Cyprus:Shows A More Dangerous View...L&C

The troika and Cyprus came to terms over the weekend and the biggest loser is you, dear reader. I'll explain, however there are two unknown knowns that signify my conclusion. First, we can no longer trust the news media to accurately report stories. There are many examples and the Cyprus bailout is the latest. Initially, the media reported that the island nation faced bankruptcy because reserves in the banking system suffered losses from withdrawals due to lack of trust by depositors. Later, it was revealed that the government had placed derivative bets on Greek bonds that went sour causing the losses. Finally, the first bailout plan which revolved around taxing the banking system depositors to cover the losses. This initial plan reveals one of the unknown knowns and that is this: the elite will stick it to us every time if a crisis surfaces that could damage the banking system with the only other option is for the taxpayer or citizen.
We have been down this road quite a few times in recent history and the thinking always comes to the same conclusion, screw the public in favor of the banks and government status quo.
Remember the Jon Corzine episode with MFGlobal? He took customers deposits and he used their money to cover his losses to keep his company alive. He did not go to jail and customers lost their money which is totally bogus. Cyprus is the second example where we find our money is no longer safe due to lack of honesty and trust in the system.
How about the Fed and the Wall St. bailout in the financial crisis of 2008 or the lack of a fair interest rate for savers?
How about FDR stealing citizens gold in 1933?
How about the next financial crisis in the future?
In the Cyprus case there was an unusual twist in that the economy of the country attracted many wealthy Russians and Britons who vacation there. This tidbit covered the troika solution because not only were the citizens being taxed, but the levy would hit the rich too. The troika overlooked the fact that the wealthy have friends who have friends who write the laws and lo and behold, this plan was scrapped.
Bottom line: the citizens still got screwed along with some wealthy visitors. The banking system basically stays intact along with the government leaders...until Tuesday when the banks reopen and the run begins. Of course, the wealthy will move their money electronically in case someone had a bad idea of robbing someone when they left one of the remaining banks.
Liars and Crooks: this week goes to the often used excuse for the weakness in our economy due to excessive regulations. Folks, we need regulations or the forest would be gone, fish extinct, water polluted and the air poisoned. With that said there are dumb laws on the books too due to corruption within the system and bad ideas that seemed good at one time. This is one of those:ethanol gas mix act. Even though gasoline demand is down, prices are up which makes no sense until you realize that the cause is ethanol regulation. We have too much ethanol because planners thought that demand would be higher not expecting the economic downturn, price evasion and alternative transportation. Refiners only need 10% in mix, however they are forced to buy than they need due to supply excesses. This is a bad regulation. This is what effects the price more than anything else. In addition, the act causes farmers to plant more corn due to price. We need to repeal this act in order to save the land because corn is too intensive, water using food source that is better on the table than driving to the store to put food on the table.

Three to Pay the Rent...L&C

You know, dear reader, that I don't usually give stock picks and my number one choice is the yellow metal, however life being what it is, we all need to eat and use energy(which is contrary to the gov't's CPI). As stated in earlier pieces, if the choices go south, I not only suffer, but I have caused you too. This is the reason that you should always seek a professional to give you a better judgement to their value or lack of. My three picks are: CVR Refining LP(CVRR), Enbridge Energy Partners LP(EEP), and Statoil(STO).
Pro Reasons
are many and interrelated in scope. Although alternative energy choices are better than my fossil choices, the demand side continues to rise with the world population and the higher standard of living in many countries like Brazil, China, India and the commodity oil rich nations. When I say better, I only mean that in the context to the cleaner energy forms like solar or wind. My choices do contain natural gas which is cleaner for the environment than oil, but still is in the fossil fuel category. As a Sierra Club member, I push LNG and CNG to them because it is a compromise step in the right direction, however that is another story.
Looking at the production side, rig count onshore in the US has been on a downtrend since 2008. Presently, it looks like it is bottoming at 423. The producers of natural gas are cutting back to support prices, however the media doesn't pick on them like when OPEC use to do the same strategy. If you haven't notice the price for MMbtu's has risen from $1.90 to the present $3.80. In addition, Schlumberger(SLB) has a study for rig usage in offshore drilling and projects a double from the 300 count in 2010 to over 600 in 2015. This is demand. This need for oil comes from the above named countries which offsets the decline in the US and Europe.
For those of you that think that hybrids will change the need for oil think again. The cost for hybrids compared to regular gasoline cars and trucks is cost prohibitive. Keep in mind that true change takes time. The use of horses started in BC and ended only around 1900. Wooden ships run the same range. The Model T is just 100 years in this revolution of change. We will have many more years before the steps are taken to LNG and CNG, which in itself will run for at least 50 years. There are many companies looking to develop fueling stations for this transition, but investors will see many years of losses before the time arrives.
Let's take a closer look.
CVRR is a new spin off IPO this year. It is from a respected US company with steady growth. This is a high yield variable partnership. They pay out most of their income on $8b in sales with 74% sales growth. The stock has climbed too high at over $35. per share. I would wait for a pullback entry point around $30. It paid 16% in its first distribution. This is a risk takers pick for growth and yield.
Next, is EEP. This is one of Canada's strongest oil & gas companies. Currently, at $28.69, it is at the low end of its 52 week range. It has suffered from the low price of natural gas, but still pays a safe 7.58% yield with a 2.90% dividend growth rate for the last five years. Get this! Its EPS is less than one. WOW! The best entry would be at $27. This is the best-in-show due to EEPs pipeline expansion into the Bakken oil region.
My last choice is from Norway. No, not a beautiful blond, but beautiful in the sense that STO is a very safe, proven company with a strong record of success, that revolves around their safety record of engineering in offshore drilling. This is important to follow because Brazil found the largest offshore field, but lacks the know-how to develop it. I feel that Brazil will call STO or Chevron to help them, but I pick STO because they also made a big move into Bakken oil. They pay a 4.36% yield with a good entry point of $23. If there is a severe correction, I would lower that to a great buy at $17.
Con Reasons
I feel that the stock market is over-bought and a correction is coming...soon. In addition, the US dollar is rising and when it rises, the market sinks. This is why gold has been falling lately. It is responding to the strength of the dollar. It is giving you a heads up. If the recent tax increases in the US cause consumers to slow even more, oil will fall. This will give you the opportunity to buy at the suggested prices, however please put in your stops because no one knows where the market will stop or what other event could trigger a further decline.
Liars and Crooks: Again, goes to the CPI index which gave its February reading of up 0.7%. Are you kidding me?! Gas up 16%. Corn has doubled! Eggs up 70%. Coffee up 160%!!!!! We demand a change to the CPI to only have food and energy and as always end the Fed! 
 

A Dangerous"Cry Wolf"...L&C

Last week a small, footnote of news hit the wire. Kim Jong-un, the son of the recently passing, Kim Jong-il of North Korea, declared that the armistice between his nation and South Korea was terminated as of this Monday, the 11th of March. The north has been very aggressive in attitude toward the south in recent years. They have instituted acts of aggression after every election in the south with excessive force in 2010. In that year the north sunk a vessel of the south(Cheonan) killing 46 sailors. In addition, an artillery shelling of the south's island of Yeonpyeong cost two more lives. The south is on alert, but the international community treats this rhetoric as crying wolf.
The problem as I see it is this: a severe future acting out by N.Korea to gather attention. I see this small person like the terrible lost souls that inflicted so much pain in the world acting out. I'm talking about the recent incidents in Connecticut and Sweden.
Do you realize that modern, basic artillery weapons from the north could strike downtown Seoul? What little response the media gave to this fearful dialogue was that N.Korea didn't have the technology to put a nuclear warhead on a missile. Of course, the source of that info was our military. You know, the same guys who said Iraq had weapons of mass destruction. Intelligence?! There's another agency that needs a revamp.
Bottom line, I hope nothing happens, but consider this: on the 27th of July of this year, it will be the 60th anniversary of a war that has never been officially ended. In addition the Ides of March appear next week.
Liars and Crooks:this week goes to our leaders in government. The media was filled with fearful alerts that would result from the "Sequester." Dear reader, the lies are so bad, I have no idea what the truth is. According to Ron Paul the cuts to the government with the sequester were no cuts in spending at all. All it was according to Paul was not increasing spending in the budget. In any event the economy didn't stop, the world still revolves around the sun and life goes on. Having said that I'd like to march against our leaders with a protest march to all their lies to us their citizens and I would begin with the Consumer Price Index(CPI). The government has the nerve to not include food and energy in this report on inflation. Folks, I don't need to remind you that gasoline has increased .52cents in the 59 days of the first two months. Eggs have gone up in price 70%. You and I know this B.S. has got to stop. I demand that the future CPI only has two components, food and energy and if it did it would show inflation running over 10%. ..and as always end the Fed!  

Sequester's Here, Now What?...L&C

For those of you who have been reading this blog you know that I predicted back in 2011 when President Obama signed the Budget Control Act that the compromise between the debt ceiling and the budget would lead to Sequester Day. At that time the president said that the Republicans were playing dirty pool in politics. They were unfairly delaying the legal extension of debt, distracting the president's reelection campaign and hurting the nation.
The Democrats came up with the compromise agreement of automatic spending cuts in the budget for a quick debt ceiling extension.
Now, that these cuts are progressing, the name blame takes front page. The real problem, dear reader, is the fact that federal law requires a budget every year and the Obama administration has not gotten one passed in the last four years which is a gross violation of duty, law and leadership.
Two Parties, Two Ideas
on how government should operate. At one time the cultural values of the nation centering around self reliance took center position to which each of the two political parties jockeyed for their modern concept of what that entails.
The Democrats like to lead by spending to which they then classify as demand. More demand is better.
The Republicans like to let an individual develop a market for something to prove that there is actually a demand. Then, they don't care how it operates in regards to the nation. No rules, the wild west influence.
True self reliance does not demand or form a market for a service to which both parties don't like cause less demand is bad in the ultimate equation of government.
Traditional Stance
The Republicans want defense spending. They will spin any adversity as a danger to national security to keep the pump primed.
The Democrats say that they represent the "little guy." This party fought for social security, unemployment benefits and medicare. They don't mention Vietnam, Korea and the two present wars that they voted to enter. They don't mention the fraud in medicare, cell phones and the other 52 tax loopholes that the president just extended when he signed the Payroll Tax Act on 1 January of this year.
Now What
nothing! The actual cuts are small. Remember the committee that gave us the format used a small, compromise edition of the original budget cut plan. For example, the 2% cuts to medicare means .98 cents on the dollar to overpriced medical care. The IRS will suspend any layoffs until summer. Did you actually think that the govenment would take a chance on losing your money?
Both parties will watch each other, the polls and the stock market. The name blame game will rise as the cuts gain momentum. The president will attempt a new spin on his solution that gave the nation the sequester. The Republicans will see if they can hold off the complaints against the sequester due to the fact that it hits defense spending in a larger proportion in the spending cuts. If they can spin the public to their viewpoints, they will cave the president to which is his basic character(all talk, no conviction)and a new compromise will surface to which cuts in entitlements will rise. The biggest influence in all this is...No! Not the public. Neither party represents the citizen. It will be the rise or fall of the stock market. I see a slow downward drift that could crash, depending on how long the new deal takes to develop and the fact that our economy contracted in the last quarter to which the administration pulled some strings and that was changed. It was just revived to a plus from a minus.
Liars and Crooks: goes to the president. We now know why the Democratic big shots got behind him. This goes back to his early entry into politics in Chicago. You may not remember, but Obama lost his reelection bid in the city. When the next election came around, Obama offered everything including the kitchen sink to win. He promises to everyone, but has no conviction, vision or leadership in what he says. The $16.5trillion to our national deficit will climb to over $20t before his term is ended.

2013: Year of Economic STORMS...L&C

CCR sang about a bad moon rising and if you were in Florida as I was back in the summer of 2004 when Hurricane Charley hit, you lived it. In fact there were three hurricanes to hit Florida that year and two, Charley and Bonnie within 24 hours. Those storms caused severe financial damage and loss of life. This year we are entering a period from January 2013 to January 2014 of economic storms that will make nature disasters appear like Sunday's leftovers. For those of you that are still suffering from Hurricane Sandy, please forgive me. I'm using the summer of 2004 because there were three terrible storms and now, I see three terrible economic storms.
Payroll Tax
was scaled back 2% beginning in January. This is only a squall compared to what is coming. Next week the sequester will hit with its $85billion in spending cuts to the budget. There are many avenues to approach this reduction in government spending. The military will feel most of it. Praise the Lord! Not only am I against the military because they breathed destruction and waste, but they have been destroying our economy since Vietnam. Defense spending results in 40% of our manufacturing and if we cut that spending, that is how much our manufacturing will decline. Like I've stated many times, there is no such thing as free trade and if we protected our workers, there would be no fear of loss in manufacturing. This is the first storm and like Hurricane Bonnie, the weakest
May 6
storm number two will hit. On that day mortgage loans with less than 20% down will face demandatory PMI(private mortgage insurance). Before the recession all home purchases had to have PMI, however ninja and liar loans did away with PMI. In the "old" days PMI would end after a homeoner reached a 20% threshold in equity. Now, if you have 10% or less, PMI will be added to your mortgage payment for the LIFE of the loan, This is like your loan interest rate rising 1%. Not only that, if you had less than 20% down, then expect to pay this increase for ten years. It gets worse because this will effect all loans that have already closed. It will hit everyone!
Obamacare
under the Affordable Care Act will kick in next January.This so-called Medicare fix will cause a tidal wave of debt for the taxpayer and our country. You see every state government has not put away funding for their municipal workers. Now, they can place their workers under Obamacare and the health cost will shift to the federal government. This will cause the deficit to add another $trillion in debt.
Liars and Crooks:goes to the Federal Reserve again! You see, most folks don't understand the bond market and how important it is to credit and finance. For example, our nation had $10trillion in debt before president Obama took office and now, we have $16t with him. However, we pay 20% less to finance our debt with $16t than we did with $10t. How can that be? The Fed! You see, they buy over 60% of our bonds because no one else would with these low rates. In fact, if rates return to their normal level, our nation would have to pay $500billion just to pay the interest on our national debt. It is that bad!End the Fed!

Disneyland in Euroland...L&C

The fantasy park grew from the West Coast to the East Coast in Orlando to Europe in France, to Asia in Japan and to central banks everywhere. The big boys are meeting in Moscow while the little members grumble from the outside with no passes to the event. I, personally cannot understand the market that keeps rising in the face of declining aspects.
Change can be good or bad, but always cause transition problems. You cannot go from point A to C without passing B unless you are in a fantasy ride.
Elections
are taking place today(President's Day)in Cyprus with Italy next week and Germany later in the year. There are governments that could lose confidence like England, Greece, Italy again, which could cause another election this year. This creates doubt which is not good.
Economic Rules
are being changed in Sweden today to tighten lending standards because the government fears a housing bubble in the nation with one of the highest personal indebtedness among European nations.
The Swiss are tightening their banking requirements by 1% to avoid future problems with capital reserves.
Lars Christensen, co-chief of the Danish bank, Saxo fears a serious decline in the Euro currency because there is no real fiscal union behind it. He says this while the Euro has gained over 8% against the dollar in recent months, while at the same time other central banks like Japan and Venezuela are debasing their currencies. In fact, central banks around the globe are printing in excess with each looking to capture some export niche.
German banks are selling a new type of bond that is backed by weaker assets and American hedge funds like BlackRock fear that this could seriously damage the bond market. Amazing! They fear these assets while they don't fear the printing of excess fiat money? This can't be good.
Current Facts
are not very strong. Germany, the European leader, is shrinking. The ECB says that its GDP will fall to .4% for 2013. The euro zone itself has contracted for three straight quarters and now has seven countries in recession. By the way, the US economy was in contraction for its last quarterly report. This is not good.
China
the world's largest exporter is slowing too, however they offered this tidbit. They said that trade with European nations will rise to the point where China will trade more than European nations will among themselves. Not good.
So, I ask you, how can governments claim that things are getting better when there is so much doubt? I would not enter this market and I would place stops to protect whatever you bought. If you buy, who benefits?(cui bono?) Buyer Beware!
Liars and Crooks: The Army Corp of Engineers who last week allowed water from the Mississippi River to go to fracking oil companies while at the same time, denied shippers to traverse the river to deliver goods because water levels are low.

HOUSING:What Happens Next...When?...L&C

According to every report concerning housing, the bottom has been reached and the slow, steady, upswing engineered by the Fed is under way. Really? Well, if that is so, what happens next?
I won't waste your time with the endless litany of positives, but I will remind you that it was the Fed in its policies that is the root cause of the housing crisis. It was "Helicopter"Ben who said that housing has never declined on a national scale. It was Ben who said that the Fed does not see a recession in 2008 and again, Ben who stated that the apparent crisis is contained in 2007. It is now the same Fed who takes the bows with this so-called recovery. By the way, the Fed does not see a new recession.
New Home
prices start on average at $304k, while existing homes sell at a national average of $231k. That is a nice spread and hedge funds are jumping all over it. In fact, one-third of all sales are from the foreclosure category. Buyers like the Blackstone Group are spending upwards of $100 million a week in 2012 and with eleven million homeowners underwater, the pickings are steady, especially when you do the math and of course, with the help from the Fed.
Fed
policy keeps rates low and the unintended consequence of their actions are forming a neo-serf society. You see, the old homeowner and now renter for the hedge funds, had a mortgage at 6% or higher. Losing his job, he could not afford the payments at around $1200 plus per month for piti(principle,interest,taxes and insurance). Blackstone and others buy on a short sale for $90k and with a low mortgage, have payments at around $350 per month. They rent to the former owner and now a serf for the corporation at $1,000 per month. The company says, "hey, your saving over $200 per month and you still get to reside in "your" home". Everyone is happy. I know Blackstone is with a 65% return which will last until the spread gets more interesting and or the rates begin to climb. Why? Because the Fed does not have an exit strategy. They are creating a new feudal society.
Corporate Flippers
If the rates rise, these same hedge fund groups will sell, flooding the market and at present, they have a $140k cushion, and rising with every price rise and it was 7% for 2012. This is bubble level.
They will also try to securitize their portfolio. In addition, when rates climb, bonds will suffer, causing another credit crisis because bonds have gone up for 30 years in a row which is the technique the Fed uses to hide our national deficit. You see, dear reader, as I state in my unpublished book, all things are related.
Historical
averages for home-price rises are from 2 to 4%. The excessive present rate is forming a new bubble if it continues. Bonds are also in danger and of course, this leads to our national deficits. Oh yeah, there is another by-product problem on the horizon. Because people are feeling better about the value of their homes, they are starting to use these same houses as ATMs to buy cars, which on average are 11 years in service. All things are related. This cannot end well...
Liars and Crooks:see book recommendation. Companies like Comcast and Time Warner have gotten government to give them exclusive control over our internet to the point where cities cannot get funding to supply their own network(if they wanted to add it along with electricity, water and sewerage). Modern society needs access just like every other utility. This is corruption!...and as always End the Fed!