. The news itself (which the market did not know) does not seem encouraging as according to the report, the company was losing money faster in Q3 than it did in Q2. However it's hard to tell what the context of trader's expectations for the company is. The numbers do not communicate a sense of an improving business model.

Technically, the 5-min charts shows a lot of volume in the first 10 minutes which apparently triggered the rally. I would not be surprised too see further sales in the stock amid general lack of interest in the coming days.

Tim Sykes' EONC trade, Nov 10, 2009

2009-11-12T01:20:00.000-08:00

This post is another addition to the gallery of Tim Sykes' trades -- I am trying to reconstruct the logics of his decision-making. Most likely this is a short trade (but strictly speaking, in a complex case like this one can't be 100% sure). If this is a short, then a change in the intra-day trend on Nov 9 and an opening with a gap (down) must have served as a trigger. (Another hint to pay attention to inter-day dynamics). Either way, a difficult trade to execute.

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2009-11-11T05:03:00.000-08:00

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SNVP mania continues, Nov 10, 2009

2009-11-11T00:42:00.000-08:00

I must admit I was wrong downplaying the importance of yesterday's gap in SNVP on the basis of intra-day dynamics. (A caveat -- these posts are written from a purely technical standpoint; it's irrelevant whether SNVP is a pump-and-dump, whether this is an oil and gas or cosmetics company, etc.) The stock continued to move higher with the same pattern: a ton of buying in the first 5 minutes of trading, seen in the 5 min chart where the excessive volume within the first 5 min bin is highlighted in red. This looks as if whoever is buying the stock is absent during the business hours and responds to some news received in between the trading sessions. What could explain such a buying pattern? Perhaps the stock is being promoted to some unsophisticated investors is Asia who out of necessity (the time zone difference) find it difficult to participate in real time? If that is the case, the stock may have a long way to go.

If I were to draw a conclusion on the basis of the very limited amount of observations in penny stocks (all of them documented here) I would conclude that one needs to put more weight on the inter-day dynamics (such as gaps between the days) and downplay what happens intra-day.

It seems too risky to short such a stock now, before there is evidence that the mania abates. Even if it abates, a study I recently came across mentions that stocks touted via e-mail spam often fail to return to previous levels due to liquidity being too low to move the price either way once the stimulated interest wanes.

SNVP, Nov 9, 2009

2009-11-10T01:10:00.000-08:00

A strange-looking event: 1) the last piece of meaningful news on SNVP was issued on Nov 2nd. 2) on Nov 9th, the stock opened with a huge gap and a spike in the volume (see charts) -- this looks as if tons of buy orders were submitted before the opening bell (not something a professional would do) 3) downward dynamics prevailed already in the first 30 min of trading. Kind of makes one think of stock manipulation.

Tim Sykes' QXM short trade, Nov 6, 2009

2009-11-09T01:41:00.000-08:00

This is an inter-day short trade. According to Tim's notes on his site, the date of the trade is Nov 6 but judging by the price level (bought at $4.31, sold at $4.80), the stock must have been sold short a day before. That day, Nov 5, was indeed the day stock cracked but Tim's stated sell price indicated that he was part of the action from the very beginning. With no easily found news related to the stock during the time period, this looks like a masterful trade. It is interesting that he has executed a long trade in the same stock just the day before.

Tim Sykes' COT trade, Nov 4, 2009

2009-11-09T01:25:00.000-08:00

On Nov 4, Cott filed a Material Definitive Agreement form with SEC, following a press-release about the offer of new notes on Nov 3. On Nov 4 one could be wondering whether the news is already priced into the market. Although the volume showed increases, there was nothing dramatic. Apparently Tim has resolved the doubts in favor of the stock, buying at $8.66 and selling at $8.88.

Tim Sykes' QXM trade, Nov 4, 2009

2009-11-09T01:04:00.000-08:00

I continue recording and researching trades published by Tim Sykes on his site for fun and self-education. QXM was bought on Nov 4 at $4.61 after two consequitive days of openings with gaps, sold on the same day at $4.89. This is one of those numerous cases when the stocks start to "get noticed" for no apparent reason -- I was not able to identify surfacing of "news" related to the company last week when the stock began moving. Checking e-mail spam could be a good idea but I am just beginning my research in how to implement this technically.

Tim Sykes' DDRX trade, Oct 30, 2009

2009-11-09T00:42:00.001-08:00

For the story behind Diedrich Coffee, read Motley Fool. The big picture of this once penny-stock is illustrated by the week chart. Tim decided to short DDRX on Oct 30 apparently following the news and the technical indications of a crack in the stock the previous days. According to the data on his site, his sell (short-sell) price was $25.70 and the buy (cover) price was $26.53.

EOPI mystery rally, Nov 5, 2009

2009-11-06T00:56:00.000-08:00

I continue screening for high volume movers in the OTC universe. EOPI's recent pattern on the day scale very much resembles UNCO from two weeks ago. We now know that UNCO continued its downward slide since making a similar jump. Unlike EOPI, UNCO's jump was triggered by news. Unlike UNCO (and like IVOT) here we see a sustained rally throughout the day. Having no clue as to what's going on, it's hard to form rational expectations in this case. The only rationality can be the one of studying market's irrationality. So I am filing this curious case here -- I am not ruling out that the interest in the stock may continue. Again, I would test whether one can proceed with taking next day's opening with a positive gap as an intra-day entry trigger the way it could have worked with IVOT.

IVOT follow-up

2009-11-06T00:32:00.000-08:00

Yesterday IVOT did open with a small gap (0.0041 vs previous close at 0.0040), so my self-imposed condition for maintaining interest in the stock was fulfilled. The stock made a new high in the first 30 minutes of trading then sold off. So the intra-day realistic 20% profit opportunity was there. From the volume however it looks like selling was not heavy; it seems that the majority of people who bought into the momentum on Nov 4th still hold the stock. Speaking of myself, I was about to buy in the first 5 min of trading -- only to realize, after checking my order, that the commission my broker would charge me would be outrageous (since the stock is very cheap, one needs to buy hundreds of thousands of shares or more and the brokers differ in how their fee structure works in such case, in particular with the OTC BB stocks).

So what did I learn? First, my screening the day before with very light analysis did deliver an actionable signal. Second, one needs to think about choosing a broker with the right commission structure for such plays.

IVOT jumps on big news, sustains the rally through the day, Nov 4, 2009

2009-11-05T00:20:00.000-08:00

IVOT jumped on the news of a distribution agreement with Whirlpool (WHR) for its green product. The magnitude of the event against the backdrop of the last months' lack of action in the stock can be easily gauged from the longer range charts above. What makes the stock different from the likes of UNCO and PLMO (abortive Supernovae) is, besides the sheer size of volume on the day of the jump, its ability to sustain the rally throughout the day. Indeed, the 5 min chart looks different from the pattern of big jump -- big pull-back -- mid-way consolidation, often seen in such cases, in that buying seems to be distributed throughout the day more evenly. It's hard to extrapolate conclusions from the higher frequency time scales to longer range, but if the stock opens with an upward gap today, things may become interesting. Definitely worth watching.

Tim Sykes' CTDC trade, Oct 29, 2009

2009-11-01T11:17:00.001-08:00

This looks like a messy but eventually profitable trade. Again, on his site, Tim only gives the date when the trade was closed, which is in this case Oct 29, and the buy and sell levels ($4.00 and $4.42). One can only guess when the trade was enetered. We know for sure the trade was closed on Oct 29.

Tim Sykes' AWSL trade, Oct 26, 2009

2009-11-01T10:58:00.000-08:00

On Tim's site, the date of this trade is Oct 26 (Monday), buy price is $3.24, sell price is $4.10. As is seen from the chart, Oct 26 could be the day when the trade was closed but the trade itself must have been entered one or two business days before. On Thursday it must have been clear that the stock gave a crack. One could question the reason for closing the trade the very first thing Monday morning despite the fact that the stock opened with a downward gap, but on the other hand, desire to take profit is understandable in such a situation.

Tim Sykes' RODM trade, Oct 23, 2009

2009-11-01T10:42:00.000-08:00

Here is a trade I found myself scratching a head to explain: a value trade on a penny stock? RODM had an earnings report on Oct 22 which apparently was a disappointment. The next day, the stock opened with the gap and Tim bought it, but apparently the stop loss was so tight that the position was closed with a loss (bought at $5.27, sold at $5.23, according to TimothySykes.com. While a small profit could theoretically be made intra-day on that day, the stop-loss proved beneficial in the long run as the stock kept moving lower. What do we learn? Apparently, an opening with a gap in penny stocks is big enough an indicator to someone with Tim's experience, so it's worth risking a small stake.

Tim Sykes' AMLM trade, Oct 22, 2009

2009-11-01T10:28:00.001-08:00

Here is a big move and a successfully executed trade: the trade is listed on Tim's site as an Oct 22 with a "buy" at $2.69 and a "sell" at $2.97 -- most likely he bought the stock the day before and exited the trade on Oct 22. But again, I don't have the intraday data for the stock. A good timing in any case.

Tim Sykes USEG trade, Oct 22, 2009

2009-11-01T10:14:00.000-08:00

As you see in the immediate history of the stock, what it did a couple of times was making a big step upwards, then taking a breather for three or four days, then making another big step. This is what Tim calls stair-stepper in his educational materials. According to the info on the same site, Tim bought at $6.12 and sold at $6.09 -- a small loss. Typically, such stock develop flag formations and it's hard to predict the next big step. It seems you can only be sure once you are inside the big step, which is something you can in principle detect intra-day by a combination of large price and volume jumps.

Tim Sykes' CBOU trade, Oct 20, 2009

2009-11-01T09:57:00.000-08:00

I continue my studies of Tim Sykes' penny stock trades, based on the freely available info found on Tim's site. This CBOU trade was made on October 20 with the "buy" level at $8.93 and "sell" level at $9.06. The stock was down on the day but the trade is listed as profitable. The movement is tiny on the big scale of things in the chart, I assume this was a long trade and an attempt to buy a break-out, based on the previous day's data. The stock had no news that day. Unfortunately no intra-day data but I figure it takes some skill to close such a trade with a profit.

VKNG on Oct 29, 2009: provoking hopes of a come-back

2009-10-30T00:35:00.000-07:00

The picture here resembles UNCO: the stock has seen better times, has been in a steady decline, then comes this sudden jump in price. Unlike UNCO, there is no news and judging by the 5min chart, the rise in price is somewhat more gradual. After hitting the resistance at 0.04, the stock pulls back -- this is seen very frequently in such cases. The 5min chart looks somewhat similar to BPMA with similar volume and similar lack of news. As we now know, BPMA went nowhere after the event.

Serial Supernova UNCO rallies on news, Oct 27, 2009

2009-10-28T01:14:00.000-07:00

The Serial Supernova status of this stock is confirmed by the five year history chart, top panel. The news announcement (approval for construction of new tailings pond at the Deer Trail Mine) hit the wire at 10:42 am. What followed and how significant it was can be seen from the day and 5-minute charts. Does the 5-minute chart look familiar? It certainly does if you looked at the similar PLMO and MYNG events.

The stock takes off at 0.0030, hits resistance at 0.0060 and then settles down at 0.0045 -- the factors of 2 work their magic. I wish it were so easy in other markets.

Pulmo Biotech, PLMO rallies after two announcements

2009-10-22T05:17:00.000-07:00

The first announcement was made Oct 20 at 4:10pm and the second, Oct 21 at 4:10pm (see Yahoo! PLMO headlines for more details). For the purpose of these technical analysis posts, it does not matter what exactly the positive news was. Apparently the stock rally on Oct 21 which began with a gap opening for the stock, was triggered entirely by the first announcement. Here as in other similar cases, you have a very clean environment to study market response to an isolated stimulus which is a perfectly localized excitation. The intraday chart looks somewhat similar to MING.

Oct 20, 2009: BPMA rallies with no news

2009-10-21T04:30:00.000-07:00

Yesterday BPMA had a moderate size rally with no news to explain it. The event is seen as a sharp spike in both price and volume.

I keep archiving penny-stock explosive events with the vision that such a gallery will prove helpful in creating an automated trigger for such events. I am interested to know how such easily detectable events change the odds in the subsequent history of the stock. Do they make it more likely for the stock to go up next day? To go down? So far there is no conclusive answer but the good news is that such events happen at the rate of the order of once a day which means that in a few months one will be able to speak about some probability estimates with a few percent accuracy.

Oct 20, 2009: NEOM rallies on settlement news

2009-10-21T04:10:00.000-07:00

Here is another penny-stock that fits my Supernova-candidate profile: NEOM rallied on the news of a settlement and license agreement with Scanbury Inc. The price had a 60% spike as the volume exceeded 200M shares. As the day chart above shows, NEOM may be a turnaround story. The news appeared on Business Wire at 2:09pm EDT -- as the intraday chart shows, a very robust rally was fully underway at that time. So these stocks need to be traded on technical indicators which in this case would have been fairly unambiguous.

Tim Sykes' VRMLQ trade, Oct 16, 2009

2009-10-17T08:16:00.000-07:00

The trade is listed on Tim's site with the "buy" at $16.79 and "sell" at $18.65. Stock's day's Range on Oct 16 according to Yahoo! was 17.30 - 19.29; so the entry point must have been Oct 15. Apparently the stock's opening with a gap on Oct 15 served as a buy signal. Volume on the contrary seems not particularly informative.

You need logarithmic scale to see the levels from which the stock rose in a matter of a few weeks:

Sure enough on Sept 11 I would call this stock a Supernova candidate, but its dynamics so far is very robust -- looks more robust and sustainable than most Supernova candidates. So far this is the first Supernova-like stock discussed in this blog where after the day of the initial explosion, the stock gapped up on the next trading day. Typically they pull back next day.

The MDFI rally of Oct 15, 2009

2009-10-16T01:18:00.000-07:00

The long-range chart shows that even at the present $0.0045 level, MDFI is only a shade of its former $0.035 glory. (Like in astrophysics, you operate with orders of magnitude in this Supernova business). The day chart shows that it's quite possible to set up an automated trigger on the basis of combined volume and price gains which would put you on the bandwagon in the later stage of the intra-day rally while having a very high signal to noise ratio -- in other words, the percentage of false starts following such a trigger would be low. The long-range chart confirms the impression -- the vacuum of action in 2009 lasted for months.

Hunt supernovae with penny stocks

2009-10-16T00:42:00.000-07:00

Supernovae are penny-stocks which sustain a several-day-long rally in which the price can increase orders of magnitude. This is the phenomenon Tim Sykes discusses a lot in his educational materials; he may be the one who coined the term. And the very concept of something changing by orders of magnitude does smell of astrophysics.

While the likelihood that a particular penny stock turns into a supernova on a given day is vanishingly small, the likelihood that any one of them does so is sizeable, since there are thousands of them.

How should a hunt for a supernova begin? You screen the stocks for the biggest volume and price gainers. But we need to know how likely it is that we are late for the train, given a particular set of selection criteria. No matter what selection criterion you use, there will be the percentage of junk you pick (stocks that do not form a sustainable rally after a spike you detect) and the percentage of valid candidates which do sustain a rally. This is what an astrophysicist would likely call a signal to noise ratio. The signal to noise ratio will depend on the selection criteria you use.

So far I am playing with these concepts in my mind and trying to form an intuitive feel as to the basic parameters and relationships involved. For that, I monitor the penny-stock market daily. This blog is very new and here I intend to collect a gallery of candidate events with intra-day charts which will be very useful in the future for any kind of signal to noise study. In a sense I act like an entomologist rather than astrophysicist at this stage, catching butterflies.

So far, neither MYNG nor IMDS, the butterflies I caught earlier, became supernovae on a more than an intra-day scale. But they did show very strong intra-day rallies. So if you set an intra-day trigger on these stocks, it seems intuitively clear that one can obtain a very good signal to noise ratio. Unfortunately intra-day historical data to tune such a trigger are a lot more expensive.

ZIOP, my first penny stock trade. Closed Oct 6, 2009

2009-10-15T02:37:00.000-07:00

Here is my trade on ZIOP and let's see how this is different from Tim Sykes (I pick him as a target for comparison since his trades are published on his website, so it's possible to study and emulate. And his track record is not bad either.).

First, the time scale is very different: I stayed in this trade for 5 days. Second, the entry is not very clean: the $2.60 level has some technical significance to it but it isn't a major break-out. The $2.60 is a resistance level; this was the high level of two earlier days.

Second, a professional trader would have probably exited the trade by stop-loss on Oct 2nd; I didn't since I had very little money at risk.

The not-so-clean entry and a draw-down make this trade look amateurish and "lucky". It often happens with amateurs that speculative trades turn into long term investments... Knowing that, I chose a company which would not be bad in the long term. As you see, ZIOP did deliver a nice surprise with a positive press release yesterday. Nevertheless I believe my exit was fine as waiting for a specific press release wasn't part of the strategy.

Tim Sykes' YONG trade, Oct 13, 2009

2009-10-15T01:44:00.000-07:00

YONG is not exactly a penny stock any longer, after the explosive August and September growth. This looks like a momentum trade based on the break-out from a side-wise range in which the stock spent the previous week. The buy level is at about the level when the break-out looks certain. As reported on Tim's site, the stock was bought at $11.05, sold at $11.66. Looking at the day levels, the stock must have been bought the previous day.

Tim Sykes' NPHC trade, Oct 13, 2009

2009-10-15T01:17:00.000-07:00

Here is another amazing short trade. On Tim's site, the trade is entered under October 13 with the "buy" price of $0.59 and "sell" price of $0.71. Looking at the chart, he must have entered the trade on October 12 and kept it overnight. Not sure how he timed the entry. Clearly the stock had a string of bad days in late September--early October while the volume was in decline; there was a new two-week low on a volume spike on October 2, but that's all I can say from the chart alone.

Tim Sykes' IMGG trade, Oct 12, 2009

2009-10-15T00:55:00.000-07:00

On TimothySykes.com, this is entered as a winning trade with buy level $0.60, sell level $0.70. On the chart, this looks like a very well timed short-sell trade. The trade was placed on a second down day after a series of daily gains for the stock.

MYNG was another big gainer on Oct 13, 2009

2009-10-14T04:12:00.001-07:00

The mining company received a buy offer for a piece of property from another company. On the intra-day chart, you can see exactly when this happened and how long it took for the price to adjust to the new level. Magically, this new level (0.003), just as the one that served as a resistance (0.004), are round figures. The whole adjustment process took about 2 hours. So here is market efficiency in action, with an estimate for the characteristic time scale. It is not instantaneous.

I am curious what will happen today: some people do not digest information on an hourly basis, but do it on a daily basis. For them, MYNG is still "in the news".

IMDS on Oct 13, 2009: watching the action

2009-10-14T03:39:00.000-07:00

After seeing the IMDS action on the day before, Oct 12, I said in a private communication that I expected the stock to consolidate between 0.02 and 0.03 and then to perhaps make another jump a few days later. So far I am right, here is the IMDS chart up to and including Oct 13:

This type of pattern puts IMDS into the "stair-stepper" class. The intra-day (5 min) chart below shows what happened yesterday:

The first few minutes after the opening bell were fun to watch, with traders running in droves to sell the stock. I don't know how many people were taking profit and how many were trying to short the stock, but the price action was quite predictable. When the stock hit the 0.02 level (losing 1/3 off the previous day's close) my brain told me I should buy it -- but I did not trust this voice and did nothing on that day. About 10% of day's trading volume was made in the first five minutes. You can see volume dying off in the intra-day chart.

Thinking about penny stock patterns

2009-10-11T11:03:00.000-07:00

There are thousands of companies with very low capitalization. Their stocks are worth order of a dollar and they can change tens per cent a day. In other words, they are extremely risky. Large players ignore this market because it can't digest their capitals -- the liquidity is limited. Each penny stock lives its own life which is fairly separate from the life of the stock market or even the economy in general. It's understandable because for a tiny company, its local news are much more important than global news. A good management decision, acquisition of a strategic partner or a client can easily double the earnings. The penny stock prices are moved by news real or imaginary and can be manipulated by various means, including sales campaigns targeting naive investors.

For the same reasons why poor people outnumber the rich, tiny companies outnumber the big ones. Because they are so numerous and move quite independently from each other, there is a chance that at any point in time, you can find one or two of them which are at a certain point of some familiar pattern -- within a certain degree of approximation, of course. The pattern or a group of them can be inferred from historical data, aggregated for this class of stocks. An automated system might scan the real-time market data for these thousands of stocks (thousands of time series) and search for those "archetype" patterns which do repeat themselves. The system might then generate a buy or sell signal. Since there are thousands of opportunities, the system may have a very high selectivity threshold and still generate a few signals a week.

Tim Sykes (TimothySykes.com) trades these stocks in a way informed by long experience and sells alerts and educational materials. In the past couple of days, I went over Tim's trades for the past month, posted on his site, to see the patterns and in hope of learning from his trades. The patterns do exist and are very clear in this market, unlike the market of the larger companies which attract the media attention and big traders. There are two problems however: one is lack of liquidity. Tim says he limits his trades to 1% of liquidity. Which means that as his personal fortune must be at about $2M, it unfortunately can not grow exponentially. It can only grow linearly since he must be trading only a small fraction of his account, more or less fixed in the nominal dollar amount. If a stock has daily volume of 100,000-1,000,000 shares and trades at $1, a trader with such a rule can trade 1,000-10,000 shares, and if his capital is order of $1M, he is limited to 1% of his account. No wonder he needs no leverage. He also is not diversified -- there is little need to since a much better way of managing the risk is to apply extreme selectivity when adopting a trade idea. It is doable in this market because of a huge selection of companies and therefore, a huge selection of potential ideas to consider.

That leads me to the second challenge: who is going to consider all those ideas. The best way is to use an automated, programmed pattern recognition system. If I decide to do that, there should be very little competition as institutional players who are able to hire someone capable of researching and implementing that (they would need a quantitative research department) are not interested in the market which is too small even for a guy with a couple millions. This may be a real chance to make the amount of money big enough to lose interest in this market before moving into something else.

For now I am going to keep monitoring Tim's trades and posting charts here.

Tim Sykes' ZAGG trade, Oct 9, 2009

2009-10-11T10:49:00.001-07:00

On Oct 9, an up-tick in ZAGG price and volume took place and Tim took advantage of it with this trade. It is interesting that the event was not quite sudden: increases in volume had been seen for the previous three trading days. Tim entered the trade after the break-out from the range-bound channel became a fact. The trade was closed with a nice profit next day, Oct 10.

Tim Sykes' GBVP trade Oct 7, 2009

2009-10-11T09:59:00.000-07:00

SEC suspended trading in GBVP on Sept 23, 2009 till 11:59 pm Oct 6, 2009, see their press release. On the TimothySykes.com web site, this profitable trade is assigned to Oct 7, thus the short position was covered the first business day on which the trading was resumed. It is amazing that the stock jumped up on that day. The stock is said to be sold at $0.27 which most likely occured on Oct 21. At that point, the technical trend was well established. Again a red candle coupled with a spike in the volume on Oct 16 signalled a trend break down.

Tim Sykes' NPHC trade, Oct 1, 2009

2009-10-11T09:27:00.000-07:00

On TimothySykes.com, this trade is dated by Oct 1 with the buy level at $0.70, sell level at $0.85. Apparently the stock was shorted on the previous day. It is not clear what served as an immediate trigger to enter this profitable trade, although Tim was very sceptical on the company, see this post.

Tim Sykes' RODM trade, Sept 28, 2009

2009-10-11T07:42:00.000-07:00

Here a bullish trade was placed exactly as RODM broke out of the range's upper boundary at $5.65. Profit was taken at $6.09. These data are from TimothySykes.com web site. Note the the volume peaked on that day. Even though RODM is frequently in the news as not only the company itself but their clients mention them in their press releases, there were no news on the company that day.

Tim Sykes' EMGE trade, Sept 28, 2009

2009-10-11T07:23:00.000-07:00

This looks like a perfect intra-day short trade. According to info on the TimothySykes.com web site, Tim sold EMGE at $3.13, covered at $2.16. This was a little risk trade, unlike the previous day's, since one could rely on an established bearish trend.

Tim Sykes' EMGE trade, Sept 25, 2009

2009-10-11T07:08:00.000-07:00

This is a winning trade on EMGE, most likely a short trade-- the stock was down on the day. According to info on TimothySykes.com, Tim sold at $3.88 and covered at $3.20. Looking at the chart, a red candle in combination with an increase in volume provides a very strong bearish indicator, but when the trade was placed, it was not clear what the final volume for the day would be. The trade was entered and exited on the very day the previously bullish trend broke down and the decision to sell short must have been based on intra-day indicators and/or fundamental data.

Tim Sykes' CHIP trade, Sept 24, 2009

2009-10-10T11:05:00.000-07:00

Here is a long play on CHIP which turned to be a loss. With the benefit of hindsight, it's hard to see the rationale for this as a short-range speculative trade. According to the chart, the speculative train is already gone by the time the trade is placed. Tim's site reports no trades in this stock during its strongest advance the week before. Technically, this looks like as a beginning of a flag formation.

Tim Sykes' RTK trade, Sept 23, 2009

2009-10-10T10:46:00.000-07:00

This trade is entered on the TimothySykes.com site as a profitable trade, with September 23 as the date, $1.97 as the "buy" level and $2.11 as the "sell" level. Both levels are outside the day's range in RTK. So I am not sure what to make of it.

Tim Sykes' GVBP trade, Sept 21, 2009

2009-10-10T10:16:00.001-07:00

A successful short trade. The trade info on TimothySykes.com assigns the trade to September 21 with "buy" at $0.29, "sell" at $0.49. But he couldn't have sold at $0.49 on September 21 -- that's outside the day's range. Apparently he sold short on the previous day and covered at $0.29.

The watershed between bullish and bearish sentiment on GVBP is clearly seen in the chart: that's September 16th, the first day when a downward (red) candle is combined with a rise in the volume. After that, the bearish trend continues while volume goes down. This pattern is already well formed by the time Tim enters his short trade.

Tim Sykes' SPDE trade, Sept 18, 2009

2009-10-10T10:00:00.000-07:00

Like in OPXA, here we see a stair-case pattern. This trade is a loss, Tim bought at $7.34, sold at $7.10. Apparently he was counting on a continuation of September 17th's upward step, despite tfact that both previous steps played out within a day, each time the euphoric upward step being followed by several days of "hang-over".

Tim Sykes' OPXA trade, Sept 16, 2009

2009-10-10T09:46:00.000-07:00

Another OPXA trade, for some reason entered as a loss on Tim's site at TimothySykes.com. He bought at $4.08, sold at $4.17. The stock was up for the day.

Tim Sykes' GVBP trade, Sept 15, 2009

2009-10-10T09:28:00.001-07:00

A loss on what could have been a momentum trade. According to the info on TimothySykes.com, Tim bought at $0.615, sold at $0.42. This is Tim's only trade in this stock since Sept 9, so one is left to wonder why not enter earlier. The B and S levels in the drawing are not precise.

Tim Sykes' OPXA trade, Sept 14, 2009

2009-10-10T08:56:00.001-07:00

Another loss on OPXA. According to the info on TimothySykes.com, Tim bought at $4.29, sold at $4.03. I don't know whether this is a short or long trade.

Tim Sykes' OPXA trade, Sept 11, 2009

2009-10-10T08:46:00.001-07:00

A losing trade. Not sure what made him enter, I see no clear signal. He bought at $4.44, sold at $4.05.

Tim Sykes OPXA trade, Sept 9, 2009

2009-10-10T08:15:00.000-07:00

This is a so-called stair-case pattern, typical for penny stocks. Again, the trade is researched based on free information on
TimothySykes.com.
Apparently a short trade, but based on the info on the site, it's hard to tell. He must have been shorting the stock after a break-out.

Tim Sykes GFGU trade Sept 9, 2009

2009-10-10T07:53:00.001-07:00

This is a recent Tim Sykes trade, researched on the basis of freely available info at TimothySykes.com. The entry decision is apparently based on an undeniable break-out with rising volume, the chart looks strongly bullish at this point. Advances in the volume seem to lead and advances in price -- to lag.

Zvezda.ru, Boris Borisov on the return to Gold Standard: "There is no spoon..."

2009-10-08T03:56:00.000-07:00

Here is a very well articulated opinion on gold I found on the Russian site Zvezda.ru. I've translated it with a few minor omissions. The Russian original can be found here: Выход из кризиса: кризис, кредит и золотой сценарий. An executive summary: the author views the present financial crisis as a crisis of the fiat money system. He sees no alternative to gold standard in the long run and estimates the resistance level of gold price at $10,000 per ounce in today's money. A broad brush picture of the post-fiat-money world is painted with a few zesty details.

Exiting the crisis: crisis, credit and the Gold Scenario

In order to understand what the present crisis is, one has to see it both on a real time scale and on a real scale of values.

Speaking of Time. The global economic history, the history of world trade -- that's many thousand years of goods exchange, a significant part of which, also measured in thousands of years, is the monetary phase. And all that time is the era of real values in circulation. The goods had real value and so did money -- gold, silver and the like. Up to very recent time, international credits used to be given and taken mainly in gold. A recently discovered gold-laden WWII ship, which was sunk on the way to the US, with several billion dollars worth of the yellow metal in today's money -- including our Russian gold to pay for military shipments -- is a good proof of the point. Gold was the main accounting tool and the main security of international exchange during both WWI and WWII. It is only for the past 60 years, following Bretton Woods, that we have a system of debt exchange in place of real value exchange in the international trade. That's a radical, qualitative change.

Circulation of debt instead of circulation of values and the consequences of the change of an economic model

Clearly, any bank note is debt, of either a bank or a state, in paper form, and a replacement of gold circulation by bank note circulation changes the essential grounds of the economy, and then, of the world order itself. The world center of power always moves toward the emission center, a change in the character of emission has changed the world economically, politically and in the military sense. In fact, after the war we got a debt circulation instead of real money circulation. Even before that, this happened inside the national economies, in the finances of the developed countries -- which was among the important reasons of the world crisis of 1930-s: both the Great Depression in the States and of an economic crisis in Europe.

Notice that the crisis of the '30s struck the groups of countries with the most developed financial and banking systems, where the real money circulation had been replaced by the debt circulation even earlier and on a deeper level -- and the crisis was to a large degree caused by the problems in the debt market. One has to understand that after several thousand years of real money circulation, only for a few decades have we had the pleasure of witnessing the beauties of the credit money circulation on a large scale. That's only about one percent of our time scale, while 99% of it is taken by the real money circulation. To conclude on such shaky and very short-term grounds that the world economy will continue to be a debt economy would be very imprudent. But that's not all. Notice the following. These sixty years consist roughly of two cycles, each one about 30 year long.

The first three decades after Bretton Woods -- that's the circulation of, for the time being, gold-backed debts, which suffered a crash by 1972, when the gold standard was abolished (that was a gradual, step-by-step process, but we will omit the details for now.) The second thirty years that finished in front of our eyes -- that's the crash of the fiat debt system as the basis of the international trade and money exchange. It is evident now, that this experiment -- the building of a global trade and exchange system on the basis of fiat debt -- has failed. We are witnessing this crash, the crash of fiat money economy. That is the essence of the present crisis. [...]

From the formula: "money is gold and gold is money" we went over to the formula "money is backed by gold" and later, in Bretton Woods, to the formula "US dollar is backed by gold while other currencies are backed by dollar" (initially, pound sterling was part of that formula as well, but it faded away later), and after 1972 we made a transition to the formula "money is backed by US dollar, and the dollar isn't backed by anything". Only a very, very naive person can be surprised that such a set-up ended in a crisis.

Speaking of how the situation might develop. The forecast of Mikhail Khazin and Andrei Kobyakov, as far as I understand, is that the dollar economy will crash and the world will unavoidably fall apart into several independent currency zones. This forecast was formulated almost ten years ago and the wave of current events confirms its main points. They believe that the present "anti-crisis measures" resemble attempts to "extinguish fire with kerosene".

Being solidary with their stance in general, I would like to note that generally speaking, one can extinguish a fire with kerosene. It depends on the amount of kerosene. If one pours a hundred liters of kerosene on just one liter that's burning, it's quite likely that the flame will be beaten off. My point, a remark on their stance is that I don't rule out a possibility that the USA will overcome this stage of the crisis as well, and will create another one -- a third one, in which not only will we see a circulation of fiat debt, but an exponentially growing circulation of fiat debt, and watching the charts of the rising US state debt, we clearly see that we are already in this third stage.

Elements of such an approach, such a solution to the financial difficulties have been seen in the policies of the world emission center for at least the past ten years. For reasons of pure mathematics, this can't last too long. Of course, for that one needs to pour on the presently burning fire of the economy not a mere trillion, but 10-30 trillions of dollars. As a result, the crash will be delayed and we will come back to it in a number of years, but with the sovereign debt of the US not of 10 as it is now, but perhaps 20, 30, 50 or 100 trillions -- that is, more than the world's GDP, which is variously estimated to stand now at 70 to 80 trillions by purchasing power parity. That's not a necessary, but a possible scenario. And only later will the predicted tearing apart of the world economy blanket take place, with the zones of influence of great powers and regional currencies. In other words, I state that the USA still have a chance to delay the end. They've even got some opportunities for counter-play here and there.

Gold as the basis of the new economic reality

In this scenario, a very important question is how these regional conglomerates of economies, the various currency zones will balance each other's accounts. My view is that in such a situation, gold will unavoidably return as the main tender of the global, inter-regional payments. One can't see even a slightest alternative to that.

The main argument of the critics of such a thesis is that "there won't be enough gold". In that, they price gold at its present level, not understanding that the change in the role gold plays, its return to the function of international tender, will unavoidably lead to a rise in its price to the level where its grand total price will dynamically match the price of the flow of goods and capital flows, which it will have to service. It is striking that the arguments in the spirit of "there won't be enough gold" are heard even from authoritative sources. This can't be explained in any way other than by their affiliation with the structures which in one way or another have their share in the profits of the dollar emission.

Recently we've seen the growth in the price of a barrel of oil from $15 (a year average for 1994) to $148 (2008), that is a factor of ten. Can gold appreciate ten-fold? Yes it can. Can it appreciate hundred-fold? Yes it can, provided there are economic grounds. One has to understand, that "there is no spoon" -- there is no upper limit to the gold appreciation. The price of mining does not limit such an appreciation in any way: we have seen the oil price near $150 while there are production sites where the cost of production is, say, $5 per barrel and that had no effect on the final price.

I would like to remind you that after abolishment of the gold backing of the dollar, gold quickly enough appreciated ten-fold (1970 -- $36 per ounce, 1979 -- $307 per ounce, year-averaged prices. In 1980, it got even to $613, but then it rolled back to the level $300-$400), and after the credit pumping of the US economy began in the early `00s, it appreciated three-fold in the decade.

There is no upper limit altogether. But significant economic consequences there are: we may soon see a group of "nuveau riche", rich gold-producing countries, which will take the place of today's Arab sheikhs. In the last two decades, only six countries produced more than 100 tons of gold per year regularly. These are South Africa (300-400 tons), USA (300 tons), Australia (300 tons), Canada (160 tons), China (150 tons), Russia (150 tons). South Africa will become world's richest country. Australia and Canada will strengthen their standing on the world arena significantly. A global change in the world-economy weight of countries -- and even continents -- is very much expected and unavoidable. Among the "nuveau riche", we will see Peru, Ghana, Papua New Guinea and some other ones which today are perceived as, pardon me, world's ass... Some countries neighboring South Africa, such as Angola, have considerable gold deposits, but their rise will depend on external security sponsors ready to install there "constitutional order".

In that sense, by the way, the answer to the question of "why Russia needs to build aircraft carriers" becomes a lot more evident, since only by maintaining a friendly regime in such countries by military force, can one expect to gain broad access to their resources. Right now, it costs a few dozen tons of gold to build an aircraft carrier, but in a new Golden Reality it will cost just a few tons. A military-political Gold Game abroad will be worth the candle and the cruise missiles.

Let me remind you that in the recent past, Angola hosted our strategic aviation base, which kept the southern Atlantic and the Indian ocean in check, while our interests there were guarded by units of Cuba army, ethnically more close to the local populace and without a "white colonizer" stigma. That's to the question of why Russia needs Cuba, and how our immediate future can be arranged. In our near abroad, counting on the Gold Scenario, a lot more attention needs to be payed to Uzbekistan which now produces almost 100 tons of gold per year, which is comparable to Russia and Central Asia in general.

Note that when I say gold, I mean all noble metals and even precious stones, including silver, platinum, other metals, diamonds and other precious stones. The appreciation will touch them all, although not evenly. Therefore for Russia it's likely fortunate despite the tiny size of our bank reserve of gold, since Russia has considerable reserves of gold in poor mineral deposits, and even in the XVIII-XX century dumps (tailings), which are uneconomical to develop at the current level of gold price just yet.

It is clear that within the framework of such a forecast, the approaches toward international politics undergo substantial changes. The African direction becomes one of the key ones in the world politics, rather than an honorable demotion for diplomats. In such a vision of the world, Africa is the future field of confrontation of the great powers, and one needs to begin establishing beach-heads there already now, until it is too late. By the way, we will have to lock horns there not with the US, but with France, which continues to consider Africa to itself something like what we consider Central Asia to ourselves.

Meanwhile, the role of oil will be gradually, slowly but steadily decline -- but that's a special long discussion. In essence, we are now living in the years of peak oil or close to that -- in the years of both maximum physical oil production and of maximum impact of the oil factor on the world politics and economics. And while today's physical oil output may be exceeded, its relative share in the world economy will begin to decline gradually in the XXI century -- just like it happened to coal in the XX century, even as the physical output of coal was growing, and growing quite fast.

While the role of, say, uranium will grow, which to a large degree is an African (and Central-Asian) theme. The Russian president recently expressed something along the lines that sooner or later the crisis would be over, and one needs to get out of it having gained in strength. First of all, I want to say, of course: "Gentlemen! You want to get strengthened, not weakened? Very good. Increase the fraction of gold in the gold and foreign currency reserves, to begin with, at least ten times. You will gain in strength all right." That's another theme, not the main one, of course -- the main ones are within our own economy -- but quite a working one -- to go to Africa. Having come to Africa in all seriousness and for a long time (that's gold, uranium and diamonds) we will exit the crisis in a completely different weight category. Yes, it doesn't hurt to make a dozen or so coups d'état there. There are huge discounts on them and a broad selection of offers. It's a buyer's market, if you will. And the buyer, as we know, is always right.

Gold as the world money

What will happen if the gold becomes world currency? If will begin gaining in price. How much? We can do quick math. Russia's gold reserves were about 500 tons in 2008. That's about 3% of our gold and hard currency reserves, which is very, very, very little. And this is while we are producing 1,500 tons every ten years, and can produce more. Speaking of the period before 2006, when gold went from the level $300 per ounce to $500 and continued to grow up to the present price of about $1000. The average gold price for the first half of `00s was $400 per ounce, $13.4M per ton to be exact. Russia's gold and hard currency reserves at the end of 2005 were $180B, out of which gold was a tiny fraction. Had the money been invested not in the American paper of various sorts, but into gold-group metals, Russia would have had by now extra $250B or gold and hard currency reserves, plus about $150B which could have been raised in the second half of `00s. Russia could have had a positive balance of gross national debt (sovereign and private) of about $500B (alas, today the debts and the hard currency reserves are about equal) and could have been watching the global crisis like an entertaining movie from a VIP lounge, having grabbed a cup of pop-corn. [...]

World's top three gold reserves:

USA: 8,135 ton
Germany: 3,428 ton
IMF: 3.217 ton

In reality almost all this gold is physically in the US, including the German gold. On balance, there are about 15 thousand tons of gold in the US, not counting that belonging to banks and private parties. Counting private gold, the total may be close to 20 thousand tons, which is about half of the global gold assets (and the global reserves count about 30 thousand tons in state reserves and about 10 thousand tons of private gold). About 80 thousand tons of gold globally is immobilized in jewelry, according to GFMS, it's on fingers and ears and we don't have to count it -- without hunger, war and plague it will not enter circulation. All that gold -- all the global gold not counting jewelry -- now, at the current price of $30M per ton -- is only about $1.2 trillions. [...] Of that gold, about half is in the US and a quarter is a property of the US government. Note that Germany which does not mine gold, having a GDP similar to ours, has seven times more gold reserves.

Based on these numbers, we can estimate the growth potential of gold in the scenario when it turns into international tender. Of course, this is a very approximate calculation, based on the balance between dollars and gold. The dollar banknotes, the little green pieces of paper, are not too numerous in the world. In January 2009, according to the Federal Reserve Statistical Release, the M1 aggregate was at 1575.0 (roughly, $1.5 trillion, year-on-year rise was 15%, out of which $800B was cash), the M2 aggregate was at 8244.0 (roughly $8 trillion), the M3 aggregate is no longer published.

By the way, quite recently, in 2006, data were published, according to which 2/3 of US dollar cash was circulating outside the US. The global economy demand for international tender along with gold and hard currency reserves can be estimated to be of the order of $10 trillion(currently these transactions are settled in US dollar, Euro, barter and partly in gold), which indicates that in the gold-based model of the world economy, gold can appreciate about an order of magnitude compared to today's price. That's a very rough estimate, but it's on target. More accurate estimates are practically impossible. In this case the USA will make a few trillions only on the dollar appreciation, which is about half the present federal foreign debt. One can not ignore this when evaluating the prospects of the USA in the Golden Economy. Let me emphasize once again that the USA has a good counter-play no matter what course the events take. Whether they will play their cards right is another question.

Gold production and emission

To check the gold forecast, let's compare the investment potential or fiat money with that of gold. Emission of fiat money (in reality, the predominant part of monetary emission is bank accounting records, not cash, therefore a more accurate term would be credit emission) fluctuates strongly year by year. The numbers for the US have been quoted above. On gold: 2.7 thousand ton was mined globally in 2007, which in today's prices (of around $1000 per Troy ounce or $30M per ton) is about $70B. Metals of gold-group have to be added to this amount, of course -- in total, we obtain about $100B of yearly emission in gold. Out of that, industry consumes about 1000 ton.

If the global GDP will, as in the past years, grow at the rate of 2-3 trillions a year, and the regular demand of new money emission globally will be about a trillion dollars (in today's purchasing power), then the potential, the upper limit for the gold's appreciation in case of a transition to gold-based transactions is up to ten times compared to today's price. Of course, the new price ceiling will pull into active use those gold deposits which are at the present level of price uneconomical to develop. (Today's global average production cost of gold is about $10 per gram, which is about $300 per Troy ounce, with large spread country to country). This will change the accumulated reserves little, but will affect new gold entering circulation which possibly will not let gold reach the upper limit of $10,000 per ounce. But under any scenario, we confidently forecast the gold price to increase by a factor of several times in the coming decade.

If you've got other assumptions, other input to apply when determining the "fair price" of gold, I will be glad to hear them. Of course, a change in the world economic order may decelerate the global economic growth very much (and during the recession phase, gold may not appreciate at all), but in general, our preliminary estimate that in the gold standard framework the appreciation of gold will be bounded in a broad corridor from today's price gradually upward to the resistance line at around $10,000 per Troy ounce -- that forecast is confirmed by the emission-based calculation as well.

Obviously when I say "an ounce of gold may enter the level of $10,000" I mean its purchasing power in the global commodity markets -- energy, metals, food -- in other words, an ounce of gold will be able to buy the same basket of commodities which now sells for $10,000. How much the dollar itself will be worth, and whether it will survive as a legal tender in the international transactions, can not, in my humble opinion, be subject to any forecast at all, since the gold volume is physically limited while the dollar emission is not. To economists of the 1960s, today's dollar emission numbers would read like letters from the madhouse.

The spirit of postmodernity and the new financial order. By Alexander Dugin.

2009-10-07T11:05:00.000-07:00

Canis Ferreus' Note: The original article by Alexander Dugin was published in a Russian conservative newspaper in September 2000. I still find the context in which this piece puts any financial forecasting research quite stimulating. Being no professional translator, I've taken time to translate this piece from the Russian in hope that English-reading public worldwide will find it interesting as well. My opinions may differ from the author's.

1. The paradoxes of postmodernity

Despite the fact that the postmodernist approach has established itself as something irreversible and total in the modern culture, the content of the term "post-modernity" is still subject to lively arguments. Post-modernity as a move, as a pose, as a style, as a method, as the specifics of our attitude towards the objects of art and technological strategies has gradually entered the very flesh of our society to such a degree that it's hardly possible now to discuss what is and what isn't post-modernistic. The permeation of postmodernity into the elements of our being is so deep that it's no longer possible to disentangle it as something independent. Therefore all interpretational and gnoseological models, built on the principles and presumptions different from the vague and evasive maxims of post-modernity, have to be addressed not to the general public but to a very narrow community of experts.

Post-modernity differs from modernity just like modernity itself differs from pre-modernity. On a number of counts, post-modernity managed to establish itself in all seriousness and for a long time, having seduced and hypnotized with its extravagant elements all those who are able to catch the universal aggressiveness of its methodology.

Modernity, having come to replace pre-modernity, in its turn, pushed to the periphery, if not into non-existence, everything linked to the traditional paradigms. Pre-modernity retired into the sphere of disjoint fragments that saturate the periphery of consciousness and the broad fields of the unconscious. Research and de-mythologization of the traces of pre-modernity would constitute the most entertaining pass-time of the twentieth century modernists. The interest in the "irrational" was in reality an aspiration of the victorious "modernistic rationality", which became a universal language, to explore those gnoseological layers whose overcoming was the basis for the spirit of modernity.

From the very beginning modernity dealt with pre-modernity very harshly. The Enlightenment rationalism simply ridiculed the traditional society and its structures, discredited them, brutally drove them into the underground, got them decapitated like the last French king. To non-modernity, the very right to existence was denied. It was demonized as "reaction", labeled "backwardness", "lack of civility", "primitivness", "archaism", "obscurantism" etc. In fact, pre-modernity was tabooed. Not until the XXth century has an interest toward this "exceeded level" re-emerged, and it turned out that modernity rushed things a bit proclaiming pre-modernity to be defeated, non-existent, eliminated. The modern man turned out to be a lot less rationalistic and a lot more archaic than positivists triumphantly stated. The more brutally did modernity treat pre-modernity, the more aggressively did the rudiments of the latter behaved later on. The European fascism was a bright flash of such a reaction. Bolshevism, ostensibly operating with rational models, was recognized to be an archaic reaction somewhat later. Tragically and gradually, in the XXth century the spirit of modernity was discovering the limits of its victory and realizing all its shakiness. The factual man turned out to be too much booby-trapped with the archetypes of the past ages...

Post-modernity replaced modernity as a sum total of pessimistic reflexions, as a result of the exhaustedness of modernity's triumphant aspect, as a result of a crisis in the aggressive aspect of positivist critique and belligerent rationalism. Post-modernity explicitly incorporated the failure of the strategy of modernity. But does it signify a new, alternative direction? To what extent is the analogy between pre-modernity and modernity, on the one hand, and modernity and post-modernity, on the other, justified?

That's not an easy question. Habermas holds an extreme stance on the issue. Some "new right" thinkers (in particular, German philosopher Armin Mohler) who welcomed in postmodernity the crash of rationalism and positivism, hold the same view -- but with the opposite sign, re-interpreting in their own favour the newly found unlimited plurality of interpretations that came to replace the one-dimensional modernistic totalitarianism.

As an alternative, there is an opinion that postmodernity is not an antithesis of modernity, that their apparent paradigmatic difference hides the deeper unity of their vectors. Such (or similar) is the view of Jean Baudrillard, the post-history theorist. In such vision, postmodernity is disclosed as a new move in the strategy of modernity, who realized the ineffectiveness of fighting the pre-modernity via direct negation. In that case a subtler position -- readiness to reveal the archetypes, already gone into the unconscious -- is occupied by modernity, but only in order to "cure" these archetypes, rather than to release them.

In the course of its totalitarian and unshared dominance, modernity went down into the depths of the unconscious assumptions, became a "natural" language, shaped the unconscious.

Meanwhile, the pre-modernity, having stayed in a "cultural ghetto", lost vitality, got weak, isolated itself. Pre-modernity rose from the human underground -- blind, worn down, tired and inviable, vampire-like, phantom-like (hence, the incredible popularity of the vampires and "revenants" in the modern mass-culture). Moreover, pre-modernity turned out to be considerably contaminated with the elements of modernity -- at least, those of them, that managed to get assimilated by the depths of the unconscious.

Thus, postmodernity emerges not as an overcoming of modernity, but as a continuation of the latter, its final stage, called up to crown its original strategy. Hence the notion of the "end of history" (Francis Fukuyama) and similar concepts of the optimistic liberals who have identified post-modernity with the ultimate victory of their ideals.

Beyond doubts, both views on the essence of postmodernity are grounded. But it's hard to prefer either of them. The content and the meaning of postmodernity can not be grasped in their final volume, since we are talking about an unfinished process, in which we all participate and whose outcome will be largely determined by its future trajectory. If Habermas and Mohler are right, the elements of pre-modernity, disperse as of now, will be able to self-organize into a conservative-revolutionary pole, to form a historical subject, which will chart a new, alternative course of civilization, where the traditional will be rehabilitated, modernity will be recognized as a subversive perversion, and a new paradigm will be formed. If those who consider postmodernity a new tactics of the modernity are right, then today's chaos will lead to the final de-ontologization of the archetypes, who will lose their viability. The man will be able to subject himself to cloning peacefully, as a purified bio-mechanism, eventually liberated from the "ontological fog". And the history will indeed end, since its subject -- the human being -- will disappear.

2. Market, the only legitimate heir of modernity

Many economists speak today of serious transformations in the market system, which mean a change of paradigm in this sphere, too. In a sense, the financial sphere is subject to post-modernization, just like the spheres of culture, of social institutions, and of the politics. And naturally, the content of such a post-modernization is just as questionable as the general definition of postmodernity in all other fields. Let's consider this problem in some detail.

Modernity projected itself onto two basic economic models, equally aspiring to succeed to the spirit of Enlightenment, to rationalism, to the orthodox compliance to the basic contemporary norms: liberal-capitalism and socialism. Economic history of the XXth century was a dramatic confrontation of the two systems -- the capitalist one and the socialist one -- for the right of becoming the main heir of the Enlightenment. Both camps contested in the orthodoxy of their views regarding the modernity, rivaled each others loyalty to the trajectory of civilization set at the origin of the New Time. Marxists considered their theory to be more "modern", and therefore, were convinced that the future would belong to socialism, which was destined to overcome the "archaic capitalism", the latter being an economic model contaminated with the rudiments of the past. Liberal economists saw socialism as an economic heterodoxy, the round-about path of the modernity, leading one away from the clear and simple principles of the free market, economic egotism and the social equality of opportunities, which are the basis of the modernist outlook.

It is in this contesting of the legacy of Enlightenment, by the way, that the philosophical basis of the "anti-fascist convergence" lay -- the basis of the Allies' relationship during the WWII. The two camps of the modernity stepped out together against the reborn "pre-modernity".

After 1945, the rivalry of the two economic systems intensified. Development of the techno-sphere, social problems, ecology, geopolitical tensions -- all that required determinateness from the two rival economic systems, each one aspiring to universality. Three different scenarios were possible:

Convergence of the two systems on the basis of the common ancestry, the loyalty to the modernist paradigm

The global victory of socialism (which would mean that the liberal model is less adequate to the spirit of modernity)

The victory of liberalism (which would mean, on the contrary, that socialism is the more archaic and, correspondingly, less modernistic phenomenon).

Up until recently, this was an open question, and only in the 90s, the third scenario became a fact. This practical turn of events -- victory of the liberal, market paradigm over the socialist model -- carries a huge conceptual meaning for the assessment of the actual content of the models of social and economic development of the modern civilization.

The fact of the victory of the liberal West over the socialist East is the signature of the greater modernist orthodoxy of the capitalist model. The Soviet socialism combined the progressist discourse (a modernist component) with the archaic underpinning of the social organization (a pre-modernistic component). Likewise, in the liberalism, modernism was combined with certain social institutions of fairly conservative flavor (monarchy, the inheritance of fortunes and the like).

Events of the early 90s proved, that the socialist model is more archaic and pre-modernistic, whereas the liberalism has confirmed its historic right to the unshared possession of the modernist fortune.

Curiously, the Hegelianist Kozhin, liberals Popper and Hayek, Raymond Aron, the French "new philosophers" Bernard-Anri Levi and Andre Glucksmann have foreseen such a development. The crash of the Soviet camp has ultimately proved this hypothesis.

The market and the modernity coincided. The plan lost, having revealed its pre-modernistic underpinning. The victory took place not just on the level of the economical and technological effectiveness. History herself pronounced her judgment, at least the line of history that identified itself with the New Time.

Therefore the modern economic history is the history of capitalism, and in it, the socialist experiment is a temporary deviation, an aberrational loop. Such an understanding of socialism is taken for granted by the most consistent of the liberal economists, and it explains, by the way, what's behind the media-cratic cliche of identifying the "red" with the "brown".

Socialism, having not proved its right of succession with respect to modernity, can not aspire to the leading role in determining the paradigm of postmodernity. That new which corresponds in the economics to the stage of transition from the modernity to the post-modernity must be found exclusively in the framework of the capitalist model, in the space of market. Therefore for the future, we drop the appeals to socialism, Marxism and so on.

The newest transformations in the market system must be studied, based on the market itself, and its immanent laws.

3. The magic world of finance

In the modern financial system of the capitalism there is a sector, which corresponds the best to the post-modernistic spirit, incorporates the economic equivalent of the basic post-modernistic strategy. We are talking about "technical analysis".

That's the customary name for the theory and practice of playing the market, based exclusively on operating with trends. George Soros, the prodigious figure of this field, who has accomplished in it the most brilliant result, calls this the "alchemy of finance". Indeed, technical analysis, completely isolated from the very basis of capitalism -- from figuring out the balance of supply and demand -- resembles a mystic discipline.

John Murphy, the greatest theorist of this field, distinguishes three basic principles of technical analysis, which he confronts with the traditional market analysis -- the "fundamentalism":

Market discounts everything

Prices move in trends

History repeats itself

The first point means that the emergence of some unit on the stock or commodity market already includes in its price all aspects of reality, related to this thing: not only the pricing mechanism, but also the social context, political mutations and even the possibility of natural disasters. From now on their reality is lifted.

The "fundamentalist" approach, proper to the classical liberalism, would refrain from such an absolutization. It never stated the complete separation of a thing from its environment. The most consistent fundamentalist trader, such as Buffet, would emphasize not what is happening in the market, but the business cycle which precedes this happening.

Even though the principle "market discounts everything" looks like the familiar classic of the liberal theory, it looks as though some typical post-modernistic ironic hint glances through it. The complete absolutization of the market and the market price of goods in separation of the business cycle in reality mystifies the very reality of the market, turns it into a separate instance, which controls existence, based on its own virtual laws. The market is stated to be not the conclusion of the business cycle, but its reason, and therefore, a serious shift happens in the implicit ontology of capitalism.

Classic capitalism defined the being of a thing through a balance of supply and demand in it. That was, of course, an ontological relativisation compared to the pre-capitalist models of ontology, where things were assumed to have more independent basis, related either to the degree of its hierarchy in the Divine scheme of creation (creationism), or in its immediate link with the Deity (manifestationism).

Technical analysis is an even more radical step away from the traditional models of ontology. With the formula "market discounts everything", a separation from even extremely relativistic model of supply and demand occurs, and the being of a thing is placed into the elements of permanent trading in the virtual spaces of the exchange. In this situations, forms such as "portfolio investments", "circulation of hot money", currency operations and especially debt servicing, assume the central significance. A transition from the market of real goods and stocks to purely financial schemes, to the virtual economy, in which the pure movement of capital is the most important thing.

When we state that "the market discounts everything", we assume the factual autonomy of the financial system with respect to all the other aspects of reality. But since this reality is assumed to be capitalist reality, the new financial order reveals itself as postcapitalism or virtual capitalism. In this postcapitalist model the emphasis falls not on the dynamics of supply and demand, but on the organisation and control of the fund exchange and futures flows, which assume an autonomous meaning, become self-important and central, marginalising the "real economy" sector and the traditional trade. The movement of capital in the market cycles becomes so important and significant, operates with such numbers (often of ephemeral meaning), that traditional sectors of the economy become insignificant in comparison...

"Prices change in trends" -- this can be regarded as the second signature of postcapitalism. The concept of trend (the basic notion of technical analysis) first appears in the theory of Charles Dow. Watching dynamics of market prices, he suggested to consider the stock price movements not as a chaotic process, but as a trajectory with implicit logic of its own. The market fundamentalists tried to discredit the very notion of a trend in the popular Random Walk Theory, stating stochastic nature of the exchange price movements, which are completely determined by the balance of supply and demand. The technical analysis campers, on the contrary, absolutize the concept of a trend, believing that the very presence of a price trend after passing a certain stage is practically unrelated to the processes outside the stock exchange, and the market price is composed by the immanent laws of virtual trading. An important philosophical consequence follows: market price dynamics within the system of trends becomes a process, independent of the actual reality of the commodity or stock. This is an expression of the same process of de-materialisation and transition to manipulations with signs, detached from reality, which Baudrillard considers the characteristic signature of postmodernity. The autonomy of a trend is nothing other than the market expression of the autonomy of a sign. Besides everything else, such an approach can result in price trends existing in reality even when the underlying market object is purely nominal, fictitious. By the way, in the case of portfolio investments, servicing and restructurization of global debts and other similar financial processes we are talking about real operations with fictitious objects...

Finally, the third thesis "history repeats itself" resembles directly the picture of the world which existed in the pre-modern conditions. The irreversibility and single-directedness of history is the basic element of the New Time (modernity). The progress, the translational, one-way development are the inalienable vectors of the modern rational thinking, predetermining all that corresponds to the "conventional wisdom" after Enlightenment. The perception of time as a cycle is, on the contrary, the brightest signature of the traditional society. Applied to the analysis of the stock exchange cycles, the technical analysis states what is clearly a non-modernistic truth. And since it is the market that constitutes today the ontological sum total, the statement of its cyclic nature de facto applies to all other aspects of reality -- for "the market discounts everything"...

The new financial system, charted most clearly in the concepts of technical analysis, is described in terms of pre-modernistic disciplines: the "alchemy of finance", "self-fulfilled prophecy" (a term analysed by Murphy which resembles theurgy of the ancients), "market wizards" (the title of a best-seller by Jack D. Schwager). Here we deal with an embrio of new reality, with postcapitalism, a bright manifestation of post-modernistic spirit in the sphere of economics. If one can dismiss the postmodernist themes in the sphere of culture (as do those who do not realize the seriousness and depth of the fundamental civilisational mutation, denoted by the term "postmodernity"), in the sphere of finances and the economy it is not so easy to dismiss.

4. To read the chart of the future correctly

The magic mazes of the new economics, neo-auguric art of "chart reading", financial hermeticism pose in front of us the same problems as do philosophical manifestations of postmodernity in other areas. Just like we leave the question of the ultimate meaning of postmodernity open, one can not sentence the maturing mutation of the economic model, the transition from capitalism to postcapitalism. Postmodernity does not simply reject modernity, it ironically equates modernity with pre-modernity, but with the pre-modernity taken as a fragment and a void sign. The new financial system in which technical analysis and magic speculations of the traders of the Soros' type will take more and more central positions, does not eliminate the mechanisms of classic capitalism, it assimilates them in a lifted form, equating them with the fragments of extravagant priniciples, borrowed from completely different historico-cultural and economic contexts. And it's very likely that, having overcome socialism and other, even more archaic forms of economy, the new financial order in the future will absorb selected exotic elements borrowed from alternative economic models. One can not exclude a priori, that post-capitalist reality will at one point put Marxism in vogue again, just like clothes of the 50s, 60s and 70s become fashionable in the New Wave teenage stylistics.

We are on the threshold of the brave new world, the world of exchange magic, hermetic spells of the brokers, electronic movement of the autonomous capital. This world has many various features -- grotesque, ironic, extravagant, exotic and sinister.

Postmodernity is the change of the basic paradigms. We ought to try to realize their essence, to decode the content of this most complex loop of the human history. And the key to such realizing -- one of the keys, at least -- is the close analysis of the newest economic trends.

Postcapitalism is irreversible and unavoidable. But who can tell what it is?