Blame the Full Moon?

Addison Wiggin – June 16, 2011

  • Is it Greece, a rotten economy or a full moon fooling with the markets? The precedents of the “Puetz window”
  • Volatility up, Reserve members thrive… Your last chance to join them
  • False alarm: Our financial crisis warning, picked up by two unlikely sources…
  • How competition thrives in one corner of Washington, D.C. — at least for a few more weeks
  • “Strategic default” and “voting or violence” threads woven into a single tapestry in our mailbag

   U.S. stocks appear to be stabilizing after the Dow’s 178-point drop yesterday. The index is sitting just below 11,900 as we write. The latest round of mayhem in Greece has been tempered by reports on first-time unemployment claims and housing starts that while awful, were not as abysmal as expected.

   Then again, maybe you can chalk up the stock market’s recent action to the full moon.

We’re smack in the middle of a “Puetz window,” after all.

   In the early ’90s, researcher Steve Puetz found that eight epic market crashes, going back to Holland’s tulip mania of 1636-7, all occurred within a unique time horizon…

  • A full moon…
  • …which is also a lunar eclipse…
  • …occurring within six weeks of a solar eclipse.

The “Puetz window” runs six days before until three days after the full moon. Supposedly, the odds of all these crashes — including 1929, 1987 and the Japanese crash of 1990 — occurring under these circumstances by accident is 127,000-to-1.

A full moon/lunar eclipse took place yesterday at 2:20 p.m. EDT. A solar eclipse took place on June 1. Thus, the window opened a week ago today and closes on Saturday.

Of course, not every Puetz window brings a crash. So far during this window, the S&P has lost only 1.8%.

   Then again, we still have two days remaining in the window.

Tomorrow is quadruple witching — one of four days a year in which stock options, stock futures, index options and index futures all expire.

The Puetz window is as good a forecast tool as any when the markets are as manipulated by QE as these…

   The volatility index spiked nearly 17% yesterday, a far more vigorous reaction than came during the market’s previous swoon last Friday. At over 21 this morning, the VIX is now its highest since late March.

We pause here to note that all this volatility has been very good for members of our assorted trading services…

  • Steve Sarnoff’s play on a falling Dow has doubled readers’ money in three weeks, while a play on a faltering tech giant is up 178% in only ten days
  • Jonas Elmerraji capitalized on bullish sentiment in a maker of electronics accessories for gains as high as 93% in 2½ weeks
  • Abe Cofnas recommends taking 51% gains on a Japanese yen play after only three days, while holding onto the other half of the position for gains up to 188% tomorrow. He’s also holding out for 78% gains on an oil play.

A select group of readers had access to all of these plays because they belong to the Agora Financial Reserve. They also have access to the longer-term stock plays of editors like Chris Mayer and Byron King… and the very long-term fortune makers in the tech and biotech field identified by Patrick Cox.

Perhaps you already subscribe to one or more of our premium services. Did you know you can get credit for that toward your Reserve membership? That means your one-time upfront fee for the Reserve could be even lower than the published price.

We’re in the home stretch of our current Reserve membership drive. The doors close at midnight tonight.

For VIP access to our full suite of services, free admission to our annual conference in Vancouver and a host of other members-only privileges, please give this invitation a look. It’s your last chance to take advantage until December — at the earliest. And by then, the admission fee will likely be higher.

   Hmnn… we’re either onto something with our new financial crisis thesis… or way, way off the mark: Both Barack Obama and Ben Bernanke issued warnings of their own yesterday. Seriously.

“We could actually have a reprise of a financial crisis,” the president told Ann Curry on the Today show. Mr. Bernanke warned Congress that “severe disruptions in financial markets and the payments system” are possible.

How often do we agree with these two guys? Well, rarely, would be the kind way to say it. It wrankles our contrarian bones… but we’re not ready to revoke our thesis.

   We’ve been trying to isolate a catalyst for the new crisis since May 31. We’ve identified a few potential triggers. But the one Obama and Bernanke cited is decidedly not on our list. They both pointed to the Aug. 2 debt-ceiling deadline.

As serious as the amount of the debt is, the taffy pull in Washington over the debt ceiling is political theater. And as theater goes, it has all the snafus of Spider-Man on Broadway, with none of the entertainment value.

If the debt ceiling were a truly serious matter, the bond vigilantes would have shown up in droves already. Instead, they’ve been in severe retreat for more than two months now. The yield on a two-year Treasury note sank this morning to a record low of 0.3%.

   One all-too-obvious catalyst we identified for the next financial crisis is simmering down a bit today. The streets in Greece are calmer, but the financial situation there is actually more dire.

The prime minister is revamping his cabinet in an effort to force tax increases and spending cuts through parliament. If they don’t pass, Greece doesn’t get its next bailout and defaults next month.

Greece’s probability of default — pegged at a staggering 74% only two days ago in the credit default swap market — is up to nearly 79% today.

   Not surprisingly, hot money is fleeing the euro, which is down to $1.413 this morning. The dollar index, which broke below 74 only 10 days ago, is back to 75.8.

The yield on a 10-year Treasury note, while not setting records like the 2-year, is still a rock-bottom 2.95%.

   As hot money flees to the dollar and Treasuries, gold and silver aren’t suffering too badly. The spot price of gold is hanging in there at $1,528, while silver stands at $35.63.

   Copper prices are down more than 1% this morning, to $4.05 a pound. Except for a couple of brief swoons last month, copper has held above $4 all year — despite growing jitters about the world economy.

That’s because even if demand slacks off, supply is harder and harder to come by. “Just like oil drillers, copper miners are putting in much more work for a lot fewer results,” says our income specialist Jim Nelson. “Mines just aren’t yielding what they used to.

“Since 1994, miners have had to work 50% harder to get the same amount of copper they did before. That’s twice the ore dug up to yield the same amount of copper. Clearly, that really eats into their profits.”

So in an environment of high copper prices, a low-cost producer is a good thing to find. And if you can generate some income with it, so much the better. Jim just uncovered a way to take the 2% dividend yield on a major copper producer… and turn it into a 15.6% yield.

It doesn’t require leverage, so it’s a very safe approach. It does, however, require a substantial upfront investment… so he’s recommending it to readers of his new high-end advisory, Total Income Alert.

We haven’t formally launched TIA yet… but you can get this service right now and lock it in for life as a member of the Agora Financial Reserve — still available through midnight tonight.

Details on this new service in particular, and Reserve membership in general, can be found in this invitation. Of if you’d like to discuss potential discounts already available in your account, call John Wilkinson at (866) 361-7662.

   One of the few bastions of relatively unfettered enterprise within the belly of the beast — Washington, D.C. — is about to fall.

The nation’s capital is home to a bustling taxicab business — some 7,300 licensed cabs. That works out to 12 cabs for every 1,000 people — a mighty favorable ratio compared to Chicago’s 2.4 or New York’s 1.6. As a result, D.C. has some of the lowest fares of any major U.S. city, according to a recent survey by the trade publication Chicago Dispatcher.

But not much longer. The D.C. city council appears on the verge of throttling this vibrant competition and twisting it into a government-enforced cartel, by introducing an abomination known as taxi medallions.

Want to drive a cab in the capital? You gotta get a medallion — a very special kind of license — affixed to the hood. They’ve been the law for decades in New York, Chicago and elsewhere.

These days in New York, a medallion costs $700,000. In Boston, $400,000.

Since D.C. plans to issue only 4,000 medallions under this proposal, 3,300 cabs would presumably be mothballed. What’s more, the system’s been rigged so that established companies will pay only $250 for their first medallions. Newer operators will have to fork over up to $10,000.

Endangered species

The Small Business Association of D.C. Taxicab Drivers figures about four out of 10 D.C. cabbies will be thrown out of work.

If you’re planning a trip to the nation’s capital, make it soon. Getting around once you get there is about to cost a whole lot more.

   “Do you have to use profanity in your articles?” a reader inquires. “It is very offensive.”

“I am starting to not like the company I am keeping here on The 5,” writes another. “Temper tantrums, violence, no values, no integrity and a whole lot of bitching, whining moaning and complaining, all anonymously and by email.

“Encouraging people like that by posting their comments is a lot like encouraging Sarah Palin by putting her on the TV.”

“I quit reading this particular edition of The 5,” writes the third on the subject, “immediately upon reading that the {dung} hit the fan. Kindly keep the language clean, or leastwise reasonably so. To use nasty language may still offend folks, believe it or not — leastways a few old-timers who were once taught that such is surely inappropriate and, indeed, offensive or abusive banter.

“The previous edition spoke of adhering to some old-time values when it comes to borrowing on a mortgage and then simply walking away. And a cleaner language may be a part of those older values that once made the country great.”

The 5: Point taken, apologies. We generally adhere to a “Presbyterian standard” of word and subject choice, but slip on occasion.

   “Clearly,” writes the reader who was labeled a “clueless idiot” by a fellow reader during our strategic default debate, “my remarks were misinterpreted by at least one individual who seems ready on a moment’s notice to accept complete and total anarchy.

“The point I attempted to make was we as individuals need to behave with a degree of propriety, which is sorely lacking in today’s society. To be sure, our political system, as well as its ancillary institutions, are out of control, but resorting to such apathetic behavior only exacerbates the problems we have.

“I’m sure the reader buys groceries with ’fíat’ currency. I’m curious as to whether walking out of the grocery store without paying the bill is OK, since the reader has such disdain for the current medium of exchange.

“Throughout history, the rich and powerful have always made the rules. We as citizens have to play by these rules to a point in order to achieve certain goals. That’s not to say we shouldn’t make a concerted effort to affect change.

“You cannot, however, walk on to a basketball court and demand to play baseball.

“A perfect world would be filled with people who play fair, make nice and grow fields full of lollipops. Unfortunately, we live where we live. Save the vitriolic rhetoric for your group of camouflage-clad buddies down at your local armory.”

The 5: And with that, the two themes running through this week’s mailbag — strategic default and “voting or violence” — have become mashed into one. We press on…

   “I hate the idea of a violent revolution,” adds another in search of the final frontier. “However, I don’t see any other plausible choice at the moment. And no, I don’t consider lying down and accepting Earth as a permanent slave planet as a viable alternative, though that is the most likely outcome.

“The best alternative is a frontier — a new, empty place where independent-minded folks who refuse to be slaves can go invest their energies into productive activity, instead of war. Let the sheeple be slaves. At least better specimens will have somewhere to go and, hopefully, survive, and then flourish.

“Twenty to 40 years ago, I thought space might be that frontier, and it should have been. Unfortunately, the predators-that-be have made sure no escape valve exists for real sentient beings. No effort to develop frontier settlements on or under the ocean have taken hold, either. So what viable option remains? Maybe it is time for ‘Give us liberty and give them death’ again.”

   “I hear all these readers talk of violent revolution, peaceful revolution, rebellion, voting the bums out, etc.,” writes a third, “Nothing will happen in this country — I mean nothing — until the bread and circuses run out.

“As bad as things are right now, the average person still has access to credit cards, cable TV, Internet, video games, sporting events and fast food on every corner. While there are sufficient distractions to keep 51% of the populace placated, the majority of the voting population will go along with the status quo, no matter how shocking to the conscience that may be.

“They still have food and entertainment. Save all this talk of reform for when the crap really hits the fan. Our streets will become like in Greece about 15 minutes after American Idol isn’t available on the tube.”

The 5: We might be further along the path than you think. A recent study from Sanford Bernstein with the Randian title U.S. Telecommunications and Cable & Satellite: The Poverty Problem shows an ominous trend among purveyors of American culture. Comcast, Time Warner, Verizon and AT&T are themselves in financial trouble because too many people are just plain broke.

“At the low end,“ the report concludes, ”customers aren’t just choosing between one provider and another. They’re often choosing between these services and a third meal.”

“The picture of an America where 40% of households are essentially bereft of discretionary spending power has incredibly important implications for companies in our coverage.”

To say nothing of the country at large.


Addison Wiggin
The 5 Min. Forecast

P.S. Final reminder: Your invitation to enroll in the Agora Financial Reserve expires tonight at midnight. We’re about to revamp the entire program, so whenever it reopens, chances are very good it will be at a higher fee. You can review your opportunity to sign up at the current fee… right here. The benefits of membership are definitely worth your attention. Please take a moment to review them now.


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