The Tight-Roping of Treason

The Obama administration secretly sought to give Iran brief access to the U.S. financial system.

Under Pressure

We noticed the following chart and subsequent commentary from Investment Research Dynamics.

What are we to make of the information presented?

Market manipulation.

And no, there has never been such a sustained absence of volatility historically.

The FED wants to insure any volatility remains in check, for if the beta became uncontrollable, things could unwind in high velocity.

Although we have no documentation, it appears certain the FED is buying and selling stocks when the deem necessary to stop any downdrafts from gaining traction.

This cannot continue, as the market will take control of itself sooner rather than later.

We have great respect for the thinkers over at Investment Research Dynamics, particularity their spot on analysis of the capital markets, although we do part company politically on occasion.

IRD nails it again, and it is warning you should heed.

The U.S. collapse will happen either now or later. For the latter outcome, at some point the Fed will need to print 10’s of trillions of dollars to prevent that horizontal line on the graph above from turning into a downward-pointing near-vertical line. Of course, please review the history of Germany circa 1923 to see how the money printing alternative worked out…

FEDeral Protection

Janet Yelln/ FED Chair

Trump fires a torpedo at the ruling class, suggesting the FED, who lost their independence some time ago, is keeping rates low to protect Obama. Trump is marginally accurate, for the ruling class would like nothing more than to dump the massive recession coming our way on a newly elected GOP president.

More aligned with the truth; however, is that rates need to rise to pull back the excessive money currently in the system, but there is heightened fear even a 0.25 basis point raise in rates will send our fragile economy spiraling downward. This would expose Obama's claims of a great recovery as false.

In addition, due to Obama's economic policies and lack of independence of the FED, few tools remain in the toolbox to counter shocks to the system, which are coming very soon.

It is important to note that in the aftermath of the housing crisis of 2008, virtually every economic decision from bailouts to excessive regulation was the wrong choice.

Free Markets, Not Affordable Housing, Cure to Housing Crisis

Numerous articles have recently appeared describing an alarming prospect for renters moving forward.

The Atlantic describes a "bleak future for renters" and Zero Hedge noted the "missing" inflation is located in rental rates, which have been on a historic rise. Bloomberg noted "the rent crisis is about to get much worse."

Many have used the fallout of the housing crisis to advance an agenda centralized on the transformation of wealth. An orchestrated series of events, from the FED's ZIRP (zero interest policy), quantitative easing (the printing of money) and the bailout of the nations banking system has led to an inflated stock market where counter party risks have escalated and an increasing disconnect between the worlds of equity and fixed income has emerged. Hypothecation is certain to be an upcoming buzzword.

The economic policies of the left have left those seeking to move up the ladder of prosperity shackled to the ground. Potential home buyers are unable to pull the trigger on purchases of new or existing homes, as median income is stagnant and full time employment growth is non-existent.

In fact, home ownership is at a 40 year low.

Chart via ZeroHedge.com

Left leaning policy wonks, who never let a crisis go to waste, think the government has opportunities to correct the situation, by stepping in to ensure affordable housing.  Stepping in to correct the "situation" they created?  One thing I know; it is not prudent to engage those who caused the problem to fix the problem.

“The economy alone is not going to solve this problem," said Andrew Jakabovics, senior director of research at Enterprise Community Partners, said in a conference call to discuss the findings. "It brings us back to the need to expand affordable housing.”

False.

Presently, consumers are boxed in with historic rises in rental rates (inflation), with little avenue of escape.

More government intervention in the market is the opposite of what is needed. As Ronald Reagan once said, The nine most terrifying words in the English language are, 'I'm from the government and I'm here to help.'

For the problem to be solved, regulation and taxation must retract to allow increases in full time employment, median incomes and entrepreneurship. Further, QE, which devalues the currency, must cease and interest rates must rise.

As the brilliant Thomas Sowell appropriately notes upon the visit of Pope Francis to America, "Pope Francis’ own native Argentina was once among the leading economies of the world, before it was ruined by the kind of ideological notions he is now promoting around the world".

Without question, free market capitalism is the best path to prosperity, where most who achieve it significantly expand their participation in charity efforts. This is not only true in America, but across the globe.

Providing an environment for potential home buyers to escape from being trapped in rental homes is essential to solve the housing problem, and a integral part of that landscape would be free market capitalism unleashing the entrepreneurial spirit of the individual, placing the federal government back operation within its means and a reduction in punitive regulatory and taxation burdens.

As former Rep. Thaddeus McCotter, R:MI, noted, "Reagan trusted in Americans' entrepreneurial spirit, innovative talents, and industriousness, and he agreed with Adam Smith's insight that freedom and prosperity are inextricably entwined and mutually reinforcing. The flexibility of our markets is endangered by excessive regulation, onerous litigation, and government redistribution of wealth".

The blueprint to solve all the nations economic ills has already been written, if our elected leaders chose to engage it.  The current group will not, choosing to increase power over the citizenry through increasing tyranny utilizing divisive policies laced with socialism.

In November of 2016, we have A Time for Choosing.

The Coming Storm

By a slew of market data, a crash in the capital markets appears imminent. The market is extremely toppy, and as Doug Ross notes in analysis of John Hussman's weekly letter, "When weak participation, rich valuations and scarce bearish sentiment accompanied a record high in the same week, the handful of instances diminish to surround the precise market highs of 1973, 2000, and 2007, as well as 1929 on imputed sentiment data – and the week ended July 17, 2015".

From earlier instances of The Hindenburg Omen, to a recent death cross formation and an increasing disconnect between the worlds of equity and fixed income, multiple and increasing signals within the capital markets indicate trouble on the horizon.

Interest rates should have been hiked over ten quarters ago, even with the putrid economic status.  The raising of the rates would have had a serious negative ripple effect on the overall economy, but this would have been healthy, an opportunity to cleanse the market of excesses and establish true points of equilibrium.

It will not happen now, as multiple, far more significant issues have arisen that threaten to torpedo the not only the capital markets, but the overall economy as well. Of particular note in this well crafted piece is the collapse in the price of oil, which would not be happening in a healthy environment with normal and reasonably efficient supply and demand levels. Rather, it signals great weakness, which in this case, could be catastrophic.

Historical Oil Chart/InvestmentResearchDynamics.com

The collapse in oil is documentation of a contracting economy. Despite the propaganda and data manipulation, as eloquently stated in the Investment Research Dynamics piece, "It’s hard to hide the truth when there’s still checks and balances around to counter-balance the Orwellian fog that is engulfing our system."

As Jim Quinn, who runs truly outstanding blog The Burning Platform, points out, department store sales are imploding, noting "What is revealed when you look under the hood of this economic recovery is that it is a complete and utter fraud. The recovery is nothing but smoke and mirrors, buoyed by subprime auto debt, really subprime student loan debt, corporate stock buybacks, and Fed financed bubbles in stocks, real estate, and bonds."

Add in the massive expansion of the FED balance sheet increasing inflation, and you indeed have an unsustainable mirage of a recovery.  No doubt; the storm is coming ashore.

In the aftermath of this impending collapse, engulfed with smoldering evidence of failure of a slew of centralized government programs, most notably Dodd-Frank, perhaps it will dawn on the minds of those placed in command of governance to all to unwind the centralized government programs, reduce taxation and regulation, unleash the great entrepreneurial spirit of America and embrace the power of free market capitalism, which in the words of noted economist Larry Kudlow, is the best path to prosperity.

Twisted Tales

I did not know whether to laugh or cry.

That was my reaction to the following headline of a post by Tyler Durden over at ZeroHedge.com:

"With 1 In 3 Homes Unaffordable, Freddie Mac Prepares To Enter The Trailer Home Loan Market"

After fighting through the propaganda presented daily by the Obama administration and their media partners, it is quite obvious that the issues surrounding this headline are illustrative of an anemic and fragile economy, with our country teetering on economic peril few can currently visualize.

With all the failed stimulus, which I was against, we literally have nothing to show for it.  The economy "grew" an a paltry 0.01 percent last quarter, and it culprit is not the much discussed weather.  The culprit remains increasing taxation and regulation, and Obamacare, the biggest job killer we have witnessed in many a moon.

With over 90 million potentially fully employed workers out of work and the lowest labor participation rate since the economically dismal Carter administration, job growth is practically extinct and the annual after tax income for the average worker has decreased approximately 10% since the financial crisis of 2009.

Therefore, although housing prices have significantly retreated, due to a bludgeoned job market, as reported by Zillow, a third of the homes for sale are unaffordable to the average household. In addition, due to Dodd Frank and increased lending requirements, there is increasing difficulty in obtaining financing. 

Housing purchases have been happening over the past year, which have potentially inflated values.
However, it has not been the young family moving up from apartments or starter homes accounting for the sales; it has been Wall Street Hedge Funds and public and private real estate asset management firms, who have been making purchases to rent back to the increasing number of potential buyers unable to make purchases.

It is noted that in recent months these firms have significantly backed off their number of purchases.

Mark Hanson is a top notch real estate analyst, and he recently presented the following chart indicating cash purchases, which were a stunning 63% of residential properties sold in Florida in December:

Mark Hanson/MHanson.com

As the FED seemingly prepares to end qualitative easing, interest rates, which have been been held down and are not a true reflection of the market where economic equilibrium would be measured, without continued FED intervention, are sure to increase.  With the employment landscape stagnant as best, the purchasing of home will become increasingly unaffordable.

Seemingly in anticipation of the negative environment for housing created by the government and their partners, GSE Freddie Mac is now set to begin financing manufactured-housing communities.

Make no mistake, increased financing opportunities are always welcome, although the government should not be involved, as the private sector should be the marketplace for mortgage lending.

But, with this action, is there a story behind the story?

Manufactured housing is typically utilized by lower income families and acreage owners in rural communities.  Are stick built homes to become increasing unaffordable, forcing middle class owners to back step and unitize manufactured housing?

Keep in mind as well, that potentially increasing regulatory actions by the EPA, under the Agenda 21 guidelines, may make transactions on older existing homes much more costly for all involved through having the subject improvement meet EPA guidelines with respect to energy efficiency of appliances, windows, roof cover,etc. before qualifying for financing from GSE's or money center banks the government has interests in.

As a real estate investor, I have not included manufactured housing in my portfolio, primarily due to limited economic life of the improvement in comparison to stick built improvements.  Be advised I am not the only investor aware of this. 

Thanks to the Obama administration and their anti-capitalist policies, the economic conditions in the country are horrendous.  Reminiscent of the climate in the Great Depression, if you are fortunate to have good, stable employment, it has been your neighbor who has been laid off who cannot find adequate employment who is really feeling the brunt of the poor economy.

With employment stagnant at best, and the true future effects of Obamacare unable to be adequately forecasted, the job market remains facing unnecessary head winds with are keeping our economy from reaching high efficiency.

Perhaps Freddie Mac knows something most of you don't, and is looking for another investment opportunity?   The weather is unpredictable; don't get the tales twisted.

Is There Gold In The Hills

Procuring physical gold seems to be a rather problematic and time-consuming process.

While most of America was fully immersed in the Christmas holiday, Glenn Beck and his team noted a troubling story presented on the fantastic financial website Zero Hedge.

The story centers around a request from the German government to repatriate portions of their gold reserves held in America by The FED.  There are many tentacles to this story, which would leave many of my readers deep in the weeds, but the story itself from Zero Hedge offers a strong overview of the situation, complete with opportunities to seek additional depth on the story.  Please see the Zero Hedge blogpost HERE.

There are seemingly logical reasons for the retrieval of physical gold to issue plagued.  Perhaps foremost on the list is covered at the end of the Zero Hedge piece, in that China and India are hoarding physical gold.  An overview of the reasons behind this demand shines a spotlight on the real elephant in the room.

Meet the theory of hypothecation.

David Buckner joined Glenn Beck back a year or so ago to effort to explain hypothecation in what most would consider English. Please take a listen:



In reflecting on the Christmas season, the wonderful Frank Capra movie Its A Wonderful Life comes to mind when attempting to provide a basic overview of hypothecation.

The Bailey Building and Loan Association, of which the central character George Bailey was the president, engaged in mortgage lending, lending out portions of monetary deposits to qualified buyers in an affordable housing project.  Provided the association retained proper reserve requirements without commingling funds, this was a quite ordinary and profitable enterprise for such a loan association.  Failure to adhere to regulatory banking laws would appropriately lead to fraud likely commensurate with incarceration upon conviction.

Enter The Federal Reserve.  The FED, as the holder of the physical gold, may lend to banks, and others, utilizing the gold as collateral, provided the depositors have consented to such an agreement.  An agreement in this regard would certainly have reserve requirements, although the FED, not being a public company and a quasi-governmental firm, has no regulatory requirement to publicly release terms of such agreements or asset balances.

Back to the request by Germany to obtain portions of their physical gold deposits from The FED.  The Zero Hedge piece noted the agreed upon amount of the first batch to be delivered was short, and Germany noted it was not the same gold initially deposited, as it was marked.

Why was did The FED short the batch size, and why were the gold bars not the original ones deposited?  Glenn Beck asks some legitimate questions about the batch and potential reasons for the alteration of the originally deposited gold bars, and the conclusions drawn are hair on fire troubling.





Has The FED deviated from common banking guidelines with respect to collateral requirements of gold reserves?  Does The FED actually possess the physical gold?  Are adequate reserves in place to accommodate the subsequent levels of hypothecation?

Where would these reserves be if not in the possession of The FED.  The financial crisis of 2008 was the greatest theft in history, and we still wonder who got all the loot.

If the gold is not possessed by The FED, given gold the position gold holds as the cornerstone of finance, the result would be catastrophic for everyone, and global collapse would be imminent.

Even Mr. Drysdale won't be able to fix this.

Carry On For Now

DJIA 9/18/2013/FOX BUSINESS

This afternoon, the FED announced they will continue to print money and buy bonds, which they would not be engaged in if the economy was in recovery and growing.

This signals clear sailing for stocks, save a geopolitical or terrorist event, as inflation will reign as too many dollars chase too few assets.

Carry on for now.  However, when this unwinds, odds strongly favor it will not for the faint of heart.

A Measure of Success

While literally in midst of another domestic terrorist attack in Washington, DC at the Naval ship yard, in what can only be described as a classless and appalling action, President Obama took to the podium in front of a staged crowd marking the five year anniversary of the financial crisis to take credit for saving America from a a depression.

The top priority since his tenure in the oval office began, Obama reiterated his intention of focusing like a laser beam in his effort in building our economy so it works for everyone and laying out a new foundation for economic growth and prosperity. Take a listen:



With an adoring mainstream media failing to once again to question the assessment of the president, the extreme lies and misrepresentations of this speech cannot go unchallenged.

Obama, through the passage of Dodd-Frank, has left most banks paralyzed, as he blames the money center banks for creating the housing crisis through unsavory lending and underwriting practices.  Never mind that much of the blame falls on the goings on surrounding the Community Reinvestment Act, which sought to provide loans to lower income individuals and families who under normal established guidelines would fail to qualify.  ACORN, a community activist organization Obama supported and worked with, threatened legal action and public ridicule through protest for those considered racist banks who refused to dismiss best underwriting practices and engage in lending to unqualified applicants.

Dodd-Frank also provides consumer protection for those engaging in commerce with banks, given the deemed incompetence of the consumer derived by the government.  Forget buyer beware, Obama and big brother are here to help, guiding (and restricting) what banking actions of commerce the consumer will be allowed to engage in. Dodd-Frank does nothing but restrict banking opportunities all while increasing costs of the consumers.  It is about nothing but government control, and limits the individual liberty and economic freedom of the citizenry.

In addition, while we are at it, the assault on property rights also adds costs and restricts freedom of property owners through EPA implemented regulatory action, restricted permitting and zoning regulations implemented under Agenda 21.  Has anyone replaced an HVAC system lately?

President Obama spoke of how his efforts jump started the flow of credit.  Through government entitlements, such as HARP, scores of homeowners have refinanced their mortgages at lower interest rates as banks beholden to the government have been directed to provide this opportunity.  The lost money is absorbed by the taxpayers.

Most property owners, due to underwater property values, facing restricted credit and unstable employment, are unable to qualify for loans without government assistance.  Credit for small businesses, and mortgage loans free from governmental intrusion, remain quite difficult to obtain.

Some thirteen trillions dollars have been spent, actually borrowed, to "stabilize the economy" and create jobs, and although Obama has no idea, this has been a colossal failure in large measure to his horrendous economic policies. Remove the FED buying bonds, begin some tapering, and see how stable the economy is.

While the administration trumpets a lowering unemployment rate, it should be noted that figure has been grossly manipulated.  Millions of Americans, unable to find work, have quit looking, and thus have fallen from being counted in the data sample, thus allowing the rate to fall.  The real story can be found by looking at the Labor Force Participation Rate, which tells us that the amount of our citizenry fully employed, not withstanding steady population growth, is at levels not seen since 1978.

 

The real statistics regarding the economy are staggering, and if the workforce was equal to when Obama was sworn in, the unemployment rate would be closer to 14%.  Among the jobs Obama has claimed to create, a mind boggling number have been part time, in large measure due to companies limiting the hours of their employees in preparation of the implementation of Obamacare.  Obama championed the flagship legislation he spearheaded in Obamacare, the current top ranked job killer in America. 

 

In a related statistic, ZeroHedge.com illustrates economic realities even the low information crowd can comprehend; reporting a record number of restaurant workers while restaurant companies report decreasing sales.  Something is wrong with this picture.

 

Obama noted an erosion of the middle class, unaware his policies are the culprit.  Families are working harder than ever for less as median family income is lower than when he took office, coupled with rising costs in health care, food and of course gas, which has been over $3 a gallon, in contrast to a cost of $1.83 upon him taking office, for over 1000 days.

 

In fact, Obama highlighted his efforts to insist on new technologies to end our addiction to foreign oil.  Given that commentary, it is puzzling that this included reducing domestic drilling where possible, with a byproduct of a reduction in jobs, and increasing purchases from foreign countries.  Obama proclaimed we sought to become Brazil's biggest customer for oil.  Cheers!

 

Higher education has been an item Obama has focused on, even having Sallie Mae taken over by the federal government,  Sadly, the cost of higher education has never been higher and issues abound.

 

Much of the stimulus money went to unions organization and green job initiatives, many of whom are now bankrupt. Bridges and roads earmarked for repair remain in need as the money went elsewhere.

 

Obama was thrilled to save Detroit, except he did not.  The city of Detroit has gone bankrupt, and General Motors has been unable to repay Uncle Sam for the bailout.  The famed Pontiac Motor Division fails now to exist, and green energy vehicles Obama forced GM to produce have not produced a profit.  In a brazen derailment from contract law, bond holders had their money stolen while auto unions were padded.  Dealerships that were closed were over 80% owned by GOP donors, a political hit.  Ford, meanwhile, turned down the bailout and is outperforming GM. 

When Obama adds it up, he sees a tremendous success. Given his ambition to fundamentally transform the United States of America, his presiding over our decline may be measured as such.  For those who appreciate free markets, individual liberty and economic freedom, his tenure has been catastrophic.

But the lies and misrepresentation did not end there.  Yet to come was the all too common bitterly partisan and divisive attack on those meddling kids, otherwise known as Republicans.



It is worth noting, again, that for the fist 18 months of the Obama administration, until the election in Massachusetts of Scott Brown, democrats held a super majority. Better stated, the republicans may as well have played golf everyday because they alone could stop no legislative action. Zero.

At this point, the GOP has the house, but the democrats still control the presidency and the senate. Furthermore, against rhetoric to the contrary, a long list of progressive GOP members refrain from contesting Obama on anything, even some having supported much of his plans, inclusive of Obamacare.

The economic chaos Obama speaks of has been caused by his wreckless spending, exploding entitlements and attacks on small business and free markets.  Keep in mind it is Obama and his party are and have been in control presiding in the decline of America.

With respect to those who are offering opposition to Obama and his collective ambitions, I joined millions of others in electing representatives charged with defeating his initiatives.  It is Obama who has tanked the economy, not a handful of GOP members who oppose his socialistic goals.

Obama is emphatic that he will not negotiate with the GOP on the budget issues, which is odd coming from a man who claimed he would negotiate with any terrorist on the planet.  The GOP always get hammered for not compromising, but it is Obama who will not negotiate.

Yes, when you add it up, freedom and prosperity has been lost under Obama's presidency.  Five years after he implemented his strategy, with limited elected opposition, the country is far from economically stable and cannot pay its bills.  Seemingly under control of the administration, the FED is monetizing our bloated debt, crushing savers and decreasing asset wealth in what has to be considered the reaching of Obama's goal of the transformation of wealth.

The media can cheer Obama on, but those of us in the middle class out here working know what the scorecard says.  The economic conditions as a result of the actions taken by Obama have significantly reduced freedom and prosperity, the opportunity to achieve it, and have decreased the standard of living for the greater majority of our citizens.

How is success measured in this case.  For Obama, presiding over the transformation of the United States is considered a rousing success.  I consider those actions unconstitutional, and therefore seek his impeachment.

Zeppelin Downdraft

An interesting post appeared over at Tyler Durden's fantastic blog Zero Hedge. 

 

Video of an interview with Marc Faber on CNBC was presented, where Faber prognosticates that at the end of the year the stock market will be potentially over 20% lower than current levels.  While Faber, publisher of the Gloom, Boom & Doom Report, eery similarities between the fundamental and technical backdrop 1987 and today.

 

With respect to the stock market, in 1987 the market was engaged in the greatest bull market in history.  Although at the time few could see the forest for the trees, the '87 crash presented a wonderful buying opportunity, fueled in part by emerging technological advancements. Technically, the area where we deem Faber correct in his analysis, Faber has noted an ominous chart pattern that has presented itself with increasing frequency in recent days; The Hindenburg Omen.

 

 

It is noted there has been historical evidence in matching chart patterns to past performances, and when comparing the market in 1987 to the market today, we can see the movements during this period have been quite similar.  I don't know what I am having for lunch tomorrow, but I recognize the story this chart is telling.

 

Fundamentally, both the micro and macro economic realities fail to resemble the landscape of 1987. It is worth noting the economy in 1987, with the Reagan Revolution well underway, was significantly superior in virtually every measurable statistic to our current economic conditions. 

In an extremely extended market where trading levels do not match fundamentals on the ground, extreme caution should be exhibited.  Too many dollars are chasing too few assets, and even with the FED fueling the pump, the overextended stock market looks primed for a downdraft.  The economy is in very sad shape, not withstanding the propaganda saying otherwise backed my manipulated data.  The unemployment rate is the best example, as the labor participation chart is disconnected to the reported unemployment rate,

It may be time to take profits, as recommended by Guggenheim, keeping in mind pigs get slaughtered.  Although it is tough to fight the tape, it would be most prudent to proceed with caution at this time.

Eyes on the Tentacles of Terrorism

The situation is fluid, but we conclude terrorists have attacked America in Boston. We will have plenty to say in the future, but for now, please keep our Bostonian friends, race competitors and their families in your prayers.

Contrary to the opinion of the Obama administration, we have been and remain in a global war on terror, both militarily and economically.  In times of a crisis, when attention is directed in appropriate fashion in a particular arena, our eye is temporarily taken off many other, and perhaps more important, issues 

Today may be such a day, as gold was in free fall as the markets closed sharply lower on Wall and Broad.

While we keep our Bostonian friends, race competitors and their families in our prayers, we must watch the other hand. There IS something to see here.

Kevin Freeman over at Secret Weapon has all the tentacles of the gold collapse covered, it is well worth your time to get up to speed over at his Global Economic Warfare site.

The economy is not doing better, and whether it is the Obama administration of Goldman Sachs informing you it has, they profit from delivering false information to you, so eliminate the noise.

Another strong piece describing the precarious situation can be found over at Zero Hedge.  As noted on this stellar website, gold volatility is signaling counter party risk again.  Is another bubble bursting?

Financial analysts are all over the place, and due to excessive market manipulation, guidelines from past history are out the window.

On top of this, we had what appeared to be a natural landslide the other day at Rio Tinto’s Kennecott mine in Utah which erased a large portion of Silver mining production for what may be years to come. Silver joined gold in tanking today.

 
Could these events possibly be related?  What does the immediate future hold?

I don't know what I am having for lunch on Tuesday, much less the direction of equity and precious metal trading in the capital markets, but I do know the market is being manipulated by the FED and that the economic fundamentals (yes, I know many companies are beating much lowered earnings expectations) are not good at all. 

I will point the labor force participation rate to hang my hat on. Caveat Emptor!

Tacking Tangible

The market indexes have been on quite some run.

If I could get a handle on all the lines of action going on on Wall Street, not only would I be a ventriloquist, I would be beyond wealthy. I am not.

The FED has increased the money supply by engaging in monetizing the debt, otherwise considered printing money, and that has resulted in excess money chasing too few assets, pushing the asset prices higher.

Due to the abysmal housing market, which cannot gain ground due to a horrendous job market and extensive regulation through Dodd-Frank, real estate investing has not been the avenue of choice for investors.  Gold and the stock market has.

A review of the NASDAQ after the close today shows the index increasing five year highs, and this has been a great run if you have been along for the ride. Take a look, but note the market level variance from the relative strength:



Weekly NASDAQ chart/Investors.com

While markets are forward looking and do not always reflect the current status of the economic realities on the ground, given our economy, it is reasonable to conclude the stock market should not be lurching into a parabolic assault on historical highs.  With an employment participation rate having retracted to levels not seen since the Reagan administration, a manipulated unemployment rate parked at levels not witnessed since The Great Depression, governmental assaults on small business, class warfare on the wealthy and putrid growth in the Gross Domestic Product, one has to wonder why the dichotomy between the capital markets and the reality on the ground.

As the excellent blog Zero Hedge accurately pointed out, many economic measures are breaking down, and while the Case Schiller Housing Index has shown signs of life depending on how you analyze the data, even though a shadow inventory remains, the housing market remains bottoming.

If housing is improving, with the state of the economy, one must conclude rising investor participation as first time home buyers are scarce.  If investors are becoming more interested in real estate, what market has fallen into disfavor and why? The stock market?

Indications are yes.

In fact, as BloombergBusinessweek reported, some $114 billion US Bank deposits have been withdrawn, at the fastest pace since the September 11, 2001 attacks. 

Apparently, few know why.

Paul Miller, a bank analyst with FBR Capital Markets, cautions against reading too much into the Fed’s weekly data. “It’s a noisy database,” he says.  No kidding.  With a media complicit in propaganda, and the FED intervening in market action in unprecedented levels, it is most difficult to accurately value equities.  It is the FED behind the curtain who is crowding banks out of the mortgage origination market and setting unreasonable credit requirements for lending practice, handicapping the housing market even with manipulated easy money.

But is there a correlation between rising housing investment and what looks to be a topping out of the DOW and NASDAQ?  Further, in anticipation of a market collapse, would tangible assets such as real estate become the favored investment?

Without government interaction, even though they have been replenishing their balance sheets borrowing free money from the Fed, banks could not withstand a major economic collapse.  Further, unwinding the hypothecation would be catastrophic.  If the clients of Jon Corzoine at MF Global are any indication, get your money while you can.  Maybe investors are.

No matter what market developments lay in store for us, a few things are certain in my view.  The housing market remains broken and cannot recover without a recovering job market. The market has been compromised and true evaluation is not possible. And, unfortunately and most notably, the rule of law and trust of the marketplace, integral for the survival of a free market capitalist system, has been violated.

As I have previously mentioned, until the rule of law is reestablished with the government becoming a bystander, allowing the FED to resume normal open market operations, the market place will remain compromised and a playground for the crony crowd.

Given the increasing turbulence, while I don't know what I am having for lunch tomorrow, I sense a major storm brewing both port and starboard. Caveat Emptor.

Market Mayhem

Investors should be treading very carefully these days in the capital markets. This is not a time for Aunt Mary and Uncle Bob and unemployed day traders. Former FED Chair Alan Greenspan said today that the market may be juiced some 50% due to FED stimulus. While the effectiveness of the stimulus can be argued, the FED cannot operate quantitative easing forever, and at some point, the stimulus will need to be retracted.

Forecasting the extraction of FED injected stimulus is one task, but navigating a market without integrity and rule of law signals a retreat to the sideline. Regrettably, in my estimation, we sadly have reached this point. MF Global is fresh on our minds, and last I saw, Jon Corzine was two fisted with his favorite cocktail cranking around the Hamptons. Meanwhile, his investors remain fighting to retrieve small portions of the investments placed with his frim feared lost.

The events surrounding the MF debacle should have been a major warning sign. In the aftermath, Ann Barnhardt shut down her brokerage firm Barnhardt Capital Management due to lack of confidence in the governance of the cattle futures market. Barnhardt warned of future issues to come, and this week we were greeted with the bizarre goings on at PFG Best. Score one for Ann.

Rick Santelli of CNBC further explains:



It seems clear we have issues at the CFTC and/or NFA, and all capital markets, for that matter. The FED seems to be in bed with the Obama administration, rather than operating with impartial market driven guidance. We have news the LIBOR rate has been manipulated, with Barclays among the first of potentially many banks to be signaled out.  JP Morgan, with problems turning up everywhere these days, reportedly played a role. LIBORgate will become a major financial mess, potentially blowing up every HP12C on the planet as the lawsuits get going. As it turns out, approximately 1 million mortgages were based off this rate, and that could be a huge problem.

We ran a blog post a few months back discussing market mayhem, eloquently described First Principles Capital Managements Doug Dachille, which we will present again below.



These market manipulations are quite complex difficult to get your arms around. However, when you couple the imminent implosion of the European Union with market manipulation and The FED gaming the system it becomes exponentially difficult to properly measure risk. In addition, the rewards of potential gains versus the risk exposure within tainted and manipulated markets seem not worth the effort. Although seemingly safe in large big caps positions, investors should keep a very tight leash on any investments.

Do you know who is running the casino? Are their friends being rewarded at your expense? Corruption is everywhere! There is market mayhem, being controlled by those who are not ashamed to be helping you lose your money. Trust and rule of law are absent. It is most unfortunate it has come to this, but in my view it clearly has.

Caveat Emptor!

Traders Handcuffed By Regulators

Governmental regulation, much of it coming from the horrendous Dodd-Frank bill, is an unwelcome participant in the marketplace, making it much harder for investors and traders to make money.

Forecast are increasingly difficult, as random governmental interaction and artificial interference curtails investment opportunities. Risk is central to an efficient market, and regulations to eliminate risk cause inefficiencies and reduce potential profits for those who can accurately measure risk.

Doug Dachille, CEO of First Principles Capital Management, was the guest host on Squawk Box last week and explains the difficulty traders are facing:

Future Financial Mayhem

You may not recognize it, but you are being lied to.

For an example, which is a full assault on your wallet, look no further than the monetization of the debt, which Fed Chairman Ben Bernanke said would not happen. Well, Investors Business Daily reports that the FED is readying for more stimulus. Perplexing for sure, given the failed results of previous quantitative easing, QE1 and QE2. Printing money decreases asset value, which surely will not be of assistance the millions of homeowners underwater.

Media outlets report that the economy is growing and jobs are being created, as evidenced by the unemployment number presented by the federal government. If that is true, it would not be necessary for the FED to engage in QE3.

Speaking of the FED, something has gone terribly wrong over the last few years. The FED is the lender of last resort and is charged with conducting monetary policy. Historically, Presidents have had little power over the FED, with the FED operating outside of executive branch influence, the exception being appointments to the boards and appointing the Charmian, if necessary.

Although the FED is by far the most powerful governmental agency, there is little regulatory oversight over its activities. Somewhere recently, particularly under President Obama, The FED seems to be carrying water for the administration and assisting in the implementation of policy. This is very troubling, particularly when the leader of the executive branch is not a free market capitalist.

Recent actions by the FED, seeming to begin with TARP, have broken tendencies and are raising concerns on both sides of the aisle. The creation of the conditions that allowed MF Global to take place is a recent example of the now problematic status of the FED, and how you are being lied to.

For a brilliant explanation, please see First Principles Capital Management CEO Doug Dachille at the Yale School of Management last December:



The government, using the FED through regulatory influence and intervention, is now choosing winners and losers. Although Fannie and Freddie are still in operation, it is the FED behind the curtain who is crowding banks out of the mortgage origination market and setting unreasonable credit requirements. As Dachille points, out, life insurance companies are being squeezed, and Sallie Mae has been taken over and private lending has been crowded out.

With MF Global, customer accounts were not protected. They were stolen to pay major players. Again, as Dachille discusses, with the suffocating Dodd-Frank bill, you might think customer accounts might be protected. If the regulators are charged with one thing, it would be to protect the integrity of the system, the trust that customer accounts not participating in risk taking activity are not hypothecated and can be made whole in a timely fashion.

This did not happen at MF Global, and due to the lack of trust in the markets sure to emerge because of this, bad things are on the horizon. If this can happen at MF Global, it can happen at any firm housing investments. A customer obviously has no control over hypothecation by these firms and therefore cannot be guaranteed a return of the investment should the firm be severely compromised or fail.

Beginning with the shafting of the bondholders of the automakers, the rule of law and trust of the marketplace, integral for the survival of a free market capitalist system, has been violated. You are being lied when government officials and the media inform you that everything is fine.

Until the rule of law is reestablished, the government becomes a bystander and the FED resumes normal open market operations, the market place is compromised and for you to be participatory in it, Caveat Emptor.

Banking Shore Leave

For those out working every day to stay afloat, a review of the daily news put forth by the drive by media reveals an economy slowly emerging from stability, albeit with anemic growth. The worst is over. Everything is fine, nothing to see here.

But if you look closely at what is really happening, there is major economic trouble lurking about all over the place. Much of the focus has been on Europe, as they struggle to escape a collapse. A European collapse would certainly be a major problem for US financial markets, which are in real trouble.

In particular trouble are the banks. As has been noted repeatedly, banks are borrowing at next to free from The FED and can lend to customers at approximately 5%, which would command high profit levels. But little lending is taking place, as lending for the housing market is extremely difficult to command, credit lines are evaporating and small business loans are rare. In fact, now loans to small business are being called.

The Los Angeles Times details a story of a small business owner having his loan called by Bank of America. He has the option of paying it off or restructuring at a new increased rate. Fox Business Network's Gerri Willis discusses this situation.


What motivation would the banks have to alienate customers in this fashion? Well, there are much bigger issues the banks are facing, and Economist David McAlvany outlines the problems to FOX Business's David Asman. Take a listen:



Under extreme duress, at what level will the banks stop in attempting to call loans and restructure loans not called at substantially higher interest rates? Most people are barely surviving now, so restructuring of this kind will bankrupt many with the banks seizing whatever assets they can. Seems far fetched I know, but did it just happen in the MF Global saga?

Ann Barnhardt thinks so. Barnhardt joins Warren Pollock to discuss this situation and what may be coming.


While portions of the forecasting going on may be worst case scenarios, it is clear that the economic standing of Uncle Sam is not on sound footing. Contract law is being broken, as evidenced by the auto bondholders, and the transformation of wealth (theft) is taking place. Banks are attacking customers, and the raising of credit card interest rates is a small example.

It is going to be an interesting time as we move through the 2012 election, and you should take steps now to secure your financial footing if possible. Should Obama, who has demonstrated his disdain for the rules set forth by our Constitution by his eagerness to bypass Congress to implement his ideas, be re-elected, a top down governmental dictatorship may be our future.

It will be the end of America as you once knew it; no longer a nation of laws, but a nation of men.

Regulations Eroding Economic Lifeline: Credit

While many of our citizens remain unaware, a slow creep of regulatory instruments are eroding the lifeline of our economy; credit. If you are working hard to make ends meet and catch bits and pieces of newscasts from national and local news outlets in the mainstream media, you likely have no knowledge of how serious this issue is.

Rahm Emanuel, former Chief of Staff of President Obama said the administration should never let a crisis go to waste. They took advantage of the fear in the aftermath of the banking crisis to power grab much of your liberty when it comes to your finances, likely without your understanding of the "small print."

It has been three years since Lehman Brothers collapsed, and although many of the experts say Uncle Sams balance sheet is improved and the worst is behind us, I don't buy it. Neither does Home Depot founder Bernie Marcus, who joins Mary Thompson, David Faber and Joe Kernen for a frank discussion on CNBC's Sqauwk Box this morning. Take a listen:



The experts are almost always wrong. Discredited economist Paul Krugman and social economic pontificator Jared Bernstein coupled with comments such as "The housing crisis is contained" and "Pass the stimulus and unemployment will not exceed 8%" come to mind.

Bernie Marcus is not wrong, and listening to him will get you more saving, more doing.

With a new wave of foreclosures coming, property owners will be seeking opportunities for refinancing among banks, but the big banks are not able to extend the necessary credit due to strict regulations. These banks can borrow from the FED at zero and lend to the public at 5%, and a banker can have a fine career in banking doing that. But this lending is not taking place, and the alternative option of small banks is being crushed by Dodd-Frank, which quite simply is killing small banks. Regulations have wrecked the residential appraisal industry, spearheaded by The Architect of Ruin, Andrew Cuomo. These regualtions allow the government to pick winners and losers as well, which raises costs and handicaps the entrepreneur.

The markets have been up this week, and given all the horrendous economic news this week, such as an unexpected rise in jobless claims, inflation and sobering news on poverty, you may wonder why. Euro Tarp! You got it, the FED is essentially bailing out Europe, which can be equated to QE3, a new installment of quantitative easing on a global scale. A socialist European dream! Of Course, I am quite sure this will fix the problem with the PIGS? Well, it won't work!

The economy is in crisis, and we are far from out of the woods. Uncle Sam is a major event way from taking a substantial leg down, and the FED is short on tools to fight the problem due the poor crony capitalism decisions made under Obama and Bernanke. Could the crisis in Europe be such an event? If so, will global governance, all for our benefit no doubt, claim more of our liberty in creating a global banking system, which could lead to a dollar collapse?

The big banks continue to get bailed out while the small banks are being killed off by excessive regulation, crippling the credit line for consumers, who are on life support. Collusion between the administration and the FED is extremely alarming, contributing to the unnecessary extension of the economic crisis we are in.

All these goings on are the antithesis of what should be taking place, and strongly appear to be orchestrated. These are critically troubling times, and our country as we know it could hang in the balance. As I pray we make it to November 2012, we must hold our freedoms dear, protect our sovereignty and remember that free market capitalism is indeed the best path to prosperity.

Is The Game Up?

The US financial markets blew up in 2008 in the aftermath of a housing crisis, a bubble caused by easy money and governmental influence, one far from in conclusion. According to the Obama administration, their policies pulled the US economy from the brink of depression and have jump started a recovery. And I am King Tut.

Birth Pangs. Day by day since, there continue to be warning signs of global financial collapse across the globe. From France burning two years ago to London two weeks ago, the natives are restless and are lashing out.

Broken in spirit, void of incentive and corralled from leadership, the youth who were promised a gravy train from a central planning government are violently attacking now that the money has run out. A history of Margaret Thatcher would seem appropriate.

Europe, joined at the hip in promoting global socialism, and through inclusion in the EU, search for stability by limiting member governments from operating independently with the necessary flexibility to innovate and increase production and individual wealth. Who could have seen the negative fall out coming?

Nigel Farage for one.

Farage hits a home run, one which should be absorbed as a shot heard round the world. Investors Business Daily notes in today's edition that Euro Zone debt fears start to hit France as the 10 year yield spread between France and Germany has tripled in recent weeks, which could be foretelling the financial contagion is spreading to the heart of Europe, just as Farage predicted.

Former FED Chair Alan Greenspan, The Maestro, who contributed to the easy money platform the housing crisis sprang from, weighed in on the Euro today, noting “The euro is breaking down and the process of its breaking down is creating very considerable difficulties in the European banking system,” Greenspan continues the European contraction would hurt profitability and stock values of American companies. You think?

The more central planners plan, the more their plans fail. The more their plans fail, the more they plan. Continue as they must to contain the fallout, we know one thing. Well, it won't work.

Greenspan correctly pointed out “The problem is that there is a growing cleavage in the economic and analytical and banking circles as to whether the Euro, which is the crucial issue here, should be 17 countries with very significantly different cultures” regarding the role of government, consumer spending and inflation. Indeed, while there can be alliances to further trade agreements, each country should have independent currencies for sound monetary policies to anchor allowing the necessary flexibility needed to create sustainable growth.

This is not the case in Europe, and with America moving swiftly to a cradle to grave entitlement nanny state, a global collapse is all but certain. PIIGS don't fly. Bailouts will lead to more bailouts, and at some point the money runs out.

Farage is quite right in hoping market principles derail the central planning elites prior to the spirit of the individual being lost for eternity. It is the principals of free market capitalism that provides the best path prosperity, and we must seek out and associate with leaders who are rock solid on this principle before the game is up.

Of course, in America, we always have the voting booth to cleanse out those void of our founding principles. At least for now.

Raising Cain

Last Thursday night, the GOP held their first 2012 presidential debate and gave America a glimpse of what cold be considered the second tier as many of the estimated front runners skipped the event.

The evening provided an opportunity for someone to emerge, as has happened in years past. Quite a bit of money was placed on Tim Pawlenty, the former Governor of Minnesota, while many others just knew former Pennsylvania Senator Rick Santorum would stand tall. Texas Congressman Ron Paul has a strong following, as we all know.

Unless you got the fever from examining a dark horse for he weekends upcoming Kentucky Derby, you may not have considered Georgia businessman Herman Cain might steal the show.

Although the other candidates held steady, it was Herman Cain that positioned himself as a candidate that could move up to the first team. Cain, a former military man who began his business career at Coca Cola, has had quite a distinguished career as the former CEO of Godfathers Pizza, Chairman of the National Restaurant Association and a position on the board of directors of the Kansas City Federal Reserve Bank.

Cain spoke common sense, something America is clamoring for. I think America wants to eject from the tainted political process with an outsider who is free to run the country like an efficient business. This was evident in the overwhelming reaction by a Frank Luntz focus group, who came away in full support of Cain. The Wall Street Journal came away impressed also.

Recently, at the Tax Day TEA Party in Orlando, Cain was the headline speaker, and I quite like him. I am not sure if he can win the GOP nomination, but given the way Republicans give away the minority vote, Cain could give the GOP opportunities it could only dream of. Employing the business background Cains brings to the table, I think in this plain spoken Georgian you may have just met the GOP VP candidate for 2012.

Did you miss Cain dominate the debate? Take a listen as Cain recaps the evening in a discussion with CNBC's Larry Kudlow.



Cain is expected to formally announce his candidacy on May 21, 2011.

Agent Speculator

This sign, reportedly located in north Central Florida, is most telling.

Please allow a moment of digression. Elements of the left wing, under the premise of assisting those in the lower levels of economic stature to purchase a home, applied pressure to banks to lend with potential charges of false racism to lend to this group of individuals. Certainly, you recall ACORN.

The easy money position taken by The Federal Reserve helped fuel and create an environment of easy lending to all levels of economic status. Coupled together, we all now know how catastrophic this series of moves was.

In response to the crash, the FED balance sheet has been expanded to allow for banks to reset. Initially, public thought was that the banks would lend this money out to the public to help restart the economy. Instead, banks have been hording the money.

Are the banks still trigger shy to lend to the small businesses and individuals that make up most of the economic growth in the community? Given the economic environment created by this administration, one which seemingly encourages people to escape their financial obligations, I would be.

Are banks not convinced of the stability of the underlying value of the collateral used to secure loans, such as real estate? I am.

Are banks saving up because they see what lies ahead in the future, which is the possibility of another crash. Could be, as a double dip recession is already underway and we can see bubbles in several areas, such as gold and silver.

If I had all the answers, I would be floating around on my Hatteras in the Bahamas.

Currently, the dollar is at near term low. One of the four pillars of Reaganomics was sound money, which includes a strong dollar, which puts our economy in prime position to function at high levels. With oil prices pegged to the dollar, a weak dollar is one of the main reasons gas prices are soaring. Another reason is the Obama administration, who set out to investigate what role speculators are having in causing prices to rise.

If I know demand is steady at a minimum and Obama is restricting oil production, adverse to increasing our domestic supply from drilling, is assisting in creating havoc in the oil rich middle east which disrupts distribution and is placing a heavy hand of regulation on the profitable energy sector, I recognize investment opportunities.

Investors are indeed speculating on higher oil costs. The way to derail the speculators is for the policies regarding oil to change, and that would heave to come from the very folks investigating potential speculation.

Recently, China has been decreasing bond purchases from the US and selling at a discounted rate, as the Chinese are not confident they will get paid what they are owed. This action devalues our economy, as does our government using quantitative easing (printing money) as stimulus.

High levels of inflation has already arrived in some areas (food), but will become an all encompassing issue in the coming years. The FED will work to quickly offset the inflationary pressure by restricting the money supply, which should include a rise in interest rates.

What will the playing field look like when this starts happening. Will the gold bubble burst. Will the much talked about municipal bond crash become a reality? Where will investors run to?

Perhaps the answer is Real Estate, a tangible investment which as adjusted has historically low prices. Due to high levels of vacant units nationwide and new home construction nil, a reset is not expected until about 2016.

If it does come full circle, I hear Exxon-Mobil is entering the home financing business. Just call me Agent Speculator!