The Chinese Are The Happiest People On Planet Earth Now.

Chinese is four times more optimistic than Americans about their economic future.

Optimism is decidedly out of favor in the United States. The slumping housing market, the credit crunch, high oil prices and a weak stock market are all making most Americans very bleak indeed about their economic future.

Meanwhile, halfway around the world, citizens of a certain very large country are all smiles. With the Olympics just a few weeks away, Chinese attitudes toward their nation’s future and its economic prospects have literally never been better.

According to the Pew Global Attitudes poll, 82% of China’s urban population considers the country’s economic situation good. A mere 20% of Americans, on the other hand, have a positive economic outlook.

And while the study is biased in favor of urban-dwellers rather than the rural population -- who are prone to rioting over high food and fuel prices -- it's evidence of general satisfaction with China’s progress since it began the transition to a more open economy 30 years ago.

The Wall Street Journal reports that most Americans have a false impression of the Chinese as toiling miserably under the heavy hand of Communist oppression. The surprisingly high level of optimism belies that view.

"Many Chinese view their country as more prosperous and freer than at any time in their lives. Many Westerners focus instead on continuing human-rights abuses and social injustice, comparing China to the yardsticks of their own societies.”

12 months ago, conventional wisdom saids China would crumble after the Summer Games, and investors will took profits accordingly. Now, with the global economy staring down mounting inflation and slowing growth, such an optimistic viewpoint seems distinctly counterintuitive.

But the Chinese don’t seem to give a hood what the rest of the world thinks, and scoff at the idea that the faltering developing world will drag China down with them. They expect prosperity to continue, a belief that may well become self-fulfilling.

Economic activity is made up of billions of individual transactions, the characteristics of each determined by the preferences of the actors involved. Whether it’s the purchase of a light bulb, buying a Toyota or making a late-night Bid Mac run, economic decision-making is driven by the attitudes of the individual. Those attitudes coalesce into a kind of "social mood.”

If a country’s people are collectively optimistic, they’re more apt to spend, take risks and invest, which feeds back into optimism as new construction sprouts up around them and retailers do brisk business. On the other hand, if fear about keeping the lights on or losing one’s job takes root, attitudes towards consumption and what’s really necessary begin to shift.

Heads Up For Gold !

As I've watched what has happened to the entire gold sector over the past two weeks, it's become clear that a large number of hedge funds have been short financials and long gold, gold mining and other inflation hedges.

When the financials began to rally last week after changes in the SEC's rules, it caused massive deleveraging across the board by these funds, since they were forced to cover shorts in financials and sell mining shares, gold, oil and other inflation hedges.

Even as the covering in the financials came to a close yesterday, the cumulative selling in the miners then resulted in more and more margin calls. And I believe those margin calls also explained much of the "randomness" of the selling in gold miners on Thursday.

In any event, I do think the gold shares are now stabilizing, and once we finish up the clean-up type selling in the shares on the open this morning, I think we've got a good shot at bringing this August-like collapse to an end today. Obviously, I believe the yellow metal's pullback from $990 also likely came to an end this morning as well.

For those that maybe missed the August 2007 low, you may be getting a rare opportunity to buy a similar climactic low in the gold miners in the here and now. Everything's fundamentally positive for the miners at this point:

1) The Fed's powerless to do anything about inflation as employment and the banking system continue to deteriorate.

2) The positive seasonal period for gold begins in 5 trading days and investment demand has already pushed SPDR Gold Shares' (GLD) holdings to a new all-time high this month. (according to the Wall Street Journal)

3) The gold/oil ratio continues to move in favor of the miners. (chart above)

4) The gold shares as a group relative to gold haven't been this cheap in years, as we can see in the new multiyear lows in the XAU/Gold and GDX/GLD ratios that were hit yesterday.

If that isn't a case for buying the miners here, I don't know what is.

Homeboy, Saiful Nang.

Saiful Nang - the celebrated Malaysian wedding photographer with international acclaims. Whose works are famous for its deep unique focus on subjects' emotions and cultural tone. A true Malaysian talent treasure !

http://www.saifulnang.net/

Let's Get Your Trading Mojo Working, Again.. !

Traders who have been participating in the market for longer than a cup of latte inevitably go through rough patches. I would equate these times with that of a baseball player going through a slump or a golfer struggling on a tour. It starts out with a few errors, or a couple trades that don’t go your way, but ultimately grows through your own mental and emotional struggles with the situation at hand.

I've been through many of these patches and while each season of challenge has, in the end, only made me stronger, they're never fun and always test me to the core.

Unfortunately, while all of us will go through these challenges, rarely does anyone take the time to relay the experience directly. Most pretend as if they never occurred at all.

At present, I'm going through one of these rough patches, so I thought it may be helpful to relay the process I have begun, in real time, to get back out of it.

Own Mistakes: It's always easy to pass off mistakes on the environment and or situation. Before I can move back into the "winning way," I have to fully accept what put me into the current situation.

I was having a very solid year until the month of June. I'd respected and played the market for what it was, not what it could be, successfully avoided losses early in the year and went on to capitalize during the latest bounce. My confidence was high, as were my accounts, but it was at this time I started believing I was smarter than the market. When we started the May fade that ran into the June fall, I started to slowly wade back into the market looking for a turn.

I was "early," a common term in the business that really means "dead wrong." Rather than stepping out quickly, I kept these positions on and waited while the market continued to fall farther and farther.

Despite it being a small amount of exposure, I became stuck and rather than throw in the losing trade have kept it on, playing hope rather than the market. I've accepted this mistake and while I will not dwell on it and let it keep me in an emotional dungeon, I won't pass it off on the environment or circumstance. I own it: It is mine.

Re-establish Style: Every trader who has tasted success has a personal trading style that was at the center of their experience. More often than not, a trader going through a rough patch has slowly gotten away from their style and must right the ship quickly and re-establish the important tenets that their style possesses.

Often it helps to write this out, while at the same time reviewing previous trades to identify the style drift on each individual move. It's important, however, to not dwell on these mistakes. Simply review them, make mental notes and move on. Traders looking to move forward must keep their eyes on the future, not the past.

Understand the Process of Challenges: The irony of this whole process is that a trader will never stop going through similar situations. They may come at different stages in one's game, through different markets or different events, but come they will and I find it ironically comforting to know that no matter what I do, I will continue to face adversity through trading as long as I accept the challenges of this craft.

It's why trading is so very rewarding, but never easy. At this very moment, I suspect that some of the greats, such as Bill Miller are going through challenges of their own and working through the mistakes made. We often believe that these rough patches no longer apply to people of a certain caliber.

This, of course, is not true, and we should all take refuge that at some point a rough patch will occur for us all. I'm certain I will move through this challenging time, but I'm just as certain that down the road another one awaits me.

Reset and Refocus: The greatest thing about the markets are that each and every day a new opportunity is presented. When a trader is going through a rough patch, and playing hope rather than the action at hand, it's important to correct problems and start anew. This could be as simple as taking a fresh look at the position, as if you had just bought it (new!), and establishing firm rules of where you would sell or cover. However, more often than not, a cleansing process must be pursued whereby the problem trades are eliminated altogether. Traders must understand that Mr. Market will always look to pour salt on wounds and often it's inevitable that the problem position will bounce shortly after being sold, but that is no reason to remain in the position while the financial and emotional capital slowly erode on a daily basis.

At this very moment, as I see the market continue to drop and panic set in, I'm reminded just how important it is to cut one's losses quickly. I still have a few positions that are broken or teetering on ill-health that need to be cut. I will pursue this in a methodical fashion and slowly remove the cancer one incision at a time.

Go ! Baby..Gold..!

While the Dow is in a bear market and will likely move lower over time (in the short term, I personally think some sort of bear market rally is probably overdue), most of the decline in the Dow/Gold ratio in the short term will probably be due to a dramatic spike in gold prices.

Either way, it's clear that gold has vastly outperformed stocks since 2000, and it continues to do so. When the Dow began to rise again in 2002, the secular bear market in stocks that started back in 2000 only appeared to end; in fact, it's been ongoing. That's because the gold-denominated Dow never reached new highs - only the dollar-denominated Dow did.

By looking at the ratio chart above, we can determine that the continued "decline" in the value of stocks was merely masked by rising inflation (just as it was in the 1970s). Similarly, the current collapse in stocks is somewhat muted by rising inflation - without it, the Dow would be down even further than it is now. In short - it could have been a bad diarrhea !

Whether due to an outright price decline or because of adjustments for inflation, all secular bull markets in U.S. stocks have declined over 90% from their peak since 1900.

In the Depression of the 1930s, the dollar was fixed to gold, so you experienced true deflation, with the Dow losing over 90% on a nominal basis. In the 1970s, when the dollar's tie to gold was broken, the decline was also over 90% but occurred on an inflation-adjusted basis rather than a nominal one., as in the ratio above.

We will no doubt see a similar decline in stocks from their peak in 2000 during this secular bear market -- 90% or more -- but it will most likely occur primarily as a result of rising inflation, just as in the 1970s. Given the flat nature of the dollar and the fact that the system has become totally dependent on continued rapid money and credit creation, it simply couldn't function without it.

That's why you'll never go wrong long Gold !

A Message by George Carlin.

Guess we all needed an up-lifter in times like this, something that make us realise that, the light at the end of the tunnel is not always an oncoming train..

Here's an amazing piece written by a comedian of the 70's and 80's - something so very eloquent...and so very appropriate...especially for times like this. This is a masterpiece. If you have not read it take the time to read it now. If you have read it take time to read it again!

"The paradox of our time in history is that we have taller buildings but shorter tempers, wider Freeways , but narrower viewpoints. We spend more, but have less, we buy more, but enjoy less. We have bigger houses and smaller families, more conveniences, but less time. We have more degrees but less sense, more knowledge, but less judgment, more experts, yet more problems, more medicine, but less wellness.

We drink too much, smoke too much, spend too recklessly, laugh too little, drive too fast, get too angry, stay up too late, get up too tired, read too little, watch TV too much, and pray too seldom.

We have multiplied our possessions, but reduced our values. We talk too much, love too seldom, and hate too often.

We've learned how to make a living, but not a life. We've added years to life not life to years. We've been all the way to the moon and back, but have trouble crossing the street to meet a new neighbor. We conquered outer space but not inner space. We've done larger things, but not better things.

We've cleaned up the air, but polluted the soul. We've conquered the atom, but not our prejudice. We write more, but learn less. We plan more, but accomplish less. We've learned to rush, but not to wait. We build more computers to hold more information, to produce more copies than ever, but we communicate less and less.

These are the times of fast foods and slow digestion, big men and small character, steep profits and shallow relationships. These are the days of two incomes but more divorce, fancier houses, but broken homes. These are days of quick trips, disposable diapers, throwaway morality, one night stands, overweight bodies, and pills that do everything from cheer, to quiet, to kill. It is a time when there is much in the showroom window and nothing in the stockroom. A time when technology can bring this letter to you, and a time when you can choose either to share this insight, or to just hit delete...

Remember; spend some time with your loved ones, because they are not going to be around forever.

Remember, say a kind word to someone who looks up to you in awe, because that little person soon will grow up and leave your side.

Remember, to give a warm hug to the one next to you, because that is the only treasure you can give with your heart and it doesn't cost a cent.

Remember, to say, 'I love you' to your partner and your loved ones, but most of all mean it. A kiss and an embrace will mend hurt when it comes from deep inside of you.

Remember to hold hands and cherish the moment for someday that person will not be there again.

Give time to love, give time to speak! And give time to share the precious thoughts in your mind. "

AND ALWAYS REMEMBER:

"Life is not measured by the number of breaths we take, but by the moments that take our breath away...." - George Carlin

" Every breath you take..,
every move you make..,
every bond you break..,
every step you take..,
I'll be watching you..
- The Police

What Do You See Here ? And What's Ahead for Them?

Can The Market Withstand Financials KO ?

In a boxing match, there's a clear cut sign a boxer is in terrible trouble (outside of saying “No Mas” and lying on his back) and that’s when his corner begins to implore the fighter to do it “for your family”.

If the market was in a professional prize fight (and in there may be no better analogy) the bulls would be screaming to fight on for pride, family and country. The sad part is it was the iconic companies that were down for the count including General Motors (GM), Boeing (BA) and Citigroup (C).

The stock market is on the verge of taking its worst drubbing since the Great Depression, down 496 points for the week, and there's nothing to suggest things will get better. Ironically, that's one of the silver linings to this current meltdown- nobody is predicting it will get better. The epicenter of the meltdown is the financial sector which completely broke down last week. As their next round of earnings come around the tension is palpable. The weird thing about last week was the fact I didn’t sense a lot of fear, except in the financials where investors are quaking in their boots. The kinds of losses expected in the sector are mind-numbing. In fact, everyday one firm is lowering expectations for another and offer guesses on losses that simply don’t seem real. Is it possible an industry could write down a trillion dollars of assets in a year and still survive? Is it possible any industry could lose and or write down assets of a trillion dollars in a year?

It's a great thing that Ben Bernanke is a student of history because his work is certainly cut out for him now. The Great Depression came about for a number of reasons but none more so than the flatfooted non-action of the Federal Reserve. Here's a bit of history, in 1928 Benjamin Strong passed away and the Fed was left without a leader. Moreover, when the recession began in August 1929 most members of the Fed thought it would be cathartic. At the time the young monetary policy making organization saw the decline in industrial production, money supply and consumer prices as the perfect antidote to the Roaring 20s. While they were putting their collective heads in the sand at the Fed the White House and Congress moved into overdrive. Massive tax hikes coupled with legislation like Smoot-Hawley that led to trade wars and global protectionism were akin to using kerosene to put out a fire.

I know it's difficult to avoid mistakes of the past even with those mistakes serving as reminders of what to do and what not to do. The key is to not allow a recession to become something worse, something it really doesn’t have to become. With that in mind the one element of the current financial malaises is the credit crunch. Money is going to become more expensive once the Fed begins to increase rates but the reality is financial institutions weren’t opening the spigots even with the tsunami of funds the Fed made available. I guess banks are hording cash to counter write-downs and their own troubles with more expensive funds. It's a mistake in my assessment. At some point banks have to get back to business and make the wheels commerce start to move again. Many (real) economic historians believe there has to be bank failures to clean out the also-rans and create opportunities for those banks left standing.

During the run of the Great Depression consumer prices plunged (yes, we have to be careful about wanting prices to come down, there are consequences), exports were eventually sliced by 70% and the unemployed climbed from 3.1 million in 1929 to 25.2 million in 1933.

The reality is the Great Depression got substantially worse during the trough of bank collapses in 1932 but that final nail sped up the healing process and the new business cycle began in March 1933. I think the stock market isn’t accurately reflecting the economy, the United States isn’t in a Great Depression, but it is vulnerable. This is a delicate time. The negative wealth effect of the housing market needs to be curtailed and contained but there are other things that must be addressed, too. My Memo to the next President:

*Don’t raise taxes.
*Don’t start a trade war.
*Don’t protect jobs that are not globally worthwhile.
*Don’t over regulate.

As for the current Fed I would say first and foremost, articulate your game plan, bending to the whims of the market is suicidal and short-sighted. Let some banks go out of business if saving those means taxpayers foot the bill for years to come. Pay attention to the numbers but also be cognizant of what’s happening in the real world beyond the reams of data that never stops piling up. The Fed is going to raise rates soon but should take each rate hike as a one-off event with a clear mind about their next move. If prices remain stubbornly high then a signal to the markets about a longer term rate hiking cycle would be necessary.