Bear Market

Markets Hibernate, But the U.S. Housing Market May Bring an Unpleasant End to the New Year Party

December 31, 2010 by · Leave a Comment 

By Michael Trinkle, ForexTraders

Data released Tuesday show that the U.S. housing market is not at all out of its difficulties, at least as far as pricing is concerned. “The S&P/Case-Shiller index of property values fell 0.8 percent from October 2009, the biggest year-over-year decline since December 2009,” according to Bloomberg. On the one hand, few people seem to expect a turnaround in the housing sector soon, but on the other, housing is expected not to become a drag on the economy as the foreclosure stock is eliminated gradually, helped by falling prices and increased affordability. So if we continue to have such negative readings on housing, the Fed may be tempted to act once again to prevent these attitudes becoming too entrenched. In general, we think that the Federal Reserve`s current operational strategy involves a long-term, Japanese style commitment to easing, which would imply that the programs, plans, names and presentation that come with the packages are for cosmetics purposes only, with more surprises always in store in Mr. Bernanke`s Santa hat in case that the spoiled children in the markets cry too loud about neglect and lack of support.

The numbers are not surprising, because the de facto freeze on the sale of foreclosed property understood to have been effected by some banks has intensified the expectation that prices will fall quite a bit further from their present levels, apparently compelling some sellers to accept discounts as the final months approach, in return for the opportunity to dispose of risk. Other background issues, like unemployment numbers, depressed consumer sentiment and spending, rising savings rates, trade and protectionism issues that could suppress growth and investment for many years may have contributed to the fall, but given the optimism inspired by the QE2 plans, we think that most of this fall in prices must be related to the rise in foreclosure stock that has been an issue for a while.

Has the housing market found a bottom? Probably not, because house prices are notoriously slow to shift trends, and the 30% fall from the peak, while significant, does not in any way imply a rapid rise from the bottom of similar proportion in the coming years. After the delusional price action of the first half of this decade, we believe that house prices will remain dormant for a long time to come.

The Fed can inflate stock prices, but it cannot excite and stimulate consumers to spend unless its workmap is being supplemented by actions of the legislature that aim at  giving some bargaining power to workers, and thereby improving the effectiveness of the transmission of the stimulus from the government to the people. The main cause for the lack of a strong relationship between falling mortgage rates and stagnant housing market trends originates from this cut-off between the two mentalities, in our opinion Political concerns aside, there is the practical and obvious fact that the Federal Reserve cannot be stopped from doing what it wants to do, given its independence. But as long as the average person doesn`t want to take risk because he can`t see his future, while the shrewd speculator is very much willing to take his dollars and dump them into some bubble somewhere in Asia without scruple, all that will happen is that the stimuli, packages, and plans will at most contribute to a worsening of the imbalances around the world, without having a perceptible impact on the housing market, or any other market where the actors are not speculators (because of past burns), as today`s news show.

Ben Bernanke is an academic and he is essentially experimenting with the world, putting his ideas about the Great Depression, and the Japanese Bust into test by using us as guinea pigs in his mental laboratory. Whether one blames him for that or not, is a matter of taste and philosophy, so doesn`t have a lot to do with practical issues like profit and trading.  It is clear that if one wants to emerge as a winner from this difficult experimental phase for the world economy, what the Fed Chairman is trying to do to our lives must be understood and analyzed well. Blind blames, and excited rhetorical flourishes may entertain us, and perhaps help discharge some of the frustration felt over being helpless and clueless as the powerful play with the lives of others. But since the game has its rules, and getting outside of those rules is both costly and risky, it is for now a good idea to do away with the discussion about who is right or wrong, while focusing on whose opinion will count for the foreseeable future. The Case-Shiller survey results only show that the Fed must do more if it wants to get concrete results from its experiment, but it doesn`t say much about whether  the Fed`s preferred course of action is justified or not. Fortunately, for us traders information of this kind and amount is highly fruitful, as we may conjecture plausibly that the Federal Resevre will continue to do what it has been doing for years, with all the predictable and exploitable outcomes that come to mind with that understanding.

More articles from ForexTraders….

My Predictions for 2011

December 31, 2010 by · Leave a Comment 

By Charles Hugh Smith, OFTWOMINDS
Despite the surfeit of predictions currently clogging the Web, I offer my own modest list of predictions for 2011.

I’ve tried to resist, but the temptation is simply too great: I’m caving in and unleashing a list of 2011 predictions.

Sitting back while other commentators issue their lists of predictions is like being in front of the salty nuts and chips at a party, watching everyone else grab handfuls of the tempting treats. I’ve held off so far but my resolve has finally broken down.

Despite the ridicule that is sure to be heaped on my head for being wrong, wrong, wrong about everything I expect to happen, at least I share that ignominy with 99.99% of humanity.

Life and history are not predictable, hence the temptation to go ahead and fling a guess or two at the dartboard.

So here goes nothing:

1. North Korea will demand a “workers’ paradise” Disneyland be constructed over its uranium enrichment plant. The North Korean Elites are tired of skulking off to the Tokyo Disneyland under faked passports, and so after a hair-raising display of bellicosity and raving threats of a “holy war” against South Korea and the U.S., the North will demand a specially themed “workers’ paradise” Disneyland be constructed over their primary deep-underground uranium enrichment plant.

The U.S. will greenlight the project over South Korea’s objections, but the deal will fall through at the last minute when North Korea also demands a Universal Studios theme park be built on the Chinese-NK border as a hard-money tourist attraction.

The North, threatening nuclear war, will contact FedEx to inquire about the shipment of fissile materials via two-day express.

2. The Bernanke Put will turn out to be more than a figure of speech. When the U.S. stock market “unexpectedly” craters in the first quarter, despite the Federal Reserve’s QE2 POMO buying of Treasuries and the positive news about retail sales, employment and Pres. Obama’s pickup games on the D.C. basketball courts, the Fed will reveal that it raked in billions of dollars in profits from a massive bet against the SPX (S&P 500), NDX (Nasdaq 100) and DJIA (Dow Jones 30) via index puts.

After the revelation, the markets will rebound on rumors that the Fed exited the Bernanke Puts and has secretly loaded up on calls. A contract for a new luxurious Fed resort on Jekyll island will be announced via mimeographed newsletter distributed on a “need to know only” basis.

3. The convergence of Hollywood, politics and finance will gather momentum.President Obama will start subbing for the L.A. Lakers, getting the nod from Jack Nicholson and Magic Johnson, while the First Lady will start attending tractor pulls and motocross races.

Ben Bernanke will be a guest on “Jeopardy!”, while Tim Geitner will do a turn on “Dancing with the Stars.” Everyone’s favorite member of the Financial Power Elite, Warren Buffett, will guest-star on “CSI: Omaha” as the avuncular billionaire who has misplaced a few billion dollars invested in Goldman Sachs stock at the bottom of the market in early 2009.

Lloyd Blankfein, the CEO of Goldman Sachs who famously declared that he and the firm were “doing God’s work,” will join Brangelina on a goodwill tour of East Africa, offering U.S. Treasury bonds to village chiefs in exchange for any diamonds they might have laying around gathering dust. He will be welcomed as a very amusing fellow, though lacking Brangelina’s star power and charisma.

4. The SNAP food stamp program will be expanded to include cable TV access to a new U.S. government-sponsored channel, “Bread and Circuses.” The new channel will be carried by all cable and satellite carriers, and will feature 24 hours of America’s favorite “reality” shows (or their knockoffs and copycats if the original show is unavailable). The lineup will include the full menu of instant-celebrity entertainment: “survivor” copycats, “American Idol” and “Dancing with the Stars” clones, and a revolving schedule of demeaning, obnoxious TV-judge shows featuring citizens confessing to lying, cheating, stealing, wife-beating, child abuse, bungled burglaries, serial addictions, going to church solely to “pick up the ladies,” coloring in their kid’s coloring books and other assorted crimes and indiscretions.

5. A new “ultimate challenge” gameshow will offer not just instant celebrity but also the chance of dismemberment and death. As the public tires of formulaic singing and dancing contests and foolish races through pig-slop and hokey contraptions, one brave production company will move to a nation without liability laws and launch “the ultimate challenge” gameshow, which will include everyone’s favorite contests plus new ones that will bring digital games that mimic combat to real life.

Contestants will gather in a replica of Rome’s famed Coliseum, and engage in a series of contests that include dancing, singing, tug-of-war, trash-talking, endzone touchdown dancing, Tongan-Rules rugby, chariot racing, blindfolded combat with exotic ancient weaponry (such as the gimlet tor, a combination throwing net and mace), helmetless motocross, hang-gliding combat, and lastly, a weeklong stint with a U.S. Army Ranger team deep in Afghanistan. Contestants who fail to return will be given spectacular burials, and their exploits will be documented and posted on YouTube, with a voiceover by a Hollywood star.

Though critics will deride the show as “barbaric,” it will be an instant hit.

6. QE3 will include issuing U.S. Treasury bonds directly to households. The sole stipulation will be that any proceeds from the sale of the bonds must be invested in the U.S. stock market.

7. Markets in precious metals, oil, commodities, stocks and bonds will rise and fall in an unpredictable fashion. Every analyst, pundit and commentator will be right about the movements, but at the wrong time. Most players will lose money while convincing themselves they made a killing. Bat guano and ‘roo innards will emerge as the “hot commodities” of the year, as both will go parabolic.

Everyone betting on the oil futures contango will be wiped out.

8. Contact will be made with an alien civilization in the Alpha Centauri system. The U.N. security Council will issue a proclamation in support of galactic peace, with Russia and China abstaining rather than support the U.S. initiative. President Obama will request a loan of 100 trillion quatloos from the aliens as a “gesture of friendship to Earth,” which his financial advisors estimate will fund the status quo to the 2012 elections.

Republicans will issue a stern warning to the aliens that “illegal immigration” to the U.S. was, well, illegal (at least in states which don’t depend on said illegals to mow their lawns, staff their slaughterhouses and tend the Elites’ offspring and elderly parents), while the Democrats will offer the aliens instant citizenship and Medicaid as long as they have “anchor babies” “within the U.S. or its airspace.”

NASA’s budget shortfall will preclude the intepretation of the aliens’ message, but it will be believed by some cryptographers to be a combination of laughter and fear.

The crush of long workdays and events has caused me to fall behind my email once again, so please allow me to thank everyone who sent their holiday greetings and best wishes to me: thank you for your kind thoughts.

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for the full posts and archives.

More articles from Charles Hugh Smith….

FX Wi(n)dow Dressing?

December 31, 2010 by · Leave a Comment 

Zero Hedge

On a day that was supposed to be as quiet as they get, the now traditional spike in FX vol that we have been observing for the past two months (even as the VIX has plunged to year lows) is back like clockwork. As the chart below shows, the EURUSD is now well over 100 pips higher on the day, and is back to early December levels. The reason, according to some, is that the various global banks, mostly French and US, who have been buying the billions in EURs sold by assorted central banking cartels in the past few months, starting with the BIS and going down, are engaged in some good old fashioned window dressing. There was a time when window dressing applied to stocks. With that now completely priced in, it is time to move on to FX, and shortly thereafter, gold. And speaking of the latter, with the yellow metal at $1,417, and just dollars away from the all time high, it would not be too surprising to see the best performing asset class tracked by Reuters to close the year at an all time high.

More articles from Zero Hedge….

How to bring down the System

December 31, 2010 by · Leave a Comment 

Zero Hedge

There are a lot of angry people out there. I see it every day in my
writing. All you have to do is look at the comments at a site like Zero
Hedge to realize that fact. To some extent you saw this in the last
election. Those who vote (less than half the population) sent a message
and as a result there has been a significant change in the political

But what do the voters get for sending the message? A slap in the face.
A few weeks later we get a monster tax break for high end earners, a
roll over of the tax treatment for hedge fund mangers (just obscene),
another $120 billion “stimulus” that won’t do a damn thing but add to
the debt and an extension of unemployment payment for yet another year
(now three years!)

If you pay bills (who doesn’t) you know that all banks, credit card
companies, utilities, insurance companies and all the others are just
nickel and diming us to death. Every month I am nicked for some damn
thing or the other. I think the FinReg rules that were supposed to
protect the average Jane or Joe actually just codified what the bastards
could charge. As a result we get hit with new fees, charges and higher

The very frustrating part of all this is that there is not a thing you
can do about it. Go write you congressperson, you’re lucky to get a form
response. Get on the phone to your CC provider and bitch over a $25
late charge on a $15 balance? Good luck.

I have been doing something for the past few months that might send a
message. If I continued for the next hundred years it would not make a
dent. If a hundred thousand did as I am doing it would be noticed but
still wouldn’t mean a thing. But if the number got into the millions it
would start to make a difference.

I have been sending 1 cent more than what is due on every bill that I
get. Citi sends a CC balance of $134.82? I send them $134.83.

I have a small sample of about 30 bills that I have been doing this
with. Well more than half get it right. On the next month CC bill you
get the Prior Balance as (-0.01). What this means is that a real person
actually got the bill and the check (or electronic payment) and made the
correct entry and gives you the once cent credit you deserve. This
result should not be surprising as people make incorrect payment amounts
all the time. What I am trying to do is force more human intervention.
That is time and money.

I paid a six-month insurance bill and added a penny to what was owed. So
far I have two letters that show the credit. How much does two computer
generated letters cost? At least a dollar a pop. There is no better
measure of success of my approach than to get a letter like this.

More exciting are the bills that do not pick up the one-cent variance.
When this happens your penny is lost. It will show up in an Exception
Report. Some computer recognizes that there is a penny that is not
properly accounted for. I assume that this happens (accidentally)
thousands of times a day. But what would happen if the number of
Exceptions all of sudden exploded to 20-50 million a month? Once again,
this would force humans to get involved.

The cost of this social protest is very minimal. Say you get 4 bills a
month. 48 pennies a year is the maximum cost. Based on my experience the
net cost would only be 20 cents or so. But the rewards on the 20 cents
just keep on giving. Every month after you can see the results. Either
they do it right or wrong. Either way there is an incremental cost. Your
penny is gumming up the system.

What if 10mm people did this on a regular basis? That would be a half
billion one-penny exceptions a year. If just one in ten resulted in an
“exception” it would mean that there would be an incremental cost
someplace of at least $50 million. In my dream world 25mm people would
do this and get just two letters a year as a result. Cost of that? Who
knows? It would imply 1.2 billion exceptions a year. That would be
noticed. (It would blow their collective minds if this started to

So if you’re mad at the system and want some revenge send an extra penny
to your friends at the gas-company, electric company, insurer, bank, CC
company, etc. I highly recommend it. The cost is negligible. Yes, it is
true that this form of protest will accomplish very little unless it
catches on like a fad. But should you get (as have I) some evidence that
your lousy penny is in fact causing someone someplace to spend time and
money trying to figure it all out you will beam with happiness at your
success. I am.

More articles from Zero Hedge….

Will Silver Be Worth More Than Gold? Perspectives On A Coming Silver Shortage

December 31, 2010 by · Leave a Comment 

Zero Hedge

While hardly news to regular readers, most of whom have ridden the 80%+ wave in silver in 2010, the following video from Future Money Trends explains some of the key basics about why silver, which is unique in the precious metals basket in that it is also an industrial metal (and has thus sparked much debate over whether or not it, like gold, is “money“), and provides some perspectives on why silver just may one day be more valuable than gold. Some facts: while there are 10 ounces of silver, for every ounce of gold mined, the most of it is not “free flowing” and is locked up in industrial uses; for every $1 in SLV investors still pile $7 in GLD; above ground silver has declined from 10 billion ounces in 1950 to 5-700 million ounces in 2010 (compared to an increase in above ground gold from 1 billion to 7 billion ounces); the gold to silver ratio is at 50x while the average long-term is 15x, industrial demand for silver is up 18% in 2010; and much more. Of course, there is no reason why one has to pick one or the other. Historically both have been tiered stores of value, with the Roman empire going so far as to succumb its silver currency when the going got tough. The simple fact is since global deleveraging will likely continue and since the US government will need to print trillions, most of it monetized by the Fed, the ongoing currency dilution will continue to result in increasing P prices: pretty simple. The only downside case to gold and silver holdings would involve massive asset liquidations a la September 2008, which also would mean that the Fed has lost control, that the US dollar is no longer the reserve currency, and that after the smoke settles, non-fiat currencies will rise again. And that includes both gold and silver.


h/t Daniel

More articles from Zero Hedge….

THe eND iS iN SiGHT (HaPPY 2011)

December 31, 2010 by · Leave a Comment 

Zero Hedge































More articles from Zero Hedge….

Davidowitz’s Rant On Overt Optimism In The Retail Space And Malls Is Not Only On Point, But Has Been Preached At BoomBustBlog For 3 Years & Counting

December 31, 2010 by · Leave a Comment 

Zero Hedge

Zerohedge has brought attention (in their own very colorful fashion) to a Pimm Fox interview of Howard Davidowitz, chairman of Davidowitz & Associates Inc. on Bloomberg. It is well worth the 12 minutes of your time. Here are some choice quotes form the interview as excerpted by ZH:

“I am not surprised by the strength
of retail sales, because i knew that 30% of consumers are responsible
for retail sales, and these 30% did much better because of the
performance of capital markets. I don’t think it is indicative of
anything going forward. I don’t think the economy is going to get any
better. If you look at our fiscal and monetary policy, we went two
trillion in the hole last year. Two trillion… to produce this… and unemployment went up to 9.8%! We’ve spent two trillion we’re printing money we’re going bananas. Our balance sheet, we’ve got $2.6 trillion on there, and what;s on there government securities, and MBS.”

…”If interest rates go up a point
Bernanke’s bankrupt. Everything he’s bought is underwater. All the MBS
are underwater, the whole country is underwater.”
The serial defaults that are coming from Europe anywhere between now and 2013 will indeed spike interest rates. Review my latest posts on the topic, or the Pan-European Sovereign Debt Crisis series for more info than you can digest in a week.
Landlords better start figuring it out pretty quick
because they already have occupancy problems, rent problems and
everything else right now. I don’t think the CRE problems are fixed by
any means. That’s why we are going to close hundreds of community
banks going forward, we are going to close hundreds more. Those CRE
debts are coming due and they will not be able to be rolled over.
We’ve got lots of problems still coming up in the banking system, and
the problems in the real estate issue is here for a long time.

I’ve covered this topic left and right, since 2007 after warning
that GGP was insolvent and bound to crash. I got into a tit for tat
with the CFO who called my research “garbage”. A year after that
comment, they filed for bankruptcy. See the whole story and over 700
pages of analysis at

Most recently, we went throught the true weaknesses in the entire
retail business, not just from the real estate side. This is a note that
a BoomBustBlog reader sent me over the summer…


I took a screen shot of my play money account and the shorts
from the four part series on why the consumer isn’t coming back. 
Consumer retail has been nailed since May and from the 4 stocks you
picked, here are two I chose to follow.

This is an example of exactly what we were talking about in our
subscription documents regarding the ridiculous run up in consumer
discretionary shares when taken in context of  the American consumer
and the stress born from the Pan-European Sovereign Debt Crisis (click the link for our detailed analysis). You can find the earlier articles in this consumer mini-series as follows:

  1. What We’re Looking For To Go Splat! Part 1: macro arguments against the spike in retail stocks
  2. What We’re Looking For To Go Splat! Part 2:
    A list of 147 retail stocks with attributes that causes on to
    question their gain in prices, with a shortlist of companies who may
    very well go “splat”!
  3. Is
    the Consumer Really Back? Well, It Depends On If You Believe What
    the Government Tells You or Whether You’re An Indendent Thinker
    – The American Recovery and the North American Economic Outlook.

There are still a couple of mall REITs that have been levitating
above water, but have but so much time left. I will be commenting on
them in detail soon.

More articles from Zero Hedge….

The Market Ticker – The Dead Sign Affidavits – Nationwide

December 31, 2010 by · Leave a Comment 

By Karl Denninger, The Market Ticker

When are we going to see law enforcement actually enforce laws?

She died in 1995. Yet her signature later appeared on thousands of affidavits submitted by one of the nation’s largest debt collectors, Portfolio Recovery Associates Inc., in lawsuits filed against borrowers.

Some regulators complain that the use of Ms. Kunkle’s name reflects an epidemic of mass-produced, sloppy and inaccurate documentation in the debt-collection industry.

Complain?  Sloppy?  Inaccurate?

Perjury is a felony!

And using the signature of a dead person sure looks like perjury to me (can’t swear to what you can’t see because you’re dead!) along with "uttering" – that is, forgery. 

It has to be forgery since the person is dead, right?

"When you see corner-cutting like this, it’s alarming," Minnesota Attorney General Lori Swanson said about the Kunkle case.


The State Attorney General for Minnesota calls this corner-cutting?

I guess robbing a bank in your jurisdiction would be "corner cutting" when it comes to acquisition of money, right?  It’s just an easier way to get money than actually earning it honestly. 

Law enforcement, including attorneys’ general, sucking off banksters and their cohorts in the "debt collection" industry is an outrage.  These are not "cut corners" they’re apparent felonies and must be investigated and prosecuted as exactly that.

What The Attorneys General of this nation at both Federal and State level have proved, beyond any reasonable doubt, over the last three years is this:

There is no longer a rule of law in this nation and there are no longer law-enforcement agencies that will enforce the law when the party harmed is an ordinary citizen.   None.  Neither political party will bring a single felony-level charge against these jackals.

I leave to the reader’s own determination what sort of response is appropriate in light of the continuing documentation that willful and intentional refusal to investigate and prosecute apparent felonious acts is not an isolated incident but rather has become the standard and expected procedure and response by alleged "law enforcement" at the highest levels of our government when it comes to those firms, including but not limited to banks and collection agencies.

More articles from the Market Ticker….

Goldman Sachs is a Bank: "The Best Way to Rob a Bank is to Own One"

December 31, 2010 by · Leave a Comment 

By Larry Rubinoff, GoldmanSachs666

William K Black who wrote the book, “The Best Way to Rob a Bank is to Own One,” talks about how the banks, including Goldman Sachs, pulled off the greatest scheme since the 1929 crash to obtain monstrous amounts of money to the detriment of the people of the United States. Because the fraud occurred at the highest levels of the banks, including the CEOs, It is referred to as accounting control fraud. The fraud promised large amounts of bonuses and pay to all. The systemic scheme was a sure thing. It appears that the banks had no loss reserves on their accounting books. Instead loss reserves fell to record lows even though massive bad loans were made.

If Goldman Sachs was insolvent in 2008 (and we know that they were borrowing massively from the Fed which suggests insolvency), then it should have been shut down rather than bailed out by the taxpayer. Goldman Sachs is right now pretending that recovery has occurred but the rules were gimmicked to the banks’ advantage so that mainly finance has recovered. In spite of the mortgage crisis, not a single arrest, indictment or conviction has been made!

These two videos can be seen here

More articles from Larry Rubinoff….

2011 Predictions: Not the Time to Buy a House

December 31, 2010 by · Leave a Comment 

I finished up my predictions for 2011 during Thursday’s Wall St snoozefest. As always, these are just my opinions and they shouldn’t be used as investment advice.

Here we go:

Read more…. »

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