A Primer to American Debt Made Easy

Bulls 1 Bears 0

As we start 2012, the Exponential Moving Average (EMA) has generated a "bullish signal" (15-week EMA > 40-week EMA).  It generated a "bearish signal" back on August 29, 2011.  Therefore, if you are so inclined, you may want to consider the long-side of the market by purchasing SPY, which is the ETF for the S&P 500.  If you have been long SH, which is the inverse ETF of the S&P 500, you may want to consider moving into a cash position, or, as indicated purchasing the SPY.  The choice is up to you.  Another strategy, if you are long the inverse SH, would be to liquidate 50% of the position this week and see what the close of the market is this Friday, January 20.

In looking at the above chart, the price is still below the long-term bullish support line, which was penetrated in August 2011.  This bullish support line was drawn from the low back in March 2009.  Also, the price is still below the bearish resistance line from the top of August 2011.  Given those two factors, I am inclined to believe that last week's EMA signal could be a false bearish signal.  I will, of course, update this chart on Friday.

Bears Must Act Now!

Unemployment Falls to 8.5%; 200,000 New Jobs Created

The “Nonfarm Payroll (NFP)” number of jobs being created came in at 200,000 on expectations of 155,000. The unemployment rate now stands at 8.5%, which is the lowest since February 2009.  Great news, isn’t it?  Well, not exactly unless you are entering the labor force as a temporary worker with virtually no benefits or job security, very low skill sets, and of course willing to work for the minimum wage.  See, I look at the number of manufacturing jobs being created as the basis for sustainable income growth.  For this month, manufacturing payrolls, which are those high paying jobs where you do need skill sets, rose only 23,000 on an expectation of 155,000.  That number is not good!

Here's the problem, the non-institutional working-age population went from 240.441 million to 240.584, a gain of 143,000 people of working age.  But the number of employed people went down from 141.070 million to 140.681, which is a loss of 389,000.  Adding the two, which is the correct way to measure the employment situation, the economy on a population-adjusted basis lost 532,000 jobs.  And, why is this an important measurement for overall economic health?  Well, it controls the taxing capacity of the government.  That is, more jobs simply means more tax revenues. 

Moral of the story, as usual, is to always look behind the scenes to discover the real truth, which is something the majority of the electorates don’t take the time to do!

Bulltarts: Welcome to 2012

Central bankers of the world have become gods to the Bulltarts; ever-increasing equity prices have become the Manna provided by these gods.    Rising financial asset prices simply demonstrate to those bulltarts that these gods have found favor with the way they are handling the world economies.  They take great pride in believing that their gods have fostered unlimited blessings on them because of their unwavering faith in the powers of the central bankers.  However, the Bulltarts, of course, are blinded to the real truth, which will finally be revealed this year.  They fail to realize that their gods (central bankers) are really anti-Messiahs, who are nothing more than wolfs in sheep clothing.   2012 will finally be the year that reveals this truth.  However, for the Bulltarts, it will be too late once this truth is revealed.  Their false gods that they placed such great and undying faith in will simply devour their financial portfolios. 

2011 Market Performance

 

 

S&P 500 closed the year down 0.04 point at 1257.60, basically unchanged for the year.  The DJIA closed the year up 5.5% at 12217.56.  The NASDAQ closed the year down 1.8%.

For Treasury bonds, the 30-year Treasury bond registered a 35% return, while the benchmark 10-year note gained 17%.

The euro ended 2011 3.3% lower on the year.

The most actively traded gold contract rose 10% on the year, while silver futures ended with a loss of 9.8%.

Looking Forward to 2012; Goodbye 2011!

Is this the Worse Delivery Ever?

I hope this was not your monitor!

"A Fool and His Money are Soon Parted."

Wow, nice Santa rally going on.  Today’s rally reminds me of the famous proverb found in the poem Five Hundred Points of Good Husbandry by Thomas Tusser, which states, "A fool and his money are soon parted.”

I am simply amazed at how Wall Street is blinded by the real reality of Main Street.  And, how Wall Street believes that its real Savior is in the Central Bankers of the world.  Enjoy “Bulltarts” this bittersweet year-end rally for 2011, because 2012 will show the complete folly of your ways.   Therefore, I thought the following Santa video is appropriate for all the Bulltarts that still believe in Santa Claus, Bunny Rabbit, and the Tooth Fairy.

Stage Analysis of a Stock Cyle

Gold Demonstrating Stage Four (Selling)

Market Trend: Bearish

Senate Approves Two-month Extension of Payroll Tax Cut

CNN just reported that the Senate voted to extend the payroll tax cut by two months, after both sides were unable to reach a comprehensive agreement to extend the payroll tax cut and unemployment benefits for a full year.  The House will vote on the extension next week.  That is just great!  Let's just kick that can down the road so everyone can go home for the holidays and not worry about it until February 2012.   And, then we wonder why our country is going “to hell in a hand basket.”  Well, that is my "rant" for the day. 

Chevy Volt: A Car for Idiots

Wow!  That is strong language.  However, those are not my words.  They come from Johan de Nysschen, President of Audi of America.  He states, "No one is going to pay a $15,000 premium for a car that competes with a Corolla. So there are not enough idiots who will buy it."  (So far for 2011, only 5,000 idiots have purchased Volts.  Probably most of those sales were to the government idiots.) He further explains his frustration with regulators and policy makers, saying the, "public has been hoodwinked into believing that electrical vehicles are the only answer to global warming.  The U.S. government, he said, is pouring billions of dollars into this technology (Chevy Volt), yet diesel technology could deliver a more immediate and dramatic decrease in global-warming emissions.  Modern diesels already power half of Audi’s cars in Europe. Diesels have been shown to emit 25 percent less carbon dioxide than gasoline engines, while using 25 to 35 percent less fuel." 

Are you listening Department of Energy, EPA, and Obama Administration?  You probably should be, since you have such a great track record at picking losers!

Elliott Wave Theorist: Closing the Year on a High Note

The following excerpts are taken from December's "Elliott Wave Theorist Newsletter" by Robert Prechter.  I thought you might find it enlightening or, if you are a "Bulltart,"  unnerving.

“It took awhile, but every market is going our way.  The U.S. dollar just broke out to a new 11-month high.  U.S. stocks have stayed below their April highs.  Foreign stock indexes are down 10%-50%.  Gold and silver closed this week at their lowest levels since their peaks.  And the CRB commodity index is down 10% on the year.

The best performing market for 2011 is one that nobody wanted.  Bulls bet against U.S. Treasury bonds due to forecasts of an economic recovery, and bears bet against bonds due to forecasts of hyperinflation.  But U.S. Treasury bonds have registered the best total return (+20%) for the year of any major investment sector.  This event makes sense only to deflationists, and a few other scattered iconoclasts hiding around the globe.

The Fed reported on Tuesday that the economy has been “expanding moderately,” but economists waiting for economic reports to indicate contraction will be six to twelve months late.  The November issue of EWT used a chart of silver to warn that the economy is already heading back into contraction.  In fact, four useful leading indicators of the economy—namely, the prices of stocks, lumber, silver and copper—turned down months ago, between February and April 2011.  If the market tries to bounce during the traditionally strong late December-early January period, any rally should stay in the context of a bear market.”

Critical Price Level: 11,600!

Key support level for the $INDU is still 11,600 for both the "Bears and Bulls."  Of course, Bulls want to see that price level hold; Bears want to see that price level broken.  As of now, it is really that simple.

Financial Asset of Choice: Mossberg 410 HS

Update on Gold (GLD) and Silver (SLV)

The Gold Break?

Gold just broke through its 200-day simple moving average, which is the first time since early 2009.  Is silver next to break its long-term moving average?  So far, the score is "Deflation 1, Inflation 0." 

My Rant for the Day

Financial asset inflation is what “Wall Street” loves and wants.  That is why “Wall Street” has not balked on the failed monetary policies of the Federal Reserve System.  As a matter of fact, it wants more trillions, not less, to continue the price inflation of financial assets.  When I make reference to “Wall Street” in this context, I am specifically referring to investment advisory firms, investment bankers, and security firms.  In other words, Wall Street would include any security entity that generates revenues by either providing investment advice, manages funds for clients, or buying/selling of securities.  Even though these investment entities know full well that the current polices on the fiscal side of deficit spending (spending > tax receipts) have failed.  (From a mathematical point of view, the economy cannot generate debt growth (9%) that exceeds income growth (2%) over an extended period of time without going bankrupt.)  Never-the-less, they want greater monetary easing on the part of the Federal Reserve System to goose the price of financial assets in order to generate revenues for their benefit, not for the benefit of the economy.   I know the counter argument is that these firms really believe that Keynesian economics has not failed us.  All what is needed is an additional trillion dollars here and there to get this economy out of its malaise.   Yes, some really do believe that by creating something out of nothing is the economic panacea.  However, I still believe that there is a greater conflict-of-interest than the investment public fully realizes between the self-interest of these investment firms and the Fed.  It is simply the nature of man, which is sad but true.