Financial topics

[freddyv]

Elliott wave researches have also something to say.
Congratulations.

"
...
Ten billion dollars per day.
A staggering figure, but what could it possibly be?
The amount of money spent between the TARP, TALF and other alphabet soup of bailout programs? No.
The amount needed to spend the proposed stimulus package? No.
The amount of asset value lost everyday in the stock market in 2008? No.
The amount of money being printed daily at the U.S. Treasury?

Still cold, so I’ll tell you. In 2009, the U.S. will post a current account deficit of more the $1 trillion, and in order to finance this deficit, more than ten billion dollars every working day must flow into this country.

Like every castle in the sand, like any house built of straw – or, in terms of Elliott wave analysis, like any third-wave advance – such a capital structure is not sustainable. "Stimulus package" or not, the U.S. cannot attract enough foreign capital to sustain a $1 trillion trade deficit, a $1 trillion current account deficit, net foreign debt of $15 trillion and unfunded federal mandates of $54 trillion.

According to the CIA's World Factbook, the U.S. right now is at the very bottom of the Current Account Balance list, below Haiti and Cuba. And it's no coincidence that the three countries at the top of the list – China, Germany and Japan – have made significant structural reforms to their economies to an export-based model.

In contrast, the consumption-based model of the United States has placed us at the bottom. To put it simply, we consume more than we produce, and we literally ship billions out in national wealth every year for non-durable goods.
..."

http://www.elliottwave.com/freeupdates/ ... ollar.aspx

Excellent info and an interesting topic.

I say that this is one of those structural changes that we WILL make over the next decade or two. The trade deficit is rapidly coming into line and after unemployment builds to levels we haven't seen in decades we will once again come to appreciate the value of a job, as people did coming out if the depression.

This next decade will all be about mass restructuring like we haven't seen in a very long time. To assume that America is not up to the task is to make a big, big mistake...I hope....

--Fred

[freddyv]

In the past there has been much discussion about the ETF, SDS, and I just read a good article on the subject at
http://seekingalpha.com/article/120246- ... b_articles

The SDS is a 2x inverse play on the S&P 500 and has been an excellent performer for those who have wanted to short the market, especially as the market is falling rapidly. Holding the SDS over a long period of time will diminish your returns so be aware of that when using this 2x leveraged, inverse ETF.

Liquidity has been excellent, especially in times of volatility, when everyone seems to want some SDS in their portfolio.

--Fred

[freddyv]

Another interesting read at http://seekingalpha.com/article/119927- ... sb_popular.

"There is a mysterious cycle in human events. To some generations, much is given. Of other generations, much is expected. This Generation has a rendezvous with destiny."

Franklin Roosevelt – 1936

President Roosevelt was correct. The generation he was speaking to was already dealing with the worst financial crisis in the history of the United States, the Great Depression. By 1945, over 400,000 of this generation had lost their lives.
...
The crucial issue is whether societies as a whole are capable of learning from the past or are they condemned to the inevitable cycle of history. Can an individual change the course of history? Was World War II inevitable, even if Adolph Hitler had been killed during World War I? Is there anything that can be done to avert the cyclical crisis that seems to arrive on a consistent basis throughout history? Is our destiny already preordained? Mr. Strauss and Mr. Howe wrote the following words in 1997:

Based on historical patterns, America will hit a once-in-a-century national crisis within the decade...'like winter,' the crisis or 'fourth turning' cannot be averted. It will last 20 years or so and bring hardship and upheavals similar to previous fourth turnings, such as the American Revolution, the Civil War, the Great Depression and World War II. The fourth turning is a perilous time because the result could be a new 'golden age' for America or the beginning of the end. It all will begin with a 'sudden spark' that catalyzes a crisis mood around the year 2005.

I don’t have a preconceived notion of our country’s destiny...

--Fred

[aedens]

Excellent info and an interesting topic.

I say that this is one of those structural changes that we WILL make over the next decade or two. The trade deficit is rapidly coming into line and after unemployment builds to levels we haven't seen in decades we will once again come to appreciate the value of a job, as people did coming out if the depression.

This next decade will all be about mass restructuring like we haven't seen in a very long time. To assume that America is not up to the task is to make a big, big mistake...I hope....

--Fred[/quote]
We have been asking The Senate for longer term solution's. Not going to happen is it.....
July 8, 2008

Thank you . . .
. . for contacting me about the impact of free trade agreements on our country. I share your deep concerns about our current trade policies and am leading the fight to change course. Last year, I voted against the Peru Free Trade Agreement, and I intend to lead the opposition to trade agreements with Columbia and South Korea that are being pushed by the Bush Administration. We live in a global economy that continues to grow and expand. Over the last century, we have consistently proven that Michigan businesses and workers can successfully compete with anyone in the world when the playing field is level. Unfortunately, persistent unfair trade practices by other countries are costing us jobs every day. Lack of trade enforcement has made it harder than ever for Michigan companies and workers to compete.
We have 230 trade agreements on the books to enforce, but the United States still has the smallest trade enforcement agency of any industrialized nation. I have consistently pushed the Bush Administration to bring trade enforcement actions against countries who break the law, and I was pleased with the World Trade Organization's recent finding that China's policy of charging a higher tax on American-made auto parts violates WTO rules. However, while our workers and businesses waited for this ruling, six of our nation's largest auto suppliers declared bankruptcy, we lost 3.4 million manufacturing jobs, and our trade deficit with China grew to a record $1.1 trillion dollars - all while our state's unemployment rate remains the highest in the nation. Of course, China is not the only country refusing to play by the rules. South Korea is blocking American products from entering its economy by doing everything from instituting excessively rigorous testing on American appliances to placing higher insurance premiums on American cars, many of which are made here in Michigan. The results have been telling.

For example, last year U.S. automakers sold only 9,723 vehicles in Korea, but Korean automakers sold nearly 773,000 vehicles in the United States. That's why I have joined with Senator Lindsey Graham of South Carolina to lead the fight to establish an office of Trade Enforcement to investigate other countries' illegal trade practices and take enforcement action on behalf of American businesses.

Additionally, countries like Japan and China are manipulating their currencies to make their products artificially cheaper. For example, this practice provides a $2,100 to $6,300 per car subsidy to Japanese automakers. That's why I have joined with Senator Bunning of Kentucky to author legislation to provide U.S. manufacturers with the legal means to fight back against what amounts to an illegal trade subsidy. Recently, I brought together Michigan manufacturers from across our state and the nation's top trade enforcement official, Christopher Padilla, who serves as Undersecretary of Commerce for International Trade. This meeting provided an open venue to discuss our current trade enforcement system and the unfair trade practices that are hurting companies and workers across the nation. We discussed issues ranging from the stealing of patents to illegal subsidies. The outcome of the meeting was clear. No one is looking for a free ride. Our businesses are simply looking for a level playing field, so we can keep jobs in America.
You can count on me to continue fighting for a comprehensive trade policy in this country that enforces our trade laws, provides real assistance to workers and communities who are hurt by trade, improves product safety, and most importantly, puts Michigan workers and business first. Thank you again for contacting me. Please continue to keep me informed about issues of concern to you and your family.
Sincerely,
Debbie Stabenow
United States Senator

[John]

The following was sent out by Joel Lloyd Bellenson, CEO/Director,
Upstream Biosciences, Incorporated, to his mailing list:

> Subject: Wealth Does Not Pass Three Generations & Depression
> Babies & Generational Crises/Dynamics

> http://globaleconomicanalysis.blogspot. ... tions.html

> [Here is a longer list of generational financial crises, every
> 70-80 years, going back further:

• Florence, Italy¹s Renaissance Art Mania/Medici Bankruptcy, 1478
  http://en.wikipedia.org/wiki/Medici_bank
• Spanish Monarchy Bankruptcy, 1557
  http://en.wikipedia.org/wiki/Habsburg_S ... .931571.29
• Dutch Tulipmania 1637
  http://www.businessweek.com/2000/00_17/b3678084.htm
• British South Sea/French Mississippi Bubble Crash 1720
  http://people.few.eur.nl/smant/m-economics/southsea.htm
  
  http://people.few.eur.nl/smant/m-economics/johnlaw.htm
• French Monarchy Bankruptcy 1789
  http://www.mises.org/story/1489
• Panic/Commercial Crisis of 1857
  http://en.wikipedia.org/wiki/Panic_of_1857
• Great Depression, 1929
  http://lachlan.bluehaze.com.au/books/ga ... crash.html
• American Mortgage Mania, 2008]

> Though I don¹t agree with the title focusing exclusively on
> Boomers, the [following] article itself is ok

> BOOMERS ­ YOUR CRISIS HAS ARRIVED
> http://financialsense.com/editorials/qu ... /0210.html

> And if you are interested in Generational Dynamics regarding the
> crisis, I highly recommend, John Xenakis¹ blog:

> http://www.generationaldynamics.com/cgi ... 010.weblog

> Though we often disagree about politics, he has been along with
> Mish Shedlock one of the most accurate predictors of the contours
> of the crisis.

> And for some of the highest quality discussions about history and
> crisis, I also would recommend going to the website based on the
> book The Fourth Turning:

> http://www.fourthturning.com/html/discussions.html

Sincerely,

John

[John]

A web site reader sent me a PDF file of a report written by Merrill
Lynch analyst David A. Rosenberg, called "Some inconvenient truths."
He says that we're in a new depression, and it's going to last 3 to 7
years.

I put the PDF file on my web site as:

http://GenerationalDynamics.com/ww2010/ ... tTruth.pdf

Sincerely,

John

[freddyv]

A web site reader sent me a PDF file of a report written by Merrill
Lynch analyst David A. Rosenberg, called "Some inconvenient truths."
He says that we're in a new depression, and it's going to last 3 to 7
years.

I put the PDF file on my web site as:

http://GenerationalDynamics.com/ww2010/ ... tTruth.pdf

Sincerely,

John

A must read, IMO.

He not only deals with the deleveraging going on but addresses the problem of retiring baby boomers, so often forgotten about as people focus on the crdit crisis. Boomers not only will be pulling money from the stock market and sucking it out of SS but they will no longer be looking to trade up to a bigger and more impressive home and in many cases will begin to move into managed care housing, though that will probably not become a huge factor for several years.

I found the following quote most interesting...

So far, the loss of
wealth in the household sector has been half as much in the Great Depression,
but if we are anywhere near the ballpark on our 660 call on the S&P 500 and a
further 15% downside to home prices, then by the end of 2009 the total hit to net
worth will approximate $20 trillion, or 40% from the 2007 peak, which indeed
would rival the severe hit to household balance sheet incurred in the 1930s

He seems to be on the right track but how he comes up with only 660 on the S&P is beyond me. I imagine that this is just a typical failure to address reality. My understanding is that none of the analysts polled by Thomson Reuters expect the S&P to drop in 2009. If you read how dire Mr. Rosenberg's predictions are for everything else it makes no sense that the stock market would only fall to 660.

--Fred

[John]

-- Earnings stats and market summary, week ending Feb 13, 2009

CNBC has reformatted its earnings central page, and moved the summary
stats to the bottom.

> EARNINGS STATS: BY THE NUMBERS

> As of Friday, February 13th:

> The blended earnings growth rate for the S&P 500 for Q4 2008,
> combining actual numbers for companies that have reported, and
> estimates for companies yet to report, fell to -42.1% from -40.6%
> due in part to lower than expected earnings for Financials such as
> Loews and Hartford Financial. On July 1st, the estimated growth
> rate for Q4 was 59.3%, and by October 1st, the estimated growth
> rate had fallen to 46.7%. (Data provided by Thomson Reuters)
> http://www.cnbc.com/id/15839135/site/14081545/

Date 4Q Earnings growth estimate as of that date
------- -------------------------------------------
Feb 6: 50.0%
Jul 1: 59.3% Start of previous (3rd) quarter
Oct 1: 46.7% Start of quarter
Dec 5: 10.0%
Dec 12: 5.9%
Dec 19: 0.5%
Dec 26: -0.9% End of quarter
Jan 2: -1.2%
Jan 9: -15.1%
Jan 16: -20.2%
Jan 23: -28.1%
Jan 30: -35.2%
Feb 6: -40.6%
Feb 13: -42.1%


From the Wall Street Journal:

> A week spent watching developments in Washington left stocks with
> their worst weekly losses since the height of the financial
> crisis, as bank shares remained an albatross for the broader
> market.

> Throughout the week, pessimism gradually spread among investors
> that the political wrangling dominating the headlines might not
> produce effective cures for the U.S. economy's ills. ...

> Coming into this week's action, the Dow had risen 9.6% from its
> November low. But it steadily slumped this week as investors
> responded to the changing details of proposals being hashed out by
> the Obama administration, Congress, and the Federal Reserve.

> Markets panned a Tuesday speech by Treasury Secretary Timothy
> Geithner that traders said was short on specifics about how the
> Obama administrations plans to value soured mortgage-backed
> assets, a crucial issue in untangling the credit crisis. Reports
> of a plan to assist troubled homeowners then rallied the markets
> late on Thursday.

> A $789 billion stimulus bill won final passage in the House of
> Representatives on Friday afternoon, with the measure also widely
> expected to gain approval in a Senate vote scheduled for the
> evening. But stocks shrugged of the news, with many participants
> still buckled in for a longer global recession than previously
> anticipated.

> "The best brains in this country missed the boat completely,"
> during the housing and credit boom that sowed the seeds of the
> current crisis, said James D. Baer, managing member at Uhlmann
> Price Securities in Chicago. "Now the market is telling us it
> doesn't have confidence that what they're doing is going to get us
> out of the morass."

> http://online.wsj.com/article/SB123452641654582439.html

Sincerely,

John

[mannfm11]

The trade figures have very little to do with who is cheating and who isn't and who is competitive and who isn't and a lot to do with who has the reserve currency and who has a credit card. The way the dollar has been used is the country that receives it lends it back to us and uses the bonds to collatralize their own currency, thus using our money to spur internal demand while depriving the system of demand for American products. It also places the money back in the US, which doesn't immediately create any need for Americans to balance their books. The more money we borrow, the more money we have which makes it conducive to having credit cards for the masses and making things overseas. The banking monopolies have never wanted us to know they set the US up at the end of World War II to be looted by the internationals through an unworkable money system. Contrary to the idea that boomers and Gen Xers destroyed this system, it was in crisis by 1960 and had collapsed by 1971 when the oldest boomer was 25. The game since then has been managing an exploding debt system that has recently come undone. The entire world is structured on getting more dollars, even if their value is dubious because this is the way the game is played. Problem is, the rich in the US would now have to spend themselves broke and the entire system, including the money in foreign countries would vaporize overnight. The absurdity of the compound interest game. Put the factor 1.01 to the 2000 power in a calculator and see what the number is. This is what an amount at 1% interest would multiply out to in 2000 years. The last time I checked, it was something like a quadrillion dollars for a penny and I venture there has been at least 1 cent drawing interest then entire time, meaning the system always collapses. Those that promote gold only promote it to collapse more often.

[mannfm11]

Freddy, I don't believe Warren Buffets career has spanned much blood in the streets And Buffet didn't coin that phrase, as I am sure it has been around at least since the panic of 1907. The S&P 500 pays a dividend not much over 3% and the payout is falling every week. The history of holding stock from the point the dividend fell to 3% hasn't been too good. The prior peaks valuations that amounted to a 3% dividend were 1929 and 1966. We reached 1% this time. You must realize that when the SPX was 1500 in 2000, it was worth at peak around 500 to 600 and history promised a good chance for 15 years to come to buy it in that price range. The 1990's mess in Japan wasn't this bad, yet our stock market represents only about 1/2 the damage of Japan so far. Buffet is going to be impaired before this one is over because he is investing the float out of an insurer and any kind of bad year in claims together with poor equity performance will blow the lid off Berkshire. Then there will be blood in the streets and he will be fully invested at a factor of 2.