Wednesday, August 25, 2010

Economy Heading for a Systemic Collapse into Hyperinflationary Great Depression

An Interview With John Williams,

When Fed Chairman Ben Bernanke admits to seeing an "unusually uncertain" economy ahead, it's pretty terrifying to imagine what he's really thinking. What John Williams envisions – and he's by no means looking to the far horizon – is a systemic collapse, a hyperinflationary great depression and the cessation of normal commerce. Despite that bleak outlook, however, when the economist and editor of sat down for this exclusive Energy Report interview, he also had some good news.

The Energy Report: A few months back, John, you said, "if you strangle liquidity you always contract an economy and deliberately or not, liquidity is being strangled, resulting in sharp declines in consumer credit, commercial and industrial loans." Does this mean it would spur more economic growth if banks actually started lending?

John Williams: It sure wouldn't hurt. We're still seeing contractions in liquidity, and that's adjusted for inflation. In real terms, M3 money supply is down almost 8% year-over-year. It's the sharpest fall in the post -World War II era. It's not so much the depth of the decline in the liquidity or the duration, but the fact that the liquidity turns negative year-over-year that signals the economy turning down.

We had the signal in December of 2009 indicating intensification of the downturn, in this case, within six to nine months. We're in that timeframe now and see softening numbers. People are talking about a weaker economy. Even Mr. Bernanke has described the economy as "unusually uncertain" in terms of its outlook. Wording like that from the Fed is a pretty good indication that something's afoot. (more)

Jay Taylor: Turning Hard Times Into Good Times

click here for audio

Is the U.S. the Next Bear Stearns?

By: Dan Weil

The U.S. government is handling its finances just like Bear Stearns, paying for long-term liabilities with short-term funding, says Jason Trennert, chief investment strategist at Strategas Research Partners.

The difference is that the government prints its own currency. “But the private sector has shown that’s not a very good way of running a railroad,” he told video.

About 60 percent of the Treasury’s debt matures within three years. That begs the question of why the government isn’t issuing debt as long-term as it can, Trennert says. After all, some companies are looking at issuing 100-year bonds to lock in these low interest rates. (more)

Low mortgage rates, prices fail to stop home sales from sinking to 15-year low

By Alan Zibel,J.W. Elphinstone, The Associated Press

WASHINGTON - Home prices in many parts of the United States scream bargain, and mortgage rates haven't been this low for decades. So why are houses across the nation sitting on the market for so long?

Sales of previously occupied homes in the United States fell 27 per cent in July, the weakest showing in 15 years, the National Association of Realtors said Tuesday. It was the largest monthly drop in the four decades that records have been kept.

Potential buyers are hesitating because they think home prices still have further to fall. Potential sellers — those with the stomach to put their homes on the market at all, anyway — are reluctant to lower their prices.

"It really is a self-fulfilling prophecy," said Aaron Zapata, a real estate agent in Brea, Calif. "If all buyers perceive that home prices are coming down, then they will stop making offers — and home prices will come down."

While the standoff plays out, home sales are plummeting. (more)

Medium-Term Declining Trend Channel

Market behavior was negative today as the open was a gap down and recovery never happened. Looking at the 10-minute bar chart below, you can see how the market just rolled over and hardly put up a fight to regain losses.

After we had the long-term signal change to SELL yesterday, it became clear we needed to zoom out and reevaluate the scene. Looking at the daily chart below you can see how we drew a declining tops line from April high to the July high. From there a line parallel was drawn and moved downward to form a trend channel. You can see that the previous market lows line up quite closely. (more)

Check Out All Of The Huge Rallies Japan Has Seen On Its Way Down The Tubes

CREDIT MARKETS: Lackluster Housing Data Further Helps Bonds

(Dow Jones)--High-grade corporate bonds were given a fresh boost Tuesday as weaker-than expected U.S. housing sales data sent investors flocking to safe-haven assets and caused Treasurys to rally tighter.

The CDX North American Investment Grade Index deteriorated more than 3% from Monday night's levels to trade at 112.51 basis points after the data. Home sales dropped 27.2% for July, twice what was expected.

There were two decent-sized high-grade-bond deals in the primary market, and no high yield deals. In secondary trading, Citigroup's 5.375% bonds due Aug. 9, 2020, were most active, trading 14 basis points wider on the day according to MarketAxess figures, after news reports suggested overdue loans at the firm's consumer lending business are higher than what the firm has been forecasting.

Investment Grade

The rally in Treasurys and demand for strong corporate bonds helped Yum Brands, Inc. score the lowest coupon and yield on record for 10-year debt issued by a BBB-minus rated company.

The Louisville, Ky., restaurant company, which owns Kentucky Fried Chicken, Pizza Hut, Taco Bell and Long John Silver's, sold $350 million in bonds maturing Nov. 1, 2020, upsized from an original offering of $300 million. (more)

US Said Preparing New Laws to Seize American's Retirement Accounts

First They Destroy Private Healthcare in America – Yes, the socialist Democrats won their first battle to destroy the private healthcare system in the US but the automatic IRA bill now in Congress is their next attack to also control, confiscate and destroy the private retirement system. Ultimately, nationalizing healthcare is designed to create a major new government revenue stream by replacing private health insurance with a nationalized, mandatory, government program and their goal is identical with your retirement plan.

Washington will decide the annual forced healthcare premiums on all Americans with the middle and upper wage earners paying far higher premiums than the subsidized voting constituencies who will be the primary beneficiaries of the program. Their goal is to allow Washington to steal much of the annual health premiums (taxes) for current revenue needs and to bailout and subsidize with your premiums the health programs for the voting blocks of poor and underemployed, illegals, unions and the millions of city, county, state and federal government employees. Eventually there will be no private competition available except for the very wealthy and Washington will constantly increase premiums just as they raise taxes today. (more)

Is Suncor Energy the Best Oil Company for Your Portfolio?

We have looked at enough of these companies at this point that we can step out of the box a little and try to understand what is going on at Suncor (SU), which is the big Canadian outfit that is working on that oil sands project.

To summarize the process, there is a deposit of oil sands in the Athabasca region of Canada. This material is mainly minerals, but on average is 11% hydrocarbon, which is comparable to the level found at a lot of the solid waste landfills in the nation.

There are two processes for extracting this stuff: strip mining, which involves removing several meters of overburden material, and extracting the sands using enormous cranes and trucks. The resultant material is then heated with water into a slurry, as much of the hydrocarbons are extracted as possible, and then the material is cracked into a crude-oil-like substance which can be used as the feedstock in a more or less normal refinery. (more)

4 Stocks Poised for a Post-Summer Rally

By David StermanAs the market grinds down toward the end of the summer, we're seeing the typical seasonal malaise when a number of good companies quietly drifts down to 52-week lows. And the selling may not be over. The S&P 500 has historically been the weakest in September, dropping an average of -1.3%. The good news: stocks really build a head of steam after that. The S&P 500 typically rises +0.7% in October, followed by average monthly gains of +1.5%, +1.9% and +2.1% in each of the next three months.

Savvy investors always keep some cash on hand for these summer doldrums, as it can be a fertile time to start researching unloved stocks that should find new appreciation as summer turns to fall. Here are four names hitting new 52-week lows on Friday that should be quite appealing for long-term investors. (more)

Chart of the Day