Al Peia's Blog: January 19, 2011 posts

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 . The following is the cumulative archive of blog posts / topics for 2010 as the new year starts anew: http://albertpeia.com/December312010postsarchive.htm or PDF formatted version
http://albertpeia.com/December312010postsarchive.pdf ]

Israeli human rights groups sound alarm (Washington Post) [ As indeed they should! As a war crimes nation along with pervasively corrupt, defacto bankrupt america, israel has much to lose by exposure of their pervasive crimes though the entire world is aware of same including illegal nukes! … Ie., Accountability is unclear in israeli probe of flotilla raid (Washington Post) Oh, come on! An israeli probe of an israeli massacre of civilians. Time for israel to pay; for illegal nukes, for violations of international law, for continued violations of u.n. resolutions, for provocations as pretexts to sabotage peace talks, and on and on ad nauseum. Why does america among other nations feel compelled to sacrifice themselves for the sake of a global criminal nation with an insatiable greed and blood-thirst as israel? ] An initiative in the Israeli parliament this month to investigate the funding of local human rights organizations has intensified debate here about the role of the groups, which critics have accused of harming Israel.

Business leaders meet with Hu, Obama to address trade issue (Washington Post) [ Oooooh! … Sounds like a plan! … For Chinese regression … I don’t think so … Trade With China?: 25 Facts That Prove That China Is Kicking Our Rear Ends Do you believe that trade with China is a good thing? Well, you might not be so sure after you read the 25 facts listed below. The truth is that China is kicking our rear ends all over the planet … Drudgereport: `GE CEO: China one day will be world's biggest economy… daaaaah! ... Obama: 'We Welcome China's Rise'...`
`Careful to avoid criticism...` ] The show of corporate might reflects the intense focus on the economic relationship between both nations.

Goldman Sachs's profit drops by 52% in Q4 (Washington Post) [ Before everyone starts shedding tears, let’s realize that those bonuses and compensation packages come off the top… Bank giant Goldman rewards staff with €11.4bn Independent.ie | Wall Street banking giant Goldman Sachs revealed today that staff earned a total of $15.4bn (€11.4bn) in pay and bonuses last year. ] The decline in Goldman's bottom line is all the more striking because it contrasts with huge gains at other financial firms. As the financial sector continues to climb out of a historic hole, the numbers reflect a divide between Wall Street and Main Street. [Previous: … Jobless rate jumps as hiring slows (Washington Post) [ The reality is not a mystery! The nation’s been thrown under the bus for the greater good (wealth) of the very few (frauds on wall street, etc.); wall street giving out record bonuses from their accomplished fraud (with no-recession b.s. bernanke help) of $144 BILLION: Come on! This is gettin’ even more downright ridiculous (if that’s even possible)! Pending home foreclosure / distress sales up, oil prices (and oil stocks) up, debased dollar down, plus a little familiar ‘better than expected’ thrown in along with prospects of a ‘no-recession bernanke’ market-frothing bull session on 60 minutes and, voila, suckers’ rally into the close to keep the suckers suckered! What’s good for the frauds on wall street is bad for just about everyone else which includes the vast majority of people and businesses, domestically and globally, as current dollar manipulation / debasement ultimately results in higher costs and loss of purchasing power (ie., oil, etc.). Clearly, this is one of those fraudulent wealth transfers to the frauds on wall street et als which will ultimately be paid for by those who least are in a position to afford it, courtesy of the ever more worthless Weimar dollar, etc., inflating earnings, eps, lowering p/e multiples, etc., see infra. This is an especially great time to sell / take profits while you can since there's much worse to come! Previous: 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! ]

Obama presses (as in pressing Mr. Hu’s pants) Chinese leader on rights At summit, Hu admits his nation needs to make more progress (Washington Post) [ Riiiiight! … Mr. Hu says with utmost sarcasm to continued perpetual war president, in the mold of dumbya bush though national u.s. defacto bankruptcy, viz., ‘wobama the b (for b*** s***)’. White House more hard-nosed about Chinese government / Hu to face a tougher Obama administration (Washington Post) [ Please … don’t make me laugh … and, are you sure you didn’t mean more ‘brown-nosed’ about the Chinese government. This is starting to sound like seed material for the Weekend Update SNL skit segment, ‘REALLY’. I mean, really. Does anybody believe this? Come on … I don’t think so! ] Analysts say President Hu Jintao is eager to burnish his legacy, but he will find a White House that views his government with misgivings.] [Drudgereport: Currency system 'product of the past'...HU QUESTIONS FUTURE OF DOLLARRISING DRAGON: China on equal footing with USA as Hu visits Washington... GE CEO: China one day will be world's biggest economy… daaaaah! ... Obama: 'We Welcome China's Rise'...
Careful to avoid criticism... ] President urges counterpart to allow more freedom and open a real dialogue with the Dalai Lama, and raises the case of imprisoned Nobel winner.

Possible Earnings Season Potholes Simon Maierhofer, On Wednesday January 19, 2011, 6:58 pm EST ‘Earnings season is upon us and according to 10 strategists and investment managers polled by Barron's, there's no cloud in the sky. The future's looking bright.If you've followed Wall Street forecasts for a few years, you must have discerned a pattern: Forecasts are always rosy. If Wall Street analysts were meteorologists, their outlook would always be 'sunny' unless it is actually raining.Therein lies the problem; Wall Street never sees hard rain coming and only offers an umbrella after investors have gotten trenched. The purpose of this article is to provide an out of the box forecast with analysis you won't hear on the Street.

Insiders vs. Analysts

Analysts have their optimistic disposition implanted by the companies they cover. Corporate managers have every incentive to stay positive for as long as they can.Ironically, as CEOs project record high earnings, insider selling has picked up. In December, Investors Intelligence reports that: 'there was a sharp acceleration in the pace of insider selling over the last week, as if they suddenly all received word that the index highs would end.'Who would you rather believe - analysts (and their sources) with an agenda or the action of insiders with skin in the game? Something doesn't seem right if insiders want you to do as they say but not as they do.

Unbridled Enthusiasm

Mark Twain said that: 'When I find myself on the side of the majority, I know it's time to find a new place to side.' The majority of investors (and analysts) now believe in rising stock prices.Sentiment gauges have recorded readings not registered since the 2007 all-time highs, or before the May 'Flash Crash.' This is usually a sign of a market that's getting ready to roll over.

Trap #1

This brings us to the first investment trap for Q1 2011 - equities. After rallying more some 90%, the major indexes a la Dow (DJI: ^DJI), S&P (SNP: ^GSPC) and Nasdaq (Nasdaq: ^IXIC) are simply overbought, over loved and overvalued. This doesn't mean that they have to crumble tomorrow, but NOW is the time to think about protection.In each of the past three years, January trading has delivered a surprise shot of reality. Don't be surprised if it happens again in 2011.Sectors with the biggest gains include retail (NYSEArca: XRT - News), consumer discretionary (NYSEArca: XLY - News), materials (NYSEArca: XLB - News), and technology and these are also the most vulnerable to correction.Even though it defies Wall Street's approach of linear extrapolation, sectors that do well one year, rarely top the list the following year. It would make sense to either buy put protection - which is historically cheap due to a low VIX - or set mental stop-loss safety levels to avoid suffering through a painful correction.In an effort to keep this article brief, we won't delve into the Europe crisis. One of the ETF Profit Strategy Newsletter's predictions for 2010 was an increase in sovereign debt defaults. The Europe crisis will be with us for a while and will turn into a big drag for developed markets (NYSEArca: EFA - News) eventually.

Trap #2

A rush for tax-free yield drove investors into municipal bonds. Chasing yields can be a pricey mistake. If you plot dividend yields against stock prices over the past 100 years, you'll quickly notice that periods of low yields are generally a good time to sell, not buy stocks.The muni bond market has been an obvious, but ignored, house of cards. California is nearly bankrupt and every other state or municipality has seen their tax revenue dwindle. Loaning money to municipalities is like giving a car loan to someone who just lost their job. The default risk is high.On August 26, the very day Treasuries and muni bonds topped - the ETF Profit Strategy Newsletter told its subscribers to get out of muni bonds, corporate bonds and Treasuries. Prices for bonds have tumbled since and the danger isn't over. The three trillion muni bond market is in serious danger. Now is the time to worry about return of your money, not return on your money.

Trap #3

Not all is as it seems and if you put your trust in the Fed, you may soon be disappointed. Quantitative easing in general, and QE2 in particular, was supposed to stimulate the economy, increase inflation and the money supply.[chart]As the chart above shows, it didn't do any of the above. QE2 also was intended to lower interest rates to increase lending and make mortgages more affordable. The chart below shows what the interest of the 10-Yr Treasury has done since QE2 was launched.[chart]The Fed is treating the previous indulgence in debt by taking on even more debt. This is like taking more heroin to kick a drug addiction. It will keep you functioning for a while, but eventually your system will shut down. The only chance of success is to detox.

The Minefield Looks Pretty

To sum up, we are looking at a minefield covered by a beautiful blanket of flowers. The Fed - although it's failed to jolt the economy - has succeeded in inflating stocks (NYSEArca: VTI - News) and commodities (NYSEArca: DBA - News). It has served as fertilizer for fake growth.But sentiment is indicative of a market ready to roll over. Similar sentiment readings and warnings by the ETF Profit Strategy Newsletter in December 2008, January 2010, and April 2010 led to declines from 9 - 29%. Aside from Fed induced liquidity, there's not been much reason to believe this time will be different. The market's internal strength has been waning as various breadth indicators failed to confirmed the recent price highs.

Enjoy the Sight, Mind the Feel

Creeping up trends like the current one can go on for weeks. But take a look at the price action leading to the April highs and it becomes clear that such stair stepping up trends tend to end very abruptly and without warning.That doesn't mean that a correction has to turn into a meltdown, but if you maneuver through trap-infested territory, it pays to be careful and protect yourself.’

Disappointing Earnings Dent Stocks Midnight Trader 4:20 PM, Jan 19, 2011 – ‘

NYSE down 85.99 (-1.1%) to 8,104.92
DJIA down 12.64 (-0.1%) to 11,825
S&P 500 down 13.10 (-1%) to 1,282
Nasdaq down 40.49 (-1.5%) to 2,725

GLOBAL SENTIMENT

Hang Seng up 1.1%
Nikkei up 0.36%
FTSE down 1.32%

UPSIDE MOVERS

(+,-) AAPL loses after-hours gain after easily beats with Q1 and guides for Q2 above Street.
(+) IBM continues evening gain that followed upbeat Q4 results, 2011 guidance.
(+) ISPH upgraded.
(+) ADM upgraded.
(+) AEO upgraded.
(+) ATHX to publish joint study on spinal cord injury.

DOWNSIDE MOVERS

(-) DSCOD secures new patent in pulmonary conditions.
(-) GS misses with revenue, tops with earnings.
(-) WFC meets with earnings, beats with revenue.
(-) BK says Q4 tops year-ago quarter.
(-) USB beats with Q4 earnings.
(-) CREE continues evening slide that followed.
(-) DRH pricing shares.
(-) C names new COO.
(-) NGLS selling shares.

MARKET DIRECTION

Stock averages traded at or near the day's lows inside the final hour of trading. Financials depressed the broader market after Goldman Sachs (GS) disappointed with revenue and American Express (AXP) guided for Q4 results below Wall Street expectations. More earnings are due in the after-hours.

Bank of America (BAC) and AXP fronted blue-chip declines, while IBM gains in the wake of its earnings and guidance beat. Wells Fargo (WFC) also fell after disappointing results.

In the broader S&P 500, financials and natural resource stocks are the biggest decliners.

The Nasdaq Composite ended near its lows of the day. Apple (AAPL) rose initially but had turned lower late in the day after beating with earnings out late Tuesday.

Treasuries edged between minor gains and losses after the Federal Reserve Bank of New York bought $7.7 billion in debt on Wednesday. The 10-year note yield rose to 3.35% but was as high as 3.40% earlier.

Crude futures fell 0.6% at $90.86 a barrel.

Gold futures rose, while copper settled lower after hitting a record high in London trading, as metals got some support from a weaker dollar.

Gold for February delivery added $2, or 0.2%, to $1,370.20 an ounce. The metal pared gains as the session progressed; the February contract had earlier risen to $1,378.90 an ounce. March high-grade copper futures moved as high as $4.47 a pound, after having touched a record in London trade. The contract settled lower, however, as oil and stocks added to earlier losses. Copper declined 6 cents to finish at $4.37 a pound.

On the economic front, construction of new U.S. homes fell 4.3% to an annualized rate of 529,000 in December, according to Commerce Department data, a sharper drop than Wall Street economists expected. But the forward-looking portion of the report proved sunnier. Building permits jumped 16.7% to an annualized rate of 635,000 in December - the highest level since last March - from a revised 544,000 in November.’

Financials Lay an Egg: Dave's Daily ‘If I don't post every day it's easy to forget how the routine goes, but that's not your problem. Anyway, most disappointment Wednesday surrounded financials and perhaps materials. Investors were pretty energized regarding bank prospects but were disappointed with GS and AXP reports. The DJIA was propped higher by IBM's earnings keeping in mind it's a "price weighted" index with the company being the big dog there. Oddly, the rest of the tech sector saw sharp declines led by semis and networking. Commodity markets were mixed to down on the day while the dollar sold-off. Bonds rallied some as stocks were lower and home building data was weak. Volume continues to be incredibly light and it's hard to put your finger on why. Connected obliquely was news that hedge fund assets reached and exceeded their prior highs now at $1.9 trillion. With an unknown percentage of these assets involved in HFT (High Frequency Trading) it only enhances the impact of this activity. As some may know we utilize DeMark indicators to assess timing exits from long or short positions. DeMark is usually quiet but today he posted a note suggesting an "imminent" decline in markets was at hand. With POMO ongoing (more today) it's the wind behind bulls' sails that could defeat many technical indicators. In any event, volume picked up on selling while breadth was decidedly negative per the WSJ.’

Europe faces a new crisis The Voice of Russia | UN depressing forecast was made in report on the World Economic Situation and Prospects-2011.

Home Construction Declines WSJ | Home construction in the U.S. fell to its lowest level in more than a year in December as builders cut back on new single-family homes, the latest sign of a moribund market.

China ‘logs double-digit growth in 2010′ China’s economy grew 10.3 percent last year but inflation exceeded the government’s full-year target, Hong Kong-based Phoenix Television said on its website Wednesday.

Housing Starts in U.S. Decreased in December to One-Year Low Builders began work on fewer homes than projected in December, a sign the industry that triggered the recession continued to struggle more than a year into the U.S. economic recovery.

US Mint Reports January Silver Sales Hit 26 Year High When we had last checked on the total silver sales by the US Mint earlier today, the amount given was 3,407,000 ounces, a number which we had earlier speculated would be a monthly record if sales were maintained at the current pace.

Perception vs. Reality: Four Reasons to Remain Cautious on U.S. Equities [ Hey, Abbott … That’s Lou Costello calling him from the other side … Wake up! … Just kidding … but I’m not kidding when I say that contrary to Abbott’s view, infra, if you’re not a successful market timer you should rethink your position as an equity investor. Moreover, in contradistinction to Mr. Abbott’s implication, if you’re not a successful speculator (there are very few), you should rethink your position as a short seller: reason…, you could be wiped out, lose more than your principal, forced to cover (that’s why the same is considered a contrary market indicator, particularly in these manipulated, contrived markets). When I did my MBA thesis (1977, NYU, GBA, Eve.Prog., Finance), a review of the data revealed even then (and much more so now with computer programmed market manipulation) that the market remained biased / propped up (artificially, especially now with computerized manipulation) to the upside for far longer periods of time than for the downside which meant that dollar-cost averaging (through regular, periodic investment, for example), meant you were accumulating shares at higher prices generally for longer periods of time skewing the average cost to the upside (dollar-cost-averaging in declining markets was ok if analysis / forecast saw resurgence based on fundamentals - now absent – which is timing, as even senile wall street / gov’t shill Buffet would attest, that ‘greedy when others are fearful thing’). Abbott discusses perception which is the psychological factor involved in security evaluation / analysis; but investors need not and should become nuts themselves, particularly when as now, the inmates are running the asylum. ] Abbott ‘Perception determines short-term market movements. The difference between perception and reality determines the direction of major market trends. Though I generally try to avoid making macro prognostications, I believe bottom-up analysis can be informative about the current level of stock prices. I want to share what my recent work tells me about where stocks are (and where they might be headed). I will outline some various nuggets of collective wisdom that are taken for granted right now by stock bulls, and I will attempt to demonstrate how reality is likely to differ from these perceptions.

First, a disclaimer. This is not a market timing call. At all times, I stay away from market timing predictions. I think that's a loser's game in the long run. Even if I'm correct about the discrepancies between the following perceptions and realities, there's no saying when people will change their minds or shift their focuses. That said, let's dive in.

Perception vs. Reality #1
Perception: Low Interest Rates, Questionable Bond Outlook Means Stocks are Attractive
Reality: Interest Rates Are Being Artificially and Deliberately Manipulated

It's no secret that the Federal Reserve's low interest rate policy and quantitative easing efforts have held interest rates very low for very long. However, when people talk about stock market implications of bond yields, they rarely mention the fact that bond yields are artificially low. In an unmanipulated market, bond prices and stock valuations should be related, but I regard that connection as highly dubious right now. Investors who say that stocks deserve higher multiples (lower earnings yields) because bond yields are so low may well be setting themselves up for disappointing returns/frustrating losses when bond prices normalize. Again, this isn't a market timing call, and yields may remain low for quite some time. But, eventually this discrepancy will correct itself, and stock performance is likely to suffer at that time.

Perception vs. Reality #2
Perception: Earnings Growth Has Been Strong and Will Remain That Way
Reality: Top-Line Growth Will Have to Pick Up; Cost-Cutting has Run Its Course

Earnings growth has certainly been robust, but much of the strength has come from companies running lean cost structures and wringing as much efficiency as possible out of their employees and their assets. Though the recession has ended, the economy is not yet healthy enough to fuel strong sales growth. Companies can only boost profits by cutting costs and increasing productivity for so long. Therefore, top-line growth will have to play a larger role going forward than it has over the past 4-6 quarters. Whether or not economic growth is strong enough to drive revenue increases is unsure, but the current level of stock prices undoubtedly assumes it is. Any stagnation of the recovery and concomitant sluggish sales will likely hit stock prices.

Perception vs. Reality #3
Perception: European Debt Crisis Drives Short-Term Volatility, but It's Not a Long-Term Concern
Reality: Crisis May Be a Harbinger of What's to Come in the U.S. if States, the Feds Don't Improve Balance Sheets

So far, turmoil in Greece and Ireland has served only as a temporary headwind to U.S. stocks. In keeping with the investment world's increasingly short-term focus, people seem more concerned with what fiscal crises in Europe mean for U.S. stocks over the coming days and months than with what they might mean down the road. I believe that this interpretation misses the mark. Since the U.S. fiscal situtation is generally considered to be stronger than that in many European countries, U.S. federal and municipal debt issuance has been relatively smooth, and interest rates have only risen modestly. If the U.S. doesn't get serious about its fiscal woes, eventually the crisis will arrive on American shores. There's no way of telling when this might happen, but the current level of stock prices seems to imply that it never will.

Here's the problem with that. To fix the federal balance sheet and/or to improve state and municipal balance sheets, legislators will have to raise taxes and/or cut spending. Tax hikes and spending cuts both reduce consumer spending. This hurts growth. There's no way around this. Stocks can certainly continue to rise for some time, but austerity will be bearish if/when it comes. If it doesn't come, we're in for a much bigger crisis some time down the road.

Perception vs. Reality #4
Perception: Everywhere You Look, You See Good Companies at Cheap Prices
Reality: It's Hard to Find Genuine Bargains, but There are Intriguing Short Prospects Everywhere

There is no shortage of stock market commentators who claim that they see bargains everywhere they look. Perhaps I'm not looking in the right places, but I've been having a difficult and increasingly impossible time finding good companies at reasonable prices. I use similar criteria to assess long and short investments, and I find intriguing shorts in lots of sectors right now. This tells me that valuations are stretched. Certainly they can become more so before we get a selloff, but every day that stocks rally, they get more expensive.

I've written on Seeking Alpha about a number of stocks which I regard as expensive (CRM, OPEN, GMCR), and take my word for it: there are plenty more than these whose shares I do not want to own at present levels. A few weeks ago, I also mused about the Facebook-Goldman deal and argued that this valuation is indicative of excessive investor enthusiasm. Bargains are hard to find, and as valuations go up, so does positive sentiment. While this is not a prediction of an impending correction or bear market, it is a message of caution for people who think stocks are cheap right now.

All that said, I always try to consider both sides of any investment issue, and there are some reasons for optimism. Job growth has shown signs of improvement, and some economic data have been increasingly (though not uniformly) positive. The Federal Reserve remains accommodative, and I'm skeptical about whether or not there is political will for austerity. For these reasons, stocks could continue onward and upward. That said, I see too many reasons for caution, and investors are turning a blind eye to these concerns as their complacency rises.’

Poor Recovery: The Problem Is Institutional [ Well it’s true that the problem is institutional as in pervasively corrupt, incompetent, nonproductive in real terms relative to their cost / damage (still no pros on the wall street fraud which is ongoing in terms of the last crisis, the worthless paper marked to anything, and the current bubble fraud that’s high-frequency computerized churn-and-earn high-frequency commissioned / sold into, 360 tons of $100 bills disappear in Iraq, etc.. What do they get paid for?) ( Peter Schiff: Washington a parasite to economy ‘US foreclosures hit record highs in 2010, but that may not be the worst of it. 2011 may be even worse. Meanwhile, JP Morgan Chase exceeded market expectations, announcing a 47% rise in quarterly profits and released details on a $28.1 billion pay and bonus pool. Peter Schiff, the President of Euro Pacific Capital said Washington and Wall Street are becoming one force and are sucking the underlying American dry like a parasite’.); but the problem is structural, as in transfer of jobs, industries, etc. (among the sources of the huge over-compensation to wall street, company executives), never to return in any meaningful sense; and as in the defacto bankruptcy of the nation with insurmountable record debt / deficits or stated another way, broke. Unlike in the past, once beyond the propaganda, rhetoric, and smoke and mirrors / obfuscation, there is no prospective way for america to grow its way out, nor are there funds in real money with which to do it. Quite simply, america’s broke / bankrupt in every which way. ] Loundsbury ‘Harold Meyerson, Op Ed Columnist at The Washington Post, has hit the nail right on the head, in the opinion of GEI. Meyerson says the debate about whether the recession and poor recovery is a cyclical problem or a structural problem is misguided. He says the problem is institutional - - - and is he ever right!

In a column last week, Myerson points out that the devastation of The Great Recession has fallen disproportionately on the blue collar population, those without a college degree. And he traces the rolling over of median family income in this century, not just in the downturn, but since the turn of the century. Even at the peak, in 2007, median family income was less than in 2000.

What Meyerson doesn't point out is that average incomes have faired better in the 21st century and in all of the past 50 years. In fact, average family income has risen more than 2.5 times as much and median income over the last 30 years. Why is this important? Because the more there is a fat tail of ever higher incomes for a few, the greater the difference between average and median income becomes.

Myerson says:

The great sociologist William Julius Wilson has long argued that the key to the unraveling of the lives of the African American poor was the decline in the number of "marriageable males" as work disappeared from the inner city. Much the same could now be said of working-class whites in neighborhoods that may not look like the ghettos of Cleveland or Detroit but in which productive economic activity is increasingly hard to find.

This grim new reality has yet to inform our debate over how to come back from this mega-recession. Those who believe our downturn is cyclical argue that job-creating public spending can restore us to prosperity, while those who believe it's structural - that we have too many carpenters, say, and not enough nurses - believe that we should leave things be while American workers acquire new skills and enter different lines of work. But there's a third way to look at the recession: that it's institutional, that it's the consequence of the decisions by leading banks and corporations to stop investing in the job-creating enterprises that were the key to broadly shared prosperity.

Since Meyerson has chosen income disparity as a cornerstone of his argument, let's look at how incomes have grown over the last 50 years. These are shown in the following graph, not adjusted for inflation.

click to enlarge images [chart]

Real median income and average income seem to grow similarly in the 1950s and 1960s, the growth of average income starts to pull away in the mid-1960s and appears to continue to gain gound for the the next 40+ years. The more average income deviates from median income the more money is found in the high income tail on the distribution curve. This is often called a "fat tail", which is very appropriate in this discussion because that is where the fat cats are. The fat tail has not gotten so because ten times as many people equaled the incomes of the former fat cats, but more because a few fat cats have received 10 times the income. This is exemplified by the often quoted statistic that average CEO salaries were 40x average worker pay 50 years ago and today are more like 400x.

The change income distribution that seems to be appearing in the above graph becomes more apparent in the following graph where real income gains are shown for the last six decades starting with the ten years from 1949 - 1959 (the 1950s) and ending with 1999 - 2009 (the 2000s). [chart]

The 1950s and 60s were real boom years. Starting with the 1970s a lower level of income growth was established, but even that lower level could not be maintained in the 2000s.

After the 1950s every decade has seen average real income grow more than the median. The fat tail has gotten fatter over the past half century in every decade, without exception. Yes the average did decline in the 2000s, but the median declined 76% more!

The most dramatic pattern of change is evident when the data is divided into two halves: 1949 to 1979 and 1979 - 2009. This is done in the following graph: [chart]

For thirty years after World War II the wealth of the country increased in a balanced manner. The average income containing the greater contribution from the top earners of the day, grew at a rate very similar to the income growth of the broader population, represented by the median.

Yes there were "fat cats" and they had significantly larger incomes than the bulk of the population. And these top incomes grew over those three decades, but at almost the same rate as the majority of the populace.

Then something happened. From 1979-2009 it appears that the American pie suddenly got smaller. In the later three decades the real median income growth was less than 10% of the rate seen from 1949 to 1979. And as the pie got smaller, the fat cats took a much larger share. The average income grew at a rate 254% that of the median income. You might say that, as the cow gave less milk, the top of the economic ladder skimmed more and more cream off the top.

Meyerson identifies the force majuere to be corporate America:

Our multinational companies still invest, of course - just not at home. A study by the Business Roundtable and the U.S. Council Foundation found that the share of the profits of U.S.-based multinationals that came from their foreign affiliates had increased from 17 percent in 1977 and 27 percent in 1994 to 48.6 percent in 2006. As the companies' revenue from abroad has increased, their dependence on American consumers has diminished. The equilibrium among production, wages and purchasing power - the equilibrium that Henry Ford famously recognized when he upped his workers' pay to an unheard-of $5 a day in 1913 so they could afford to buy the cars they made, the equilibrium that became the model for 20th-century American capitalism - has been shattered. Making and selling their goods abroad, U.S. multinationals can slash their workforces and reduce their wages at home while retaining their revenue and increasing their profits. And that's exactly what they've done.

Meyerson doesn't get into some of the other areas that might be brought to bear on the current condition of the American economy:

He doesn't address the fact that the U.S. ranks below some third world countries in education.
He doesn't discuss the increasing burden of health care, both because costs have been running out of control and because an ever increasing portion of the population is kept from making the contribution they might have otherwise because of poor health.
He doesn't discuss the capture of much potential domestic capital by financial engineers who find it much easier to get rich in a rigged casino than to make money the old fashioned way.

Part of the problem is that Americans have fallen into the way of the easiest path, where, either by credit card or by making quick trades, the desires of the moment are satisfied with no seemingly current cost.

It seems that few want to think about the needs of tomorrow. This is true starting with the masses who kiss off the idea of working hard in school to prepare for what they will need 20 years down the road. This is also true of the "capitalist" who finds that skimming a few percent off each of many deals a year to get quick, large quarterly returns is much easier than investing and building something that will will make much larger returns extending over decades and producing things of real economic utility.

There are a number of things that Meyerson does not address, but if you want to hit one nail at a time, I think he has picked the baddest nail in the plank. He finishes his column thusly:

Our economic woes, then, are not simply cyclical or structural. They are also - chiefly - institutional, the consequence of U.S. corporate behavior that has plunged us into a downward cycle of underinvestment, underemployment and under-consumption. Our solutions must be similarly institutional, requiring, for starters, the seating of public and worker representatives on corporate boards. Short of that, there will be no real prospects for reversing America's downward mobility.

If we were to address all the other issues I mentioned previously and did not address the institutional problem Meterson has identified, we would not ultimately solve our economic puzzle.’

(1-19-11) Dow 11,825 -12 Nasdaq 2,725 -40 S&P 500 1,282 -13 [CLOSE- OIL $90.86 (-54% for year 2008) (RECORD TRADING HIGH $147.27) GAS $3.00 (reg. gas in LAND OF FRUITS AND NUTS $3.20 REG./ $3.29 MID-GRADE/ $3.39 PREM./ $3.79 DIESEL) / GOLD $1,370 (+24% for year 2009) / SILVER $28.80 (+47% for year 2009) PLATINUM $1,825 (+56% for year 2009) / DOLLAR= .74 EURO, 82 YEN, .62 POUND STERLING, ETC. (How low can you go - LOWER)/ http://www.federalreserve.gov/releases/h15/update 10 YR NOTE YIELD 3.33% …..… 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

Statement by Secretary Napolitano on Senator Lieberman’s Retirement [ Good riddens … Connecticut should be jumping for joy! ]Jason Douglass | After Sen. Lieberman’s retirement announcement, Napolitano makes statement.

Man Dies After House Fumigated With Same Fluoride Compound Sprayed On Food Steve Watson | Known insecticide toxin was approved for use on fruits, nuts sold to Americans.

10 Ways In Which China Humiliates The United States Paul Joseph Watson | Globalists are using China as the vehicle through which to complete the total deindustrialization of a decaying America.

Terrormania Grips US: PSYOPs Justify Bloated Budgets Jason Douglass | Around the country ‘regular people’ are coming face to face with terror!

Will Corporate Media Blame Spokane MLK Bomb on Tea Party? Kurt Nimmo | Incident follows Arizona shooting by less than two weeks.

Doping Up the Troops EconomicPolicyJournal.com | U.S. Central Command policy allows troops a 90- or 180-day supply of highly addictive psychotropic drugs before they deploy to combat, reports Nextgov.

China Moves Troops Into North Korea Salem-News.com | South Korea’s daily newspaper is reporting that what Western analysts have feared has happened: Chinese troops have been deployed into North Korea.

Poll: US support for Afghan war drops Press TV | A recent poll shows the American people’s support for the Afghan war has dropped to the lowest level since President Barack Obama took office.

10 Ways In Which China Humiliates The United States Rolling out the red carpet, lining Constitution Avenue with Communist flags, and treating unelected Chinese dictator Hu Jintao to lavish White House dinners while he badmouths the U.S. dollar is hard enough to stomach, but there are a plethora of ways in which China is humiliating the United States as the globalists get ready to use China as the vehicle through which to complete the deindustrialization of the decaying American banana republic.

China Plants Flag on Constitution Avenue On Tuesday night, Obama followed the script closely. He sat down to what the corporate media describes as “an unusual and intimate dinner” with Hu Jintao, the CEO of the sprawling slave labor gulag and globalist dream come true in China.

Man Dies After House Fumigated With Same Fluoride Compound Sprayed On Food A man found dead in a house in San Jose, California, Monday was believed to have been killed by a toxic fluoride compound used to fumigate the residence, the same fluoride compound that has found its way into many foods with government approval.

Will Corporate Media Blame Spokane MLK Bomb on Tea Party? Rachel Maddow has yet to pin blame for a bomb left along a Martin Luther King parade route in Spokane, Washington, on the Tea Party, but NPR suggests white supremacists may be responsible.

Meet The New Boss: China Owns The United States The flags along Constitution Avenue tell you everything you need to know – America has been sold out and our new Chinese slavemasters are now leading the sheep to slaughter. Even as Barack Obama bows and fawns to President Hu Jintao, the globalists for whom he fronts are sharpening the knives and preparing to unleash the bloodletting as the dying carcass of America is dragged into line to facilitate the global management of the planet.

“Experience China” debuts at NYC’s Times Square A video show about Chinese people made its debut on screens at Times Square on Monday, presenting Americans a multi-dimensional and vivid image of Chinese people.

Arlington Man Loses Gun License Due To Blog About Tucson Shooting A blog threatening members of Congress in the wake of the Tucson, Arizona shooting has prompted Arlington police to temporarily suspend the firearms license of an Arlington man.

MSFT, Goldman Sachs CEOs to Meet Obama, Hu at White House Chief executive officers from Microsoft Corp. and Goldman Sachs Group Inc. will be among the corporate leaders the Obama administration is bringing together today for a meeting with Chinese President Hu Jintao aimed at expanding U.S. business interests in China.

Drudgereport: Currency system 'product of the past'...HU QUESTIONS FUTURE OF DOLLARRISING DRAGON: China on equal footing with USA as Hu visits Washington... GE CEO: China one day will be world's biggest economy… daaaaah! ... Obama: 'We Welcome China's Rise'...
Careful to avoid criticism... HOUSE VOTES TO REPEAL HEALTHCARE LAW...
Dem Compares Republicans to Nazis during debate...
26 states join suit against law... SHOCK CLAIM: World needs $100 TRILLION more credit, says World Economic Forum...
Japan hits 'critical point' on state debt...APPLE faces pollution storm in China... ‘A group of 36 Chinese environmental groups has accused Apple of failing to address concerns over pollution and worker health issues in factories supplying components for its gadgets…’
Home building stuck near 50 year lows... CASHOUT: Daley Files to Sell $8.3 Million JPMORGAN Shares After Joining Obama Team...
Taiwanese mock meeting w/ video cartoon...
Missiles off target in major Taiwan drill...
China 'got stealth tech from Russia'...
GE to sign slew of China deals...
'Experience China' takes over NYC's Times Square...
PEW: 65% see China as an 'adversary' or 'serious problem'...
STUXNET WORM USED AGAINST IRAN WAS TESTED IN ISRAEL... Three U.S. Soldiers Killed in Iraq... GALLUP: U.S. Satisfaction Remains Near 12-Month Low... CBS POLL: 77% say cut spending; only 9% say raise taxes... States Warned of $2.5 Trillion Pensions Shortfall... Schwarzenegger: I Was 'Addicted' To Being Governor... Comprehensive List of Tax Hikes in Obamacare... Republican senator sees bipartisan agreement on debt ceiling … (no surprise here; after all, they have to get paid…for what?…more and more people are asking the question - all three branches including the toy soldiers for perpetual war and illegal drugs / arms ops) ... Obama Gives Communist Leader Lavish State Dinner...
China lending hits new heights; Funding to poor states (that includes defacto bankrupt america) tops World Bank...RISE OF RED DRAGON: CHINA SHAPES WORLDJobs Takes Medical Leave...
House panel wants Homeland Security documents...
GALLUP: U.S. Satisfaction Remains Near 12-Month Low... Ahmadinejad, Medvedev agree to boost ties...
Moscow reaffirms Soviet recognition of Palestine...Camden, NJ braces for deep police, fire cuts...

White House more hard-nosed about Chinese government / Hu to face a tougher Obama administration (Washington Post) [ Please … don’t make me laugh … and, are you sure you didn’t mean more ‘brown-nosed’ about the Chinese government. This is starting to sound like seed material for the Weekend Update SNL skit segment, ‘REALLY’. I mean, really. Does anybody believe this? Come on … I don’t think so! ] Analysts say President Hu Jintao is eager to burnish his legacy, but he will find a White House that views his government with misgivings.

Concerns rise over Afghan forces (Washington Post) [ Well, to their credit, at least the Afghans purport to know how to count which of course is something lost on defacto bankrupt america and so-called ‘coalition’ members. After all, there will come a time when this military apparatus will say, pay / feed me, at which point the reply will be, with what, at which point, obfuscated or not, all hell breaks loose. ]

Proposed sale of land stokes anti-Chinese views Job creation seen as key to China's investment in U.S. (Washington Post) [ Boy, you can’t make this stuff up! Talk about coming full circle. I think Japan and the u.s. are constrained to start getting used to it. From scourge for taking jobs to now prospective savior for potentially creating them, I’d say communist China’s in the catbird’s seat as defacto bankrupt america pounds salt and fritters away money she doesn’t have in perpetual needless wars in the mideast, etc.. ]

Obama to feds: Cut the red tape (Washington Post) [ Riiiiight! That red tape thing … you know, as in laws, regulations that rein in corrupt, illegal, fraudulent behavior … Heck, we all know they’re not enforced anyway; ie., still no pros of the frauds on wall street, plus legislative help to cover-up their gargantuan past (and ongoing) crimes by way of mark to anything FASB rule change for those worthless toxic paper assets from the last fraud, etc.. Yes … change, as in change change by the man of change, changer wobama the ‘b’ for b* s*!. After all, the next election cycle will be gearing up and those campaign funds need replenishin’. Sounds like a plan. ]

Steve Jobs Your Take: Apple without Steve Jobs (Washington Post) [ Yeah! It’s quite difficult to imagine in any positive sense. Indeed, there was a feeding frenzy among the dinosaurs (ie., microsoft, et als) purportedly owing to the absence of the 800 pound gorilla (Apple – far advanced in evolutionary terms) which according to the frauds on wall street should benefit the dinosaurs, spiking their share prices (unlike when gates, who just loved that archaic BASIC programming language to death, etc., left; and then the notorious problems with that ‘ms kernel’ that only people who know, KNOW). Jobs indeed will be sorely missed! ]

[ It should be noted that the paranoid american criminals have once again, this time by way of hack via microsoft (willing accomplice as was att of jersey / dumbya bushland – deleted / I caught the problem and have also installed opensource.org which I strongly recommend (at least a look – won’t disappoint – I used same for the archived PDF post files) is free and a breeze to use and though compatible with word and a multitude of other formats, for now on these specific web site documents (I have image folders already linked which would require at least a look) it’s easier and faster for the time-being for me to add to the existing documents with word; but as is so of america, microsoft’s a dinosaur) gave me a few problems, serious enough to require a redo, which I have corrected / overcome; but believe me, I won’t forget it! They will be sorry! ]

20 Shocking New Economic Records That Were Set In 2010 2010 was quite a year, wasn’t it? 2010 will be remembered for a lot of things, but for those living in the United States, one of the main things that last year will be remembered for is economic decline…The Economic Collapse Jan 14, 2011 ‘2010 was quite a year, wasn’t it? 2010 will be remembered for a lot of things, but for those living in the United States, one of the main things that last year will be remembered for is economic decline. The number of foreclosure filings set a new record, the number of home repossessions set a new record, the number of bankruptcies went up again, the number of Americans that became so discouraged that they simply quit looking for work reached a new all-time high and the number of Americans on food stamps kept setting a brand new record every single month. Meanwhile, U.S. government debt reached record highs, state government debt reached record highs and local government debt reached record highs. What a mess! In fact, even many of the “good” economic records that were set during 2010 were indications of underlying economic weakness. For example, the price of gold set an all-time record during 2010, but one of the primary reasons for the increase in the price of gold was that the U.S. dollar was rapidly losing value. Most Americans had been hoping that 2010 would be the beginning of better times, but unfortunately economic conditions just kept getting worse.

So will things improve in 2011? That would be nice, but at this point there are not a whole lot of reasons to be optimistic about the economy. The truth is that we are trapped in a period of long-term economic decline and we are now paying the price for decades of horrible decisions.

Amazingly, many of our politicians and many in the mainstream media have declared that “the recession is over” and that the U.S. economy is steadily improving now.

Well, if anyone tries to tell you that the economy got better in 2010, just show them the statistics below. That should shut them up for a while.

The following are 20 new economic records that were set during 2010….

#1 An all-time record of 2.87 million U.S. households received a foreclosure filing in 2010.

#2 The number of homes that were actually repossessed reached the 1 million mark for the first time ever during 2010.

#3 The price of gold moved above $1400 an ounce for the first time ever during 2010.

#4 According to the American Bankruptcy Institute, approximately 1.53 million consumer bankruptcy petitions were filed in 2010, which was up 9 percent from 1.41 million in 2009. This was the highest number of personal bankruptcies we have seen since the U.S. Congress substantially tightened U.S. bankruptcy law several years ago.

#5 At one point during 2010, the average time needed to find a job in the United States had risen to an all-time record of 35.2 weeks.

#6 Back in 1970, 25 percent of all jobs in the United States were manufacturing jobs. Today, only 9 percent of the jobs in the United States are manufacturing jobs, which is believed to be a new record low.

#7 The number of Americans working part-time jobs “for economic reasons” was the highest it has been in at least five decades during 2010.

#8 The number of American workers that are so discouraged that they have given up searching for work reached an all-time high near the end of 2010.

#9 Government spending continues to set new all-time records. In fact, at the moment the U.S. government is spending approximately 6.85 million dollars every single minute.

#10 The number of Americans on food stamps surpassed 43 million by the end of 2010. This was a new all-time record, and government officials fully expect the number of Americans enrolled in the program to continue to increase throughout 2011.

#11 The number of Americans on Medicaid surpassed 50 million for the first time ever in 2010.

#12 The U.S. Census Bureau originally announced that 43.6 million Americans are now living in poverty and according to them that was the highest number of Americans living in poverty that they had ever recorded in 51 years of record-keeping. But now the Census Bureau says that they miscalculated and that the real number of poor Americans is actually 47.8 million.

#13 According to the FDIC, 157 banks failed during 2010. That was the highest number of bank failures that the United States has experienced in any single year during the past decade.

#14 The Federal Reserve brought in a record $80.9 billion in profits during 2010. They returned $78.4 billion of that to the U.S. Treasury, but the real story is that thanks to the Federal Reserve’s continual debasement of our currency, the U.S. dollar was worth less in 2010 than it ever had been before.

#15 It is projected that the major financial firms on Wall Street will pay out an all-time record of $144 billion in compensation for 2010.

#16 Americans now owe more than $881 billion on student loans, which is a new all-time record.

#17 In July, sales of new homes in the United States declined to the lowest level ever recorded.

#18 According to Zillow, U.S. housing prices have now declined a whopping 26 percent since their peak in June 2006. Amazingly, this is even farther than house prices fell during the Great Depression. From 1928 to 1933, U.S. housing prices only fell 25.9 percent.

#19 State and local government debt reached at an all-time record of 22 percent of U.S. GDP during 2010.

#20 The U.S. national debt has surpassed the 14 trillion dollar mark for the first time ever and it is being projected that it will soar well past 15 trillion during 2011.

There are some people that have a hard time really grasping what statistics actually mean. For people like that, often pictures and charts are much more effective. Well, that is one reason I like to include pictures and graphs in many of my articles, and below I have posted my favorite chart from this past year. It shows the growth of the U.S. national debt from 1940 until today. I honestly don’t know how anyone can look at this chart and still be convinced that our nation is not headed for a complete financial meltdown….[chart]

14 Eye Opening Statistics Which Reveal Just How Dramatically The U.S. Economy Has Collapsed Since 2007 Most Americans have become so accustomed to the “new normal” of continual economic decline that they don’t even remember how good things were just a few short years ago. ‘The Economic Collapse Jan 10, 2011

’Most Americans have become so accustomed to the “new normal” of continual economic decline that they don’t even remember how good things were just a few short years ago. Back in 2007, unemployment was very low, good jobs were much easier to get, far fewer Americans were living in poverty or enrolled in welfare programs and government finances were in much better shape. Of course most of this prosperity was fueled by massive amounts of debt, but at least times were better. Unfortunately, things have really deteriorated over the last several years. Since 2007, unemployment has skyrocketed, foreclosures have set new all-time records, personal bankruptcies have soared and U.S. government debt has gotten completely and totally out of control. Poll after poll has shown that Americans are now far less optimistic about the future than they were in 2007. It is almost as if the past few years have literally sucked the hope out of millions upon millions of Americans.

Sadly, our economic situation is continually getting worse. Every month the United States loses more factories. Every month the United States loses more jobs. Every month the collective wealth of U.S. citizens continues to decline. Every month the federal government goes into even more debt. Every month state and local governments go into even more debt.

Unfortunately, things are going to get even worse in the years ahead. Right now we look back on 2005, 2006 and 2007 as “good times”, but in a few years we will look back on 2010 and 2011 as “good times”.

We are in the midst of a long-term economic decline, and the very bad economic choices that we have been making as a nation for decades are now starting to really catch up with us.

So as horrible as you may think that things are now, just keep in mind that things are going to continue to deteriorate in the years ahead.

But for the moment, let us remember how far we have fallen over the past few years. The following are 14 eye opening statistics which reveal just how dramatically the U.S. economy has collapsed since 2007….

#1 In November 2007, the official U.S. unemployment rate was just 4.7 percent. Today, the official U.S. unemployment rate is 9.4 percent.

#2 In November 2007, 18.8% of unemployed Americans had been out of work for 27 weeks or longer. Today that percentage is up to 41.9%.

#3 As 2007 began, there were just over 1 million Americans that had been unemployed for half a year or longer. Today, there are over 6 million Americans that have been unemployed for half a year or longer.

#4 Nearly 10 million Americans now receive unemployment insurance, whichis almost four times as many as were receiving it back in 2007.

#5 More than half of the U.S. labor force (55 percent) has “suffered a spell of unemployment, a cut in pay, a reduction in hours or have become involuntary part-time workers” since the “recession” began in December 2007.

#6 According to one analysis, the United States has lost a total of approximately 10.5 million jobs since 2007.

#7 As 2007 began, only 26 million Americans were on food stamps. Today, an all-time record of 43.2 million Americans are enrolled in the food stamp program.

#8 In 2007, the U.S. government held a total of $725 billion in mortgage debt. As of the middle of 2010, the U.S. government held a total of $5.148 trillion in mortgage debt.

#9 In the year prior to the “official” beginning of the most recent recession in 2007, the IRS filed just 684,000 tax liens against U.S. taxpayers. During 2010, the IRS filed over a million tax liens against U.S. taxpayers.

#10 From the year 2000 through the year 2007, there were 27 bank failures in the United States. From 2008 through 2010, there were 314 bank failures in the United States.

#11 According to the U.S. Department of Housing and Urban Development, the number of U.S. families with children living in homeless sheltersincreased from 131,000 to 170,000 between 2007 and 2009.

#12 In 2007, one poll found that 43 percent of Americans were living “paycheck to paycheck”. Sadly, according to a survey released very close to the end of 2010, approximately 55 percent of all Americans are now living paycheck to paycheck.

#13 In 2007, the “official” federal budget deficit was just 161 billion dollars. In 2010, the “official” federal budget deficit was approximately 1.3 trillion dollars.

#14 As 2007 began, the U.S. national debt was just under 8.7 trillion dollars. Today, the U.S. national debt has just surpassed 14 trillion dollars and it continues to soar into the stratosphere.

So is there any hope that we can turn all of this around?

Unfortunately, the massive amount of debt that we have piled up as a society over the last several decades has made that impossible.

If you add up all forms of debt (government debt, business debt, individual debt), it comes to approximately 360 percent of GDP. It is the biggest debt bubble in the history of the world.

If the federal government and our state governments stop borrowing and spending so much money, our economy would collapse. But if they keep borrowing and spending so much money they will continually make the eventual economic collapse even worse.

We are in the terminal stages of the most horrific debt spiral the world has ever seen, and when the debt spiral gets stopped the house of cards is going to finally come down for good.

So enjoy these times while you still have them. Yes, today is not nearly as prosperous as 2007 was, but today is most definitely a whole lot better than 2015 or 2020 is going to be.

Sadly, we could have avoided this financial disaster completely if only we had listened more carefully to those that founded this nation. Once upon a time, Thomas Jefferson said the following….

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.’

Tipping Point: 25 Signs That The Coming Financial Collapse Is Now Closer Then Ever The financial collapse that so many of us have been anticipating is seemingly closer then ever. Over the past several weeks, there have been a host of ominous signs for the U.S. economy.

The Economic Collapse
Dec 17, 2010

The financial collapse that so many of us have been anticipating is seemingly closer then ever. Over the past several weeks, there have been a host of ominous signs for the U.S. economy. Yields on U.S. Treasuries have moved up rapidly and Moody’s is publicly warning that it may have to cut the rating on U.S. government debt soon. Mortgage rates are also moving up aggressively. The euro and the U.S. dollar both look incredibly shaky. Jobs continue to be shipped out of the United States at a blistering pace as our politicians stand by and do nothing. Confidence in U.S. government debt around the globe continues to decline. State and local governments that are drowning in debt across the United States are savagely cutting back on even essential social services and are coming up with increasingly “creative” ways of getting more money out of all of us. Meanwhile, tremor after tremor continues to strike the world financial system. So does this mean that we have almost reached a tipping point? Is the world on the verge of a major financial collapse?

Let’s hope not, but with each passing week the financial news just seems to get eve worse. Not only is U.S. government debt spinning wildly toward a breaking point, but many U.S. states (such as California) are in such horrific financial condition that they are beginning to resemble banana republics.

But it is not just the United States that is in trouble. Nightmarish debt problems in Greece, Spain, Portugal, Ireland, Italy, Belgium and several other European nations threaten to crash the euro at any time. In fact, many economists are now openly debating which will collapse first – the euro or the U.S. dollar.

Sadly, this is the inevitable result of constructing a global financial system on debt. All debt bubbles eventually collapse. Currently we are living in the biggest debt bubble in the history of the world, and when this one bursts it is going to be a disaster of truly historic proportions.

So will we reach a tipping point soon? Well, the following are 25 signs that the financial collapse is rapidly getting closer….

#1 The official U.S. unemployment rate has not been beneath 9 percent since April 2009.

#2 According to the U.S. Census Bureau, there are currently 6.3 million vacant homes in the United States that are either for sale or for rent.

#3 It is being projected that the U.S. trade deficit with China could hit 270 billion dollars for the entire year of 2010.

#4 Back in 2000, 7.2 percent of blue collar workers were either unemployed or underemployed. Today that figure is up to 19.5 percent.

#5 The Chinese government has accumulated approximately $2.65 trillion in total foreign exchange reserves. They have drained this wealth from the economies of other nations (such as the United States) and instead of reinvesting all of it they are just sitting on much of it. This is creating tremendous imbalances in the global economy.

#6 Since the year 2000, we have lost 10% of our middle class jobs. In the year 2000 there were approximately 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.

#7 The United States now employs about the same number of people in manufacturing as it did back in 1940. Considering the fact that we had 132 million people living in this country in 1940 and that we have well over 300 million people living in this country today, that is a very sobering statistic.

#8 According to CoreLogic, U.S. housing prices have now declined for three months in a row.

#9 The average rate on a 30 year fixed rate mortgage soared 11 basis points just this past week. As mortgage rates continue to push higher it is going to make it even more difficult for American families to afford homes.

#10 22.5 percent of all residential mortgages in the United States were in negative equity as of the end of the third quarter of 2010.

#11 The U.S. monetary base has more than doubled since the beginning of the most recent recession.

#12 U.S. Treasury yields have been rising steadily during the 4th quarter of 2010 and recently hit a six-month high.

#13 Incoming governor Jerry Brown is scrambling to find $29 billion more to cut from the California state budget. The following quote from Brown about the desperate condition of California state finances is not going to do much to inspire confidence in California’s financial situation around the globe….

“We’ve been living in fantasy land. It is much worse than I thought. I’m shocked.”

#14 24.3 percent of the residents of El Centro, California are currently unemployed.

#15 The average home in Merced, California has declined in value by 63 percent over the past four years.

#16 Detroit Mayor Dave Bing has come up with a new way to save money. He wants to cut 20 percent of Detroit off from essential social services such as road repairs, police patrols, functioning street lights and garbage collection.

#17 The second most dangerous city in the United States – Camden, New Jersey – is about to lay off about half its police in a desperate attempt to save money.

#18 In 2010, 55 percent of Americans between the ages of 60 and 64 were in the labor market. Ten years ago, that number was just 47 percent. More older Americans than ever find that they have to keep working just to survive.

#19 Back in 1998, the United States had 25 percent of the world’s high-tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China’s share had soared to 20 percent.

#20 The U.S. government budget deficit increased to a whopping $150.4 billion last month, which represented the biggest November budget deficit on record.

#21 The U.S. government is somehow going to have to roll over existing debt and finance new debt that is equivalent to 27.8 percent of GDP in 2011.

#22 The United States had been the leading consumer of energy on the globe for about 100 years, but this past summer China took over the number one spot.

#23 According to an absolutely stunning new poll, 40 percent of all U.S. doctors plan to bail out of the profession over the next three years.

#24 As 2007 began, there were just over 1 million Americans that had been unemployed for half a year or longer. Today, there are over 6 million Americans that have been unemployed for half a year or longer.

#25 All over the United States, local governments have begun instituting “police response fees”. For example, New York Mayor Michael Bloomberg has come up with a plan under which a fee of $365 would be charged if police are called to respond to an automobile accident where no injuries are involved. If there are injuries as a result of the crash that is going to cost extra.

16 Nightmarish Economic Trends To Watch Carefully In 2011 The American Dream Dec 15, 2010 ‘If you only watch the “economic pundits” on television, it can be very confusing to figure out exactly what is happening with the U.S. economy. One pundit will pull out a couple statistics that got a little bit better over the past month and claim that we have entered a time of solid recovery. Another pundit will pull out a couple statistics that got a little worse over the past month and claim that we are headed for trouble. So what is the truth? Well, if you really want to get a clear idea of what is really going on you have to look at the long-term trends. There are some economic trends which just keep getting worse year after year after year, and it is those trends that tell the real story of the decline of our economic system.

As you examine the long-term trends, you quickly come to realize that the U.S. is trapped in an endless spiral of debt, the middle class is being wiped out, the U.S. dollar is being destroyed and America is rapidly becoming a post-industrial wasteland.

Posted below are 16 nightmarish economic trends to watch carefully in 2011. It is becoming exceedingly apparent that unless something is done rapidly we are heading for an economic collapse of unprecedented magnitude….

#1 Do you want to see something scary? Just check out the chart below. Since the beginning of the economic downturn, the U.S. monetary base has more than doubled. But don’t worry – Federal Reserve Chairman Ben Bernanke has promised us that this could never cause inflation. In fact, Bernanke says that we need to inject even more dollars into the economy. So if you are alarmed by the chart below, you are just being irrational according to Bernanke….

[chart]

#2 Thousands of our factories, millions of our jobs and hundreds of billions of dollars of our national wealth continue to be shipped overseas. In 1985, the U.S. trade deficit with China was 6 million dollars for the entire year. In the month of August alone, the U.S. trade deficit with China was over 28 billion dollars. Nobel economist Robert W. Fogel of the University of Chicago is projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040 if current trends continue.

#3 The United States is rapidly becoming a post-industrial wasteland. Back in 1959, manufacturing represented 28 percent of all U.S. economic output. In 2008, it represented only 11.5 percent and it continues to fall. Sadly, the truth is that America is being deindustrialized. As of the end of 2009, less than 12 million Americans worked in manufacturing. The last time that less than 12 million Americans were employed in manufacturing was in 1941.

#4 The number of Americans that have been out of work for an extended period of time has absolutely exploded over the last few years. As 2007 began, there were just over 1 million Americans that had been unemployed for half a year or longer. Today, there are over 6 million Americans that have been unemployed for half a year or longer.

#5 The middle class continues to be squeezed out of existence. According to a poll taken in 2009, 61 percent of Americans ”always or usually” live paycheck to paycheck. That was up substantially from 49 percent in 2008 and 43 percent in 2007.

#6 The number of Americans living in poverty is absolutely skyrocketing. 42.9 million Americans are now on food stamps, and one out of every six Americans is now enrolled in at least one anti-poverty program run by the federal government. Unfortunately, many of those that have been hardest hit by this economic downturn have been children. According to one new study, approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.

#7 Many American families have been pushed beyond the breaking point during this economic downturn. Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008. The final number for 2010 is expected to be even higher.

#8 The U.S. real estate market continues to stagnate. During the third quarter of 2010, 67 percent of mortgages in Nevada were “underwater”, 49 percent of mortgages in Arizona were “underwater” and 46 percent of mortgages in Florida were “underwater”. So what happens if home prices go down even more?

#9 More elderly Americans than ever are being forced to put off retirement and continue working. In 2010, 55 percent of Americans between the ages of 60 and 64 were in the labor market. Ten years ago, that number was just 47 percent. Unfortunately, it looks like this problem will only get worse in the years ahead. In America today, approximately half of all workers have less than $2000 saved up for retirement.

#10 In the United States today, there are simply far too many retirees and not nearly enough workers to support them. Back in 1950 each retiree’s Social Security benefit was paid for by 16 workers. Today, each retiree’s Social Security benefit is paid for by approximately 3.3 workers. By 2025 it is projected that there will be approximately two workers for each retiree.

#11 Financial assets continue to become concentrated in fewer and fewer hands. For example, the “big four” U.S. banks (Citigroup, JPMorgan Chase, Bank of America and Wells Fargo) had approximately 22 percent of all deposits in FDIC-insured institutions back in 2000. As of the middle of 2009 that figure was up to 39 percent.

#12 The Federal Reserve has been destroying the value of the U.S. dollar for decades. Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power. An item that cost $20.00 in 1970 would cost you $112.35 today. An item that cost $20.00 in 1913 would cost you $440.33 today.

#13 Commodity prices continue to soar into the stratosphere. Ten years ago, the price of a barrel of oil hovered around 20 to 30 dollars most of the time. Today, the price of oil is rapidly closing in on 100 dollars a barrel and there are now fears that it could soon go much higher than that.

#14 Federal government spending is completely and totally out of control. The U.S. government budget deficit increased to a whopping $150.4 billion last month, which represented the biggest November deficit on record. But our politicians can’t seem to break their addiction to debt. In fact, Democrats are trying to ram through a 1,924 page, 1.1 trillion dollar spending bill in the final days of the lame-duck session of Congress before the Republicans take control of the House of Representatives next year.

#15 The U.S. national debt is rapidly closing in on 14 trillion dollars. It is more than 13 times larger than it was just 30 short years ago. According to an official U.S. Treasury Department report to Congress, the U.S. national debt is projected to climb to an estimated $19.6 trillion by 2015.

#16 Unfortunately, the official government numbers grossly understate the horrific nature of the crisis we are facing. John Williams of Shadow Government Statistics has calculated that if the federal government would have used GAAP accounting standards to measure the federal budget deficit for 2009, it would have been approximately 8.8 trillion dollars. Not only that, but John Williams now says that U.S. government debt is so wildly out of control that it is mathematically impossible for us to “grow” our way out of it….

The government’s finances not only are out of control, but the actual deficit is not containable. Put into perspective, if the government were to raise taxes so as to seize 100% of all wages, salaries and corporate profits, it still would be showing an annual deficit using GAAP accounting on a consistent basis. In like manner, given current revenues, if it stopped spending every penny (including defense and homeland security) other than for Social Security and Medicare obligations, the government still would be showing an annual deficit. Further, the U.S. has no potential way to grow out of this shortfall.

The more one examines the U.S. economic situation, the more depressing it becomes. The U.S. financial system is trapped inside a horrific debt spiral and we are headed straight for economic oblivion.

If our leaders attempt to interrupt the debt spiral it will plunge our economy into a depression. If our leaders attempt to keep the debt spiral going for several more years it will just make the eventual crash even worse. Either way, we are headed for a financial implosion that will be truly historic.

The debt-fueled good times that we have been enjoying for the last several decades are rapidly coming to an end. Unfortunately for the tens of millions of Americans that are already suffering, our economic problems are only going to get worse in the years ahead.’

Jobless Recovery?: 25 Unemployment Statistics That Are Almost Too Depressing To Read ‘… Unemployment is up again! That’s right – even though Wall Street is swimming in cash and the Obama administration is declaring that “the recession is over”, the U.S. unemployment rate has gone even higher. So are you enjoying the jobless recovery? Economic Collapse Blog Dec 4, 2010 ‘Guess what? Unemployment is up again! That’s right – even though Wall Street is swimming in cash and the Obama administration is declaring that “the recession is over”, the U.S. unemployment rate has gone even higher ... Times are really, really tough and unfortunately the long-term outlook is very bleak. We should have compassion on those who are out of work right now, because soon many of us may join them.

The following are 25 unemployment statistics that are almost too depressing to read….

#1 According to the Bureau of Labor Statistics, the U.S. unemployment rate for November was 9.8 percent. This was up from 9.6 percent in October, and it continues a trend of depressingly high unemployment rates. The official unemployment number has been at 9.5 percent or higher for well over a year at this point.

#2 In November 2006, the “official” U.S. unemployment rate was just 4.5 percent.

#3 Most economists had been expecting the U.S. economy to add about 150,000 jobs in November. Instead, it only added 39,000.

#4 In the United States today, there are over 15 million people who are “officially” considered to be unemployed for statistical purposes. But everyone knows that the “real” number is even much larger than that.

#5 As 2007 began, there were just over 1 million Americans that had been unemployed for half a year or longer. Today, there are over 6 million Americans that have been unemployed for half a year or longer.

#6 The number of “persons not in the labor force” in the United States recently set another new all-time record.

#7 It now takes the average unemployed American over 33 weeks to find a job.

#8 When you throw in “discouraged workers” and “underemployed workers”, the “real” unemployment rate in the state of California is actually about 22 percent.

#9 In America today there are not nearly enough jobs for everyone. In fact, there are now approximately 5 unemployed Americans for every single job opening.

#10 According to The New York Times, Americans that have been unemployed for five weeks or less are three times more likely to find a new job in the coming month than Americans that have been unemployed for over a year.

#11 The U.S. economy would need to create 235,120 new jobs a month to get the unemployment rate down to pre-recession levels by 2016. Does anyone think that there is even a prayer that is going to happen?

#12 There are 9 million Americans that are working part-time for “economic reasons”. In other words, those Americans would gladly take full-time jobs if they could get them, but all they have been able to find is part-time work.

#13 In 2009, total wages, median wages, and average wages all declined in the United States.

#14 As of the end of 2009, less than 12 million Americans worked in manufacturing. The last time that less than 12 million Americans were employed in manufacturing was in 1941.

#15 The United States has lost at least 7.5 million jobs since the recession began.

#16 Today, only about 40 percent of Ford Motor Company’s 178,000 workers are employed in North America, and a big percentage of those jobs are in Canada and Mexico.

#17 In 1959, manufacturing represented 28 percent of U.S. economic output. In 2008, it represented 11.5 percent.

#18 Earlier this year, one poll found that 28% of all American households had at least one member that was looking for a full-time job.

#19 In the United States today, over 18,000 parking lot attendants have college degrees.

#20 The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

#21 As the employment situation continues to stagnate, millions of American families have decided to cut back on things such as insurance coverage. For example, the percentage of American households that have life insurance coverage is at its lowest level in 50 years.

#22 Unless Congress acts, and there is no indication that is going to happen, approximately 2 million Americans will stop receiving unemployment checks over the next couple of months.

#23 A poll that was released by the Pew Research Center back in June discovered that an astounding 55 percent of the U.S. labor force has experienced either unemployment, a pay decrease, a reduction in hours or an involuntary move to part-time work since the economic downturn began.

#24 According to Richard McCormack, the United States has lost over 42,000 factories (and counting) since 2001.

#25 In the United States today, 317,000 waiters and waitresses have college degrees.

But this is what we get for creating the biggest debt bubble in the history of the world. For decades we have been digging a deeper hole for ourselves by going into increasingly larger amounts of debt. In America today, our entire economy is based on debt. Even our money is debt. We were fools if we ever thought this could go on forever. Just think about it. Have you ever gone out and run up a bunch of debt? It can be a lot of fun sitting behind the wheel of a new car, running your credit cards up to the limit and buying a beautiful big house that you cannot afford. But in the end what happens? It always catches up with you. Well, our collective debt is starting to catch up with us. There is a sea of red ink on every level of American society. It is only a matter of time before it destroys our economy. IF YOU THINK THAT THINGS ARE BAD NOW, JUST WAIT. THINGS ARE GOING TO GET A WHOLE LOT WORSE. A HORRIFIC ECONOMIC COLLAPSE IS COMING, AND IT IS GOING TO BE VERY, VERY PAINFUL.’

Howard Davidowitz on the Economy: "Here Are the Numbers ... WE'RE BROKE!" 11-25-10 ‘The U.S. economy "is a complete disaster," Howard Davidowitz declared here in July, the most recent in a string of dire predictions from Tech Ticker's most entertaining guest.On the eve of Thanksgiving, I asked Davidowitz if he had any regrets, or was ready to throw in the towel given recent signs of economic revival. Are you kidding me? "Here are the numbers...we're broke," Davidowitz declares, noting the U.S. government goes $5 billion deeper into debt every day and is facing $1 trillion-plus annual deficits for the next decade. "In other words, we're bankrupt."As with the economy, Davidowitz is unwaveringly consistent in his views on President Obama, calling him "deranged, dysfunctional and discredited."Results of the midterm election show "the people of this country think we are in a catastrophe," he says. "I'm with them."Check the accompanying video for more of Howard's unfettered opinions and stay tuned for additional clips from this interview. And...Happy Thanksgiving! Aaron Task is the host of Tech Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com’

Timid Tuesday: Is it Safe? Davis ‘… This is how we pay off our current debts and I think bondholders are simply happy to get anything out of a country that admits it owes $15Tn (1/4 of global GDP) but probably owes closer to $60Tn (entire global GDP) in the form of unfunded liabilities. The funniest thing about this (and you have to laugh) is to see Conservative pundits get on TV and talk about how we need to cut $100Bn worth of discretionary spending to "fix" this (while continuing to spend $1Tn on the military and $1Tn on tax cuts for the top 1% each year). There is no fixing this and even a Republican said you can’t fool all of the people all of the time. THIS HOUSE OF CARDS IS TEETERING FOLKS – PLEASE BE CAREFUL OUT THERE! ‘

17 Things Worrying Investors Lloyd's Wall of Worry

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.

Consumer confidence down, LiveLeak.com - Loonie closes above U.S. dollar … dollar for first time closes below parity on Canadian loonie … hey, hey, hey … 'Huge' stock decline — but not yet MarketWatch - Brimelow ‘Commentary: Adens … ‘mega trend’ looks grim … The Adens expect a hyperinflationary collapse … ‘ Oh come on! Manipulated dollar decline with inflated earnings, stock prices thereby, etc., … we’ve seen this all before … the last few crashes … Jobless rate jumps to 9.8% as hiring slows (Washington Post) [ The reality is not a mystery! The nation’s been thrown under the bus for the greater good (wealth) of the very few (frauds on wall street, etc.); wall street giving out record bonuses from their accomplished fraud (with no-recession b.s. bernanke help) of $144 BILLION: Come on! This is gettin’ even more downright ridiculous (if that’s even possible)! Pending home foreclosure / distress sales up, oil prices (and oil stocks) up, debased dollar down, plus a little familiar ‘better than expected’ thrown in along with prospects of a ‘no-recession bernanke’ market-frothing bull session on 60 minutes and, voila, suckers’ rally into the close to keep the suckers suckered! What’s good for the frauds on wall street is bad for just about everyone else which includes the vast majority of people and businesses, domestically and globally, as current dollar manipulation / debasement ultimately results in higher costs and loss of purchasing power (ie., oil, etc.). Clearly, this is one of those fraudulent wealth transfers to the frauds on wall street et als which will ultimately be paid for by those who least are in a position to afford it, courtesy of the ever more worthless Weimar dollar, etc., inflating earnings, eps, lowering p/e multiples, etc., see infra. This is an especially great time to sell / take profits while you can since there's much worse to come! Previous: 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 ]

[ It should be noted that the paranoid american criminals have once again, this time by way of hack via microsoft (willing accomplice as was att of jersey / dumbya bushland – deleted / I caught the problem and have also installed opensource.org which I strongly recommend (at least a look – won’t disappoint – I used same for the archived PDF post files) is free and a breeze to use and though compatible with word and a multitude of other formats, for now on these specific web site documents (I have image folders already linked which would require at least a look) it’s easier and faster for the time-being for me to add to the existing documents with word; but as is so of america, microsoft’s a dinosaur) gave me a few problems, serious enough to require a redo, which I have corrected / overcome; but believe me, I won’t forget it! They will be sorry! ]

Self Correcting Market Poses Unique Situation Pierce ‘There is quite a danger premium built into this market as the market continues to grind higher. Here are a few thoughts as to what the look of a correction could look like from user AlbertaRocks on Seeking Alpha referencing the Hindenburg Omen, Goldman Sacks, and market makers.

Sources are saying that the vast majority of investors are now in the market “with no hedge”, meaning with no puts. But you can bet that the institutional managers have some protection of some sort. If they don’t have puts in place, you can be pretty sure that they have trailing stops in place. And we can rest assured that they’re tightening those trailing stops with each passing day. The more wacky and contrived this melt-up becomes, the tighter they’ll move them. Wouldn’t you just love to know how tight those stops are, and how many shares are for sale at each price level just below the market? You can bet the farm that Goldman knows.

That’s most likely why there’s been no sell-off allowed. And that’s why there’s little likelihood of there being any sell-off that they can control. I’ve been speculating on this for damned near a year now. I thought they’d lost control at the August correction, but I was wrong. But the further this Fed induced insanity has gone, the more likely it is that the xxxxxxx (the Fed, GS and their minions) are probably finally trapped. This is why we “need” to see if 1130 holds. If it does, I’d bet that it would be “barely”. If it doesn’t, then 900 might not hold either. Anyway, that’s why I’m expecting violence in the markets. I don’t even know whether to expect a nice, tidy slow melt-down that accelerates (if that’s even possible), or a 40 handle gap lower one of these days. But whatever it is, when those stops begin triggering, there won’t be a damned thing GS can do about it other than buy them all up… or just let ‘em go and throw all their own shares into the pot as well. If the bankers ever want out, the question we’ve all be asking is “who they gonna sell to?”. Now we can add the fact that not only do they have nobody to sell to, but they have billions of shares of competition who’ll want out at the same time as the banks do. Man…. I can’t see how it could be anything other than a violent crash.’

Gauging Economic Activity: It Takes Money to Make Money Hansen ‘It appears that most people focus on money flows as the gauge of economic activity. Non-monetary measures are generally ignored. GDP measures money flows.

Consider that the majority of people (aka "consumers") in the USA (and the world for that matter) account for a small portion of the money movements. Looking at incomes (and not expenditures), the reality comes into focus.

[chart]

click to enlarge images

The above graph shows the breakdown of the economy by income - not selected expenditure like GDP. The sum of this income pie is several times GDP as money moves around the economy. The relationship between the incomes of people, business and government (as shown on the above pie chart) has remained fairly constant since 1948.

What has changed is the income distribution of people (totaling 43% of total USA income) in the yellow and green pie slices. The yellow pie slice of Joe Sixpack has been getting smaller while the green pie slice for the richer Americans has been getting larger.

[chart]

Average income becomes larger than median income as the number of high earners increases.

When we use money flows as a metric to understand how well an economy is doing, the majority of the population (the yellow pie slice) becomes insignificant. Joe Sixpack does not have enough money to be a factor in this economy where money flows are the squeaky wheel which gets the grease. As the economic controllers are graded by how much money flows grow, natural gravity (not conspiracy or lobbyists) would cause laws and regulations to favor groups (business and high worth people) which will make the "money flow" economy expand.

In the case of the USA, 80% of the people amount to 40% of personal income, while 20% of the people make 60% of personal income. This fixation on money movements as a metric to understand economic growth favors the elements of the economy which most easily can generate faster monetary expansion.

You remember the saying "It takes money to make money".

For the richest people of the economy, this has translated into long term wealth building (chart complements of Wikipedia).

[chart]

If economic progress was based on counting jobs, or living conditions, or life expectancy - attention would be directed towards that metric instead of GDP which has little in common with Joe Sixpack, or the majority of Americans. The GDP metric is now discriminating against Joe Sixpack.

GDP in chained dollars keeps rising. Joe is getting further behind.

Economic News This Week:

Econintersect economic forecast for January 2010 pointing to a slightly improving economy. This week the Weekly Leading Index (WLI) from ECRI continued to improve from 3.4 to 3.7 implying the business conditions six months from now might be improving. Six monts ago, the WLI was declining indicating that December should have been slightly worse then July 2010. This December data is coming in fairly strong.

[chart]

Initial unemployment claims in this week’s release increased slightly. If you look at the not seasonally adjusted claims - they rose to an eye popping 770,413.

[chart]

Here is a comparison to prior years non-seasonally adjusted initial claims with the approximate gain over the previous week:

2005 693,776 (+153K)
2006 555,114 (+80K)
2007 506,709 (+0K)
2008 547,943 (+25K)
2009 956,791 (+225K)
2010 815,593 (+170K)
2011 770,413 (+192K)

It is likely that the seasonal adjustment factors are a little off this week, and is one more reason to follow the four week moving average with smooths out the inconsistencies in the data. The unadjusted increase for the first week of the year in 2011 is similar to the two preceeding years (2009 and 2010). All three are obviously much larger than the preceeding three years (2006,2007 and 2008). One is tempted to ascribe this difference to the institution of a New Normal. However, 2005 (153,000) is close to the range observed for 2009-2011 so maybe the distribution of data 2006-2011 is a circumstantial arrangement of random data.

Moral: Exercize caution when casually attributing observations to a "New" Normal.

Most of the data released this week was inconsistent with Econintersect’s December forecast of slow growth - and it more resembles Econintersect's January forecast. Overall the December data released this week was strong. However, the transport indicators began their improvement in December which historically foretells economic improvement. Warning: one month does not make a trend. The table below itemizes the major events and analysis this week.

Weekly Economic Release Scorecard:

Item	Headline	Analysis
CPI	Up 0.5%	Energy price surge a concern to Econintersect for 2011 economic expansion
Retail Sales	Up 0.8%	This is a gross understatement. This is record sales up 8% YoY.
Industrial Production	Up 0.8%	Agree that Industrial Production increased
Manufacturing & Trade Sales	Up 1.2%	This is November Data - but the increase is confirmed by the unadjusted data
PPI	Up 1.1% MoM	Energy surged 7.7%. Likely to show up in CPI in the following months
Trade Balance	Shrunk $100 million	Historically high exports but surplus likely grew $3.5 billion
Consumer Metrics Index		Consumer Contraction is now 270 days old
Diesel Consumption	Up 2.4%	Diesel use at December historical highs
Rail Traffic	Up 7.3%	Positive trend lines going into 2011
Small Business Sentiment	Down 0.6%	Both consumer sentiment and small business are in the same relative negative positions
Wholesale Sales	Up 1.9%	November sales are at historical highs for November
Blueprint for Disinflation		Avoid owning fixed assets
Bond Vigilantes		Historically major bond holders dump at first sign of inflation
Inflation Chupacabra		Chupacabra is not coming to eat our goats
Opinion: Headwinds for 2011		There is far more risk then realized
Opinion: Currency, Newton and the Gardener		The underlying economic driver is jobs.
Opinion: Yellen Says QE Saved the Economy		This entire economic policy morass is encumbered with lack of experimental control.

Bankruptcy this week: Constar International Inc.

Bank Failures This Week: [chart] ‘

On Unemployment, Inflation and Flawed Fed Logic [ Hasner has omitted a very crucial fact: america’s defacto bankrupt and saddled with insurmountable record level debt! ] Hasner ‘The sum total of Fed actions over the past 3 years can probably be summed up as the central bank attempting to create its own reality. They have committed to the following :

Keeping deflation at bay and raising the inflation rate
Keeping the Fed Funds rate low for an indefinite period (forever?)
QE1 and Q2 (and Q3)? (Quantitative Easing - the purchase of US government securities in the open market)
Supposedly working toward full employment while stating that it will take 4 to 5 years for employment to recover?

All of these actions are the result of a single fact: They are compensating for failing to do the job they were tasked with from 2000 to 2008. They failed and we pay and pay.

I think we have to first explore why inflation is so important to the Fed to make sense of this mess.

The banks are still in a big hole (of their own digging) and need housing prices to stay elevated to keep their losses in check. These same banks need to recapitalize at low interest rates (via bond issuance) and to profit from the rate spread to keep their salary game intact. The wealthiest individuals in America stand to lose the most from deflation, even though housing price devaluation would enable an entire new generation of hard working Americans to participate in the housing market.

The influence of the wealthy on Fed policy is not hard to understand. Keep the status quo and you are safe from congressional inquiry as a Fed governor; do what's in the best long term best interest of the American citizenry at large and you are not. Congress by and large will continue to go along with this charade for as long as we let them. It should be "one man, one vote", but these days it’s how many dollars you can pony up that determines how many "votes" you can muster.

Why does inflation serve the largest banks and corporations disproportionately while hurting the average working citizen?

Greater Inflation is desired because the largest banks still hold massive amounts of "bad" loans on their books that simply cannot be justified under any scenario except elevated housing prices. Greater inflation is desired by large multinational businesses so that they may increase current pricing levels and continue to grow profitability for shareholders. Greater inflation is sought so that the Fed can regain credibility and maintain the illusion of being in control of the markets. Inflation in basic necessities such as food, energy, health care and educational expenses have the potential to drain the resources of anyone below the upper strata of society. Making life harder for those on the margin to protect those at the top is not only bad economic policy, it's immoral.

What might the potential long term effects of a near zero Fed funds rate be?

The longer the Fed keeps rates at zero, the longer the banks have to develop strategies for operating in a "risk" free capital environment. Given past history, it's only a matter of time (when, not if) until the banks blow the economy up yet again. Low rates directly benefit the banks and large corporate sectors of the economy. They can borrow at historic low rates whereas the average citizen has no capability of obtaining such funding. While mortgage rates have moved to levels we have not seen in a decades, the corresponding tightening in loan qualification standards means that many cannot take advantage of them. Profits to the largest businesses and no tangible benefit to the American citizen - can you see a pattern developing?

The Fed will eventually be faced with a quandary of enormous proportions. Either raise rates and suffer the wrath of a capital allocation system that has spent the better part of 5 years devising the most profitable ways to game that system, or keep rates at or near zero and continue favoring the largest and wealthiest businesses in America over the working class. I fear the Fed may be secretly planning to permanently lower rates because I cannot frankly see any other way out of their dilemma.

Let's talk about employment in America, or more correctly, the problem with employment in America.

The latest government report shows a 9.4% rate of unemployment. While that statistic is down from 9.8% from the previous month, it probably reflects people actually dropping out of the labor force and not gains in employment. They drop out when their discouragement level becomes so high it is unbearable for them to keep trying. Unbearable for them to keep trying to seek gainful employment. Is this the America we really want?

The latest report shows that 103,000 jobs were created. This is not even near enough to take up the new workers entering the work force, let alone put back to work the tens of millions (yes that's right....tens of millions) of people who have lost their jobs and are seeking work. I can't believe this is happening in America. It's sickening. Record profits and cash balances for America's biggest businesses and no employment opportunities for the working class.

Unemployment compensation was extended to 99 weeks for those seeking work. But what was missing was any sort of connection between these benefits and actually re-training these folks for careers that may be in demand. If a worker is laid off due to economic circumstances, chances are his line of work or skillset is not in demand anymore. Why in the world are we not getting these folks into new careers? I know for some it is a stretch to think that an educated IT worker may now have to re-train as a health care worker or a nursing home assistant, but at some point in this vicious cycle you have to let the free market work.

We currently 'import' people from all over the world to staff our hospitals and nursing homes and I sometimes wonder why we are not putting able bodied Americans to work instead of just sending them 99 weeks of unemployment checks while they go through the futile exercise of trying to re-live their past glories. The reason, of course, is that these jobs pay much less than their former occupations and then they wouldn't be able to afford that damn McMansion anymore. You do see it all goes back to the banks and their bad loans. When does it all end? The Fed believes that more inflation is the answer to unemployment in America. How about you?

To be constructive in my final analysis, I recommend we do the following things NOW to get this country back on the path to economic opportunity for all, and not just those who already have it:

Stop trying to keep housing prices inflated. Houses are overpriced now and the market laws of supply and demand should be allowed to set the price level.
Force the banks to clean up the bad loans. I frankly don't care how much it would hurt profitability. Enough is enough. If we force them to take losses on their bad loans and clear their balance sheets, we can finally get back to the business of growing America for all citizens. The one benefit is the huge Wall Street salary and bonus scam will have to come to an end. Someone in government has got to have enough backbone to take them on - I just don't know who that is.
Instead of spending taxpayer resources on efforts to keep housing price levels inflated, we should use that money to create a “What's needed now” job clearance engine that will be a government/private industry partnership. When someone loses their job, they would be required to utilize the services of this job clearing facility and be prepared to be re-trained, if necessary. If they don't want to, fine, but the unemployment checks would soon stop. Incentive enough, I would hope. We have become a society of pampered “I want it now” consumers and it's time we realized that our economic competitors in the global scheme are working harder at jobs we would not consider "worthy". We need to wise up before they overtake us and become the ones who determine our economic destiny instead of the other way around. Any work is good work, period.
We need to get interest rates to a level 3.5 to 5%, where seniors and other people who cannot afford risk taking in any form can still provide for themselves after a lifetime of hard work and savings. What we are doing to these people is surely a crime, and for what? To keep the banks in the salary and bonus business?
Finally, we absolutely need to question the way we have allowed the largest banks to get bigger during the crisis without regard to solving the "too big to fail" problem. I know that nobody in Congress wants to take them on, but the banks need to be broken up. It's the only way America can get back on sound footing and prevent future disasters.’

Chinese Yuan; A new world reserve currency? Economic Assassin | Twelve days into the New Year (2011) and China has already set the wheels in motion to use their most powerful weapon, the Yuan, in order to combat inflation.

China Says the End of the Dollar is Near WSJ & AFP | Chinese President Hu Jintao emphasized the need for cooperation with the U.S. in areas from new energy to space ahead of his visit to Washington this week, but he called the present U.S. dollar-dominated currency system a “product of the past” and highlighted moves to turn the yuan into a global currency.

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http://www.albertpeia.com/wallstreetlunacy2ndqtr10108.htm

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Al Peia's Blog

Thursday, January 20, 2011

January 19, 2011 posts

Business / Economic / Financial

Europe faces a new crisis The Voice of Russia | UN depressing forecast was made in report on the World Economic Situation and Prospects-2011.

Home Construction Declines WSJ | Home construction in the U.S. fell to its lowest level in more than a year in December as builders cut back on new single-family homes, the latest sign of a moribund market.

China ‘logs double-digit growth in 2010′ China’s economy grew 10.3 percent last year but inflation exceeded the government’s full-year target, Hong Kong-based Phoenix Television said on its website Wednesday.

Housing Starts in U.S. Decreased in December to One-Year Low Builders began work on fewer homes than projected in December, a sign the industry that triggered the recession continued to struggle more than a year into the U.S. economic recovery.

US Mint Reports January Silver Sales Hit 26 Year High When we had last checked on the total silver sales by the US Mint earlier today, the amount given was 3,407,000 ounces, a number which we had earlier speculated would be a monthly record if sales were maintained at the current pace.

National / World

Statement by Secretary Napolitano on Senator Lieberman’s Retirement [ Good riddens … Connecticut should be jumping for joy! ]Jason Douglass | After Sen. Lieberman’s retirement announcement, Napolitano makes statement.

Man Dies After House Fumigated With Same Fluoride Compound Sprayed On Food Steve Watson | Known insecticide toxin was approved for use on fruits, nuts sold to Americans.

10 Ways In Which China Humiliates The United States Paul Joseph Watson | Globalists are using China as the vehicle through which to complete the total deindustrialization of a decaying America.

Terrormania Grips US: PSYOPs Justify Bloated Budgets Jason Douglass | Around the country ‘regular people’ are coming face to face with terror!

Will Corporate Media Blame Spokane MLK Bomb on Tea Party? Kurt Nimmo | Incident follows Arizona shooting by less than two weeks.

Doping Up the Troops EconomicPolicyJournal.com | U.S. Central Command policy allows troops a 90- or 180-day supply of highly addictive psychotropic drugs before they deploy to combat, reports Nextgov.

China Moves Troops Into North Korea Salem-News.com | South Korea’s daily newspaper is reporting that what Western analysts have feared has happened: Chinese troops have been deployed into North Korea.

Poll: US support for Afghan war drops Press TV | A recent poll shows the American people’s support for the Afghan war has dropped to the lowest level since President Barack Obama took office.

China Plants Flag on Constitution Avenue On Tuesday night, Obama followed the script closely. He sat down to what the corporate media describes as “an unusual and intimate dinner” with Hu Jintao, the CEO of the sprawling slave labor gulag and globalist dream come true in China.

Will Corporate Media Blame Spokane MLK Bomb on Tea Party? Rachel Maddow has yet to pin blame for a bomb left along a Martin Luther King parade route in Spokane, Washington, on the Tea Party, but NPR suggests white supremacists may be responsible.

“Experience China” debuts at NYC’s Times Square A video show about Chinese people made its debut on screens at Times Square on Monday, presenting Americans a multi-dimensional and vivid image of Chinese people.

Arlington Man Loses Gun License Due To Blog About Tucson Shooting A blog threatening members of Congress in the wake of the Tucson, Arizona shooting has prompted Arlington police to temporarily suspend the firearms license of an Arlington man.

Tipping Point: 25 Signs That The Coming Financial Collapse Is Now Closer Then Ever The financial collapse that so many of us have been anticipating is seemingly closer then ever. Over the past several weeks, there have been a host of ominous signs for the U.S. economy.

Chinese Yuan; A new world reserve currency? Economic Assassin | Twelve days into the New Year (2011) and China has already set the wheels in motion to use their most powerful weapon, the Yuan, in order to combat inflation.

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