FedUpUSA

Archive for the ‘Wall Street’ Category

Everywhere you turn these days, someone is proclaiming that the economy is improving.  Barack Obama is endlessly touting the “improvement” in the economy, the mainstream media is constantly talking about “the economic recovery” and an increasing number of Americans seem to be buying into this line of thinking.  A new NBC/Wall Street Journal poll found that 37 percent of Americans believe that the economy will improve over the next year, while only 17 percent of Americans believe that it will get worse.  But is the economy actually improving?  Not really.  At the moment things are relatively stable.  Some economic statistics are improving slightly and some continue to get even worse.  However, it is very important to keep in mind that one of the biggest reasons why things have stabilized is because the federal government is pumping more than a trillion dollars a year into the economy that it does not have.  The Obama administration is engaging in a debt binge unlike anything America has ever seen before, and yet many economic indicators are still in decline.  So what is going to happen when the federal government stops injecting gigantic waves of borrowed money into the economy?  That is a frightening thing to think about.  The best efforts of our “leaders” in Washington D.C. are not accomplishing a whole lot.  The Federal Reserve has pushed interest rates as low as they can go and the federal government is spending unprecedented amounts of money.  But even with the federal government and the Federal Reserve pushing the accelerator all the way to the floor, the economy is still not improving much at all.  Millions upon millions of Americans out there are anticipating some sort of a “great economic recovery”, and they are going to be bitterly disappointed.

But right now there are some “bright spots” in the economy, and you are bound to run into family and friends that will repeat to you the nonsense that they are hearing on the television about how the economy is recovering.

When they try to convince you that the economy is getting better, ask them these questions….

If the economy is getting better, then why did new home sales in the United States hit a brand new all-time record low during 2011?

If the economy is getting better, then why are there 6 million less jobs in America today than there were before the recession started?

If the economy is getting better, then why is the average duration of unemployment in this country close to an all-time record high?

If the economy is getting better, then why has the number of homeless female veterans more than doubled?

If the economy is getting better, then why has the number of Americans on food stamps increased by 3 million since this time last year and by more than 14 million since Barack Obama entered the White House?

If the economy is getting better, then why has the number of children living in poverty in America risen for four years in a row?

If the economy is getting better, then why is the percentage of Americans living in “extreme poverty” at an all-time high?

If the economy is getting better, then why is the Federal Housing Administration on the verge of a financial collapse?

If the economy is getting better, then why do only 23 percent of American companies plan to hire more employees in 2012?

If the economy is getting better, then why has the number of self-employed Americans fallen by more than 2 million since 2006?

If the economy is getting better, then why did an all-time record low percentage of U.S. teens have a job last summer?

If the economy is getting better, then why does median household income keep declining?  Overall, median household income in the United States has declined by a total of 6.8% since December 2007 once you account for inflation.

If the economy is getting better, then why has the number of Americans living below the poverty line increased by 10 million since 2006?

If the economy is getting better, then why is the average age of a vehicle in America now sitting at an all-time high?

If the economy is getting better, then why are 18 percent of all homes in the state of Florida currently sitting vacant?

If the economy is getting better, then why are 19 percent of all American men between the ages of 25 and 34 living with their parents?

If the economy is getting better, then why does the number of “long-term unemployed workers” stay so high?  When Barack Obama first took office, the number of “long-term unemployed workers” in the United States was approximately 2.6 million.  Today, that number is sitting at 5.6 million.

But there is some good news.

When Barack Obama first took office, an ounce of gold was going for about $850.  Today, the price of an ounce of gold is over $1700.

The era of great prosperity that America has enjoyed for so long is coming to an end.

In fact, our long-term economic decline is about to accelerate.

So enjoy this “bubble of hope” while you can, because it won’t last long.

As I have written about previously, many are warning that Europe is on the verge of a nightmarish financial crisis that could potentially plunge us into a global recession even worse than 2008.

So let us hope for the best, but let us also prepare for the worst.

Just because the economy is about to go through hard times does not mean that you have to go through hard times personally.

Right now, you can decide to make an investment or start a business that will thrive in a tough economic environment.

Victory often goes to the most prepared.  So don’t just sit there while the storm clouds gather.  Instead, this should be a time when you are gathering resources and developing a gameplan for the coming economic chaos.

Those that choose to have blind faith in “the system” are going to be tremendously disappointed in the years ahead.  Just because you have a job right now does not mean that it is always going to be there.  Just because your stock portfolio is doing well right now does not mean that will always be the case.

Hopefully we all learned some important lessons from 2008.  The global financial situation can turn on a dime.  When markets fall apart, they tend to do so very rapidly.

Ultimately, the debate about whether the economy is improving or not is going to be ended very emphatically.  When the next wave of the financial crisis hits, there will be no doubt about what direction things are going.

Don’t let the next wave catch you by surprise.

Now is the time to prepare.

The Economic Collapse

Congressional Testimony of William K. Black regarding the 2008 Lehman Brothers failure.  It’s fraud.  It’s all fraud and Congress has been advised.  They should no longer be allowed the plausible deniability of ignorance.

Now we’re talking…

60 Minutes’ December 11, 2011 interview of President Obama included a claim by Obama that, unfortunately, did not lead the interviewer to ask the obvious, essential follow-up questions.

“I can tell you, just from 40,000 feet, that some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn’t illegal.”

http://www.cbsnews.com/8301-18560_162-57341024/interview-with-president-obama-the-full-transcript/?tag=contentMain;contentBody

Obama did not explain what Wall Street behavior he found least ethical or what unethical Wall Street actions he believed was not illegal. It would have done the world (and Obama) a great service had he been asked these questions. He would not have given a coherent answer because his thinking on these issues has never been coherent. If he had to explain his position he, and the public, would recognize it was indefensible.

Bill is a very bright guy who I’ve interviewed on Blogtalk before.

His blind spot is in his failure to recognize the deadly embrace between Congress, the Executive and the Banks.  Without the bubbles that the banks inflate Congress and The Executive cannot overspend, and without that offshoring of jobs cannot happen, the looting cannot happen, none of it can happen.

In short you have Bill’s criminogenic environment but in point of fact it is mutually profitable for everyone except the ordinary person.  He gets serially raped by these practices.  The truth of not only the underlying practice but its duration is found in my now-many-times-reproduced chart:

There is no resolution to this problem that does not put a stop to the behavior that causes that chart to come into existence and be maintained.

There is also no financial stability possible until this practice ends.

Government cannot spend more than it takes in via taxes.  It’s that simple.  Nobody wishes to deal with this but it is the intentional refusal to deal with this fundamental truth head-on and live within it’s confines that leads to all of these frauds.

In 2007 and 2008 I started publishing The Market Ticker focusing on this exact point and the abuse of leverage in the financial system.  Nobody wanted to hear it.  Then the 2008 collapse happened.  You’d think that the pain of that collapse would have forced the government to act, to force financial institutions to pull that leverage out of the system and reverse their perversities, to put a stop to the stupidity.  Perhaps support for a short period of time while that was done would have been reasonable, perhaps not.

But none of that happened.  Instead, what happened is that the support was provided and the government did it level damned best to prevent the removal of the leverage that was endemic in the system.  Specifically, everything possible was done to prevent the clearing of home prices and deflation of those “values” (which were utter and complete crap – and still are.)

Now we’re doing the same crap: This morning it is reported on CNBC that European banks are buying sovereign debt at 5% coupons and borrowing the money from the ECB at near zero for three years.  This is a scam as BASEL allows them to buy these bonds with zero capital!

This is a doomsday trade: If the trade “works” and there is no blowup they’ll make more money than they’ve ever made before.  If it blows up the guys on the other side of the trade will get zero because they can’t pay.  Instead of leverage coming out it’s being added!

This crap has to stop.

Bill closes his column (and you should read the whole thing) with:

To date, Bush and Obama have prosecuted none of the mortgage frauds in the top nine levels. I urge reporters to ask him to explain three things about his statements to 60 Minutes. • Why are there no prosecutions of the felons that drove the crisis and occupy the nine worst rungs of unethical and destructive acts? • Explain the five unethical acts by elite financial institutions that you consider the most destructive and least ethical – but which you believe to be legal. How do you rank the degree of unethical conduct and destruction in those acts? • What specific statutory provisions did you propose to make those five unethical acts illegal? As enacted, which provisions of the Dodd-Frank Act made those five unethical acts illegal? Who has been prosecuted for those formerly legal but seriously unethical and destructive acts that were made illegal by the Dodd-Frank Act?

Reporters will have to be persistent in coordinating their follow-up questions to get Obama to provide direct answers to these questions. I request that private citizens write President Obama to ask him to provide specific, written answers to these three questions. I will be proposing a series of questions that I will urge citizens to demand answers to because it is clear that the regular media will rarely ask demanding questions of elite politicians or bankers. It is up to us to hold them accountable and end the doctrine of Presidential Amnesty for Contributors.

The important factor here Bill is that it’s not just PACs, although certainly “money in politics” hasn’t helped.  It’s the fact that no matter where you look Congress and The Executive have not only bought into the scam of ever-increasing leverage in the system they have been some of the worst abusers of this by making political promises that cannot be fulfilled any other way.

We will never address the true cause of the problem until we come to understand and accept that the promises made by the political class to Americans in the form of forward entitlement promises and similar games in the federal budget process are part and parcel of the scam and they are entirely reliant on the banking system running a serial bubble machine and never being forced to reconcile their books lest all of those promises disappear in a puff of smoke!

Neither left or right sides of the aisle will tell the truth about this — but in fact we must if we are to ever find economic stability.

The Federal Reserve has been going back and forth with reporting from Bloomberg regarding the massive bailouts and loans made to the financial sector during the crisis.  What is rather astonishing is the ability to discuss trillions of dollars of loans made to largely irresponsible financial institutions with absolutely no oversight.  Like an angry couple on Maury Povich, only an objective outsider can see how dysfunctional the relationship has become.   All of this happened in the shadows.  What is more astonishing is a large amount of questionable assets that were shifted from bank balance sheets are still sitting comfortably in the balance sheet of the Federal Reserve.  This is not disputed.  Profits at banks are on the rise but it is hard to lose money when you have unlimited access to taxpayer bailouts and the ability to dilute the currency of the nation.  U.S. banks hold $9.7 trillion in deposits with a FDIC Deposit Insurance Fund (DIF) that currently has $7.8 billion.  Do the math on that one.

A glance of U.S. banking data

Here is a nice snapshot of U.S. banking data:

Source:  Bank Tracker

What is the most amazing fact is that over $9.7 trillion in deposits is backed by a measly $7.8 billion.  This is like trying to stop a hurricane with a paper napkin.  Most Americans are earning virtually nothing on their deposits at banks but what other options are available?  Should they enter the highly volatile and opaque stock market?  When a typical savings account is paying close to 0 percent it is hard to digest but the volatility of the stock markets for this entire year have rendered a nearly neutral result.  Even money market accounts have fallen strongly since the recession hit:

“The typical money market account is down over 80 percent since 2006.  It isn’t like inflation has suddenly disappeared or that our debt problems have gone away like dust in the wind.  To the contrary the economy has gotten much more mired in a stagnating funk.”

Banks are back at making profits but it is hard to lose when you have unlimited taxpayer bailouts:

Source:  FDIC

While the Federal Reserve was trying to cast doubt on the results published by Bloomberg, they failed to address the massive amount of “assets” that remain on their balance sheet.

Read the rest at My Budget 360

An array of evidence suggests that a crash in equities might be just ahead.

I know, I know, retail sales are up so everything’s wunnerful, but the captain of Global Equities Flight 2011 just instructed the passengers to assume crash positions. It seems the captain has the distinct advantage of being able to see what’s just ahead, not to mention being able to monitor the engines and fuel levels. (Hmm, did the starboard engine just conk out? Not good….)

Levity aside, there are unnerving similarities between the present and the pre-crash 2008 equities market. To make the case, let’s turn to some excellent charts from The Chart Storeand Ron Griess.

In the first chart, Ron has traced out the basic pattern and the percentage of stocks above their 200-day moving average (MA). Notice how weak that is compared to price.

Next, a chart which shows we’re right where the 2008 rally topped and tanked.

Last up, one of my favorites, an analog chart that overlays the present-day rally over the 1907 crash and rally. It is uncannily similar until QE2 saved the day for a few months. That pushed the present out beyond the 1907 line, but then current prices began falling until the most recent “6-week wonder” prop job once again saved equities from collapse.

Apparently we’re supposed to believe that channel-stuffing auto dealers and Americans-self-medicating-with-shopping-on-credit are really going to power the economy to ever greater heights of sales and profits. Anything’s possible, but despite the cheer and the constant calls for a year-end rally to end all rallies, the market is looking a little uncertain here.

Consider the broad-based Russell 2000, which seems to have traced out a beautiful head and shoulders pattern, as good a precursor to a crash as you can get.

The last time the RUT looked this ugly, the Powers That Be pulled one save after another out of their bag of tricks. Despite brave talk from Fed lackeys that “we have more amazing stimulus plans right here,” everyone knows they’ve shot their wad and have been reduced to playing around with Treasury yields that won’t do anything for the real economy. So all that brave talk about the next big Fed-rides-to-the-rescue is just that, hot air and paper-thin bravado.

For a very insightful chart of the RUT from a razor-sharp analyst, please see Technical Perspective: Repetition in the Russell 2000(Chris Kimble).

Zooming in a bit, let’s take a look at the S&P 500, where we see a classic wedge/pennant, the sort of thing that breaks big up or down. Given the abundant evidence of weakness, not to mention the potential for outright panic in global credit markets, does anyone not being paid to lie really think the probabilities favor a breakout here to the upside? Based on what? I know, I know, “seasonal patterns.” In other words, we’re depending on Santa to deliver the rally everyone needs to stay solvent.

It doesn’t take much imagination–none, really–to see the similarities between the July topping-out and the present. If volume is the weapon of the Bull, then everyone betting on the next big rally has to explain why volume has been declining.

Rather than get distracted with how much low-quality crap gets sold at loss-leader prices on November 25, we might be better served to focus on the U.S. dollar.As everyone knows, equities and the buck have been on a see-saw for a long time. If the dollar rises, equities drop. If the dollar rises a lot–for any reason, or no reason, it doesn’t matter– then equities crash.

If the euro weakens, the dollar rises. If the dollar rises, equities weaken. If there is anything else to know about the current equity market, how much can it possibly be worth?

He who sells first sells best. Something to ponder in the weeks ahead.

Charles Hugh Smith – Of Two Minds

The young and the broke – 37 percent of young households held zero or a negative net worth in 2009.  The median net worth of those 35 and younger is $3,600.

It is hard to imagine a future generation of Americans were those moving forward are actually poorer than the current generation.  Yet that is precisely the world we are diving into.  Those that purchased homes in the pre-bubble days and also attended college in less inflated times have a massive head start on the current younger generation that is contending with a bursting housing bubble and a financial system that might as well be a roulette wheel.  One startling figure from a recent Pew Research report shows that 37 percent of young households hold zero or a negative net worth.  This is not a good way to build a healthy financial future.  The wealth gap between previous generations is also becoming increasingly large.  This narrative ties into the overall systemic pilfering of the middle class.

How large is the net worth gap?

The gap between younger and older Americans has never been so large:

Source:  CNN, Pew Research

“(CNN Money) In 1984, households headed by people age 65 and older were worth just 10 times the median net worth of households headed by people 35 and younger.

But now that gap has widened to 47-to-one, marking the largest wealth gap ever recorded between the two age groups.”

A large part of this gap has to do with the timing of the housing bubble.  Many younger Americans bought during inflated times while Wall Street banks were pillaging the entire system.  Older Americans purchased homes during a time when Glass-Steagall was still in place and the bulk of loans made in the housing market came from stale fixed rate mortgages.  Yet I would also argue that the cost of college today is sapping out a large portion of future earnings.  We have seen a diminishing return on investment for college graduates:

Source:  BusinessWeek

A college education is becoming more expensive while the return on investment is falling.  A similar trend hit in the housing market.  Yet the gap in just one generation has catapulted into a tragic scenario.  In 1984 households headed by those 65 and older held a 10 time median net worth advantage on households headed by those 35 and younger.  That figure is now up to a stunning 47 today.  A gap is always expected as those who are older have time to save and accumulate but the size of the gap is troubling.

Read the rest at My Budget 360