Friday, December 10, 2010

Headlines: December 10th

Federal government today announces a $150 billion deficit for the month of November.

Federal Reserve today announces $105 billion in government debt purchases in January.

On pace for Federal Reserve to soon begin purchasing all of deficit with printing press.

US currency on pace for complete annihilation.

Leaders cut no spending. 

Only press harder on the gas.

For an excellent discussion of this topic and the recent tax cuts I discussed briefly yesterday, you can read economist Peter Schiff's recent article:

WASHINGTON ORDERS ANOTHER FREE LUNCH

Thursday, December 9, 2010

The Future Interview

As I wrote about a weeks ago, before the Ireland bail out was confirmed, there would be no rioting from the citizens of their country until AFTER the government decided to save the banks, I mean, "people of Ireland."  And sure enough, since the announcement the people have taken to the streets to riot to show their appreciation of the government's "generosity."



Now they are strapped with years and years of additional debt and interest payments that will be paid for by newly imposed austerity packages from the ECB and IMF. (Global private central banks)

The sacrifices of the every day worker in Ireland will go toward another year of record bonuses paid out to the banks who will take no losses on the sovereign debt they purchased.

In the meantime, the United States has announced tax cuts across the board for the coming fiscal year in order to support growth.  I commend this strategy as an effective tool to promote business hiring and growth. 

I was then excited to look down the budget line items to find the spending cuts they will make in the other areas of our enormous and grotesquely bloated budget.  And I found......

NOTHING. 

No spending cuts will be made to offset the tax cuts. 

Our deficit will continue to be paid for by Ben Bernanke who has already announced his plan to finance 75% of our spending through the first half of the year with QE 2.  QE 3 will follow soon after during the second half and will probably finance 100% of the remaining deficit.

Americans sit passively by as the country is brought closer to complete ruin and collapse.  I am paying close attention to the actions overseas by both politicians and the citizens as it provides a sneak preview of what is soon in store for America.

For a glimpse into this future, the following is an interview with a common Irish citizen who fully understands what is taking place before him.... (warning: explicit)

Wednesday, December 8, 2010

The Big Bank Theory

The Daily Show With Jon StewartMon - Thurs 11p / 10c
The Big Bank Theory
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Secular Bear Market Update

The following graph shows that after some ups and downs the S&P 500 (American stock market) is exactly where it was on December 31, 1998.  12 years ago.



An investor who has patiently put money into this market over this period has earned exactly zero on stock appreciation.

It shows the importance of understanding long term cycles in markets.  We are currently in a long term bear market in stocks and a long term bull market in commodities.  Both cycles, which began in the year 2000, are secular and tend to last 15 - 20 years historically.

Stock price increases are good opportunities to sell (or go short) and commodity pull backs are good opportunities to purchase.

Tuesday, December 7, 2010

YTD Performance: All Assets

Year to date performance update through December 7th:

Is It Finally Time To Buy?

As we approach the end of the year it is time once again time to reflect on where we are currently, and where we are headed moving forward.

I will go into a very lengthy detailed discussion on the state of the markets in my 1st Quarter Outlook for 2011, which I will release as we move closer to the end of the month.

I will also be providing the 2011 update to the FT Capital page which will discuss how the 2010 recommendations finished the year as well as my investment recommendations based on the outlook for the year ahead.

Today I just want to briefly remind investors that my outlook from the second half of this year to today has not changed.  To briefly summarize:

Hold all current positions bought during first half of year, continue to add safe cash and wait for buying opportunities.

This now in hind sight was far too precautious as the markets have been on a tear during the second half of the year.  While the original assets purchased have been exploding in value, (see FT Capital) the new cash has been sad to watch the markets rise higher and higher.

The catalyst for this move, of course, was the surprise announcement from the Fed in August for Quantitative Easing II. 

So after months of investors blindly rushing into risky assets and moving every asset upward, where do I now stand?

I am far more precautious than I was at the end of the 2nd quarter as well as the 3rd.  The reason is that while the injected liquidity from the Fed, like a shot of heroin, makes everyone temporarily feel amazing, it has blinded the market that under the surface the fundamentals have become far more negative.

A $30 silver price or $90 barrel of oil does not make me want to purchase the assets more than when they were 30% cheaper.  While the natural human instinct is to feel that way, you have to continue to focus as an investor to think the opposite.

While I certainly will not be selling any silver or oil at these prices, I will not be purchasing additional amounts either. 

I continue to recommend the safest possible forms of cash.  Holding a high yielding money market account, 30 year treasuries, or other "can't lose" bond options are not safe cash. 

As I said, I will be going into this topic in far greater detail over the next few weeks, but I wanted to provide an interim update that high prices and a euphoric market (sentiment indicators are currently at record high across the board) have not in any way made me feel better about our economy or risk assets; they have done the exact opposite.

Monday, December 6, 2010

David Einhorn On The Next Crisis

David Einhorn, who I could lavish over for hours because he is essentially the person I want to be, spent some time with CNBC this morning to discuss the financial markets.

He went from being a very popular name to a global icon back in early 2008 when he became the leading voice against Lehman Brothers and their balance sheet.

The two had a vicious public battle where Lehman accused Einhorn of trying to talk down their stock in order to profit from his short position.  Einhorn did not back down and continued to stay on record that the company was worth zero.

We all know how the story ended; a few months later the Lehman stock went to zero, and Einhorn has been enshrined into the "legendary" camp of investors.

His largest position today? 

Gold.

Fun With Silver

As we wake up this morning to 30 year highs in the silver market, which is moving toward $30, I thought I would share an interesting video I came across this weekend discussing the JP Morgan silver price manipulation.

I have discussed this topic on numerous occasions over the past few years (one of my posts reached a semi-mainstream news site), and the topic is slowly becoming a serious discussion in financial groups around the world.

The video (which is explicit) has been sensationalized but explains the core issue in that JP Morgan has sold short years of mining production in paper silver contracts.

The site the cartoon recommends (which I am not endorsing here) sold out of precious metals in hours this past weekend when the video went viral.

Enjoy the ride up, because the day JP Morgan has to cover their short position will be a day the market will remember for many years.