Is This the "Mega Millions" Market?

DJIA and the S&P 500 recorded their biggest first-quarter point gains ever.  The DJIA rose 994 points, or 8.1%, and the S&P 500 rose 150.87 points, or 12%, during the first three months of 2012.  And, the NASDAQ rose 486.42, or 19%, in the first quarter, just narrowly missing its biggest point gain since 2000.  At this point in 2012, investors are thoroughly convinced that the bull market is back to stay. 

However, if you believe this rally is more like 1937 (See following chart.), you already know what followed.  So, as an investor, you can go along with the current market psychology that this is a once in a lifetime investment (Mega Millions) opportunity, or this is the worst time in generations to be exposed to equities.  In other words, the choice is yours!

Student Loans on Rise for Kindergarten

Unable to afford private school, more and more parents are turning to loans years before their children start college.  And, I thought the trillion dollars for college loans outstanding were bad enough, but these pre-college loans are insane.  Have we as a society completely lost our minds? 

According to "Smart Money," approximately 20% of families that applied for aid to pay for their children's kindergarten through 12th grade private school education had incomes of $150,000 or more.  Further, according to "Smart Money, these loans can be very expensive.  The interest rates, which can be fixed or variable, range from around 4% to roughly 20%.  (Lower rates are given to parents with higher FICA scores.)  And, the loan sizes can be large.  The average loan size given by Your Tuition Solution is $14,000.  First Marblehead (love that name, which is very appropriate for those insane parents) loans are up to $30,000 a year.  At the Lake Trust Credit Union that's headquartered in Lansing, Mich., borrowers can have up to $40,000 outstanding in so-called K-12 education loans. 

$270 Billion in Student Loans are at Least 30 Days Delinquent

This is not good, folks!  Fitch Rating Service believes several macroeconomic factors are putting pressure on student loan borrowers. The main ones are unemployment and underemployment. However, no need to worry about these student loans if they should default, because the American taxpayers have it all covered, as usual.  Aren't those taxpayers great to have?

Current Business Model of Success

 Sturm, Ruger & Company, Inc. (NYSE-RGR), announced today that for the first quarter 2012, the Company has received orders for more than one million units. Therefore, the Company has temporarily suspended the acceptance of new orders.

The Oil Conundrum Explained

 Alt-Market does a great job in explaining the current run-up in oil prices.  No, it is not lack of supply!  Of course, the proverbial bottom-line in which no one is focusing on for the root cause of the problem is the continued fiat, monetary expansion by the Federal Reserve System that depreciates the dollar.  And, why is this debasement of the dollar significant?  Answer: The world's oil market is denominated in dollars.  Therefore, it takes more dollars to purchase the crude!

Student-Loan Debt Tops $1 Trillion

Total student debt outstanding appears to have surpassed $1 trillion late last year, said officials at the Consumer Financial Protection Bureau, a federal agency created in the wake of the financial crisis. That would be roughly 16% higher than an estimate earlier this year by the Federal Reserve Bank of New York.

Yesterday, Bloomberg reported that almost two-thirds of U.S. student-loan borrowers misunderstood or were surprised by aspects of their loans or the student-loan process.  About 20 percent of the respondents in an online survey said the amount of their monthly payments was unexpected.  These respondents had an average of $76,000 in student debt.

Folks, this is not going to end very good.  I know the pundits say that a "college degree is an increasingly good investment because of the widening pay gap between jobs that require a degree and those that don't. Ultimately, the educational degrees and added skills are meant to help workers earn higher incomes that, in time, will more than offset the student debt."  I don't buy that argument it at all.  Sure, certain degrees will more than offset all that student debt; however, for the majority of students will be in servitude for the rest of their lives.  

Oh, that average of $76,000 in student debt, the monthly payment works out to $693.67 at 5% for 12 years.  In other words, don't go into debt to go to school.  Go to a community college where the tuition is affordable, work and go to school part-time, enter the military and let them pay for your college education, or you may want to really think outside the box and attend a college overseas where the tuition is 1/3 of what it is in the United States, and the curriculum is delivered in English.

Everything is OK! (We Just Have to Keep Telling Ourselves That.)

End of the Road Documentary Trailer from Tim Delmastro on Vimeo.

Energy Production on Federal Land Drops Under the Obama Administration

I love the way that this Administration touts that fossil fuel production is way up under the Obama Presidency.  It really is; however, not on federal land, just private land.  What really irks me is this Administration through its half-truths takes total credit for this increase in production.  Once again, the main-stream media does not call into question the President's Press Secretary or anyone else in Obama's Administration who make such a claim.   Since 2008, according to the U.S. Energy Information Administration, fossil fuel production on federal land has declined by 7%.

Gas Prices Around the World

Gasoline prices in the United States, which have recently hit record highs, are actually much lower than in many countries.  The main factor in price disparities between countries is government policy.  For example, many European nations tax gasoline heavily, with taxes making up as much as 75% of the cost of a gallon of gasoline.  In the United States, taxes are currently 20%.  The following gas prices are taken from "Fuel Prices Europe"  for March 12, 2012.  In converting the prices to gallons and U.S. dollars, I used the current rate of exchange of $1.31 to a Euro along with 3.785 liters to the gallon.

1. France $8.58/gallon
2. Germany $8.22/gallon
3. Switzerland $7.34/gallon
4. United Kingdom $8.61/gallon.

I guess through the eyes of the Obama Administration gas prices here in America are really dirt cheap!  Just last week, Secretary of Energy, Steven Chu, said that the DOE is on track to lower gasoline prices through some indirect methods, including promotion of alternatives such as biofuels and electric vehicles.  (Those indirect methods have worked really well, especially those electric cars!)  In other words, this Administration is not trying to reduce "current" gasoline prices.  If anything, it appears that this Administration wants much higher gasoline prices to not only align this country with European gasoline prices but support its agenda for developing alternative sources of energy.

Green Cars Just Can Not Catch a Break!

Soon after Consumer Reports bought the Fisker Karma to test, which had a price tag of $107,850, it stopped working. The luxury plug-in hybrid had to be towed off the track.

The "Green Light Bulb:" Government Subsidized, Of Course

The U.S. government last year announced a $10 million award, known as the L Prize, for any manufacturer that could create a “green” but affordable light bulb.  Well, the verdict is in and Phillips has won.  (Oh, as a side-bar point, that corporations is a Dutch company.  So much for keeping those so-called green manufacturing jobs totally here in the US.  But, then again, I guess that is asking too much from our government.)  Now, I do know the definition of "affordability;" however, I don't believe those in Washington do!  But, then again, those are the same folks who brought to the American taxpayer Solyndra and the Chevy Volt.  Ok, what is affordability to our government?  That light bulb can be yours for the affordable price of $50.  Yes, that is correct, and that is for "one" bulb, not a gross.

Nonfarm Payrolls (NFP) for February 2012

I will not bore you with the "spin" that is coming forth from today's "Non-Farm Payroll" numbers by BLS. I will leave that up to the government, Fed, and main stream media, such as CNBC.  However, I will give you the facts and nothing but the facts; because they don't lie.  The Bureau of Labor Statistics (BLS), or more commonly referred to as the Bureau of Lies and Scams, reported that employment rose by 227,000 on expectations of 210,000 by the so-called economic pundits.  The unemployment rate stayed the same at 8.3%.  On the surface, everything seems positive.  That is the problem, on the surface.  But what happens when one goes beneath the surface?  First, 60% of the 227,000 newly created jobs were due to an increase in part-time jobs, which are minimum wage positions, and the infamous "Birth/Death Model of the BLS."  Second, in regard to the "Birth/Death Model," it added 91,000 jobs, or those so-called statistical jobs that are really not real ones.  I like to think of those jobs in this model as being created out of thin air by the BLS.  (Something like the Fed does when it creates money in our economy.)  Therefore, when we subtract off those part-time jobs and statistical, unreal jobs, NFP only increased by 91,000, not 227,000.

Fed Chairman Ben Bernanke Has Confidence in U.S. Economy

I am going to be very direct with what I am going to say.  Some of you may consider that I have gone too far in expressing my opinion.  Then again, it is my blog, isn't it?  This man, Bernanke, must be relieved of his Chairmanship now, not later.  We can not afford his monetary policies going forward.  Period!  I thought the next President of the United States will be the most hated individual in this land; however, I now believe it will be Ben Bernanke.   Just listen to his statement before Congress.  He is encouraging retirees into extremely risky investments, which will not play out very well in a financial sense.  As a matter of fact, these retirees will probably lose everything they have invested in these risky securities!  That includes municipal bonds (Alabama, anyone?) and stocks.  In addition, he admits that his own son is on his way to racking up $400,000 in debt as he makes his way through medical school.  This whole educational thing is a bubble in itself that will burst very shortly.  I don't care if you are in medical school or getting that degree in business, education or what.  You will not be able to pay off those kinds of student loan debts.  Why? Because you will not have the financial wherewithal to make those monthly payments.  But you say, I will file bankruptcy.  Ok, go ahead.  However, those student loans will not be forgiven like all that credit card debt that you have run up.  How do you thing you received those student loans in the first place, on your good looks?  Those financial institutions knew exactly what they were doing.  The trouble is, you did not.  In other word, you will be a slave to that lender of your student loans until you die.  Bottom line, simply enjoy it while you can; because the party is ending very soon.  As a matter of fact, sooner than you think.

Chevy Volt: The Car That Keeps on Giving

I just can not get enough of this Chevy Volt thing!  It is becoming an obsession with me.  Thank you, Government Motors (GM).

Chevy Volt - Building a Better Tomorrow from Ben Howe on Vimeo.

Are Gasoline Prices Really All That High?

Basic economics teach us that a change in price of any good, service, or commodity can be the result of changes in supply and demand factors, taxes, inflation, or any possible combination of the three determinants. 

Our media outlets and government want us to believe that the greedy oil companies are responsible for the rise in gasoline prices.  Ok, let’s see how greedy these major, integrated oil and gas companies really are.  According to Yahoo Finance, the net profit margin of these greedy oil and gas companies is 7.9%.  What does that percentage mean?  Well, for each dollar of sales generated by these companies, only 7.9 cents goes to the company.  Wow!  You mean with all the risk that these companies take, they get to only keep something like eight cents on the dollar.  Yes, that is exactly what is occurring.  Let’s put this into perspective.  Federal, state, and local taxes account for approximately 20% of gasoline’s price.  Now, with this fact in mind, for every $1 of gasoline sold at the pump, governments take 20 cents.  But wait, oil companies take all the risk and get to keep only 7.9 cents but governments get 20 cents.  That is exactly correct, which is why the government does not want you to know this fact.  By the way, back in 1950, governments took only 1.5 cents on every dollar sold at the pump.

Ok, what about the inflationary impact on gasoline prices?  In 1950, a gallon of gasoline went for $.30.  Today, adjusted for inflation and government taxes, a gallon of gasoline should be $3.48, which is what I can purchase it in my area of the country.  So, when one adjusts for inflation (thank you Fed) and taxes (thank you government) but excluding supply and demand influences from China and India, the price of gasoline at the pump is definitely not out of line.  I guess the questions should be, why are gasoline prices not higher, due to demand pressures for oil coming from China and India?

So, the next time, when the media and government sources take political aim at the oil companies, remember the above exercise; and, of course, remember that the root cause of higher oil prices are indeed caused by our government increasing its take from 1.5% to 20%, monetary inflationary policies of the Federal Reserve System, and demand pressures from China and India.

The Primary Reason to Abolish the Federal Reserve System

The Federal Reserve System’s mandate is as follows: “The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”  Now, according to my Webster’s New World College Dictionary, 4^th Edition, stable is defined as “not likely to change or be affected adversely.”  Now, the Federal Reserve System was founded in 1913.  Since that time the value of a dollar has declined 95.75%.  Or, put another way, that dollar in 1913 is worth approximately four cents today!  (So much for price stability.)  In my opinion, this price stability failure alone is sufficient evidence to abolish the Fed.  Then again, let’s us not forget the Coinage Act of 1792, which called for the death penalty for anyone who debases the value of the currency.  Are you listening Mr. Bernanke and the other six Board of Governors of the Federal Reserve System? 

Manipulation of Equity Markets By Central Bankers

Well, you want to know what has been driving our equity markets higher in the face of individual investors leaving it in droves?  The answer, of course, lies with all those "Central Bankers."  Bloomberg reports that he Bank of Israel will begin a pilot program to invest a portion of its foreign currency reserves in U.S. equities.  The investment will amount to 2 percent of the $77 billion reserves, or about $1.5 billion.  At a later stage, the investment is expected to increase to 10 percent of the reserves.  In addition to the Bank of Israel, a small number of central banks have started investing part of their reserves in equities.  About 9% of the foreign exchange reserves of Switzerland’s Central Bank were invested in equity shares at the end of the third quarter.

Incidentally, it is illegal for our Federal Reserve to invest in equity markets.  Now, I see exactly what has been happening.  Our Fed, which can not directly purchase equity shares, has created billions of dollar swap lines with foreign central banks.  Then, these central banks take the dollar swap lines and purchase equity shares on the New York Stock Exchange.  Therefore, our Fed has indirectly been manipulating the stock market through equity purchases of these foreign central banks.  Subterfuge, anyone?  So much for financial integrity.

GM Halts Production of Volt

Well, what do we have here?  I thought everything was going so well for the Chevy Volt.  At least, that message was conveyed in its most recent television advertisement.  In that commercial, the narrator says, "This isn’t just the car we wanted to build.  This is the car America had to build.”  The only problem is that the demand was so weak, in spite of GE buying 12,000 of them in January, that GM has decided to cease production for five weeks and 1,300 employees were given the "pink slips."  We may have seen the end of this so-called infamous green car.  This is the car that GM's CEO Daniel Akerson testified before Congress in January in which he said, "We engineered the Volt to be a technological wonder."

Impact on GDP for Every $10 Price Hike in Oil

Folks, the following graph illustrates that for every $10 increase in crude prices, cuts U.S. GDP by approximately 1%, which is worst than anyone else.  Since October of 2011, crude oil as increased by $32/barrel, or 42%.  On an annualized basis, that equates out to 100%.  To say the least, this is not good for the economy going forward into 2012, which correspondence to my bearish forecast for this year.

How Does GM Create Sales?

The following chart shows how a government led recovery looks like though its subsidiary Government Motors, which is better known as GM.  A complete and utter failure.  Why a failure?  As soon as those wonder cars are shipped to the dealers, they are recorded as "SALES" to Government Motors.  Who cares about the dealers if they can not sell them.  That is their problem, but GM has recorded sales and profits.

Note: To enlarge the graph, click anywhere within the graph.