1)The dinosaurs of the market, like myself, are collectively being struck by the similarity of the current stock market and that of September 1987, just before the one day, 25% plunge in the Dow. That was when I tied to buy stock with the index down 300 from a payphone in Paris, only to have the trader at Morgan Stanley burst into tears and smash the phone down on the desk (remember that David G.?). My new guru is Gluskin Sheff's strategist David Rosenberg, who says that stocks have already discounted two years of recovery and now carry a lot of risk. It is priced for 40% EPS growth and a 'V' shaped recovery, which we have zero chance of getting. GDP this year will come in at negative 2.5%, and will claw back a listless 1-2% rate in 2010. Stocks are discounting a 4% GDP growth, compared to only 2% for bonds, so he'd much rather own those. With a deflation rate of minus 2% and high yield returns of 12%, junk now offers a 14% inflation adjusted yield, not bad. The secular 25 year bull market in credit expansion is over. Rent still accounts for a third of the CPI, and they are falling for the first time in 17 years. Sure, we'll see ephemeral sugar highs like those for cash-for-clunkers and the tax credit for first time home buyers. But at best, it will only add up to a series of small 'W''s, or what I refer to the as the 'square root' shaped recovery. With the price of everything stretched, you better start reeling in some of that risk.

2) Until now, you had to live on the side of a volcano for geothermal energy to work profitably, as in Iceland, where lucky residents can sink a pipe a few hundred feet in their backyard to get a lifetime of free heat. Elsewhere, they had to be kept alive by massive dollops of subsidies in order to produce very high cost electricity for local utilities. But $350 million in new research funded by Obama's stimulus package is threatening to finally make it economic. The first oil crisis in the seventies spawned firms like Calpine, which exploited massive geyser fields in Northern California marked by hundreds of steam plumes. Unfortunately, low oil prices and technical difficulties, like constantly clogging pipes, starved the industry of new capital, and Calpine went bankrupt.?? Now, a breakthrough technology called Enhanced Geothermal Systems (EGS), where water is pumped down through pipes to 16,000 feet and comes back as superheated steam to run a conventional turbine, is promising to drive costs down dramatically. These plants use minimal amounts of land, conserve water with their closed systems, and unlike solar and wind, operate 24/7. Once built, they produce power at 6.9 cents/kw, vs. 3 cents for coal, 12 cents for wind, and 15 cents for solar. The downside is that these plants are expensive to build, face permitting bottlenecks, need new transmission lines , and may cause earthquakes, so they can't be built near populated areas. The play here is that utilities in many states, like Pacific Gas & Electric (PGE) in California, are legally obligated to obtain high percentages of the power from renewable sources in the near future, whatever the cost. In PGE's case it is 20% by 2017. The Golden State already leads the world in geothermal output, and this will double from 2,605 MW by 2015.?? A larger installed base will bring economies of scale and a further drop in costs. The recent excitement caused Magma Energy's (MGMXF.PK)?? $87 million IPO to be oversubscribed. Better value can be found in Reno, NV based Ormat Technologies (ORA), which boasts operations in the US, Israel, the Philippines, Kenya, Nicaragua, and New Zealand. Check out their website by clicking here at http://www.ormat.com/

3) It's another sign of the times when the weekend fruit picker population is doubled by people hard hit by the economy,?? looking to save money on food costs. After driving through miles of undulating brown hills studded with oak trees, passing mile upon mile of horse ranches, rusted out cars, and abandoned mobile homes, you come to Brentwood, the fruit capital of Northern California. There, thousands of families harvested ripe bing cherries and peaches at the wholesale price of $1 a pound, fruit that normally costs $6 a pound at the supermarket. Anything you eat in the orchard is free. All a great deal if you don't mind having purple fingertips at the end of the day. Just watch out for the cars pulled over on the side of the road on the way home, their occupants puking out all their excess cherries. In a nod to the 21st century, growers in this Grapes of Wrath industry compile lists of email addresses, and notify their itinerant fruit pickers which crops are ready for harvest via the Internet. Also on the calendar this season are grapes, apples, apricots, plums, loquats, nectarines, mandarin oranges, and wheel chair accessible walnuts (?). At the end of each harvest, professional crews sweep through and pick up what's left, if the prices will bear it. If you wonder why we put up with the earthquakes, high taxes, gridlocked politics, and a non functioning state government, this is the reason. By the way, does anyone know what to do with 25 pounds of cherries? Send me your recipes.

QUOTE OF THE DAY

'Wall Street packages luck, and sells it as skill,' said Dan Solin, author of The Smartest Retirement Book You'll Ever Read.

1) Well, you certainly don?t need my help anymore. With everything in the world going up but the greenback, you certainly don?t need the advice of financial advisors, brokers, pundits, or sadly, even this humble online columnist. I never thought I?d see the day when stocks, bonds, gold, silver, oil, natural gas, copper and collectable beany babies were all up in unison. Not only is the punchbowl ubiquitous, but the Kool-Aide is spiked with ecstasy, and it is so large, that there is a risk we might fall in and drown. Industry analysts are now putting out forecasts for their individual companies implying a 5% GDP growth rate next year, but macroeconomists at those very same houses see 2% as a stretch. All of this in the face of a catatonic consumer, $3.40/ gallon gasoline, and banks maintaining a death grip on lending to any but the primest of borrowers. I guess this is what happens when the Fed is determined to keep interest rates at zero, for as far as the eye can see, and the printing presses in Washington DC are running so fast that I can hear them here in San Francisco. With $4 trillion in cash sitting on the sidelines there is a risk that the faith based rally will continue. Is the Fed trying to cure a burst bubble with a profusion of? bubbles?

2) It?s time to take another look at the short US Treasury bond ETF (TBT). I first recommended this 200% leveraged bet that long dated bonds were going down big time in January at $35, catching a near double to $60 (click here for report) . We have now retrenched back to $45, and it?s time to reload the boat. The US government has now committed to $9.1 trillion in debt issuance over the next ten years. Foreign governments will need to borrow as much to fund their own bail out/stimulus programs. Did I mention inflation? There is absolutely no way the ten year can maintain a 3.40% yield in the face of this onslaught.?? It is clear that zero short rates are driving investors, many of whom will only buy Treasuries, into making terrible investments. This is what the awesome bid to cover ratio of 3.2X for today?s three year auction is telling you. The dollar clearly sees this and is hitting a new one year low. It?s just a matter of time before bond investors put on their bifocals and see the locomotive that is about to run over them.

3) Lack of a pure copper ETF is stampeding hedge funds into the shares of Freeport McMoRan (FCX), the world?s largest copper and gold producer, no doubt spurred by the red metal?s recent run at a new 2009 high.?? FCX is one of my favorite stocks, and one of the great ?tells? on the state of the global economy.?? CEO, Richard Adkerson, says it?s all about ?China, China, China?, which has been frenetically stimulating its economy with a $586 billion reflationary package, and rebuilding stockpiles of the copper at a furious pace. The ongoing lifestyle upgrade in other emerging markets is adding to demand, as is the switch to hybrid cars in industrialized countries, which use two to three times more copper than conventional cars. Last year, FCX mined 102 billion pounds of copper, 40 million ounces of gold, and 266 million ounces of silver. Talk about being in the sweet spot. A doubling of copper prices since January enabled FCX to announce blowout earnings. The stock has more than quadrupled since my New Year recommendation . Did you know that this is the number two performing stock in the S&P 500 this year? If you want a core holding that is in many right places at the right time, use dips to back up the truck for FCX. If you need any help on how to building a position in physical copper, please e-mail me at madhedgefundtrader@yahoo.com

4) The US is turning into Europe. Think high taxes, chronic high unemployment, more government involvement in everything, less innovation, and much lower growth, in exchange for a social safety net and better coffee. That is the message the markets told us by retreating to the 6,000 handle in March, levels not seen since 1996, and down 54% from the 2007 peak. Equity prices will shrink to multiples, in line with permanently lower long term growth rates of maybe 1%-2%, a shadow of the 5% rate seen for much of this decade. Hint: that?s a lot lower than here. Perhaps this is what mature economies are supposed to look like. If someone is holding a gun to your head and you must buy American stocks, only select names that get the bulk of their earnings from overseas. Microsoft (MSFT), Intel (INTC), Oracle, (ORCL), Cisco (CSCO) all get 60%-70% of their profits from overseas, where up to 90% of the real economic growth will come from for the next decade. Commodity, agricultural companies,?? and their ETF?s also fit this picture. As for me, I think I?ll move to Tahiti and live off of coconuts and freshly speared fish, wearing only a loin cloth. Anything is better than becoming French.

1) So who was the dummy that waited until August to lay off their workers? Fire the bastard! Apparently, there are a large number of managers out there who don't read newspapers, watch TV, or talk to anyone, and waited until the Great Depression was nearly two years old to cut costs. That is one of many conclusions I am forced to draw on the news that the August non-farm payroll showed a further hemorrhage of 216,000 jobs, better than the 230,000 consensus, and a big improvement over the 273,000 July figure. But it included downward revisions of 50,000 in June and July, not good. The unemployment rate came in at 9.7%, continuing its relentless march towards double digits. The net net is that the economy has jumped off the top of the Empire State Building, but is now plummeting towards 5th Avenue and the meat wagon at a slower rate. The usual culprits were there; 65,000 jobs lost in construction, 63,000 in manufacturing, and 27,000 in finance. What was truly amazing to me was to see losses in education at the start of the school season. And what is going to happen to the 1.5 million who will exhaust their unemployment benefits by year end? The figures are all proof that there will be no economic recovery without bank lending. Running a business without credit is like trying to complete a marathon while holding your breath. Bring on the 'L.' My many US Navy readers should seriously consider re-upping, as the economy will not see net hiring for a very long time. Just hope we don't invade anyone new.

2) Crude has been trading like a 3X short dollar ETF. If you look at pure supply/demand considerations, oil should be trading in the $40-$50 range, not the $65-$75 range that we have seen. That means that a $25 speculative premium can be laid purely at the door of the big hedge funds. The big oil producing countries, seeing Obama's policies leading to a weak dollar for as far as the eye can see, are also ditching their bucks as fast as they get their hands on them. That is why the Gulf sheikdoms were one of the biggest buyers of crude near last year's $148 peak. This leaves industry insiders clueless about the price direction of their products, not an easy way to run a business. They understand rig counts, tanker deliveries, and depletion rates, not commitment of traders reports, Bollinger bands, and Fibonaccis. No doubt it was their carping that brought regulators to pressure Deutsche Bank to shut down its double long oil ETN (DXO). Of course, this all means the consumer is getting shafted, paying $3.39/gallon at the pump, instead of $2. This premium is causing a drag on the economic recovery as well. Europeans and Japanese who are paying up to $10/gallon are wondering what we are bitching about. Bring on a 'W' recession and poof!, that premium disappears, as it did last year.

3) Just as it is prudent to top up your flood insurance ahead of the hurricane season, investors are loading up on gold ahead of the treacherous September-October stock trading period. Yesterday's $22 move up shows that attempt number six to run the yellow metal up to a new high has begun. Silver happily tagged along for the ride, tacking on 70 cents to $15.49. Historically, September is the best month of the year to own the barbaric relic, showing an average 3.5% gain over the last 20 years. The onset of the Indian wedding season, Ramadan, and the run up to the Christmas and the Chinese New Year jewelry buying binge are all conspiring to give gold a boost.?? A tip off this was coming was the big put selling seen for the shares of the gold ETF (GLD), and Kinross (KGC). One good way to play gold at this late stage might be the shares of highly leveraged unhedged producers like Rangold resources (GOLD), Jaguar Mining (JAG), and royal Gold (RGLD). Confirmation that the markets are moving towards risk aversion can be found in the euroyen chart, which hit a one month low at 131, after double topping at 140.50. If gold does break, it could tack on 20% very quickly to $1,200. Load up on those American gold eagles. If you want to know where to find them in size, check with the experts at http://www.millenniummetals.net by clicking here.

QUOTE OF THE DAY

'Making money on a trade is like getting applause, but you are the only one who hears it,' said Jon Najarian, an ex Chicago bears linebacker who now runs optionmonster.com.