There are many aspects to every economy that operate differently within it due to culture and other diversified reasons unique to it. One of these is Shadow Banking. Inside the field of shadow banking is another strange contributor called the Repo Market. It provides short-term loans to the banking industry. These are generally over-night loans that institutions use for bond transactions or covering new rule guidelines like the recent Basil Accord which requires banks to have higher capital assets. The new level of safe banking is 5%.
95% at Risk
This means that banks previously had leverage over 95%. They use our money to increase their bonuses and shareholder value. This is not safe in my thinking and the recent situation in Cypress exposes the weakness in the banking industry that is too interrelated. If one gets a cough, the industry catches a virus.
How Affects the Repo Market
In many countries like China, the Repo market is unregulated. In many western nations it is loosely regulated. In addition, Europe is killing the repo market in two ways. One, the EU says banks now need more capital and they have to follow new improved rules. These requirements will cut $883b of assets. The EU has also instituted a new tax called the "FFT(financial transaction tax)". This tax will effect all bonds and derivative trades.
These new rules have caused the spreads on repo loans to jump 72 percentage points to lend money to banks to cover these taxes. This high rate jump will kill the repo market and when, not if, banks need quick over-night funds, they won't be there. Read trouble and another potential crisis.
There is another aspect to the repo market that is troubling. It is shrinking. In the US it has declined 35% from a peak of $7t in 2008 to $4.6t today. Analysts say the Fed will use it to guide rates higher under the tapering concept of QE.
The Problem
the Fed buys over 60% of treasuries, leaving little investing for the repo market. Richard Comotto of ICMA(International Capital Market Association) says, the new EU tax makes the repo loans unprofitable and this will also effect money market funds. This will surface as rates climb and there won't be a repo market to make the short-term loans that banks will need. Not good.
What I See
there are new rules for capital, but no one is prepared for cyber crime like hacking. There were six major US banks which suffered websites outages in 2012. The KPMG, a UK bank has seen a 12% increase in fraud, especially from hacking. There is at this time the demographic issue. Many older bank executives are retiring and the new, younger replacement hires have no experience. This replacement aspect will effect over 5 large UK banks. Can you say, "I didn't know!"
Liars and Crooks: Obama wins again! His idea to use student loans based on some arbitrary concept of "value" is just a status quo in disguise. The results will be all the established schools getting lower rate loans and all the smaller schools getting screwed. This is very troubling when the student population is shrinking due to demographics.
Saturday, August 24, 2013
Sunday, August 18, 2013
Lights Out Arab Spring...SA
There are four stages to civil unrest. It begins with demonstrations, moves to protests, then violence and it ends with riots. This is not good for a society unless life is so untenable that it needs to clean house and try something new. This is how revolutions start. We had one in Libya which is still a work in progress. We have one happening now in Syria.
In the Middle East the global community has seen the Arab Spring movement in many countries. Egypt is the latest example of the third stage and it appears to be entering the final stage. If you recall, Algeria entered this stage and it took a decade to end it. This is not good for Egypt's citizens and world economies. Whether emotions calm down in the historical leading Muslim nation or not, there are other problems looming. The infrastructure within the nation is suffering and it could be the root cause for many problems throughout the world.
Electricity
Although it hardly receives media attention with all the unrest in Egypt, there have been rolling blackouts within the nation. When it is reported, the tone is that the leaders in government do this to curtail their citizens. This is false. According to Ken Moors of Oil & Energy Investors, it is happening because the utility companies lack the resources to keep the lights on. Electricity production comes from either water, oil, natural gas, nuclear, coal, sun or some hybrid form. With people not paying their bills and a dysfunctional government, utility operators are left to their own devices. Moors estimates that by November under the present conditions, the nation will go dark.
When or if this happens, the global community will see future shock.
In Syria, President Bashar Al-Assad does this as part of his military struggle to defeat the revolutionaries within his nation. He cuts off water, electricity and fuel shipments to areas he deems hostile. The Egyptian military in charge will do the same thing in short order. One, because it is an effective option and the operators in charge of producing electricity will inform them of the current situation. Rolling blackouts will save fuel and time to regain control of their society. It will happen in Egypt and soon wherever people gather to demonstrate against their leaders. These acts will push their societies towards protests and the other two stages. We are in troubling times for world peace.
SPECIAL AWARD: No L&C this week. Instead we have an award recognition. It goes to T. Mark Jones. He did receive $597million from the federal government as a whistle-blower. His story is a life struggle against Big Pharmacy. Jones opened a small clinic in Key West in the 80s to help aid victims. After a few years of success, a big pharmaceutical company came to town. Suddenly, he lost all his business. In fact, he was put out of business. He looked into the reasons. He found out the big company gave kickbacks to all doctors if they used their services. Jones could not prove this, although he kept up the fight and gathering information. He finally was able to prove to the government that after the kickbacks, Big Pharma would pad their prices to Medicare, stealing billions from the government program. It is estimated by government officials that Jones es pose will save Medicare over $15.7b in the next decade. Consider this: this is only one region within the nation. The government watchdogs should be all over these crooks. Maybe we could hire some "old" KGB guys to do the job? Anyway, congrats!
In the Middle East the global community has seen the Arab Spring movement in many countries. Egypt is the latest example of the third stage and it appears to be entering the final stage. If you recall, Algeria entered this stage and it took a decade to end it. This is not good for Egypt's citizens and world economies. Whether emotions calm down in the historical leading Muslim nation or not, there are other problems looming. The infrastructure within the nation is suffering and it could be the root cause for many problems throughout the world.
Electricity
Although it hardly receives media attention with all the unrest in Egypt, there have been rolling blackouts within the nation. When it is reported, the tone is that the leaders in government do this to curtail their citizens. This is false. According to Ken Moors of Oil & Energy Investors, it is happening because the utility companies lack the resources to keep the lights on. Electricity production comes from either water, oil, natural gas, nuclear, coal, sun or some hybrid form. With people not paying their bills and a dysfunctional government, utility operators are left to their own devices. Moors estimates that by November under the present conditions, the nation will go dark.
When or if this happens, the global community will see future shock.
In Syria, President Bashar Al-Assad does this as part of his military struggle to defeat the revolutionaries within his nation. He cuts off water, electricity and fuel shipments to areas he deems hostile. The Egyptian military in charge will do the same thing in short order. One, because it is an effective option and the operators in charge of producing electricity will inform them of the current situation. Rolling blackouts will save fuel and time to regain control of their society. It will happen in Egypt and soon wherever people gather to demonstrate against their leaders. These acts will push their societies towards protests and the other two stages. We are in troubling times for world peace.
SPECIAL AWARD: No L&C this week. Instead we have an award recognition. It goes to T. Mark Jones. He did receive $597million from the federal government as a whistle-blower. His story is a life struggle against Big Pharmacy. Jones opened a small clinic in Key West in the 80s to help aid victims. After a few years of success, a big pharmaceutical company came to town. Suddenly, he lost all his business. In fact, he was put out of business. He looked into the reasons. He found out the big company gave kickbacks to all doctors if they used their services. Jones could not prove this, although he kept up the fight and gathering information. He finally was able to prove to the government that after the kickbacks, Big Pharma would pad their prices to Medicare, stealing billions from the government program. It is estimated by government officials that Jones es pose will save Medicare over $15.7b in the next decade. Consider this: this is only one region within the nation. The government watchdogs should be all over these crooks. Maybe we could hire some "old" KGB guys to do the job? Anyway, congrats!
Sunday, August 11, 2013
Progression Test: Vallejo, Detroit, ?...L&C
Vallejo
Not familiar with Vallejo, Ca.? It is in the San Francisco Bay area. It has served twice as the capital of California. It became the largest city to file for bankruptcy in the state in 2008. In the short time period since then, Vallejo lost its infamous recognition to Stockton, California, when it filed in 2012. It did find more insufferable recognition by being named the most miserable US city in 2013.
Detroit
What needs to be said that hasn't been said already? I think the Tigers will win the pennant and they have a good chance to win it all. The Lions will probably be a five hundred team. The court system is rigged in favor of the rich over the poor which translates to the labor unions getting kick again. The real problem will be the "aha!" moment by the workers in Detroit and in the state of Michigan and in the country. They will suffer by having their pension cut. Their emotions will be steaming over the fact that the government bailed out the banks. There will be protests and strikes. Not good. There will probably be violence which could erupt because this awareness will have sympathy across the US. If this connection is coupled, the labor movement will awaken after 50 years or more from a comatose position. This could be a blessing, especially if a new political party is formed to which I advocate. However, this is a long shot and it will be very difficult to tell the difference between the candidates, whether, good, bad or ugly, if the opportunity surfaced.
These things take time and time is exactly what the status quo utilize. How recent were the financial problems of Spain and Italy? It was just last July when the European Central Bank President, Mario Draghi vowed to do,"whatever it takes..." to keep the euro from collapsing and the membership intact. At the time short-term interest rates in Spain and Italy were rising to 7%, but with the ECB buying their bonds, rates fell. The stock markets in both of these nations has risen, although both economies are in recession with unemployment rising. Go figure?
When will Europe have their aha moment? Where does Europe go after the reelection of Angela Merkel in September? I have no idea, however the global situation will determine the EUs continuation in its present form. I think the present state of currency fires will arise from India which will be the spark that lights the weapons of financial destruction or derivatives
Meanwhile, in the US the national scene will continue to talk with gridlock over our many issues, but few will draw attention to the progression of financial troubles that are emerging within our state governments. According to Moody's, there are only fifteen states that are credit worthy to cover their costs for state pension workers. By the way the threshold number that Moody uses is 80% funded. Simple math tells you that we have a serious financial problem that is looming for 35 states. The federal government will not help for many reasons with number one being that they cannot afford to help. There is no money. These people never look ahead, plan for a rainy day. This is reflected in our national debt.
Forecast
are given for everything. Not-with-standing my predictions for the two Detroit professional teams, but here, dear reader, I'm talking about financial estimates. Does anyone in the media bring up the fact that the Fed stated that our recession would be over by now back in 2008? They predicted that the stimulus would give us 3.5% to 4% GDP. Didn't happen. In fact the Fed along with the Obama administration have been wrong about every financial estimate for our economy which at present, is less than half of what was forecast. Not good. This leads to the question, is there a trend? If there is a trend, where is it going?
Illinois
is the fifth largest state with 12,875,255 people. The state government has made its forecast too, especially about state pension workers. The state government has only funded 43% of its needs. It has a very serious problem. It owes for 350,000 past workers and another 500,000 present workers. This means the taxes for the twelve million will go up for the 800K state workers and all will be well. It could happen except that the people running these pensions always give rosy numbers like all government workers, but fail when the due date results are counted. The state pension people said that they would receive 7.84% growth rate when they only got 5.6%. This difference in percentages is small, but in real money the shortfall is in the billions which only adds to lower the 43% funded amount. Consider multiplying the number of years to retirement along with the aspect of new regulations on state mandates to fund pensions and the discrepancy reaches 57%. Sadly, this state will be the first to fall. When? Can't say, but the debt is rising with every passing moment.
Liars and Crooks: goes to China and all those who call for free trade. China was found by the WTC to have illegally taxed US chicken exporters of chicken parts, legs, breasts, etc,(very sexy)to the tune of 105.4%. Ouch! This is a tariff. No wonder that they run a surplus with us. In fact, the average Chinese tariff on US products is 25%. There is no such thing as free trade. Tax all imports! End the Fed!
Not familiar with Vallejo, Ca.? It is in the San Francisco Bay area. It has served twice as the capital of California. It became the largest city to file for bankruptcy in the state in 2008. In the short time period since then, Vallejo lost its infamous recognition to Stockton, California, when it filed in 2012. It did find more insufferable recognition by being named the most miserable US city in 2013.
Detroit
What needs to be said that hasn't been said already? I think the Tigers will win the pennant and they have a good chance to win it all. The Lions will probably be a five hundred team. The court system is rigged in favor of the rich over the poor which translates to the labor unions getting kick again. The real problem will be the "aha!" moment by the workers in Detroit and in the state of Michigan and in the country. They will suffer by having their pension cut. Their emotions will be steaming over the fact that the government bailed out the banks. There will be protests and strikes. Not good. There will probably be violence which could erupt because this awareness will have sympathy across the US. If this connection is coupled, the labor movement will awaken after 50 years or more from a comatose position. This could be a blessing, especially if a new political party is formed to which I advocate. However, this is a long shot and it will be very difficult to tell the difference between the candidates, whether, good, bad or ugly, if the opportunity surfaced.
These things take time and time is exactly what the status quo utilize. How recent were the financial problems of Spain and Italy? It was just last July when the European Central Bank President, Mario Draghi vowed to do,"whatever it takes..." to keep the euro from collapsing and the membership intact. At the time short-term interest rates in Spain and Italy were rising to 7%, but with the ECB buying their bonds, rates fell. The stock markets in both of these nations has risen, although both economies are in recession with unemployment rising. Go figure?
When will Europe have their aha moment? Where does Europe go after the reelection of Angela Merkel in September? I have no idea, however the global situation will determine the EUs continuation in its present form. I think the present state of currency fires will arise from India which will be the spark that lights the weapons of financial destruction or derivatives
Meanwhile, in the US the national scene will continue to talk with gridlock over our many issues, but few will draw attention to the progression of financial troubles that are emerging within our state governments. According to Moody's, there are only fifteen states that are credit worthy to cover their costs for state pension workers. By the way the threshold number that Moody uses is 80% funded. Simple math tells you that we have a serious financial problem that is looming for 35 states. The federal government will not help for many reasons with number one being that they cannot afford to help. There is no money. These people never look ahead, plan for a rainy day. This is reflected in our national debt.
Forecast
are given for everything. Not-with-standing my predictions for the two Detroit professional teams, but here, dear reader, I'm talking about financial estimates. Does anyone in the media bring up the fact that the Fed stated that our recession would be over by now back in 2008? They predicted that the stimulus would give us 3.5% to 4% GDP. Didn't happen. In fact the Fed along with the Obama administration have been wrong about every financial estimate for our economy which at present, is less than half of what was forecast. Not good. This leads to the question, is there a trend? If there is a trend, where is it going?
Illinois
is the fifth largest state with 12,875,255 people. The state government has made its forecast too, especially about state pension workers. The state government has only funded 43% of its needs. It has a very serious problem. It owes for 350,000 past workers and another 500,000 present workers. This means the taxes for the twelve million will go up for the 800K state workers and all will be well. It could happen except that the people running these pensions always give rosy numbers like all government workers, but fail when the due date results are counted. The state pension people said that they would receive 7.84% growth rate when they only got 5.6%. This difference in percentages is small, but in real money the shortfall is in the billions which only adds to lower the 43% funded amount. Consider multiplying the number of years to retirement along with the aspect of new regulations on state mandates to fund pensions and the discrepancy reaches 57%. Sadly, this state will be the first to fall. When? Can't say, but the debt is rising with every passing moment.
Liars and Crooks: goes to China and all those who call for free trade. China was found by the WTC to have illegally taxed US chicken exporters of chicken parts, legs, breasts, etc,(very sexy)to the tune of 105.4%. Ouch! This is a tariff. No wonder that they run a surplus with us. In fact, the average Chinese tariff on US products is 25%. There is no such thing as free trade. Tax all imports! End the Fed!
Sunday, August 4, 2013
Government Says 2+2=5...L&C
If freedom of speech is taken away, then dumb and silent, we may be led to the slaughter.
- George Washington
We received many stats this past week and words from "Helicopter" Ben of the Fed. The stats were the cement and Bernanke layed the bricks as the S&P crossed another milestone at 1700. If one didn't know better, it is all good. Dear reader, I know better and although it appears that deep pockets are winning, the game ain't over until its over. Thank you, Professor Yogi.
Hosing prices are rising. This creates jobs and it has many trickle down affects to the national economy like your new home may need appliances, carpet, nick-knacks, whatever. Commissions for real estate agents. Home insurance sales. Tax revenues for cities and states. Everyone gets a piece of the action. The BLS says GDP grew at a surprising 1.7%. Gotta love the way that they release the stats. I would be smiling except it is another lie that our government presents to the nation.
GDP Is Manipulated!
Going back to the fourth quarter of 2012, the BLS first said GDP was negative. The market paused. It waited for the revised number, which came in at 1%. Go figure? The doubts get extended when the first quarter is released. GDP came in at 1.8%. We're growing! Lies! How do I know? Well, when they released their numbers last week, they added a revised number to the previous stat which translates to this: GDP only grew at 1.1% in the first quarter because .7% growth was misplaced into the first quarter, when it should've been in the second quarter. See. They manipulate positive news which pushes up the market. They get a positive market response with the big jump from a negative to a positive and now, they double dip the positive news by using the same growth twice. What about the other positive stats on the economy like housing and car sales? Glad you asked.
US Car Sales
were selling at a 2.7m clip a year in 2012 and that was up from 1.7m in 2011. Now, they are up to 3.27m in 2013. Great! I'm happy for Detroit. It needs some good news, however one needs to look at all angles to understand the picture. Inventory. How many cars on lots and for how long gives the true aspect into the health of the auto industry. Keep in mind there are 100m cars in the US that are in the 7 to 12 year old range. People need to replace their vehicles and low interest rates are helping sales. This is the confluence point. Interest rates are climbing and higher rates means less expendable money after the purchase. This will hurt other industries within the economy. Not good. Rising gas prices don't help either. Further, inventory is climbing too. It has gone from under two months on the lot to now 71 days, but the problem is this: the 2014s are coming and that means lower margins or unsold inventory for 2013s. An inflection point is coming in September that could hurt the recovery in auto sales.
Housing
prices are up over 12% this year and over 24% in the past three years. This is great except rising interest rates effect housing more than any other industry. Consider the trend and correlate this into it. In June housing starts dropped 9.9% and yet, home builders were saying that they lost sales because they lacked inventory. Liars! How do I know? Because new permits are down 7.5%. Construction spending is down .6% and pending sales are down .4%. Mortgage applications are down three weeks in a row. They know before you do. Add this little tidbit to the game. Blackstone and Fortress, the two biggest home buyers declared that they are now selling!
Jobs
this info is the most manipulated of all the stats. Consider dear reader, what you read above about GDP. When the jobs number is released, the market responds. The numbers were all good which has kept the rally in the market. Lies! Two months ago it was reported that there were 195K jobs when in fact, there was only 176k jobs. Last month it was reported that another 195k jobs were created when it was only 188k. 26,000 jobs that didn't exist and yet, unemployment is down Go figure?! Consider what the Hamilton Project estimated about jobs and unemployment in our economy. They figure when you add population growth and people passing, and using a growth number of 208k per month, it will take us into the year 2026 to reach the level of employment that we had in 2007. By the way, we are not averaging 208k per month. I would add at this time that an iconic brand will seek bankruptcy at the end of this month. I would name it except that I am afraid that they will sue me. If you think that you would like a second opinion, I have it for you from two great past professors whose voice is gone, but not forgotten. Bud Abbot and Lou Costello on unemployment. (I will use today's numbers.)
Bud: Unemployment is 7.4%
Lou: That's a lot of people out of work.
Bud: No! 14.7% are out of work.
Lou: You just said, 7.4%
Bud: 7.4% unemployed.
Lou: Right, 7.4% out of work.
Bud: No! that's 14.7%.
Lou: Wait a minute! Is it 7.4% or 14.7%?
Bud: 7.4% are unemployed and 14.7% are out of work.
Lou: If you are out of work, you are unemployed.
Bud: No! Congress said you can't count the "out of work" unemployed because you have to look for work.
Lou: But you are out of work!
Bud: No! You miss the point.
Lou: What point?
Bud: Someone who doesn't look for work can't be counted with those who look for work. It wouldn't be fair.
Lou: For whom?
Bud: the unemployed.
Lou: but they're all out of work!
Bud: No. The unemployed are actively looking while the others gave up looking.
Lou: So, if you're off the unemployment rolls that would count as less unemployment.
Bud: Absolutely!
Lou: The unemployment goes down because you don't look for work.
Bud: Absolutely. Otherwise, it would be 14.7%. Our government does not want you to read about 14.7%.
Lou: That would be tough running for reelection.
Bud: Absolutely.
Lou: That means there are two ways to bring down unemployment.
Bud: Two ways - correct.
Lou: Unemployment can go down if someone finds a job.
Bud: Correct.
Lou: Unemployment can also go down if you stop looking.
Bud: Bingo!
Lou: Of the two ways, the easier choice is to stop looking.
Bud: You are becoming an Economist.
Lou: I don't even know what the hell I said.
Bud: Now, you're thinking like Congress.
Liars and Crooks: Goes to Congress who are out of touch with the people, especially with incomes. Our lawmakers take advantage of their position to get inside information about products and corporations before the public. They use this info to get rich. There are no middle class or poor lawmakers. Congress members can see stock info on their "docket." If rules are passed that can help a company, they buy before anyone else knows. They also steer their committees to favor projects that can effect stock prices. Nothing like knowing the final score before the game is even played.
- George Washington
We received many stats this past week and words from "Helicopter" Ben of the Fed. The stats were the cement and Bernanke layed the bricks as the S&P crossed another milestone at 1700. If one didn't know better, it is all good. Dear reader, I know better and although it appears that deep pockets are winning, the game ain't over until its over. Thank you, Professor Yogi.
Hosing prices are rising. This creates jobs and it has many trickle down affects to the national economy like your new home may need appliances, carpet, nick-knacks, whatever. Commissions for real estate agents. Home insurance sales. Tax revenues for cities and states. Everyone gets a piece of the action. The BLS says GDP grew at a surprising 1.7%. Gotta love the way that they release the stats. I would be smiling except it is another lie that our government presents to the nation.
GDP Is Manipulated!
Going back to the fourth quarter of 2012, the BLS first said GDP was negative. The market paused. It waited for the revised number, which came in at 1%. Go figure? The doubts get extended when the first quarter is released. GDP came in at 1.8%. We're growing! Lies! How do I know? Well, when they released their numbers last week, they added a revised number to the previous stat which translates to this: GDP only grew at 1.1% in the first quarter because .7% growth was misplaced into the first quarter, when it should've been in the second quarter. See. They manipulate positive news which pushes up the market. They get a positive market response with the big jump from a negative to a positive and now, they double dip the positive news by using the same growth twice. What about the other positive stats on the economy like housing and car sales? Glad you asked.
US Car Sales
were selling at a 2.7m clip a year in 2012 and that was up from 1.7m in 2011. Now, they are up to 3.27m in 2013. Great! I'm happy for Detroit. It needs some good news, however one needs to look at all angles to understand the picture. Inventory. How many cars on lots and for how long gives the true aspect into the health of the auto industry. Keep in mind there are 100m cars in the US that are in the 7 to 12 year old range. People need to replace their vehicles and low interest rates are helping sales. This is the confluence point. Interest rates are climbing and higher rates means less expendable money after the purchase. This will hurt other industries within the economy. Not good. Rising gas prices don't help either. Further, inventory is climbing too. It has gone from under two months on the lot to now 71 days, but the problem is this: the 2014s are coming and that means lower margins or unsold inventory for 2013s. An inflection point is coming in September that could hurt the recovery in auto sales.
Housing
prices are up over 12% this year and over 24% in the past three years. This is great except rising interest rates effect housing more than any other industry. Consider the trend and correlate this into it. In June housing starts dropped 9.9% and yet, home builders were saying that they lost sales because they lacked inventory. Liars! How do I know? Because new permits are down 7.5%. Construction spending is down .6% and pending sales are down .4%. Mortgage applications are down three weeks in a row. They know before you do. Add this little tidbit to the game. Blackstone and Fortress, the two biggest home buyers declared that they are now selling!
Jobs
this info is the most manipulated of all the stats. Consider dear reader, what you read above about GDP. When the jobs number is released, the market responds. The numbers were all good which has kept the rally in the market. Lies! Two months ago it was reported that there were 195K jobs when in fact, there was only 176k jobs. Last month it was reported that another 195k jobs were created when it was only 188k. 26,000 jobs that didn't exist and yet, unemployment is down Go figure?! Consider what the Hamilton Project estimated about jobs and unemployment in our economy. They figure when you add population growth and people passing, and using a growth number of 208k per month, it will take us into the year 2026 to reach the level of employment that we had in 2007. By the way, we are not averaging 208k per month. I would add at this time that an iconic brand will seek bankruptcy at the end of this month. I would name it except that I am afraid that they will sue me. If you think that you would like a second opinion, I have it for you from two great past professors whose voice is gone, but not forgotten. Bud Abbot and Lou Costello on unemployment. (I will use today's numbers.)
Bud: Unemployment is 7.4%
Lou: That's a lot of people out of work.
Bud: No! 14.7% are out of work.
Lou: You just said, 7.4%
Bud: 7.4% unemployed.
Lou: Right, 7.4% out of work.
Bud: No! that's 14.7%.
Lou: Wait a minute! Is it 7.4% or 14.7%?
Bud: 7.4% are unemployed and 14.7% are out of work.
Lou: If you are out of work, you are unemployed.
Bud: No! Congress said you can't count the "out of work" unemployed because you have to look for work.
Lou: But you are out of work!
Bud: No! You miss the point.
Lou: What point?
Bud: Someone who doesn't look for work can't be counted with those who look for work. It wouldn't be fair.
Lou: For whom?
Bud: the unemployed.
Lou: but they're all out of work!
Bud: No. The unemployed are actively looking while the others gave up looking.
Lou: So, if you're off the unemployment rolls that would count as less unemployment.
Bud: Absolutely!
Lou: The unemployment goes down because you don't look for work.
Bud: Absolutely. Otherwise, it would be 14.7%. Our government does not want you to read about 14.7%.
Lou: That would be tough running for reelection.
Bud: Absolutely.
Lou: That means there are two ways to bring down unemployment.
Bud: Two ways - correct.
Lou: Unemployment can go down if someone finds a job.
Bud: Correct.
Lou: Unemployment can also go down if you stop looking.
Bud: Bingo!
Lou: Of the two ways, the easier choice is to stop looking.
Bud: You are becoming an Economist.
Lou: I don't even know what the hell I said.
Bud: Now, you're thinking like Congress.
Liars and Crooks: Goes to Congress who are out of touch with the people, especially with incomes. Our lawmakers take advantage of their position to get inside information about products and corporations before the public. They use this info to get rich. There are no middle class or poor lawmakers. Congress members can see stock info on their "docket." If rules are passed that can help a company, they buy before anyone else knows. They also steer their committees to favor projects that can effect stock prices. Nothing like knowing the final score before the game is even played.
Sunday, July 28, 2013
Emerging or Submerging Markets...L&C
TV media financial experts love to tout emerging market stocks and Exchange Traded Funds. In the long run after 2021, I would agree, especially when you consider demographics. Most of these nations like Brazil and Australia rely on commodities to grow their economy. However, if you look at a chart of the CRB(commodity)Index, it stood over 450 in September 2008 and today, it is under 300. Ouch!
This is not a paper burn. It is more like falling in the bath tub with hard surfaces all around you on a slippery floor. Not good.
If your central export is under pressure, you got a problem that will affect many other areas in your economy.Your unemployment will rise, your tax revenues will shrink, your expansion plans will be put on hold or cancelled. You will be voted out of office if democratic or chased out like in any Arab quarter. None of the above is going to add to global GDP. In addition, there are other related consequences that also effect emerging markets and together could be the new focal point for an economic earthquake.
10 Steps to a Crisis
1) The Fed's QE easing pushes inflation higher in emerging market nations which slows their overall economy.
2) QE pushes emerging market currencies higher which also slows their economy.
3) Because they are exporting less commodities and at the same time receiving lower prices, their foreign exchange reserves fall which can lead to a host of problems, including a currency collapse.
4) Falling commodity prices are great for old industrialized nations like the US and Europe which could foster a continuation of policies which led to lower prices which in turn, cause a continuation of hardship to emerging market nations.
5) China now exports more to emerging market nations than anyone else, however with emerging market economies slowing, they will import less. China will sell less. The global GDP shrinks.
6) China imports the most commodities, but the interrelated slowdown will result in less demand by China. Lower imports with lower prices means less for emerging market nations.
7) Together, a vicious cycle evolves where falling commodity prices and lower demand lead to still lower prices and lower demand. This is a deflation spiral.
8) With declining foreign exchange reserves, emerging market nations will have to lower their demand which leads to lower imports. In addition, these nations will no longer have excess reserves to buy US Treasuries which will cause interest rates to rise. When you consider that the Fed now buys 63% of treasury notes, who will buy the rest? This could lead to the phoniness between the Fed and the US Treasury being exposed. The Founding Fathers in allowing the first US National Bank would not let them do this phony technique.
9) Long-term rates will climb which will hurt housing and all related aspects in our economy like corporate borrowing costs.
10) Higher rates will cause our deficits to explode beyond the already much to high levels. Consider this: If housing rates on a $200,000 mortgage were to rise three points from 3.5% to 6.5%, the new higher cost of $660 per month would equal the actual monthly cost at 3.5%.
Like I have stated many times, the Fed has no exit strategy. End the Fed!
Liars and Crooks: Sebastian told you last week that many big banks were caught manipulation electric costs. This week he adds Goldman Sachs which are under investigation for "rents." These are fees paid by the London Exchange to store certain commodities like aluminium. Apparently, Goldman delays in delivering the aluminium that they held to companies like Coors which use the product in beer cans. They do this to capture higher prices beside the rent that they collect. If a citizen commits a felony, he goes to jail. I believe that if a company repeatedly commits crimes, they should be put out of business! Adious, Goldman!
This is not a paper burn. It is more like falling in the bath tub with hard surfaces all around you on a slippery floor. Not good.
If your central export is under pressure, you got a problem that will affect many other areas in your economy.Your unemployment will rise, your tax revenues will shrink, your expansion plans will be put on hold or cancelled. You will be voted out of office if democratic or chased out like in any Arab quarter. None of the above is going to add to global GDP. In addition, there are other related consequences that also effect emerging markets and together could be the new focal point for an economic earthquake.
10 Steps to a Crisis
1) The Fed's QE easing pushes inflation higher in emerging market nations which slows their overall economy.
2) QE pushes emerging market currencies higher which also slows their economy.
3) Because they are exporting less commodities and at the same time receiving lower prices, their foreign exchange reserves fall which can lead to a host of problems, including a currency collapse.
4) Falling commodity prices are great for old industrialized nations like the US and Europe which could foster a continuation of policies which led to lower prices which in turn, cause a continuation of hardship to emerging market nations.
5) China now exports more to emerging market nations than anyone else, however with emerging market economies slowing, they will import less. China will sell less. The global GDP shrinks.
6) China imports the most commodities, but the interrelated slowdown will result in less demand by China. Lower imports with lower prices means less for emerging market nations.
7) Together, a vicious cycle evolves where falling commodity prices and lower demand lead to still lower prices and lower demand. This is a deflation spiral.
8) With declining foreign exchange reserves, emerging market nations will have to lower their demand which leads to lower imports. In addition, these nations will no longer have excess reserves to buy US Treasuries which will cause interest rates to rise. When you consider that the Fed now buys 63% of treasury notes, who will buy the rest? This could lead to the phoniness between the Fed and the US Treasury being exposed. The Founding Fathers in allowing the first US National Bank would not let them do this phony technique.
9) Long-term rates will climb which will hurt housing and all related aspects in our economy like corporate borrowing costs.
10) Higher rates will cause our deficits to explode beyond the already much to high levels. Consider this: If housing rates on a $200,000 mortgage were to rise three points from 3.5% to 6.5%, the new higher cost of $660 per month would equal the actual monthly cost at 3.5%.
Like I have stated many times, the Fed has no exit strategy. End the Fed!
Liars and Crooks: Sebastian told you last week that many big banks were caught manipulation electric costs. This week he adds Goldman Sachs which are under investigation for "rents." These are fees paid by the London Exchange to store certain commodities like aluminium. Apparently, Goldman delays in delivering the aluminium that they held to companies like Coors which use the product in beer cans. They do this to capture higher prices beside the rent that they collect. If a citizen commits a felony, he goes to jail. I believe that if a company repeatedly commits crimes, they should be put out of business! Adious, Goldman!
Sunday, July 21, 2013
58 Minutes = Future Schock...L&C
To paraphrase the great William Shakespeare, "...tears do not come in drips, but torrents."
Detroit is back in the news. Yeah, the Tigers look good for the pennant. But no! The Lions have troubles. Yes, but no again. So, what is the reason? Bankruptcy. I don't like labels or one word answers. There are problems with single answers as expressed by my blog mission. The general public has been exposed to sound bytes on Detroit for years. There is a reason for this. The status quo know that this is the best way to deal with issues that could blow up their control over our society. It softens the blow as the public already knew what was going to happen. If you watch any financial network or media shows like Meet the Press, Face the Nation, et al. Their expert guests will throw how Detroit failed to diversify from the auto business. How cronyism was short-sighted in long-term economic trends. Some truth in there, but hides the real culprit which makes these answers all B.S.! When you had over 300,000 manufacturing workers in a country that has under the radar race issues in your city and it is the most integrated in the nation, you are diversified. Those middle class jobs developed many other opportunities like real estate, construction, appliances, teachers, doctors, whatever.
64K Question
The real culprit was the anti-union movement by greedy producers who used globalization to destroy the unions which led to the beginning of tax loss for the city. The related fields were affected, but only revealed through time.The dominoes fell like the loss of the related jobs, the results of inflation, drugs and crime, white flight and more which leaves Detroit today with only 27,000 manufacturing jobs that will shrink if the global recession continues. Sadly, that is what I see and predict.
Contagion
other cities are watching the events unfold. Oakland, Baltimore, Chicago, San Jose, LA, Houston, everywhere. Why? Because if the bankruptcy judge says Detroit does not have to pay the full amount of its unfunded obligations to its pension program, they will sing Hallelujah
The powers-to-be screwed the private unions and now, they will screw the public unions.
Oakland As always had pitching and they want a new stadium. B.S.! I love sports, but life takes center stage before leisure. There is a local artist who lives at Jack London Square. He filmed car robbers in action. He called the police who did not come. He gave them the video. They have done nothing. This has happened many times with no response or help for what the police classify as petty crimes.
I placed this tidbit because the media made a big deal over the fact that it takes the police in Detroit 58 minutes to respond. They don't even come in Oakland!
Recovery
this is feel good news that is a lie. Ten years ago and millions less in population we consumed 150,000billions of gallons in yearly gasoline. Today, we are down to 130,000b. We have more people collecting food stamps than working full time. Greece is in its fifth year of recession with Italy and Spain heading for their third. What is EU answer? They will paper over the debts as they seek a new answer to avoid inflation and default. The problem as I see it is this: they, meaning central bankers, will end currency in society. The government will have full big brother control over you because all your spending will be recorded. Financial freedom will end because you will not be allowed to pay cash for anything. The young will jump on the ease of transaction not aware of the big picture until it is too late. The military ended the street war protests with a volunteer, full time army. Local government ended long lines at the unemployment office with electronic entitlements as did other agencies like social security. Out of sight, out of mind. The Fed plans to end cash. You won't be seen because you won't have financial freedom. You won't need a local branch bank because all money will be electronic. The government loves it. No printing press means no need for special paper and ink. No repairs to fix. No labor. Fiat money is saving itself. They realized this when Orange County went bankrupt. The list slowly expanded with San Bernadino, Stockton and Jefferson County, however the list is huge. There are over 50,000 communities that lost middle class manufacturing jobs and there isn't enough money to rollover the debt. They will seek to hide the truth as all money will be under their control, electronically. This long rant ends with the message that I said before and I say it again, End the Fed!
Liars and Crooks: the banking industry led by Deutsche Bank, however this lead is tenuous as JPMorgan will eventually take over. What, you ask? The banks were caught trying to manipulate electricity prices by placing bets in the market because they constructed deals to go their way. Barclays is appealing their $470million fine, however Deutsche have already settled. You see when central banks give you free money at .25%, you can multiply it many times over with leverage with the only setback being caught, not claiming guilt, pay your fine and if it is so serious as to threaten your business, well, it pays to have the central bank cover your ass with a bonus to boot. End the Fed!
Detroit is back in the news. Yeah, the Tigers look good for the pennant. But no! The Lions have troubles. Yes, but no again. So, what is the reason? Bankruptcy. I don't like labels or one word answers. There are problems with single answers as expressed by my blog mission. The general public has been exposed to sound bytes on Detroit for years. There is a reason for this. The status quo know that this is the best way to deal with issues that could blow up their control over our society. It softens the blow as the public already knew what was going to happen. If you watch any financial network or media shows like Meet the Press, Face the Nation, et al. Their expert guests will throw how Detroit failed to diversify from the auto business. How cronyism was short-sighted in long-term economic trends. Some truth in there, but hides the real culprit which makes these answers all B.S.! When you had over 300,000 manufacturing workers in a country that has under the radar race issues in your city and it is the most integrated in the nation, you are diversified. Those middle class jobs developed many other opportunities like real estate, construction, appliances, teachers, doctors, whatever.
64K Question
The real culprit was the anti-union movement by greedy producers who used globalization to destroy the unions which led to the beginning of tax loss for the city. The related fields were affected, but only revealed through time.The dominoes fell like the loss of the related jobs, the results of inflation, drugs and crime, white flight and more which leaves Detroit today with only 27,000 manufacturing jobs that will shrink if the global recession continues. Sadly, that is what I see and predict.
Contagion
other cities are watching the events unfold. Oakland, Baltimore, Chicago, San Jose, LA, Houston, everywhere. Why? Because if the bankruptcy judge says Detroit does not have to pay the full amount of its unfunded obligations to its pension program, they will sing Hallelujah
The powers-to-be screwed the private unions and now, they will screw the public unions.
Oakland As always had pitching and they want a new stadium. B.S.! I love sports, but life takes center stage before leisure. There is a local artist who lives at Jack London Square. He filmed car robbers in action. He called the police who did not come. He gave them the video. They have done nothing. This has happened many times with no response or help for what the police classify as petty crimes.
I placed this tidbit because the media made a big deal over the fact that it takes the police in Detroit 58 minutes to respond. They don't even come in Oakland!
Recovery
this is feel good news that is a lie. Ten years ago and millions less in population we consumed 150,000billions of gallons in yearly gasoline. Today, we are down to 130,000b. We have more people collecting food stamps than working full time. Greece is in its fifth year of recession with Italy and Spain heading for their third. What is EU answer? They will paper over the debts as they seek a new answer to avoid inflation and default. The problem as I see it is this: they, meaning central bankers, will end currency in society. The government will have full big brother control over you because all your spending will be recorded. Financial freedom will end because you will not be allowed to pay cash for anything. The young will jump on the ease of transaction not aware of the big picture until it is too late. The military ended the street war protests with a volunteer, full time army. Local government ended long lines at the unemployment office with electronic entitlements as did other agencies like social security. Out of sight, out of mind. The Fed plans to end cash. You won't be seen because you won't have financial freedom. You won't need a local branch bank because all money will be electronic. The government loves it. No printing press means no need for special paper and ink. No repairs to fix. No labor. Fiat money is saving itself. They realized this when Orange County went bankrupt. The list slowly expanded with San Bernadino, Stockton and Jefferson County, however the list is huge. There are over 50,000 communities that lost middle class manufacturing jobs and there isn't enough money to rollover the debt. They will seek to hide the truth as all money will be under their control, electronically. This long rant ends with the message that I said before and I say it again, End the Fed!
Liars and Crooks: the banking industry led by Deutsche Bank, however this lead is tenuous as JPMorgan will eventually take over. What, you ask? The banks were caught trying to manipulate electricity prices by placing bets in the market because they constructed deals to go their way. Barclays is appealing their $470million fine, however Deutsche have already settled. You see when central banks give you free money at .25%, you can multiply it many times over with leverage with the only setback being caught, not claiming guilt, pay your fine and if it is so serious as to threaten your business, well, it pays to have the central bank cover your ass with a bonus to boot. End the Fed!
Sunday, July 14, 2013
Nature & Deep Pockets Winning...L&C
Would you venture into a game that was rigged at 75% to 25% out of 100% against you? Probably not, yet that is exactly the percentages in the stock market in the battle between the bulls and bears. Human nature seeks positives. No one wants to wish ill will toward a company and its employees. If you short their stock, that is exactly what you are saying.
This aspect to our inner make-up is reflected in the fact that the market goes up three days for every down day. When you add to this to the present market make-up of central bank support, hedge funds and the very wealthy, it is easy to understand why analysts in the media shout to buy equities. Oh, did I mention that lack of truth in reporting?
Alcoa Aluminum(AA)
started the earnings season last Monday. They lost .11cents a share or $119m in the quarter versus a loss of $2m in the same quarter yoy. Guess what? It is reported as a beat. A win! A great start to the earnings season. The company made .07cents in one division, the aerospace unit, when it was estimated to only make .06cents a share in this section. By the way this estimate of company share earnings is another rigged aspect to the market.
83% of S&P 500
gave warnings or lower guidance for this quarter. So, the company only makes .05cents a share when six months ago they stated that they would make .10cents a share doesn't matter. Worse than that is this: they lose money, but less than they thought. All these cases are reported as positives by the financial media and general media.
How can the bears win? One more aspect to AA. The company closed 149,000 metric tons of production in the quarter after closing 531,000 metric tons last year. The industry itself is closing capacity in China, Europe and wherever there is a plant. Prices are declining and yet this bell weather of the global manufacturing is described as part of the recovery. The refs are throwing yellow and red cards at bears, holding on bears, three seconds on bears, icing on bears, on-and-on.
I want to remind you, dear reader that last year at this time, analysts were predicting that the global community would grow GDP to the tune of 6.5% and in the US, the Fed and IMF stated our GDP would be 2.7% or more.
Didn't Happen!
Our growth slowed to .04% in the final quarter of the year 2012 and that was a revision from negative. GDP for the first quarter was less at 2% and declined to 1.7% in the second with a projected .07% for this quarter. So, explain these market results to me because I see a way overvalued stock market. The Dow is up 18%, S&P is up 17.8% and NASDAQ is up 19.23% for 2013. How can prices be rising when the overall economy is grinding by because it receives life support from the Fed and our government? There is one truth in Helicopter Ben's statements, the economy is weak!
Consider what my losing bear team understands. Consumer Confidence is declining. Three manufacturing indexes declined with no job improvement - Philly, New York and the Mid-West. Corporate Insiders are selling 9x more than they are buying. Housing interest rates jumped by one and half percent in one month. Twenty-three million Americans have no job and 48m collect food stamps. In fact there are more Americans on food stamps than are working full time. More than half of the EU member nations are in a recession. China is slowing and is possibly facing a real estate bubble. Violence is beginning in Spain and Portugal, and continues in Greece. Sadly, I can see the first rock being thrown in our nation(see L&C) and those cameras will be hated more than anything else.
Liars and Crooks: Goes to our Congress. They cannot do anything right. This week the immigration bill was in the news. Can you explain to me how does national defense, farming subsidies, national deficit, jobs and many other fields all be within the parameters of immigration overhaul? One other note in regards to the food bill addition. Congress will vote for stimulus, subsidies even the use of federal lands for farmers, but no to helping people with food stamps. Yeah, government for the people!
In my unpublished book I noted that is fallacy in government bills should end with the bill writer. No one should be allowed to add pet causes, pork barrel, etc. to some one's bill. Vote for one bill, one at a time. "Stop in the name of love..." thank you Supremes.
This aspect to our inner make-up is reflected in the fact that the market goes up three days for every down day. When you add to this to the present market make-up of central bank support, hedge funds and the very wealthy, it is easy to understand why analysts in the media shout to buy equities. Oh, did I mention that lack of truth in reporting?
Alcoa Aluminum(AA)
started the earnings season last Monday. They lost .11cents a share or $119m in the quarter versus a loss of $2m in the same quarter yoy. Guess what? It is reported as a beat. A win! A great start to the earnings season. The company made .07cents in one division, the aerospace unit, when it was estimated to only make .06cents a share in this section. By the way this estimate of company share earnings is another rigged aspect to the market.
83% of S&P 500
gave warnings or lower guidance for this quarter. So, the company only makes .05cents a share when six months ago they stated that they would make .10cents a share doesn't matter. Worse than that is this: they lose money, but less than they thought. All these cases are reported as positives by the financial media and general media.
How can the bears win? One more aspect to AA. The company closed 149,000 metric tons of production in the quarter after closing 531,000 metric tons last year. The industry itself is closing capacity in China, Europe and wherever there is a plant. Prices are declining and yet this bell weather of the global manufacturing is described as part of the recovery. The refs are throwing yellow and red cards at bears, holding on bears, three seconds on bears, icing on bears, on-and-on.
I want to remind you, dear reader that last year at this time, analysts were predicting that the global community would grow GDP to the tune of 6.5% and in the US, the Fed and IMF stated our GDP would be 2.7% or more.
Didn't Happen!
Our growth slowed to .04% in the final quarter of the year 2012 and that was a revision from negative. GDP for the first quarter was less at 2% and declined to 1.7% in the second with a projected .07% for this quarter. So, explain these market results to me because I see a way overvalued stock market. The Dow is up 18%, S&P is up 17.8% and NASDAQ is up 19.23% for 2013. How can prices be rising when the overall economy is grinding by because it receives life support from the Fed and our government? There is one truth in Helicopter Ben's statements, the economy is weak!
Consider what my losing bear team understands. Consumer Confidence is declining. Three manufacturing indexes declined with no job improvement - Philly, New York and the Mid-West. Corporate Insiders are selling 9x more than they are buying. Housing interest rates jumped by one and half percent in one month. Twenty-three million Americans have no job and 48m collect food stamps. In fact there are more Americans on food stamps than are working full time. More than half of the EU member nations are in a recession. China is slowing and is possibly facing a real estate bubble. Violence is beginning in Spain and Portugal, and continues in Greece. Sadly, I can see the first rock being thrown in our nation(see L&C) and those cameras will be hated more than anything else.
Liars and Crooks: Goes to our Congress. They cannot do anything right. This week the immigration bill was in the news. Can you explain to me how does national defense, farming subsidies, national deficit, jobs and many other fields all be within the parameters of immigration overhaul? One other note in regards to the food bill addition. Congress will vote for stimulus, subsidies even the use of federal lands for farmers, but no to helping people with food stamps. Yeah, government for the people!
In my unpublished book I noted that is fallacy in government bills should end with the bill writer. No one should be allowed to add pet causes, pork barrel, etc. to some one's bill. Vote for one bill, one at a time. "Stop in the name of love..." thank you Supremes.
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