Chris Martenson | chapters - The Crash Course

The Crash CourseReady to learn everything you need to know about the economy in the shortest amount of time?The Crash Course is a condensed online version of Chris Martenson's "End of Money" seminar.What is it?The Crash Course seeks to provide you with a baseline understanding of the economy so that you can better appreciate the risks that we all face. The Intro below is separated from the rest of the sections because you'll only need to see it once...it tells you about how the Crash Course came to be.How long will it take?

Chris Martenson | chapters - The Crash Course - chapters, Crash Course, Economy, Energy, environment, Peak Oil, videos

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Warren Buffett Interpreation Of Financial Statement.

Income Statement

• Gross profit should be more than 50%.Avoid less than 20%.
• SGA , must consistant % of gross profit.Avoid consistently high SGA expenses co.
• R&D, high R&D have an inherent flaw in competitive advantage.
• Depreciation,very real expense and should always be included in any calculation of earning.Look for low depreciation.. e.g P&G only 7%.
• Interest expenses, look for less than 15% of operation income. Lower % in the industrial, better competitive advantage.
• Income before tax,using pre-tax income for analysis.
• Income taxes paid, US in 2008 about 35% of income, use this to counter check,e.g pre-tax income*35% compare to income tax paid.
• Net earning, looking for uptrend, look for % of revenue in up trend.E.g KO earn 21%, look for more than 20%, except bank, high % high risk.

Balance Sheet

• Shareholders' Equity ( Net worth,book value) , is all the assets substrate all the liability.
• Current Assest(Working Assest) , look for cash generate from ongoing business., no debt.
• Inventory, look for inventory and net earning corresponding rise.
• Prepaid Expenses e.g Insurance.
• Current ration : Current asset/current liability. Look for greater than 1.Some good earning power co, e.g KO has ratio of 0.95.
• Goodwill, buying amount over the book value.
• Long term investment, value of long term investment that more than a year,e.g stock. bond,real estate, invest in co subsidiaries.State at cost of market price whichever lower.
• Short term debt, when borrow short term and invest long term, problem occure when shorten interest increase higher than long term invest return.When invest in bank , look for less than 60% of short term debt over long term debt.
• Long term debt, look for min long term debt, yearly earning able to pay off all of it long term debt with 3 to 4 years.
• Minority interest, represents it value of buy over co that the co did not won.
• Debt to shareholders' equity ration is total liabilities/shareholder equity.Look for less than 0.8 unless is back about 10.
  
• Prefer and common stock carried in balance as par value, any money in excess of apr that was paid when company sold the stock is "paid in capital".Look for absence of preferred stock.
• Retained earning,accumulate no,look for growth, or it invest wisely.
• Treasury stock, share that buy back by the co.Good indicator.
• Return on shareholders' equity, is net earning/SE,higher the better, history of strong earning with negative SE, ok.

Cash Flow Statement

• Total cash from operating , is net income + depreciation + Amortization.
• Net change is cash is Total cash from OA +IA +FA.
• Capital Expenditure, look for low #, e.g KO only 19% of total earning, less than 50% of annual net earning.

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Gold up trend likely for next few months.

The speculative element to golds surge is reflected in the 138% increase attained by speculative net longs in gold futures to a 9-month high of 155,306 contracts (see above chart). Speculative longs as a percentage of total open interest reached 52%, the highest since July, suggesting further upside remains ahead. Interestingly, the record high in golds net speculative longs was reached in December 2007, three months before the metal hit its all time highs. The 3-month lag between golds net longs and multi-year highs also took place in 2006. Thus, even if speculative net longs regain record territory above 200K contracts, prices may have at least 2-3 months of upward momentum. The prospects for $1,200-1,300 gold by end of Q3 remain underpinned by a set of cogent fundamental variables involving currencies, interest rates and the global economy. Meanwhile, even as the divergence between gold and oil begins to fade, any oil-friendly dynamics are seen positive for gold's luster.

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China Investment Watch List

• China Aerospace International Holding , H-Share OTC:CAIF
• Jiangxi Hongdu Aviation Industry , 600316,A-Shares.
• Jiangnan Heavy Industry Co, 600072,a-Shares.Aircarft carrier.
• China Life Insurance Co.Ltd ,HKG 2628, NYSE LFC.
• Aluminum Corp of China Ltd , NYSE ACH
• Focus Media Holding Ltd, NASDAQ FMCN
• PetroChina NYSE PTR.
• China Railway Erju Co, 600528 A-shares,List in HK.
• Ctrip.con NASDAQ CTRP
• COFCO International HKG 0506
  
• Oriental Food Holding Singapore
• Nanning Sugar MFG SHE000911 A-shares
• American Dairy Inc NYSE ADY
• Chaoda Modern Agriculture Ltd HKG 0682 H-shares
  
• Pine Agritech Ltd Singapore
• China Medicl Tech NASDAQ CMED

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The Oldest, Most Trusted Technician in the World Is Telling You to Sell Now

The oldest, most trusted technician in the world is telling you to sell now.Recession? Depression? Nascent recovery? Market bottom? Dead cat bounce?

Bad News and Worse

I could point out the worst GDP reading in a quarter century (except I think I already have several times over the past few weeks). I could read you chapter and verse on current unemployment (7.2% according to the government, already cresting 12% according to some more “inclusive” calculations).

I could quote no less a luminary than British Prime Minister Gordon Brown, who confessed in the House of Commons that we are truly mired in a great depression akin to the 1930s. (The apparatchiks at #10 Downing Street are desperately trying to retract the statement, but I’m afraid that this particular cat is out of the bag, through the door, and out of sight down the street already.)

Or I could simply go back to Charles Dow’s tenet 4: “The Transports must confirm the Industrials.”

The Facts of the Matter

If you look at the Dow Jones Industrial Average for the past few days, you can’t help but see the fact that last Monday’s low of 7867.37 beat the previous low of 7909.03 set on Jan. 23.

If you look to the Dow Transports’ chart you can see consecutive lower lows of 2926.66 on Jan. 27 and 2865.58 on Feb. 2.

The Only Sane Solution (and a Sure Shot at Triple-Digit Gains)

The trend is already in place. The counter-reaction is ending. The next leg down has been signaled and confirmed. The only protective tactic that makes any sense is to buy puts against both the Industrials and Transports similar to the ones I have asked WaveStrength Options Weekly (WOW) readers to purchase.

Today's Taipan Daily

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ProShares Ultra-Short 20+ Treasury Fund (TBT)

The central banks/governments around the entire world are fighting the credit crisis with everything and the kitchen sink. Some of the efforts will take hold, encouraging a bit of risk taking activity. That means money will come out of treasuries and go somewhere... whether it's A-grade debt, foreign bonds, emerging bonds, preferred debt, convertible debt. In other words, the money does not have to flow into stocks for the ProShares Ultra-Short 20+ Treasury Fund (TBT) to thrive; it just has to leave U.S. treasuries... and I believe that it will.

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Geithner, China, and the Specter of Technical Insolvency

Even including the TARP 1 injection of capital of $230 billion into the banking system and the further $200 billion of capital injected by private investors and sovereign wealth funds since the start of the crisis, the overall banking system would still be borderline insolvent.Moreover, in order to restore the capital of the banking system to the previous level of $1.4 trillion (a level close to the 8% capital requirement of Basel II) an additional $1.4 trillion of private and public/government capital would have to be injected in the banking system to restore safe credit growth. If a reform of the regime of regulation of banking institutions were to argue that banks and broker dealers need more than the Basel II 8% criteria to operate safely even more than $1.4 trillion of new capital will have to be injected in the banking system.Thus, even the release of TARP 2 (another $350 billion) and its use to recapitalize banks only would not be sufficient to restore the capital of banks and broker dealers to internationally accepted capital ratios. A TARP 3 and 4 of up to $1.05 trillion (assuming generously that all of TARP 2 goes to banks and broker dealers) may be needed to restore capital ratios to adequate levels.

Safe Haven | Geithner, China, and the Specter of Technical Insolvency

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Banks of America

Investors who have been pining for a chance to buy into the beleaguered banking sector may have a bit longer to wait. Just this past Friday holders of Bank of America's (NYSE: BAC) stock were greeted with the reporting of the company's first quarterly loss ($1.79 billion) since 1991. To make matters worse, the company cut its quarterly dividend from $.32 to $.01. The loss prompted a new rescue package totaling $138 billion, which comes on the heels of the recent round of government injected capital of $25 billion last year.

That level of distress has forced the shares of the largest U.S. bank by assets down 74% in the last 6 months. But it's not just BofA that has been suffering lately; the Financial Select Sector SPDR (NYSE: XLF) has nearly 2/3 of its value in that same time period.

So why have financials suffered so much in the past year and is now a good time to jump in? After all, with losses like those it's hard to imagine how the sector wouldn't offer a good opportunity, even if just from a contrarian's perspective. But there are three factors that belie the inclination to pony up new cash at this time.

First, investors must understand that Citigroup (NYSE: C), Wells Fargo (NYSE: WFC), et al could all be named "Bank of America," as they have become de facto wards of the state. Government investment in the financial sector goes hand in hand with government control. That means lending practices, dividend payouts and compensation packages will now be highly influenced by the government. Unless you view the post office or DMV as models of efficiency, this wouldn't seem the best path back to corporate health.

Second, since there appears to be no imminent end to their write downs, many of these banks will likely need to raise yet more capital from the government in the future. More capital injections mean more dilution to the existing shareholders.

And finally, investors must realize that before these financial companies can begin to return profits to their investors, the government must get paid back first.

It is not until the housing market bottoms and the unemployment rate plateaus that the economy can begin to stabilize. That would help place a floor under banks' assets and put an end to their seemingly endless parade of write downs. Only then can investors accurately access the value of banking shares. Until then it is advisable to avoid trying to catch the proverbial falling dagger.

Safe Haven | Banks of America

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Something’s Happening Here (With The Price of Oil)

As you read this, huge supertankers filled with oil are moored off the coast of Scotland and the Gulf of Mexico. The question is why... and what it could mean for oil-related profit opportunities in 2009.

Something’s Happening Here...

Something very strange is going on with the price of oil. Not just in terms of straight-up price, but in regard to the huge discrepancy between the near-month and far-month futures contracts.

As I write, the going price for near-month West Texas Intermediate crude is $36.51 per barrel. The December 2009 contract, on the other hand, is trading at $55.13.

That is a monster spread. We’re talking a difference of more than $18 a barrel between spot crude – the stuff you can buy in the cash market – and crude slated for delivery at the end of this year.

The technical name for this situation is contango. That’s what they call it when a forward-month commodity contract is trading at a higher price than the near month. (You don’t really need to know this right now, but the opposite of contango, when near-term prices are higher than the back months, is backwardation.)

The reason this is strange is because of the massive profit opportunity embedded in the crude market.

Assuming you had the means, you could go out right now and sell millions of dollars worth of December crude contracts at $55 dollars a barrel... buy the equivalent amount in the cash market for $37 a barrel or less... and then just wait until it’s time to deliver the oil (and lock in your $18 profit).

The only hitch in the deal is finding a place to store the stuff. If you were to buy crude on the cheap now, you would have to take delivery and store it until late November (or whatever month your delivery date rolls in, when you close the trade and take your locked-in profit).

.........................

Today's Taipan Daily

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Bank Functionally Bankrupt

The banks, that is.

XLF (the financial sector spyder) yesterday, down 16.5%.  That's impressive, but what's even more impressive is the loss in some of the components, to wit:

BAC, down 28.9%
Citigroup, down 20%
Goldman Sachs, down 18.9%
JP Morgan, down 20.7%
Morgan Stanley, down 15.9%
State Street, down 59% (!)
Wells Fargo, down 23.8%

Those are one day losses folks.  In one day anywhere from twenty percent to more than half of these firms was wiped out.  If you hold their stock, I hope you're prepared for what you see when you look online at your account.

Why did this happen?

Quite simply the market calls all bets.

Paulson, just last week, gave an interview in which he defended the TARP and said that they had "stabilized the financial system."

The market said in response:

Let me make this very clear - the market is saying very loudly that the common stocks of these firms are going to zero. They are all functionally bankrupt, right here, right now, with their current capital structure, and have been for months.


That's the market's pronouncement as of yesterday - and as you can probably surmise I agree with it, given that I've been calling for cramdowns of the debt structure in these firms as the proper means to resolve the excessive bad debt problem for more than a year. Such a move would inherently destroy all value in the common and preferred stock (at the same time it resolves the firm's - and the nation's - bad debt.)

The Market Ticker

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