Friday, December 28, 2012

The 10-Step Plan To End The Era Of Ponzi Finance

The developed world’s Ponzi scheme is caused by record-high levels of public and private debt. As Boston Consulting Group notes, it is exacerbated by huge unfunded liabilities that will be impossible to pay off owing to long-term changes in developed-world demographics. Addressing these challenges at any time would be difficult. To make matters even worse, however, BCG points out that they come at a moment when the developed world’s traditional model of economic growth appears to be broken. This is partly a consequence of the Ponzi scheme itself. The underlying issues cannot be ignored any longer. The developed world faces a day of reckoning. It is time to act. In this excellent layman's guide to the the real world, not only does BCG explain the Ponzi, but they lay out ten critical steps that developed economies must take to definitively end the era of Ponzi finance. Some are sacrifices required of various stakeholders. Others are new social investments, both public and private, that are needed in order to return to a sustainable growth path.

The paper starts with the Origins of the Ponzi Scheme we call modern economies...
goes on to discuss the Broken Growth Formula...

Then lays out ten steps to any solution for developed economies...(more)

Rigging of the Oil and Gasoline Markets – What Will Obama do?

UBS paid $1.5 Billion for manipulating Libor, and Barclay`s already paid the piper for manipulating the Libor rate. Well, it is about time the CFTC get its act together, and start going after the culprits who rig the oil and gasoline markets costing consumers and businesses a mafia tax by paying prices much higher than the markets should be priced based upon supply and demand fundamentals in the consumption marketplace.
Gasoline Market
Today we had another build in Gasoline supplies, up 2.2 million barrels in the week for a fourth straight weekly build. We have had builds of 3.9 million barrels, 7.9 million barrels, 5.0 million barrels, and 2.2 million barrels totaling 19 million barrels build in gasoline inventories in a month.
Well, you say there must be strong demand numbers for gasoline. Nope, gasoline demand in the wholesale market is soft down 2.9 year-on-year, meaning gasoline sales this month are weak as well!
US crude oil stocks 2
Now, what is happening to price? On November 28th 2012 RBOB Gasoline prices were 2.66 a gallon, and today after 19 million barrels of build, (i.e. we no longer have short supplies on hand, about average for this time of year, in fact), RBOB gasoline prices are 2.74 a gallon. (more)

This Value Stock Could Be One of the Best Trades: CJES

Value is widely used to find long-term investments, but it can also be used by traders as a way to reduce risk. Value stocks generally have low price-to-earnings (P/E) ratios or other metrics that are below market averages. The fact that a company trades at a low value reduces the risk of a large price drop since there is usually little room to fall.

For example, if the average P/E ratio in the stock market is about 15, a stock selling with a P/E ratio of 5 is undervalued. If earnings are stable or growing, it is unlikely that the P/E ratio could fall an additional 50% even though the market average P/E ratio could fall by 50%.

To avoid the value trap -- buying stocks that have a low P/E ratio and continue to trade at low P/E ratios for years -- traders can add a relative strength (RS) screen and buy only value stocks that have high RS. This indicates the stock price is moving up, possibly because other investors recognize the value and expect more gains.

One stock that meets those criteria right now is C&J Energy Services (NYSE: CJES), a small-cap oil services company. CJES provides services and equipment needed for hydraulic fracturing processes. Fracking is a potentially controversial topic, and over time, there will be changes within the industry. CJES seems positioned to take advantage of any changes.

Fracking is regulated at the state level and states are always likely to supplement any federal regulations. CJES minimizes regulation risk by diversifying geographically and is active in 9 of the 10 largest shale plays in the country.


CJES also offers a variety of services and manufactures some of the equipment that needed for the process. In a worst case, the equipment could most likely be adapted for other uses.

This company has grown revenue at an average annual rate of about 130% for the past three years. Over that time, the company has gone from losing money to earning $3.82 a share in the past 12 months. At a price of $21.85 a share, the stock is trading with a P/E ratio of about 5.7. Earnings growth is expected to decline next year with earnings per share (EPS) of $3.02 in 2013, and annual EPS growth averaging 20% a year after that.

If CJES traded at only 10 times next year's expected EPS, the stock would be worth $30, giving traders a gain of more than 37%. The chart shows that $28 is a reasonable price target.
CJES Chart

CJES has been a publicly traded company for less than 18 months and has been in a trading range for most of that time. The depth of the trading range, about $6, can be added to the top of the range, near $22, to find the price target. The stochastics indicator is bullish and RS is above 80, which is also bullish.

In addition to buying the stock at a low P/E ratio, traders who buy CJES should place a stop-loss near the center of the trading range, at $19. That makes the risk equivalent to about 12% of the amount invested.

Traders looking to decrease the risk, in dollar terms, should consider call options. It could take a year for CJES to move significantly higher and options are available with an expiration date of January 2014. Calls expiring more than a year from now with an exercise price of $25 are trading for about $2. If CJES reaches $28, these options will be worth at least $3. The risk is limited to the amount paid for the options.

A Better Perspective To the Present Economic Situation

Lesson # 1:

* U.S. Tax revenue:        $  2,170,000,000,000
* Fed budget:                 $  3,820,000,000,000
* New debt:                    $  1,650,000,000,000
*   National  debt:          $14,271,000,000,000
* Recent budget cuts:  $       38,500,000,000

Let’s now remove 8 zeros and pretend it’s  a household budget:

* Annual family income:                                        $  21,700
* Money the family spent:                                     $  38,200
* New debt on the credit card:                             $  16,500
* Outstanding balance on the credit  card:          $142,710
* Total budget cuts so far:                                  $     38.50

Got It ?
OK now,

Lesson # 2:
Here’s another way to  look at the Debt Ceiling:
Let’s say, You come home from work and find
there has been a sewer backup in your  neighborhood….
and your home has sewage all the way up to your  ceilings.
What do you think you should do ……
Raise the ceiling, or remove the crap?

Who’s Been Naughty Or Nice & What To Expect In 2013

from KingWorldNews:
With Europe stumbling into the end of the year, the new Prime Minister, Abe, in Japan calling for more money printing, and the US heading towards the fiscal cliff, Michael Pento writes exclusively for King World News and strongly believes investors should be acquiring gold and gold equities because of the extraordinarily-dangerous macroeconomic environment facing the world today.
Here is Pento’s piece: “It should now be clear to all Americans that our government is completely incapable of voluntarily reducing our fundamental problem of excess debt. The inability of Washington D.C. to address spending, even under the duress of a legal obligation to do so, is flagrantly obvious.”
“The sequestration, which is supposed to reduce our debt by $2.4 trillion over the next 10 years, is not the result of a curse brought to earth by an asteroid. It is a self-imposed act of congress to finally address our nation’s habit of raising the debt ceiling with as much concern as a thief cares about getting a credit line increase on a stolen Visa Card. Isn’t it ironic, then, that those same individuals who agreed on the sequestration a year ago are now doing back-flips in order to undo their insufficient and feeble attempt at austerity….
Michael Pento continues @

Consumer Confidence Plunges, Unadjusted New Homes Sales Slide To Lowest Since February

from Zero Hedge:
Just as we saw with UMich, it appears the hope for change is wearing thin among the people. Today’s Consumer Confidence data missed by its biggest margin in 7 months, dropped below the year’s average, and saw the largest 2-month drop in over 15 months. All age cohorts lost confidence with the eldest most and it appears those earning over $35k are also beginning to worry (as those between $35k and $15k seem more confident). Over 40% expect stock prices to decline and it is expectations that have plummeted from a hope-filled 80.9 to a 13-month low of 66.5. In other news, we got the November New Homes Sales report from the Census Bureau. On the surface the number was good, but like the initial claims dats, below the surface its not as pretty – on an unadjusted, unannualized basis, November saw a tiny 27K houses sold – lowest since Feb 2012. In fact, the only thing that really did soar was the number of homes for sale at the end of the period which rose to 151K: the highest since November of 2011.
Read More @ Zero