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?

What is the $DJIA's Relative Strength Saying About its Future Price Direction?

The rising RSI has penetrated its rising trend line that has been in force since 2009.  What is the proverbial bottom-line?  If past trends hold, $DJIA might be heading to 5,800, or decline of at least 64% from its current levels.  (See the following chart.)

$SLV's "Unthinkable" Downside Price Objective

Psychological 3% Rate on 10-year TSY Note

Interest rates are heading higher.  No, rates have been rising since August of 2012.  However, the psychological 3% rate on the 10-year Treasury Note is what everyone is focusing on today.  Currently, the rate is at 2.93%.  However, from following chart, one can discern that the 10-year rate reached its low last August.  So, what can an investor expect going forward?  Rates on all kinds of borrowings will go up, such as car loans, credit cards, home loans.  Also, once that 3%  psychological level is penetrated, I expect stocks to suffer big time.

 

You are Kidding, Right?

Would you buy health insurance because of this ad with a guy in pajamas talking about insurance?  I don't think so!  But, our government must think so because you, taxpayer, have been footing the bills for such ads.  (I would say that this ad begs the following question: "Should the federal government be spending $684 million on marketing ads for Obamacare?")  

Now, if you believe that health insurance should be the main holiday topic this year, you can go to the following site, Health Care for the Holidays, for step-by-step instructions.  As a matter of fact, the site puts forth "four steps" on how to have a holiday health care conversation.  (No, I am not kidding. This is an actual site with four specific steps for your holiday conversation.)

Percentage of Subprime Auto Loans -- Unbelievable

I am always amazed at how little we learn from history, especially history just five years old. Today, nonprime, subprime, and deep subprime new auto loans make-up 26% (2013 Third Quarter) of all new vehicle financing, which, of course, is one out every 3.85 loans are highly risky.  (Subprime lending includes borrowers with credit scores below 520.)  Worse yet, the subprime loans for used vehicles comprise 55% of the market in the third quarter of 2013.  But, then again, no need to worry about subprime lending, because this time is different.  Right?   

Will the Fed Announce Its "Taper" Intentions Tomorrow?

Wall Street is waiting to see what the Fed will do about its future purchasing plans for tapering $85 billion worth of mortgage-backed securities and Treasury bonds per month, or a trillion dollars per year.  I, for one, don't believe that the Fed has the nerve to taper (cut back on its security purchases) at this time.  Or, should I say Wall Street will not allow the Fed to taper just yet?  Wall Street just likes that $1 trillion per year just a little too much.  My guess is the so-called "taper" will occur sometime during the first quarter of 2014.

Dionysus Exiquus: The Answers

Dionysus Exiguus was a member of the Scythian monk community.  He is known as the inventor of the Anno Domini (AD) era (year of the Lord), which is used to number the years of both the Gregorian and Julian calendars.  However, what has probably been lost in history is his major role in the reason why Christians celebrate Christmas! 

Coming to Rome sometime between 500 AD and 525 AD, Dionysus Exiguus arrived upon the time of the Solstice festival celebrating the birthday of the sun.  He witnessed all of Rome in celebration and revelry.  Wreaths of greenery were hung on the doors of homes as emblems of the sun.  Everyone exchanged gifts and debauchery parties were everywhere.

Learning that these practices in Rome were in honor of the ancient sun idol (Mithras), Dionysus Exiguus was shocked and dismayed.  Reasoning that it was impossible to stand in the way of such, or even change this so-called pagan holiday, he sought to change the meaning for it by claiming it to be the celebration of the birth of the Messiah.  Thus, the celebration of Christmas was born.

Who Was Dionysus Exiguus and What Was His Claim to Fame?

Answer: ?

What Has Caused the Debasement of the U.S. Dollar?

Since 1913, the dollar has lost nearly 90% of its value, as measured in terms of the Swiss Franc, and the purchasing power of that dollar has collapsed, as measured by the CPI.  Why?  The significance of 1913 was the creation of the Federal Reserve System.  The significance of 1971 was when President Nixon took the nation off the gold standard.  Up until 1971, the growth of the money supply (creation of dollars in circulation) was directly tied to the amount of gold that the U.S. held.  In other words, the gold standard was a constraint on our central banker, Fed, to create dollars.  The only way that more dollars could be created was by having more gold.  Today, the Fed has no constraint on its ability to create dollars.  It's monetary policy of QEs has enlarged it balance sheet by close to $4 trillion.  That is, the creation of money out of thin air!  The consequences of such actions were for the dollar's value to plummet against the Swiss Franc and the destruction of the purchasing power of the U.S. dollar.

Bulls Gone Mad!

Currently, we have 4x as many bulls as bears, which is a record high.  From the following chart, it simply implies that now may be a good time to lighten-up on those equity positions in the portfolio, or get out of equities completely.

Ryan-Murray Budget Deal: A Total Mockery of Fiscal Contraint

Let me be perfectly clear that this so-called budget deal is nothing but a farce.  This budget deal does nothing to solve our out-of-control federal spending and our ever-increasing national debt.  As a matter of fact, this deal will cause federal spending to increase by $45 billion when spending was scheduled to drop by approximately $20 billion through sequestration.  Also, the Ryan-Murray deal promises to reduce the deficit by $28 billion over the next ten years.  However, the federal government will spend around $40 trillion over the next ten years.  The math tells me that deficit reduction amount equates to 0.007% of federal spending over the ten-year period.  What a joke!  To add further insult to economic sanity, the Ryan-Murray deal will add something like $8 trillion to our national debt over this time horizon for a total of $25 trillion. 

Silver: Update From My Post of December 4

From my post, dated December 4, which was entitled, "Silver: Dollar Cost Averaging," I stated that the momentum indicators for $SLV were extremely oversold at these price levels ($19).  Further, I went on to say that a bounce within its current Stage 4 Selling Phase could result in $SLV rising between $22-$24.  So far, so good.  See the following chart.

Dichotomy Between Earnings and Prices

Fundamental analysis, as an investment tool, states that the price of any financial asset is the present value (PV) of expected cash flows.  In regard to equities (stocks), that would be a firm's earnings.  Higher the firm's earnings should result in higher price for the firm's stock.  Well, there is definitely a disconnect between a firms earnings and its price.  (See the following chart.)  Since the 2007 peak in EBITDA (earnings before interest, taxes, depreciation, and amortization), the S&P 500's EBITDA has fallen 7%, but the S&P 500 has risen 15%.  Therefore, from the perspective of a value investor, who uses fundamental analysis, this market, as measured by the S&P 500, is not cheap.  Why the dichotomy?  Look no further than the Fed's QE policies, which has created this monster equity bubble.

U.S. Treasury "Out" Of GM For $10.5 Billion Loss on its Original Investment

The U.S. Treasury has finally sold its last holdings of GM for a total loss of $10.5 billion.  Thank you, once again, U.S. Taxpayer for your most gracious generosity.  Your utter kindness makes me speechless at a time like this!  At least all is not loss, because our government can now take the proceeds from the sale and double-down its investment in "Obamacare." 

If You Like It

Math Question From "Common Core"

The problem, which to me is incomprehensible, comes from a Houghton Mifflin Assessment Guide.  Therefore, we must be teaching our children to make up answers when there is not enough data to arrive at a logical solution.  However, if our children come up with a process in arriving at a solution to any incomprehensible question, I guess it would be counted as correct.  This math question appears among a larger set of basically similar math problems here. The above problem involving Juanita appears on page AG102.

U.S. Secretary of Education, Arne Duncan, has promised to improve education quality by pushing for the implementation of the Common Core State Standards Initiative with the likes of the above math question.  Does any of this sound familiar to the likes of the "Affordable Health Care Act," or better known as Obamacare?  It simply tells me that the federal government is not very good at doing anything.

Watch the Pro-Gun, Daniel Defense Ad the NFL Won't Run During the Super Bowl

Way too much sex, violence, and assault rifles.  Then again, you will have to judge for yourself if the NFL made the right decision.

Car and Student Loans Account for 95% of All Consumer Credit Issued in Past Year

Now, let me get this straight. 95% of all "Consumer Loans" were issued to students, who have no credit score and no future job prospects, and individuals, who purchased new cars with a credit score below 659, which, which-by-the way, is considered sub-prime.  Oh, this is going to end so very well.  Once again, I know what you are thinking; and I agree.  Why?  Because none of my economic/financial rants matters to anyone until they matter to everyone.

What is the Real "Unemployment Rate in the U.S.?

Well, the BLS reported earlier today that the unemployment rate for November is currently at 7% (U3), which is down from the October rate of 7.3% (U3).  Does anyone really believe that 7% rate besides Wall Street?  Simply look at the following chart, which is provided by "ShadowStats,"for what the true unemployment rate happens to be in this country.  No, the rate is not 7%, nor 12.5% (U6) but closer to 24% (Solid Blue Line)!

Please Buy the Excess Merchandise (Inventory)

Over the past year, nominal GDP has risen $534 billion of which 56%, or $300 billion was due to nothing else but inventory hoarding by businesses.  The problem with inventory hoarding is that at some point it will have to be "unhoarded," usually at much lower prices, which will comprised corporate profit margins and reduce GDP growth.

Silver: Dollar-Cost Averaging

Complete Extinction of Bears on Wall Street

 

If I am reading the above chart correctly, just maybe the "Bulls" should not get too excited, because previous market tops correspond to today's current readings. Just take a look for yourself.  But, I know most of you are saying, but this time is different, because the Fed has our back.  That is, one giant "PUT" at current prices.  However, if you look at the history of this ratio, it has happened 15 times in the last 24 years with stocks falling 79% of the time in the following 3 months.  



Have a Public Pension? You May Want to be Concerned!

Detroit's bankruptcy has been ruled legal.  Let the haircuts begin.  That is, pensioners will likely receive something like "eleven cents on the dollar."  The courts ruled that pensions are not protected by state constitutions.  Why?  Because federal bankruptcy laws trump state constitutional laws when it comes to bankruptcy.  Article 1, Section 8 of our Constitution states as follows: "To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States."  In other words, pensions are just like any other debt when it comes to bankruptcy.  Take heed pensioners of California and Illinois.  You are next in line!  Like I been saying for the past several years that if you have a pension in Illinois see if you can take a lump-sum distribution and get the "you know what" out of the state.

Will the Real Economy Place Stand Up!



No, it is not the S&P 500.  S&P 500 is simply suppose to make you feel better because of the wealth effect caused by the Fed's QEs.  Keep-in-mind that what goes up must come down!

The Federal Reserve and Wall Street Complicit in Robbing You of $400 Billion of Interest Income Per Year

You, "Main Street" are being robbed of $400 billion a year thanks to the "Zero Interest Rate Policy" of the Fed's "Quantitative Easing" program.  That is according to the FDIC's Quarterly Banking Profile, which states as follows:

“Chief among the data points to be noted is that net interest expense, which is the money paid to depositors at banks, continues to fall.  While all banks earned about $118 billion in interest income last quarter, they paid just $13 billion to depositors, a graphic example of the “financial repression” used by the Fed to subsidize the US banking industry.  Via QE, the Fed is subsidizing all banks to the tune of over $100 billion per quarter in artificially depressed interest cost and income to depositors of all stripes.

Prior to the 2007 financial crisis, total interest expense for all US banks was over $100 billion every three months and interest income was almost $200 billion.  In order to maintain the net interest margin for banks at +/- $100 billion per quarter, the Fed is robbing US savers, including companies, investors and the elderly, of almost the same amount each quarter in badly needed income.”

This Fed policy has done nothing to assist "Main Street," but it has enhanced "Wall Street," especially those "Too Big to Fail Banks!"  Speaking of banks, the concentration (financial power) of the number of banks has been staggering since 1986.  In 1986, we had a total of 18,000 banks in the U.S.  Today, the number of banks is 6, 891, or a decline of 62%.  In other words, the "Too Big to Fail Banks" have become larger and the small banks have either merged or exited the industry, which has reduced competition and harmed "Main Street."

Why the Upcoming Depression is Going to be a Whole Lot Worse than the Depression of the 1930s