Financial Sense Blog

The military power with the best tanks, aircraft and ships doesn't always win a battle. Wars may be decided by many factors, including non-military factors. For example, a military confrontation may be decided beforehand when a society gradually turns to recreational drug use; or when the work ethic collapses; or a significant segment of the society unwittingly adopts the enemy's ideology; or the political elite of the country shows itself to be corrupt and contemptuous of the public.

There are many market participants out there whose nerves appear to be pricking up lately as we approach the two worst months of the year, more so given the fact that the S&P 500 has risen more than 50% from the March lows and is overdue for a correction. Last year should have made the point that in terms of the financial markets, anything and everything is possible as we appeared to be on the brink of a systemic collapse. However, while anything is possible, how likely is another 1987-like sell off in the weeks ahead, or even a sell off similar to the 1998 Asian Currency Crisis?

On Aug. 16 we read in Pravda.info the comments of Vladimir Filin, a self-described Marxist and former GRU officer living in Kiev, well-connected to KGB structures, supposedly aligned against Putin, marching in the "revolutionary movement of all enslaved peoples" (especially those in Finland, according to his Live Journal blog). Filin's business interests reach from the poppy fields of Tajikistan to the lumber mills and chicken farms of Brazil...

The forecast projects that the spending waves for the US and Europe (incl. Eastern Europe) has topped relative to the rest of the world, the peak was around 2007-2008 and that the trend will be down until 2024-2025. In the coming years the number of the retired and the disabled will rise to unmanageable levels. Europe, Russia and Japan are expected to lose more than 30% of their population during the next several decades.

Early last week, Gary Dorsch wrote a timely article titled: "Chinese Red-Chips Show Signs of Fatigue." In his article, Gary pointed out the parabolic move in the Shanghai stock market and signs of a possible reversal. I especially liked one of his charts (below) that discussed the psychological underpinnings to the reversal because that's what charting is—the sum of mass psychology.

Last month George Friedman of STRATFOR.com wrote something of special interest. According to Friedman, on July 17 a crowd near Tehran University was heard chanting “Death to Russia!” This particular crowd contained “elements” hostile to Iranian President Ahmadinejad...

With U.S. household net worth down US$14 trillion since the peak in 2007, Congress has belatedly started to act concerned about the financial condition of the American consumer.

The rally off the March lows has been something to behold with the S&P 500 up more than 45%. The market has climbed a wall of worry as many financial pundits were repeatedly looking for a market top for the bear trend to continue or a significant pullback to at least offer them a chance to reenter the market.

If you want to thoroughly understand something, examine its origins. With regard to nations, examine the nations’ founders; for nations draw their character from men; and the character of men may be read in their words and deeds. Today the world stands on the brink of a great transformation: what Marxists call “The Revolution.” Through global economic distress and upheaval, with help from its Russian partner, China hopes to become the world’s chief power in East Asia, the Pacific and North America...