The VRTrader.com VR Silver Newsletter - Monday 1/25/2010
"Tools for the High Performance Trader"
Copyright ©2010, All rights reserved.
Redistribution in any form is strictly prohibited.
"Tools for the High Performance Trader"
Copyright ©2010, All rights reserved.
Redistribution in any form is strictly prohibited.
LEIBOVIT FILES | by Mark Leibovit
Leibovit Files
Monday, January 25, 2010
A Shot Across The Bow For Equity Markets!
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I will be also speaking at the 2010 PHOENIX INVESTMENT CONFERENCE AND SILVER SUMMIT
Renaissance Glendale Hotel and Spa
9495 W.Coyotes Boulevard, Glendale, AZ
Thursday / Friday, February 4 - 5
Here is the link with a promo code: http://cambridgehouse.com/email/jan1210pho...x_leibovit.html
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UPCOMING ECONOMIC RELEASES/MARKET EVENTS
JANUARY 25 - 29, 2010:
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MONDAY, January 25, 2010:
Existing Home Sales
10:00 AM ET
4-Week Bill Announcement
11:00 AM ET
3-Month Bill Auction
11:30 AM ET
6-Month Bill Auction
11:30 AM ET
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TUESDAY, January 26, 2010:
Turnaround Tuesday
FOMC Meeting Begins
ICSC-Goldman Store Sales
7:45 AM ET
Redbook
8:55 AM ET
S&P Case-Shiller HPI
9:00 AM ET
Consumer Confidence
10:00 AM ET
FHFA House Price Index
10:00 AM ET
State Street Investor Confidence Index
10:00 AM ET
4-Week Bill Auction
11:30 AM ET
2-Yr Note Auction
1:00 PM ET
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WEDNESDAY, January 27, 2010:
Bank Reserve Settlement
MBA Purchase Applications
7:00 AM ET
New Home Sales
10:00 AM ET
Tim Geithner Speaks
10:00 AM ET
EIA Petroleum Status Report
10:30 AM ET
5-Yr Note Auction
1:00 PM ET
FOMC Meeting Announcement
2:15 PM ET
President Barack Obama delivers State of the Union address to Congress.
9:00 PM ET
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THURSDAY, January 28, 2010:
Durable Goods Orders
8:30 AM ET
Jobless Claims
8:30 AM ET
EIA Natural Gas Report
10:30 AM ET
3-Month Bill Announcement
11:00 AM ET
6-Month Bill Announcement
11:00 AM ET
7-Yr Note Auction
1:00 PM ET
Fed Balance Sheet
4:30 PM ET
Money Supply
4:30 PM ET
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FRIDAY, January 29, 2010:
GDP
8:30 AM ET
Employment Cost Index
8:30 AM ET
Chicago PMI
9:45 AM ET
Consumer Sentiment
9:55 AM ET
Farm Prices
3:00 PM ET
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STOCKS - ACTION alert -
Look to buy inverse ETFs on a market rally for a potential downled to SPX 1030-1050, TSX 10,200-10,500 and Dow Industrials 9500-9700.
After a bad week in the markets, many are pointing fingers at what went has gone wrong with the economy and the markets. The government stimulus has not and will not get traction which is the current problem. Money has gone to the wrong place.
The truth?
Wall Street was and is corrupt and caused the problem and the government due to its close ties to Wall Street bailed them out, but did not bail out anyone else. In other words, it was the victums that needed to be bailed out not the institigators (the perpetrators). Politically, there is an outrage and further bailouts to Wall Street will become more difficult.
Ultimately, we're likely headed for another American Revolution, especially if the economy and the markets nosedive again in coming years. Could we be headed into another Great Depression? We will know in the 2012-2017 period - a time frame where long-term cycles 'nest' and where such a risk exists.
Above I wrote: "A Rally First, But We're Entering a Bear Market Year!" We're clearly in a first-quarter correction, but, frankly, it came earlier than I expected. Normally, we would see the lows around mid-March. Perhaps this time cycles will invert, but we won't know until we get there. Unless you're inclined to play inverse ETFs or short, I told you in recent days that the best place was to be was in cash.
The Dow Industrials could very well decline another 1000 points from here (or more later), so you should be looking for entry points to play for a further short-term decline. Tuesday, is a potential 'Turnaround Tuesday', so the current downleg may hit a wall then, however, until we get a clear sign of a bottoming process, let's be patient.
The stock market got crushed on Friday, falling for the third consecutive day, after earnings reports came in mixed, with GE and McDonald's exceeding expectations, but Google, American Express, and Capital One disappointing. Misguided political proposals are also weighing on the market. The bulls tried to lift the market before noon on Friday, but the bears won out and the stock market finished at the lows of the day. The Dow fell 216.90 or 2.09% to 10,172.98. The S&P lost 24.72 or 2.21% to 1091.76. The NASDAQ declined 60.41 or 2.67% to 2205.29.
Weighing on the market Friday was news that the Democrats may not have the votes to reconfirm Ben Bernanke as Federal Reserve Chairman. While I certainly support non-confirmation of Bernanke and favor complete elimination of the Fed, as you already know, there is no denying that these things would be bad for the stock market in the short term.
The market also remained under pressure by Thursday's announcement from President Obama of plans to limiting the amount of risk large banks could take, thus prohibiting commercial banks from trading. Financials (XLF) fell another 3.26% Friday after declining 2.85% on Thursday. Financials were also weak after disappointing earnings from American Express and Capital One (see earnings section below).
Technology (XLK -3.48%) was the biggest loser on Friday after disappointing earnings from Google and AMD (again, see earnings section below).
All the major market indexes are now below their 50-day moving averages. Only the small and mid cap indexes (Russell 2000, S&P 600, and S&P 400) are above that key level. Eight of the nine market sectors are trading below their 50-day moving averages.
Earnings have been strong so far this season. Revenues have been as well, though not as strong. At Thursday's close, 70 of the companies in the S&P 500 Index had reported fourth-quarter results, with 79% beating expectations for the bottom line, 3% matching and 19% falling under consensus forecasts. The 79% figure is unusually high, compared with the 15-year average of 61% of S&P 500 companies topping expectations. If that 79% holds through to the end of the reporting season, it would tie the record-high percentage tallied in the third quarter. Of the 69 companies that reported revenue numbers, 65% topped expectations; none matched and 35% offered results that came in below estimates. As a result, it is aforementioned politics that is hurting the stock market.
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DOW TRANSPORTS - ACTION alert -
Look to short IYT (Dow Transports ETF) for a potential move in the Dow Transports to 3600.
Transportation stocks fell with the market on Friday with all but one of the Dow Transport stocks declining (Southwest Airlines was unchanged). Not even falling oil prices have been able to lift the Transportation sector. The Dow Jones Transportation Average fell 88.74 or 2.17% to 4005.08.
The Dow Transports closed on Thursday right at its 50-day moving average, only to blow through that support on Friday. The Transports are now trading at their lowest levels since December 2.
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GOLD and METALS - ACTION alert -
Though I am a long-term bull, Gold is signaling a potential move to 1000 or less and I am awaiting a clear buy signal to jump back into this market.
Precious metals fell sharply on Friday, especially platinum and palladium though gold recovered to close with just a small loss, as inflation concerns disappeared amid worries that the economy is weakening and as traders worried about demand, especially with commercial bank trading is under attack. Gold fell 1.60 to 1099.40, but traded as low as 1080.90. Silver fell 0.40 to 16.97. The effects of the new Platinum and Palladium ETFs have worn off. Platinum dropped 49 to 1547 and palladium declined 18 to 431.
Copper bounced back after hitting a new one-month low of 3.2670, settling up 0.0520 at 3.3470.
As I wrote last week, President Barack Obama's proposed tougher bank regulations may result in less money flowing into commodities markets. This is hurting both metals and energy. Regardless, it is only temporary.
The VR Gold Letter is available to Platinum subscribers for only an additional $50 per month and to Silver subscribers for only $70 per month. Email me at to sign-up today!
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BONDS - ACTION alert -
Still looking to buy bonds under the market as contra-play to the stock market correction.
Treasuries rallied on Friday as traders fled the suddenly uncertain equity market and moved toward safer Treasury bonds. The long bond future gained 7/32 to 118 27/32 and hit a 5-week high of 119 3/32 Friday morning
With no economic reports on Friday, traders were looking forward to this week's auctions of $118 billion in notes. The Treasury Department will sell $44 billion in 2-year notes on Tuesday, followed by $42 billion in five-year debt the next day. It will also auction $32 billion in seven-year notes on Thursday.
Traders also expect more corporate deals, as companies continue to find market conditions favorable. Companies have sold $96.7 billion already this month, including $4 billion from Morgan Stanley on Thursday and $2.25 billion from Simon Property Group on Tuesday.
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CRUDE OIL - ACTION alert -
Crude Oil appears headed lower, but it's oversold here and should bounce. I am not particularly interested in playing Crude Oil on the short-side, particulary with geopolitical uncertainties day to day, but will keep an open mind if a clear trade unfolds.
Oil got hit on Friday, trading at its lowest level in a month, on the continued economic concerns and worries that Obama's plans to limit trading at commercial banks will reduce demand for oil futures. Crude oil fell 1.54 to 74.54.
Natural gas rose, though, after Thursday's inventory report showed a larger than expected drawdown in supplies. Natural gas gained 0.204 to 5.819, but staying in that 5.40 to 6.10 range.
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US DOLLAR - ACTION alert -
The US Dollar is terminal. Terminal as the definition of 'dead'. You can listen to all the jawboning from Washington or Wall Street, but when Russia decides to buy Canadian Dollars and Venezuela, Cuba and possibly Brazil are allied with Iran in the western hemisphere, think about it. How about all the rich gold and silver mines to the south in Mexico. That will become the true wealth, not paper U.S. Dollars. My prediction: You will come in some Turnaround Tuesday morning in the months or possibly years ahead (don't think it will be that long) and the Dollar is be devaluated possibly 50%. Gold will double or triple literally overnight and those who hold Dollars will be catatonic.
The US Dollar Index held steady on Friday as uncertainty regarding the US financial system, specifically Bernanke's reconfirmation and Obama's plan to restrict commercial banking, was offset by a flight to safety caused by the recent decline in equity markets. The US Dollar Index slipped 0.043 to 78.277.
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URANIUM - ACTION alert
The true solution to energy on the planet is the use of uranium. Not solar, not wind power, not geo-thermal, not renewable biomass energy, etc. This will only fill in some missing gaps. Nuclear power can provide infinite power at minimal cost. When the lights go out and the environmentalists are sitting freezing or without food, the realization will come, but will it be too late? Who can't help but admire France for generating 85% of their energy through nuclear power. Unfortunately, the world passing the US by and we're dumb enough to not to realize it. As Michael Savage says: 'Liberalism is a Mental Disorder'.
Ux U3O8 Prices* (Uranium)
January 18, 2010 Posting
Spot: $43.50 DOWN 1.00. Bull market high in the cash market was $138.00.
The February Uranium Futures closed at $43.25. The current bear market low is $42.00. June 13, 2007 hosted the bull market high of 154.95. Major support lies well under the market at $36.00.
The spot price of uranium quadrupled from 2004 to 2007. When it hit $138/lb, uranium became a certified bubble, which has now burst. For investors, this is the best possible news, of course. Nuclear power is the ultimate alternative fuel, as the French will tell you. You get all the power, 84% cheaper than coal, with none of the politics of rogue nations and none of the greenhouse emissions.
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ECONOMIC NEWS:
President Barack Obama said Friday he is confident that Federal Reserve Board Chairman Ben Bernanke will win a second term, despite some concern Democrats may remove their support for Bernanke -- one of the principle architects of the bank bailout plan -- in the new political environment without their 60-seat majority in the Senate. Concern about Bernanke's appointment grew this week after Obama said he wanted to put new restrictions on the nation's biggest banks.
CORPORATE NEWS:
General Electric Co.'s fourth-quarter net earnings fell 19%, weighed down by declines in its infrastructure and financial-services businesses, the company reported Friday. For the most recent quarter, the Fairfield, Conn., company said profit fell to $2.94 billion, or 28 cents a share, from $3.65 billion, or 35 cents, earned in the year-earlier period. Restructuring and other charges of nine cents a share were partly offset by benefits in the quarter, including one cent a share in transaction gains and a five-cent benefit from a lower industrial-tax rate. Analysts had expected GE to earn 26 cents a share, on average. Revenue fell 10% to $41.44 billion, ahead of analysts' mean estimate of $39.99 billion. GE didn't release a 2010 outlook. GE gained 0.6%.
McDonald's Corp. on Friday reported a 23% increase in fourth-quarter profit, helped by the weak dollar and higher demand from the U.S. and France to Russia and Australia. Net income rose to $1.22 billion, or $1.11 a share, from $985.3 million, or 87 cents a share, in the year-earlier period. Revenue rose 7% to $5.97 billion from $5.57 billion, Oak Brook, Ill.,-based McDonald's said. Excluding the benefit of currency translation, revenue would have been up 2%. The fourth-quarter bottom-line results include a 7-cent per share benefit from foreign currency translations and an 8-cent per share benefit from the resolution of certain liabilities, the company said. Analysts, on average, estimated the fast-food giant to earn $1.01 a share with revenue of $5.92 billion. MCD rose 0.3%.
Google said Thursday its fourth-quarter net income rose to $1.97 billion, or $6.13 a share, from $382 million, or $1.21 a share in the same period a year earlier. Net revenue rose to $4.95 billion, Google said. Excluding special items, Google said earnings for the quarter were $6.79 a share. Wall Street analysts have been expecting Mountain View, Calif.-based Google to post earnings excluding items of $6.48 a share, and $4.92 billion in net revenue. GOOG fell 5.7%.
Advanced Micro Devices on Thursday reported a fourth-quarter profit of $1.18 billion, or $1.52 a share, compared with a loss of $1.44 billion, or $2.36 a share, for the year earlier period. Revenue was $1.65 billion, up 42% from the same quarter the previous year. On an adjusted basis, the company posted a loss of 8 cents a share. Analysts had expected the Sunnyvale, Calif.-based chipmaker to report a loss of 17 cents a share, on revenue of $1.49 billion. AMD cited "net favorable impacts" from its legal settlement with Intel Corp. AMD lost 12.4%.
American Express reported a jump in quarterly profit late Thursday as the credit card giant set aside less money to cover bad debt. Fourth-quarter net income came in at $716 million, up from $240 million in the same period a year earlier. Income from continuing operations that's attributable to common shareholders was 59 cents a share versus 26 cents a share a year ago, the company added. Consolidated provisions for losses totaled $748 million, down 47% compared to $1.4 billion in the year-ago period, Amex noted. "The decline reflected continued improvement in credit quality during the latter part of 2009," the company said in a statement. AXP dropped 8.5%.
Capital One Financial said late Thursday that fourth-quarter net income came in at $375.6 million, or 83 cents per common share. That compares to a net loss of $1.45 billion, or $3.74 per common share, a year earlier. The credit card and banking company was expected to make 43 cents a share. Managed provision expense dropped by $353.5 million from the prior quarter, the company noted. COF declined 12.1%.
Kimberly-Clark Corp. reported lower fourth-quarter profit than analysts expected and set more somber predictions for 2010 than Wall Street's as the company faces rising ingredient costs and promotes its products like Kleenex to keep people spending. The company, based in Dallas, said Friday that higher prices on Huggies diapers and other products -- plus higher sales volumes -- lifted its fourth-quarter profit, but promotions it launched to maintain volumes cut into sales. Kimberly-Clark earned $492 million, or $1.17 per share, for the three months that ended Dec. 31. That's 17 percent higher than its profit of $419 million, or $1.01 per share, a year earlier. Analysts predicted Kimberly-Clark would earn $1.25 per share. Sales jumped 8 percent to $4.98 billion, helped by a weaker dollar as well as the price hikes, and topped analysts' forecast for $4.92 billion. The higher prices initially compensated for higher ingredient costs, but Kimberly-Clark hasn't rolled them back as those expenses fell. KMB slipped 1.4%.
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The Annual Forecast Model (VR Forecaster Report) is now posted at the website - so sign up today! Remember, there is no price too high for good information! Don't make the mistake of not subscribing. Last year's AFM warned in January we were entering a multi-month bear market! Gold-bug? Check on the AFM for Gold!
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Canadian TSE, TSE Venture and Canadian Dollar Commentary for our Canadian clients updated for Monday, January 25.
The Canadian market was hit on Friday, but less than the US market, as a weak Canadian Dollar made the decline in metals more bearable and should help Canadian exporters compete. And while Canadian financial stocks were hit hard, they were not hit nearly as hard as their US counterparts. The TSE fell 125.67 or 1.10% to 11,343.43. The TSE closed at its lowest end of day level since November 6. A Negative Volume Reversal ® was formed on January 12.
Canadian retail sales fell for the first time in four months in November on fewer car purchases, and as a milder winter led shoppers to skip buying warm clothes, the national statistics agency said. Sales fell 0.3 percent from October to C$35.2 billion ($33.4 billion), Statistics Canada said. Sales were expected to drop 0.2 percent.
Canada reported a C$4.36 billion ($4.13 billion) budget deficit in November after reporting a surplus a year earlier, as jobless benefit payouts rose and tax receipts fell. The country's deficit in the first eight months of the fiscal year that began April 1 was C$36.3 billion, the finance department said in a report published in Ottawa. The federal government in November 2008 had a monthly surplus of C$96 million and an eight-month surplus of C$39 million. Prime Minister Stephen Harper forecasts a record C$55.9 billion deficit this fiscal year because of slowing revenue, unemployment benefits and an auto industry bailout. Harper this week named a new minister to lead a government spending review that he says will help eliminate the deficit as the economy recovers, while a parliamentary budget officer says deficits will persist without tax increases or spending reductions. Program spending rose 15 percent in November from a year earlier to C$18.7 billion, led by a 57 percent jump in unemployment payouts. The number of people receiving regular jobless benefits peaked at 829,300 in June, and fell to 795,940 in November, Statistics Canada said. Revenue fell 12 percent to C$16.7 billion from November 2008. Corporate income tax receipts dropped 36 percent to C$1.48 billion, and personal taxes fell 11 percent to C$8.37 billion.
Bank of Montreal's long-term ratings were cut one grade by Moody's Investor Service, which cited unstable earnings potential from the investment banking business. The deposit rating for Canada's fourth-biggest bank and its units was cut to Aa2 from Aa1, the New York-based rating company said in a statement. The lenders financial strength rating fell to B- from B. The downgrade reflects Moody's view that "the bank's wholesale investment bank exposes the bank to greater earnings volatility than previously incorporated in its ratings and the fact that BMO allocates substantial capital to this business," Senior Vice President Peter Routledge said in a statement. Bank of Montreal has reported C$2.7 billion ($2.55 billion) in pretax charges related to capital markets, according to estimates from Moody's. The profitability of the Toronto-based bank will "remain constrained" due to weak earnings from its U.S. banking businesses in coming months, the ratings company said. BMO.TO decli ned 0.89%.
Energy 141.03 -1.88
Financials 167.07 -2.65
Health Care 35.37 -0.12
Industrials 95.22 -0.52
Information Technology 28.47 -0.37
Metals & Mining 1,051.23 -2.80
Telecommunications 77.84 -0.55
Utilities 195.33 -0.93
Resistance is 12,126, 12,968, 13,771, 13,889, 13,983, 14,157. Support is 11,249, 10,800, 10,600, 10,480, 10,384, 9500, 9300, 9140.
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TSE Venture:
The Venture held up better than the TSE or the US market as gold mining stock rebounded in the afternoon as gold's decline was small and made even smaller in Canadian Dollar terms by its decline. The TSE Venture fell 9.24 or 0.59% to 1549.67, hitting lows not seen since January 3.
Resistance is 1630, 1680. Support is 1534, 1521, 1493, 1483, 1469, 1403, 1383.
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THE CANADIAN DOLLAR (using the FXC Exchange Traded Fund):
The Canadian Dollar fell to a one-month low on Friday as traders sought the safety of the US Dollar, Canada announced weak economic news and low inflation last week, and a decline in commodity prices hurts commodity exporters, such as Canada, Australia, Brazil, and South Africa. FXC dropped 0.57 to 94.18. FXC posted a Negative Volume Reversal ® on January 15:
http://www.vrtrader.com/vr_platinum/GetVRChart.asp
The Canadian currency has dropped 2.7 percent since Jan. 15 in what would be the worst weekly performance since the five days ended Oct. 30. The Bank of Canada reiterated this week its conditional pledge to leave the target lending rate at a record low 0.25 percent until the end of June.
Resistance is 97.46, 98.00, 100.00. Support is 92.90, 92.10, 91.00, 89.75, and 85.18.
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TIMER DIGEST signals for Stocks, Gold and Bonds are available to Platinum subscribers on the Home Page.
TIMER DIGEST has named Mark Leibovit of VRTrader.com 'TIMER OF THE YEAR' for 2006 and was named the #2 Timer for 2007.
More kudos - Mark Leibovit was named the #1 Intermediate Market Timer for the 10 year period ending in 2007; the #1 Intermediate Market Timer for the 3 year period ending in 2007; the #1 Intermediate Market Timer for the 8 year period ending in 2007; and the #8 Intermediate Market Timer for the 5 year period ending in 2007. NO OTHER ANALYST SURVEYED APPEARED IN ALL FOUR CATEGORIES FOR INTERMEDIATE MARKET TIMING AS PUBLISHED IN TIMER DIGEST JANUARY 28, 2008!
Mark Leibovit was also named the #1 Gold Timer for the one-year period ending March 25, 2008. Most recently, from: 12/26/08 to: 03/27/2009, he is ranked in the #5 position for 3 month return.
Current TIMER DIGEST signals for stocks:
'Buy' signal March 4, 2009.
'Sell' signal May 27, 2009.
'Buy' signal July 21, 2009.
'Sell' signal September 2, 2009.
'Buy' signal September 3, 2009.
'Sell' signal October 15, 2009.
'Buy' signal November 13, 2009.
'Sell' signal November 30, 2009.
'Buy' signal December 1, 2009.
Current TIMER DIGEST signals for Gold:
'Sell' signal November 30, 2009.
'Buy' signal December 1, 2009.
Mark Leibovit is currently ranked the #2 Market Timer for the 3 month period ending October 23, 2009.
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Economic Black Hole:
20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover
Even though the U.S. financial system nearly experienced a total meltdown in late 2008, the truth is that most Americans simply have no idea what is happening to the U.S. economy. Most people seem to think that the nasty little recession that we have just been through is almost over and that we will be experiencing another time of economic growth and prosperity very shortly. But this time around that is not the case. The reality is that we are being sucked into an economic black hole from which the U.S. economy will never fully recover.
The problem is debt. Collectively, the U.S. government, the state governments, corporate America and American consumers have accumulated the biggest mountain of debt in the history of the world. Our massive debt binge has financed our tremendous growth and prosperity over the last couple of decades, but now the day of reckoning is here.
And it is going to be painful.
The following are 20 reasons why the U.S. economy is dying and is simply not going to recover....
#1) Do you remember that massive wave of subprime mortgages that defaulted in 2007 and 2008 and caused the biggest financial crisis since the Great Depression? Well, the "second wave" of mortgage defaults in on the way and there is simply no way that we are going to be able to avoid it. A huge mountain of mortgages is going to reset starting in 2010, and once those mortgage payments go up there are once again going to be millons of people who simply cannot pay their mortgages.
#2) The Federal Housing Administration has announced plans to increase the amount of up-front cash paid by new borrowers and to require higher down payments from those with the poorest credit. The Federal Housing Administration currently backs about 30 percent of all new home loans and about 20 percent of all new home refinancing loans. Tighter standards are going to mean that less people will qualify for loans. Less qualifiers means that there will be less buyers for homes. Less buyers means that home prices are going to drop even more.
#3) It is getting really hard to find a job in the United States. A total of 6,130,000 U.S. workers had been unemployed for 27 weeks or more in December 2009. That was the most ever since the U.S. government started keeping track of this statistic in 1948. In fact, it is more than double the 2,612,000 U.S. workers who were unemployed for a similar length of time in December 2008. The reality is that once Americans lose their jobs they are increasingly finding it difficult to find new ones.
#4) In December, there were also 929,000 "discouraged" workers who are not counted as part of the labor force because they have "given up" looking for work. That is the most since the U.S. government first started keeping track of discouraged workers in 1949. Many Americans have simply given up and are now chronically unemployed.
#5) Some areas of the U.S. are already virtually in a state of depression. The mayor of Detroit estimates that the real unemployment rate in his city is now somewhere around 50 percent.
#6) For decades, our leaders in Washington pushed us towards "a global economy" and told us it would be so good for us. But there is a flip side. Now workers in the U.S. must compete with workers all over the world, and our greedy corporations are free to pursue the cheapest labor available anywhere on the globe. Millions of jobs have already been shipped out of the United States, and Princeton University economist Alan S. Blinder estimates that 22% to 29% of all current U.S. jobs will be offshorable within two decades. The days when blue collar workers could live the American Dream are gone and they are not going to come back.
#7) During the 2001 recession, the U.S. economy lost 2% of its jobs and it took four years to get them back. This time around the U.S. economy has lost more than 5% of its jobs and there is no sign that the bleeding of jobs is going to stop any time soon.
#8) All of this unemployment is putting severe stress on state unemployment funds. At this point, 25 state unemployment insurance funds have gone broke and the Department of Labor estimates that 15 more state unemployment funds will likely go broke within two years and will need massive loans from the federal government just to keep going.
#9) 37 million Americans now receive food stamps, and the program is expanding at a pace of about 20,000 people a day. The United States of America is very quickly becoming a socialist welfare state.
#10) The number of Americans who are going broke is staggering. 1.41 million Americans filed for personal bankruptcy in 2009 - a 32 percent increase over 2008.
#11) For decades, the fact that the U.S. dollar was the reserve currency of the world gave the U.S. financial system an unusual degree of stability. But all of that is changing. Foreign countries are increasingly turning away from the dollar to other currencies. For example, Russia's central bank announced on Wednesday that it had started buying Canadian dollars in a bid to diversify its foreign exchange reserves.
#12) The recent economic downturn has left some localities totally bankrupt. For instance, Jefferson County, Alabama is on the brink of what would be the largest government bankruptcy in the history of the United States - surpassing the 1994 filing by Southern California's Orange County.
#13) The U.S. is facing a pension crisis of unprecedented magnitude. Virtually all pension funds in the United States, both private and public, are massively underfunded. With millions of Baby Boomers getting ready to retire, there is simply no way on earth that all of these obligations can be met. Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern's Kellogg School of Management recently calculated the collective unfunded pension liability for all 50 U.S. states for Forbes magazine. So what was the total? 3.2 trillion dollars.
#14) Social Security and Medicare expenses are wildly out of control. Once again, with millions of Baby Boomers now at retirement age there is simply going to be no way to pay all of these retirees what they are owed.
#15) So will the U.S. government come to the rescue? The U.S. has allowed the total federal debt to balloon by 50% since 2006 to $12.3 trillion. The chart below is a bit outdated, but it does show the reckless expansion of U.S. government debt over the past several decades.
#16) So has the U.S. government learned anything from these mistakes? No. In fact, Senate Democrats on Wednesday proposed allowing the federal government to borrow an additional $2 trillion to pay its bills, a record increase that would allow the U.S. national debt to reach approximately $14.3 trillion.
#17) It is going to become even harder for the U.S. government to pay the bills now that tax receipts are falling through the floor. U.S. corporate income tax receipts were down 55% in the year that ended on September 30th, 2009.
#18) So where will the U.S. government get the money? From the Federal Reserve of course. The Federal Reserve bought approximately 80 percent of all U.S. Treasury securities issued in 2009. In other words, the U.S. government is now being financed by a massive Ponzi scheme.
#19) The reckless expansion of the money supply by the U.S. government and the Federal Reserve is going to end up destroying the U.S. dollar and the value of the remaining collective net worth of all Americans. The more dollars there are, the less each individual dollar is worth. In essence, inflation is like a hidden tax on each dollar that you own. When they flood the economy with money, the value of the money you have in your bank accounts goes down. The chart below shows the growth of the U.S. money supply.
#20) When a nation practices evil, there is no way that it is going to be blessed in the long run. The truth is that we have become a nation that is dripping with corruption and wickedness from the top to the bottom. Unless this fundamentally changes, not even the most perfect economic policies in the world are going to do us any good. In the end, you always reap what you sow. The day of reckoning for the U.S. economy is here and it is not going to be pleasant.
Leibovit Files
Monday, January 25, 2010
A Shot Across The Bow For Equity Markets!
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I will be also speaking at the 2010 PHOENIX INVESTMENT CONFERENCE AND SILVER SUMMIT
Renaissance Glendale Hotel and Spa
9495 W.Coyotes Boulevard, Glendale, AZ
Thursday / Friday, February 4 - 5
Here is the link with a promo code: http://cambridgehouse.com/email/jan1210pho...x_leibovit.html
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UPCOMING ECONOMIC RELEASES/MARKET EVENTS
JANUARY 25 - 29, 2010:
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MONDAY, January 25, 2010:
Existing Home Sales
10:00 AM ET
4-Week Bill Announcement
11:00 AM ET
3-Month Bill Auction
11:30 AM ET
6-Month Bill Auction
11:30 AM ET
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TUESDAY, January 26, 2010:
Turnaround Tuesday
FOMC Meeting Begins
ICSC-Goldman Store Sales
7:45 AM ET
Redbook
8:55 AM ET
S&P Case-Shiller HPI
9:00 AM ET
Consumer Confidence
10:00 AM ET
FHFA House Price Index
10:00 AM ET
State Street Investor Confidence Index
10:00 AM ET
4-Week Bill Auction
11:30 AM ET
2-Yr Note Auction
1:00 PM ET
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WEDNESDAY, January 27, 2010:
Bank Reserve Settlement
MBA Purchase Applications
7:00 AM ET
New Home Sales
10:00 AM ET
Tim Geithner Speaks
10:00 AM ET
EIA Petroleum Status Report
10:30 AM ET
5-Yr Note Auction
1:00 PM ET
FOMC Meeting Announcement
2:15 PM ET
President Barack Obama delivers State of the Union address to Congress.
9:00 PM ET
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THURSDAY, January 28, 2010:
Durable Goods Orders
8:30 AM ET
Jobless Claims
8:30 AM ET
EIA Natural Gas Report
10:30 AM ET
3-Month Bill Announcement
11:00 AM ET
6-Month Bill Announcement
11:00 AM ET
7-Yr Note Auction
1:00 PM ET
Fed Balance Sheet
4:30 PM ET
Money Supply
4:30 PM ET
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FRIDAY, January 29, 2010:
GDP
8:30 AM ET
Employment Cost Index
8:30 AM ET
Chicago PMI
9:45 AM ET
Consumer Sentiment
9:55 AM ET
Farm Prices
3:00 PM ET
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STOCKS - ACTION alert -
Look to buy inverse ETFs on a market rally for a potential downled to SPX 1030-1050, TSX 10,200-10,500 and Dow Industrials 9500-9700.
After a bad week in the markets, many are pointing fingers at what went has gone wrong with the economy and the markets. The government stimulus has not and will not get traction which is the current problem. Money has gone to the wrong place.
The truth?
Wall Street was and is corrupt and caused the problem and the government due to its close ties to Wall Street bailed them out, but did not bail out anyone else. In other words, it was the victums that needed to be bailed out not the institigators (the perpetrators). Politically, there is an outrage and further bailouts to Wall Street will become more difficult.
Ultimately, we're likely headed for another American Revolution, especially if the economy and the markets nosedive again in coming years. Could we be headed into another Great Depression? We will know in the 2012-2017 period - a time frame where long-term cycles 'nest' and where such a risk exists.
Above I wrote: "A Rally First, But We're Entering a Bear Market Year!" We're clearly in a first-quarter correction, but, frankly, it came earlier than I expected. Normally, we would see the lows around mid-March. Perhaps this time cycles will invert, but we won't know until we get there. Unless you're inclined to play inverse ETFs or short, I told you in recent days that the best place was to be was in cash.
The Dow Industrials could very well decline another 1000 points from here (or more later), so you should be looking for entry points to play for a further short-term decline. Tuesday, is a potential 'Turnaround Tuesday', so the current downleg may hit a wall then, however, until we get a clear sign of a bottoming process, let's be patient.
The stock market got crushed on Friday, falling for the third consecutive day, after earnings reports came in mixed, with GE and McDonald's exceeding expectations, but Google, American Express, and Capital One disappointing. Misguided political proposals are also weighing on the market. The bulls tried to lift the market before noon on Friday, but the bears won out and the stock market finished at the lows of the day. The Dow fell 216.90 or 2.09% to 10,172.98. The S&P lost 24.72 or 2.21% to 1091.76. The NASDAQ declined 60.41 or 2.67% to 2205.29.
Weighing on the market Friday was news that the Democrats may not have the votes to reconfirm Ben Bernanke as Federal Reserve Chairman. While I certainly support non-confirmation of Bernanke and favor complete elimination of the Fed, as you already know, there is no denying that these things would be bad for the stock market in the short term.
The market also remained under pressure by Thursday's announcement from President Obama of plans to limiting the amount of risk large banks could take, thus prohibiting commercial banks from trading. Financials (XLF) fell another 3.26% Friday after declining 2.85% on Thursday. Financials were also weak after disappointing earnings from American Express and Capital One (see earnings section below).
Technology (XLK -3.48%) was the biggest loser on Friday after disappointing earnings from Google and AMD (again, see earnings section below).
All the major market indexes are now below their 50-day moving averages. Only the small and mid cap indexes (Russell 2000, S&P 600, and S&P 400) are above that key level. Eight of the nine market sectors are trading below their 50-day moving averages.
Earnings have been strong so far this season. Revenues have been as well, though not as strong. At Thursday's close, 70 of the companies in the S&P 500 Index had reported fourth-quarter results, with 79% beating expectations for the bottom line, 3% matching and 19% falling under consensus forecasts. The 79% figure is unusually high, compared with the 15-year average of 61% of S&P 500 companies topping expectations. If that 79% holds through to the end of the reporting season, it would tie the record-high percentage tallied in the third quarter. Of the 69 companies that reported revenue numbers, 65% topped expectations; none matched and 35% offered results that came in below estimates. As a result, it is aforementioned politics that is hurting the stock market.
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DOW TRANSPORTS - ACTION alert -
Look to short IYT (Dow Transports ETF) for a potential move in the Dow Transports to 3600.
Transportation stocks fell with the market on Friday with all but one of the Dow Transport stocks declining (Southwest Airlines was unchanged). Not even falling oil prices have been able to lift the Transportation sector. The Dow Jones Transportation Average fell 88.74 or 2.17% to 4005.08.
The Dow Transports closed on Thursday right at its 50-day moving average, only to blow through that support on Friday. The Transports are now trading at their lowest levels since December 2.
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GOLD and METALS - ACTION alert -
Though I am a long-term bull, Gold is signaling a potential move to 1000 or less and I am awaiting a clear buy signal to jump back into this market.
Precious metals fell sharply on Friday, especially platinum and palladium though gold recovered to close with just a small loss, as inflation concerns disappeared amid worries that the economy is weakening and as traders worried about demand, especially with commercial bank trading is under attack. Gold fell 1.60 to 1099.40, but traded as low as 1080.90. Silver fell 0.40 to 16.97. The effects of the new Platinum and Palladium ETFs have worn off. Platinum dropped 49 to 1547 and palladium declined 18 to 431.
Copper bounced back after hitting a new one-month low of 3.2670, settling up 0.0520 at 3.3470.
As I wrote last week, President Barack Obama's proposed tougher bank regulations may result in less money flowing into commodities markets. This is hurting both metals and energy. Regardless, it is only temporary.
The VR Gold Letter is available to Platinum subscribers for only an additional $50 per month and to Silver subscribers for only $70 per month. Email me at to sign-up today!
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BONDS - ACTION alert -
Still looking to buy bonds under the market as contra-play to the stock market correction.
Treasuries rallied on Friday as traders fled the suddenly uncertain equity market and moved toward safer Treasury bonds. The long bond future gained 7/32 to 118 27/32 and hit a 5-week high of 119 3/32 Friday morning
With no economic reports on Friday, traders were looking forward to this week's auctions of $118 billion in notes. The Treasury Department will sell $44 billion in 2-year notes on Tuesday, followed by $42 billion in five-year debt the next day. It will also auction $32 billion in seven-year notes on Thursday.
Traders also expect more corporate deals, as companies continue to find market conditions favorable. Companies have sold $96.7 billion already this month, including $4 billion from Morgan Stanley on Thursday and $2.25 billion from Simon Property Group on Tuesday.
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CRUDE OIL - ACTION alert -
Crude Oil appears headed lower, but it's oversold here and should bounce. I am not particularly interested in playing Crude Oil on the short-side, particulary with geopolitical uncertainties day to day, but will keep an open mind if a clear trade unfolds.
Oil got hit on Friday, trading at its lowest level in a month, on the continued economic concerns and worries that Obama's plans to limit trading at commercial banks will reduce demand for oil futures. Crude oil fell 1.54 to 74.54.
Natural gas rose, though, after Thursday's inventory report showed a larger than expected drawdown in supplies. Natural gas gained 0.204 to 5.819, but staying in that 5.40 to 6.10 range.
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US DOLLAR - ACTION alert -
The US Dollar is terminal. Terminal as the definition of 'dead'. You can listen to all the jawboning from Washington or Wall Street, but when Russia decides to buy Canadian Dollars and Venezuela, Cuba and possibly Brazil are allied with Iran in the western hemisphere, think about it. How about all the rich gold and silver mines to the south in Mexico. That will become the true wealth, not paper U.S. Dollars. My prediction: You will come in some Turnaround Tuesday morning in the months or possibly years ahead (don't think it will be that long) and the Dollar is be devaluated possibly 50%. Gold will double or triple literally overnight and those who hold Dollars will be catatonic.
The US Dollar Index held steady on Friday as uncertainty regarding the US financial system, specifically Bernanke's reconfirmation and Obama's plan to restrict commercial banking, was offset by a flight to safety caused by the recent decline in equity markets. The US Dollar Index slipped 0.043 to 78.277.
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URANIUM - ACTION alert
The true solution to energy on the planet is the use of uranium. Not solar, not wind power, not geo-thermal, not renewable biomass energy, etc. This will only fill in some missing gaps. Nuclear power can provide infinite power at minimal cost. When the lights go out and the environmentalists are sitting freezing or without food, the realization will come, but will it be too late? Who can't help but admire France for generating 85% of their energy through nuclear power. Unfortunately, the world passing the US by and we're dumb enough to not to realize it. As Michael Savage says: 'Liberalism is a Mental Disorder'.
Ux U3O8 Prices* (Uranium)
January 18, 2010 Posting
Spot: $43.50 DOWN 1.00. Bull market high in the cash market was $138.00.
The February Uranium Futures closed at $43.25. The current bear market low is $42.00. June 13, 2007 hosted the bull market high of 154.95. Major support lies well under the market at $36.00.
The spot price of uranium quadrupled from 2004 to 2007. When it hit $138/lb, uranium became a certified bubble, which has now burst. For investors, this is the best possible news, of course. Nuclear power is the ultimate alternative fuel, as the French will tell you. You get all the power, 84% cheaper than coal, with none of the politics of rogue nations and none of the greenhouse emissions.
---------------------------------------------
ECONOMIC NEWS:
President Barack Obama said Friday he is confident that Federal Reserve Board Chairman Ben Bernanke will win a second term, despite some concern Democrats may remove their support for Bernanke -- one of the principle architects of the bank bailout plan -- in the new political environment without their 60-seat majority in the Senate. Concern about Bernanke's appointment grew this week after Obama said he wanted to put new restrictions on the nation's biggest banks.
CORPORATE NEWS:
General Electric Co.'s fourth-quarter net earnings fell 19%, weighed down by declines in its infrastructure and financial-services businesses, the company reported Friday. For the most recent quarter, the Fairfield, Conn., company said profit fell to $2.94 billion, or 28 cents a share, from $3.65 billion, or 35 cents, earned in the year-earlier period. Restructuring and other charges of nine cents a share were partly offset by benefits in the quarter, including one cent a share in transaction gains and a five-cent benefit from a lower industrial-tax rate. Analysts had expected GE to earn 26 cents a share, on average. Revenue fell 10% to $41.44 billion, ahead of analysts' mean estimate of $39.99 billion. GE didn't release a 2010 outlook. GE gained 0.6%.
McDonald's Corp. on Friday reported a 23% increase in fourth-quarter profit, helped by the weak dollar and higher demand from the U.S. and France to Russia and Australia. Net income rose to $1.22 billion, or $1.11 a share, from $985.3 million, or 87 cents a share, in the year-earlier period. Revenue rose 7% to $5.97 billion from $5.57 billion, Oak Brook, Ill.,-based McDonald's said. Excluding the benefit of currency translation, revenue would have been up 2%. The fourth-quarter bottom-line results include a 7-cent per share benefit from foreign currency translations and an 8-cent per share benefit from the resolution of certain liabilities, the company said. Analysts, on average, estimated the fast-food giant to earn $1.01 a share with revenue of $5.92 billion. MCD rose 0.3%.
Google said Thursday its fourth-quarter net income rose to $1.97 billion, or $6.13 a share, from $382 million, or $1.21 a share in the same period a year earlier. Net revenue rose to $4.95 billion, Google said. Excluding special items, Google said earnings for the quarter were $6.79 a share. Wall Street analysts have been expecting Mountain View, Calif.-based Google to post earnings excluding items of $6.48 a share, and $4.92 billion in net revenue. GOOG fell 5.7%.
Advanced Micro Devices on Thursday reported a fourth-quarter profit of $1.18 billion, or $1.52 a share, compared with a loss of $1.44 billion, or $2.36 a share, for the year earlier period. Revenue was $1.65 billion, up 42% from the same quarter the previous year. On an adjusted basis, the company posted a loss of 8 cents a share. Analysts had expected the Sunnyvale, Calif.-based chipmaker to report a loss of 17 cents a share, on revenue of $1.49 billion. AMD cited "net favorable impacts" from its legal settlement with Intel Corp. AMD lost 12.4%.
American Express reported a jump in quarterly profit late Thursday as the credit card giant set aside less money to cover bad debt. Fourth-quarter net income came in at $716 million, up from $240 million in the same period a year earlier. Income from continuing operations that's attributable to common shareholders was 59 cents a share versus 26 cents a share a year ago, the company added. Consolidated provisions for losses totaled $748 million, down 47% compared to $1.4 billion in the year-ago period, Amex noted. "The decline reflected continued improvement in credit quality during the latter part of 2009," the company said in a statement. AXP dropped 8.5%.
Capital One Financial said late Thursday that fourth-quarter net income came in at $375.6 million, or 83 cents per common share. That compares to a net loss of $1.45 billion, or $3.74 per common share, a year earlier. The credit card and banking company was expected to make 43 cents a share. Managed provision expense dropped by $353.5 million from the prior quarter, the company noted. COF declined 12.1%.
Kimberly-Clark Corp. reported lower fourth-quarter profit than analysts expected and set more somber predictions for 2010 than Wall Street's as the company faces rising ingredient costs and promotes its products like Kleenex to keep people spending. The company, based in Dallas, said Friday that higher prices on Huggies diapers and other products -- plus higher sales volumes -- lifted its fourth-quarter profit, but promotions it launched to maintain volumes cut into sales. Kimberly-Clark earned $492 million, or $1.17 per share, for the three months that ended Dec. 31. That's 17 percent higher than its profit of $419 million, or $1.01 per share, a year earlier. Analysts predicted Kimberly-Clark would earn $1.25 per share. Sales jumped 8 percent to $4.98 billion, helped by a weaker dollar as well as the price hikes, and topped analysts' forecast for $4.92 billion. The higher prices initially compensated for higher ingredient costs, but Kimberly-Clark hasn't rolled them back as those expenses fell. KMB slipped 1.4%.
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The Annual Forecast Model (VR Forecaster Report) is now posted at the website - so sign up today! Remember, there is no price too high for good information! Don't make the mistake of not subscribing. Last year's AFM warned in January we were entering a multi-month bear market! Gold-bug? Check on the AFM for Gold!
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Canadian TSE, TSE Venture and Canadian Dollar Commentary for our Canadian clients updated for Monday, January 25.
The Canadian market was hit on Friday, but less than the US market, as a weak Canadian Dollar made the decline in metals more bearable and should help Canadian exporters compete. And while Canadian financial stocks were hit hard, they were not hit nearly as hard as their US counterparts. The TSE fell 125.67 or 1.10% to 11,343.43. The TSE closed at its lowest end of day level since November 6. A Negative Volume Reversal ® was formed on January 12.
Canadian retail sales fell for the first time in four months in November on fewer car purchases, and as a milder winter led shoppers to skip buying warm clothes, the national statistics agency said. Sales fell 0.3 percent from October to C$35.2 billion ($33.4 billion), Statistics Canada said. Sales were expected to drop 0.2 percent.
Canada reported a C$4.36 billion ($4.13 billion) budget deficit in November after reporting a surplus a year earlier, as jobless benefit payouts rose and tax receipts fell. The country's deficit in the first eight months of the fiscal year that began April 1 was C$36.3 billion, the finance department said in a report published in Ottawa. The federal government in November 2008 had a monthly surplus of C$96 million and an eight-month surplus of C$39 million. Prime Minister Stephen Harper forecasts a record C$55.9 billion deficit this fiscal year because of slowing revenue, unemployment benefits and an auto industry bailout. Harper this week named a new minister to lead a government spending review that he says will help eliminate the deficit as the economy recovers, while a parliamentary budget officer says deficits will persist without tax increases or spending reductions. Program spending rose 15 percent in November from a year earlier to C$18.7 billion, led by a 57 percent jump in unemployment payouts. The number of people receiving regular jobless benefits peaked at 829,300 in June, and fell to 795,940 in November, Statistics Canada said. Revenue fell 12 percent to C$16.7 billion from November 2008. Corporate income tax receipts dropped 36 percent to C$1.48 billion, and personal taxes fell 11 percent to C$8.37 billion.
Bank of Montreal's long-term ratings were cut one grade by Moody's Investor Service, which cited unstable earnings potential from the investment banking business. The deposit rating for Canada's fourth-biggest bank and its units was cut to Aa2 from Aa1, the New York-based rating company said in a statement. The lenders financial strength rating fell to B- from B. The downgrade reflects Moody's view that "the bank's wholesale investment bank exposes the bank to greater earnings volatility than previously incorporated in its ratings and the fact that BMO allocates substantial capital to this business," Senior Vice President Peter Routledge said in a statement. Bank of Montreal has reported C$2.7 billion ($2.55 billion) in pretax charges related to capital markets, according to estimates from Moody's. The profitability of the Toronto-based bank will "remain constrained" due to weak earnings from its U.S. banking businesses in coming months, the ratings company said. BMO.TO decli ned 0.89%.
Energy 141.03 -1.88
Financials 167.07 -2.65
Health Care 35.37 -0.12
Industrials 95.22 -0.52
Information Technology 28.47 -0.37
Metals & Mining 1,051.23 -2.80
Telecommunications 77.84 -0.55
Utilities 195.33 -0.93
Resistance is 12,126, 12,968, 13,771, 13,889, 13,983, 14,157. Support is 11,249, 10,800, 10,600, 10,480, 10,384, 9500, 9300, 9140.
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TSE Venture:
The Venture held up better than the TSE or the US market as gold mining stock rebounded in the afternoon as gold's decline was small and made even smaller in Canadian Dollar terms by its decline. The TSE Venture fell 9.24 or 0.59% to 1549.67, hitting lows not seen since January 3.
Resistance is 1630, 1680. Support is 1534, 1521, 1493, 1483, 1469, 1403, 1383.
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THE CANADIAN DOLLAR (using the FXC Exchange Traded Fund):
The Canadian Dollar fell to a one-month low on Friday as traders sought the safety of the US Dollar, Canada announced weak economic news and low inflation last week, and a decline in commodity prices hurts commodity exporters, such as Canada, Australia, Brazil, and South Africa. FXC dropped 0.57 to 94.18. FXC posted a Negative Volume Reversal ® on January 15:
http://www.vrtrader.com/vr_platinum/GetVRChart.asp
The Canadian currency has dropped 2.7 percent since Jan. 15 in what would be the worst weekly performance since the five days ended Oct. 30. The Bank of Canada reiterated this week its conditional pledge to leave the target lending rate at a record low 0.25 percent until the end of June.
Resistance is 97.46, 98.00, 100.00. Support is 92.90, 92.10, 91.00, 89.75, and 85.18.
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TIMER DIGEST signals for Stocks, Gold and Bonds are available to Platinum subscribers on the Home Page.
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Economic Black Hole:
20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover
Even though the U.S. financial system nearly experienced a total meltdown in late 2008, the truth is that most Americans simply have no idea what is happening to the U.S. economy. Most people seem to think that the nasty little recession that we have just been through is almost over and that we will be experiencing another time of economic growth and prosperity very shortly. But this time around that is not the case. The reality is that we are being sucked into an economic black hole from which the U.S. economy will never fully recover.
The problem is debt. Collectively, the U.S. government, the state governments, corporate America and American consumers have accumulated the biggest mountain of debt in the history of the world. Our massive debt binge has financed our tremendous growth and prosperity over the last couple of decades, but now the day of reckoning is here.
And it is going to be painful.
The following are 20 reasons why the U.S. economy is dying and is simply not going to recover....
#1) Do you remember that massive wave of subprime mortgages that defaulted in 2007 and 2008 and caused the biggest financial crisis since the Great Depression? Well, the "second wave" of mortgage defaults in on the way and there is simply no way that we are going to be able to avoid it. A huge mountain of mortgages is going to reset starting in 2010, and once those mortgage payments go up there are once again going to be millons of people who simply cannot pay their mortgages.
#2) The Federal Housing Administration has announced plans to increase the amount of up-front cash paid by new borrowers and to require higher down payments from those with the poorest credit. The Federal Housing Administration currently backs about 30 percent of all new home loans and about 20 percent of all new home refinancing loans. Tighter standards are going to mean that less people will qualify for loans. Less qualifiers means that there will be less buyers for homes. Less buyers means that home prices are going to drop even more.
#3) It is getting really hard to find a job in the United States. A total of 6,130,000 U.S. workers had been unemployed for 27 weeks or more in December 2009. That was the most ever since the U.S. government started keeping track of this statistic in 1948. In fact, it is more than double the 2,612,000 U.S. workers who were unemployed for a similar length of time in December 2008. The reality is that once Americans lose their jobs they are increasingly finding it difficult to find new ones.
#4) In December, there were also 929,000 "discouraged" workers who are not counted as part of the labor force because they have "given up" looking for work. That is the most since the U.S. government first started keeping track of discouraged workers in 1949. Many Americans have simply given up and are now chronically unemployed.
#5) Some areas of the U.S. are already virtually in a state of depression. The mayor of Detroit estimates that the real unemployment rate in his city is now somewhere around 50 percent.
#6) For decades, our leaders in Washington pushed us towards "a global economy" and told us it would be so good for us. But there is a flip side. Now workers in the U.S. must compete with workers all over the world, and our greedy corporations are free to pursue the cheapest labor available anywhere on the globe. Millions of jobs have already been shipped out of the United States, and Princeton University economist Alan S. Blinder estimates that 22% to 29% of all current U.S. jobs will be offshorable within two decades. The days when blue collar workers could live the American Dream are gone and they are not going to come back.
#7) During the 2001 recession, the U.S. economy lost 2% of its jobs and it took four years to get them back. This time around the U.S. economy has lost more than 5% of its jobs and there is no sign that the bleeding of jobs is going to stop any time soon.
#8) All of this unemployment is putting severe stress on state unemployment funds. At this point, 25 state unemployment insurance funds have gone broke and the Department of Labor estimates that 15 more state unemployment funds will likely go broke within two years and will need massive loans from the federal government just to keep going.
#9) 37 million Americans now receive food stamps, and the program is expanding at a pace of about 20,000 people a day. The United States of America is very quickly becoming a socialist welfare state.
#10) The number of Americans who are going broke is staggering. 1.41 million Americans filed for personal bankruptcy in 2009 - a 32 percent increase over 2008.
#11) For decades, the fact that the U.S. dollar was the reserve currency of the world gave the U.S. financial system an unusual degree of stability. But all of that is changing. Foreign countries are increasingly turning away from the dollar to other currencies. For example, Russia's central bank announced on Wednesday that it had started buying Canadian dollars in a bid to diversify its foreign exchange reserves.
#12) The recent economic downturn has left some localities totally bankrupt. For instance, Jefferson County, Alabama is on the brink of what would be the largest government bankruptcy in the history of the United States - surpassing the 1994 filing by Southern California's Orange County.
#13) The U.S. is facing a pension crisis of unprecedented magnitude. Virtually all pension funds in the United States, both private and public, are massively underfunded. With millions of Baby Boomers getting ready to retire, there is simply no way on earth that all of these obligations can be met. Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern's Kellogg School of Management recently calculated the collective unfunded pension liability for all 50 U.S. states for Forbes magazine. So what was the total? 3.2 trillion dollars.
#14) Social Security and Medicare expenses are wildly out of control. Once again, with millions of Baby Boomers now at retirement age there is simply going to be no way to pay all of these retirees what they are owed.
#15) So will the U.S. government come to the rescue? The U.S. has allowed the total federal debt to balloon by 50% since 2006 to $12.3 trillion. The chart below is a bit outdated, but it does show the reckless expansion of U.S. government debt over the past several decades.
#16) So has the U.S. government learned anything from these mistakes? No. In fact, Senate Democrats on Wednesday proposed allowing the federal government to borrow an additional $2 trillion to pay its bills, a record increase that would allow the U.S. national debt to reach approximately $14.3 trillion.
#17) It is going to become even harder for the U.S. government to pay the bills now that tax receipts are falling through the floor. U.S. corporate income tax receipts were down 55% in the year that ended on September 30th, 2009.
#18) So where will the U.S. government get the money? From the Federal Reserve of course. The Federal Reserve bought approximately 80 percent of all U.S. Treasury securities issued in 2009. In other words, the U.S. government is now being financed by a massive Ponzi scheme.
#19) The reckless expansion of the money supply by the U.S. government and the Federal Reserve is going to end up destroying the U.S. dollar and the value of the remaining collective net worth of all Americans. The more dollars there are, the less each individual dollar is worth. In essence, inflation is like a hidden tax on each dollar that you own. When they flood the economy with money, the value of the money you have in your bank accounts goes down. The chart below shows the growth of the U.S. money supply.
#20) When a nation practices evil, there is no way that it is going to be blessed in the long run. The truth is that we have become a nation that is dripping with corruption and wickedness from the top to the bottom. Unless this fundamentally changes, not even the most perfect economic policies in the world are going to do us any good. In the end, you always reap what you sow. The day of reckoning for the U.S. economy is here and it is not going to be pleasant.
Suggestions? Comments? on the newsletter service. We would like to hear from each and everyone of our subscribers. Our email is mark.vrtrader@gmail.com.
DISCLAIMER
This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of VRTrader.com may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. VRTrader.com staff makes every effort to provide timely information to its subscribers but cannot guarantee s pecific delivery times due to factors beyond our control.
