Federal Reserve's Holdings of U.S. Gov't Debt Hits Record $1,696,691,000,000

Today, the Federal Reserve revealed that its holdings of U.S. government securities (debt) had increased to an all-time record of $1,696,691,000,000.  (Yes, that is in trillions.)  This makes the Fed the single largest holder of U.S. government debt.  China comes in second at $1,170,100,000,000.  

And, I thought the Federal Reserve System was not suppose to monetize the debt of our government. I guess that I am just too naive and simply not with this whole "Quantitative Easing (QE) thing by the Fed.  In other words, what's all this worry about the debt ceiling when you have the Federal Reserve System that can simply create money out of "nothing" to purchase Treasury securities.  What's the problem?  The Fed is the enlightened one.  It knows exactly what it is doing.  Sit back and simply watch as the enlightened Fed utterly debases the U.S. currency through its monetary policies.  You know like keeping the dollar stable in value, which is one of its mandated goals.  Let's see how well that has worked.  The Fed was created by commercial banks in 1913, not by the federal government. Therefore, if you had $1 in 1913, the value of that $1 today would be worth "FOUR CENTS!"  To put it another way, that $1 in 1913 has lost 96% of its value in terms of purchasing power.

The Truth about "AK and AR" Firepower

I fully understand that this blog is not about guns, nor “Gun Control.”  And, I don’t want it to be.  However, a lot of misinformation is out there concerning the firepower of “AKs and ARs.” See, it is all about the “cartridge size” of the bullet, not the type of gun (AK or AR).  In other words, it is pure politics of misinformation as it pertains to these types of guns.  Once you review the video, you may just agree with me.

 

What, Me Worry?

Investors are not worried at all.  Why?  Because investors believe they have a "put" from the Federal Reserve System.  In that any precipitous drop in the market, the Fed will "bail-out" any and all investors that are long equities.  And, why would investors believe the "put" theory?  Simply look at how the Fed has manipulated the equity markets since March of 2009.  Enough said.

Ok, how does one measure this market complicity?  It is measured through various volatility indices that measure the implied volatility for a basket of put and call options related to a specific index, such as the DJIA ($VXD), S&P 500 (VXV), and NASDAQ ($VXN).  When these volatility indices reach extremely low levels, investors perceive little investment risk going forward, which is usually a very good harbinger that the market is ready for a major correction.  As a matter of fact, today's levels of volatility are the lowest since 2007.

The following volatility chart of the S&P 500 ($VXV) indicates how investors perceive a total lack of concern to a significant decline in the market.  I have learned one thing in following the market over the past couple of decades is that the "market will do whatever it takes to prove the majority of investors wrong!"

Union Membership

The Bureau of Labor and Statistics (BLS) reported today that in 2012 union membership rate, which is the percent of wage and salary workers who were members of a union, was 11.3 percent, down from 11.8 percent in 2011.  The number of wage and salary workers belonging to unions, at 14.4 million, also declined over the year.   For a perspective on this decline, the BLS states the following: "In 1983, the first year for which comparable union data are available, the union membership rate was 20.1 percent, and there were 17.7 million union workers.

Highlights of the report are given as follows:

1. Public-sector workers had a union membership rate (35.9%) more than five times higher than that of private-sector workers (6.6%).
2. Workers in education, training, and library occupations and in protective service occupations had the highest unionization rates, at 35.4% and 34.8%, respectively.
3. Black workers were more likely to be union members than were white, Asian, or Hispanic workers.
4. Among states, New York continued to have the highest union membership rate (23.2%), and North Carolina again had the lowest rate (2.9%).

How Did the American Revolution Really Start? Gun Control or Taxation?

"The British decided they would try to learn exactly who had muskets, ball and powder and intended to confiscate those military weapons.  (Sound familiar?)  On April 18, 1775, British General Thomas Gage sent 700 soldiers to destroy guns and ammunition the colonists had stored in the town of Concord, just outside of Boston, MA.  They were met by some seventy "Minutemen" at Lexington Common.  The British ordered the Colonists to surrender their weapons.  Of course, the Colonists refused.  In addition, the British also planned to arrest Samuel Adams and John Hancock, two of the key leaders of the patriot movement."

"Our American Revolution did not start over "taxation," which many probably believe to be true.  Yes, taxation was an issue.  However, the fact remains that the actual cause of armed hostilities in 1775 was an attempt to confiscate military-style weapons from the citizens."  Thanks "Market-Ticker" for setting the record straight.

Debt Ceiling Shenanigans

Selective Economic Questions:

1. What is the current size of our national debt?  Answer: $16.461 trillion. 
2. What is the current size of our GDP?  Answer: $15.555 trillion. [Our national debt is approximately 106% of GDP!]
3. How many times since 2001 has the debt ceiling been raised?  Answer: Eleven.
4. Have we breached the current debt ceiling limit?  Answer: Yes. [We have exceeded it by $41.3 billion.]
5. How can the government exceed the debt ceiling?  Answer: The government has been able to circumvent the debt ceiling by raiding its various trust funds. However, these trust funds will run out of money by the end of March. 
6. What is the House Republicans' strategy for dealing with the debt crisis going forward? Answer: Kick the "proverbial debt can" down the road for another three months. 
7. What was the approximate "federal deficit" for 2012?  Answer: $1.3 trillion.
8. When one takes into account the 2012 "federal deficit" plus the "present value of our unfunded liabilities, such as Social Security & Medicare, for 2012, what was the TRUE federal deficit for 2012?  Answer: $6.9 trillion.
9. What would you like to say to Congress?  Answer: I am sorry, but I can not print that!

The 80-year S&P 500 Log Chart Trendline: Mean Reversion

I extracted the following chart from Zero Hedge.  The bottom line conclusion from the chart is the following statement: "For over 80 years, the S&P 500 has cyclically reverted to it its logarithmic trend-line growth.  The last time the market reverted from its bullish up-trend was in 1982 (and the previous period of cyclical reversion took 32 years from 1942 to 1974) and suggests the S&P 500 could well revert to around an 850 level within the next year or so." 

Economic/Financial Bubbles Never End Well!

Education is indeed the new bubble, and as is true with all pass bubbles will not end well for those that have taken on student loans and, of course, those that still pay taxes.

The following "for-profit-educational institutions" should be watched carefully for further clues as to when this bubble does burst: American Public Education (APEI), Apollo Group (APOL), DeVry (DV) and ITT Education (ESI).  In other words, as an investor, I would avoid these stocks like the plague.

World Governments Gold Reserves

In today's world, we have two sets of "Golden Rules.”  We have the secular “Golden Rule,” that states, “He who has the gold makes the rules;” and the spiritual “Golden Rule,” that states, “Do to others what you would have them do to you (Matthew 7:12).”  For my preference, I like the latter “Golden Rule.”  However, my post today is about who has the physical gold.  And, as you will read shortly, the United States has the vast majority of the world’s gold reserves, which is why we are “still” the dominate power in the world and why our currency “still” remains the world’s reserve asset.  (Personally, I would like an audit of our gold holdings.)  As a matter of fact, the reported figures indicate that the U.S. has something like 2.4 times as much gold as the second largest holder, which is Germany.  (Definitely keep an eye on Germany’s influence on world events.  The world’s focus is on China’s influence throughout the world.  I contend Germany is where we should be focusing on, especially in the Middle East.)

1. United States (8,133.3 tons)
2. Germany (3,396.3 tons)
3. IMF (2,814 tons)
4. Italy (2,451.8 tons)
5. France (2,435.4 tons)
6. China (1,054.1 tons)
7. Switzerland (1040.1 tons)
8. Russia (936.7 tons)
9. Japan (765.2 tons)
10. Netherlands (612.5 tons)
11. India (557.7 tons)
12. European Central Bank (502.1 tons)
13. Iran (500 tons).

$AAPL is in "Stage Four Declining Phase"

$SLV Based on "High/Low/Close" Price Chart

Yesterday, I showed a "Point & Figure Chart" on silver (SLV).  Today, the following chart depicts a typical "High/Low/Close" price chart for silver.  The difference is that a Point & Figure chart provides a relatively long-term view of price activity, while a price chart, in this case, provides a time frame of one year.  I use Point & Figure charts to provide long-term signals and price charts for short-term signals.  Generally, price charts are good for indicating "overbought and oversold" levels.

$SLV Update

Is Gold/Silver a Safe Investment for Your Future?

I guess the answer to that question depends on your time horizon and if you believe in Biblical prophecy.  From a Biblical perspective, the world’s economic troubles are about to get worse, even worse than what one can imagine.  According to Biblical prophecy, times will get so bad that people will throw their gold and silver into the streets.  Ezekiel 7:19 states, “They throw their silver into the streets, and their gold becomes as filth.  Their silver and their gold is unable to deliver them in the day of the wrath of Yahuah (God).”   Why would anyone do that?  A famine will occur, as told to John, on earth similar to the one prophesized by Joseph to the Pharaoh of Egypt in Genesis 41 but only worse.

Let’s look at that prophecy as it pertains to this upcoming famine that is described to John in the sixth chapter of Revelation.  Revelation 6:6, which is the “Third Seal,” states, “A measure of wheat for a denarius and three measures of barley for a denarius.”  [A measure of wheat bakes one loaf of bread, and a denarius was the equivalent of a day’s wage.]  When the economic system collapses, Ezekiel and John prophesized that one’s gold and silver will be worthless. 

Now, I believe that gold and silver are a form of insurance for the currency crisis that lies ahead of us.  I like junk (circulated) silver coins, which are those pre-1964 dimes (.07 ounces of silver), quarters (.18 ounces of silver), and half dollars (.36 ounces of silver).  However, for the Day of Yahusha, your protection is in Yahuah (God), not your gold and silver. 

For those of you that want to learn about your future as it pertains to Biblical prophesy, you may want to dust off your Bible and read Chapters 6-10 of Revelation. 

Is 807 the New Number (Sign) of the S&P 500 Beast and Not 666?

The following chart is brought to you by way of "Zero Hedge:"

"807" just might be the new sign of the beast for the S&P 500; however, the 807 point rise from March 2009 did start at the infamous "666!" 

The Lone Wolf at the Federal Reserve System

Jeffrey M. Lacker, who is President of the Federal Reserve Bank of Richmond, has warned repeatedly that the Fed’s extraordinary efforts to stimulate growth are ineffective and inappropriate.  Last year, he cast the sole dissenting vote at each of the eight meetings of the Fed’s policy-making committee, which is only the third time in history a Fed official dissented so regularly. 

He states, “We’re at the limits of our understanding of how monetary policy affects the economy.  The economy continues to muddle along, shadowed by the threat of another government breakdown, and the crisis of high unemployment is only slowly receding.  But in trying to address those problems by suppressing interest rates, the Fed risks the unleashing of speculation and inflation."  At least, someone at the Fed has some sanity to the ultimate consequences of increasing the Fed's balance sheet in excess of $2 trillion through its QE programs.

Wal-Mart Revisited

Return "of" My Money

 
Will Rogers' words of wisdom have never been more relevant in today's investment climate, which will become very obvious over the next three years: "I am more concerned with the return of my money than the return on my money."

$SLV: Time to Add Some Junk Silver

Thank You Federal Reserve System for a Job Well Done, NOT!

Do You Really Know Where Your Tax Dollars Are Going? I Don't Think You Do!

 "A database of 200 million "Electronic Benefit Transfer" records from January 2011 to July 2012, obtained by The New York Post through a Freedom of Information request, showed welfare recipients using their EBT cards to make dozens of cash withdrawals at ATMs inside Hank’s Saloon in Brooklyn; the Blue Door Video porn shop in the East Village; The Anchor, a sleek SoHo lounge; the Patriot Saloon in TriBeCa; and Drinks Galore, a liquor distributor in The Bronx." 

Wait one minute!  I thought that was not permissible under the Federal Temporary Assistance for Needy Families Program.  Well, you would be partially correct.  Welfare recipients receive food stamps and cash assistance under the Temporary Assistance for Needy Families program.  Both benefits handouts are accessed through an EBT card, but only cash assistance, which is meant for housing, utilities and household necessities, can be accessed through ATMs.  For instance, a single-person household could receive a maximum $200 in monthly food stamps plus $158 in cash assistance. A family of four could get as much as $668 in food stamps and $433 in cash.  Of course, the food-stamp program prohibits the purchase of booze, tobacco and lottery tickets with an EBT card.  But with the cash-assistance program, users can blow money on strippers or a six-pack and to tap welfare dollars from liquor stores, casinos and adult-oriented establishments where ever an ATM is located. 

The problem is that currently EBT cards operate like debit cards.  That is, recipients swipe them at a participating ATM or grocery checkout and enter their PIN, and the amount is deducted from their balance.  Grocery-card transactions can be traced, but cash transactions can’t really be traced.  For instance, if that ATM machine is located in strip clubs and liquor stores, do you really believe that the cash transaction is going to be used to pay the rent rather than for a lap dance?  And there you have it.  Therefore, the next time you see an ATM machine, remember where some of those EBT cash withdrawals just might be going. 

What is our government doing about this problem?  Good question.  I will have to get back to you on that one.  Better yet, why doesn't the government simply insert a magnetic device or some device that does not allow an EBT card to be used at an ATM machine?