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Dow's Short-term Outlook

$SLV: Critical Price Support at $18

The Great Bamboozle Perpetuated by the Financial Accounting Standards Board (FASB) and Wall Street

Yes, you, “Main Street,” have been bamboozled into believing that all is well with the “Too Big to Fail Financial Institutions.”  (Why do you think they are called “Too Big to Fail Institutions”?  There must be a reason.)  And, that reason is due to “Mark-to-Market” accounting, which went away in 2009.  Securities, such as mortgages, with exposure to interest rates are now defined as being “Available For Sale (AFS)” as per FAS 115, which in turn prevents any profits or losses from hitting the income statement even if they did impact retained earnings through the “Accumulated Other Comprehensive Income (AOCI) line.   In other words, as interest rates rise, prices of debt securities like mortgages will decline.  However, with the elimination of “Mark-to-Market” accounting, financial institutions do not have to reflect those losses as such.  Therefore, the financial position of those institutions will appear to be healthier that what they are. 

Case in point is Bank of America’s most recent quarterly financial report.  It reported a profit of $4.012 billion.  Well done, indeed! Not so fast, “Main Street.”  See, this is the great bamboozle.  That profit of $4,012 billion absent of “Mark-to-Market” accounting should have been a loss of $221 million.  (See the following Chart).  Oh, since the fourth quarter of 2011, Bank of America has effectively swept under the rug some $7.6 billion in cumulative losses, which are not losses only thanks to the demise of “Mark-to-Market.” 

Which Is Greater: Full Time Jobs or Americans on Food Assistance and Disability?

The answer is "full-time jobs."  I bet you thought I was going to say that Americans on "Food Assistance and Disability."  I can hear you give a sigh of relieve.  Be careful!  Why?  According to the Bureau of Labor Statistics (BLS), there are 116 million Americans with full-time jobs, which includes 21.9 million government workers.  (Keep-in-mind that government workers are not the productive ones within our society when it comes to increasing ones standard of living.  That is, these workers do not produce goods and services that we Americans buy.  If anything, these workers are to some extent a necessary evil.)  Now, on the other hand, there are 112.5 million individuals on food assistance and disability, or something like 1 out of 3 Americans.  Therefore, there are only 3.5 million more Americans with full-time jobs than there are Americans who are reliant on the government for their daily bread.  And, if you exclude government workers from the productive side of society, then, you have 40.3 million more Americans on government support than those Americans who actually produce something of value.  Let me be very clear on the state of the economy, given these statistics, it is dismal and only going to get worse.

Too Big to Fail Banks Now Extended to the U.S. Economy

"If the economy is so fragile that the government cannot allow failure, then we are indeed close to collapse.  For if you must rescue everything, then ultimately you will be able to rescue nothing." So, stated Seth Klarman.  Who is Mr. Klarman.  He is an American billionaire who founded the Baupost Group, a Boston-based private investment partnership and the author of Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.

TBT-ProShares UltraShort the Long Treasury Bond (20+Years)

$TNX: Stage 2 Advancing Phase for 10-Year Rates Confirmed!

Quality of Jobs for June 2013

The following chart depicts the "quality vs. quantity" aspect of job creation in America for the month June.  For June, 360,000 part-time jobs were created; 240,000 full-time jobs were lost.  Can anyone say "Obamacare?"

10-year Treasury Note: Point & Figure Perspective

The following "Point & Figure Chart" illustrates the interest rate objective for the 10-year Treasury Note at 4.55%.

Interest Rates Going Forward

The rates on the 10-year Treasury Note correlates inversely with risk assets, such as stocks.  Why is this important?  Well, according to the following chart, the interest rate trend on the key 10-year Treasury Note is now up.  The infamous exponential moving average strategy has signaled a reversal in trend for the 10-year rates on Treasury Notes.  That is, the 15-week EMA has exceeded the 40-week EMA, which simply means that the trend for this key rate has shifted from a declining trend to a positive, rising, trend.  In addition, if 2.65% is penetrated, that will be a clear break of the downward resistance line from 2007 and further confirmation of a rising interest rate trend going forward.

Please, Tell Me This is Not True

Electric cars, despite their supposed green credentials, are among the environmentally dirtiest transportation options, a U.S. researcher, Zehner, suggests.  Writing in the journal IEEE Spectrum, Dr. Zehner says electric cars lead to hidden environmental and health damages and are likely more harmful than gasoline cars and other transportation options.  He further states, "Upon closer consideration, moving from petroleum-fueled vehicles to electric cars starts to appear tantamount to shifting from one brand of cigarettes to another."  Dr. Zehner is a visiting scholar at the University of California, Berkeley, which is definitely not a bastion of conservatives.