Business / Economic / Financial

[ This link to a somewhat more cumulative blog posts page will precede current days news since most all topics remain current in terms of impact and longer-term effect and can be searched by topical index term more easily. The same is provided since the blog site http://alpeiablog.blogspot.com has just been censored as to size by google which is typical for google as nsa / cia / gov’t shill as more are becoming aware of. The same is true for microsoft, another co. that’s seen their best days and relies on the government to maintain their monopoly. Up to now the better page http://www.scribd.com/alpeia is provided for ease of formatting and clarity thereby while the Washington Post page is the real deal but without formatting http://www.washingtonpost.com/wp-srv/community/mypost/index.html?plckPersonaPage=PersonaComments&plckUserId=alpeia&newspaperUserId=alpeia ]

Progress in Afghan war called 'uneven' ( Washington Post ) [ Uneven? Riiiiight! The real question consonant with reality: Is there EVEN progress at all … just a little bit … un petit peux … teeny weeny, itsy bitsy, one iota of progress … A resounding NO! … unless you’re counting the magnitude of america’s defacto bankruptcy, anti-american sentiment, etc.. ]

U.S. deployment sends a message to China ( Washington Post ) [ And what message is that , pray tell … I’d say they’ve gotten the message and here’s the first installment of a reply to the multi-front contrived war / war mongering / pervasively corrupt, defacto bankrupt nation america … Drudgereport: CHINA, RUSSIA QUIT DOLLAR … Previous: N.Korean attack leaves U.S. with few options I’d be very concerned about the contrived nature of the incident as set forth by infowars.com / prisonplanet.com as follows: Korean War Crisis: Brought To You By Uncle Sam Despite the fact that South Korea admits it fired the first shots that prompted the North to retaliate, the vast majority of the establishment press are feverishly blaming North Korea for a new escalation in the crisis, while failing completely to acknowledge the fact that the whole fiasco was generated as a direct result of Uncle Sam’s policy through two separate administrations to ensure hereditary dictator Kim Jong-Il and his successors acquired the atom bomb. North Korea Attack Part Of RAND Plan For Total War? The exchange of artillery fire between North and South Korea, which the North says was started by South Korea firing shells during a military drill, could act as the catalyst for a huge new conflict that the RAND Corporation has been lobbying for over the past two years. ] North Korea's artillery attack on a South Korean island Tuesday, coupled with its choreographed rollout of a new nuclear program, has presents the U.S. with a massive strategic challenge. Photos: Artillery fire exchanged In sending the aircraft carrier USS George Washington to the Yellow Sea, the Obama administration says it is putting on a show of U.S. support for South Korea. Poll: How should U.S. proceed? Few good options for U.S.

Obama is hostage to a tepid economic recovery (Washington Post) [ Cheerleader? Wobama the B (for b* s*)? I think not … he’s been there, done that … that dog don’t hunt no more … this self-created fortress of failure is the direct consequence of failing to do as promised, particularly the war spending (could you imagine the macroeconomic effects of such funds if spent domestically rather than frittered away in foreign lands in illegal, contrived wars / conflicts which are contra-indicated by any rational criteria, prosecutions of the wall street fraud ‘big boys’, etc.. Don’t forget … america’s defacto bankrupt and pervasively corrupt. ] Obama faces the prospect of having to be a cheerleader for a tepid recovery.

Va. liquor privatization plan off by millions, report says (Washington Post) [ What can you expect from a d.c. suburb dominated by the cia, pentagon, et als, essentially an alphabet soup kitchen where ‘being there’ participants wrap themselves in flags as an excuse for their less than legitimate / productive activities which they posit as patriotism in the most self-interested forms otherwise known more colloquially as plain old-style corruption, crime, venality. Then there’s the purposeful lack of math skills the facilitates billions at at time going missing. I think for succinctness we may call this the moonshine effect which I observed, experienced directly: previous - Ex-Justice official: CIA may have exceeded limits (Washington Post) Wee doggies! This sounds like the stuff that SNL Weekend Update ‘Really’ skits are made of; also fitting into that list of queries as, ‘Is the Pope Catholic?’, ‘Do bears **** in the woods?’, etc.. Come on! Wake up! This is the kind of complicit cover-up / corruption found betwixt and between all three branches of the u.s. government leading ineluctably to america’s current decline and to which I’ve attested under penalty of perjury in the context of the RICO litigation [ http://www.albertpeia.com/112208opocoan/ricosummarytoFBIunderpenaltyofperjury.pdf http://www.albertpeia.com/112208opocoan/PeiavCoanetals.htm ].

Wall Street Is Laundering Drug Money And Getting Away With It Zach Carter | Wachovia was moving money behind literally tons of cocaine from violent drug cartels. It wasn’t an accident. ] A commission finds that the Republican governor's staff was too rosy in its estimates and also simply made mathematical errors.

Ireland unveils painful plan to cut spending (Washington Post) [ Things are getting’ downright existential / philosophical; all this pain, suffering stuff … I’m waitin’ for them to start qoutin’ Soren Kierkegaard’s ‘sickness unto death’ … yeah … things are that bad and coming soon to a region near you! Drudgereport:The Domino Effect... List of Problem Banks Grows... ‘…The number of banks on the Federal Deposit Insurance Corp's confidential "problem" list grew over the summer even while the overall industry posted solid net income. The FDIC says its list of troubled banks rose to 860 in the July-September quarter from 829 in the previous quarter. At the same time, the FDIC says banks earned $14.5 billion during the third quarter. That was a decrease from the previous quarter's result of $21.4 billion, but well above the $2 billion banks earned a year earlier ..’ ]The move comes as the near-bankrupt government scrambles to show negotiators from the International Monetary Fund and European Union that it can cut spending and raise more revenue to meet the conditions of a $115 billion rescue package. Related News Europe contagion worsens on Merkel's plan Ireland rating lowered by S&P Spain excludes bailout amid 'speculative attacks'

Come on! Rosy numbers on consumer sentiment, unemployment (far better than private forecasts) from the government prior to the holiday so-called ‘shop till you drop’? How can anyone believe anything they say? Najerian interviewed by Motek chimes in with the reason for good retail cheer; viz., people have stopped paying their mortgages and are using the funds to purchase retail goods; while Davidowitz adds that with record numbers of americans on food stamps, real unemployment at 17+, and wall street giving out record bonuses from their accomplished fraud (with no-recession b.s. bernanke help) of $144 BILLION … the high end stores / jewelers will do well … daaaaah! And, with insiders and wall street frauds selling into the bubble as preceded last crash, this is an especially great opportunity to sell / take profits! Suckers’ rally on light volume, full moon, and government complicity (false data / reports) to keep suckers suckered (easy for the wall street frauds to do with just a mouse click / push of the button – and, they know all those technical trade lines that are easy to program in this current phase of the scam/fraud with the debased dollar). Keep in mind, the totally mindless blather from the ‘cottage industries’ of and fraudulent wall street itself in talking up lower P/E multiples when the same is a direct result of the debasement of the dollar and the consequent manipulation / translation (not real, see Davis, infra) which preceded the financial crisis / last crash. Unemployment, trade, deficit, etc., numbers continue decidedly worse than expected along with other negative data (and in the ‘wrong direction’, that spin accorded ‘down but not as bad as before’ b*** s*** ) yet the market has rallied like no tomorrow with used home foreclosure / distressed sales, though abated owing to ‘foreclosuregate’, the other ‘heralded’ good news. Moreover, the dumbo lemmings of Europe have jumped on the fraudulent defacto bankrupt american crazy train propelled to the precipice also as if no tomorrow. This is about keeping the suckers sucked in with the help of a market-frothing pre-election debased dollar for favorable currency translation and paper (but not real when measured in, ie., gold, etc.) profits which preceded the last crisis, inflating a bubble as in the last crisis to facilitate the churn-and-earn, particularly with computerized (and high frequency) trades and which commissions they’ll get again on the way down. There is nothing to support these overbought stock prices, fundamentally or otherwise. These are desperate criminals ‘at work’. Even wall street shill, the senile Buffett is saying we’re still in a recession (depression) [ Davis: ‘… all profits are inflated by 10% (from falling, debased dollar) and that 10% is the E that gets divided from the P and gives us a much better price/multiple to hang our hats on and that gets investors to BUYBUYBUY …’ The bull market that never was / were beyond wall street b.s. when measured in gold ] This is a great opportunity to sell / take profits (these lower dollar, hyperinflationary currency manipulations / translations to froth paper stocks will end quite badly as in last crash)! This is a global depression. This is a secular bear market in a global depression. The past up moves were manipulated bull (s***) cycles (at best) in a secular bear market. This has been a typically manipulated bubble as has preceded the prior crashes with great regularity that the wall street frauds and insiders commission and sell into. This is a typical wall street ‘programmed computerized high-frequency churn and earn pass the hot potato scam / fraud as in prior crashes ( widely reported, high-frequency trading routinely accounts for more than 50% of daily U.S. equity trading volume and regularly approaches 70%. )’. This national decline, economic and otherwise, will not end until justice is served and the wall street frauds et als are criminally prosecuted, jailed, fined, and disgorgement imposed.The Stock Market's Long Decline Has Begun Smith ]

Wednesday's Data Dump: Durable Goods, Jobless Claims, Wages [ Dump indeed! As in stocks. After all, as bad as the durable goods data is, it no doubt is worse than they’re saying! ] The U.S. Bureau of Economic Analysis published several economic reports today that collectively offer a mixed bag of macroeconomic news. The updates on new orders for durable goods, personal income and spending, and weekly jobless claims are usually dispatched on separate days. Because of the Thanksgiving holiday tomorrow, all three were released this morning, leaving an unusually hefty dose of statistics to review. Here’s a brief tour of some of the noteworthy data points:
DURABLE GOODS (much worse than expected)
New orders for durable goods dropped a hefty 3.3% on a seasonally adjusted basis in October vs. the previous month. The drop reverses September’s revised 5.0% rise, the Census Bureau reports. It’s too soon to say if October’s retreat for new orders is a sign of things to come, but it’s troubling nonetheless. Indeed, we haven’t seen such a deep fall in durable goods orders since the 8% tumble in January 2009, when the financial crisis and recession were raging. The setback was widespread. Even after ignoring the volatile aircraft sector, or removing the government’s defense-related orders, October was still a losing month for durable goods orders. The only good news is that new orders are still up sharply vs. a year ago, rising more than 10% last month vs. October 2009. And let's remember, too, that this is a volatile series. It's also a crucial leading indicator, and so for the moment there’s a new reason to wonder about the staying power of the economic recovery. One month is hardly definitive proof of anything, but any excuse to worry will do these days. click [chart] for images
[chart]
PERSONAL INCOME & SPENDING
The trend was more encouraging for income and spending last month. Disposable personal income (DPI) rose by a seasonally adjusted 0.4% in October, more than repairing September’s modest 0.1% decline, according to the Bureau of Economic Analysis. DPI has increased every month this year except for September’s mild setback. Meanwhile, consumer spending marched upward last month as well. Personal consumption expenditures (PCE) advanced in October by a respectable 0.4% over September. That’s the fourth consecutive monthly rise. The increase in consumption was especially strong in the cyclically sensitive area of durable goods purchases, which gained 1.9% in October—the best month since March’s 3.5% jump.
[chart]
INITIAL JOBLESS CLAIMS
We saved the best for last. New filings for jobless benefits dropped by a robust 34,000 last week, the Labor Department advises. That pushed new weekly unemployment applications down to 407,000—the lowest since July 2008. Is the long-awaited drop in jobless claims finally here? If so, that bodes well for stronger job growth, or so history suggests. Of course, there’s always reason to doubt any one report. The obvious suspect for skewing the data is the Thanksgiving holiday. Did the newly unemployed delay filing last week because of Turkey day? We’ll know soon enough. But even if last week’s drop is misleading, there’s no denying the improvement in this series over the past few months. If the lower levels of jobless claims holds in the weeks ahead, it’s a strong sign of improving momentum in the labor market.
[chart]
WAGES
In fact, the update on private wages for October in the spending and income report suggests that the job market is on the mend. Or at least wage growth is. Private wages rose 0.6% last month, the fourth-straight monthly increase. On a year-over-year basis, the trend looks even stronger, as the chart below shows. Falling applications for jobless benefits and rising wages is a potent combination, assuming it lasts. It has so far.
[chart]

AP Business Highlights: On Wednesday November 24, 2010, 5:47 pm EST ‘Probe leads investors to wonder: Is game rigged? NEW YORK (AP) -- The Wall Street insider trading investigation may lead everyday investors -- already rattled by a stock market meltdown, a one-day "flash crash" and the Madoff scandal -- to finally conclude that the game is rigged …’ [ Come on! Wake up! It’s worse than just rigged! These computerized high-frequency churn-and-earn commissioned tades are literally eating away at the nation’s productive resources ($144 billion in wall street bonuses this year alone) … then the continuing frauds … the mark to anything worthless paper from the last fraud still out there … now let’s see if they have the fortitude and resolve to prosecute the perps. ]

YAHOO [BRIEFING.COM]: ‘… Support picked up amid news that the latest initial jobless claims count fell 34,000 week-over-week to a two-year low of 407,000, which is less than the 442,000 initial claims that had been widely expected among economists polled by Brieifng.com. Continuing claims set their own two-year low at 4.18 million, down from 4.32 million in the prior week. The improvement in jobless claims generally overshadowed disappointing durable goods orders data for October. Total orders declined 3.3%, which is worse than the 0.3% decline that had been widely expected. Orders less transportation fell 2.7%, which contrasts sharply to the 0.4% increase that had been expected by many. The rather poor orders readings for October come after overall orders for September increased 5.0% and orders less transportation increased 1.3%. Less attention was paid to personal income and spending for October. Income increased 0.5%, which is slightly stronger than the expected increase of 0.4%. Spending increased 0.4%, but that was a bit softer than the 0.6% increase that had been expected. In the prior month income was flat and spending had increased 0.3%. Once trade opened and stocks made a nice gap up, buying was further bolstered by the final Consumer Sentiment Survey for November from the University of Michigan. It improved to 71.6 after a preliminary reading of 69.3. However, enthusiasm for that report was offset by news that new home sales for October fell 8.1% month-over-month to an annualized rate of 283,000 units, which is less than the 314,000 units that had been broadly forecast by economists polled by Briefing.com …’

[video] Teddy Weisberg: No Positives for Market NEW YORK (TheStreet) - - Teddy Weisberg of Seaport Securities is bearish on the direction of the market.

The 17 Things Worrying Investors This Week Lloyd's Wall of Worry

Week of November 22-26
Worry Count: 17

CHINA: 1,330,044,605 people can’t be wrong.

The PIIGS: Fasten your seatbelts. It’s gonna be a long, bumpy, expensive, weird, (insert your own adjective here) freak show of a ride.

CALIFORNIA AND THE OTHER 49 STATES: Not yet as dire as “The PIIGS”. Might I suggest the classier moniker of “The Prosciuttos” for the American basket-case states?

QE II: Gobble?

U.S. ECONOMY: The “Punky Brewster” of the global economic landscape.

UNEMPLOYMENT: Only thing worse than losing your job, losing your unemployment check. At least there’s the holiday season to cheer everyone up (read: heavy sarcasm).

TAXES: Praying to the Financial Market Gods that we don’t have another TARP-like vote fiasco.

OBAMA ADMINISTRATION PART II: Still two years before the Pres. election and the peanut gallery is already pleading for a Hail Mary Pass to get them back in the game.

HFT: Instead of beating up these liquidity supplying traders, let’s honor them with their very own stock exchange. But wait -- with no retail saps to pick-off they will never get that Day 1 opening bell tick. Perfect.

XMAS 2010: As my professor friend Nick says, “Nowadays Americans are dining off of two menus – The Million Dollar and the $0.99 Cent.” And both are pissed about it.

CURRENCIES: Poor Mr. Greenback. Does someone need a hug?

HOUSING CRISIS: Price Stabilization – Are we there yet? Just a little bit more. Are we there yet? Just a little bit more. Are we there yet? Just a little bit more….

INFLATION/DEFLATION: Fed Chief Ben B. comes out swinging from his heels in defense of inflation promotion. Don’t punch yourself out as this one is likely to go the distance.

COMMODITIES: Corrected but still sky high; fortunately these prices are only affecting core, basic, life-sustaining necessities and sparing our electronic gadgets and plus-sized SUVs. Whew!

INSIDER TRADING: Another black eye for Hedge Funds. I estimate that makes black eye number 6,597.

INTEREST RATES: South Korea and China slowly turning up the dial to “11”. On the other hand the U.S. has removed the dial altogether. This never ends well….

NORTH KOREA: Here we go again.

Mom: “Honey I thought you were going to raise their allowance?”
Dad: “I did. But they’re a year older and they want more now.”
Mom: “Kids nowadays!”

Insider Trading Inquiry Accelerates New York Times - Peter Lattman, Azam Ahmed - John Marshall Mantel for The New York TimesDon Chu was arrested on charges that he helped hedge funds obtain improper information about publicly traded companies. Crackdown on Insider Trading Picks Up Steam Wall Street Journal Authorities suspect an inside game on Wall Street Los Angeles Times [ Suspect? With the computer-programmed high-frequency churn-and-earn scams it’s far worse than they can even imagine! ]

Stocks Sharply Lower Today as Fed Minutes Aggravate Negative Global Factors Midnight Trader 4:14 PM, Nov 23, 2010

China, Russia quit dollar China Daily | China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.

Portugal Goes Pop? ‘Euro burning, people pay, bankers get away’ Protests against austerity measures have also flared in cities across Europe. Portugal has ground to a halt, as workers stage a 24-hour general strike over public sector pay cuts and tax rises. It comes two days before parliament votes on a severe new budget. Some experts say adopting the single currency was a mistake in the first place.

As Irish Financial System Collapses, We Present Goldman’s Recent Thoughts On Bank Of Ireland Take one look at Bank of Ireland stock this morning. Then read the following October 4 report on BOI from Goldman Sachs, and please join us in extended our congratulations to Goldman analyst Pawel Dziedzic who has joined the prestigious ranks of Cramer and Dick Bove of telling those who care to buy a bank days or weeks ahead of its bankruptcy.

For Europe’s Future, Spain Is All That Matters Last Spring it was Greece that was in crisis mode—then last week, it was Ireland—and coming up next is Portugal— but all those pale in comparison to Spain.

China, Russia quit dollar on bilateral trade China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday in St. Petersburg.

Who Will Any Form of Intermediate Term Wealth Effect Really Help? [ The so-called ‘wealth effect touted by no-recession helicopter ben‘ is just a continuation of the fraudulent wall street bailout / subsidization churn-and-earn scam / fraud. Bill Fleckenstein Has Some Thoughts On QE2: “These Idiots Think We Can Print Our Way To Prosperity” ( I disagree! I believe they are well aware of the folly of their fraudulent and ultimately disastrous approach but are, as in the last debacle, creating a fraudulent bubble for the wall street frauds and insiders to sell into, which they are indeed doing as we speak. (INSIDER SELLING IS AT RECORD HIGHS) (Another Nobel Economist Says We Have to Prosecute Fraud Or Else the Economy Won’t Recover As economists such as William Black and James Galbraith have repeatedly said, we cannot solve the economic crisis unless we throw the criminals who committed fraud in jail. ) ] Fed to pump $600B into the economy (Washington Post) [ Listen to this total, absolute b*** s*** … from no-recession-helicopter ben shalom or b.s. for short, bernanke, with green shoots wilting on the vine … to his recent ‘better to try and fail than to do nothing at all’ … Balderdash! … I hearken back to a distinction made by the brilliant Peter Drucker who in emphasizing the distinction between efficiency and effectiveness states that being effective means doing the right things, clearly not the case here … other than frothing that fraudulent wall street market with high-frequency programmed trades and debased dollars he can’t seem to print enough of, and for all but wall frauds churn and earn profits as they retain their fraudulent gains from the last debacle and this one, his policies are nothing short of disaster for this nation and the world. That money going into wall street pockets has to come from somewhere … guess. Remember, america’s defacto bankrupt and the consequences for those continuing frauds on wall street don’t justify the irretrievable costs! ] In addition to a question for Bloomberg TV anchor Betty Lui, who asked Bill to “admit” that “the markets were in a better mood yesterday after QE2,” which is simply this: “Betty? Betty? Betty? How about in summer 2008, 2007, were the markets in a good mood? Were the markets in a good mood then?” Quite right! The same pattern that preceded the last crash. Falling dollar, high volume programmed high frequency trades to the upside creating an even larger, gravity-defying bubble for the wall street frauds and insiders to sell into. They’re not too big or important to fail and jail! Prospective economic health depends on that reality! ]

John Hussman: Bubble, Crash, Bubble, Crash, Bubble... [ This really is the story and far worse than the bad scenario presented herefter by Hussman in light of the debased dollar and the inflated earnings and lower P / E ratios thereby, etc. ] Excerpt from the Hussman Funds' Weekly Market Comment (11/8/10):

‘We will continue this cycle until we catch on. The problem isn't only that the Fed is treating the symptoms instead of the disease. Rather, by irresponsibly promoting reckless speculation, misallocation of capital, moral hazard (careless lending without repercussions), and illusory "wealth effects," the Fed has become the disease ... It is difficult to interpret Bernanke's defense of QE2 as anything else but an attempt to replace the recent bubble with yet another - to drive already overvalued risky assets to further overvaluation in hopes that consumers will view the "wealth" as permanent. The problem here is that unlike housing, which consumers had viewed as immune from major price declines, investors have observed two separate stock market plunges of over 50% each, within the past decade alone. While investors have obviously demonstrated an aptitude for ignoring risk over short periods of time, it is a simple fact that raising the price of a risky asset comes at the sacrifice of lower long-term returns, except when there is a proportional increase in the long-term stream cash flows that can be expected from the security. As a result of Bernanke's actions, investors now own higher priced securities that can be expected to deliver commensurately lower long-term returns, leaving their lifetime "wealth" unaffected, but exposing them to enormous risk of price declines over the intermediate (2-5 year) horizon. This is not a basis on which consumers are likely to shift their spending patterns. What Bernanke doesn't seem to absorb is that stocks are nothing but a claim on a long-term stream of cash flows that investors expect to be delivered over time. Propping up the price of stocks changes the distribution of long-term investment returns, but it doesn't materially affect the cash flows. This reckless policy has done nothing but to promote further overvaluation of already overvalued assets. The current Shiller P/E above 22 has historically been associated with subsequent total returns in the S&P 500 of less than 5% annually, on average, over every investment horizon shorter than a decade ... We are betting on the wrong horse. When the Fed acts outside of the role of liquidity provision, it does more harm than good. Worse, we have somehow accepted a situation where the Fed's actions are increasingly independent of our democratically elected government. Bernanke's unsound leadership has placed the nation's economic stability on two pillars: inflated asset prices, and actions that - in Bernanke's own words - should be "correctly viewed as an end run around the authority of the legislature" (see below). The right horse is ourselves, and the ability of our elected representatives to create an economic environment that encourages productive investment, research, development, infrastructure, and education, while avoiding policies that promote speculation, discourage work, or defend reckless lenders from experiencing losses on bad investments.’

(11-24-10) Dow 11,036 +151 Nasdaq 2,543 +48 S&P 500 1,180 +17 [CLOSE- OIL $81.25 (-54% for year 2008) (RECORD TRADING HIGH $147.27) GAS $3.00 (reg. gas in LAND OF FRUITS AND NUTS $3.15 REG./ $3.29 MID-GRADE/ $3.39 PREM./ $3.79 DIESEL) / GOLD $1,373 (+24% for year 2009) / SILVER $27.54 (+47% for year 2009) PLATINUM $1,659 (+56% for year 2009) / DOLLAR= .75 EURO, 83 YEN, .63 POUND STERLING, ETC. (How low can you go - LOWER)/ http://www.federalreserve.gov/releases/h15/update 10 YR NOTE YIELD 2.91% …..… AP Business Highlights ...Yahoo Market Update... T. Rowe Price Weekly Recap – Stocks / Bonds / Currencies - Domestic / International This Is a Secular Bear Market and The End of Buy and Hold … and Hope MARKET MANIPULATION AND HOW THE LATEST BUBBLE-FRAUD PRE-COMING CRASH IS BEING ACCOMPLISHED 3-11-10 6 Theories On Why the Stock Market Has Rallied 3-9-10 [archived website file] Risks Lurk for ETF Investors The bull market that never was/were beyond wall street b.s. when measured in gold Property Values Projected to Fall 12% in 2010 Jan 31, 2010 The Week Ahead: Risk Is Off the Cliff; Unwind Has Begun Jan 31, 2010 01-13-10 Forecast for 2010 from Seeking Alpha Contributor THE COMING MARKET CRASH / CORRECTION 1-28-10 Maierhofer (01-15-10) 11 Clear Signs Economy Sinking Economic Black Hole 1-22-10: 20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover Current Economic / Fiscal Charts Trendsresearch.com forecast for 2009 1-7-10 Crash is coming! ‘WORST ECONOMIC COLLAPSE EVER’ Must Read Economic / Financial Data This Depression is just beginning The coming depression… thecomingdepression.net MUST READ: JEREMY GRANTHAM’S QUARTERLY UPDATE 25 January 2010 (850 on the S&P) by TPC The Next Wave of Collapse is Coming Sooner than you think Sliding Back Into the Great Depression ABSOLUTELY, ABSURDLY, RIDICULOUS! SELL / TAKE PROFITS WHILE YOU CAN SINCE MUCH, MUCH WORSE TO COME!

National / World

[ http://www.prisonplanet.com http://www.infowars.com ]

Rep. Kucinich slams fake Afghan elections, fake withdrawal, fake Taliban Rep. Dennis Kucinich (D-OH) again called for the United States to end its involvement in Afghanistan after it was revealed that NATO officials were duped into holding negotiations with a man posing as a senior member of the Taliban.

Students Riot Again In London Two police officers were injured as police held back demonstrators trying to break through their lines. A police van was attacked, fires started and barricades thrown during clashes in Whitehall.

Pentagon to Send Aircraft Carrier Strike Group into Yellow Sea The Pentagon will further exacerbate the situation by sending in an aircraft carrier strike group led by the USS George Washington into the Yellow Sea.

Drudgereport: Tough-guy Putin calls DiCaprio 'a real man' for Tiger Summit ...
CHINA, RUSSIA QUIT DOLLAR

OPT-OUT...
POLL: 61% oppose new airport security measures...
Prosthetics Become Source of Shame at Airport Screenings...
Scanner Uproar Shadows Holiday Travel...
AAA Expects Record Traffic on Highways...
30-Mile Backup on Mass Turnpike...
VIDEO: TSA Speedo Protester...
VIDEO: Woman wears bikini to LAX...
Woman: Agents Singled Me Out For My Breasts...
Fliers Claim TSA Has Deactivated Body Scanners... Jobless Claims, Durable Goods Offer Mixed (Though Faked to the Upside) Economic Message...
Food bank delivery van stolen on eve of Thanksgiving...
Squatters overrunning foreclosed homes in LA... Ireland Plans to Reduce Spending 20%, Raise Taxes...
Cut Minimum Wage...
Portugal, Spain hit by investor fears over debt...
The Domino Effect... List of Problem Banks Grows... ‘…The number of banks on the Federal Deposit Insurance Corp's confidential "problem" list grew over the summer even while the overall industry posted solid net income. The FDIC says its list of troubled banks rose to 860 in the July-September quarter from 829 in the previous quarter. At the same time, the FDIC says banks earned $14.5 billion during the third quarter. That was a decrease from the previous quarter's result of $21.4 billion, but well above the $2 billion banks earned a year earlier ..’

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To solve the deficit, the numbers add up -- but not the votes ( Washington Post ) [ Geeh! A discussion of the deficit with a reference to math … who woulda’ thunk it! I mean, that’s script material for the next installment of ‘Mission Impossible’. ] The sudden proliferation of deficit-reduction plans is a reminder that the deficit is, at its heart, a math problem.

N.Korean attack leaves U.S. with few options ( Washington Post ) [ I’d be very concerned about the contrived nature of the incident as set forth by infowars.com / prisonplanet.com as follows: Korean War Crisis: Brought To You By Uncle Sam Despite the fact that South Korea admits it fired the first shots that prompted the North to retaliate, the vast majority of the establishment press are feverishly blaming North Korea for a new escalation in the crisis, while failing completely to acknowledge the fact that the whole fiasco was generated as a direct result of Uncle Sam’s policy through two separate administrations to ensure hereditary dictator Kim Jong-Il and his successors acquired the atom bomb. North Korea Attack Part Of RAND Plan For Total War? The exchange of artillery fire between North and South Korea, which the North says was started by South Korea firing shells during a military drill, could act as the catalyst for a huge new conflict that the RAND Corporation has been lobbying for over the past two years. ] North Korea's artillery attack on a South Korean island Tuesday, coupled with its choreographed rollout of a new nuclear program, has presents the U.S. with a massive strategic challenge. Photos: Artillery fire exchanged

October unemployment down in D.C., unchanged in Md., Va. ( Washington Post ) [ Wow! If there ever was a contrarian economic / financial indicator, decreased unemployment in the pervasively corrupt, defacto bankrupt u.s. government’s capital (excepting The Washington Post, of course) has got to be it. After all, efficiency / effectiveness / competence is not their strong suit, need I say more in restating the obvious. Not even an instance of ‘too many chefs’. ] Federal government data released Tuesday illustrates the region's mixed progress on a long road to economic recovery.

Foreclosure process 'must be fixed,' Treasury official says ( Washington Post ) [ Oooooh! Sounds like a plan! … and from a ‘tiny tim buck 2 man’ … Whew! Close one! Dodged that bullet! Not to worry since ‘johnny on the spot’ treasury’s on the case for some timely action … Not! ] Federal investigators have found widespread and "inexcusable" breakdowns in basic controls in the foreclosure process.

Joblessness to remain elevated, Fed projects ( Washington Post ) [ Mr. Irwin’s come a long way from his ‘glass-half-full-though-empty’ days and I just wish in discussing those so-called enhanced earnings that he included reference to the lessened quality of said earnings as accomplished by way of the debasement of the u.s. currency inflating a bubble in part thereby as preceded the last crash,; which bubble the wall street frauds and insiders commission and sell into (see plenary discussion infra, ie., Why Ben Bernanke Is Wrong Rein This column originally appeared in Forbes ‘… In other words, he wants simply to reinflate the bubble that caused our problems in the first place. Soaring equity prices won't increase confidence until more jobs are created. It will only postpone the day of reckoning…’ , etc. ). ] Even though conditions are likely to remain miserable for job seekers, a bounce-back is underway in the nation's corporate sector.

[video] Teddy Weisberg: No Positives for Market NEW YORK (TheStreet) - - Teddy Weisberg of Seaport Securities is bearish on the direction of the market.

Unintended Consequences of Bernanke's QE2 Simon Maierhofer, On Tuesday November 23, 2010, 12:34 pm EST

In the mid-2000s, Alan Greenspan was the hero of the financial world. With his blunt philosophy of inflation, Greenspan was credited for turning the tech-bust into a real estate and financial boom.Following the 2008/2009 meltdown, Greenspan morphed from hero to scapegoat (or for Thanksgiving aficionados; turkey to feather duster). Another Turkey to Feather Duster Roundtrip?Bernanke carried on the torch of fearless Keynesian Fed Presidents and made it on the cover of Time magazine within his first term. Much ink has been spilled about the effects and side effects of quantitative easing in general and QE2 in particular (click here if you care to read my two cents worth). Actions speak louder than words, and the initial reaction by stocks and commodities has been net-positive (at least when going back to the initial announcement), which is exactly what the financial alchemists in Washington wanted to see; but, what about the economy or the unemployed? Obviously, that's only a secondary concern.According to Bernanke (quoted in the Washington Post), inflating stock prices is the golden grail of today's monetary policy: 'Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.'

QE2 - UNFAIR FOR MANY REASONS

Perhaps it's been lost to Mr. Bernanke that the Fed actively inflating asset prices has a number of unfair side effects.

1) Wall Street banksters' get to profit from their mistakes that led to the sub-prime debacle.

2) Retail investors have been withdrawing money from mutual funds for two years. The effect of higher stock prices is lost to many.

3) Artificially depressing interest rates takes away wealth from savers and distributes it to borrowers. Who are today's savers? Retirees and near-retirees. In fact, this group accounts for more individuals (and lost spending power) than ever before.

WHAT EFFECT HAS THE FEDERAL RESERVE'S MONETARY POLICY HAD ON JOBLESS AMERICANS? LET'S EXAMINE THE FACTS:

August 2007: Fed lowered discount rate, unemployment rate at 4.7%

December 2008: Fed reduced rates to just north of zero, unemployment rate at 7.4%.

March 2009: Fed launches QE1, unemployment rate at 8.6%.

November 2010: Fed launches QE2, unemployment rate at 9.6%.

MAKING THE RICH RICHER AND THE POOR POORER

While large cap (NYSEArca: IVV - News), mid cap (NYSEArca: MDY - News), small cap (NYSEArca: IWM - News), international (NYSEArca: EFA - News), emerging market stocks (NYSEArca: EEM - News) and commodities are brewing their own Fed sponsored bubble, the jobless are left in the dust. Would there have been anyway to help them?

Our infrastructure (streets and bridges) is literally rotting away beneath our tires. $600 billion (as in $600 billion QE2) would have been enough money to employ 4 million construction workers at $75,000/year for two years.

Going this route would provide jobs for the hardest hit sector, increase morale and social status and distribute money to the consumer so he can do what he does best - consume. The labor cost of such an infrastructure repair program would be far less than $600 billion because the government wouldn't have to pay unemployment benefits to Americans who could be employed.

GOING THE JAPAN ROUTE

The United States' current predicament is not unique, it happened before. Not in the U.S., but in Japan (NYSEArca: EWJ - News). Following a late 1980s real estate bust, Japan's Nikkei has gone nowhere but down (aside from counter trend rallies, some massive, but nonetheless trumped by the bear market).

The chart below illustrates Japan's pain. The April 2010 ETF Profit Strategy Newsletter, includes an in-depth analysis of the similarities between the two scenarios.

One of the few differences is that Japan's breakdown occurred amidst a roaring global bull market. The U.S. bear market isn't that lucky, as it parallels an escalating European debt crisis and, therefore, should be swifter and ultimately more pronounced.

DON'T COUNT YOUR CHICKENS BEFORE THEY HATCH

If there's only one sentence you take away from this article, let it be this: Things change fast. If you wish, you may add a second: Bear markets work much faster than bull markets.

Momentum is a strong force. Upside momentum breeds optimism which eventually culminates at optimistic extremes. A few days before the April decline, the ETF Profit Strategy Newsletter noted that the: 'message conveyed by the composite bullishness is unmistakably bearish.'

A more recent example of bear market forces taking hold can be found in the municipal bond market. For over two years, muni bonds have been quenching the thirst of yield hungry investors.

On July 8, the ETF Profit Strategy Newsletter observed: 'Predicting the location of the next credit crisis isn't easy by virtue of the fact that there are so many darn cracks everywhere. Nevertheless, the $2.8 trillion municipal bond market looks especially ripe for disaster.'

On August 26 - the very day muni bonds and 30-year Treasury Bonds (NYSEArca: TLT - News) peaked - the ETF Profit Strategy Newsletter followed up the initial red flag with this word of advice: 'Our technical analysis along with fundamentals suggest that T-Bonds are getting ready to roll over. A look at the overall picture suggests that this is more than just a minor correction. The rally in municipal, corporate and high yield bonds is showing signs of weakness too. Investors should start exiting from those markets.'

The chart of the iShares S&P National Muni Bond ETF (NYSEArca: MUB - News) below shows that MUB lost nearly two years worth of gains within a matter of weeks.

DON'T DISCOUNT THE RIPPLE EFFECT

Thus far, the major indexes a la Dow Jones (DJI: ^DJI), S&P (SNP: ^GSPC) and Nasdaq (Nasdaq: ^IXIC) have largely resisted that drag. But a chain is only as strong as its weakest link.

At its most recent earnings disappointment, Cisco CEO Chambers disclosed that weak sales to the government and state sector contributed to weak earnings. The government sector accounts for 13% of spending on goods and services.

It's probably just a matter of time until this weakness affects the tech (NYSEArca: XLK - News), and by extension the consumer discretionary (NYSEArca: XLY - News) sectors; especially since earnings for 2011 are expected to clock in at an all-time high (no, that's not a typo, check Standard and Poor's earnings estimates).

For right now, the straws (fundamental problems) are piling up on the camel's back (stock market), until the last straw breaks his back. My personal guess is that the insanity will go on a bit longer, but as we've seen in 2000, 2007, 2010 and the above MUB chart, the power of the last straw can bring the camel to its knees in a hurry.

Unlike Wall Street and the financial media, the ETF Profit Strategy Newsletter doesn't simply ignore red flags, but tries to identify Trojan-Horse-like asset classes before they enter and destroy your portfolio. Semi-weekly updates continually monitor major asset classes and provide invaluable support and resistance levels.

Fred Carstensen: We're in for a Lost Decade Levy ‘Economist Fred Carstensen is a professor of economics at the University of Connecticut and executive director of the university's Center for Economic Analysis.

H.L.: What do you predict is the real effect of the Federal Reserve’s plan to buy $600 billion worth of Treasurys – and what do you think of Fed Chairman Ben Bernanke’s defense of the move against other countries’ negative reactions?

F.C.: It’s exactly what the late economist Milton Friedman, the great guru of conservative economic thought, would want him to do. There’s no question that it’s the right strategy, and there’s no question that it’s actually working. The American stock market is up 14 percent since Bernanke announced in August that he would do this. And it’s gotten investors to switch from government debt to equities. Household wealth has increased $1.3 trillion as a consequence, and households feeling somewhat wealthier will consume somewhat more.

The hope is that the shift in investments will also help convince companies to expand. So insofar as the Fed police can actually influence financial markets, it’s worked.

But there are two issues: First, it may not be large enough to really have a sufficient impact on economic performance. Second, monetary policy is like pushing on a string, because ultimately businesses respond to demand not supply. So, Bernanke has successfully improved the supply of credit, but American demand is still very weak. In fact, some significant share of the benefits from the policy flow out of the country and flow abroad. And because so much of what we consume is imported, it increases capital exports to China, Viet Nam, South Korea, and Germany and increases imports of merchandise, and those two processes tend to drive the value of the dollar down. It diminishes the demand for dollars and increases the demand for foreign currencies, because when you invest in China you have to convert your dollars into Chinese currency. The consequence is the demand for dollar falls. That’s why foreign countries are complaining about this, because it’s working. Meanwhile, the foreign countries that I mentioned are pursuing dynamic economic development strategies, improving their workforce, investing in education, investing in infrastructure. The U.S. is pursuing none of these strategies in any coherent way.

But let’s get this into perspective. The depreciation of the dollar is much, much less than the depreciation that occurred during the Bush administration. There is no historical basis on which to complain about the change in the value of the American dollar or about the Fed’s policies by other countries or by the Republicans who are criticizing it and asking that it be stopped. The only reason they would want it stopped is because they want to thwart economic recovery. I do mean that the only motivation that I can understand is they want to thwart recovery. But the data demonstrate that the policy has been successful, but in a large sense, the policy has not and will not improve American economic performance.

H.L.: Where is the U.S. economy headed?

F.C: In general, the economy is going to grow at an anemic pace, and as a consequence it will generate relatively few new jobs. We will therefore continue to have relatively high unemployment rates for several years. I don’t see how we’re going to get unemployment rates below 8 to 10 percent in the foreseeable future. I don’t see where the job creation is going to come from.

Most forecasters have downgraded their projections for U.S. economic growth for the next two or three years from a range of 2.5 to 3 percent growth down to 2 to 2.3 percent annually. That is such a slow growth rate it will create very few jobs. We will not get a job recovery in the near future, and we are not making the kinds of strategic investments that are likely to strengthen our economic performance further out. Frankly, I think we’re in for a lost decade. I can easily see us limping along through the entire decade.

H.L.: What’s going to change it?

F.C.: It’s just a matter of effective political leadership and getting the people to understand the kind of perverse policies that we’re currently pursuing. There’s a huge mythology that’s been out there over the last 30 years that government doesn’t do anything useful, Yet it’s public-sector investment in human capital and infrastructure that is at the heart of America’s historic economic success and it is precisely the strategy that these competitive economies are now pursuing. India and China are in fact making massive investments in education, rfeserach and development, and infrastructure. It is making them progressively more competitive, even as America becomes less competitive.

H.L.: Is the economy threatened by deflation -- the downward cycle of prices, leading to lower profits, then lower wages, then fewer new jobs, and more layoffs -- that feeds on itself, drains the economy, and keeps it flaccid?

F.C.: No. There is some small threat of deflation, but the Federal Reserve is going to do everything imaginable to prevent that from happening. If we got into a deflationary cycle it would be extraordinarily destructive.

H.L.: Will the resurgent Republicans solve our economic problems with the plans they’ve announced, or will their goal of blocking all Democratic initiatives paralyze the economy and the nation even more than they already are?

F.C.: Yes. I have seen nothing in the Republican proposals that suggest anything, any strategies or initiatives that would help to drive economic recovery. They talk about budget cuts. Well, budget cuts are going to reduce the number of people who are employed, reduce the demand for goods and services, so inherently what the core set of proposals that Republicans seem to be committed to enacting would clearly be a drag on the national economy.

H.L.: So you seem to think that the deficit hawks are wrong in their approach to healing the economy?

F.C.: Reducing the deficit in the short term in the face of a weakening economy inevitably weakens the economy further. That’s simply basic economic analysis that has nothing to do with ideology.

H.L.: Should all the Bush tax cuts be extended or just those for people earning less than $250,000 a year?

F.C.: Keep them, kill them, it won’t make much difference either way. The reason is that the Bush tax cuts themselves delivered very little benefit to the American economy. Following the Bush tax cuts we had the lowest level of business investment in 50 years. We had a very weak job recovery. The benefits of the Bush tax cuts both in consumption and in investment largely flowed out of the country. They benefited the global economy. They did not benefit the American economy. We import our consumption goods and the attractive investments are in emerging markets, so the money did not stay here.’

Tumbling Tuesday - China Korea and Europe, Oh My! Davis ‘Man was yesterday silly! We ran with some upside plays out of the box but they died by 10:10. I called the top at 10:12 when I pointed out to Members that 2,530 was Friday’s top-out on the Nas and 2,532 was resistance going back to the Friday before. By 10:54, the Nasdaq was back down to 2,515 and I said to Members:

Wow, that turned fast! What a joke that the Nas can pop from 2,500 to 2,530 in 30 mins and then all the way back down 30 mins later – as I said this morning – an untradable market unless you are a real cowboy day-trader.

Of course we are cowboy day traders, and mega kudos to JRW, who called a move into TZA at $20.06 and a move out at $20.84 (4%) at 1pm. My own 1:31 note to Members was: "Volume died at 77M on the Dow at 1:27, only 50M since 10am so very slow at the moment, which means we could start heading up again." And, of course, we did! At 1:57, I added: "Meanwhile, Nas looks like it’s going to make another run back to 2,532 – just to make sure it’s totally obvious what a farce this market is…"

Of course, at PSW, we don’t care IF the market is fixed as long as know HOW it’s fixed so we can play along at home. As the Nas headed back to our 2,532 target (where they closed exactly for the day), we added the weekly QQQQ $53 puts at .45, which was a play I called at 3:01 in Member Chat, while the puts were still selling for .55 – that's how fixed the market is – we know option prices an hour in advance!

Speaking of fixed markets, the image above right is from Bess Levin’s well-titled "Insider Trading Festivus 2010" in which she suggests sending FBI strip-o-grams to the evil hedge fund of your choice "just to f*ck with them!" Bess cautions fund managers not to assume that all FBI agents bursting through their doors are strippers as that can lead to some very awkward moments…

Meanwhile, it’s a Festivus for the rest of us (who are short) as the markets roll back over. Of course, yesterday’s insane market moves served to reinforce our "take the money and run" sentiment as we got a drop on the Dow all the way to 11,060 at 12:48 yet the Dow recovered 120 points into the close on weak volume that gave us the cue to move in short – despite our bullish expectations for HP (HPQ) earnings (we sold puts earlier in the session).

The Nikkei was up 1% this morning but the rest of Asia had a rotten day with the Hang Seng falling 627 points (2.67%) and the Shanghai off 56 points (2%) and the BSE down 265 points (1.33%). This knocked the FXI below support and down to the 22 DMA at 42.67 (see David Fry’s chart) and breaking that would be – bad. China is experiencing runaway inflation and Wen Jiabao’s price controls are doing nothing to rein in the 54% increase in the money supply over the past two years – an amount our own Fed calls "a good start."

Bloomberg has an article today with this little anecdote:

Standing near his 12-table noodle shop on Beijing’s Yonghegong Avenue, owner Liu Heliang says meat and vegetable prices have climbed 10 percent in a year and staff wages are up 40 percent.

“I’m struggling to make ends meet with costs going up like this,” said Liu, a native of Sichuan province who pays his workers as much as 1,800 yuan ($271) a month, or 88 percent more than the Beijing minimum wage, to serve up a staple Chinese meal. “Raising prices is the only way out,” he said, predicting he won’t be able to hold out beyond two months.

I mean, really people, how is a man supposed to run a successful business when he is forced to pay his workers close to $10 a day?!? This is why we must protect the business owners in this country before our own workers start getting funny ideas about being able to afford to eat the food they serve or buy the things they make ... This is a great example of why China’s growth is unsustainable. Just the way Egypt’s growth was unsustainable 3,000 years ago because it was based on slavery, China’s growth also reaches a breaking point if the workers are no longer willing to accept their lot in life.

Paying a worker $271 a month (and that dollar matters when it’s only $271!) for 160 hours of work (and you know it’s more than that) is $1.70 per hour or about what I made as a busboy in 1976, when my plan was to buy a brand new VW Beetle for $1,999. That’s why Tata motors has cars for $2,499 – that’s what the market will bear over there! Of course, in 1976 gas was $1 per gallon and we’d put 6 kids in that VW and $1 each would get us to the shore and back and another Dollar would pay for lunch so I was happy to work one hour to pay for a day off and save the rest. Modern workers are not so lucky as they work all 40 hours of the week just to buy necessities and spend their free time praying nothing happens that will force them to borrow money.

“They are just not addressing the fundamental problem at all,” said Patrick Chovanec, an associate professor at Beijing’s Tsinghua University. With the expansion of credit and cash in the economy stemming from China’s response to the global crisis, “you’re sitting on a volcano,” he said. China’s plans to rein in prices include selling state food reserves, stabilizing the cost of natural gas and cracking down on speculation in and hoarding of agricultural products, the State Council said. The aim is to damp food inflation that reached 10 percent in October, more than twice the 4.4 percent headline rate.

If you think you don’t have to worry about whether or not Chinese workers can afford a Big Mac, think again. The myth of infinite Chinese demand is what’s spurring the speculative rally in America. Since the people PHYSICALLY cannot afford price increases, margins are being squeezed and sales are dropping fast. Bloomberg points to another example of an apple seller whose prices went up 60% which led directly to a 60% drop in sales – all this is right on the money with my call on the 2010 outlook I made last year – it’s "A Tale of Two Economies" and the wealthy investing class simply does not see (or does not want to see) the abject suffering of the working class – whether it’s Chinese or US workers, as the situation reaches a breaking point.

Even the mighty US consumers are nearing the breaking point with just 15.7% of holiday shopping completed by the week ending Nov. 14th compared to 20.5% at this time last year and 28.3% in 2008 – the last year we had a "healthy" economy and when 10M more people had jobs and 4M more families had homes to put a Christmas tree up in.

Food companies are still reeling from lower sales volumes that began in 2008 with what some dub "pantry deloading." Over the past two years, the number of items kept in American pantries has fallen about 20%, according to a recent SymphonyIRI survey. Consumers are also cutting back on the range of goods they stock. The average household had 369 unique items in its medicine cabinets, pantries and cosmetics bags this year, compared with 404 in 2006, the survey found.

[chart]

We’re going to run our annual PSW Holiday Shopping Survey this weekend so our Members can give us their observations of Black Fridays from around the nation. Our holiday surveys have been excellent predictors in the past so I look forward to this year’s results! The Government revised GDP UP this morning, to 2.5% in Q3 from 2% originally estimated. That’s a nice 50% improvement over Q2′s 1.7%, although we still have 9.6% official unemployment but I guess those bums weren’t shopping anyway. A big contributor to GDP was a 28.2% boost in year over year profits in the Financial Sector, which is about 20% of the S&P these days. Thank goodness for that as we were sure worried about our Bankster buddies in this rough economy!

openingimageFed Minutes are out at 2 pm and we can expect the Fed to lower their forecasts, despite the GDP. They have to do this to justify QE2, of course, as "The Bernank" does whatever it takes to distract you from what’s really happening.

Ireland is NOT "fixed." As I mentioned in yesterday’s post, they are two weeks away from a budget vote and, if they can’t agree on the loan terms that are being shoved down their throats – we could be right back to chaos over there. Now that Ireland does appear to have a lifeline, the sharks have moved on to surround Portugal, Italy and Spain, with Antonio Garcia Pascual, chief southern European economist at Barclays Capital in London, saying “Spain is bit too big to be bailed out, the size of a rescue required would use up all the funds available and then you have Italy with contagion as well,” prompting “a situation where the euro itself is put into question.”

So happy Tuesday to you and GOOD LUCK – we’re going to need it to get through this mess! We’ll be watching our 10% lines and taking the money and running on our short plays because we don’t really have the volume for a proper breakdown just yet but the trend is no longer the friend of the bulls who need to do more than last minute stick-saves to turn things around at this point.

Things should be interesting this afternoon with the Fed Minutes and, for the morning, we’ll be looking to hold the floor we established last Thursday and Friday at Dow 11,120 (already lost), S&P 1,185 (already lost), Nasdaq 2,500 (holding), NYSE 7,550 (oops again), and Russell 715 (holding). If those break down, we’ve got a clean shot for another 2.5% drop below those lines and that’s going to make for a very worried Thanksgiving for those who ignored my cash calls of the past month.’

Why Ben Bernanke Is Wrong Rein This column originally appeared in Forbes [ ‘… In other words, he wants simply to reinflate the bubble that caused our problems in the first place. Soaring equity prices won't increase confidence until more jobs are created. It will only postpone the day of reckoning…’ ]

‘I have a childhood friend named Johnny. Our families used to vacation together. By high school we had grown apart, as Johnny got into drinking and pot. He dropped out of school and graduated to hard drugs and who knows what else. By the time he reached his 20s, he was a total mess. Out of love, his parents vainly doled out money and vacations to him. No matter how well-intentioned they were, his parents basically enabled him. Johnny got worse and worse. Nothing worked until one day they kicked him to the curb and said "we love you but we won't give you any more money.' The next few years were torture for both Johnny and his parents. He would disappear for months at a time, occasionally showing up gaunt and ragged. Fortunately, he is now getting rid of his internal demons, off drugs, back in school and living at home. Like Johnny's parents, Federal Reserve Chairman Ben Bernanke is misguided with his $600 billion "QE2" quantitative easing. He is continuing to enable America's addiction to debt without addressing America's internal structural problems. As I said on Bloomberg TV in an appearance last week, America is addicted to debt the way a drug addict is addicted to heroin. Bernanke needs to cut off the money supply, as Johnny's parents did, and have the U.S. go through very painful restructuring for three to five years. Otherwise America will never get better. With QE2, Bernanke is copying the mistakes Japan made over the past two decades trying to move beyond its stagnation. Like the U.S. now, Japan lowered interest rates nearly to zero and invested in infrastructure. Those policies led to drawn-out stagnation with entire industries and towns dependent on handouts. The same will happen to America if Bernanke continues to pump liquidity into the system. Why? Low interest rates and an increased money supply are worthless tools if companies don't think there are ways to make money. More than a trillion dollars sits on the books of America's largest companies in reserves for a rainy day, because they are scared about the future. It is true that when credit markets don't work a short-term money infusion is needed (as was done with the Trouble Asset Relief Program in 2008), but continuing to throw money at those problems nearly three years after the recession started in the hope that something will finally stick is foolish. Aside from relying on the wrong measures to remedy the current situation, here are two more reasons why Bernanke's policy is wrong.First, Bernanke says he wants a looser monetary policy to boost the stock market and increase confidence, even though the Dow has rebounded from 6,000 to 11,000 in the last two years. Huh? What a ridiculous, dimwitted view for a central b anker to have. In other words, he wants simply to reinflate the bubble that caused our problems in the first place. Soaring equity prices won't increase confidence until more jobs are created. It will only postpone the day of reckoning. Instead, the U.S. should look to Singapore for guidance. The government there subsidized new hires of private companies as soon as the crisis hit. The result? Companies competed to hire at a fraction of their normal costs. Even though Singapore's export-oriented economy got hit hard, its gross domestic product grew 10.6% in the third quarter of 2010, year over year. America should subsidize new hires for small and medium enterprises in key sectors like clean technology, high technology and media and focus on job creation in small and medium-size businesses, not on temporary census takers. That will boost confidence and create jobs. Second, global investors are rightly worried that with the U.S. money supply growing the value of the dollar will continue to drop. So what are they doing? Companies likeApple, General Electric and Pepsi are investing in emerging markets like Brazil, India and China that are rebounding better from the crisis. The result is massive asset bubbles in those places that could create great volatility if they popped. In other words, Bernanke is unleashing America's economic woes and bubbles on the rest of the world. America's closest allies like Germany and Brazil are protesting, sensibly, as are the Chinese. They don't want Bernanke to fob off America's problems onto them. Lowering the value of dollar also won't help America export its way to success, as Bernanke and President Obama mistakenly believe. Countries like Thailand and Japan will keep up by devaluing their own currencies. Currency wars don't help anyone. Instead of debasing the greenback, America should bolster its manufacturing prowess. It doesn't have the workers and infrastructure needed to make Nike and Ralph Laurenproducts, but it can and should be manufacturing more products higher up the value chain, where China and Vietnam can't compete. Instead of trying to blame China's currency policies for America's problems (I am still not sure how Bernanke seems to forget that the global crisis started because of irresponsible regulatory oversight and easy credit in the U.S., since he became a member of the Fed's Board of Governors in 2002), the Federal Reserve chairman needs to look at quelling America's economic demons. There are no easy answers. Fixing those problems will be painful and politically difficult and may cause unemployment to spike and the equity markets to drop. But it has to be done. Unless Bernanke learns as Johnny's parents did that tough love works better than throwing money at problems, I am very concerned that America's addiction to debt will continue to damage the global economy.’

Fed lowers economic expectations for 2011 Washington Post - Neil Irwin - During the housing boom, millions of homeowners got easy access to mortgages. Now, some mortgage lenders and government officials have taken action after discovering that many mortgage documents were mishandled. Bernanke Has FOMC Dissent But Still Runs The Show Forbes Fed Downgrades US Economic Outlook - Minutes Wall Street Journal

Asian Stocks Decline on Korea Attack Jonathan Burgos | Asian stocks fell, dragging the benchmark index to an almost four-week low.

Yuan begins trading against the rouble China started allowing the yuan to trade against the Russian rouble in the interbank market from Monday as policymakers promote the currency’s use in global trade and finance.

Velma Hart, Who Questioned Obama’s Policies, Loses Job Velma Hart, who told President Obama she was “exhausted” of defending him and became the face of disappointed Americans this fall, has lost her job.

The Beginning Of The Ponzi End: As Of Today, The Biggest Holder Of US Debt Is Ben Bernanke Well, folks, it’s official – mark November 22, 2010 in your calendars – today is the day the Ponzi starts in earnest.

Irish Clash with Cops as IMF Readies Austerity Plan In Dublin, Ireland, people are not taking the IMF invasion sitting down. On Monday, November 22, around 50 Irish demonstrators attempted to stage a sit-down at a government building and protest the sell-out of the country to the international bankers.

Insiders selling (into the bubble as preceded last crash), this is an especially great opportunity to sell / take profits! Suckers’ rally to keep suckers suckered (easy for the wall street frauds to do with just a mouse click / push of the button – and, they know all those technical trade lines that are easy to program in this current phase of the scam/fraud with the debased dollar). Keep in mind, the totally mindless blather from the ‘cottage industries’ of and fraudulent wall street itself in talking up lower P/E multiples when the same is a direct result of the debasement of the dollar and the consequent manipulation / translation (not real, see Davis, infra) which preceded the financial crisis / last crash. Unemployment, trade, deficit, etc., numbers continue decidedly worse than expected along with other negative data (and in the ‘wrong direction’, that spin accorded ‘down but not as bad as before’ b*** s*** ) yet the market has rallied like no tomorrow with used home foreclosure / distressed sales, though abated owing to ‘foreclosuregate’, the other ‘heralded’ good news. Moreover, the dumbo lemmings of Europe have jumped on the fraudulent defacto bankrupt american crazy train propelled to the precipice also as if no tomorrow. This is about keeping the suckers sucked in with the help of a market-frothing pre-election debased dollar for favorable currency translation and paper (but not real when measured in, ie., gold, etc.) profits which preceded the last crisis, inflating a bubble as in the last crisis to facilitate the churn-and-earn, particularly with computerized (and high frequency) trades and which commissions they’ll get again on the way down. There is nothing to support these overbought stock prices, fundamentally or otherwise. These are desperate criminals ‘at work’. Even wall street shill, the senile Buffett is saying we’re still in a recession (depression) [ Davis: ‘… all profits are inflated by 10% (from falling, debased dollar) and that 10% is the E that gets divided from the P and gives us a much better price/multiple to hang our hats on and that gets investors to BUYBUYBUY …’ The bull market that never was / were beyond wall street b.s. when measured in gold ] This is a great opportunity to sell / take profits (these lower dollar, hyperinflationary currency manipulations / translations to froth paper stocks will end quite badly as in last crash)! This is a global depression. This is a secular bear market in a global depression. The past up moves were manipulated bull (s***) cycles (at best) in a secular bear market. This has been a typically manipulated bubble as has preceded the prior crashes with great regularity that the wall street frauds and insiders commission and sell into. This is a typical wall street ‘programmed computerized high-frequency churn and earn pass the hot potato scam / fraud as in prior crashes ( widely reported, high-frequency trading routinely accounts for more than 50% of daily U.S. equity trading volume and regularly approaches 70%. )’. This national decline, economic and otherwise, will not end until justice is served and the wall street frauds et als are criminally prosecuted, jailed, fined, and disgorgement imposed.The Stock Market's Long Decline Has Begun Smith ]

To solve the deficit, the numbers add up -- but not the votes ( Washington Post ) [ Geeh! A discussion of the deficit with a reference to math … who woulda’ thunk it! I mean, that’s script material for the next installment of ‘Mission Impossible’. ]The sudden proliferation of deficit-reduction plans is a reminder that the deficit is, at its heart, a math problem.

National / World

Lowest ever: Obama job approval sinks to 39%, as even Democrats’ support melts away President Obama has passed the Big 4-0 — going the wrong way.

Korean War Crisis: Brought To You By Uncle Sam Despite the fact that South Korea admits it fired the first shots that prompted the North to retaliate, the vast majority of the establishment press are feverishly blaming North Korea for a new escalation in the crisis, while failing completely to acknowledge the fact that the whole fiasco was generated as a direct result of Uncle Sam’s policy through two separate administrations to ensure hereditary dictator Kim Jong-Il and his successors acquired the atom bomb.

North Korea Attack Part Of RAND Plan For Total War? The exchange of artillery fire between North and South Korea, which the North says was started by South Korea firing shells during a military drill, could act as the catalyst for a huge new conflict that the RAND Corporation has been lobbying for over the past two years.

Polls Indicate Americans Waking Up To TSA Tyranny A new national poll indicates that the majority of Americans are against the enhanced TSA pat-downs that some have likened to sexual molestation, while more travelers are turning against the full body scanners as they learn more about the risks associated with the technology.

NKorea’s military command vows ‘merciless’ military strike against SKorea North Korea threatened to continue “merciless” strikes on South Korea on Tuesday after the communist state launched a deadly artillery attack across their western sea border.

Ron Paul: Crotch Groped by TSA, Calls for Boycott of Airlines Kurt Nimmo | “I think it’s a healthy wake-up call to a lot of Americans,” Paul told Jones.

Ron Paul: Korea Conflict May Be Orchestrated Crisis To Boost Dollar Paul Joseph Watson | RAND Corporation lobbied Pentagon for major war to reverse US economy

RT Crew Arrested for Reporting Pentagon’s Dirty Laundry Kurt Nimmo | It is Job One of the corporate media to make sure the American people remain oblivious to the ramifications of U.S. foreign policy.

Korean War Crisis: Brought To You By Uncle Sam Paul Joseph Watson | US military-industrial complex armed North Korea with nuclear weapons.

Breaking: South Korea Threatens Retaliation Against North Korea Infowars.com | Kim Jong-un, the anointed successor of Kim Jong-il, is said to be responsible.

Drudgereport: US-SKorea Joint Military Exercises Possible in Coming Days...
NKorea's military command vows 'merciless' military strike against South...
Fires artillery onto island...
South denies seeking redeployment of U.S. tactical nuclear weapons...
Returns Fire...
'Intentional, planned attack'...
CHINA WATCHES... WHITE HOUSE CONDEMNS...
Russia Sees 'Colossal Danger'...IT BEGINS

POLL: Obama job approval sinks to 39%... Woman who told Obama her financial fears -- has lost her job...
Even MoveOn.org sours... Afghan violence soars, insurgency expanding..

A united goal: Saving the tiger (Washington Post) [ Clearly the wisdom of an historically great leader for the ages, Vladimir V. Putin should be given great deference in all matters of global concern. Having evolved from his youthful indiscretion as a novice KGB agent, a hand dealt to him (by a soviet communist system) more than chosen, he has reminded the world of the greatness that was, is, and forever will be Russia’s and His! ] The tale of the magnificent Siberian tiger, and its unfinished fight for survival, should be a compelling one for the 500 conservationists and world leaders arriving for Russian Prime Minister Vladimir V. Putin's tiger summit this weekend. Protecting where the wild things are Washington Post - Kathy Lally - ‎IN MOSCOW The tale of the magnificent Siberian tiger, and its unfinished fight for survival, should be a compelling one for the 500 conservationists and world leaders arriving for Prime Minister Vladimir Putin's tiger summit this weekend ... 13 nations meet to try to save wild tigers CNN International Putin, Wen, other leaders in bid to save the tiger Reuters

The Economy Will Not Recover Until the Economic Criminals are Prosecuted, and There Are Real Investigations Into 9/11 and Other Government Failures Trust is essential for a stable economy; Trust is currently at an all-time low; Launching criminal prosecutions and real investigations is one of the main prerequisites for an economic recovery.

Multitudes of lobbyists weigh in on Dodd-Frank Act (Washington Post) [ Who cares what they have to say. What can you expect them to say? After all, for the amounts they’re getting paid, what do you expect them to say. As it stands, the dodd-frank bill’s already a soft touch for the perennial frauds on wall street. Partner rates, ie., Washington-based Patton Boggs, at $990 per hour (in 2008, higher no doubt today), do you really think you’re paying for knowledge / expertise or just influence / slush? These amounts are staggering. Such is unheard of in more productive societies. ] The financial overhaul has generated more work for lawyers and lobbyists now than during the frenzied days leading up to its passage.

Helmand's refugees disheartened by troops (Washington Post) [ ‘Gauge of success?’ Come on! What success can be had? Greater defacto bankruptcies for the nato coalition members? More death and destruction? Even if it were not true (that they are to blame) though I believe it is, the u.s. / brits / nato will be blamed for even unimprovable scenarios beyond their scope and control where even pyhric victories are not in the cards (though that’s all they could possibly have hoped for). Indeed, a geopolitical misstep of monumental proportion for the u.s., Britain, et als. Then there’s the u.s. initiated resurgence of the poppy / heroin production / trade … their raison d’etre. ] The arid province will be an important gauge of success in the U.S.-led strategy against the Taliban. But refugees offer a bleak assessment, blaming insecurity in Afghanistan on the presence of U.S. and British troops.

With bailout near, Irish PM's coalition cracks (Washington Post) [ Cracks? If it were only the Irish coalition that suffers from cracks, things might be just a smidgen better than the bleak reality, current and prospective. Cracked, on crack, all cracked up, etc., are expressions that describe any number of political / business interest groups that should have got crackin’ when the same would have really meant something! ]

The Wall Street snitch pitch (Washington Post) [ Oh yeah! Laws are great on paper, but in a pervasively corrupt, defacto bankrupt nation as america, just try to get them to apply them as opposed to the more lucrative perpetration and cover-up (but the incentives are a positive). ] An unlikely ad has been getting screen time in Manhattan theaters that cater to a Wall Street crowd. [

October 15, 2010 (*see infra)

Steven M. Martinez, Assistant Director In Charge
Federal Bureau of Investigation, USDOJ
11000 Wilshire Blvd., Suite 1700

Los Angeles, CA 90024

Dear Sir:

I enclose herewith 3 copies of the within DVD rom autorun disk (which will open in your computer’s browser) as per your office’s request as made this day (the disk and contents have been scanned by Avast, McAfee, and Norton which I’ve installed on my computer to prevent viral attacks / infection and are without threat). I also include 1 copy of the DVD as filed with the subject court as referenced therein (which files are also included on the aforesaid 3 disks in a separate folder named ‘112208opocoan’). The (civil) RICO action (as you’re aware, the RICO Act is a criminal statute which provides a civil remedy, including treble damages and attorney fees, as an incentive for private prosecution of said claims probably owing to the fact that the USDOJ seems somewhat overwhelmed and in need of such assistance given the seriousness and prevalence of said violations of law which have a corrupting influence on the process, and which corruption is pervasive). A grievance complaint against Coan was also filed concurrently with the subject action and held in abeyance pending resolution of the action which was illegally dismissed without any supporting law and in contravention of the Order of The Honorable Robert N. Chatigny, Chief Judge, USDC, District Connecticut. The files below the horizontal rule are the referenced documents as filed. (Owing to the damage to the financial interests of both the U.S. and the District of Congresswoman Roybal-Allard, viz., Los Angeles, the Qui Tam provisions of the Federal False Claims Act probably would apply and I would absent resolution seek to refer the within to a firm with expertise in that area of the law with which I am not familiar).

The document in 5 pages under penalty of perjury I was asked to forward to the FBI office in New Haven is probably the best and most concise summary of the case RICO Summary to FBI Under Penalty of Perjury at Their Request (5 pages) [ ricosummarytoFBIunderpenaltyofperjury.pdf http://albertpeia.com/ricosummarytoFBIunderpenaltyofperjury.pdf ].

The correspondence I received from the Congresswoman by way of email attachment (apparent but typical problem with my mail) along with my response thereto is included on the 3 disks as fbicorrespondencereyes.htm . With regard to the calls to the FBI’s LA and New Haven, CT offices: There was one call to the LA office and I was referred to the Long Beach, CA office where I personally met with FBI Agent Jeff Hayes to whom I gave probative evidentiary documents of the money laundering which he confirmed as indicative of same (he was transferred from said office within approximately a month of said meeting and his location was not disclosed to me upon inquiry). The matter was assigned to FBI Agent Ron Barndollar and we remained in touch for in excess of a decade until he abruptly retired (our last conversation prior to his retirement related to the case and parenthetically, Rudy Giuliani whose father I stated had been an enforcer for the mob to which he registered disbelief and requested I prove it, which I did – he served 12 years in prison, aggravated assault/manslaughter? – and no, there is no Chinese wall of separation – Andrew Maloney’s the one that prosecuted gotti).

In contradistinction to the statement in said correspondence, there is a plethora of information including evidence supporting the claims set forth in the RICO VERIFIED COMPLAINT (see infra). Such includes and as set forth in the case, inter alia,

A judgment had been entered in my favor in the case, United States District Court Case #3:93cv02065(AWT)(USDCJ Alvin Thompson), worth approximately now in excess of $300,000 remains unaccounted for and which could be used for payment to creditors, Los Angeles, etc..
Counsel Robert Sullivan on my behalf documented by way of certification upon investigation that Alan Shiff, USBCJ, had falsely stated a dismissal upon which false statement he predicated a retaliatory and spurious contempt proceeding against me causing substantial damage, and for which he sought Judicial Notice of those and related proceedings as did I in some of my filings.
The Order of Dismissal With Prejudice by Alan Shiff, USBCJ, owing to Defendant Coan’s failure to file anything whatsoever by the court’s deadline causing creditors and me substantial damages: [ Shiff Order of Dismissal With Prejudice on Coan’s Failure to File Page 1 Page 2 ]
Defendant Coan had filed an action against me to prevent me from suing him which necessitated me to fly to Connecticut for a hearing before The Honorable Robert N. Chatigny, Chief Judge, USDC, District of Connecticut, who denied Coan’s requested relief as to Coan but precluded my action against Shiff (although there is no immunity, judicial or otherwise, for criminal acts, ie., fraud connected with a case under Title 11, USC, etc.) . [ transcript in pertinent part - crossexamofcoanbypeia.pdf ]
Newly appointed judge, Maryanne Trump Barry, Donald Trump’s sister, was assigned the RICO case despite the conflict of interest in light of hundreds of thousands of dollars of illegal (drug) money being laundered through the Trump casinos by the RICO defendants, and despite my motion to recuse her which motion she heard herself and denied, and U.S. Trustee Hugh Leonard with whom I met personally refused to join or file a separate motion to recuse and not long thereafter left said office for private practice at Cole, Shotz, et als on retainer with the RICO defendants as his primary client.
Probative and evidentiary documents, affidavits, exhibits, including those turned over to FBI Agent Jeff Hayes in Long Beach, CA, had been given to Assistant U.S. Attorney Jonathan Lacey with whom I met personally at the U.S. Attorney’s Office in Newark, N.J., at which time Samuel Alito was U.S. Attorney, and went over said documents and their probative value with him. Within approximately a month thereafter upon inquiry I was told that Jonathon Lacey was no longer with the office, that the file/documents could not be located, and that there was no further information available concerning contacting him or his location. I thereupon delivered by hand, copies of said documents to the office of then U.S. Attorney Alito, addressed to him, with assurance they would go directly to him. In addition to being inept [ I looked in on the one mob case he had brought, bungled, lost (accidently on purpose?) since I was suing some mob-connected under RICO and the court (I had known / previously met outside of court the judge Ackerman through a client) was absolute bedlam and a total joke since incompetent corrupt Alito brought in all 20 mob defendants (rather than prosecute one or a few to flip them first) who feigning illness had beds/cots in the courtroom along with their moans during testimony and had the jury in stitches. As much as I hate the mob, it truly was funny, if not so tragic.], Alito is also corrupt (and maybe corrupt because he is inept). After a reasonable (but still rather short) time I called to determine the status and was told that Alito was no longer with the Office of the U.S. Attorney, that he was (appointed) a federal judge, and that neither the documents nor any file or record of same could be located. Alito did parley the same / cover-up into quid pro quo direct lifetime appointment to the Court of Appeals, 3^rd circuit, despite the absence of judicial experience or successful tenure as U.S. Attorney (Maryanne Trump Barry as well). This is the same Sam Alito that now sits on the purported highest court in the land. The real application of the illegal rule ‘don’t ask, don’t tell’.

There is applicable insurance / surety coverage and neither LA, nor creditors, nor I should continue to have been damaged by this brazened corrupt and illegal scenario, which should be resolved in accordance with the meaningful rules of law apposite thereto.

Sincerely,

Albert L. Peia

611 E. 5^th Street, #404

Los Angeles, CA 90013

(213) 219-**** (cell phone)

(213) 622-3745 (listed land line but there are unresolved problems with the line, computer connection may be the reason but I hesitate to chance greater non-performance / worsening by their ‘fix’ so cell phone best for contact).

----------

*The foregoing and as indicated therein was previously send 9-14-10 but delivery confirmation was flawed as set forth below and my inquiries to the u.s. postal service rebuffed (I believe tampered with inasmuch as your office could not locate same). This cover letter (9-13-10) is on the 3 disks with navigable hyperlinks to the subject files for ease of reference, including the files in the RICO action as indicated. (10-15-10) I spoke with Rose, FBI, ADIC Secretary, who indicates once again that your office has not received the aforesaid and which can reasonably be presumed to have been tampered with, and hence, a violation of the federal statute concerning same. ]

-----

Food banks swamped by demand (Washington Post) [ Oooooh! Sounds bullish (unlike those other bank runs) … to the lunatic frauds on wall street this full-moon luneday (Monday) … you know … ‘demand is up’ … riiiiight! … but the real question is: Are Stocks Over Loved and Over Valued? [ Is the Pope Catholic? Do bears s*** in the woods? … Reality’s short answer: YES! YES! YES! ]
Simon Maierhofer, On Monday November 22, 2010, 12:32 pm EST ‘Momentum and perception are the big intangibles of the investing universe. Nobody knows exactly when the investing masses' mojo will turn on or off, overheat or over correct.Valuations, similar to gravity, are the big equalizer. In a world of uncertainty, valuations are the one thing you can rely on. Getting valuations right is one thing, figuring out when valuations will exercise their gravitational pull on stocks (NYSEArca: VTI - News) is another.
Using Valuations as a Guide
When planning a trip from point A to B, you need to know where A and B are. If you don't know your destination, you will most likely end up some place you don't want to be. Failing to prepare is preparing to fail.Fair valuations are the final investment destination. If you invest in an undervalued market or stock and have the patience to let the market do its magic, your investment will be profitable 9 out of 10 times.If you invest in an overvalued market and don't get out in time, odds are that your journey will end in tears.
Asking the 'Valuation Guru'
Charles Dow, the founder of the Wall Street Journal and inventor of the Dow Jones Averages was an astute student of valuations. According to Mr. Dow, a correct understanding of valuations is the single most important ingredient to investment success. If Mr. Dow was still alive, what would he say about today's market? Would he tell you to buy or sell?Let's examine the most basic and probably purest measure of value: Dividend yields.Unlike P/E ratios, dividend yields can't be fudged and massaged. Companies with a healthy cash flow use their financial prowess to attract and retain buy-and hold type investors with juicy dividend checks.The dividend yield is expressed as a percentage of the stock price and can rise for two reasons: 1) stock price drops or 2) dividend payment increases. As a rule of thumb, the higher dividend yields, the healthier valuations.
Dividend Yield - Buy High, Sell Low
It's human nature to want what you can't get. Current yields are low, but everybody wants income, so investors are willing to risk the return of their money for return on their money. Current yields are close to an all-time low, so it's fair to assume that stocks are overvalued.The opposite was true in the first quarter of 2009. A variety of ETFs yielded close to or even more than 10%. The Financial Select Sector SPDRs (NYSEArca: XLF - News) and Vanguard Financial ETF (NYSEArca: VFH - News) paid more than 7%.Dividend ETFs like the iShares DJ Select Dividend (NYSEArca: DVY - News) and SPDR S&P Dividend ETF (NYSEArca: SDY - News) had yields north of 6%, and even plain value ETFs like Vanguard Value (NYSEArca: VTV - News) and iShares Russell 1000 Value (NYSEArca: IWD - News) paid more than 4%.The problem at that time was that nobody was interested in yield. Investors shunned stocks and yields like cats shun water. Within a week of prices bottoming and stocks beginning to rally, the ETF Profit Strategy Newsletter recommended to load up on dividend-rich ETFs.Here's the newsletter's March 2, 2009 recommendation: 'This counter trend rally will have to be broad and powerful in order to relieve investor's pent-up urge to buy. Dividend ETFs with a higher allocation to financials are likely to rise higher than the broad market. Some of the dividend yields are quite juicy and can help to offset timing mistakes.'

Beware of the Yields Trap

Since then, the S&P (SNP: ^GSPC) has risen as much as 84%, the performance for the Dow Jones (DJI: ^DJI) and Nasdaq (Nasdaq: ^IXIC) has been similar. What about dividend yields?If the March 2009 lows marked a true market bottom, dividend payments should have increased somewhat proportionally to stock prices. They didn't. In fact, yields today are lower than they were at the March 2009 bottom.In March 2009 the dividend yield for S&P 500 constituents was 3.6%. By multiplying 3.6% with the March 2009 low of 666 we arrive at a dividend yield of 23.98 points. In October 2010, the S&P yielded 1.97%. Based on an S&P at 1,200 points, this represented 23.64 points, 0.34 points less than at the March 2009 bottom.Hunting after yield without considering the risk at current prices is similar to maxing out your credit cards just to rack up frequent flier miles. The return comes at a (long-term) cost.Beware of the Earnings TrapIn my humble opinion, earnings are more than just a trap, they are a minefield. According to the numbers we are fed, earnings have already surpassed the threshold reached at the peak of the dot-com bubble and are projected to eclipse even the 2007 all-time record high in 2011.If this doesn't strike you as odd, take a moment to examine the chart below. Leading up to the 2007 stock market and earnings high, we had consistent GDP growth (not historically great but steady). The real unemployment rate (U-6, published by the Bureau of Labor Statistics) was 8.4%.[chart]Today, GDP is sputtering (and inflated by government subsidies) and U-6 unemployment has more than doubled to 17%. For those who prefer to go by the media's more palatable U-3 jobless number, it has soared from below 4.7% to 9.6%. Does that look like the kind of environment that would produce record high earnings?I don't think it would be presumptuous to wonder if financial engineering and massaging the books has something to do with high earnings. Remember the 157 rule change which allows banks (NYSEArca: KBE - News) to hide real estate losses (see June 2010 ETF Profit Strategy Newsletter for a detailed analysis).Even when assuming that current earnings are for real, the P/E ratio (high earnings translate into a lower P/E ratio) is still historically elevated. Admittedly not as much out of line as a year ago, but still high.

Don't Bet Against Valuations

Buying into an overvalued market and expecting a long-term gain, is like sowing seed in the winter and expecting to reap in the summer - it doesn't work that way.Of course, over the short-term, markets can defy valuations and make disciplined investors look like temporary fools. But, as the 2000 and 2008 declines have shown, there are no shortcuts to long-term success.The most intriguing facet of dividend yields and P/E ratios is that they tend to pinpoint major market bottoms. All historic market bottoms had one thing in common: super high dividend yields and ridiculously low P/E ratios.Based on this historic clue, the March 2009 bottom looks more like a fake than a major bottom. Just as ice doesn't thaw unless the temperature rises above 32 degrees, the market doesn't bottom until P/E ratios and dividend yields signal that a valuation reset has occurred.The December issue of the ETF Profit Strategy Newsletter includes a detailed analysis of P/E ratios, dividend yields, and two other benchmarks of value-based forecasting plotted against historic charts of the S&P 500 and Dow Jones.A picture paints more than a thousand words, and the featured chart shows how overvalued stocks are and how far they have to drop before a sustainable new bull market can begin.’

Al Peia's Blog

Wednesday, November 24, 2010

November 24, 2010 posts