Ultra-Luxury Automobiles Are Totally Recession-Proof, Sell Out

Posted By on September 15, 2011

The rich have it all…..the new Ferrari family car is $356,000 and is sold out, that gets you just one car!  Yep, you read that right.   Ultra-luxury remains totally recession-proof. The gap between rich and poor have never been greater.

Maserati aims to boost deliveries by almost eightfold to 45,000 cars in 2014 as it increases dealers by 150 percent worldwide. Lamborghini SpA’s new Aventador model is sold out for 18 months and Rolls-Royce Cars announced a 10 million-pound ($15.8 million) expansion at its Goodwood, England plant.

Maserati SpA’s new sport-utility vehicle was one of the most sought-after models at the Frankfurt car show this week and Ferrari SpA predicted record sales as executives said ultra-luxury remains recession-proof.

“If you go to the Ferrari stand, there aren’t any customers worried about the recession,” Fiat Chief Executive Officer Sergio Marchionne said at the International Motor Show. “The last Ferrari customers I saw at the show weren’t crying.”

Maserati aims to boost deliveries by almost eightfold to 45,000 cars in 2014 as it increases dealers by 150 percent worldwide. Lamborghini SpA’s new Aventador model is sold out for 18 months and Rolls-Royce Cars announced a 10 million-pound ($15.8 million) expansion at its Goodwood, England plant.

Ferrari expects to deliver 7,000 cars in 2011 on demand for its first family car, the $356,000 four-seat FF that came to market this year.

Consumer Prices And Jobless Claims Exceed Forecasts

Posted By on September 15, 2011

This is the government in action!

The consumer-price index increased 0.4 percent in August, and jobless claims climbed by 11,000 to 428,000 in the week ended Sept. 10, both negatively exceeded forcasts according to Labor Department figures posted today in Washington.  Unemployment is stuck around 9 percent.

U.S. Mortgage Rates Fall To Lowest On Record

Posted By on September 15, 2011

The average rate for a 30-year fixed loan dropped to 4.09 percent in the week ended today from 4.12 percent, Freddie Mac said in a statement. That’s the lowest in the company’s records dating back to 1971. The average 15-year rate fell to 3.30 percent from 3.33 percent.

SAT…Sing A Tune, Nope – Let’s Try Again

Posted By on September 14, 2011

SAT Reading Scores for 2011 hit an all-time low, but here’s the reason why….In 1973 at the begining of this chart, and in fact before about 2004, only students planning to go to college took the test.  Now, schools encourage…and in some states make, every student take the test.  That makes the average drop, drop, drop.

h/t John Lohman

www.zerohedge.com

Listening Near And Far

Posted By on September 14, 2011

Interesting to say the least!  The National Security Agency (NSA) has opened a massive $2 billion, 1 million-square-foot complex in the Utah desert…devoted to storing and sorting through emails, web searches and business transactions.

This system is capable of monitoring 10 million people simultaneously this year and will be able to monitor 100 million next year! You’re right if you said nothing seems to be private anymore.

The Patriot Act authorized ‘sneak and peek’ search warrants — where you, the suspect, don’t have to be notified of the search until after the fact. If you’re a patriot and thought those powers would be used to fight terrorism, well you would be wrong.

Meanwhile, the National Security Agency (NSA) has opened a massive $2 billion, 1 million-square-foot complex in the Utah desert…devoted to storing and sorting through emails, web searches and business transactions. Perhaps yours.

A similar complex is being built near San Antonio. By 2015, according to journalist James Bamford, the NSA will store data equivalent to 1 septillion printed pages. That’s a 1 followed by 24 zeroes.

“Somewhere between Sept. 11 and today,” wrote Bamford last week, “the enemy morphed from a handful of terrorists to the American population at large, leaving us nowhere to run and no place to hide…”

At the NSA, thousands of analysts who once eavesdropped on troop movements of enemy soldiers in distant countries were now listening in on the bedroom conversations of innocent Americans in nearby states…

A surveillance system capable of monitoring 10 million people simultaneously this year will be able to monitor 100 million the next year — at probably half the cost. And every time new communications technology appears on the market, rest assured that someone at the NSA has already found a way to monitor it. It’s what the NSA does.

www.dailyreckoning.com

On The Down Slope

Posted By on September 13, 2011

This kind of sums things up, the government said we had slow growth, odd then how median household income in 2010 dropped $1,154 from $50,599 to $49,445!  Hmm, they call that growth?

From Bloomberg:

Data released by the Census Bureau today showed the proportion of people living in poverty climbed to 15.1 percent last year from 14.3 percent in 2009, and median household income declined 2.3 percent. The number of Americans living in poverty was the highest in the 52 years since the U.S. Census Bureau began gathering that statistic.  Median household income in 2010 was $49,445, down from $50,599 the year before.

Labor Dept. Data: Only 1.75 Full-Time Private Sector Workers Per Social Security Recipient

Posted By on September 12, 2011

Bad seats…hey buddy!  Epecially if you’re a baby boomer!  We all need to plan well after reading this.

From (CNSNews.com) …. There were only 1.75 full-time private-sector workers in the United States last year for each person receiving benefits from Social Security, according to data from the Bureau of Labor Statistics and the Social Security board of trustees. 

In its latest annual report, the Social Security board of trustees reported that the federal government’s total revenue from Social Security taxes in 2010—$544.8 billion—was not enough to cover Social Security’s total benefit payments—$577.4 billion.

The 93.641 million full-time private sector workers last year worked out to 1.75 for each person receiving Social Security benefits.

These 93.641 million full-time private sector workers were the foundation of the tax base that supported both government at large and Social Security in particular.

Government Will Likely Offer New (Sub Prime) Loans In Effort To Save Real Estate

Posted By on September 11, 2011

This is what we discussed on August 30 here at www.thestatedtruth.com :  

Da boys in the White House are working on a new giveaway to be presented after the Labor Day weekend.  The word is, that it will highlight how to give real estate losers something for nothing (free monopoly money or casino chips) in an effort to turn around housing….kind of like magic. As you might guess, the banks aren’t so happy about the idea. 

Now:

In the next few weeks we are going to see a massive Real Estate ReFi proposal along the lines described previously. This will justify the Fed to initiate $1 trillion of Operation Twist. The announcement will most likely come on September 21st.

These are in effect new sub prime loans, but the government won’t call them that… but this could bury real estate for years to come.  Why you say? …Well who do you think finances this stuff?  It used to be banks, insurance companies and investors, now it’s mostly the government.  So who is going to lay out money for morgage financing if the rules (contracts) can be changed by the government midstream with dynamic negative losses to the investors (lenders) as a result? Correct if you said nobody.  Bill Gross of PIMCO has touched on this earlier this year.

This may cause restructuring (wipe out of equity) to some of the weaker large banks, and ultimately raise the cost of mortgages, making them much harder to get. The end result may be opposite government expectations.  The real estate markets and especially the mortgage markets could see chaos. 

Mortgage Backed Securities holders (banks, retirement plans and insurance companies) along with savers will get hit on the head to the tune of a negative $25b as the rules will have officially changed.  But no one cares about them any longer.

This will punish the banks (they have n0 friends) and savers (mostly old folks) while being negative for the stock market which is likely headed down for years to come. Pension plans will be dead in the water for as far as the eye can see. 

Gold is the new real estate and will continue to be so!

This from www.zerohedge.com:

The current ReFi restrictions that require a borrower be no more than 25% underwater and have a 780 FICO are about to be waived.

The final bit of data comes from the CBO (Congressional Budget Office). They did an analysis of what the implications are of big refinancing might be. The CBO was very clear that the work they did on this topic was not a report on a specific proposal, but rather a generic review.

It is probably correct that any plan that the administration comes up with will vary in scope from the review by CBO. It is also correct that this review has been done in anticipation of a specific proposal. Therefore the review and the conclusions are worth noting.

The key assumptions used in the analysis:

(1) Eligibility includes existing loans guaranteed by Fannie Mae, Freddie Mac, or FHA.


(2) A borrower must be current on an existing mortgage and must not have been more than 30 days late on any mortgage payments during the prior year, but there are no limits on the borrower’s current income or on the loan-to-value ratio of the new loan.


(3) The new loan has a fixed rate of interest, at the prevailing market rate, and a term of 30 years.

The CBO has concluded that there are $4.3 trillion of mortgages that broadly meet the above requirements. These mortgages have been converted to Agency MBS. The report looks at what were to happen if 10% in that universe were restructured. The following chart looks at the results.

The bottom line is that 2.9mm homeowners would get a benefit of $7.5b (each year) and the net cost to the government would be a one time hit of only $600mm. A nice trick.

In Memory Of September 11, 2001

Posted By on September 10, 2011

Image was courtesy of www.ingerletter.com

Egypt Declares State Of Emergency

Posted By on September 10, 2011

A bug looking for a windshield!

Egypt’s ruling military council declared a state of emergency to restore order after protesters attacked the Israeli embassy in Cairo.  Egyptian commandos rescued embassy security personnel and civil security forces dispersed protesters gathered outside the embassy for a second day.

“The fact that the Egyptian authorities acted decisively to bring about the release of our people is commendable and deserves thanks,” Netanyahu said in a televised address from his office in Jerusalem. “At the same time, the Egyptians cannot ignore the heavy damage done to the fabric of peace with Israel and this extreme violation of international norms.”

http://www.bloomberg.com/news/2011-09-09/egypt-fires-gas-at-israel-embassy-protest-arabiya-says-1-.html

Egyptian Protesters Take Aim At Israeli Embassy

Posted By on September 9, 2011

The Middle East is starting to melt………Egyptian police stood aside as activists tore down the concrete wall of the Israeli embassy to the cheers of hundreds of demonstrators, then burned an Israeli flag.

(From Reuters) – Thousands of Egyptian activists destroyed a wall around the Israeli embassy and set police cars on fire in Cairo on Friday at Tahrir Square. 

Protesters scaled the embassy building, removed the Israeli flag for the second time in less than a month and burned it.

Giza’s police chief said that two police vehicles were set alight near the Israeli embassy building during the protests. State television said four police vehicles were set on fire.

“This action shows the state of anger and frustration the young Egyptian revolutionaries feel against Israel especially after the recent Israeli attacks on the Egyptian borders that led to the killing of Egyptian soldiers,” Egyptian political analyst Nabil Abdel Fattah told Reuters.

Egyptian police stood aside as activists tore down the concrete wall to the cheers of hundreds of demonstrators.

CBS New York…Sources: Authorities Concerned About Possible Dirty Bomb, Times Square Strike

Posted By on September 9, 2011

One thing we would observe, the Feds don’t put this kind of fear into everyone for no reason.  Best to stay indoors this weekend.  “Remember, an awful lot of the security we have you don’t see” , Mayor Michael Bloomberg.   Hmm…..sounds like the Eastern flank is covered, but what about the South, Midwest and out West?

This from CBS New York:

Some of the information on the latest terror threat could be coming from Younis al-Mauritani, the man hand-picked by Osama bin Laden to develop terror targets in the United States. He’s a “most wanted list” senior al Qaeda operative who was arrested in Pakistan last week with his computer, BlackBerry and other tools.

“Remember, an awful lot of the security we have you don’t see,” Mayor Michael Bloomberg said. “I’m satisfied that Commissioner Kelly has deployed all of our resources doing everything that we should be doing.”

There was a lot of security you could see on Friday in the Big Apple, especially in Times Square, because, as sources told Kramer, the intelligence includes information that al Qaeda wants to strike again in Times Square to make up for Faisal Shahzad’s failed car bomb attempt in May 2010.

“We have to think about a dirty bomb, where you take radiological material and mix it with conventional explosives,” NYPD Commissioner Ray Kelly said.

That’s why the NYPD is deploying all kinds of radiation detectors, panel trucks with sophisticated instruments. On Friday, cops had personal radiation detectors on their belts, and radiation detectors are being used by police within a 50-mile radius of New York City — in New Jersey, Connecticut, and Pennsylvania and on Long Island.

Based on informant information authorities are looking for three suspects. One is believed to be an American citizen. Two others apparently have U.S. travel documents.

Consumer Credit Rose In July….But

Posted By on September 8, 2011

But wait until you see why?  Non-revolving debt, mostly comprised of educational loans along with loans for autos and mobile homes, rose by $15.4 billion in July, while revolving debt, which includes credit cards, fell by $3.4 billion.  The rise in non-revolving loans was the most since November 2001.

We’re going to totally bury (by educational loans) the future pole bearers of our economy. This will guarantee slow growth for this financially broke demographic generation as far as one can see. 

According to Bloomberg:

Consumer borrowing in the U.S. rose by the most in more than three years in July, led by a gain in non-revolving credit that includes student loans.

Credit increased $12 billion after a revised $11.3 billion rise in June, the Federal Reserve said today in Washington. Economists projected a $6 billion gain, according to the median forecast in a Bloomberg News survey. The rise in non-revolving loans was the most since November 2001.

Revolving credit showed the biggest decrease in six months, indicating Americans may be cutting back on non-essential items as limited job and wage growth depresses consumer confidence.

Non-revolving debt, including educational loans and loans for autos and mobile homes, rose by $15.4 billion in July, and revolving debt, which includes credit cards, fell by $3.4 billion.

U.S. Homeland Security Reports Specific, Creditble 9/11 Terror Threat

Posted By on September 8, 2011

Best to stay in on Sunday, September 11, 2011

The Department of Homeland Security has “specific, credible but unconfirmed threat information” as the 10th anniversary of the Sept. 11 terrorist attacks nears, said agency spokesman Matt Chandler in a statement.

A U.S. intelligence official who isn’t authorized to speak publicly said the report is credible largely because of al- Qaeda’s longstanding interest in important anniversaries and symbolic targets. The official said authorities received the information today, and that it hasn’t yet been fully vetted.

“Sometimes this reporting is credible and warrants intense focus; other times it lacks credibility and is highly unlikely to be reflective of real plots under way,” he said in the statement. “Regardless, we take all threat reporting seriously, and we have taken, and will continue to take all steps necessary to mitigate any threats that arise.”

PIMCO’s El-Erian: They Don’t Understand

Posted By on September 8, 2011

The U.S. Fed doesn’t get it, stimulus won’t work, they’re addressing the wrong things here….we have “structural issues and they require structural solutions.” Ei-Erian

Pacific Investment Management Co.’s Mohamed El-Erian said the U.S. faces “serious” economic challenges, including lagging housing and labor markets, that will prove resistant to Federal Reserve stimulus efforts.

“You simply can’t overcome these impediments,” said El- Erian, chief executive and co-chief investment officer at California-based Pimco, manager of the world’s largest bond fund. “These are structural issues and require structural solutions.”

Responses to financial crises in the U.S. and other countries “have been too cyclical and too dependent on central banks,” he said today at a symposium on Asian banking and finance held at the Federal Reserve Bank of San Francisco.

The world is undergoing a “historical” realignment akin to “tectonic plates shifting,” which is focused on balance sheets, growth dynamics among different countries, and policies or politics, he said.“A cyclical mindset is not sufficient given the world we live in, You need to think structurally.”

Donald Trump’s Thoughts On Libya

Posted By on September 6, 2011

We’re not particularly found of him, but Donald makes a good point!

“China gets their oil from Libya. Why isn’t China involved? They’re going out and spending billions of dollars a day on trying to take over the world economically. And we’re spending billions and billions and billions of dollars on policing the world. Why isn’t China involved with Libya?…we don’t get oil from Libya, China does.”

    Donald Trump

Elephants In A China Shop

Posted By on September 6, 2011

Food for thought!

China slows, bad for commodities. China grows, good for commodities. Makes sense, right? In case you missed it, China’s manufacturing activity fell for the third straight month in June. The official purchasing managers index stood at 50.9, down from 52 in May. Any number over 50 means expansion and below that means contraction. Unofficially, things are probably worse, because officials have a way of dressing up doggy numbers.

Keep in mind that China is still growing, just at a slower rate. Now imagine what happens if China actually contracts?      Just asking?

Capice!

www.dailyreckoning.com

No Miricles Here! A Road Of Hard Times Looms Dead Ahead…

Posted By on September 6, 2011

 

So…overall household debt to disposable income has declined minesquely from a peak of 134% in 2007 to 125% currently. That doesn’t exactly set the house on fire as most assets have declined at a faster rate, especially for entities that have not experienced stable or growing revenues (main street America comes to mind). If Dick Stoken is right, the reality of this new paradigm of secular credit contraction will come more into focus by the broad population and behavior will change. One of the primary tenets of Buddhism is that man will not change until the pain of his suffering is greater than the pain of change. This most likely means that household economic behavior will come more into alignment with rational solutions for reestablishing financial security. This is reasonable thinking, is it not!   Severe budgeting and the attendant saving will bring forth the “Savings Paradox.” Retirement will have to be postponed for the Baby Boomers, making it especially hard for those at the entry level to find employment. In an effort to liquidate debt, home prices will continue to be under extended selling pressure as will stocks and most other things not nailed down like collectibles, art work etc.  Welcome to the new normal, it’s likely to be here a while.

 

Rick’s Picks 

Monday, September 6, 2011

“Phenomenally accurate forecasts”

[It was nearly a year ago that our good friend Doug Behnfield, a financial advisor based in Boulder, Colorado, lucidly described here how America was headed  into an economic coma that would last for many years. With the financial phase of the crisis winding down, says Doug, we are about to enter a prolonged period of asset deflation, high joblessness and stagnant-to-negative GDP growth. A chief cause of this will be by-now-unavoidable, drastic cutbacks baby boomers must make in their retirement plans. For a close-up look at what to expect, read Doug’s essay, below. RA]

We are in the early stages of a secular credit collapse following the biggest credit bubble in human history. The credit expansion that began in the late 1930s finally became a bubble as a result of a universal, irrational and linear belief in real asset appreciation that developed in the 1990s and reached its glorious peak in 2007. The credit collapse began with the financial crisis of 2008. That was followed by all the king’s horses and all the king’s men brandishing marvelous new tools trying, but failing to put Humpty Dumpty back together again. We got a pause in the collapse and a spectacular bear market rally, but now we are rolling back into contraction. Six months into the transition, it is time to deliver a forecast for the next stage in the new paradigm that began with the inflection of the secular credit cycle. The First Stage was the Financial Crisis. The Second Stage is the Economic Crisis, with all its attendant deflation and GDP contraction.

I am reminded of a quote that Art Zeikel included in On Thinking. The quote was from economist Dick Stoken: “Because human psychology is slow to change, a broad economic move usually occurs in three stages. The first stage begins when some unexpected event shatters an overdone psychological environment. Yet, while some people respond immediately to this new lesson, most people, as they find it outside their past experience, do not believe it. They need more evidence — that is, a second stage. Typically, the majority become convinced during the second stage and therefore the psychological background changes. People begin to act differently, and their behavior soon affects the performance of the economy (my italics).”

The event that shattered the overdone psychological environment this time around was the abrupt reversal in the market for residential real estate. Real estate had become the foundation for practically the entire society’s financial plan, not to mention the primary source of discretionary dollars for most households’ profligate consumption. The trajectory of home prices went from straight up to straight down practically overnight. But that was after 70 years of only brief and regional setbacks, so it is understandable that most people didn’t rush out and put a sign up in 2009.

No ‘Rubber-Band’ This Time

In similar fashion, every post-WWII recession had been relatively brief and quickly followed by new highs in GDP, employment, corporate earnings, and tax revenues.

Due to the severity of this financial collapse, unprecedented fiscal and monetary stimulus was brought to bear, followed by a strong and noisy consensus that, due to the magnitude of the “Great Recession” the subsequent recovery would be awesome. Much like pulling on the rubber band.  So it is understandable that small businessmen particularly have tried to avoid losing longstanding but superfluous employees that would be a source of profit in the recovery just around the corner. By the same token, for the 90% of people still employed, it didn’t make sense to sit everyone down and radically cut the household budget or lower expectations on what constituted an affordable college.

But we didn’t get the rubber-band effect. We got “pushing on a string.” And there are costs associated with hanging tough through the valley.  Reduced revenues, whether at the corporate, household or government level, must be compensated for by increasing debt or reducing savings if cuts in spending are deferred. So it is reasonable to assume (at the margin) that balance sheets have actually suffered in the last 4 years since the economic contraction began, for entities that have not experienced stable or growing revenues.  Admittedly, overall household debt to disposable income has decline to 125% from a peak of 134% in 2007. However, government transfers have taken on a much larger role in the denominator. Cash on corporate balance sheets have also ballooned, to more than $1.8 trillion. But how much of that is in the financial sector or reserved because management is preparing for winter?

A New Layer of Recession

The question for the thoughtful and objective observer is: What happens if the next recession begins (or the original contraction continues), before organic growth has resumed enough and balance sheets have been repaired enough to weather it? And: What are the policy options if the Fed has not had the opportunity to reload the gun and the society will not politically support even more extreme fiscal stimulus than the first round, which appears to have been ineffective? We are about to get the answer. If Dick Stoken is right, the reality of this new paradigm of secular credit contraction (collapse) will come more into focus by the broad population and behavior will change. One of the primary tenets of Buddhism is that man will not change until the pain of his suffering is greater than the pain of change. This most likely means that household economic behavior will come more into alignment with rational solutions for reestablishing financial security. As an aside, last week, the latest round of policy response to the credit crisis in real estate by the mortgage bankers (Fannie and Freddie) entered the rumor mill. Would Obama execute an “October Surprise” by offering an $800 billion jubilee to upside down mortgagees? The consensus was that such an act would be, among some other really bad things, stimulative. We have been saying for several years that like any other lousy investment, mortgage lenders would have a lot to write off before this is over. But stimulative? Give me a break! This is one more example of asset destruction that is the bedrock of a credit collapse. It matters not whether the asset (a mortgage) is owned by a bank or a ward of the state. Credit is being dissolved. There is not one stimulative aspect to it.

Frugality Is Coming

Whereas deteriorating household balance sheets were tolerated when the prevailing wisdom was one of linear economic expansion, it becomes unbearable when the perception is that the economy is in secular contraction. For the 55-year-olds in 2007 who are now 58, there is no doubt that their household economies are in secular contraction, regardless of what the global economy has to offer. Two years ago we researched what the 80th percentile, 55-year-old householder looked like financially and it turned out that he was upside down! That is to say, financial assets available to fund retirement were substantially less than mortgage debt. And they have $150,000 of household income to fund a major portion of at retirement. For the Baby Boomers, the evidence is rapidly becoming unavoidable that a change in behavior toward extreme frugality is the least painful alternative. All the things that home appreciation or at least the prospect for wage or stock market gains used to pay for are being reassessed. In their place, the savings that go along with a tighter budget is likely to be combined with productive life style alternatives to solve the problems associated with the legacy of the unsuccessful planning decisions of the past. (Those included leveraging your way to prosperity.)

We have focused on the Baby Boom Cohort for a variety of reasons, but the main one is that, along with their traditional role of driving the fashion for the population as a whole, they have entered the stage in their lifecycle characterized by maximum political power. Local and national politics should reflect the mores of this cohort like never before as their economic behavior changes. It is difficult to imagine that the political establishment will not be beset by some revolutionary forces as Baby Boomers embrace a strategy of frugality and financial rebuilding. The Age of Aquarius meets AARP. The old paradigm of conspicuous consumption is yesterday. As Ringo Starr would say at age 70, “Peace and Love.”

Postponed Retirements=Fewer Jobs

There is much work to be done, and none of it will bring back the credit expansion any time soon. Severe budgeting and the attendant saving will bring forth the “Savings Paradox.” Retirement will have to be postponed for the Baby Boomers, making it especially hard for those at the entry level to find employment. In an effort to liquidate debt, home prices will be under extended selling pressure. “Pay as You Go” is making a major comeback. Government employment will be a major source of economic contraction. Keynesianism is toast.

So, there you have it. A very deflationary outlook favoring investment strategies that capture safe and durable income, even as asset values come under increasing pressure. It is not that farfetched, but who among us wants to question the quality of the Emperor’s robe? The most startling possibility is that, even as the vast majority of pundits debate how “gradual” the recovery will be, we have already entered a period that seems destined to mark the most severe contraction since 1937.

In an act of heroism, Wall Street Economists are upping their estimate for the likelihood of recession in 2012 to 35-50%. That means chances of avoiding it are slim to none. We have experienced the unthinkable and we haven’t even gotten to the economic stage of this crisis yet. Just the initial, financial stage. Sub-11 million auto sales, 300,000 new home sales, a 33% decline in Case-Shiller. 18 million unemployed, a $1.4 trillion deficit and on top of it all, what do you get? 3 years older and deeper in debt. The shift to long term government bonds is just starting up again. 

***

Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indication of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  Rick’s Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick’s Picksreserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2011, Rick Ackerman. All Rights Reserved.

www.rickackerman.com

The U.S. Post Office Continues To Slip On Its Own Grease

Posted By on September 5, 2011

The U.S. Post Office has created many of it’s own competitive disadvantages , but UPS and FedEx are operating with some of the same problems.  The law also prevents the post office from raising postage fees faster than inflation, but the government says we have no inflation….so that should be a moot point!  Or maybe not.  And….The agency (morons) have long guaranteed no layoffs to most of its workers, and management (dumber morons) agreed to a new no layoff-clause in a major union contract last May.  Now the agency is asking Congress to enact legislation that would overturn the job protections and let it lay off 120,000 workers in addition to trimming 100,000 jobs through attrition.

Exerts from The New York Times:

“Our situation is extremely serious,” the postmaster general, Patrick R. Donahoe, said in an interview. “If Congress doesn’t act, we will default.”

In recent weeks, Mr. Donahoe has been pushing a series of painful cost-cutting measures to erase the agency’s deficit, which will reach $9.2 billion this fiscal year. They include eliminating Saturday mail delivery, closing up to 3,700 postal locations and laying off 120,000 workers — nearly one-fifth of the agency’s work force — despite a no-layoffs clause in the unions’ contracts.

The post office’s problems stem from one hard reality: it is being squeezed on both revenue and costs.

As any computer user knows, the Internet revolution has led to people and businesses sending far less conventional mail.

At the same time, decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees.

Mail volume has plummeted with the rise of e-mail, electronic bill-paying and a Web that makes everything from fashion catalogs to news instantly available. The system will handle an estimated 167 billion pieces of mail this fiscal year, down 22 percent from five years ago.  and volume could plunge to 118 billion pieces by 2020. The law also prevents the post office from raising postage fees faster than inflation, but the government says we have no inflation……so it should be a moot point!  Or maybe not.

Congress is considering numerous emergency proposals — most notably, allowing the post office to recover billions of dollars that management says it overpaid to its employees’ pension funds. That fix would help the agency get through the short-term crisis, but would delay the day of reckoning on bigger issues.

Postal service officials say one reason for their high costs is that they are legally required to provide universal service, making deliveries to 150 million addresses nationwide each week. They add that a major factor for the post office’s $20 billion in losses over the past four years is a 2006 law requiring the postal service to pay an average of $5.5 billion annually for 10 years to finance retiree health costs for the next 75 years.

The agency is considering some new ideas, like gaining the right to deliver wine and beer, allowing commercial advertisements on postal trucks and in post offices, doing more “last-mile” deliveries for FedEx and U.P.S. and offering special hand-delivery services for correspondence and transactions for which e-mail is not considered secure enough.

Cutting the work force is more difficult. The agency’s labor contracts have long guaranteed no layoffs to the vast majority of its workers, and management agreed to a new no layoff-clause in a major union contract last May.

But now, faced with what postal officials call “the equivalent of Chapter 11 bankruptcy,” the agency is asking Congress to enact legislation that would overturn the job protections and let it lay off 120,000 workers in addition to trimming 100,000 jobs through attrition.

 

Home Refinancing On A Ramp…27% Of Homes Now Have Negative Equity

Posted By on September 2, 2011

The positive side of this…..should put more monthly income into the economic system. But…lenders’ capacity to handle loan applications could be an obstacle for the Obama administration, which is weighing options for spurring a housing recovery, including steps to promote refinancing for underwater borrowers, or those who owe more than their property is worth. Almost 27 percent of single-family homeowners with mortgages have negative equity, according to Zillow Inc., a Seattle-based real estate data provider.

Mortgage rates at near historic lows have sparked a refinancing boom that has U.S. lenders struggling to handle the surge.

“There’s just so much volume,” said Kristin Wilson, a senior loan officer in Bloomington, Minnesota, for Fairway Independent Mortgage Corp., who has seen clients seeking lower rates climb to about half of her business from 20 percent a month ago. “We can’t just ramp up by hiring inexperienced people because they don’t know what they’re doing.”

The lending logjam extends to the nation’s biggest banks, which fired thousands of mortgage workers after interest rates rose in November through February, chilling refinancing demand. Now, the time needed to close a loan has as much as doubled to 60 days, according to Wilson and other bankers, and lenders are holding some mortgage rates higher than they could be to slow the torrent of customers, data show.

Refinancing applications are up 83 percent from this year’s low in February, according to an index compiled by the Mortgage Bankers Association, a Washington-based trade group. The average rate on 30-year fixed loans fell two weeks ago to 4.15 percent, the lowest in surveys dating back to 1971 by Freddie Mac, the second-largest U.S. mortgage-finance company.

Compounding the delays are stricter underwriting and disclosure requirements implemented in the past few years, which leave no room for shortcuts, said Stew Larsen, head of the mortgage unit at San Francisco-based Bank of the West.

http://www.bloomberg.com/news/2011-09-02/banks-in-u-s-overwhelmed-by-mortgage-refinancing-boom-after-reducing-jobs.html

Read My Lips…No New Jobs Were Created. None, Zippo, Nota, Just A Big Fat Zero

Posted By on September 2, 2011

The U.S. economy added no new jobs for the first time in almost a year, while the unemployment rate was stuck at 9.1%.

Economic Failure……Presidential failure….Congressonal failure….Voter failure…. Bank Regulation failure, Healthcare failure…Fair Taxation failure…War failure…Currency failure, etc., etc. …..has caused this disaster that we currently have.  Take your pick of the above.

Lights Dim For The Large Banks If This NYT Leak Is Correct… U.S. Is Preparing Legal Actions Against More Than A Dozen Big Banks

Posted By on September 1, 2011

Will the arrogant banks finally get their comeuppance…..we’ll see?  Chris Whalen, speaking on King World News (www.kingworldnews) and known as one of the top U.S. bank analysts, says Bank of America Corp (BAC) will probably have to restructure (go bankrupt) sooner rather then later, wiping out shareholders and giving bond holders a haircut.  Whalen said the new Bank of America Holding company would create a much stronger bank that can grow going forward.  Separately Bank of America bank deposits should be safe and protected according to Whalen. 

The New York Times has broken major news that the U.S. is preparing legal actions against more than a dozen big banks, which include Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank among others, in an attempt for Fannie Mae and Freddie Mac to recoup $30+ billion. The lawsuit is expected to hit the docket in the next few days: “The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims.”  Unlike the Walnut Place litigation, this will take place in Federal Court where Article 77 is not applicable.

From the New York Times:

The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.

Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers.

In July, the agency filed suit against UBS, another major mortgage securitizer, seeking to recover at least $900 million, and the individuals with knowledge of the case said the new litigation would be similar in scope.

Private holders of mortgage securities are already trying to force the big banks to buy back tens of billions in soured mortgage-backed bonds, but this federal effort is a new chapter in a huge legal fight that has alarmed investors in bank shares. In this case, rather than demanding that the banks buy back the original loans, the finance agency is seeking reimbursement for losses on the securities held by Fannie and Freddie.

Besides the angry investors, 50 state attorneys general are in the final stages of negotiating a settlement to address abuses by the largest mortgage servicers, including Bank of America, JPMorgan and Citigroup. The attorneys general, as well as federal officials, are pressing the banks to pay at least $20 billion in that case, with much of the money earmarked to reduce mortgages of homeowners facing foreclosure.

And last month, the insurance giant American International Group filed a $10 billion suit against Bank of America, accusing the bank and its Countrywide Financial and Merrill Lynch units of misrepresenting the quality of mortgages that backed the securities A.I.G. bought.

Bank of America, Goldman Sachs and JPMorgan all declined to comment. Frank Kelly, a spokesman for Deutsche Bank, said, “We can’t comment on a suit that we haven’t seen and hasn’t been filed yet.”

www.zerohedge.com

France Warns Iran About Building Nuclear Weapons

Posted By on September 1, 2011

We’ve already heard that the Pentagon warned the White House about September being a dangerous period between Israel and Iran…Now we hear from France.  It’s probably another reason why Gold is acting so good against what is normally a negative summer seasonality. 

France’s President Nicolas Sarkozy warned on Wednesday that Iran’s alleged attempts to build long-range missiles and nuclear weapons could lead unnamed countries to launch a pre-emptive attack.

“Its military nuclear and ballistic ambitions constitute a growing threat that may lead to a preventive attack against Iranian sites that would provoke a major crisis that France wants to avoid at all costs,” he said.

Sarkozy did not say which country might launch such a strike, but it has been reported that Israel — perhaps with US support — has considered bombing Iranian nuclear sites if it believes Tehran is close to building a weapon.

The French leader placed the blame for the crisis on Iran, which insists it has no intention of building a nuclear weapon, and is merely enriching nuclear fuel for medicial research and a domestic atomic energy programme.

“Iran refuses to negotiate seriously,” he told an annual meeting of French diplomats. “Iran is carrying out new provocations in response to the challenge from the international community for it to provide a credible response.”

Goldman Report Hits The Nail On The Head With A Sledge Hammer!

Posted By on August 31, 2011

$1 Trillion in capital needed in Europe for banks…Geez   Gold anyone?

From the WSJ: “Here we go again,” says the Goldman report, amid a number of charts displaying negative statistics similar to those that portended problems before the 2008 financial panic. “Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?”

Further exert from the Wall Street Journal:

A top Goldman Sachs Group Inc. strategist has provided the firm’s hedge-fund clients with a particularly gloomy economic outlook and suggestions for how these traders can take advantage of the financial crisis in Europe.

In a 54-page report sent to hundreds of Goldman’s institutional clients dated Aug. 16, Alan Brazil—a Goldman strategist who sits on the firm’s trading desk—argued that as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China’s growth may not be sustainable.

Food Stamp Line, Take A Number…The Line Starts Outside Around The Block, Accross The Street, Up The Hill, Under The Bridge And Around The Backside Of The Lake! Bathrooms Are Up Front, Take An Other Number…Good Luck, Expected Wait Time Is: 8 Hours…For The Bathrooms That Is

Posted By on August 31, 2011

A record 45.8 million people are now relying on the government’s food stamp program, up 12% from a year ago and up an astonishing 34% in only the last two years.

Mutual Fund Money Is All Aboard….The Bad News Blues

Posted By on August 31, 2011

Historically it’s very negative for the stock market when cash levels are low. It means that everybody that wants in the market , is in, and the money has been spent. It’s doubly bad when cash levels are at record lows!  Mutual funds just saw Liquid Assets drop to a new all time record low of 3.3% (down from 3.4%).  That amounts to about $150 billion cash on $4.54 trillion in stock assets.  The chart below goes back to 1986.

www.zerohedge.com

Heads Up

Posted By on August 31, 2011

We’re in an economy where demand is falling. Gasoline use in the U.S. has dropped to an 8-year low. Households are saving money (or trying). Incomes are going down while the real economy is shrinking.  We live in challenging times to say the least!
 
 

 

Shrinking Labor And Bad Demographics Effects U.S. Expansion

Posted By on August 31, 2011

Amoung areas of interest for investing in this demographic tidal wave …..We would expect to see strong growth in all areas of health-care spending, that’s a no brainer.  

Women and baby boomers entering the American workforce after 1950 helped to supercharge expansions in 1975 and 1983 by filling an increasing number of jobs and purchasing more goods and services. Now as the share of women with jobs falls and older Americans age into retirement, the shrinking — or, at best, slowly growing — workforce will weaken economic activity for the next two decades.

The demographic changes may be the biggest and least-appreciated reason why the two-year recovery has slowed, because the rate of growth for labor and capital is “the most important determinant” of economic expansion, said James Paulsen, chief investment strategist for Wells Capital Management in Minneapolis.

More retirees mean slower household formation, reduced consumer spending and downward pressure on equity prices as retirement cuts people’s purchasing power, according to John Lonski, chief economist at Moody’s Capital Markets Group in New York, and Gus Faucher, director of macroeconomics at Moody’s Analytics Inc. in West Chester, Pennsylvania.

Household purchases rose at an average annual pace of 3.2 percent in the quarter century that began in 1972, when the oldest of the boomers turned 26, and averaged 2.8 percent since 1996, when they turned 50, according to Lonski. He forecasts the decline will continue, to between 2 percent and 2.5 percent a year, as growth slows for Americans aged 15 to 49.

“A weaker labor force does dampen the pace of the rebound,” along with “our expectation for what an expansionary trend is,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “We should be lowering our sights on potential GDP compared to when our population was younger.”

Anemic gains in the number of new workers has effectively cut the long-term “speed limit for growth” to 2.25 percent, estimates Maki, a former senior economist at the Federal Reserve. That compares with the Fed’s estimated 2.5 percent to 2.8 percent rate for gross domestic product and average growth of 3.2 percent from 1980 to 2000.

The aging population also may hold down stock values for the next two decades as boomers sell shares to finance retirement, according to a Federal Reserve Bank of San Francisco research paper released Aug. 22.

“The mentality has shifted to preserving wealth rather than growing wealth, with less-risky portfolio allocations,”said Emily Sanders, president of Sanders Financial Management Inc. in Norcross, Georgia, whose largest group of clients is aged 55-65. A typical 65-year-old may have 50 percent of his portfolio in stocks, which would drop to 30 percent at age 80, she said.

An estimated 72 million people, or 19.3 percent of the population, will be 65 and older by 2030, compared with 40 million, or 13 percent, in 2010, the Census Bureau estimates.

The baby boom, the population bulge born after World War II between 1946 and 1964, added 9.4 million people in the 16-24 age group during the 1960s and 7.3 million in the 1970s. The percentage of women in the workforce almost doubled to 60.3 percent in 2000 from 33.6 percent in 1953, according to the Labor Department.

Boomers started turning 65 this year, and every day for the next 18 years, about 10,000 more will hit the age that historically has been associated with retirement, according to the Pew Research Center in Washington. Women’s participation in the labor force may decline slightly during the next 40 years to about 57 percent because fewer will have jobs as they grow older, the Bureau of Labor Statistics projects.

More at: http://www.bloomberg.com/news/2011-08-30/aging-baby-boomers-shrinking-labor-force-may-curb-u-s-growth-for-20-years.html

 

They Still Don’t Get It!

Posted By on August 31, 2011

The Fed is caught by its tail in a mouse trap. Charles Evans, president of the Chicago Federal Reserve Bank  told CNBC television the labor market, with its 9.1 percent jobless rate, looks to be in a recession.

(Reuters) – The central bank in early August discussed a range of unusual tools it could use to help the economy, with some officials pressing for bold new steps to help the economy.

Before settling on a promise to keep rates near zero at least until mid-2013, the Fed examined an array of policy options to shore up a flagging recovery, including tying the path of interest rates to either unemployment or inflation.

“Participants noted a deterioration in labor market conditions, slower household spending, a drop in consumer and business confidence and continued weakness in the housing sector,” according to minutes from the central bank’s August 9 meeting released on Tuesday.

The minutes said that the few officials who pressed for going beyond the low-rates vow the Fed offered viewed the new guidance “as a step in the direction of additional accommodation.”

The U.S. economy sputtered in the first six months of 2011, with gross domestic product expanding at less than a 1 percent annual pace. The jobless rate, meanwhile, remains stuck above 9 percent.

The latest dark sign for the economy came on Tuesday when data showed confidence among consumers plunged in August to its lowest level in more than two years.

Charles Evans, president of the Chicago Federal Reserve Bank and a noted policy dove, said he favored strong central bank accommodation “for a substantial period of time,” since the economy now looks to be moving “sideways.”

But Narayana Kocherlakota, president of the Minneapolis Federal Reserve Bank stopped well short of signaling support for further easing, showing he remains firmly on the hawkish wing of the Fed’s policy-setting panel.

Markets are primed for the Fed’s next policy meeting on September 20-21, and Evans’ comments on CNBC television on Tuesday fueled expectations that the Fed could build on its series of unprecedented moves to prop up the economy.

The remarks by the two policymakers came on the heels of Fed’s annual conference in Jackson Hole, Wyoming, where Fed Chairman Ben Bernanke on Friday stopped short of detailing further action by the central bank.

Evans told CNBC television he backs “some of the most aggressive policy actions” now being considered by the Fed, adding that the labor market, with its 9.1 percent jobless rate, looks to be in a recession.

http://www.reuters.com/article/2011/08/30/us-usa-fed-minutes-idUSTRE77T4EX20110830

PIMCO’s Bill Gross Out With A New Report…..

Posted By on August 30, 2011

Bill Gross says everyone needs to get real…”We are into the “bumpy journey” phase of our New Normal where fear, lack of policy options and loss of control can dominate.”

From PIMCO:

New-Fangled Love Songs

  • Liquidity concerns may affect all European peripheral bond markets unless the European Central Bank counters the rush for the exits with an enlarged daily checkbook.
  • In the U.S., discord between rich and poor has led to lower, not higher, Treasury yields as approaching recessionary winds force the Fed and private investors to favor bonds.
  • We prefer investing in the “cleaner” dirty shirt countries of Canada, Australia, Mexico and Brazil, along with non-dollar currencies that have strong trade ties with the Asian continent.

Just an old-fashioned love song Comin’ down in three-part harmony. Three Dog Night  

In many ways the global economic crisis is like a marriage gone bad. As the Three Dog Night sang years ago, global economies have functioned harmoniously for many years, but suddenly the love songs have become strident and cacophonous, the policy coordination morphing into a war of the roses as opposed to a giving of them. Instead of three-part harmony we are now experiencing, at a minimum, tri-party disharmony, teetering on the brink of “divorce,” which in economic parlance means a possible “developed economy” recession – a downturn from which reconciliation may be difficult due to a lack of policy options and cooperation. But I get ahead of myself. Let’s first ring the wedding bells, then take you through an explanation of three separate global marriages and how each of the partners have grown apart. 


Europe Unites!


California Dreamin’ This impending divorce in America is not about sex or sleeping around, but more about romancing the now stone-cold notion that anyone could be a millionaire in the good old U.S. of A. if only they worked hard enough. Our Statue of Liberty proclaimed “give us your tired, your poor…” and sent many of them West to build a little house on the prairie or strike it rich in the goldfields of Sacramento, California or Skagway, Alaska. Many of them did and a century later, the option-laden fields of Silicon Valley provided modern-day examples of rags to riches fairytales come true. But this odd couple marriage of rich (and poor hoping to be rich), now seems on rather shaky ground. Instead of boundless opportunity, the nursery rhyme describing Jack Sprat – who could eat no fat – and his wife – who could eat no lean – appears to be the starker of the two realities. There are the poor and there are the very rich, with the shrinking middle class resembling Mr. Sprat rather than his wife.

Oh those feisty Europeans! Always fighting like a dating couple and then finally resolving their differences by saying “I do” sometime in the 1950s with the creation of the Common Market and the European Economic Community (EEC). In doing so, France and Germany said “never again,” and even though they didn’t like each other (read “hate”) they decided to make economic lurv in the hopes that they wouldn’t destroy the continent again. It later turned into a formal union, a European Community (EC), where they invited lots of witnesses to the ceremony and created instant family members, if that’s metaphorically possible. Twenty-seven of them, including Italy, Spain and the U.K. were now relatives despite some liking pasta and others preferring horrid cuisines featuring Shepherd’s Pie or fish and chips. The marriage progressed to the point of a smaller monetary union sometime in 1999, but critically, without a common budget. Husband and Wife – Germany and Greece – decided to have a joint bank account, but with separate allowances and no oversight. Greece could issue bonds at nearly the same yield as could its Northern hard-working neighbors, but were free to spend it any way they chose. This was an economic version of an open marriage where one party gets to have all the fun and the other worked nine-to-five and came home too exhausted for whoopee. Well sometime last year, global lenders said enough is enough and soon the whole cheating European Union (EU) was at each other’s throats, hiring lawyers and threatening to break up. Calmer heads prevailed when the ECB decided to make nice and use its checkbook. Last week Angela Merkel and France’s Sarkozy sort of got engaged for at least the second time, nixing expanded funding for their Southern neighbors and placing the burden even more on the ECB. Who knows where it goes now, but let’s put it this way – Germany and France are sleeping in a king-size bed while the rest of its EU family are sleeping in separate bedrooms. As a result Euroland faces economic contraction.

During this country’s recent economic “recovery,” real corporate profits increased by four times the amount of working wages in dollar terms, and, as the chart below shows, are 50% higher than at the turn of the century while wages remain relatively unchanged, something that has not occurred since this country’s nuptials were concluded over three centuries ago. Is it any wonder that preliminary battlefield skirmishes in Wisconsin and Ohio between labor and capital promise to spread across every state of this land? (Not Texas!) Is it any wonder that Republican orthodoxies favoring tax cuts for the rich and Democratic orthodoxies promoting entitlements for the poor threaten to hamstring any constructive efforts to reduce unemployment over the foreseeable future? We are witnessing romantic love turning into a spiteful, bitter clash between partners in name only.

    The Asian Miracle

Confucius say, “Can there be a love which does not make demands on its object?” While not a marriage, there has definitely been a love affair between Western consumers and their Chinese producer “objects” for several decades now. We loved them because they made cheap goods, but somehow they seemed to love us more as they slowly but surely put their people to work while ours were hitting the unemployment lines. Imperceptibly, the developed world’s manufacturing base was gradually eroding and being replaced by securitized finance that destroyed itself and nearly its economies in 2008.
China, meanwhile, calmly played its cards with a decades-long plan centered around capitalistic mercantilism, a game the United States claimed to play best but somehow forgot most of the rules. Even when holding the trump card of a reserve currency, mercantilistic domination depends on making something the rest of the world wants. We don’t and they do. The Chinese “object” has turned into an object lesson for developed economies that debt-financed consumerism is reaching an end. This affair then, which has sustained global growth during much of the 21st century, is vulnerable. Both parties still play kissy face and say “luv ya” (weak form for “I love you”) but there is tension there. China questions our credit quality and the yields on their trillion dollars of Treasury bonds. The U.S. questions their exchange rate and claims currency manipulation behind closed doors. This couple claims to still be dating, but “hooking up” may be more like it. Even then, no one stays the night, claiming they left their toothbrush at home.
Judge Judy’s Verdict

What to do when a love affair goes bad? How should you invest when Euroland is at each other’s throat, when a thinly disguised battle between labor and capital freezes policy action in the United States, when a mercantilistic partnership between developed and developing nations produces more questions than answers, more losers than winners? Increase the odds for a divorce, we’d suggest, which in investment markets means focusing on the return of your capital as opposed to the return on your capital. Of the three rocky relationships, Euroland has the most immediacy. Mohamed El-Erian is increasingly of the persuasion that one or more of the outer periphery (Greece, Ireland and Portugal) may be forced to vacate the premises. If so, technically destabilizing liquidity concerns may affect all peripheral bond markets unless the ECB counters the rush for the exits with an enlarged daily checkbook.

In the U.S., strangely enough, matrimonial discord between rich and poor has led to lower, not higher, Treasury yields as approaching recessionary winds force the Fed and private investors to favor bonds. There are limits, however. Ten-year Treasuries at 2.25% are discounting a heap of trouble (none of it strangely enough due to its own credit standing), and neither investor nor borrower may emerge from this brouhaha unscathed. We prefer the “cleaner” dirty shirt countries of Canada, Australia, Mexico and Brazil, where higher yields and more pristine balance sheets prevail.

And what of China and its fling as mercantile dominatrix? Here to stay – get used to it, PIMCO would say, but at the same time a substantial currency revaluation would assist its image and economy in its new role as the global economy’s economic locomotive. Consider investing, therefore, in non-dollar currencies that have strong trade ties with the Asian continent. Global equities? They’re cheap – dividend yields are higher than bonds in many cases – yet if growth falters there may be more downside to come.

A good relationship, as any adult knows, takes hard work and even then true love never runs smooth. We are into the “bumpy journey” phase of our New Normal where fear, lack of policy options and loss of control can dominate relationships. At a minimum, investors need to prepare for disharmony even with the hope of eventual reconciliation. Those old-fashioned love songs have become new-fangled freshly entangled ones from which an escape may be hard to envision.

June Case Shiller Real Estate Index Show’s Price Declines Continued, Down 4.5% Y/Y, And 0.1% Lower For June

Posted By on August 30, 2011

Da boys in the White House are working on a new giveaway to be presented after the Labor Day weekend.  The word is, that it will highlight how to give real estate losers something for nothing (free monopoly money or casino chips) in an effort to turn around housing….kind of like magic. As you might guess, the banks aren’t so happy about the idea.  All of that aside, this June data is almost three months outdated.  Geez.

The Case Shiller Real Estate update for June is out, the number printed at a -4.5% decline, slightly better than consensus of -4.6%, while the month over month change was -0.1%, on expectations of an unchanged print. Stripping aside the noise shows that the housing market is crawling along the bottom after double dipping months ago but at least it is not imploding. Yet!

Consumer Confidence In Trouble, But Come To Think Of It….So Is The Consumer

Posted By on August 30, 2011

Ugh….this should come as no surprise!  The consumer makes up over 70% of the economy.

August consumer confidence fell from 59.2 to 44.2 … below the consensus of 52, and dropping to its lowest level since April 2009.  Even uglier is the 6 month outlook which fell from 74.9 to 51.9.

Israel Sends Two More Warships To Egyptian Border

Posted By on August 30, 2011

The U.S. Pentagon has repeatedly warned that September is a time to be watchful about the happenings in the Middle East!

From the AP:

“The Israeli military says it has sent two more warships to the Red Sea border with Egypt following warnings that militants are planning another attack on southern Israel from Egyptian soil. Earlier this week, Israel’s military ordered more troops to the border following intelligence reports of an impending attack. Israel’s home front minister said Tuesday that militants from the Gaza-based Islamic Jihad are in Egypt’s Sinai peninsula waiting to attack. Gunmen who infiltrated Israel through the porous Egyptian Sinai border killed eight Israelis earlier this month. The attack sparked calls to increase security on both sides of the frontier and created new tensions between Israel and Egypt. No changes in security alignments were observed on the Egyptian side of the border.” As a reminder, here is the latest distribution of US naval assets as of August 24, courtesy of Stratfor. We doubt the status quo of just one aircraft carrier patroling the Gulf region will remain for long.

www.zerohedge.com

Odd’s Are We’re Headed Back Into A Recession

Posted By on August 28, 2011

The forth quarter GDP (Gross Domestic Product) may bounce because of Hurricane Irene damage repairs, but it will likely just be temporary in the bigger picture of things.

Rich Yamarone (Bloomberg’s Chief Economist) points out that when GDP year-over-year drops by more than 2%, we have always had a recession. So with Friday’s second-quarter revision (first revision of many) down to just 1% (technically 0.99%), where are we?  At 1.5% year-over-year.  The chart is below:

The Michigan Consumer Sentiment number was also just awful. It dropped 8 full points (which is huge for this index) to 55.7. The index has fallen nearly 20 points in three months. In the chart below, note the close previous correlation between sentiment and GDP. Which do you think is more likely to happen: sentiment to rise or GDP to fall?

 www.JohnMauldin.com

The Year Was 1896…..

Posted By on August 26, 2011

MONROE, Ga. (AP)  Besse Cooper turned 115 on Friday, August 26, and is now listed as the oldest living person in the world .  Besse was born in 1896.  To put things in proper perspective, the automobile was just being invented back then, there was no such thing as a TV and most people didn’t have running water or an indoor toilet. All of that in one lifetime…..Geez!  Her husband, Luther, died in 1963.

Hurricane Irene May Be Worse Because Of New Moon

Posted By on August 26, 2011

Here comes the mother of all storms for the East coast!  So here’s an interesting question….what happens if you have a giant crane up in the air working a project on the East coast (New York or New Jersey) and it can’t be removed in time because you’ve never before seen a hurricane come this far north like this one?  Just wondering?  Umm….

From the DailyMail:

The intensity of Hurricane Irene and the extent of the flooding on the East Coast could be made worse by a new moon and high temperature of water in the Atlantic, scientists warn.

During new and full moons, the sun, Earth, and the moon are arranged in a straight line, with the sun and moon intensifying each other’s gravitational pull on Earth.

Meteorologist Jeff Masters, director of the Weather Underground website, said the result is more severe tidal fluctuations.

That means low tides are lower than usual and high tides are higher.

Due to these so-called spring tides, any town that sees the hurricane pass by during one of the two daily high tides is especially in danger of heavy flooding due to storm surges.

Masters cited Atlantic City in New Jersey as an example, if it is hit between 7pm and 8pm local time on Sunday, nationalgeographic.com reports.

Storm surges are caused by a hurricane’s high winds, which create a ‘mound’ of water along the front of the eye as the storm moves forward.

A Category 3 hurricane can push a storm surge of 9 to 12 feet tall ashore at landfall.

So far the United States has been largely spared by the 2011 Atlantic hurricane season, which lasts from June 1 to November 30.

But in May the U.S. National Oceanic and Atmospheric Administration issued a busy forecast.

Eric Blake, a hurricane specialist with the National Hurricane Center, tells TIME that a combination of factors have already contributed to a rise in storms in 2011.

He said: ‘One of the things is, how warm is the Atlantic Ocean? How warm is it compared to an average year? The other factor is the status of El Niño.

The National Hurricane Center reports that sea-surface temperatures in the Main Development Region are reading as the third warmest on record, and models predict a continuation of ‘very warm’ temperatures through the hurricane season.

This is all with the possibility of La Niña redeveloping.

Masters said: ‘I don’t see any roadblocks to intensification over the next few days.’

‘The ocean temperatures are 1 to 1.5 degrees warmer than average this year. Climatologically, conditions are conducive for strong hurricanes tracking far to the north this year.’

Read more: http://www.dailymail.co.uk/news/article-2030278/Hurricane-Irene-2011-Flooding-worse-arrival-new-moon.html#ixzz1WBX3JFpH

Warning Signs Are Popping Up On The Economy…But Is Anybody Really Listening

Posted By on August 25, 2011

Beware, the ides of October……“I think we are heading for a market shock in September or October that will match anything we have ever seen before,” said a senior credit banker at a major European bank. A more severe crash than the one triggered by the collapse of Lehman Brothers could be on the way, according to alarm signals in the credit markets.

Insurance on the debt of several major European banks has now hit historic levels, higher even than those recorded during financial crisis caused by the US financial group’s implosion nearly three years ago.

Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis points, meaning the annual cost to insure £10m of the state-backed lender’s bonds against default is now £343,540.

The cost of insuring RBS bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008, and shows the recent dramatic downturn in sentiment among credit investors towards banks.

“The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008,” said one senior London-based bank executive.

“I think we are heading for a market shock in September or October that will match anything we have ever seen before,” said a senior credit banker at a major European bank.

More at: http://www.telegraph.co.uk/finance/financialcrisis/8721151/Market-crash-could-hit-within-weeks-warn-bankers.html

Stratfor Out With Middle East Review: Israeli-Arab Crisis Dead Ahead

Posted By on August 23, 2011

We have touched on this important subject back on July 17th and again just a few days ago on August 19th here at TheStatedTruth.com in an article that was titled “Things That Could Go Bang And Change The World“.  Scroll down to read it.

 

Israeli-Arab Crisis Approaching

 

By George Friedman | August 23, 2011

In September, the U.N. General Assembly will vote on whether to recognize Palestine as an independent and sovereign state with full rights in the United Nations. In many ways, this would appear to be a reasonable and logical step. Whatever the Palestinians once were, they are clearly a nation in the simplest and most important sense — namely, they think of themselves as a nation. Nations are created by historical circumstances, and those circumstances have given rise to a Palestinian nation. Under the principle of the United Nations and the theory of the right to national self-determination, which is the moral foundation of the modern theory of nationalism, a nation has a right to a state, and that state has a place in the family of nations. In this sense, the U.N. vote will be unexceptional.

However, when the United Nations votes on Palestinian statehood, it will intersect with other realities and other historical processes. First, it is one thing to declare a Palestinian state; it is quite another thing to create one. The Palestinians are deeply divided between two views of what the Palestinian nation ought to be, a division not easily overcome. Second, this vote will come at a time when two of Israel’s neighbors are coping with their own internal issues. Syria is in chaos, with an extended and significant resistance against the regime having emerged. Meanwhile, Egypt is struggling with internal tension over the fall of President Hosni Mubarak and the future of the military junta that replaced him. Add to this the U.S. withdrawal from Iraq and the potential rise of Iranian power, and the potential recognition of a Palestinian state — while perfectly logical in an abstract sense — becomes an event that can force a regional crisis in the midst of ongoing regional crises. It thus is a vote that could have significant consequences.

The Palestinian Divide

Let’s begin with the issue not of the right of a nation to have a state but of the nature of a Palestinian state under current circumstances. The Palestinians are split into two major factions. The first, Fatah, dominates the West Bank. Fatah derives its ideology from the older, secular Pan-Arab movement. Historically, Fatah saw the Palestinians as a state within the Arab nation. The second, Hamas, dominates Gaza. Unlike Fatah, it sees the Palestinians as forming part of a broader Islamist uprising, one in which Hamas is the dominant Islamist force of the Palestinian people.

The Pan-Arab rising is moribund. Where it once threatened the existence of Muslim states, like the Arab monarchies, it is now itself threatened. Mubarak, Syrian President Bashar al Assad and Libyan leader Moammar Gadhafi all represented the old Pan-Arab vision. A much better way to understand the “Arab Spring” is that it represented the decay of such regimes that were vibrant when they came to power in the late 1960s and early 1970s but have fallen into ideological meaninglessness. Fatah is part of this grouping, and while it still speaks for Palestinian nationalism as a secular movement, beyond that it is isolated from broader trends in the region. It is both at odds with rising religiosity and simultaneously mistrusted by the monarchies it tried to overthrow. Yet it controls the Palestinian proto-state, the Palestinian National Authority, and thus will be claiming a U.N. vote on Palestinian statehood. Hamas, on the other hand, is very much representative of current trends in the Islamic world and holds significant popular support, yet it is not clear that it holds a majority position in the Palestinian nation.

All nations have ideological divisions, but the Palestinians are divided over the fundamental question of the Palestinian nation’s identity. Fatah sees itself as part of a secular Arab world that is on the defensive. Hamas envisions the Palestinian nation as an Islamic state forming in the context of a region-wide Islamist rising. Neither is in a position to speak authoritatively for the Palestinian people, and the things that divide them cut to the heart of the nation. As important, each has a different view of its future relations with Israel. Fatah has accepted, in practice, the idea of Israel’s permanence as a state and the need of the Palestinians to accommodate themselves to the reality. Hamas has rejected it.

The U.N. decision raises the stakes in this debate within the Palestinian nation that could lead to intense conflict. As vicious as the battle between Hamas and Fatah has been, an uneasy truce has existed over recent years. Now, there could emerge an internationally legitimized state, and control of that state will matter more than ever before. Whoever controls the state defines what the Palestinians are, and it becomes increasingly difficult to suspend the argument for a temporary truce. Rather than settling anything, or putting Israel on the defensive, the vote will compel a Palestinian crisis.

Fatah has an advantage in any vote on Palestinian statehood: It enjoys far more international support than Hamas does. Europeans and Americans see it as friendly to their interests and less hostile to Israel. The Saudis and others may distrust Fatah from past conflicts, but in the end they fear radical Islamists and Iran and so require American support at a time when the Americans have tired of playing in what some Americans call the “sandbox.” However reluctantly, while aiding Hamas, the Saudis are more comfortable with Fatah. And of course, the embattled Arabist regimes, whatever tactical shifts there may have been, spring from the same soil as Fatah. While Fatah is the preferred Palestinian partner for many, Hamas can also use that reality to portray Fatah as colluding with Israel against the Palestinian people during a confrontation.

For its part, Hamas has the support of Islamists in the region, including Shiite Iranians, but that is an explosive mix to base a strategy on. Hamas must break its isolation if it is to counter the tired but real power of Fatah. Symbolic flotillas from Turkey are comforting, but Hamas needs an end to Egyptian hostility to Hamas more than anything.

Egypt’s Role and Fatah on the Defensive

Egypt is the power that geographically isolates Hamas through its treaty with Israel and with its still-functional blockade on Gaza. More than anyone, Hamas needs genuine regime change in Egypt. The new regime it needs is not a liberal democracy but one in which Islamist forces supportive of Hamas, namely the Muslim Brotherhood, come to power.

At the moment, that is not likely. Egypt’s military has retained a remarkable degree of control, its opposition groups are divided between secular and religious elements, and the religious elements are further divided among themselves — as well as penetrated by an Egyptian security apparatus that has made war on them for years. As it stands, Egypt is not likely to evolve in a direction favorable to Hamas. Therefore, Hamas needs to redefine the political situation in Egypt to convert a powerful enemy into a powerful friend.

Though it is not easy for a small movement to redefine a large nation, in this case, it could perhaps happen. There is a broad sense of unhappiness in Egypt over Egypt’s treaty with Israel, an issue that comes to the fore when Israel and the Palestinians are fighting. As in other Arab countries, passions surge in Egypt when the Palestinians are fighting the Israelis.

Under Mubarak, these passions were readily contained in Egypt. Now the Egyptian regime unquestionably is vulnerable, and pro-Palestinian feelings cut across most, if not all, opposition groups. It is a singular, unifying force that might suffice to break the military’s power, or at least to force the military to shift its Israeli policy.

Hamas in conflict with Israel as the United Nations votes for a Palestinian state also places Fatah on the political defensive among the Palestinians. Fatah cooperation with Israel while Gaza is at war would undermine Fatah, possibly pushing Fatah to align with Hamas. Having the U.N. vote take place while Gaza is at war, a vote possibly accompanied by General Assembly condemnation of Israel, could redefine the region.

Last week’s attack on the Eilat road should be understood in this context. Some are hypothesizing that new Islamist groups forming in the Sinai or Palestinian groups in Gaza operating outside Hamas’ control carried out the attack. But while such organizations might formally be separate from Hamas, I find it difficult to believe that Hamas, with an excellent intelligence service inside Gaza and among the Islamist groups in the Sinai, would not at least have known these groups’ broad intentions and would not have been in a position to stop them. Just as Fatah created Black September in the 1970s, a group that appeared separate from Fatah but was in fact covertly part of it, the strategy of creating new organizations to take the blame for conflicts is an old tactic both for the Palestinians and throughout the world.

Hamas’ ideal attack would offer it plausible deniability — allowing it to argue it did not even know an attack was imminent, much less carry it out — and trigger an Israeli attack on Gaza. Such a scenario casts Israel as the aggressor and Hamas as the victim, permitting Hamas to frame the war to maximum effect in Egypt and among the Palestinians, as well as in the wider Islamic world and in Europe.

Regional Implications and Israel’s Dilemma

The matter goes beyond Hamas. The Syrian regime is currently fighting for its life against its majority Sunni population. It has survived thus far, but it needs to redefine the conflict. The Iranians and Hezbollah are among those most concerned with the fall of the Syrian regime. Syria has been Iran’s one significant ally, one strategically positioned to enhance Iranian influence in the Levant. Its fall would be a strategic setback for Iran at a time when Tehran is looking to enhance its position with the U.S. withdrawal from Iraq. Iran, which sees the uprising as engineered by its enemies — the United States, Saudi Arabia and Turkey — understandably wants al Assad to survive.

Meanwhile, the fall of Syria would leave Hezbollah — which is highly dependent on the current Syrian regime and is in large part an extension of Syrian policy in Lebanon — wholly dependent on Iran. And Iran without its Syrian ally is very far away from Hezbollah. Like Tehran, Hezbollah thus also wants al Assad to survive. Hezbollah joining Hamas in a confrontation with Israel would take the focus off the al Assad regime and portray his opponents as undermining resistance to Israel. Joining a war with Israel also would make it easier for Hezbollah to weather the fall of al Assad should his opponents prevail. It would help Hezbollah create a moral foundation for itself independent of Syria. Hezbollah’s ability to force a draw with Israel in 2006 constituted a victory for the radical Islamist group that increased its credibility dramatically.

The 2006 military confrontation was also a victory for Damascus, as it showed the Islamic world that Syria was the only nation-state supporting effective resistance to Israel. It also showed Israel and the United States that Syria alone could control Hezbollah and that forcing Syria out of Lebanon was a strategic error on the part of Israel and the United States.

Faced with this dynamic, it will be difficult for Fatah to maintain its relationship with Israel. Indeed, Fatah could be forced to initiate an intifada, something it would greatly prefer to avoid, as this would undermine what economic development the West Bank has experienced.

Israel therefore conceivably could face conflict in Gaza, a conflict along the Lebanese border and a rising in the West Bank, something it clearly knows. In a rare move, Israel announced plans to call up reserves in September. Though preannouncements of such things are not common, Israel wants to signal resolution.

Israel has two strategies in the face of the potential storm. One is a devastating attack on Gaza followed by rotating forces to the north to deal with Hezbollah and intense suppression of an intifada. Dealing with Gaza fast and hard is the key if the intention is to abort the evolution I laid out. But the problem here is that the three-front scenario I laid out is simply a possibility; there is no certainty here. If Israel initiates conflict in Gaza and fails, it risks making a possibility into a certainty — and Israel has not had many stunning victories for several decades. It could also create a crisis for Egypt’s military rulers, not something the Israelis want.

Israel also simply could absorb the attacks from Hamas to make Israel appear the victim. But seeking sympathy is not likely to work given how Palestinians have managed to shape global opinion. Moreover, we would expect Hamas to repeat its attacks to the point that Israel no longer could decline combat

War thus benefits Hamas (even if Hamas maintains plausible deniability by having others commit the attacks), a war Hezbollah has good reason to enter at such a stage and that Fatah does not want but could be forced into. Such a war could shift the Egyptian dynamic significantly to Hamas’ advantage, while Iran would certainly want al-Assad to be able to say to Syrians that a war with Israel is no time for a civil war in Syria. Israel would thus find itself fighting three battles simultaneously. The only way to do that is to be intensely aggressive, making moderation strategically difficultIsrael responded modestly compared to the past after the Eilat incident, mounting only limited attacks on Gaza against mostly members of the Palestinian Resistance Committees, an umbrella group known to have links with Hamas. Nevertheless, Hamas has made clear that its de facto truce with Israel was no longer assured. The issue now is what Hamas is prepared to do and whether Hamas supporters, Saudi Arabia in particular, can force them to control anti-Israeli activities in the region. The Saudis want al Assad to fall, and they do not want a radical regime in Egypt. Above all, they do not want Iran’s hand strengthened. But it is never clear how much influence the Saudis or Egyptians have over Hamas. For Hamas, this is emerging as the perfect moment, and it is hard to believe that even the Saudis can restrain them. As for the Israelis, what will happen depends on what others decide — which is the fundamental strategic problem that Israel has.

Read more: Israeli-Arab Crisis Approaching | STRATFOR

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Federal Reserve Bank: Hard Years Ahead For Baby Boomers

Posted By on August 22, 2011

Demographics my dear Watson……According to a Federal Reserve Bank report just out stocks could fall an average of 13% over the next ten years solely because of retiring baby boomers. The actual P/E ratio should decline from about 15 in 2010 to about 8.3 in 2025.

The model-generated path for real stock prices implied by demographic trends is quite bearish. Real stock prices should follow a downward trend until 2021.

The same has already started in real estate.  But looking ahead, by 2025, things should start getting better and by 2027 we could hopefully be back to breakeven, at least in the stock market part of things.  Good to know that by 2027 we can relax as we convalesce watching CNBC at age 80-90 something! Good seats, hey buddy!

Monday, August 22, 2011

A new report by the Federal Reserve Bank of San Francisco predicts stock prices could fall 13% over the next decade solely because of baby boomers dumping stocks to branch into more conservative investments as they retire.

It could take an additional six years, until 2027, for share prices to return to the level they reached last year, according to the analysis by researchers Zheng Liu and Mark M. Spiegel.

The report’s basic premise is that stock prices “have been closely related to demographic trends in the past half century” — in other words, that baby boomers pushed up stock prices in earlier years as they hit their prime earning and saving years.

Aside from being a longer-term depressant, selling by baby boomers -– the post-War contingent born between 1946 and 1964 –- could forestall any current-day recovery in the market from the global financial crisis.

“It is disconcerting that the retirement of the baby-boom generation, which has long been expected to place downward pressure on U.S. equity values, is beginning in earnest just as the stock market is recovering from the recent financial crisis, potentially slowing down the pace of that recovery,” the report says.

The good news is stock values could rise solidly in later years as the boomer generation ages. Stock prices should begin rising strongly starting in 2025, and by 2030 should be about 20% higher than in 2010, according to the report.

More at: http://latimesblogs.latimes.com/money_co/2011/08/related-workers-are-more-pessimistic-about-retirement-study-finds.html

Other Things That Make You Go Umm…….

Posted By on August 22, 2011

Morgan Stanley, at the brink of collapse in 2008, got $107 B, yes, B as in Billion from the Fed. They’ve  got’ta be kidding!  Nope, not kidding.  Soon after that, record bonuses came flowing faster then you could flick a bic! Every Fed official should be ashamed of this BS… yes the same stuff that gets stepped in. Oh we know the alternative was a depression, but let’s be realistic, we may have one anyway because of an even bigger mess bestowed on us now. The next few years will be tough ones.  This is yet another warning.  Are you prepared?

From Bloomberg: August 22, 2011

As markets convulsed in September 2008, Morgan Stanley (MS) Treasurer David Wong briefed the Federal Reserve on a “dark” scenario in which the U.S. firm would need at least $10 billion of emergency loans from the central bank.

It got 10 times darker by month’s end. Morgan Stanley borrowed $107.3 billion, the most of any bank, according to data compiled by Bloomberg News using information released in response to Freedom of Information Act requests, related court orders and an act of Congress.

Morgan Stanley’s borrowing was more than twice the amount all banks got from the Fed in the market squeeze that followed the Sept. 11 terrorist attacks.

Morgan Stanley’s Fed loans which were tallied in a Bloomberg News database and assembled from government records of more than 21,000 transactions and 29,346 pages, opens a window on Wall Street’s secretive, lucrative and risky dealings with hedge funds.

At the peak of Morgan Stanley’s Fed borrowings, on Sept. 29, 2008, the firm reported that liquidity was “strong,” without mentioning how dependent its cash stores had become on the government lifeline. Liquidity refers to the daily funds a bank needs to operate, including cash to cover withdrawals.

More at: http://www.bloomberg.com/news/2011-08-22/morgan-stanley-at-brink-of-collapse-got-107b-from-fed.html

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