What do Farmland Real Estate and Student Loans Have in Common?

Both "farmers and students" are taking on mounting debt that is totally unsustainable going forward, which has "bubble" written all over both of them.  Student loan debt today exceeds $1 trillion. Yes, that is trillion.  As of December 31, 2012, the delinquency rate on student loans has surpassed that of credit card debt.  Why?  According to a TransUnion study’s analysis of government data, more than half of the college graduates under the age of 25 are unemployed or underemployed.  

Now, in regard to farm real estate, farmland prices in the heart of the "Corn Belt" have increased at a double-digit rate in six of the last seven years, according to a study by the Federal Reserve.  "The study states that farmland prices were up 15% last year in the most productive part of the corn belt, and 26% percent in the western corn belt and high plains."  (In other words, the Fed's QEs have not only manipulated equity prices but farmland prices.)  With the rise in farmland prices has come a disturbing trend in the balance sheets of farmers.  According to the Kansas Farm Management Association (see the above link), the number of farmers with debt to equity ratios (financial leverage or risk factor) today of at least 40% is higher than it was in 1979, shortly before the farmland crash of the 1980s.  Further, those farms with a debt to asset ratio of over 70% are "three times as numerous today.

Therefore, we have the real potential of "TWO BUBBLES for the PRICE of ONE."  And, we thought the sub-prime mortgage bubble was bad.  However, we haven't seen anything yet with these two bubbles getting ready to burst!

Lies, Lies, and More Lies

The following memo from the Central Bank of Cyprus sent on February 11, 2013 to ensure everyone that "restricting the property rights of depositors" is unconstitutional."  In other words, the entire memo was one "big lie."  Worse yet, according to a "confidential memo," a “haircut” of 50% on its sovereign bonds is the next step, which will destroy the financial sector of Cyprus.

 

Deja Vu Again?

I know those infamous words on everyone's tongue, which are, "But, it is different this time." Maybe, but I doubt it!  Just take a look at the following chart, and you may just agree that it may not be so different this time.

$SLV Update

The critical price support for $SLV remains at $26. As indicated in the following chart, the odds do favor an eventual break of that price support.  The main factor for a break of $26 is due to its current Stage 4, Selling Phase.

Savers Beware!

The Cyprus Banking Woes Should Not Have Been a Surprise to Anyone!

Three weeks ago the Cyrus banking system passed the so-called European stress test for financial institutions.  That means that the ECB and IMF did not have Cyprus or its banks on any watch list.  Therefore, one would conclude that what has happened in Cyprus is not a "one off" situation but systemic throughout the entire European banking community.  Just as the following chart implies, the Cyprus banking implosion should not have come as a surprise to anyone!  Who is next in European?

Obama’s Limo Breaks Down

 

Israeli workers had to scramble Wednesday, March 20, to find transportation for President Obama after his limousine that was to have taken him around the country broke down.  I know it is the fault of "sequestration."  The Administration just could not afford the cost of changing the oil.  By the way, is that limo in the picture a GM vehicle.  Yes, indeed!  Well, I guess it is just poetic justice for all those GM bondholders who lost everything so that the UAW could remain whole. 

Obamacare: Projected Premium Increases by State

"I (President Obama) will sign a universal health care bill into law by the end of my first term as president that will cover every American and cut the cost of a typical family's premium by up to $2,500 a year."  So much for that political promise.

The House Energy and Commerce Committee has put together the following table that projects premium increases by state:

Yes, I know ObamaCare advocates are saying that generous subsidies will be forthcoming to offset those ominous premium increases.  But wait!  Someone has to pay for those increase premium costs.  Right?  To that end, Obamacare’s exchange subsidies are estimated by the Congressional Budget Office to cost over $1.2 trillion over 10 years.  Pray tell, how are we, as a Nation, going to pay for this trillion dollar plus subsidy?  Oh, I know!  It will be accomplished through deficit spending that will be monetized by the Federal Reserve System, which will further debase your purchasing power of your dollar.  So, your health insurance premiums will definitely go up along with the debasement of your dollars.  My advise.  Get a large jar of K-Y Jelly, or better yet, buy two; because the reamer is within sight.

Do You Really Know the Legal Ramifications of Your Bank Deposits?

Between 1929 and 1933, 9,000 banks in the United States closed their doors.  President Roosevelt shut down all banks for a short time after his inauguration.  In December 2001, the government of Argentina froze virtually all bank deposits, barring customers from withdrawing the money they thought they had.  Over the weekend, Cyprus decided to confiscate up to 10% of bank depositors' funds on orders from the ECB and IMF.  As of today, Tuesday, March 19, Cyprus banks and stock exchanges are still closed while waiting on a vote by its Parliament.  Sometimes such restrictions happen naturally, when banks fail; sometimes they are imposed as Cyprus found out over the weekend.  Sometimes the restrictions are temporary; sometimes they remain for a long time.

Why do banks fail?  For nearly 200 years, the courts have sanctioned an interpretation of the term “deposits” to mean not funds that you deliver for safekeeping but a loan to your bank.  Let’s repeat that in another way.  Your bank balance, then, is an IOU from the bank to you, even though there is no loan contract and no required interest payment. Thus, legally speaking, you have a claim on your money deposited in a bank, but practically speaking, you have a claim only on the loans that the bank makes with your money.  If a large portion of those loans is tied up or becomes worthless, your money claim is compromised.  A bank failure simply means that the bank has reneged on its promise to pay you back.  The bottom line is that your money is only as safe as the bank’s loans.  In boom times, banks become imprudent and lend to almost anyone.  In busts, they can’t get much of that money back due to widespread defaults.  If the bank’s portfolio collapses in value, say, like those of the Savings & Loan institutions in the U.S. in the late 1980s and early 1990s, the bank is broke, and its depositors’ savings are gone, or as Cypriots are finding out those savings can be simply confiscated by the government. 

Why Wealth Confiscation Will Occur in the United States

Well, it seems that Cyprus has decided to extend its so-called bank holiday until Thursday of this week.  (Banks in Cyprus were suppose to open on Tuesday.)  Who is next in line to confiscate wealth of its citizens? Italy? Spain? United States?

Ok, why will the United States have to confiscate a portion of your wealth?  The answer lies in the simple fact that within two years the government of the United States will only have sufficient tax revenues to fund "Medicare, Medicaid, Social Security, and Interest on its National Debt," which by the way corresponds to the end of the Shemitah on September 13, 2015.  For example, last year Medicare took in slightly more than $200 billion; however, between Medicare and Medicaid, our government spent slightly more than $1 trillion.  Now, keep-in-mind, our government only took in approximately $2.3 trillion.  That leaves $1.3 trillion for everything else, which, of course, was not enough because our deficit was over $1 trillion.  That deficit of $1 trillion was for all practical purposes monetized (Created money out of thin air to buy the debt, which in itself is illegal. But then again, our government doesn't seem to be too concerned about the rule of law.  Remember GM bondholders.) by the Federal Reserve System.  If the Federal Reserve System stops its policy of monetizing the debt, or is forced to by the market, the only option for the government will be a Cyprian type measure of wealth confiscation.  If the Fed continues to monetized the debt, your wealth (currency) will be completely debased (destroyed) through hyper-inflation, which will be the same as a direct confiscation of your bank and retirement accounts.  Therefore, you just might want to consider a greater allocation of your wealth into precious metals.  

Wealth Tax (Confiscation) a Cometh; No, It is Here!

Cypriots will have money taken directly out of their bank accounts come Tuesday.  Monday is a bank holiday in Cyprus; but by the time banks open on Tuesday, all depositors will have money confiscated, or stolen by their government, taken directly out of their account and into the government accounts.  Accounts with less than €100,000 will face a levy of 6.75 percent.  Those with more, will be taxed at 9.9 percent.  This deposit confiscation is expected to raise nearly €6 billion.  Also, the government blocked all electronic transfers over the weekend.  In addition to the wealth tax on depositors, Cyprus will raise its corporation tax from 10 percent to 12.5 percent. 

Oh, but you say that you, as an American, live in a land of "rules and laws."  Yes, say that to the GM bondholders who that thought, according to "contract law," had a first lien against GM assets.  How will did that work out for those GM bondholders?  Of course, our government completely ignored contract law and GM bondholders lost everything.  So, do you still believe that our government would never confiscate a portion your checking accounts, saving accounts, CDs, retirement accounts, and pension funds for its own self-preservation?  Finally, remember that $100 in your hand will be worth approximately 7% to 10% more come Tuesday than the $100 in that Cyprus bank account.  By the way, where is your $100? 

Florida Lawmakers Look to Ban "EBT" Use at Strip Clubs, Casinos, Liquor Stores, and Gun Shops

Florida lawmakers "are considering legislation" that would ban those receiving government assistance from using their Electronic Benefits (EBT)" cards at strip clubs, casinos, liquor stores, and gun stores.  Wait one minute. Florida lawmakers are just considering doing it. Make it a top priority of your state legislation and "Just Do It."  Come-on Floridians put pressure on your state legislators and get this bill on the docket. Ever single state of the Union should have similar legislation either already passed or pending. 

This IMF Chart is Just Completely Laughable

The IMF is forecasting that Greece (Yes, Greece!) will show the fastest rate of growth in relaltion to its European counterparts for 2016.  Poor Germany,which is the strongest of the EU, comes in dead last. Well, I guess hope really is eternal.



Why is Healthcare in This Country so HIgh?

Look no further than what the "Healthcare Lobby" spends in Washington? Nearly five times what the "Oil & Gas Lobby" spends, or for that matter any other lobby.

Foodstamp Recipients Hit Record: 20% of Eligible Americans on EBT

From "Zero Hedge:" Another record market close for the DJIA, record US debt ($16,701,846,937,879.74), and record number of Americans on food-stamps.  According to the USDA, an all time high of 47,791,966 Americans at year end 2012 were in possession of the highly desire EBT cards.  As a matter of fact, 20% of eligible Americans are on Food-Stamps and growing monthly. 

The New U.S. Petroleum Pipelines

Who needs the "Keystone Pipeline" when you have railroads and crony capitalism? Warren Buffett, who has given plenty of tax advise to this Administration, has been aggressively attempting to corner the railroad market to haul the oil!  The following chart tells it all!

BLS Reports That Payrolls Surge by 236,000 in February

Big surge in "seasonally adjusted" employment numbers on expectations of 150,000. The optimal phrase in the former sentence being seasonally adjusted employment numbers.  You know those so-called statistical jobs that will be revised downward within the next two months.  Oh, that infamous "birth-death phantom jobs" statistic added 102,000 to the unadjusted job number.  So, if we subtract the statistical, phantom jobs of 102,000 from 236,000, you arrive at 134,000 jobs, which is really less than the expectations of 150,000.  (That is the main reason why I like to use in my analysis "year over year" data that eliminates any need for seasonal adjustments.)  In other words, we, as a nation, still need approximately 200,000 new jobs each month just to absorb those new entrants into the job market every month.  And, one more statistic from the BLS is that the unemployment rate went from 7.9% to 7.7%.  For some reason I just don't buy into what the BLS reports.  However, you can read the full report and judge for yourself by clicking on BLS.

$SLV Bounce

I would expect a $2 increase in $SLV, based on some very oversold levels on the daily bar charts. (See details within the following Daily Bar Chart.) Long-term $SLV remains in Stage 4, Selling Phase based on Point & Figure Charts. And, of course, $26 remains the so-called critical mass support level for the metal.

Bear's Last Hope

One of my favorite technical tools is the Exponential Moving Strategy (EMA) that incorporates the 15-week EMA and 40-week EMA.  The strategy simply states that if the 15-week EMA is above the 40-week EMA, the primary trend is up and "Bullish."  If the 15-week EMA is below the 40-week EMA, the primary trend is down and "Bearish."  Just as valid as the EMA strategy has been since 1994 is the potential set-up of a "Triple Top" at 1560 to 1580, based on the 15/40 week EMAs.  A "Double Top" occurred in  2000 and 2008 with subsequent price declines from 2008 (January) to 2009 (March).  A "Triple Top" from the current levels would portend to even greater price declines than that occurred from 2008.

Employment Rate of the U.S. Population -- No Change Since 2009!

Bear Market for Gold Mining Stocks ($GDX)

Sequestration Madness

Let the cuts begin.  What I have been hearing and reading is that these $85 billion in cuts will bring America to its knees.  Sequestration will cause planes to fall from the sky; lawlessness in the streets (I thought that is what we have now, especially in Chicago.); no meat inspectors; no IRS agents (According to the Administration that will happen only after April 15. Someone has to collect all those tax dollars.); no teachers; no national defense; no health care; no police; and the list goes on-and-on.  Another words, one scare tactic after another.  Just complete madness. Then, we have the absurd coming from Maxine Waters, U.S. Representative for California's 43 Congressional District.  She states that sequestration has the potential for the U.S. to lose 170 million jobs. The problem with that statement, Ms. Waters, is that we only have something like 140 million jobs in American.  But, then again, why bother with facts when one can simply make things up as facts!

Speaking of facts, let's look at these facts.  Our national debt is $16,687,289,180,215.37 (That is in trillions.).  The sequestration amount is $85 billion, or 0.5% of our national debt.  For the 2013 fiscal year, our federal government will spend $3.6 trillion.  Sequestration is $85 billion, or approximately 2.3% of what the government will spend. 

Let me put this whole sequestration in perspective using Apple as an example.  At the end of December 2012, Apple had a total of $137.1 billion in cash, cash equivalents, and marketable securities.  One company has $137.1 billion in cash, and our government is screaming bloody murder in having to find $85 billion in cuts.  Will someone please tell me why our government can not find $85 billion to cut out of the $3.6 trillion in spending?  By the way, government spending will actually go up again this fiscal year, not go down, and tax revenues are at a record level.  I just thought you would like some additional, "real" facts.