Palpara Merchants

Each day the S&P 500 makes new all time highs, and everywhere you look are smart people telling you how bad things are because of the Fed. Danielle DiMartino Booth, Ben Hunt of Epsilon Theory, Bill Gross and John Hussman all have incredible insight into why things could go wrong but don’t. Everyone of them is intelligent. Everyone of them is seemingly upset with the Fed for unleashing ZIRP on the world. But the problem is the consequences are invisible and if they result in SPX making new highs on a daily basis, no one really cares or believes the Fed has done anything wrong. All the dire warnings are cast as “fear mongering” which we know is a habit only miserable bears engage in while the bulls laugh all the way to the bank…

The truth is no one is leaving the EU tomorrow. We all know Brexit will never happen. We all know as soon as Britain votes to remain the SPX can definitively break through 2100 and attempt an overtake of all time highs. When the SPX closes at all time highs, the Dow Jones Industrials will likely be close behind. Then the trade will be to buy the transports because Dow Theory tells us transports have to make a new high and algos know this! So the algorithms will see that the transports are 20% from new highs and begin to ramp the whole index. I like DAL and LSTR the best. They both have cash from ops that exceeds cap ex+ dividends+ buybacks.

Gold is likely to become outdated as an anti-system store of value as technological advancements become integrated into daily life, and we are not talking about block chain becoming currency (which it is becoming). Gold may not be as rare as we thought.

Large hadron collider will be used to understand the very nature of atoms. We know that atoms can be best described as vibrating energy. This idea we get from the formula that energy is matter (e=mc^2) which gives string theory it’s appeal. So atoms are matter and matter = energy so atoms- protons and electrons- are just energy.

After more grants and research dollars are tossed at these progressive scouts of the new world like John Hammond to Dr. Grant in Jurassic Park, they will surely be able demonstrate some level of adeptness at turning atoms of Pb into Au. This will make the much more rare Au virtually worthless in the wild. So no longer will “plowmen dig the earth” as Dylan sings.

Most assets that depend on gold mining for their income stream are worthless as actual alchemy is likely to be acheived in mankind’s measureable future.

Most young people hold the opinion that as far investment vehicles are concerned, ETFs possess many advantages over mutal funds. For most educated, relatively well-to-do young people this preference for ETFs over mutual funds is warrented. Readers will generally understand the reasons that ETFs are a better choice. If you are reading this and dont understand why ETFs are better, you should just go to www.morningstar.com and pick a highly ranked, broad based, balanced mutual fund (balanced means the fund will contain both stocks and bonds. You really only need one balanced fund with a good manager, and Morningstar does the best job at figuring this out for you). Now, if you understand that ETFs are your best method for investing, here are some important concepts you must incorporate into your investing methodology.

•Market timing (which is just tilting at windmils for most investors) is not the same thing as waiting for value to emerge before buying (which is prudent and responsible investing).

•Almost half of S&P 500 earnings come from outside America so don’t fixate on domestic vs. foriegn exposure- the SPY will get you a pretty good mix of exposure to US and foriegn earnings.

•Bond ETFs do not possess the same desirable characteristics as stock ETFs (only US and Japanese government bond ETFs have the same qualities as stock ETFs that make them desirable investment vehicles; corporate bond ETFs are a very different story).

•Investing for the long term means ignoring short term fluctuations in both directions- yes, it is OK to excercise patience if the market is too richly priced based on its historical price-to-earnings ratio.

Avoiding the misconceptions above will improve your understanding of how to make ETFs a great investment vehicle for your portfolio.

We have discounted the facts:
USA consumes about 20 mbpd of crude oil. (OGJ link)
We have at most 480 mbrl crude in storage
We have another roughly 35 mbrl off shore TX (Bbg link)
That means we have about 10 and 3/4 days of crude supply.
We produce roughly 10 mbrl per day.
Saudi Arabia is in control of world crude price for the next decade.
Isis makes all its money selling crude on the black market (how about just stop selling them Toyotas?)

What’s not factored in:
The largesse of the great bailout (we saved the autos when we should have just cut the smallest one, Chrysler, and bailed out just GM so as not to send Ford’s suppliers under; now there are so many autos we have Volkswagon cheating and so many excess autos are getting into the hands of Isis enough to provide them a fleet of vehicles to assist them in their evildoing). Some of these autos have to go away.

The war in the Middle East re-conflict. Oil is difficult to get out for export.

Cyberwar fare becomes real, the government needs Watson to sort through big data and IBM becomes the next generation arms manufacturer. Warren buffett’s IBM stake soars.

The hackers that Russia has been training and then defect to do Bond villain stuff like Borris in Golden Eye get into a face off with USA like the Cuban missle crisis but with cyber nukes and this time Putin does what he probably wishes Kruschev did. I wonder if Putin is that crazy…

A beloved computer company is investigated for using the microphones and pictures of it’s devices when intimate sized groups of users are gathered in one location (check the banner add on your smart phone browser next time you at a party watching football on tv). In a Snowden like leak it is revealed that the iconic company was selling at a premium those advertisements that were based off real time interaction with friends; the product in the add being gently introduced to you in a hardly noticeable banner add. Products recommended to you by your friends are of more value so why not an add shown to you while you are having a good time with your friends? The stock of the famed empire crumble amidst the scandal.

A combo cyberwar and ground war completely shut the supply of oil off for two weeks and we consume our supply of oil in about 11 days in. The USA goes for 3 days with no crude oil to be had. The price of crude skyrockets as people bet in fear that the government is lying to them about when crude will be back on line but then price plummets after 3 days pass. Crude oil stays permanently low in a deflationary trap set by the Keynesionites. There are no more wars cause oil is cheap and plentiful and no one wants it.

None of this is priced in 🙂

The autumn of 2015 was a timeline rich with events that saw made one of the greatest, back door political deals in history. It started with the Freedom Caucus ousting Speaker Boehner. This was widely known and reported on so no “shocking but true” revelations here. Right after Boehner resigned, Kevin McCarthy was rumored to be the top spot for Speaker. However, what happened next was too outrageous to be a gaff: McCarthy went on Fox and said to Saun Hannity something to the affect that the Bengazi hearing largely accomplished its goal of throwing a wrench into the gears of the Clinton campaign!!! Now McCarthy is no fool. He didn’t get to the number 2 spot in the House majority by being politically inexpedient. He knew exactly what he was doing when he said that. He was sacrificing his chance at speakership (which is reported to be a job that no one wants at present) in order to slander the reputation of the hearings which were being headed by the chairman of the Bengazi commission, Trey Gowdy- a known member of the Freedom Caucus that ousted McCarthy’s boss, John Boehner.
Was this slandering by McCarthy just revenge on Gowdy for making his life so difficult while he worked for Boehner as whip? Whatever McCarthy’s reason for trashing the Bengazi hearings weeks before Hillary Clinton gave her testimony, the revenge exacted upon McCarthy for his slandering was even more brutal. Days after McCarthy steamrolled Gowdy’s investigation, there was a Wikipedia entry for McCarty’s Wikipedia page that stated McCarthy was having trouble getting the speakership nomination due to an affair with a female member of Congress. Previous to this Wikipedia entry, there was no concern about McCarthy or his alleged affair, but the Wikipedia entry de facto made it an issue and focused attention to the matter. We know this Wikipedia entry was a plant because the IP address that made the edit to McCarthy’s page was assigned to a computer terminal located in an NSA building! That’s correct, government employees in charge of collecting everyone’s data to make us safe were on Wikipedia making edits to top Representatives pages to exact political vengeance. Shortly after this, McCarthy withdrew from nomination for Speaker.
The next event in sequence that proves a deal was made is Vice President Joe Biden officially announcing he would not join the campaign for president, even after he was pulling ahead of 3 other candidates for the D’s in some polls. Evidence for a grand deal being made lies int the fact that Biden’s “not running” speech was actually a “I’m running and this is what my campaign will be centered around” speech with the word “not” tossed in before running. We could see it in Biden’s face during his interview with Steven Colbert on The Late Show that Biden wanted to run but the party was telling him not to because they didn’t want to mess up winning the White House for Clinton. The timing of Biden’s message was peculiar in that it was just one day before Clinton’s testimony. If there was no deal made and Biden was truly allowed to make up his own mind about running, logic dictates he would have waited until after her hearing to see how it went; if she bombed in front of the committee than Biden would have to run for president to save the party’s chances at retaining the White House. But Biden knew Clinton would breeze through the testimony because he knew she would be given softball questions because Biden knew there was a deal made. The components of the deal were this:
-Boehner steps down to satisfy the hard right.
-the left gets another Speaker that will work with them, Paul Ryan.
-the R’s get to run against Clinton in 2016 which is what they want because they know she is polarizing and the GOP base will come out to vote against her, whereas they may not if it was Biden the R’s were up against.
-Clinton gets softball questions at her testimony.
-the government avoids a shutdown and gets funded without a planed parenthood funding fight.

Executive Summary:

•Keystone XL won’t be built because Warren Buffett doesn’t want it built.

•Koch bros do want Keystone XL built.

•W. Buffett lives in Omaha, Nebraska.

•The proposed route for XL goes clear across Nebraska.

•The company that wants to build Keystone XL, Transcanada, needs to lay pipe across Nebraska so they don’t have to pay either Enbridge or Kinder Morgan to the north or south of Nebraska respectively to move oil in their pipes.

•Keystone XL will ship crude from tar sands where Koch bros are invested.

•If Keystone XL doesn’t get built, crude from tar sands continues to be shipped via Burlington Northern Santa Fe railroad, owned by Warren Buffett.

•Indeed, looking at a map of US oil pipelines we see no pipes going through Nebraska, a state whose legislature is well attuned to the desires of the world’s richest person who happens to reside in the Cornhusker State.

•W. Buffett is worth $65 billion.

•Koch bros worth a combined $100 billion or about $50 billion each.

•This is how the ultra elite have a quarrel.

•It’s as simple as that. Keystone XL won’t get built as long as Warren Buffett still holds wealth and political influence.

•It has nothing to do with the environment (indeed shipping via rail is just as if not more detrimental to the environment than building a pipe) or lowering the cost of oil by increasing supply (the crude oil already comes here, it just has to go through Enbridge or Kinder Morgan pipes currently).

The real reason keystone will never be built:

It amazes me how much commentary and analysis there is about the subject of the keystone xl pipeline and how little of the commentary is based off facts. Virtually all the commentary is either pro or con Based on party affiliation. You will be hard pressed to find any D that would favor keystone xl and harder still to find an R that doesn’t think refusing to build keystone is a national tragedy. My heuristic is that when a topic so ordinary such as a pipeline (of which there are many in this country) is so polarizing to supporters and opponents, there are two large interest groups shaping the public debate, each jockeying for their perspective positions.

Ask anyone that has a great conviction for either side of the argument about keystone xl if they have ever looked at a map of the contested pipeline route. I am certain that everyone with conviction about keystone has NEVER looked at a map of the pipelines of the US. If they have, they have zero critical thinking skills and shouldn’t be forming or expressing views related to matters of civics.

Take a look at this map of all the existing pipelines in USA and the proposed xl route. The first thing you should notice is that there are already many pipelines that go from the location xl will originate to the location xl will terminate. From Alberta to Louisiana there are many miles of pipe but none of it crosses through Nebraska. That state is absolutely barren of pipe, when all other surrounding states seem to have many. This curious observation is what intrigues me and gives us the true story of keystone xl.

Warren buffet operates his corporate empire from Omaha, Nebraska. He owns a railroad that mainly ships coal and crude oil around the west and Midwest. The pipelines are his main competition. It is reasonable to assume a man with vast wealth seeks to preserve that wealth and has a vested interest in decisions being made by politicians insofar as they affect his profit and loss. It would make sense that there all no pipelines going through Nebraska if you first assume that warren Buffett is influential with the Nebraska legislature and then assess the process for getting permitted to build a pipe. It is a highly regulated process and there high barriers to entry.

On July 4, a sell TLT trade was suggested based on the technical breakdown shown in this video. So far it’s working. The second part of the trade was to get long TLT at $100. With the TLT at $106 and very weak today, the trade remains.

Little talked about, is the Portuguese yield breaching 7% today. Last summer, the dreaded 7% mark was watched with anticipation as an indicator that the Spanish and Italian markets were going to collapse…

Bonds are getting whacked. Here is a video link to show you how to invest in bonds using the TLT ETF.