The cheering is all over the media this morning, especially CNBC.
The charts? They look stellar, especially the Nasdaq.
Straight up and accelerating.
But beware. The internals belie the truth -- this is a rally that is happening on increasingly-narrow participation. In this case, all Apple, all the time.
But Apple will fail. They always do when they take these positions of leadership. It is simply a matter of when, not if. The current "golden boy" will make a mistake, and when it does that monstrous percentage will cut on the downside just as it boosts on the upside.
It is not often that one gets this sort of rotational warning in such a clear form, but you're getting it now. The same thing is true in the DOW, with IBM being the power mover there.
Beware folks. Be very, very careful.
There's a decent shot that this move has more legs in it, just as it did in late 2007 and before that, in late 1999 and early 2000.
But there's a very high correlation between these sorts of rotational moves, which have shown up before both major tops in the last 20 years, and that event down the road.
This is not a crash call and it is certainly is not a call to "short everything" today. But it is a caution that when coupled with the fiscal situation here, in Europe and in Japan, that the "strong market" meme that has taken over is in fact, on the internals, becoming too extended and is now narrowing down, which makes it increasingly dangerous to continue to dance.
Critics are missing the larger point. Why should the Department of Health and Human Services (HHS) decree that any of us must pay for "insurance" that covers contraceptives?
I put "insurance" in quotes for a reason. Insurance is supposed to mean a contract, by which a company pays for large, unanticipated expenses in return for a premium: expenses like your house burning down, your car getting stolen or a big medical bill.
Right. Insurance is a negative-sum game. That is, on balance everyone who buys it must lose when everyone adds up their expenses, since nothing is free and the company that aggregates and doles this out must get paid somehow.
Therefore it is not insurance when you are buying "insurance" on something that everyone, or close to everyone, will actually use.
Insurance is the purchase of a contract that pays off when you have an unlikely event that would otherwise be catastrophically expensive. By spreading this risk of unlikely but catastrophic outcome while everyone must mathematically lose when all the costs and benefits are added up, the cost becomes palatable to people in general. This is why homeowners insurance is reasonable in cost -- it's unlikely that you'll have a fire, but if you do the loss would bankrupt you absent the insurance. You thus voluntarily buy the insurance to protect against the risk, unless of course you have a shack, in which case you don't care (and don't buy.)
But when it comes to "Social Insurance" (Medicare, Medicaid and Social Security) these are not insurance programs, in the main. Nor is the "HMO/PPO" nonsense with coverage of routine expenses. And it is those routine expenses that have gone through the roof in cost, along with prescription drugs and devices at the same time "catastrophic" events have skyrocketed.
Nobody denies that things like heart stents and "miracle" drugs are expensive to develop. But the benefit -- and cost -- of those things can be borne by actual insurance, with individual people choosing to have or not have that coverage.
Routine medical care, on the other hand, along with chronic conditions are another matter. Those are things that are utterly predictable. We all get old. We all go to the doctor more often as we get old. It is as routine as, well, getting old.
Likewise with birth control. If you're of fertile age as a woman or a man involved with such a woman then you have this concern in one form or another. You either both want an unlimited-size family or you do not. If you do not, and most people do not, then this is an utterly predictable expense.
As for those who say that this sort of thing is "expensive", no it's not. Not any more than your iPhone is. If you can afford the cellphone you can afford the birth control. Is sex more important to you than your toy piece of technology?
It's not about "access" and it's not about "insurance." It's because Americans, when paying even modest co-payments, choose to spend their money on other things. They prefer a new iPod to a "wellness visit" to the doctor. As the HHS unwittingly admits: "Often because of cost, Americans used preventive services at about half the recommended rate."
Yep. And Americans prefer this because they do not have to bear the cost of this decision.
That is, Americans are free to spend the money on an iPod rather than a "wellness visit" to the doctor because if they make this choice and then get severely ill they can force everyone else to cover the otherwise-avoidable expense they would not have taken on if they eschewed the iPod and went to the doc!
This is where the problem lies and until we admit it and deal with it there is no resolution to our budget mess that is possible. The simple fact of the matter is that we do not have the ability to pay for that which we've promised to people. This has resulted in what look like "excellent profits" in various businesses (like Apple) that are factually false as these "sales" are in fact shifted to federal borrowing -- a death spiral that will detonate in our face.
This game must end. In reality this "debate" about birth control in Obamacare is not about birth control at all. It is about the Church and the professional left and right creating entitlement programs that serve as nothing more than a cost-shift they cannot fund, then claiming that we "cannot stifle" an alleged but false economic recovery! This an outright fraud by both the Church and everyone else involved in it, both government and private sector. So long as the Church was able to make someone else -- anyone else, including their congregation -- eat the cost of their frauds they were perfectly happy with it. In fact they reveled in it as the Church's historical role in helping the poor through voluntary donations was able to be sloughed off to the taxpayer! The bleating now, just like that of the doctors, drug companies and hospitals, is all a function of the truth being shoved in their face -- their cost-shifting game has backfired and they are now forced to deal with not only the financial but moral costs of the policies they actively promoted.
There is no recovery folks and there can't be until truth is faced. The Federal Government is creating the illusion of economic demand that does not exist and has been for more than a decade. The truth of this is becoming more and more evident as each day goes on and our standard of living is continually eroded as each pillar of debt dependency is exposed for what it is -- a pyramid scheme and thus an outright scam.
You're free to buy into this if you want and to believe in the "faux outrage" of the Catholic Bishops, but that's what it is -- faux outrage. These same people were more than happy to shove you into the hole so the government could take by taxation that which they believed you "should" give as nothing more than a throwback to former Church policy when the Church had the force of law behind it. By making such arguments and endorsements from the pulpit, something that the Pope just did recently with his claim that "redistribution" is "appropriate", the Church has in fact endorsed Ponzi spending that is no more correct than was the Church's insistence that Earth was the center of the universe.
There are many "churches" that are involved in this scheme and scam and most of them do not have crosses over their altars. That there is an intersection between the political left, right and various faith-based groups is no surprise -- none of them are willing to abide our Constitution or the math.
The fact of the matter is that fully 61% of Federal Spending (FY 2012) is for blatantly unconstitutional things. Universal retirement and indigent health care (Medicare and Medicaid), Title I (public education), universal retirement income (Social Security) and universal money and goods assistance to indigent people (welfare in all forms, AFDC, Section 8, etc) are all without foundation in the Constitution of the United States at a federal level. The growth of these programs was utterly predictable -- with federal medical spending growing from $53 billion in 1980 to over $800 billion last year, a compound growth rate of just over 9%, it is clear that mathematically Medicare and Medicaid alone will eclipse the entire Federal Budget within the next 20 years. This will bankrupt our nation with certainty unless we stop being stupid.
The bad news is that when we stop the economic contraction that will inevitably ripple through the economy is going to be massive and the magnitude of that contraction grows with every day we continue to pretend instead of "eating our peas." This economic adjustment, which I estimate was 10% of GDP in 2000, grew to 20% by 2007 and today is approaching double that amount! If we don't accept the truth soon collapse will become inevitable.
While you can ignore the Constitution, seemingly without consequence in this country, you cannot ignore math. Compound functions just are, and the consequence of refusing to deal with them is utterly predictable and in fact certain.
We must stop this now and if there was any sort of honest outrage from these institutions, including the Church, their outrage would be directed at the fact that the majority of what our Federal Government does today is in fact blatantly unconstitutional and thus without justification under The Constitution of the United States.
The very same Constitution that, when it's convenience for them, they bitch about being violated.
The difference between rape and sex is consent. As such I'll be interested in the Church's complaints about contraception when -- and only when -- they stop telling me that being horse-raped on a daily basis by my government is in fact consensual sexual intercourse.
In the week ending February 4, the advance figure for seasonally adjusted initial claims was 358,000, a decrease of 15,000 from the previous week's revised figure of 373,000. The 4-week moving average was 366,250, a decrease of 11,000 from the previous week's revised average of 377,250.
What's the raw number look like?
The advance number of actual initial claims under state programs, unadjusted, totaled 397,810 in the week ending February 4, a decrease of 24,477 from the previous week. There were 440,706 initial claims in the comparable week in 2011.
Ok, that looks fairly decent.
But what I want to look at is the big table, as that's the "big deal", although we're (of course) a couple of weeks behind. And here we see that the numbers are basically flat, with a +7982 figure at the bottom; drops in initial and EUC benefits were offset by more extended benefits.
The only caution on this report is that if there's more long-term unemployment (but the rate itself is stable) that's not positive. It's not as negative as adding more unemployed would be, but long-term unemployment is far more damaging from a budgetary perspective than those who lose their job but find a new one in a reasonably-rapid timeframe.
Worth watching.... and thinking about. But do so soon, because if we don't the system will collapse, and then there will be no benefits at all.
Bill puts into graphs in a couple of minutes what I've been writing about for the last five years. Your choice is to either act on it or go to the store, right now, and buy all the vasoline you can find -- because if you don't act you're going to need it.
And people wonder why there are more and more folks who are saying (or should say) "fuck it", throw their hands in the air, make no investment in capital formation and just walk off?
A multistate settlement with five large U.S. banks over foreclosure practices would include as much as $17 billion in mortgage debt forgiveness and loan modifications and take three years to complete, according to a letter describing the deal.
The draft letter to stakeholders from state attorneys general outlines an agreement among large mortgage servicers, states and the Department of Justice, which are continuing talks to finalize the proposal.
Perjury is, in most states, a felony. Uttering (forgery) is also, in most cases, a felony.
And you, dear reader, are going to (again) take it in the ass.
What do you think the banks held over these folks? Might it have been their state bond financings? Oh, probably. Property rights and a property registration system that literally pre-dates the Revolution? No problem, we'll give it all to you, Sir Greedy Bastard, so long as you keep presenting your bare member for us to perform an obscene act upon.
Then we will tell our constituents that we "got the best deal possible" and that "we couldn't have prosecuted."
In point of fact what the states had to do was stop the ridiculous overspending and tell the banksters to pound sand. But they didn't because you insisted they keep making promises to you they couldn't keep, and so once again the so-called "elected" turn out to be a bad joke. Representation of the people, by the people and for the people falls again to those who do whatever the hell they want, law be damned.
There is no law any more folks. Not when it really matters -- when systemic and rampant violations are committed by big business and your fundamental liberty interests are ignored.
We, the people of this nation, deserve this. We vote for Attorneys General in 43 states and in all but two of the others they're appointed by the governor (and we vote for the governor.)
So get out of your chair this evening, my friends, and go stand in front of the mirror to identify the problem. Then decide for yourself whether you're going to keep consenting, because up until now, you have and this crap will not stop until you decide you've had enough and insist that the law that applies to you is also applied equally to these institutions and their executives.
There is a game of 'Pass the Parcel' happening in the world at the moment. The 'parcel' is filled with U.S. dollars. Just like little children at a birthday party, the governments who are holding vast reserves in the form of US paper dollars, are full of apprehension and nervous giggling lest they be left holding the 'parcel'. They are jiggling the parcel up and down and frantically trying to pass it on to the government sitting next to them. The general hubbub is almost drowned by the din of bursting balloons.
The problem in the real world of course is that there are many, many parcels of U.S. dollars in the hands of foreign governments, and they are all trying to pass them to each other. No one wants the parcel they already have, let alone the one in the hands of the government sitting next to them. They all want to avoid being left with a vast wad of cash which they strongly suspect will end up not only worthless, but making them look like complete mugs.
All are hoping against hope that the storm will pass. All fear to be the first to start selling in large amounts, yet simultaneously fear to be the last. Each is regularly divesting itself of tiny amounts. As fast as they do manage to dump a part of their parcel those dollars head back to the U.S.. U.S. exports will start to look good for a while which will reflect the desperate desire to exchange the dollars for something, anything.
All money must eventually head back to the country of its issuance. That is the only way ultimately that value can be realized. Now is the time for that value to be realized, whilst there still is any. The trillions of U.S.$'s in the world are returning home. As that money washes up into the US economy so it will continue to drive U.S. domestic prices higher and higher, placing ever greater strain on the economy, which is already at breaking point.
The period wherein the U.S. dollar was the official reserve currency of the western world is now over. That will neither be announced nor admitted by any government until they have finally dumped the dollars that they own. It is in everyone's interest to maintain the facade, at the moment. In reality they want almost anything except U.S.$'s in their reserves.
Bernanke must dramatically raise interest rates to strengthen the U.S. dollar, that is a MUST. Of course that will mean the collapse of the whole U.S. real estate market within a month. That would lead to the absurd and sad situation of millions of empty houses within sight of millions of families living in cars and tents. Such an interest rise would take a Volcker on steroids which Bernanke most certainly is not, so of course he hasn't raised interest rates, and he won't.
His whole education and training make him more inclined to again drop interest rates in a forlorn attempt to re-start money flow into the asset area of the economy. Too late he has been disabused of some of his Ivory Tower notions and now knows that won't work any longer either. 'Fool me once shame on you, fool me twice shame on me'. Dropping interest rates would also precipitate a panicked flight from the U.S. dollar which would see a faster flood of ever more worthless dollars turning up in the supermarket and energy area of the domestic economy. No matter what Bernanke does or doesn't do, the chickens are coming home to roost.
It is unlikely to be the Chinese or any of the other major holders of U.S. dollars who precipitate mass selling. They have so many that they would crash the currency just by opening their mouths. They also are damned if they do and damned if they don't. It will more likely come out of left field and be one of the smaller holders. Maybe one of the Arab mini-states will take the chance that they can dump all their dollars without anyone noticing. The likelihood is that it would be immediately noticed. Everyone has their beady eyes on everyone else at the moment. The awareness that the 'big dump' had started would lead to a stampede. How would the Fed handle that... print more dollars... tinker with interest rates?
Obviously, not selling at the moment is seen by the major holders of U.S. dollars as an option, albeit an enforced one. Becoming a buyer most definitely is not an option. Along with the game of 'Pass the Parcel' there is another concurrent game being played called 'First to Blink'. The government who blinks first and tries to dump their wad at below market price just might win, immediately followed by everyone else losing. There may be some reservations about being the first seller, but there will be none about the desire to avoid being the last seller.
The unpleasant truth is that the mutually agreed selling truce is occasioned by the fact that there are no buyers of the amounts needing to be sold. All would dump their dollars now if they could, the fact that they would like to, but cannot, speaks loudly and eloquently of the problem.
Thus Bernanke will continue to procrastinate and do nothing with interest rates. It is the sanest approach, as it is the approach most likely to put off the inevitable for a while longer. Procrastination is contagious, which at this point may be a good thing. Any decision to do something will end in complete disaster as it forces the governments playing pass the parcel to blink and also do something. Whatever they do would be very bad for the U.S. dollar and curtains for the U.S. economy. For many decades there has been a very ugly reality underneath the attractive veneer of confidence in the U.S.$ and economy. That veneer of confidence has now completely gone. What lies exposed is not a pretty sight.
The only hope for America is that those governments holding U.S.$'s will continue to hold them even though they are quite aware that they will at best drift down in value, and at worst collapse. It is a conspiracy of silence aimed at maintaining the status quo. I will hold mine and pretend that they are still valuable if you will do the same. All governments are using the borrowed time as best as possible to prepare their economies for the coming collapse of America. The U.S.$ will continue to be a currency for as long as that tacit agreement holds.
The End of the Party
I wonder how Bernanke is sleeping at the moment? I also wonder whether he and Paulson are personally buying gold and silver and secreting it away. Everyone who truly understands the situation has a survival plan. I find it hard to believe that Bernanke and Paulson still do not understand the real situation. Maybe they believe the government will look after them... maybe it will. What is for certain though is that the government will not look after Main Street. As always the common herd is pencilled in to foot the bill for this disaster. The bill is far larger for each household than each household owns in total assets. If it is any consolation the banks will go down as well.
For those who have not already lost everything, there is right now, possibly, one final chance to remove their capital from the cesspit that comprises the U.S. financial markets and exchange pseudo investments for real money... namely gold and silver. Not the paper variety of options or futures, but bullion. All paper is now suspect.
Even stock in mining companies is now suspect due to the vast amounts of naked short selling that has taken place. Many 'owners' of mining stock are going to find out, too late, that the statements of stock ownership in their filing cabinet are worthless. There are publicly listed companies on the major U.S. exchanges that have more stock sold than legally exists, a lot more. The situation on the minor boards is even more dire. An unknown at this time number of 'owners' of stock are going to find out too late that they in fact own fraudulently printed paper worth precisely zero.
Criminality in the U.S. financial markets is rampant and all pervasive. Corruption exists from the top to the bottom. A blind eye is turned by the regulators because they are afraid that to expose it now would topple the whole system. That gives an indication of how large the corruption is. It is the return of the Wild West (WW2), and at this point, the outlaws are running the show. Marshall Elliot Spitzer was the guy who rode into town on a white horse. He was almost immediately gunned down. Is there anyone else out there who will publicly challenge what is happening... preferably someone who doesn't mind going home to his wife at the end of the day?
Naked short selling is a great example of the type of 'mal-investment' created by showering a financial system with cash and credit and calling it economic growth. The past has, and the future will, show a direct parallel between the size of the inflation and the size of the ensuing criminality. What has been exposed so far is just the tip of the iceberg.
The economies of the world are on a knife's edge and we can but cross our fingers for the 'system' to hold together a while longer. The best hope is for a long, meandering collapse, much along the lines of the last 37 years, but at a greatly increased pace. It will end up with not just both parents being forced to work to survive, but the children as well. That will probably be spun as 'Children's Liberation'.
America no longer has even the appearance of an expanding economy because the world will no longer lend the money to finance it. That is because they know now, as they should have known years ago, that the U.S. cannot hope to ever pay back the money that it has been borrowing.
The worst case scenario is for a sudden and calamitous fall with no time to adjust. The end result over whatever time frame it happens will be very unpleasant. It will be a profound shock for most people who have been conditioned to believe that whatever happens the government will look after them.
A Party Bag For Everyone
The transition from fear to panic when it comes will be remarkably fast. One moment people will be just sitting there eating their Prozac, the next they will have a party bag in their lap. Inside the party bag will be a parcel which has finally found its way to its real home. At that point the contents of the parcel will be exposed for what it really always was under our current banking system... debt... vast, unpayable debt.
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