Road Trip -- Day 3: Bonneville Salt Flats

Finally made it to Bonneville after all these years of trying. Never once got a television commercial greenlighted for this location. Nor was I successful in finagling a photo shoot of any kind at this location. Just goes to show if you want to do anything right, you've got to do it yourself. The light reflection blows away anything I've ever experienced on the water. You feel like you're being x-rayed. And the salt absolutely trashes your car. Mine looked like I just drove through a blizzard.

Found a car wash in nearby West Wendover, NV. And then had a humorous dinner at the Rainbow Casino among the tourists and the neon and the floor to ceiling mirrors.

Nowhere near as good as the perfection below. The highlight of my short visit to Salt Lake City: the pastrami cheeseburger at Crown Burgers. Legendary. Not to be missed.

Road Trip -- Day 2: Moab, Utah

Today was a lot more serene than yesterday. No rock slides, no dust storms. Just unspeakably beautiful sights, each one more jaw dropping than the other.

I spent the night in Moab, Utah. This morning I woke up early, cashed in some short positions as the S&P 500 was melting down, then drove 5 short miles north to Arches National Park. I've never seen anything more ethereal in my life. I feel like I've been to the moon.

Speaking of the moon, tomorrow I head to the Bonneville Salt Flats. Another terrestrial lunar landscape. It's been on my list since my impressionable youth and the days of Craig Breedlove and his Spirit of America land speed records.

Regarding the S&P, I would've liked more volume today. But price is price. I would only be a buyer much lower and a seller much higher. Good luck and enjoy the ride. It should be wild either way.

Road Trip -- Day 1: Leaving The Valley

Some of you may recall that I've been making preparations for a full-scale digital nomad tour of the Pacific Northwest. Today I departed from Scottsdale, leaving behind the searing heat and some great memories. Today's vertical range from the Valley of the Sun was from a little over 1100 feet to just over 7,000 feet. The temperature range was 107 to 72. I drove through a dust storm, just missed a rock slide, and narrowly avoided hitting some spilled firewood in my path while traveling well above the posted speed limit. Somebody up there likes me.

I hope you enjoy the moody shot of Monument Valley taken from the Arizona side.

I Can't Emphasize Just How Serious This Is

If you want to know what the so-called Financial Reform bill will do to America, listen to what NH Senator Judd Gregg has to say in this video from CNBC. Senator Gregg is one of the few straight shooters in the senate and is retiring. You will not hear any politically correct nonsense here; he simply tells it like it is. Just listen how many times he says the words "credit" and "contraction" together. He's sending us a strong message worthy of Ludwig von Mises. Ignore the ramifications of a contraction of credit at your peril. High Noon for Bank Reform - CNBC.com

Europe's Sovereign Troubles Spreading To Europe's Banks

The latest data from the Federal Reserve shows foreign commercial paper outstanding is shrinking: November 248.4, December 230.2, January 217.1, February 218.5, March 211.8, April 192.7, May 178.2

Drip, drip, drip . . .

This is not what Trichet wants to see. When commercial paper starts drying up, especially when you're trying to inflate, you've got a big problem. Debt investors have a nasty habit of cutting back on buying commercial paper when they fear that firms will default on their debts. Slowly, European banks are becoming infected with same problems as their respective governments.

Total outstanding U.S. commercial paper issued by foreign & foreign-parent domestic banks is almost back to the Lehman crisis levels of 2008.

This is not good news if you're a bull.


Source: Federal Reserve

China Lifts The Dollar Peg

"Yuan Unshackled May Strengthen China Shift to Domestic Demand," say Bloomberg.

I say, Hilarious.

Would you want your currency pegged to something that has just entered a multi-year bull market? I didn't think so. The Chinese may be greedy, but they aren't fools.

They are greedy because they knowingly entered into a Faustian bargain to be the producer to the world's consumer. This binary relationship is already starting to end badly. Their primary bankroll, Euroland, is on the ropes. Their primary consumer, America, is starting to crater. Their internal demand, regardless of what you are served in the press, is years away from picking up the slack.

I have one word for China. Overcapacity. Here's another. Implosion.

Here's another beauty from Bloomberg: "China Backs Obama With U.S. Treasury Securities Rising Another 3% To $900 Billion." I've got one word for this one too: PR.

It would be nice if somebody backed Obama, but this has nothing to do with him, his administration, or its policies. Buying treasuries is what China must to do survive their Faustian bargain. Will it work? No. Has our stimulus stimulated? No.

The futures are up on the Chinese Yuan news. Good. Get this market as high as possible. Again. One word. Implosion.

Rule #1

Rule #1: Know what kind of market you're in. Are you in a bull market, a bear market, a value market, a market based on fundamentals, or a market built on credit?

We're in a credit market. Or as BMO puts it more poetically here, we're in a levered market. (Sorry that I'm just getting around to commenting on this fine report by our Canadian friends, but I'm packing for a month long boots-on-the-ground tour of the Pacific Northwest. Look for more updates and commentary from the road. By the way, I recently shot footage of the neutron bomb-like effects of the real estate implosion here in sunny Scottsdale, Arizona, that is still being edited, but it is quite powerful. I'll post it here soon.)

In a levered market, throw out the fundamentals. They don't matter. If you want to keep your bearings and stay true, watch the sovereign credit markets. It is not a pretty picture. It is going to get much worse, as you'll discover in the latest BMO report.

What this report makes crystal clear is that the world may be awash in credit, but it's starving for dollars. I discussed this back in March; BMO is kindly providing the proof. Check out these key phrases: dollar imbalance...dollar squeeze...dollars are sought...emergency dollar funding...central bank dollar deficiency...banks hoarding safe haven treasuries . . . Do you see what's happening here? There is a shortage of the real to hold up the unreal. There aren't enough dollars to support credits denominated in dollars. The remedy for this imbalance is brought about by debt liquidation. Try as they might to avoid this natural cleansing process, governments will go broke trying to fill the ocean of credit with their garden hoses. Look for them to gradually come to their senses only after it's too late. The central message from BMO is raise cash. I concur.

I'll leave you with two last comments: one, the rise from the 5/25/2010 lows is sloppy and will be completely retraced. Two, China is screwed.