FedUpUSA

Archive for July 4th, 2010

Our world is changing at a pace that is so staggering these days that it can be really hard to fully grasp the significance of what we are witnessing.  Hopefully the collection of random facts below will help you to “connect the dots” just a little bit.  On one level, the facts below may not seem related.  However, what they all do have in common is that they show just how much the United States has fundamentally changed.  Do you ever just sit back and wonder what in the world has happened to America?  The truth is that the America that so many of us once loved so much has been shattered into a thousand pieces.  The “land of the free and the home of the brave” has been transformed into a socialized Big Brother nanny state that is oozing with corruption and has accumulated the biggest mountain of debt in the history of the world.  The greatest economic machine that the world has ever seen is falling apart before our very eyes, and even when our politicians actually try to do something right (which is quite rare) the end result is still a bunch of garbage.  For those who still love this land (and there are a lot of us) it is heartbreaking to watch America slowly die. 

The following are 50 random facts that show just how dramatically America has changed….

#50) A new report released by the United Nations is publicly calling for the establishment of a world currency and none of the major news networks are even covering it.

#49) The state of California is so broke that Arnold Schwarzenegger has ordered California State Controller John Chiang to reduce state worker pay for July to the federal minimum allowed by law — $7.25 an hour for most state workers.

#48) A police officer in Oklahoma recently tasered an 86-year-old disabled grandma in her bed and stepped on her oxygen hose until she couldn’t breathe because they considered her to be a “threat”.

#47) In early 2009, U.S. net national savings as a percentage of GDP went negative for the first time since 1952, and it has continued its downward trend since then.

#46) Corexit 9500 is so incredibly toxic that the UK’s Marine Management Organization has completely banned it, so if there was a major oil spill in the North Sea, BP would not be able to use it.  And yet BP has dumped over a million gallons of dispersants such as Corexit 9500 into the Gulf of Mexico.

#45) For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.

#44) It has come out that one employee used a Federal Emergency Management Agency credit card to buy $4,318 in “Happy Birthday” gift cards.  Two other FEMA officials charged the cost of 360 golf umbrellas ($9,000) to the taxpayers.

#43) Researchers at the State University of New York at Buffalo received $389,000 from the U.S. government to pay 100 residents of Buffalo $45 each to record how much malt liquor they drink and how much pot they smoke each day.

#42) The average duration of unemployment in the United States has risen to an all-time high.

#41) The bottom 40 percent of all income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

#40) In the U.S., the average federal worker now earns about twice as much as the average worker in the private sector.

#39) Back in 1950 each retiree’s Social Security benefit was paid for by 16 workers.  Today, each retiree’s Social Security benefit is paid for by approximately 3.3 workers.  By 2025 it is projected that there will be approximately two workers for each retiree.

#38) According to a U.S. Treasury Department report to Congress, the U.S. national debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015.

#37) The federal government actually has the gall to ask for online donations that will supposedly go towards paying off the national debt.

#36) The Cactus Bug Project at the University Of Florida was allocated $325,394 in economic stimulus funds to study the mating decisions of cactus bugs.

#35) A dinner cruise company in Chicago got nearly $1 million in economic stimulus funds to combat terrorism.

#34) It is being reported that a 6-year-old girl from Ohio is on the “no fly” list maintained by U.S. Homeland Security.

#33) During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the 16th consecutive quarter.

#32) According to a new report, Americans spend twice as much as residents of other developed countries on healthcare, but get lower quality and far less efficiency.

#31) Some experts are warning that the cost of bailing out Fannie Mae and Freddie Mac could reach as high as $1 trillion.

#30) The FDA has announced that the offspring of cloned animals could be in our food supply right now and that there is nothing that they can do about it.

#29) In May, sales of new homes in the United States dropped to the lowest level ever recorded.

#28) In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1.  Since the year 2000, that ratio has ranged between 300 to 500 to one.

#27) Federal border officials recently said that Mexican drug cartels have not only set up shop on American soil, they are actually maintaining lookout bases in strategic locations in the hills of southern Arizona.

#26) The U.S. government has declared some parts of Arizona off limits to U.S. citizens because of the threat of violence from Mexican drug smugglers.

#25) According to the credit card repayment calculator, if you owe $6000 on a credit card with a 20 percent interest rate and only pay the minimum payment each time, it will take you 54 years to pay off that credit card.  During those 54 years you will pay $26,168 in interest rate charges in addition to the $6000 in principal that you are required to pay back.

#24) According to prepared testimony by Goldman Sachs Chief Operating Officer Gary Cohn, Goldman Sachs shorted roughly $615 million of the collateralized debt obligations and residential mortgage-backed securities the firm underwrote since late 2006.

#23) The six biggest banks in the United States now possess assets equivalent to 60 percent of America’s gross national product.

#22) Four of the biggest U.S. banks (Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup) had a “perfect quarter” with zero days of trading losses during the first quarter of 2010.

#21) 1.41 million Americans filed for personal bankruptcy in 2009 – a 32 percent increase over 2008.

#20) BP has hired private security contractors to keep the American people away from oil cleanup sites and nobody seems to care.

#19) Barack Obama is calling for a “civilian expeditionary force” to be sent to Afghanistan and Iraq to help overburdened military troops build infrastructure.

#18) On June 18th, two Christians decided that they would peacefully pass out copies of the gospel of John on a public sidewalk outside a public Arab festival in Dearborn, Michigan and within 3 minutes 8 policemen surrounded them and placed them under arrest.

#17) It is being reported that sales of foreclosed homes in Florida made up nearly 40 percent of all home purchases in the first part of this year.

#16) During a recent interview with Larry King, former first lady Laura Bush revealed to the world that she is actually in favor of legalized gay marriage and a woman’s “right” to abortion.

#15) Scientists at Columbia University are warning that the dose of radiation from the new full body security scanners going into airports all over the United States could be up to 20 times higher than originally estimated.

#14) 43 percent of Americans have less than $10,000 saved for retirement.

#13) The FDIC’s deposit insurance fund now has negative 20.7 billion dollars in it, which represents a slight improvement from the end of 2009.

#12) The judge that BP is pushing for to hear an estimated 200 lawsuits on the Gulf of Mexico oil disaster gets tens of thousands of dollars a year in oil royalties and is paid travel expenses to industry conferences.

#11) In recent years the U.S. government has spent $2.6 million tax dollars to study the drinking habits of Chinese prostitutes and $400,000 tax dollars to pay researchers to cruise six bars in Buenos Aires, Argentina to find out why gay men engage in risky sexual behavior when drunk.

#10) U.S. officials say that more than three billion dollars in cash (much of it aid money paid for by U.S. taxpayers) has been stolen by corrupt officials in Afghanistan and flown out of Kabul International Airport in recent years.

#9) According to a report by the U.S. Department of Transportation’s Bureau of Transportation Statistics, the baggage check fees collected by U.S. airlines shot up 33% in the first quarter of 2010 to $769 million.

#8) Three California high school students are fighting for their right to show their American patriotism - even on a Mexican holiday - after they were forced to remove their American flag T-shirts on Cinco de Mayo.

#7) Right now, interest on the U.S. national debt and spending on entitlement programs like Social Security and Medicare are somewhere in the neighborhood of 10 to 15 percent of GDP.  By 2080, they are projected to eat up approximately 50 percent of GDP.

#6) The total of all government, corporate and consumer debt in the United States is now about 360 percent of GDP.

#5) A 6-year-old girl was recently handcuffed and sent to a mental facility after throwing temper tantrums at her elementary school.

#4) In Florida, students have been arrested by police for things as simple as bringing a plastic butter knife to school, throwing an eraser, and drawing a picture of a gun.

#3) School officials in one town in Massachusetts are refusing to allow students to recite the Pledge of Allegiance.

#2) According to one new study, approximately 21 percent of children in the United States are living below the poverty line in 2010.

#1) Since 1973, more than 50 million babies have been murdered in abortion facilities across the United States.

The Economic Collapse

By Karl Denninger

With all the screaming going on this weekend by various market prognosticators – and the truly pitiful performance Friday late, I thought I’d try to put forward some balance on this Independence Day.

First, Gold. 

Momentum is unfavorable and the close under the 50MA not positive at all.  Short-term regaining and holding the 50MA, and preventing it from turning downward, is critical.  Should that fail first-level support is around the 1160 level and second-level around 1075 – the latter, however, is under the 200MA and isn’t very likely to hold if we get there.

This isn’t the sort of pattern you want to see if you’re bullish on Gold.  I’ve talked about it for months now – the original triple-ascending slope is a relatively-common and dangerous parabolic blow-off sort of move.  Gold then fell through the second trendline and wallowed along the lowest-slope one for over a month, leading many to proclaim it as a “buying opportunity.”  I warned on the 28th that if it did not regain that trendline with at least a chart pin in the next few days a huge selloff was likely, and what’s exactly we got.

Yes, that is a 50/200MA “Death Cross” – by a fraction of a point, but it is indeed. The S&P 500 looks like total crap on a daily chart, with only one little glimmer of hope – stochastics, which imply a short-term bottom may be at hand. The key here is “short-term.”  It seems that everyone is looking for a crash ala 1987 – they rarely happen when everyone is looking for it, of course.  Indeed, those placing bets on it tend to provide exactly the fuel for short-covering rallies that stop it from happening with the smallest pretext. 

Calling crashes is a fool’s game.  What one can say, however, is that this current decline – 10 days of red with one tiny spinning top in the middle – is the worst consecutive string of declines in this Bear Market, including the October 2008 nastiness (in which we managed to string eight together, including a massive reversal on the last day on 10/10.)  In point count it’s not the worst, but in terms of the relentless nature of the ”grind downward” it sure is.

If you recall my earlier writings I said that while you might not feel like the market was crashing it wouldn’t really matter in terms of the impact on your account if you stayed too long in the game.  Such it now appears to be.  The weekly chart makes the problem more-clear:

That’s the 13/34 weekly exponential moving average, one of the long-term timing signals that I follow.  Back in September of last year when it crossed positive I opined that I was not going to put my long-term funds back into the market on the signal, even though a purely-mechanical trading system would call for exactly that.  This is what I fully expected to happen, and is why – it is virtually impossible to avoid a sell signal now on that indicator unless we were to rally beyond 1100 this week.

80 points straight up?  I kinda doubt it.  But the buy was at 1010, which means right now you’re a paltry 1.2% to the good if you followed that signal.  Blech.

The 20/50WMA (another long-term timing signal I’ve covered in the past) crossed at 1005, incidentally, and remains reasonably-apart now, with the 20W at 1129.72 and the 50W at 1091.86.  The danger here should be obvious – you could easily be well underwater before you get a SELL on that indicator.  Again, back when it crossed I said I was not going to follow it this time, and this is why – the insane divergence in slope of the indicator and price at the time it crossed positive meant you could easily be 10 or even 20% underwater before you got a SELL if it turned out badly – the risk was simply too high for long-term (defined as “intended to be in the market for five years or more”) money.

To those who argued with my logic at the time – how’s it looking now?  Remember, these are mechanical signals – if you’re going to trade them you have to trade them as they come.  In the fullness of time, I like my decision from last fall, despite all the people telling me I was “nuts” and that we were “in a new bull market” last year.

Scoring the 2010 Look Forward Ticker, I get the following thus far:

• This is not a new bull market: Any questions?
• The long end of the Bond Curve will move higher.  Miss thus far.  Quite possibly a massive miss, but we shall see.  My personal nightmare scenario is a back-half selloff in equities, bonds and the dollar.  That leaves Benny and Friends with damn little room to act.  So far, however, this is a clean bust.
• House prices will fall another 20%.  Not yet, but the year is not over.  This much we do know – there has been no material increase in prices.
• Banks will “give up” on holding real estate.  They’re doing it.  And everyone is trying like hell to shove back their bad paper.  I believe this tend will continue to accelerate.
• Credit will not ease for “ordinary people.”  It hasn’t.  Bullseye.
• A massive second wave of small-business bankruptcies.  I couldn’t have predicted the oil leak, but damn, you should have seen the Destin Commons last night for the fireworks.  Easily down by half on traffic from last year.  The government continues to say that small businesses are firing rather than hiring, so this looks good so far.
• Unemployment will appear to stabilize, but that will prove illusory.  We got the first half, now let’s see if the second pans out.
• The “revolting” call for last year was early – but not wrong.  Greece anyone?  That’s not over – by a long shot.
• The states will go to the government well, but it won’t matter.  Bingo.  Ill-noise has become the poster child on this one.  Gee, where’s Obama from again?  Interestingly enough the states haven’t gotten bailed out – at least not yet.
• A “double dip” will be recognized.  Lotsa talk so far.  ECRI’s LEI complex says it’s in the bag.  I agree as this was exactly what I was looking to happen.  We’ll see.
• China will lose control of their bubbles.  Looks like they may be.  The PMI report recently is likely just the first of big trouble over there.  Beware.
• Canada’s real estate market will crack.  Creaking, but not break – yet.  So far in line with expectations.
• The Fed’s games will “leak” and their credibility will be shaken.  Heh heh heh…. yep.  I could spend five Tickers on this one; the “junk bond” fiasco is just part of it.
• The Democrats lose big in the House.  November approacheth.
• Congress tries to spend its way out – and fails.  No bond market dislocation yet, but I don’t like those TBAC reports nor do I like the updated GDP and debt graph. 
• One or more of the PIIGS is forced into austerity.  Bullseye!
• Contrary to virtually EVERY “investment pundit” return OF capital will re-assert itself.  Uh huh.  1220 to 1022 in less than two months, all gains from early September 2009 gone.

Six months left to falsify any of these, or prove ‘em up.  So far, however, I like how this is playing out.

Short-term there are just too many people calling for an immediate collapse down another 130-150 handles, or roughly 15%.  While this could happen – indeed, crashes come from severely oversold conditions, the odds do not favor this.  Instead, the more-likely path is to scare the living bejeebus out of people and then rally like a SOB, trapping all the bears that got too aggressive and cocky in their short positions and destroying their accounts – then the market falls apart.

Speaking of which, this is a good time to talk about general strategies – specifically, being short in a deflationary environment.

Sure, you can make money.  But let’s look at this objectively.

Being short a $100 stock has a maximum possible profit of 100%.  That is, the stock can go to zero, and you get to keep the entire $100.

But consider the $100 stock that goes to $10 and doesn’t bankrupt, but then recovers.  If you buy at $10 you have 10x your original investment, or a profit of 900%.

The fallacy of “holding through downturns” also applies.  If you start with a $100 stock and it loses half, you now need a double to get back to even.  If it loses 90% you need a ten bagger to get back to even.  The Jim Cramers of the world will try to tell you that there’s a decent strategy for this sort of thing if you get caught holding stocks into a big dump. 

I disagree.

For most, if not nearly all, people who are in the market they have absolutely no business trading actively.  This is particularly true in markets like this, where 2, 3 even 4% swings on a daily basis have become commonplace.  While the last year has seen these be nearly all upward, the last few weeks and months has seen it be nearly all down.

For the long term investor the point is to wind up with more money than you started with – in purchasing power – over a 10, 20 or 30 year horizon.  You cannot afford big mistakes as they will force you to take big risks in order to recover, and if you’re wrong on the latter you will wind up with a destroyed account. 

Speculation is an entirely different thing.  There has been good money to be made in the last few years and with the volatility being what it is there will be plenty to be made for years to come.  But the wise long-term money isn’t short in this market – it’s out and has been since the end of 2007, when I (and a very few others) called “everyone out of the pool!”

Always remember that it’s risk-adjusted return that matters.  If you wish to gamble with 1/20th of your net worth, have at it.  As you make gains take them and move them to your long-term accounts and sit on them.  Gamble with the house money and so long as you do so effectively, keep at it.  No harm there at all.

Near the lows in 2009 I was selling $5 PUTs on GE like a mofo, trying to get intentionally assigned.  Why?  I didn’t believe GE would go bankrupt, and I was willing to buy tens of thousands of shares at $5 each.  GE never traded $5 and I got to keep the premium from those PUTs I wrote.  C’est la vie.

The key to making a true fortune in anything folks is to buy smart – not sell smart.  This is something I’ve learned through my entrepreneurial affairs.  MCSNet was successful in large part because I was a bare-knuckled negotiator for what I needed to acquire for the company. In short, I was a hard-nosed SOB and made no apologies for it, as that’s how you make money legitimately in any business venture.  If you buy smart making money is easy.  If you have to sell smart you’re always one mistake away from massive losses and potential bankruptcy. 

Nobody is good enough to bat 1,000.  600, 700, sure.  1,000?  Nope.  Not unless you’re God – or are cheating.

During The Depression people who had capital and sat on it were able to buy stocks at extremely cheap prices.  But they didn’t buy in 1930.  They bought during the second downward move, in 1932 and 33.  They bought at an 80% or 90% discount, not a 60% one.  They were able to buy houses, machine tools, land, all for a literal nickel on the dollar.  They didn’t get rich fast, but they became rich with certainty over time, because they bought smart.

Such it will be this time, just as it was last time.

There are a lot of people who have been chasing real estate at “half off.”  They’re fools.  I’m a buyer at 90% off with both fists.  Ditto for stock in companies I believe will survive.  Sure, I’ll be wrong about some of them, but the others will be 10 baggers.  Until then I’m a patient man with my capital, happy to speculate short-term with small amounts of my “nut” but ever-mindful that it’s when you buy, not when you sell that matters.

There is no reason in a deflationary environment, which we are now in, to add beta to your long-term funds.  The cowboys who want to do that with their entire net worth are welcome to it – you’ll still have a place to live when they blow up and are under a freeway overpass.  Most of them will – indeed, while there is always someone who claims to have “nailed it” ex-post-facto for each big market move, you’ll note if you bother to view things through an objective lens that 100 people had opinions prior to the move and only one of them still has an account with a positive balance in it.  Worse, that person’s prognostications for what’s to come next are almost-certain to be dead wrong.

There were many who predicted in the summer of 2009 that we were “up up and away” and would “exceed the 1576 SPX high” some time in the next two years.  If you listened to them in September of 2009 you’ve lost all your gains.  If you listened to them after that point you now have a loss.  It matters not what someone does over the short term – what matters is whether they can manage their portfolio over ten or twenty years and, including what they spend to live on, whether they still have it.

Jesse Livermore thought he could beat those odds – and the math.  He went from being extremely wealthy to broke several times during his trading career, having made $100 million in the 1929 market crash – at a time when $100 million was roughly equivalent to a few billion today. 

In 1940, having lost all of it, he blew his brains out in a cloakroom.

Don’t be Jesse.

The Market-Ticker

By Jeff Sommer

WITH the stock market lurching again, plenty of investors are nervous, and some are downright bearish. Then there’s Robert Prechter, the market forecaster and social theorist, who is in another league entirely.