Economy May Be Headed Into Free Fall Again

Many borrowers, particularly since late 2010, thought they were buying at the bottom of a housing market that had already suffered steep declines, but have been caught out by a continued fall in prices in wide swaths of America. - source link below

First things first.  Remember this big dog and pony show Bernanke went on a couple weeks ago to pontificate on how open the Fed is about how it conducts its operations now?  Well it turns out that is just another well-crafted cover-story for the truth.  Those of us who follow and understand the truth know that Bernanke is about as full of shit as they come.

Now comes this:  When Bank of America took over Merrill Lynch, it was largely thought by those who analyzed the numbers - as opposed to gobbling up the garbage spooned out by the Fed, politicians and media - that Merrill Lynch was in trouble similar to Lehman before Lehman collapsed and that the deal was a "shot-gun" marriage brokered by the Fed and smoothed over by the injection of $20 billion in Taxpayer bailout money to Bank of America.  Recall that John Thain, who left Goldman to become the CEO of Merrill Lynch for about 20 seconds before BAC absorbed Merrill.  Thain was given a $15 million signing bonus and spent $1.2 million refurbishing the CEO office. 

It turned out that after the merger was completed, Merrill reported billions in losses that were not disclosed before the shareholder vote on the deal.  Apparently there many phone calls that included then CEO of BAC, Ken Lewis, and Bernanke and Thain.  There's a shareholder lawsuit on this matter and it turns out that the shareholders would like question Bernanke about conversations he had with Lewis prior to the closing of the merger.  The Fed and Bernanke are vigorously fighting this subpoena:  LINK

Quite frankly, I think Taxpayers should be just as interested in this fraud as BAC shareholders. Anyone who still places faith and trust in the Fed, and specifically in Bernanke, is either hopefully naive or hopelessly ignorant.

On to the economy.  Today the personal income and spending report by the Government was released.  It showed a slight increase in personal income.  Per this keen analysis by zerohedge, if you strip out the increase in Government transfer payments (welfare, social security), personal income declined, personal spending declined and the savings rate bumped a slight amount, but is still substantially below the March 2011 savings rate:  LINK

In addition, the Chicago Purchasing Managers Index showed a big plunge in March from its February reading and the headline number is the worst it's been since November 2009.  Also, the Dallas Fed released its manufacturing survey, which plunged into a negative reading, -3.4 from its prior reading of 10.8, dropping to its lowest reading in 7 months.  You can see the action HERE

Finally, I happened to run across an item reported on CNBC's website last Thursday in which Reuters reported a Corelogic survey that showed "(m)ore than 1 million Americans who have taken out mortgages in the past two years now owe more on their loans than their homes are worth..."  Here's the LINK.

Not sure how those who are promoting a bottom/recovery going on in the housing market would like to respond to that data.  Corelogic is not an industry-motivated promotional association, so the numbers are likely to be pretty accurate.

To be sure, there are some very select areas around the country that are showing a slight bounce in the overall health of the housing market in those areas.  However, I believe that even in those areas the "bounce" will be ephemeral.

Put everything above into the same context and you have an economy that is starting into a free fall.  Why does it not seem that way? 1) The mainstream media is regurgitating the b.s. that is fed to it by Wall Street and the Government, similar to the way Obama reads from his teleprompter (TOTUS - Teleprompter of the United States);  2) over 50% of all Americans receive some form of Government transfer payment, of which roughly 47 cents on every dollar is borrowed by the Treasury in order to make that payment.  The Taxpayers of this country are providing one massive safety net that is making the true economic conditions seem less severe.  

This can't go on ad infinitum.  At some point the U.S. debt creation machine will hit a wall.  For sure a blow up in Europe in Spain or Italy will fingered as the culprit.  But the Truth is that the United States is in worse condition than any individual European country and the EU collectively.  It is what it is - just better pray that history's guidebook for how these situations end up does not happen this time...

Yes Virginia, There IS A Free Lunch In The U.S...

I've been collecting some articles that I've wanted to post and comment on this week but didn't have time.  Instead, I'll post them for everyone to read and form their own conclusions.

First, Meredith Whitney buckled under the intense criticism of her assessment last year that many municipalities would go bankrupt.  I guess since that particular shit didn't hit the fan within a standard 3 month/one-quarter time frame, Ms. Whitney's confidence crumbled.  Well, last week this item hit the newswire, and I'm sure it wasn't reported on CNBC/Bloomberg/WSJ/Barron's:  LINK  Ms. Whitney was right, now she has to grow some "brass."

Second, the Government "one-upped" itself.  Currently it pays unemployed workers, who qualify for benefits, to not work.  One can get paid not to work for up to three years now.  May as well let Mexican workers sneak in to the country and be vilified for doing the jobs that those who are getting paid not to do those jobs taken by the "illegals" would otherwise have to take if they weren't getting the Government welfare payments (unemployment benefits are indeed "welfare").  So now the Obama Administration is implementing a program that lets employers hire jobless benefits workers as temps AND enables these workers to continue receiving welfare.  In other words, the Taxpayer is going to pay for temporary workers to work at no cost to employers who take them on:  LINK  Whoever said there's no such thing as a free lunch has never met Barack Obama or the U.S. Government.

Speaking of free lunches, Michelle Obama's luxurious travel schedule has been a point of irritation for me since Obama was inaugurated.  Talk about milking the system.  The Taxpayers are constantly paying for her, her friends and all the security involved while she takes vacations normally taken by wealthy trust fund heiresses and nouveau riche trophy wives.  It's beyond appalling.  In January she was in Aspen for a long holiday weekend courtesy of the Taxpayer.  I doubt she even knew what Aspen was before Barack Hussein was anointed El Hefe.

Today, someone sent me this snapshot of an ad someone placed in the Panama City (FLA) News Herald back in February:

 

Have a great weekend!

Shove This Up Your Ass, Warren...

Reuters’ McGeever acknowledges how the “gold market is tiny” compared to “trillions and trillions of dollars worth of cash and assets sloshing around the world financial system.” He asks how can countries back “all of that” against such a “tiny and finite amount of gold?”  Butler responds by saying that “the amount of gold is finite by weight or volume, it is not finite by price   - article linked below

I will get to the article which is the source of the above quote below.  But first I wanted to link a speech given to the NY Fed by a guy named Robert Wenzel, who authors the Economic Policy Journal blog.  In this speech, he highlights the failure of Ben Bernanke's policies, why they are failing and why Government intervention in the economy leads to failure.  He does a brilliant job of translating basic economic laws and theories into layman terms.  With regard to the fact that Government "helps" the unemployed by taking taxpayer money and giving to the unemployed, he states rhetorically: 

In present day America, the government focus has changed a bit. In the new focus, the government  attempts much more to prop up the unemployed by extended payments for not working. Is it really a surprise that unemployment is so high when you pay people not to work?

I've made this comment to friends and colleagues many times.  He also cites work done by the recipients of the 2010 Nobe Prize in economics for work which shows that Government interference (transfer payments, regulations, etc) causes a higher rate of unemployment.

Here's the LINK.  If you only have time to read that today, stop reading this blog and read that.

On the quote at the beginning.  Goldcore.com posted an essay today making the argument that one of the BRIC countries is likely to introduce a gold-backed currency at some point in the near future that will replace the dollar.

I have always believed - and I have posted my theory in the past - that China would be the likely candidate for this once it had accumulated enough gold to enable it to make the claim as having the largest gold stock in the world.  The U.S. used that claim after WW2 in order to back its move to make the dollar the reserve currency per Bretton Woods. 

If this does indeed occur, the dollar will likely collapse.  Of course, the other interesting aspect to this would be that China/Russia would likely force the U.S. to make good on its claim that it still owns 8,100 tonnes of gold.  In that regard, Mr. Wenzel from above had this point to make:

I am very confused by the response of Chairman Bernanke to questioning by Congressman Ron Paul. To a seemingly near off the cuff question by Congressman Paul on Federal Reserve money provided to the Watergate burglars, Chairman Bernanke contacted the Inspector General’s Office of the Federal Reserve and requested an investigation [12]. Yet, the congressman has regularly asked about the gold certificates held by the Federal Reserve [13] and whether the gold at Fort Knox backing up the certificates will be audited. Yet there have been no requests by the Chairman to the Treasury for an audit of the gold.This I find very odd. The Chairman calls for a major investigation of what can only be an historical point of interest but fails to seek out any confirmation on a point that would be of vital interest to many present day Americans.

In this very building, deep in the underground vaults, sits billions of dollars of gold, held by the Federal Reserve for foreign governments. The Federal Reserve gives regular tours of these vaults, even to school children. [14] Yet, America’s gold is off limits to seemingly everyone and has never been properly audited. Doesn’t that seem odd to you? If nothing else, does anyone at the Fed know the quality and fineness of the gold at Fort Knox?

Clearly, the gold investing community is not the only one which would be interested to see an open, legitimate, independent audit of the U.S. gold inventory - something which has not been legitimately undertaken since Eisenhower was the President.  The Fed/Bernanke has jumped up and down like a lunatic promoting its new policy of "transparency."  How about making good on it rather than relying on the tenuous concept of "full faith?"

At any rate, this essay on Goldcore is another must-read:  LINK, as it responds with the free market, capitalist answer to the concern that there's not enough gold in the world to make a gold standard practical.  To that, the correct response is, "why not?"  The value of the gold is the key variable.  Value is calculated by the product of quantity and price.  If the quantity is relatively fixed, and there needs to be more "value," then the price has only one way to go...

Given the enormous amount of paper fiat currency in circulation globally that has been printed up since the last time gold was used to back money, it is understandable that from a value standpoint, that the price of gold is significantly undervalued....Warren Buffet can take my last statement there and shove it up his ass.

In The Context Of What Jon Corzine Is Getting Away With

in his illegal plundering of $1.2 billion in customer assets, the fact that the SEC is wasting its time suing Egan Jones - on the heels of EJ downgrading the credit quality of the U.S. Government - is just beyond appalling:   LINK

Notwithstanding the fact that this lawsuit is a massively frivolous waste of Taxpayer money, it's emblematic of the fact that our system is collapsing.  Our Government is pathetic.

Think about what Jon Corzine is getting away with when you read this quote.  And keep in mind that Obama is still happily spending the campaign money Corzine raised for him.  I bet that money is tainted with fraud and corruption as well: 

When you see that trading is done, not by consent, but by compulsion – when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see money flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self sacrifice - you may know that your society is doomed. (Francisco D'Anconia, "Atlas Shrugged")

Government Creep

While the government struggles to save one crumbling enterprise at the expense of the crumbling of another, it accelerates the process of juggling debt, switching losses, piling loans on loans, mortgaging the future and the future's future. As things grow worse, the government protects itself not by contracting this process, but by expanding it.  - Ayn Rand, 1973

As an example of the mis-direction and "spin" put on economic news, I want to illustrate how today's release of the Case Shiller 20 metro city home price index for February.  The index showed a slight gain (.15% adjusted) across the metro areas used in the index, but it missed the degree of gain that Wall Street was expecting.  However, prices declined in 15 of the 20 cities.  Moreover, if you use the unadjusted numbers in the report - but not reported in the media headlines, home prices actually declined again by .8%, for the 6th month in a row.  Furthermore, the C/S price index hit its lowest level in 10 years. 

When the news report hit the tape, CNBC immediately posted this headline "home prices post surprise monthly gain." Clearly CNBC was not at all interested in presenting the facts or the truth. Here's the news link from the Washing Post - keep in mind that this is what a lot of the politicians, lobbyists etc will see:  LINK  You can draw your own conclusions on what motivates CNBC or the WashPo, but in my view the Government machine is teeing up the next round of money printing, Government stimulus deficit spending - both also known as "dollar devaluation."

I was going to write about this yesterday, but thought that the Spellman piece was a lot more interesting, since I've been warning anyone who would listen for about 10 years that eventually the Government was going to go after retirement fund assets eventually as means of financing Government deficits.

Many of you have already seen this, but there was a report in the NY Post over the weekend that Congress is starting to look at ways to shoehorn money out of your IRA/401 account.  You can read the specifics here:  LINK 

This comes as no surprise to me and this is going to be just the start.  I said back in late 2002 that "the elitists who control the system would hold things together until they had swept every last crumb of middle class wealth off the table and into their pockets.  This includes eventually de facto confiscating retirement funds in order to fund Government deficit spending."

This is a concept that is so anathema to the thinking and expectations of the general population, that 99% of the people in this country would never believe that Government will pillage their retirement account...that is, until it actually happens. 

Most are not aware of this, but during the election/transition period back in late 2008, there was a symposium held in Congress in which academics presented alternative methods of structuring the retirement system in this country.  The most plausible scenario, and one which has well-received by the audience of Congressmen, was a plan in which the Government would "annuitize" all retirement assets by exchanging your current retirement plan for one in which, in exchange, you would receive a guaranteed annuity benefit that would be collateralized by Treasury bonds.  And of course, Wall Street would be put in charge of managing the whole process.

Think about what this plan does.  It scoots around any eminent domain issues - not that Obama gives a rat's ass about Rule of Law and the Constitution, but it will enable the Government to issue trillions more in Treasury paper that will be exchanged for the assets in your retirement fund.

Please make no mistake about it, whatever legislation is born from proceedings described in the NY Post report, it is merely embryonic.  As we've seen with everything else that is Big Government, it starts small and the slow creep turns into an avalanche of Government administration and control.  If you think that you have some kind of divine right to keep and maintain your own retirement account, you are going to find out in time that you do not.

The Gold Standard Shuffle

What we are witnessing is a sea change in which market forces are driving a de facto return to the gold standard. All that is missing for this to be a de jure gold standard is some regulatory and legal recognition and one has been proposed. The Basel Committee for Bank Supervision, the maker of global capital requirements is studying making gold a bank capital Tier 1 asset.    -  Professor Lew Spellman, University of Texas from The Spellman Report (link below).

The source of that quote is a must-read essay written by Lew Spellman, who is a professor of finance at the University of Texas of business school.  He has also served as Assistant to the Chairman of the President's Council of Economic Advisors and as an economist at the Federal Reserve.  It is the latter two prestigious roles which make it both surprising that Professor Spellman would have written this essay and, yet at the same, thereby reinforces its validity.  You will not find this piece mentioned in ANY mainstream media news source in this country.

Spellman lays out the case for for the subtle, systemic manner in which gold is slowly creeping back into use by the banking system as an asset being used to back paper currencies and financing transactions. Those of us who study the precious metals markets on a daily basis, in the context of the overall global financial system, have been pointing to this dynamic for a while now.  For instance, Spellman links the announcement in which the Basel Committee is studying making gold a Tier 1 banking asset.  This was announced several months ago and remarked upon widely in the precious metals community.  I doubt anyone's financial adviser called them up to point this out.

The market, along with the massive Central Bank accumulation of gold by China, Russia and several of China's strategic allies - like the other BRIC countries - is starting to force this transformation.  I say "the market" because most of the collateral that has been pledged to secure paper financial transactions has been pledged/rehyopothecated (see MF Global, Lehman, Madoff).  This is especially true in the repo market where sovereign paper/Treasuries was historically the only asset to be used.  Now Central Banks have stretched the range of credibility and extended collateral status to everything except the Brooklyn Bridge (who knows how many times that's been rehypothecated...).  The last man standing is gold and it is being forced by the market back into the system as a paper anchor by necessity.  Eventually gold will remain as the bastion of "flight to safety" because of its ultimate utility for that purpose.

Everyone needs to read this essay and make sure they understand what is happening and why.  Here's the LINK  For me, this essay has "seminal" status because it was written by a former "insider" to elite circles - the elite circles which constantly denigrate and revile gold - and because it will likely expose a wider circle of market observers to a systemic dynamic that is taking place with little or no acknowledgement by 99.5% of all market participants.

Atlas Shrugs, Orwell Yawns

The Obama Justice Department is the worst in the history of this country.  It's an absolute joke. It makes the old Soviet Politburo look like a system based on rule of law.  Eric Holder is one of the most corrupt Federal officials that I have witnessed in my lifetime, starting with the pardon letter that he drafted, to pardon infamous tax evader Marc Rich, for Clinton to sign as Clinton was walking out of the Oval Office for the final time.  - Dave in Denver

The Orwellian cloud of Government deceit that is hanging over our system is now thicker than the 420 cloud that will hang over most cities where people are having big 420 celebrations, like the one in Denver at Civic Park.  Civic Park sits between the Colorado State Capitol and the Denver City and County Courthouse.

It was reported today that the SEC has decided to pursue enforcement actions against the Egan Jones credit rating agency for making "material misstatements" on its 2008 application to begin rating asset-backed and sovereign (e.g. U.S. Government bonds) LINK

Egan Jones is the least well known of the major credit rating agencies (Moody's, S&P, Fitch, Egan Jones).   But anyone who has been around the credit markets for a long time knows that Egan Jones is the most honest and forthright.  To be sure, Egan Jones is not influenced by the undo monetary and political persuasion that is successfully exerted on, and happily received by, Moodys and S&P.

Literally two weeks ago, Egan Jones downgraded the credit rating of the U.S. Government from AA+ to AA:  LINK  Of course, anyone who understands the factors that go into assessing any entity's credit rating knows that the U.S. Government, in reality, has a C credit rating for being on the verge of default.  If it weren't for the U.S. Government's unfettered ability to print money, it would have already defaulted.  So a AA credit rating by any standard of measurement should be welcomed with a red carpet by the Obama Administration.  And really, the move in gold from $250 to $1650, despite the considerable headwinds presented by Central Bank manipulation, is telling us that the U.S. is in de facto default.

Be all of that as it may, the SEC has decided to go after Egan Jones for these "misstatements" from 2008.  Why all of a sudden did the SEC decide that Egan Jones committed violations four years after the fact?  Having been through SEC/FINRA regulatory application processes several times over the past 25 years, I can say with certainty that, at most, the Egan Jones "misstatements" were most likely nothing more than clerical errors or general oversight.  I'm sure 90% of all regulatory applications have these issues.  It was certainly, to be sure, nothing to do with Egan Jones' ability and competency to analyze and assess credit ratings.

What really blows my mind is that the SEC looks the other way when Jon Corzine, MF Global, JP Morgan, Goldman Sachs, Bank of America et al, ad nauseum commit grave and obvious crimes of theft and fraud.  Why isn't the SEC scouring over these firms' regulatory applications in order to come up with meaningless filing violations? 

Anyone who truly believes that this action by the SEC is merely coincidental to Egan's ratings downgrade of Treasury bonds two weeks ago has been spending too much time at too many 420 celebrations.  It's getting worse by the day, as the Government enables the big wealthy entities who fund elections and Presidencies to get away with murder and capriciously enforces rules and laws against those who are not always in a position to properly defend themselves.  Hopefully Sean Egan owns his own politician or Government official who is in a position to deflect this nonsense, although I doubt he does because this would not have happened in the first place if he did.

And Obama was supposed to change all of this.   Everyone remember his mantra of "Hope" and "Change?"  Has there been any real, material change created by Obama?  I was at lunch yesterday with two attorneys who are staunch, dogmatic Democrats.  I mentioned to them that Obama had not delivered on one single campaign promise he issued during his campaign.  I also reminded them that I attended his campaign rally as a supporter in October 2008, so I heard these promises firsthand.  My lunch friends were not there.  (I subsequently withdrew my support for Obama as soon as he nominated Geithner for Treasury Secretary - it's been all downhill since then...).  I explained to them that Obama had not delivered on ONE single promise that I heard, firsthand, in person that day.  Not one.  Even the health care bill, which is one giant clusterfuck and does not even come close to delivering on the health care agenda set by Obama during his campaign, can not be used as an example of something Obama has achieved (one of them threw that at me).

The Golden Truth is that not only has Obama failed as a leader and has turned out to be just another straw man, farce of a human being, but he's continued down the path set by his predecessors of ignoring and shredding the Constitution and completely eliminating habeus corpas and Rule of Law.  Our system as we've known it for 236 years just can not survive without habeus corpas and Rule of Law.  Obama will be written about by historians who are motivated to present the facts and the truth as the President who ushered in totalitarianism and Rule of Privilege.

Happy 420 day, if that's your thing.  Please try to enjoy what you can, while you can, as much as you can.  I plan on enjoying playing in a big tennis tournament this weekend, starting this afternoon.

Moron Bubbles

The bubble is in paper assets, particularly sovereign debt. Historic lows in interest rates mean that prices are at historic highs as rates and prices move inversely. Take into account the solvency factor, and the conclusion is inescapable that such paper assets are in the biggest bubble in history. Sadly, the vast majority of people will not understand this until it is too late and their savings have been destroyed.  - Robert Fitzwilson on King World News (link below)

First I quickly want to point out that yesterday, despite the rosy headlines reported with regard to weekly mortgage applications, which increased due to refinancing applications, the purchase index absolutely plunged by over 11%.  This follows a big decline the previous week.  In addition, today the annualized, seasonally adjusted existing home sales number came in well below the Wall Street consensus expected number.  Wall Street, the media and the National Association of Realtors are doing what they can to shamelessly slather lipstick on the pig, but the truth is that the housing market is collapsing again.

To be sure, it would appear that there might have been a slight bounce in the housing market in the early part of 2012, but as I've demonstrated in previous posts, with the data to back it up, the majority of that "bounce" was fueled by in an influx of "investors" buying homes to rent out, a brief decline in mortgage rates which was stimulated by the Fed's "Operation Twist" money printing scheme and a liberalized, tax-payer subsidized mortgage finance initiative extended by the FHA, which includes the ability to buy a home with no money down.  Given the amount of Government intervention in this marketplace, you would have thought that the dollar devaluation operation conducted by the Fed and the taxpayer-financed lending by the Obama Clan would have sparked a bounce in the housing market that we actually noticed...

This leads me back to the quote above, which comes from a must-read interview with Robert Fitzwilson by Eric King.  Fitzwilson explains why the biggest bubble in the history of the world is the bubble in paper assets and specifically, the bubble in sovereign debt.  To illustrate his point, I took the liberty of sourcing a chart of total credit market debt (Government plus private sector debt) for just the U.S.:

(click on graph to enlarge)

THAT, my friends and colleagues, is what a REAL bubble looks like!  I would also like to point out that the slight decline shown starting around 2009 is not a true decline, per se.  Rather, it represents the amount of mortgage and other private market debt that has been either written off by the banks or written off by the banks and monetized by the Fed - primarily the latter.

Finally, Fitzwilson contrasts the debt bubble with the media-induced idea that gold is in a bubble: 

Nothing could be further from the truth. The perception is so far below the reality that we effectively have a negative bubble. Buyers of these three assets are speculating fools according to the mainstream media. The only thing that is foolish is not holding onto positions and not adding as nominal prices periodically come down.

Here's the LINK

Judging from what looks to be like possibly the worst sentiment I have seen in eleven years of my involvement in the precious metals sector, I have to concur with Mr. Fitzwilson.  Bubbles do not culminate with extreme negative sentiment toward an investment.  In fact, the hallmark of a bubble is the exact opposite.  And for the most part the general public has been largely sellers of the their gold and silver (witness the mania in cash for gold - this is you selling, not buying).  How can there possibly be a bubble in something which the public has yet to participate?

Stay In The Trade

Men who can both be right and sit tight are uncommon.  I found it one of the hardest things to learn.  But it is only after a stock operator has firmly grasped this that he can make big money.  -  Jesse Livermore

I don't have time produce some of my own work, so I wanted to highlight Eric King's interview with Rick Rule at King World News:

You know, Eric, for investors who are frustrated, past is probably prologue. They need to have a sense of what happened in the 1970s market. If you go back to that bull market, you will remember there were numerous occasions, probably 25 or 30 in that decade, where the precious metals prices fell 10% or 15%. The equities associated with gold and silver fell even further.

The grandaddy of all of those declines was in 1975. Now, what’s instructive to know is that nothing changed with regards to the fundamentals for gold and silver. What changed was the official sector’s interest rates and people’s perceptions of the value of gold and silver.

If you were in the market and had the cash and the courage to stay in the market from peak to trough, that is from the bottom of 1975 decline, five years later you were up eight-fold. It’s tragic that some people had the idea behind the bull market, but didn’t have the cash or the courage to stay the trade. Can you imagine getting shaken out of a trade where you were right, and then missing five years of an eight-fold advance?

So, for people who are frustrated with the volatility in this market, especially the downside volatility, simply remember that what is changing are people’s attitudes, not the fundamentals. The market doesn’t care if you are frustrated. The market doesn’t care about your time frame.

The market doesn’t care about anything. The market is merely a facility for buying and selling assets. If you have the courage of your convictions, if you believe, as an example, that gold is a better store of wealth than fiat currencies, then stay the trade.

That's most of the interview and here's the rest: LINK

Not much to add to that other than that I have found in that in twenty years of trading, which encompassed being an institutional junk bond trader/market maker, a trader of my own capital and the manager/trader of a small hedge fund, the worst time to bail out of a trade that I know is right is when I feel the most uncomfortable holding it.  Right now the sentiment in the metals and mining sector is about as putrid as I've observed it for close to eleven years of doing this sector exclusively. 

I can say with complete conviction and confidence that the best gains in this sector are still ahead of us. 

There's No "BS" Like Government "BS"

The Government reports garbage and the morons in the financial media reports that garbage as hard facts - Charles Biderman, Trim Tabs Independent Research

Mr. Biderman didn't exactly discover plutonium here with this revelation, but he provides excellent analyis of why the Government-released retail sales report this week is a complete farce.  Yesterday's retail sales report for March was reported to be up strongly led by auto sales.  However, as Biderman details in the brief video presentation linked below, the Government numbers on auto sales for March are at an extreme divergence from the numbers reported by the auto manufacturers themselves, which showed an unexpected and precipitous drop for March.  Biderman's 4 1/2 minute rant is well worth watching, and he offers realistic replacements to track retail sales data and employment simply by tracking credit card sales and tax revenues.  Not only would that be more accurate, but it would enable to the Government to get rid of part of its Census Bureau and BLS bureaucracy, cut expenses and take a step toward reducing wasteful, useless Government spending:  LINK

On to housing.  Yesterday the National Association of Homebuilder's builder sentiment index was released.  It plunged 3 points from the previous month to 25 and was 4 points below consensus expectations.  Note: any reading below 50 is negative.  Then today housing starts for March were released and those plummeted nearly 6% from the previous month and were substantially below the Wall Street consensus estimate.  Of course, the media had to spin a positive on this so it was highlighted that building permits jumped.  But this was entirely for multifamily/apartment dwellings.  Here's a LINK  An increase in the number of apartment units is another variable that will put downward pressure on home values.  In fact, for most of the last year, any perceived strength in the housing market has been due primarily to an increase in demand for rental units.  We also know that foreclosures are quickly ramping up again and this will further depress home values. 

It's going to get a lot worse in the housing market.  Make no mistake about that, despite any Orwellian attempt by the media and industry pimps to put lipstick on the pig and despite the enormous amount of taxpayer-subsidized support that the Fed and the Obama Government are throwing at the housing market.  In fact, this chart below pretty much will explain the basic problem with the housing market - and for the entire economic system for that matter.  I sourced this chart from the daily King Report and the numbers were compiled by Sentient Research from the Government (BLS).  Just to clarify this data series, it is MUCH uglier if you strip out Government entitlement/transfer payments (social security, welfare, etc), which are included in the Government calculation of household income:

(click on chart to enlarge)

Living Off Your Tax Money And Hard Work: Atlas Shrugs...

While the government struggles to save one crumbling enterprise at the expense of the crumbling of another, it accelerates the process of juggling debts, switching losses, piling loans on loans, mortgaging the future and the future’s future.  As things grow worse, the government protects itself not by contracting this process, but by expanding it. - Ayn Rand

For those of you who advocate a generous Welfare State, you should know that general reliance on Government handouts is bankrupting this country.  And the rate at which it is doing so is accelerating.  Defense spending is also contributing to the demise of our system, but right now the ranks of those who take from those who produce is growing quickly.  Obama's Administration has been instrumental in expanding the base of people who suck from the system.

This scenario is very similar to the scenario that unfolded in "Atlas Shrugged."  I wanted to link an excellent blog post from Economic Collapse that details just how egregious the situation has become.  Caution, only read this if you are prepared to get angry or sick.  I read it this morning and I've had a case of stomach flu ever since:  LINK

To make matters worse, I'm sure many of you have now heard about the unbelievable spending junket that a GSA conference in Vegas turned into.  Apparently the GSA spent close $150 grand on food and drinks and $6300 on commemorative coins for participants.  Gee, I guess those coins really help GSA personnel do their jobs.  It turns out that the regional commissioner who planned this conference was subpoenaed to testify before Congress and, of course, he invoked the 5th Amendment.  He did this even in response to a a basic question about whether he attended.  LINK  If I lived near this Jeff Neely, I would make sure that I left a big pile of my dog's shit on his front porch every morning.  If I were on the House panel that was grilling him, I would have asked him he if patronized a prostitute while he was there and whether or not that cost was expensed. 

This is YOUR taxpayer people.  It really makes me feel good about getting out of bed everyday early and working late most week nights in order to make a living to pay for my housing and food AND to pay for Jeff Neely's commemorative coin and hooker at a Vegas junket that pissed away close $1 million in taxpayer money.

Thanks Barack!

JP Morgan To World: Heads We Win, Tails You Lose

Once you start quantitative easing, such as we have, $17 trillion, how in the world do you pull back from it? How do you stop without having everything collapse behind you? Truth be known, Bernanke didn’t have a choice. If Bernanke did not do QE, this place would look like the day after (the movie) ‘Mad Max.’  - Jim Sinclair, link below

Happy Friday everyone!  I only wanted to link the Sinclair interview on King World News but I decided it was important to blog about what JP Morgan is doing.

To begin with, they reported earnings today and all the media fell in love JPM's reported bottom line.  The expected number was $1.17, they reported $1.31.  HOWEVER, if you strip out the 28 cents they recorded by reducing their loan loss reserve, they actually did $1.03, and missed big time.  This is not a valid decreasing of their loan loss reserve a) because we know the housing market is plunging again and JPM will soon have to write down a lot more mortgage debt, b) their non-performing loan disclosure showed that their non-performing loans increased by $600 million to $10.6 billion and c) we know the economy is tanking again so JPM will likely suffer big loan write-downs across all of its lending lines.

But then again, if you know that the President will sign off on using Taxpayer money to bail you out, it's a wonder they don't take their loan loss reserve to zero and really show some paper GAAP b.s. earnings per share!

It turns out Blythe Masters, JPM's head of commodities trading, lied her ass off on CNBC last week when she explained on CNBC that JPM's trading business is client-driven (most of knew she was full of shit).  But I thought everyone on Wall Street told the truth when they were on TV (wink wink).  Here's the report that explains how JPM has simply moved its proprietary (the in-house hedge fund aka "prop trading") functions into the office of the CIO.   This maneuver was done in order to move the risk-based capital trading out of the securities unit and into the bank holding unit.  Why?  Twofold:  1) it removes the proprietary trading away from the eyeballs of the securities regulators and the Volker Rule AND 2) it shifts this risky trading into a  business unit that would be covered by the FDIC.  It's what Bank of America did when it moved something like $52 trillion in gross derivative positions from its Merrill Lynch securities unit to its holding company.

Here's the report:  LINK  That article only mentions currency trading in passing but I would bet BOTH of my testicles that the CIO prop positions include a heavy does of gold and silver COMEX short positions.  In fact, I recall about 18 months ago JPM announced that it would be moving its precious metals prop positions up to its bank holding company.  You can google it to verify that I am correct.

Finally, in connection with the above quote from Jim Sinclair, every single person reading this, if they don't read anything else today or this weekend, NEEDS to read this brief interview with Sinclair on Eric King's King World News blog: LINK  I agree with every single word and punctuation mark in the interview, except that he didn't predict QE to infinity before anyone.  Myself and many of my colleagues understood that this is how things would unfold in the U.S. and globally right around the same time Sinclair started ranting about it.

Have a great weekend.

Subprime Bubble Being Reinflated

Anyone who uses Goldman, JP Morgan or Bank of America/Merill  as their investment custodian is either ignorant, stupid or completely insane.  - Dave in Denver

IMF: Gold Is Scarce “Safe Asset” And “Rising Demand for Safe Assets”..."In the future there will be rising demand for safe assets, but fewer of them will be available, increasing the price for safety in global markets.”  - quote sourced from http://www.goldcore.com/   LINK

Well, there ya go.  In fact, that quote ties into the subject of my title, but first I wanted to comment on potential for the bottom of this vicious precious metals correction that began in late April last year.  The sentiment indicators are at rock bottom.  I can say from some of the comments that have been posted on my blog over the past few weeks that even some pretty long time gold bulls have thrown in the towel on the mining stocks.   Usually this type of sentiment marks the bottom of the next big move higher. 
Also, Dennis Gartman,who happens to be singularly one of the best contrarian indicators of the gold market - and this fact has been close 100% consistent over the last seven years that I've been aware of Gartman mentioning gold in his newsletter - declared the end of the gold bull market about a week ago.  Gold is up 5% since he advised his readers to dump gold.  This so reminds of late 2005, when gold had a very difficult time breaking through $500.  Gartman sold everything.  Gold then proceeded to make a huge run up to $1000 before the next nasty correction.  Gartman missed most of it. 

(Click on the chart to enlarge)

That chart reveals the golden truth.  Gold has now corrected and consolidated into a seriously bullish technical formation.  Given that the fundamental backdrop - all of the factors constantly discussed on this blog - is significantly stronger than at the end of the last two nasty corrections, per the red circles above, the next move up in the metals/miners could be breathtaking.

Finally, for some icing on the cake, take a look at this article from Marketwatch on the Hulbert Gold Newsletter Sentiment Index:  LINK  The index reading now is -15.  Historically, as Hulbert points out, extreme negative indicators for this index have signalled a big move higher in gold.  In fact, to quote from the article:   "analysis of gold market sentiment over the last three decades has shown that, at the 95% confidence level that statisticians often use to assess whether a pattern is most likely genuine, gold tends to do better in the wake of low levels of bullish sentiment (like now)."  95% confidence level is a very high level of confidence in which to invest...

The subprime bubble is being reinflated with your help.  This should scare the shit out of everyone, because Taxpayer money was used freely by Obama and Geithner to bail out the big banks the first time around.  You can be sure that it will be again.  Just as an anecdotal aside, I heard an ad on the radio yesterday for a mortgage broker here in Denver, First Option Lending - who was promoting 0% down payment mortgages.  There's no doubt that this program is coming from the FHA and therefore is a taxpayer subsidized program.

Here's an article from the New York Times which describes how lenders are once again loaning to high risk borrowers:  LINK  Even worse, AIG is back to investing in real estate again:  LINK  I guess inflating and blowing up AIG the first time around, with about a trillion in taxpayer assistance,  was so profitable for AIG insiders, Goldman Sachs and JP Morgan that all the players are coming back for round two.  This should first make the hair on the back of your neck stand up and, second, make you move as much of your paper wealth into gold and silver as you can.  NOT GLD, SLV, GTU, CEF etc. (PHYS and PSLV are exceptions to this). 

Remember the invisible 2x4 that is now being swung at the collective heads of the middle class?  This reinflating of subprime is added fuel to the speed and power of that swing.  And it's the epitome of the moral hazard that is embedded in the system.  Make no mistake, the people who are doing the "swinging" are going to get even wealthier when the 2x4 connects with your head, unless you know how to "duck."  Got gold?

It's Getting Ugly

There will be a time when the middle class gets hit by a 2x4 in the back of the head that they never saw coming - Dave in Denver, circa 2004...That 2x4 is in motion - Dave in Denver, today

Major European bourses were down anywhere from 2% to 5% (Italy).  Italian and Spanish 10yr sovereign bond yields are soaring again.  Large fissures are forming again now that the ECB's latest version of money printing (LTRO/QE) has been applied and the dust has settled.  The problem is that the financial equivalent of Mt. Vesuvius is starting to rumble again.  I visited the ruins at Pompeii last summer.  Until then, I had never really grasped the true devastation caused by the eruption of Mt. Vesuvius.  It's truly horrifying.

The amazing thing to me is how few people understand that the European situation is nothing but one big deflection/cover-up for the catastrophic problems embedded in the U.S. financial and economic system.  If the quantifiable problems in Europe are "x," the quantifiable problems in this country are at least "5x."  Note: that is what's quantifiable.  Note #2:  Not "quantifiable" by what is being reported in the media but what is "quantifiable" by doing intelligent research, including knowing where to look for quantifiability (like applying what we know about true housing market values to the level 1, 2, and 3 assets listed in the footnotes of Bank of America's latest 10Q). 

The black swan on the horizon in this country is that which is not readily quantifiable.  An good example of that is the pension underfunding disclosure announced by the State of Illionois yesterday.   The State of Illinois announced that the State pension fund is underfunded by $83 billion.  Huh?  Here's the LINK  Now, there are two components of unquantifiabilty to this disclosure.  First, I wouldn't trust that $83 billion number any more than I'd trust Rick Santorum with my little nephew.  I would bet my entire net worth that the $83 billion number is not based on a true mark to market assessment of a decent amount of the pension fund's holdings, like real estate, real estate backed assets, derivatives and private equity investments.  The real number is much larger than $83 billion.  Second, as the article states, this number does not include "uncalculated billions in underfunded pension obligations for city, county and other local governments."  Unquantifiable underfunding - just in the State of Illinois.

Now if that's Illinois, imagine how ugly the truth of this particular problem is for California.  And New York, New Jersey, Ohio, Pennsylvania and Michigan are right behind Illinois.  But it's the "unquantifiable" truths that should be scaring the shit out of everyone.  Another example of the unquantifiable is an event like MF Global.  If MF Global is illegally stealing customer funds to use as collateral, I can guarantee you that other bigger brokerages are doing the same.  Jon Corzine is a thief, but he's not clever and he's not an original thinker. 

It's this unquantifiable reality that is the 2x4 that is going to hit most of the people in this country in the back of the head.  I would argue that the swinging of it has begun.   I just don't know when impact will be.  The market definitely senses the presence of this 2x4 that's been put in motion toward the collective heads of the middle class.  When the S&P 500 started dropping like Wile E. Coyote off a cliff, initially the metals and miners started down with it.  But then out of nowhere some "invisible hand" ignited a sharp reversal, first in gold and silver and then in the miners.  Some of the smaller cap mining stocks went from being down 5% at one point to going green on the day.  The S&P/Dow remained on their lows of the day, down about 1.5% each.

What caused this?  Two hours after the reversal occurred I have yet to find any news item or rumor that would have triggered the reversal in the precious metals and miners.  What I will say, though, is that gold (and silver) tend to sniff out big problems well ahead of those problems becoming obvious to all.  It's almost as if gold and silver started sensing that 2x4 in motion...if that's the case, the market will soon truly understand the role gold and silver play as flight to safety vehicles.

More On Housing, Gold, Etc...

The financial system of the United States of America is like the Titanic. Hubris led many to declare it financially unsinkable even as its fundamental design was riddled with fatal flaws and the human pilots in charge ran it straight into the ice field at top speed.  - Charles Hugh Smith, LINK

I want to post some interesting articles without too much commentary.  I hope you read them in their entirety, as they underscore some of the themes about which I've been ranting for the past several months.

First, as has been reported by several non-mainstream media sources, China continues its aggressive accumulation of gold and mining assets.  This is an article about that from Australia's biggest selling national newspaper: 

A very reliable source close to several gold companies tells us Chinese interests are not only taking stakes in explorers and miners, they are also buying gold directly from producers and shipping it home

Here's the LINK (note:  if you have trouble loading the whole article, copy the title of the article into a google search bar and then click on the link that comes up - it should load in its entirety).

This article reinforces the fact that China is looking to diversify a large portion of its dollar-based foreign reserves into physical gold and mining assets and is doing so in ways camouflage the obviousness of overt physical buying in London.  In fact, China seems to think that right now it's cheaper to buy gold in the ground on a per ounce basis by buying mining companies than it is to buy refined bars on the open market.   I happen to agree with that.

Second, I've been ranting about the next wave down in the U.S. housing market.  I have argued that there was a substantial slowdown in bank foreclosures while the robo-signing fraud suit was settled.  FNM and FRE also slowed down their foreclosures so they could figure out how to unload their massive REO inventory.  Here's an article that reinforces my claim.  It quotes a couple of non-Government and non-industry organizations that track the housing market.  As you'll see, foreclosures have started to ramp up again:  LINK

Furthermore, the Fed just established a framework of rules and policies that enable big banks to rent out their housing inventory:  LINK.  Wouldn't you think that if the housing market was recovering the way the Government and the National Association of Realtors are both claiming that banks would want to unload their inventory to buyers?  What I find amusing about this is that the Fed has put its banks in direct competition with the Taxpayers/Govt in renting out housing inventory that can't be sold.  The banks will be competing directly with investor groups who are buying blocks of homes for the purpose of renting from Fannie and Freddie under a new dedicated rental program rolled out by the Government to enable FNM/FRE to unload inventory in order to make room for even more.

Bottom line:  the next year will be a great time to look for a nice home to rent and rental prices should decline considerably as bank and GSE inventory hits the rental market.  Conversely, it looks like this rental supply will soak up a lot of potential buyers and housing prices will start tanking again.  Per the recent monthly Case-Shiller data, prices have already begun to drop.  My bet is that they will drop precipitously over the next 12 months.

Make no mistake about it.  The economy is slipping back into crash mode.  Regarding the Fed and QE3, I'm still waiting for someone to explain to me in detail how the Government will fund its massive Treasury issuance for the rest of this year without creating downside chaos in Treasury prices (causing yields to spike a lot higher) unless the Fed prints up new money to buy the coming supply of Treasuries...

Lefties Of The World Unite!

Another Lefty wins the Masters!!!

Congratulations, Bubba.  What an unbelievable recovery shot on the 2nd playoff hole - wow!

Look Out Below (make sure you watch the video below)

Just a quick one today.  Contrary to the public backscratching campaign over the supposed relative strength of the economy being conducted by the media, the real economy data continues to belie the lies being propagated by the financial journalists, Fed officials and politicians.

First, housing is tanking and now more proof to back up my thesis that foreclosures this year will swamp the market and push prices down even more.

Bloomberg:  Home Prices Seen Dropping 10% in U.S. on Foreclosures: Mortgages  LINK
Reuters:  Americans brace for next foreclosure wave  LINK

Zerohedge:  LINK

In a previous post, I linked the actual, unadjusted housing data from the Census Bureau and NAHB - the stuff that neither gets published by the media nor does makes any headlines - and it shows that the actual number of homes being started and sold, plus the actual number of existing home sales that actually close, is still probing historical lows.  Moreover, an increasingly large number of homes are being purchased by investors who aspire to turn around and rent out these properties.  This will put pressure on rental rates and we'll back into the downward spiral in prices again.

Second, Alcoa announced today that it was shuttering about 4% of its alumina production capacity.  This is on top of a sizable amount of smelting capacity that was shut down in January.  The reason given was that Alcoa wanted to avoid creating oversupply of alumina:  LINK

What this really means is that demand for alumina and aluminum products is starting to dry up.  If there is any commodity that is a good GDP indicator, it's alumina.  Alumina is used in some way in just about every durable good produced.  If demand for alumina is falling, it's indicative of a significant decline in production/economic activity. 

I'm sure when everyone opens up their local newspaper or turns on the nightly local news to catch the weather and sports, the newscasters will be crowing about the decline in jobless claims, which is statistically very suspect.  The public won't be treated to an analysis of Alcoa's alumina production cutbacks.

Tomorrow the stock markets are closed.  Banks and the bond market are open, but all intents and purposes, tomorrow is a holiday day.  Happy Easter/Passover to everyone observing those celebrations.  Have a great weekend!

This is my good friend Brad, aka "Bulldog" in his rendition of a scene from Dr. Strangelove:

Strictly A Rhetorical Question...

...because the answers is obvious.

How will the U.S. Government fund all of the additional budget deficit spending that has already been built into this year's spending plans if the Fed does not print money in some fashion in order to help finance all of the new Treasury debt issuance in 2012? 

Before you answer this, you need to be aware, and you can use google to find the numerous sources of this data, from the time QE2 commenced until it ended the Fed directly or indirectly purchased over 100% of of all new Treasury debt issuance during that time period.  In other words, it also paid for some of the refunding/rollover issuance.

Furthermore, Operation Twist, was nothing more than a attempt a cleverly disguising the Fed's role in funding Treasury issuance since QE2 formally ended.  With this operation, the Fed simply sold down its short term Treasury holdings to a collateral-starved money market and repo-collateral market and used the funds to buy Treasuries in the meat of funding curve - 7 to 10 yrs - which funded the Treasury plus helped keep a lid - sort of - of mortgage rates.  For all of 2011, the Fed purchased a "stunning" 61% of ALL net Treasury issuance:  LINK
I think we all can see what happens if the Fed does not start printing soon.

I thought I'd throw in a little humor after yesterday's post.  I frequent a news aggregator and excellent market monitor website called Finviz (www.finviz.com).  This morning when I pulled it up to check the list of news items, I found these two headlines posted 1st and 2nd respectively:

"Private sector [adds] 209,000 jobs in March"  LINK
"Yahoo lays off 2,000 employees"  LINK

I just love that.  The 1st metric comes from the monthly ADP payroll report.  This report is commonly understood to be even less reliable than the monthly BLS employment report.  I did some research a while back on how ADP calculates its numbers and discovered that they use similar algorithmic modelling as the BLS.  I think that tells you all you need to know about the ADP monthly report.  Note also that it is clearly stated as an "estimate."

Yahoo, on the other hand, is reporting jobs that have already been chopped.  Now they have to inform the chop-ees.  I suspect we'll see a lot more reports of big companies cutting jobs.  I'm sure Yahoo isn't done yet for the year as well.

I wanted to stop there today, but I came across this revealing blog piece from Felix Salmon.  In terms of systemic liquidity and the question of whether or not the Fed will roll out QE3 (I think we all know the true answer to that), Salmon has a chart you have to look at which shows syndicated bank lending by quarter.  Syndicated bank loans - which is the big corporate loan market - are starting to cliff dive.  This means that corporations are not funding new projects AND that banks are not lending to new projects.  To make this data even uglier, most of the syndicated lending that has occurred - 70% in fact - has been refinancing older, higher interest rate debt.  Not only are the banks NOT providing liquidity to the corporate market, but only a small relative percentage of the lending is "new blood" lending.  Here's the LINK

Batten down the hatches.  It could get really ugly for awhile...

WTF? A Couple Of Irritations Today

So CNBC plus your local moronic financial adviser are trying to convince you that gold is in a bubble?   Barron's online just posted an article in which some shit-for-brains analyst from Piper Jaffray and another one from some bucket shop laid out the case for AAPL to hit a trillion dollar market cap.  I've been wondering when Wall Street was going to start throwing out numbers like that for AAPL.  I think the absurdity of that valuation in relation to AAPL's underlying business and market fundamentals speaks for itself.  I will say, though, if the Fed has to print money in the quantities that will be needed to fund our Government, we could see several stocks hit a trillion dollar market cap, especially the large mining stocks.

Here's the Barron's article if you want either a good chuckle or feel a need to be irritated:  LINK

The second source of irritation for me today was when I woke to the reports that Obama accused the Supreme Court of judicial "activism" if they struck down Obamacare.  He referred to the SCOTUS as "unelected" officials.  Here's a link that's not from Fox News:  LINK

Ummm, what I am I missing here?  I thought that we learned in like 9th grade that we had three branches of Government in our system in order to provide checks and balances within the Governmental process.  I thought that the Supreme Court's function was to determine the constitutionality of legislation created by Congress and signed by the President.  If the Supreme Court strikes down Obamacare, isn't the Supreme Court doing what it's supposed to do?  If a President can influence the way in which the Constitution is meant to be applied, then isn't our system failing?

It seems to me that the only "activism" taking place here is by Obama.  Quite frankly, I find it hard to believe that he is supposedly a Constitutional law expert.   But then again, we have already seen by his actions - as opposed to and contrary to his campaign promises - that Obama is systematically putting what's left of the Constitution - that which wasn't destroyed by his predecessor - through a paper shredder.  In truth, we should not be surprised that a politician who skated through the system on affirmative action programs and who has lived on public largess his entire career doesn't give a rat's ass about the Constitution.  Let's call Obama a "Con" law expert, as he conned a lot of people into voting for him to be the POTUS.

The bottom line is that our system is quickly collapsing into a state of Governmental totalitarianism.  The signs are abundant.  Just look at the way in which the MF Global catastrophe is being handled by the Justice Department.  It's not and that's the problem.  The Obama Administration is looking the other way while the JP Morgan and Jon Corzine walk away from looting at least a billion in customer funds. 

And what's with Obama signing a law the gives the Government the right to take control of the entire infrastructure and resource base of this country AND to implement martial law WITHOUT the exigencies of a national emergency.  I'm referring to the recent National Defense Resources Preparedness Executive Order signed by Obama a couple weeks ago.  Think he's not serious about this?  Check out the recent ammunition procurement by the Department of Homeland Security:  LINK.   Those are not crowd control rubber bullets.  Those are hollow-points designed for efficient killing.  What is our Government worried about?

I guess in the context of the enormous power that has been consolidated into the Executive Branch of Government, first by W and then by Obama, we shouldn't be surprised that Obama is trying to verbally usurp the authority of the SCOTUS to do its job the way it was laid out by Founding Fathers and the Constitution.  But then again, with a name like Barack Hussein Obama, we know our POTUS does not have much in the way of American heritage, so why should he respect or heed the system set up by the people who started this country...

Hunger Games

 A bankrupt empire still trying to police the world is the ultimate act of hubris

- quote is from the article linked below

I woke up today in a bearish mood for some reason and the commentary below from The Burning Platform blog was perfect fuel: 

•We’ve increased our national debt by $5.6 trillion in the last three and a half years. It took from 1789 until 2000, two hundred and eleven years, to accumulate the first $5.6 trillion of debt.

•Our average annual deficit from 2000 through 2008 was $190 billion. Our average annual deficits since 2008 have been $1.3 trillion. Our deficits never exceeded 4% of GDP prior to 2008, but now they exceed 9%.

•The national debt will reach $20 trillion by 2015 and if interest rates normalized to the same level they were in 2007 (5%), annual interest expense would be $1 trillion, or 45% of current tax revenue.

•There are 242 million working age Americans and 100 million of them are not working. But don’t concern yourself. The Federal government reports that only 13 million of these people are actually unemployed. The other 87 million are just kicking back and living off their accumulated riches.

•The economic recovery has been so great that the 7.5 million people added to the Food Stamp rolls since the recession officially ended in December 2009 isn’t really an indication of severe stress among the 99%. Only 46.5 million Americans (15% of the population) need food stamps to survive.

•The unfunded liabilities of Medicare, Medicaid and Social Security exceed $100 trillion and cannot possibly be honored, leaving future generations to fend for themselves.

I'm not bearish, mind you, on the prospects for the markets, especially the precious metals.  The Fed will print plenty of money to accommodate the Government's deficit spending and debt accumulation.  The prospects are hopeless for new leadership that will do what is needed to start saving this country.  The Republican choices are beyond dismal (except Ron Paul) and Obama is really nothing more than an extension of his predecessor.  Any Obama apologist who believes otherwise is a complete idiot.

With that, I hope everyone takes the time to read thru this commentary from The Burning Platform:  LINK

Just for the record, the entire precious metals sector is fundamentally and technically set up for its next big cyclical move to new highs.