The following paragraphs are taken from John Mauldin's "Frontline Weekly Newsletter:"
"This week saw President Obama give us a budget with a projected 2009 deficit of $1.75 trillion dollars, and a massive tax increase on the "wealthy." But hidden in the details was an even larger tax increase on everyone. Obama wants to create a "Cap-and-Trade Program" for carbon emissions. (You call it what you want, but it is still a TAX.) This is expected to generate $79 billion in 2012, $237 billion by 2014, and grow to $646 billion by 2019. These will be payments by energy (primarily utility) companies to the government. That will cause utilities to have to raise the prices they charge customers for energy. Such a level of taxation is eventually 4-5% of total US GDP. That is not small potatoes. And since the wealthy do not use all that much more power than the rest of us, it will affect the lower incomes disproportionately.
It will take money out of consumers' pockets and transfer it to the government. You can call it cap-and-trade, but it is a tax. And a huge one. Anything that will take 4% of GDP away from consumer spending is not business friendly. And by driving the cost of energy up, it will drive high-energy-using businesses away from the US to developing countries where energy is cheaper. It will make it even harder for people to save money and drive up costs for the elderly and retired. But it will make the environmental lobby happy.
Further, Obama's accounting magicians assume that the US economy is going to grow by 1.2% this year and 3.2% next year and at a blistering 4% pace after that. Since that is not likely to happen, the deficits will be far worse than projected. Since large taxpayers can see the tax increase coming, it is likely that they will shift behavior, and tax revenues will be less than projected.
Several analysts have noted that you could tax 100% of the income of the "wealthy" and still not balance this budget. While the bottom 95% may not see their taxes rise this year, you can bet they will see them rise in the future. While the US can run multi-trillion-dollar deficits for a few years, it cannot run them for long without serious consequences for interest rates and inflation. And when our entitlement program problems hit in the middle of the next decade? You can count on higher taxes."
To become better informed about what "Cap and Trade" is all about, I have identified two sites for your perusal: Cap and Trade 101 and Emissions Trading.
Saturday, February 28, 2009
Thursday, February 26, 2009
Nearly a TRILLION DOLLARS in New Taxes
ABC News reports that President Obama's budget proposes $989 billion in new taxes over the course of the next 10 years, starting in fiscal year 2011, most of which are tax increases on individuals.
1) For individuals making more than $250,000, the allocation is as follows:
$338 billion - Bush tax cuts expire
$179 billlion - eliminate itemized deduction
$118 billion - capital gains tax hike
Total: $636 billion/10 years
2) For business, the allocation is as follows:
$17 billion - Reinstate Superfund taxes
$24 billion - tax carried-interest as income
$5 billion - codify "economic substance doctrine"
$61 billion - repeal LIFO
$210 billion - international enforcement, reform deferral, other tax reform
$4 billion - information reporting for rental payments
$5.3 billion - excise tax on Gulf of Mexico oil and gas
$3.4 billion - repeal expensing of tangible drilling costs
$62 million - repeal deduction for tertiary injectants
$49 million - repeal passive loss exception for working interests in oil and natural gas properties
$13 billion - repeal manufacturing tax deduction for oil and natural gas companies
$1 billion - increase to 7 years geological and geophysical amortization period for independent producers
$882 million - eliminate advanced earned income tax credit
Total: $353 billion/10 years
1) For individuals making more than $250,000, the allocation is as follows:
$338 billion - Bush tax cuts expire
$179 billlion - eliminate itemized deduction
$118 billion - capital gains tax hike
Total: $636 billion/10 years
2) For business, the allocation is as follows:
$17 billion - Reinstate Superfund taxes
$24 billion - tax carried-interest as income
$5 billion - codify "economic substance doctrine"
$61 billion - repeal LIFO
$210 billion - international enforcement, reform deferral, other tax reform
$4 billion - information reporting for rental payments
$5.3 billion - excise tax on Gulf of Mexico oil and gas
$3.4 billion - repeal expensing of tangible drilling costs
$62 million - repeal deduction for tertiary injectants
$49 million - repeal passive loss exception for working interests in oil and natural gas properties
$13 billion - repeal manufacturing tax deduction for oil and natural gas companies
$1 billion - increase to 7 years geological and geophysical amortization period for independent producers
$882 million - eliminate advanced earned income tax credit
Total: $353 billion/10 years
GM Posts $9.6 Billion Loss, Burns Through $6.2 Billion in Cash
For the year, GM lost $30.9 billion, the second biggest loss in the auto maker's 100-year history.
The Wall Street Journal reports that GM is awaiting word from its auditors as to whether the company must be labeled a "going concern" in filings to the U.S. Securities and Exchange Commission, a judgment that casts doubt on the company's ability to survive. The determination is expected in March.
The Wall Street Journal reports that GM is awaiting word from its auditors as to whether the company must be labeled a "going concern" in filings to the U.S. Securities and Exchange Commission, a judgment that casts doubt on the company's ability to survive. The determination is expected in March.
Wednesday, February 25, 2009
The Numbers
What can I say? Absolutely nothing. It is indeed a very sorry state of affairs to what has happen to our country and our economy.
Source: Evil Speculator (To enlarge, double click inside the graph.)
"One would be amazed at how fast financial capital can flee its borders if you try to tax it unfairly. The last thing the U.S. needs is capital flight." Compliments of the "Financial Ninja."
Source: Evil Speculator (To enlarge, double click inside the graph.)
"One would be amazed at how fast financial capital can flee its borders if you try to tax it unfairly. The last thing the U.S. needs is capital flight." Compliments of the "Financial Ninja."
Monday, February 23, 2009
Twelve Years of Market Gains -- GONE!
The S&P 500 could not hold above the 800-825 support levels on a weekly basis. See the following chart. (To enlarge, double-click inside it.) By penetrating the 800 price level definitely has the bears firmly in control of this market. I still expect a bear-market rally, which will give me an opportunity to purchase some double-inverse ETFs, such as SDS, DXD, and QID.
Yes, it is dire, especially for those investors who are still in equities. For us, we have been kept completely out of "harms way" since January 8, 2008.
Yes, it is dire, especially for those investors who are still in equities. For us, we have been kept completely out of "harms way" since January 8, 2008.
Thursday, February 19, 2009
Santelli’s Tea Party
I am not a big fan of CNBC, but I loved this segment! Anyone want to toss a few "derivatives, credit default swaps, and sub-prime mortgages"into Lake Michigan this summer?
Mortgage Bailout
The mortgage bailout has earmarked $75 billion to go to approximately 9 to 10 million households, but the real dollar extent of the bailout is probably going to be in the neighborhood of at least $200 to $300 billion. Like all the other bailouts, no one really knows the true dollar magnitude of what it will cost the American taxpayer. Unfortunately, it has already been proven that more than 60% of mortgages that were modified previously failed within six months. That is the problem, and this bailout will have the same likely consequences. Is Congress really incapable of thinking through all the negative ramifications of this dire bailout? I know, what a stupid question!
Let me get directly to the point why this bailout is bad for potential homeowners and lenders alike. Here it is: "President Obama said he will support revamping U.S. bankruptcy rules to let judges reduce mortgages on primary residences to fair market value as long as borrowers pay their debts under a court-ordered plan." Why is this proposal bad? Let me respond to my rhetorical question with an example. Let's assume as a private lender, I had loaned you $250,000 to purchase a home back in 2006. Today, you file bankruptcy and petition the bankruptcy judge that the home is no longer appraised at $250,000 but $150,000. You tell the judge that you can afford the P&I payments on $150,000 but not $250,000. The bankruptcy judge agrees and reducing the mortgage to $150,000. Who is the loser on this financial arrangement? Of course, I am, as the lender, not you, as the borrower. I have just lost $100,000, but you get to keep the house and have your principal balance outstanding reduce from $250,000 to $150,000. As a lender, do you think that I am going to make any more home loans? Probably not. In other words, availability of credit for mortgage money will be greatly reduced. If I do decide to lend, I will want to be compensated for the increased risk of some bankruptcy judge reducing the principal that is due me. This simply means that mortgage rates will go up dramatically! There you have the consequences of this bailout: reduce mortgage credit from the private sector and higher mortgage rates. Great isn't it? But then again, there is any such thing as a "free lunch."
Let me get directly to the point why this bailout is bad for potential homeowners and lenders alike. Here it is: "President Obama said he will support revamping U.S. bankruptcy rules to let judges reduce mortgages on primary residences to fair market value as long as borrowers pay their debts under a court-ordered plan." Why is this proposal bad? Let me respond to my rhetorical question with an example. Let's assume as a private lender, I had loaned you $250,000 to purchase a home back in 2006. Today, you file bankruptcy and petition the bankruptcy judge that the home is no longer appraised at $250,000 but $150,000. You tell the judge that you can afford the P&I payments on $150,000 but not $250,000. The bankruptcy judge agrees and reducing the mortgage to $150,000. Who is the loser on this financial arrangement? Of course, I am, as the lender, not you, as the borrower. I have just lost $100,000, but you get to keep the house and have your principal balance outstanding reduce from $250,000 to $150,000. As a lender, do you think that I am going to make any more home loans? Probably not. In other words, availability of credit for mortgage money will be greatly reduced. If I do decide to lend, I will want to be compensated for the increased risk of some bankruptcy judge reducing the principal that is due me. This simply means that mortgage rates will go up dramatically! There you have the consequences of this bailout: reduce mortgage credit from the private sector and higher mortgage rates. Great isn't it? But then again, there is any such thing as a "free lunch."
Wednesday, February 18, 2009
Heaven Help Us!
1. What a surprise for GM and Chrysler having to come back for more money. I am shocked. However, I am looking forward to driving that 2012 Aztec, or whatever they going to call it. (LOL)
2. Dream on! The only thing that it will create is MORE debt! Welcome to the permanent world of federal deficits in excess of $1 trillion a year. So much for the American dream.
3. We are bailing out everyone else. Why not homeowners? God helps us.
4. Money isn't worth anything, so what's the big deal?
5. That statement is indeed true.
Source: Tim Knight at Slope of Hope
Tuesday, February 17, 2009
S&P 500 Breaks 800
S&P 500 has decisively penetrated the 800-825 levels. Since I track the S&P 500 on a weekly basis (Friday's close), Friday's closing price becomes a pivotal day. Not that it matters to us, because we have been out of the market for over a year (January 8, 2008).
So far today, SRS is up $8.14(11.84%), QID is up $3.51 (6.70%), TLT is up $2.52 (2.46%), and gold is up $28 (3.12%). I guess I have been way too bearish on the yellow metal. But then again, I know it is extremely overbought at these levels. In other words, I am still looking for a pull back. Maybe I will be singing this same old song all the way to $1,500. I hope not.
So far today, SRS is up $8.14(11.84%), QID is up $3.51 (6.70%), TLT is up $2.52 (2.46%), and gold is up $28 (3.12%). I guess I have been way too bearish on the yellow metal. But then again, I know it is extremely overbought at these levels. In other words, I am still looking for a pull back. Maybe I will be singing this same old song all the way to $1,500. I hope not.
Sunday, February 15, 2009
UAW Objects to GM, Chrysler Plan as Deadline Nears
Bloomberg reports that the United Auto Workers union is objecting to proposals from GM and Chrysler to modify a retiree health-care fund as required by the U.S. so the automakers can keep the $17.4 billion bail-out. The UAW stopped negotiations with GM yesterday. However, Chrysler still is talking to the UAW, though the talks haven’t been substantive.
I don't know what Ron Gettlefinger and the UAW think they're going to accomplish with this tactic. Maybe they believe that President Obama is in their "hip-pocket," and his administration will never allow the auto industry to fail. Time will tell.
Let me point out a few things that the auto employees and union members don't seem to understand (Denninger):
1. If GM and thus its pension fund goes "belly-up," the Pension Benefit Guaranty Corporation (PBGC) will be forced to step in and take it over. PERIOD The PBGC has maximum benefits that it pays out to retirees. (PERIOD) If a retiree is getting more than what the PBGC allows, too bad. (PERIOD) How does a 50% to 75% reduction in one's promised pension benefits sound and complete elimination of all post-retirement or post-layoff private health insurance, leaving one with nothing until you can qualify for Medicare?
2. If the Voluntary Employees Beneficiary Association Plan (VEBA) is unable to be funded, too bad. Pension funding under the PBGC does not include "all expenses paid" health insurance. Once again, welcome to Medicare, when you are old enough to qualify. Until then, you fund it yourself.
3. The PBGC guarantees are much more limited than your GM/UAW pension, especially if you're not already retired. The cap is based on the law, not your contributions to date, and is invoked at the time the plan goes "belly-up". If you're under 55, you will get exactly nothing, with the maximum amount set by law, disregarding (for the most part) your contributions to the system.
I am not sure that the rank-and-file members fully comprehend or understand the above three points. And if you think that the government won't force Chapter 11 with the government providing Debtor-In-Possession Financing (DIP), you better think again.
I am aware that President Obama is a strong friend of organized labor, and so are some Americans. But very few are friends of the UAW outside of its membership, and that is a serious problem for the UAW.
Resources: Bloomberg News and Karl Denninger at the Market Ticker
I don't know what Ron Gettlefinger and the UAW think they're going to accomplish with this tactic. Maybe they believe that President Obama is in their "hip-pocket," and his administration will never allow the auto industry to fail. Time will tell.
Let me point out a few things that the auto employees and union members don't seem to understand (Denninger):
1. If GM and thus its pension fund goes "belly-up," the Pension Benefit Guaranty Corporation (PBGC) will be forced to step in and take it over. PERIOD The PBGC has maximum benefits that it pays out to retirees. (PERIOD) If a retiree is getting more than what the PBGC allows, too bad. (PERIOD) How does a 50% to 75% reduction in one's promised pension benefits sound and complete elimination of all post-retirement or post-layoff private health insurance, leaving one with nothing until you can qualify for Medicare?
2. If the Voluntary Employees Beneficiary Association Plan (VEBA) is unable to be funded, too bad. Pension funding under the PBGC does not include "all expenses paid" health insurance. Once again, welcome to Medicare, when you are old enough to qualify. Until then, you fund it yourself.
3. The PBGC guarantees are much more limited than your GM/UAW pension, especially if you're not already retired. The cap is based on the law, not your contributions to date, and is invoked at the time the plan goes "belly-up". If you're under 55, you will get exactly nothing, with the maximum amount set by law, disregarding (for the most part) your contributions to the system.
I am not sure that the rank-and-file members fully comprehend or understand the above three points. And if you think that the government won't force Chapter 11 with the government providing Debtor-In-Possession Financing (DIP), you better think again.
I am aware that President Obama is a strong friend of organized labor, and so are some Americans. But very few are friends of the UAW outside of its membership, and that is a serious problem for the UAW.
Resources: Bloomberg News and Karl Denninger at the Market Ticker
Saturday, February 14, 2009
ETFs in Review
On Wednesday (February 11), I discussed the Commercial Mortgage Backed Securities (CMBS) and isolated on SRS (ProShares Ultra-Short Real Estate ETF). So far, the market agrees in that the price on the open on February 11 was $60.35. SRS closed Friday at $68.76. So far, so good.
On Thursday (February 12), I noted that GLD (gold) was near-term overbought at $93.17. GLD closed Friday at $92.55. [Note: Long-term, I am very bullish on gold.] In regard to the other metal, silver (SLV), I noted (February 13) it was also near-term overbought at $13.16. On Friday, it closed at $13.54. For both GLD and SLV, I anticipate a short-term price correction.
In the bond area, I stated on Thursday (February 12) that TLT (ETF on 20+ TSY Bonds) is getting close to a near-term buy. On Friday, it closed at $102.41. I would like to the price to test its 200-Day EMA at $100. We may see it this coming week.
For the coming week, I am looking very closing at QID (ProShares UltraShort on QQQ) for a possible buy signal this week. The chart on QID is as follows:
Note: To enlarge, double-click inside the chart.
On Thursday (February 12), I noted that GLD (gold) was near-term overbought at $93.17. GLD closed Friday at $92.55. [Note: Long-term, I am very bullish on gold.] In regard to the other metal, silver (SLV), I noted (February 13) it was also near-term overbought at $13.16. On Friday, it closed at $13.54. For both GLD and SLV, I anticipate a short-term price correction.
In the bond area, I stated on Thursday (February 12) that TLT (ETF on 20+ TSY Bonds) is getting close to a near-term buy. On Friday, it closed at $102.41. I would like to the price to test its 200-Day EMA at $100. We may see it this coming week.
For the coming week, I am looking very closing at QID (ProShares UltraShort on QQQ) for a possible buy signal this week. The chart on QID is as follows:
Note: To enlarge, double-click inside the chart.
S&P 500: Weekly Update
The 800-825 support continues to be the "line-in-the-sand." Stimulus bill has been approved by Congress and President Obama will sign it into law on Tuesday. According to conventional wisdom, we buy the rumor and sell the news. Therefore, I guess Tuesday, (markets are closed on Monday) will be a very interesting day. Also, the Federal Open Market Committee (FOMC) meets this coming week.
GM is reporting in Saturday's WSJ that it will offer Congress two choices: Bankruptcy or More Billions. Is anyone really surprised by GM asking for more BILLIONS? According to the WSJ, the Treasury reports that GM probably needs an additional $5 billion to continue its operations beyond the first quarter. Of course, the thorn in this entire process is the "legacy cost."
Note: To enlarge, double-click inside the chart. Note: To enlarge, double-click inside the chart.
GM is reporting in Saturday's WSJ that it will offer Congress two choices: Bankruptcy or More Billions. Is anyone really surprised by GM asking for more BILLIONS? According to the WSJ, the Treasury reports that GM probably needs an additional $5 billion to continue its operations beyond the first quarter. Of course, the thorn in this entire process is the "legacy cost."
Note: To enlarge, double-click inside the chart. Note: To enlarge, double-click inside the chart.
Friday, February 13, 2009
Silver (SLV)
Silver, like gold, has reached short-term overbought conditions. Expect price weakness near term. Long-term, I am very positive on silver and gold.
Note: To enlarge chart, double-click inside.
Note: To enlarge chart, double-click inside.
Thursday, February 12, 2009
Gold: Near Term Price Action
Note: To enlarge, double click inside chart.
Even though I am long-term bullish on this metal, I do expect near term weakness to the $850-$880. $850 is major support.
Commercial Mortgage Backed Securities (CMBS)
Commercial Mortgage Backed Securites (CMBS) have not yet received enough attention amidst the bailout mania of the moment that is focused entirely on the financial institutions and residential real estate. However, that will change in 2009 as the macro-deleveraging process continues. The time has come for the commercial real estate market to be exposed for the excesses over the past five years. CMBS will be the CDS (Credit Default Swaps) and Sub-prime Mortgages of 2008.
Approximately $380 billion in commercial real estate are up for renewal/refinance/payoff during 2009. Financial institutions are holding over $1.2 trillion in commercial real estate. And unfortunately, we are just now hitting our stride in terms of the inevitable down cycle of commercial real estate. The "Contrary Investor" states that the commercial real estate cycle has followed the residential real estate cycle with an approximate 18-24 month time-lag period.
Many of the commercial real estate loans up for renewal were financed at incredibly high valuations (wasn't everything over the past five years) relative to now deteriorating per square footage rental rate prospects. The reason for the drop in the per square footage rental rates is the commercial real estate property vacancy rates are rising dramatically.
How does one take advantage of the potential CMBS debacle? My vehicle (stock) of choice is SRS, which is ProShares Ultra-Short Real Estate ETF. This vehicle rises as the value of real estate declines and, of course, vice-a-versa. It closed yesterday at $60.35. A chart of SRS is as follows:
Approximately $380 billion in commercial real estate are up for renewal/refinance/payoff during 2009. Financial institutions are holding over $1.2 trillion in commercial real estate. And unfortunately, we are just now hitting our stride in terms of the inevitable down cycle of commercial real estate. The "Contrary Investor" states that the commercial real estate cycle has followed the residential real estate cycle with an approximate 18-24 month time-lag period.
Many of the commercial real estate loans up for renewal were financed at incredibly high valuations (wasn't everything over the past five years) relative to now deteriorating per square footage rental rate prospects. The reason for the drop in the per square footage rental rates is the commercial real estate property vacancy rates are rising dramatically.
How does one take advantage of the potential CMBS debacle? My vehicle (stock) of choice is SRS, which is ProShares Ultra-Short Real Estate ETF. This vehicle rises as the value of real estate declines and, of course, vice-a-versa. It closed yesterday at $60.35. A chart of SRS is as follows:
Wednesday, February 11, 2009
The Massive Tax Break for American Workers: $13 More Per Week
This mega-dollar amount of $13 should begin showing up in most workers' paychecks in June 2009; however, it will fall to about $8 a week next January 2010. Please don't spend it all in one place. Spread it around!!!!
Tuesday, February 10, 2009
Funds for Bank Programs May Reach an Addition $2 Trillion Bailout
Treasury Secretary Geithner unveiled a stepped-up program today to stabilize (LOL) the financial system including an initial fund of $500 billion to absorb toxic assets.
The plan includes a public-private partnership aimed at soaking up toxic assets that are in the financial system. It also includes new efforts to boost consumer lending, limit home foreclosures and provide new capital for banks.
Now, let's look at this public-private partnership whereby the government will start with an initial $500 billion to get rid of all that toxic waste that lies within the balance sheets of our financial institutions. This is the good part, especially if you are a hedge fund. As the hedge fund, the government provides you with 95% non-recourse financing (presumably very cheaply), whereby you only have to put up 5% of the face value. In return, you get a 7% coupon, which means that in one year you have recouped your investment, and in two you are making money like a madman, up 200% or more on their original risk capital. Example: You purchase $100 million of the stuff with only a 5% investment, or $5 million. If the coupon is 6%, you receive $6 million ($100 million x 6%) at the end of the year; and, if the cash flow continues in the second year, you have some great profits. But what happens when these instruments default? (I am sure they will default.) The Treasury winds up eating the entire face value, while the hedge fund is completely off the hook and has made off with all of the coupon money in the meantime. Boy, is this a sweet deal. Wish I had a spare billion or two!
The plan includes a public-private partnership aimed at soaking up toxic assets that are in the financial system. It also includes new efforts to boost consumer lending, limit home foreclosures and provide new capital for banks.
Now, let's look at this public-private partnership whereby the government will start with an initial $500 billion to get rid of all that toxic waste that lies within the balance sheets of our financial institutions. This is the good part, especially if you are a hedge fund. As the hedge fund, the government provides you with 95% non-recourse financing (presumably very cheaply), whereby you only have to put up 5% of the face value. In return, you get a 7% coupon, which means that in one year you have recouped your investment, and in two you are making money like a madman, up 200% or more on their original risk capital. Example: You purchase $100 million of the stuff with only a 5% investment, or $5 million. If the coupon is 6%, you receive $6 million ($100 million x 6%) at the end of the year; and, if the cash flow continues in the second year, you have some great profits. But what happens when these instruments default? (I am sure they will default.) The Treasury winds up eating the entire face value, while the hedge fund is completely off the hook and has made off with all of the coupon money in the meantime. Boy, is this a sweet deal. Wish I had a spare billion or two!
Monday, February 09, 2009
General Motors to Invest $1 Billion in Brazil Operations -- Money to Come from U.S. Rescue Program
According to to to the Latin American Herald Tribune, "General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.
According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."
So much for using U.S. taxpayer dollars to generate jobs here in America. Thank you Congress and General Motors.
According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."
So much for using U.S. taxpayer dollars to generate jobs here in America. Thank you Congress and General Motors.
Sunday, February 08, 2009
S&P 500: Weekly Update
Note: To enlarge, double click inside the chart.
Game plan for this week is the same as last week. That is continue to watch the 800-825 levels on the S&P 500.
National Debt: Argentina Here We Come!!!!
Tim Knight over at the "Slope of Hope" blog states that the "U.S. National Debt was $930 billion in 1980, or 33 percent of GDP. Today, it is $10.7 trillion, or 76 percent of GDP. The National Debt has grown by 1,150 percent in 28 years. With the planned fiscal stimulus (taxing future generations), the National Debt will reach 100 percent of GDP during the Obama administration. When Argentina's economy collapsed in 1998, their National Debt as a percentage of GDP was 65 percent. The Great Deniers say we are not Argentina. They say we are safe because the U.S. dollar is the reserve currency of the world. This is like jumping off a 20 story building and as you pass the 10th floor someone yells out the window asking how you are doing. You answer, "Good, so far"."
Thursday, February 05, 2009
President Obama: The Paper Tiger
President Obama has set executive pay limits for bailout companies. Sounds good, doesn't it taxpayers? That is what the perception one would have had by listening and reading the news yesterday. However, perception is not always reality. Bloomberg reports, "Executives at Goldman Sachs Group Inc., JPMorgan Chase & Co. and hundreds of financial institutions receiving federal aid aren’t likely to be affected by pay restrictions announced yesterday by President Obama.
The rules will apply only to top executives at companies that need “exceptional” assistance in the future. The limits aren’t retroactive, meaning firms that have already taken government money won’t be subject to the restrictions unless they have to come back for more."
In other words, these new compensation rules will not have much effect at all!!!
The rules will apply only to top executives at companies that need “exceptional” assistance in the future. The limits aren’t retroactive, meaning firms that have already taken government money won’t be subject to the restrictions unless they have to come back for more."
In other words, these new compensation rules will not have much effect at all!!!
Wednesday, February 04, 2009
Five Myths About the Great Depression
The current financial crisis has many in Congress petitioning and requesting another "New Deal." Those individuals should remember that America's biggest industrial collapse occurred in 1937, eight years after the 1929 stock market crash and almost five years into Roosevelt's New Deal.
Andrew Wilson's five myths are as follows:
1. Herbert Hoover, elected President in 1928, was a laissez-faire Republican who clung to the idea that markets were basically self-correcting.
2. The stock market crash in October 1929 precipitated the Great Depression.
3. Where the market had failed, the government stepped in to protect ordinary people.
4. Greed caused the stock market to be overvalued and then crash.
5. Enlightened government pulled the nation out of the worst downturn in its history and came to the rescue of capitalism through rigorous regulation and government oversight.
Now, read Andrew Wilson's Five Myths About the Great Depression and explain the five myths. Also, who was Henry Morganthau and what was the significance of his comments to Congressional Democrats in May 1939?
Andrew Wilson's five myths are as follows:
1. Herbert Hoover, elected President in 1928, was a laissez-faire Republican who clung to the idea that markets were basically self-correcting.
2. The stock market crash in October 1929 precipitated the Great Depression.
3. Where the market had failed, the government stepped in to protect ordinary people.
4. Greed caused the stock market to be overvalued and then crash.
5. Enlightened government pulled the nation out of the worst downturn in its history and came to the rescue of capitalism through rigorous regulation and government oversight.
Now, read Andrew Wilson's Five Myths About the Great Depression and explain the five myths. Also, who was Henry Morganthau and what was the significance of his comments to Congressional Democrats in May 1939?
Make or Break Time
These are the current "support" numbers for the following indexes:
1. S&P - 800
2. Dow - 8,000
3. Transports - 3,000
4. NASDAQ Composition - 1,500
5. NASDAQ 100 - 1,200
6. OEX - 400
7. Gold (spot price) - 900 (Resistance)
These levels must hold for the "Bulls." If not, the "Bears" will take firm control, and prices will be significantly lower. Once again, our long-term investors remain in cash per our original sell signal in "January 8, 2008." No, that is not 2009. January 8, 2008 is the correct date that my readers moved from equities to money market instruments per my Exponential Moving Average strategy.
1. S&P - 800
2. Dow - 8,000
3. Transports - 3,000
4. NASDAQ Composition - 1,500
5. NASDAQ 100 - 1,200
6. OEX - 400
7. Gold (spot price) - 900 (Resistance)
These levels must hold for the "Bulls." If not, the "Bears" will take firm control, and prices will be significantly lower. Once again, our long-term investors remain in cash per our original sell signal in "January 8, 2008." No, that is not 2009. January 8, 2008 is the correct date that my readers moved from equities to money market instruments per my Exponential Moving Average strategy.
Sunday, February 01, 2009
Bear Continues: 15-Week EMA Still Below the 40-Week EMA
An update of the 15- and 40-Week EMAs is illustrated in the following chart. Keep-in-mind that as long as the 15-Week EMA is below the 40-Week EMA, a bear market remains in tact. However, I want to draw you attention to the two boxes in blue. The first box depicts the 2002-03 price activity prior to the start of the bull market that culminated in late 2007, and the second depicts the recent price activity. The recent price activity is similar in many aspects to the 2002-03 period. Am I saying that we are on the brink of the start of a new bull market? No, I will let the EMAs tell me when that will occur. However, the 800 level on the S&P 500 must hold. If not, we could see a major sell off that would probability take it to 600.
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