Would You Purchase This Security?

Update on $SPX's Exponential Moving Average Strategy

Why Today's Market Euphoria?

 Let me count the ways.  First, the House passed the "Clean Debt Ceiling" bill.  What?  If this bill is approved by the Senate, the U.S. will be able to spend as much as it wants until March 15, 2015.  Yes, we will no longer have a debt ceiling.  Our national debt is currently north of $17 trillion.  That figure can now grow exponentially over the next year.  So much for any fiscal conservatives in Congress.  Second, Janet Yellen proclaimed that the easy money policies of her predecessor, Ben Benanke, will continue.  And, there you have the two reasons (fiat money and more fiat money) for today's euphoria.  From the above chart, you can clearly see that the "euphoria" does not end well!

Student Loan Debt

The average debt load for the class of 2012, latest available, was $29,400, according to the "Institute for College Access & Success' Project on Student Debt."  This is up 10.5% from the class of 2011. Now, that is a lot of debt for someone going into today's weak job market.  A good site to visit to learn about student loan basics and interest rates on those loans is at American Student Assistance.

Let's go back and look at what the monthly payments would be for that average debt loan of $29,400 at 6% for 10 years.  According to my calculations that monthly payment is $326.  Now, what happens if that student defaults on that loan.  If you default on a student loan there are statutory penalties, retroactive interest and fees that get added to the outstanding principal balance, since these are all federally-guaranteed, and those penalties and fees frequently run to 50% of the outstanding balance.  If you default on $29,400 of student loan debt, you now owe $44,100, not $29,400.  And, of course, you can't discharge any of it in bankruptcy.

Do Dividend Yields Really Matter?

In the latest edition of the "Elliott Wave Financial Forecast (February 7, 2014)" states as follows: "For instance, few currently perceive any risk conveyed by the DJIA's dividend yield of just 2.09%.  A false sense of complacency may be due to the fact that for all but 5% of the time over the past 20 years, the DJIA's yield has been under 3%.  Historically, however, a 3% DJIA dividend yield attended stock market peaks.  Between 1915 and 1994, the dividend yield remained higher than 3% for all but one brief moment, in 1987, and that reading preceded a stock market crash."

And, there you have it!  Historically, dividend yields do seem to matter.  Today, we are at the junction again with the DJIA's dividend between 3%.  Will the consequences be different this time?  I believe not, but, then again, we shall so find out!

$INDU: Retracement to 15,750?

$SLV: Using Exponential Moving Averages to Indentify Trends

Who Owns Our U.S. Treasury Securities?

 

China's holdings of U.S. Treasury securities rose to a record $1.317 trillion!  That is what the media has been reporting today, which, of course, is true.  No where did I hear any reporting by the main-stream media that the Fed holds $2.164 trillion of U.S. Treasury securities.  And, exactly how did the Fed come up with the $2.164 trillion to purchase those Treasury securities?  Oh, they simply created those trillions of dollars out of thin air to make those purchases.  Boy, do I like that business model!

2014 Economic Freedom Index

The level of economic freedom in the U.S. is at an all-time low.  According to the Heritage Foundation, the U.S. is ranked "12th."  Last year, the U.S. was ranked "10th."  We have dropped for seven years in a row with this year moving out of the top ten.

According to an article in the Wall Street Journal by Terry Miller in which he states the following: "For 20 years, this index has measured a nation's commitment to free enterprise on a scale of 0 to 100 by evaluating 10 categories, including fiscal soundness, government size and property rights.  These commitments have powerful effects: Countries achieving higher levels of economic freedom consistently and measurably outperform others in economic growth, long-term prosperity and social progress.  Those losing freedom, on the other hand, risk economic stagnation, high unemployment and deteriorating social conditions."

I have to admit that it does appear that the glory days of the U.S. are behind us if we continue on our current economic course of limiting economic freedom.

Disposable Income vs. Retail Sales

1929 Analog to Current $DJIA

Interesting analog!  But, in order to confirm the 1929 analog, the $DJIA's 15-week EMA must decline below its 40-week EMA, which, of course, we are not there yet!  For a bear, let's hope that this analog does unfold according to script. 

Civilian Labor Force "Participation Rate"

The "participation rate" refers to the number of people who are either employed or actively looking for work in relation to the civilian non-institution population of at least 16 years old.  Another measure that I use to measure overall employment strength is the "Civilian Employment Rate."  The civilian employment rate is similar to the participation rate with the exception that it excludes those individuals actively looking for employment.  In other words, the civilian employment rate only includes those individuals that do, indeed, have a job.  It current rate is at 58.6%.  The reason that I like the civilian employment rate over the participation rate series is due to the fact that it only includes those individuals that have a job, which, of course, are those individuals that pay "taxes" to support everyone that does not have a job! 

Your State is Shamed at What?

For my state, Missouri, it is "bankruptcy!  What about your state?  See the following chart.

Did You Know That the Federal Reserve System Has its Own Police Force?

I thought that I had a good grasp and understanding of the workings of the Federal Reserve System.  However, I did not realize that the Fed has its "own" police department.  And, it is going on a major hiring binge.  Currently, the Fed has approximately 1,000 police officers.  I wonder why?  Could it be that the Fed is preparing for the next financial meltdown over the next two years?

2013 Financial Markets: Performance Update

Investment performances of various financial assets for 2013 were as follows:

1. The DJIA was up 27%.  (Best single year since 1995.)
2. The yield on the 10-year Treasury Note was up 78% as the price fell.  Since the low in July 2012 at 1.38%, the 10-year Treasury Note rate has advanced to 3%.  (Is the bond market telling us something about risk assets going forward, which, of course, would be highly negative for the equity markets.)
3. Silver prices were down 35% and 61% since its 2011 peak. (I am still anticipating a counter-trend rally within its Stage 4 Selling Phase, which could send silver to $22.)
4. Gold prices were down 28%.  (Similar to silver, I am anticipating a counter-trend rally within its Stage 4 Selling Phase, which could send gold to approximately $1,300.)

The Art of Channel Stuffing

How does GM increase the proverbial bottom-line?  Channel Stuffing!  Please explain.  Channel Stuffing is when a vehicle rolls off the assembly line and heads to your local GM dealership.  GM instantly records that car as a "sale," when, in fact, it simply ends up sitting in the dealer's lot.  (See the following chart.)  By the way, the December GM dealer inventory (channel stuffing) for the month of December was the largest in the company's restructured history.  But you say, those GM cars will be sold because of our solid economy.  In addition, all those people getting jobs will need cars to get them to work.  My only comment to such idiotic rhetoric is that economic stupidity still reins supreme in America.

Be Careful When You Buy Donkey Meat From Wal-Mart

Purchasers of "Donkey" meat at Wal-Mart stores in China have warned that donkey products maybe tainted with fox meat.  Wal-Mart has recalled "Five Spice" donkey meat sold at some outlets in China after tests showed the product contained the DNA of fox meat.  Wal-Mart said it had set up an investigation team to look into the incident.  I don't know what the problem is, because I thought fox meat was more expensive than donkey meat.

So Much for Cheap Credit Going Forward!

The Rich Get Richer and the Poor Get Poorer

Currently, we not only have Wall Street taking advantage of Main Street, but now have Washington, D.C. getting richer while most of the country subsidies those federal workers living there.  Case in point, the Federal Reserve Bank of St. Louis reports that the median annual income of Washington, D.C. is more than $65,000 while the national median income is approximately $50,000. 

I have a recommendation for the current administration, who seem to be so concerned with income inequality.  Thin the ranks of the federal workers in Washington, D.C., which would go a long way to eliminate income inequality.

No Bubble Here, Right?

New home prices have never been more unaffordable at a stunning 6.7x average salary.  Thank you, Mr. Bernanke.  You learned your lessons very well from Greenspan where new home prices were only 6x average salary under his Fed tenure.  And, mortgage rates are only 50% of what they were when Greenspan left his post as Fed Chairman.  But, no bubble is visible, right?