Monday, February 13, 2012

Marc Faber Interview Fox Business News 10 Feb 2012

Feb 10, 2012 : Is Greece Irrelevant to Global Markets? Marc Faber the author editor and publisher of the Gloom, Boom & Doom Report explains to Fox Business News why he thinks that Greece should have little impact on the markets and why he is bullish on emerging markets

The Financial Crisis Explained: Subprime Mortgage

The Liberty Option Documentary Film : A blow by blow explanation of how the Subprime Mortgage Crisis of 2007 unfolded. This set of events ultimately lead to the Global Financial Crisis of 2008 Subprime lenders (like Countryside) sold the loans to banks (non-depository banks, like Lehman Brothers) so that they could replenish their reserves (so mortgage lenders could keep lending). Investment banks like Lehman brothers took the crappy mortgages and paid rating agencies to AAA or BBB stamp them while hiding the really crappy mortgage loans off their books)=. These investment banks then bundled up these mortgages and sold them to investors (companies, commercial banks, etc)

Martin Armstrong - The Movie Trailer


The year is 2012: Europe is stumbling from one emergency summit to the next, America has gone crashing through the 15-trillion-dollar debt ceiling, people are taking to the streets across the world because they have realised that something has been thrown off kilter; that the banks have spiralled out of control; that governments have lost their grip on public debt.

And after eleven years off the radar, a man resurfaces in Philadelphia, a man who used a computer model and the number pi in the nineties to predict economic turning points with astounding precision: Martin Armstrong predicted the exact date of the October crash in 1987, the decline in the value of the dollar in 1986, the demise of the Japanese bull market in 1990 and the Nikkei crash in 1989. He was one of the most expensive Wall Street market analysts and was named economist of the decade and fund manager of the year in 1998.

But Martin Armstrong refused to play along with the bankers’ game and warned his customers that “the club” were manipulating currency and silver markets. He quickly made powerful enemies: New York investment bankers, hedge funds managers, Salomon Brothers, Goldman Sachs. The FBI and SEC, the US Securities and the Exchange Commission started to show interest in his computer model. In 1999 he was arrested on charges of fraud which he still disputes to this day. He was incarcerated for seven years for contempt of court. After time in solitary confinement and threats against his mother, he signed a partial confession and was sentenced to a further four years. Armstrong says he no longer fears death after everything he has experienced over the last eleven years. Give me liberty or give me death – there is no middle road. Martin Armstrong wants to leave America, the country that calls itself the land of the free, yet imprisons more of its own citizens than any other: America


Why Is Gasoline Consumption Tanking?

Gasoline deliveries reflect recession and growth. The recent drop in retail gasoline deliveries is signalling a sharp contraction ahead.

Mish recently posted some intriguing charts depicting a significant decline in gasoline consumption. Then correspondent Joe R. forwarded me this stunning chart of gasoline retail deliveries, from the U.S. Energy Information Administration: (EIA)

As Joe noted, this data is interesting because it is un-manipulated, that is, it is not "seasonally adjusted" or run through some black-box modifications like so much other government data.

Retail gasoline deliveries, already well below 1980 levels, have absolutely fallen off a cliff. Is the plunge inventory-related, i.e. are storage facilities so full that retailers are simply putting off deliveries?

Though I don't have data on hand to support this, I know from one of my correspondents who is in the gasoline distribution/delivery business that gasoline is very much a "just in time" commodity: gas stations are often close to running out of fuel when they get a delivery. Stations aren't holding huge quantities of surplus gasoline; that's not how the business works.

Given the absence of "extra storage" in gas stations (and the fact that the number of gas stations has fallen dramatically since 1980), it is reasonable to conclude that retail delivery is largely a function of demand, i.e. gasoline consumption.

Even if you dismiss the recent plunge as an outlier, the declines in retail gasoline deliveries are mind-boggling. If you look at the data from 1983 to 2011 on the link above, you will note that delivery declines align with recessions.

For example, deliveries jumped from 50.1 million gallons per day (MGD) in November 1983, when the nation was emerging from the deepest postwar recession then on record, to 58 MGD the following November (1984).

Deliveries steadily rose to a peak of 67.1 MGD in July 1998, declined marginally in the 2001-2 recession and then surged to 66.8 MGD in August 2003. If we just look at one month--say November--then we see that deliveries remained in a remarkably consistent channel from 1994 to 2008, between 54 MGD and 63 MGD, with the higher numbers occuring in the "peak bubble years" of 1998 and 2003.

In 2010, gasoline deliveries declined to the low 40s--literally falling off the charts. In November 1983, deliveries were 51.1 MGD; in November 2010, they were 42.8 MGD, and in November 2011 they were 30.9 MGD.

Does this reflect higher fuel efficiencies in the U.S. vehicle fleet? To examine fuel efficiency and other macro-trends, I assembled some charts of fuel efficiency (courtesy of the Early Warning blog) and a graph of employment, a commonly used proxy for economic activity/growth.

Let's start with some basic data about population and vehicles. There are 254 million passenger vehicles registered in the U.S. Some percentage of these are classic cars and other vehicles that aren't driven much, but nonetheless the number of vehicles that are in regular use is large.

U.S. population in 1983 was approximately 234 million. The U.S. Census Bureau estimates the current population at 313 million.

Vehicle sales declined from a record 17.4 million in 2000 to 11.5 million in 2010.

People are driving less: The Road... Less Traveled: An Analysis of Vehicle Miles Traveled Trends in the U.S.. (2008)

Driving, as measured by national Vehicle Miles Traveled (VMT), began to plateau as far back as 2004 and dropped in 2007 for the first time since 1980. Per capita driving followed a similar pattern, with flat-lining growth after 2000 and falling rates since 2005. These recent declines in driving predated the steady hikes in gas prices during 2007 and 2008. Moreover, the recent drops in VMT (90 billion miles) and VMT per capita (388 miles) are the largest annualized drops since World War II.

Here are two charts of U.S. employment which show two periods of strong expansion: in the late 1990s and in 2002-08.

If the number of jobs were correlated to gasoline deliveries, then we would expect deliveries to be close to those registered in 2003 and 1999, since the number of jobs has declined to the levels of those years.

Instead, we find deliveries are dramatically lower:
November 1999: 59 MGD
November 2003: 63.8 MGD
November 2010: 42.8 MGD

Once again, this is not an outlier: deliveries for all of 2010 were between 42 and 46 MGD, compared to deliveries in the high 50s/mid 60s in 1999 and 2003.

There are all kinds of other things that influence the number of miles driven, but there is little evidence that any one factor can account for a 47% drop in retail gasoline deliveries. For example, it is well-known that the U.S. economy has shifted to a digital, service economy in the past 30 years, and since more people can "consume" (via shopping at, etc.) and "produce" (work from home) without driving, then it makes sense that people are driving less.

But if we examine the data, it's difficult to attribute the massive recent drops to people ordering stuff online or working from home more. After all, people were working from home and ordering stuff online in 2003, when gas deliveries reached 63 MGD, and in November 2006, when deliveries were 58.8 MGD.

Deliveries in November 2011 were 30.9 MGD, a staggering 47% decline.

What about fuel efficiency? here are two charts from the Early Warning blog. They show a significant increase in the 1980s, but only modest improvement through the 1990s and 2000s.

If we use the same year as in the employment analysis, 1999, we see there was a 6% rise in efficiency from 1999 to 2010. This would suggest 6% of the decline in gasoline deliveries can be attributed to increased efficiency. But what about the other 40% of the decline? That cannot be attributed to higher efficiency.

I've marked up the first chart to show the secular trends in efficiency and employment.

There are no data-supported broad-based drivers for dramatically lower gasoline consumption other than austerity and lower economic activity. The code-word for "austerity and lower economic activity" that is verboten in the Mainstream Media is "recession." Indeed, if you examine the EIA data, the only causal factor that has backing in the data is recession--or if you prefer, austerity and lower economic activity.

Then there is the price of fuel. People have to go to work, pick up the kids, get their meds, etc., and few urban centers in the U.S. have mass transit systems that are up to the task of replacing autos. So most Americans have what we might call non-discretionary driving. But as the price of fuel rises, people find ways to lower their discretionary driving by combining trips, shopping less often, shortening or eliminating vacations, etc. Enterprises reduce costly business travel with teleconferences and other digital technologies.

Data supports the notion that high oil prices lead to recession. For example, Chris Martenson recently made a compelling case for this in Why Our Currency Will Fail ("Note that all of the six prior recessions were preceded by a spike in oil prices.")

Household income doesn't rise just because oil is climbing in cost, and so the extra money spent on fuel is diverted from other consumption or saving (capital accumulation). Higher fuel costs lower household capital formation and reduce consumption/economic activity.

Oil has been elevated for months, kissing $100 and rarely dipping below $90/barrel. Do higher oil costs explain the decline in gasoline consumption? Once again, they undoubtedly influence consumption, but that cannot explain the 40% drop in consumption. After all, when oil spiked in 2008 to $140/barrel, deliveries only dropped by a few million gallons: from 58.8 MGD in July 2007, before the spike, to 54.8 MGD at the point of maximum pain in July 2008.

The cost of oil has declined sharply from mid-2008, yet consumption has tanked from 54.8 MGD in July 2008 to 42.4 MGD in July 2011. That's a hefty 21% decline.

What other plausible explanation is there for the decline from 42.4 MGD in July 2011 to 30.9 MGD in November 2011 other than a dramatic decline in discretionary driving? That 27% drop in a few months in unprecedented, except in times of war or sharp economic contraction, i.e. recession.

If we stipulate that vehicles and fuel consumption are essential proxies for the U.S. economy, then we can expect a steep decline in economic activity to register in other metrics within the next few months.

Such a sharp drop would of course be "unexpected" given the positive employment data of the past few months. But as the data above shows, employment isn't tightly correlated to gasoline consumption: gasoline consumption reflects recession and growth.

In other words, look out below.

Hedge Against Rising Rates With TMV If rates rise, bond prices should fall -- and TMV should rise

The economy appears to be improving, and so sometime this year interest rates are expected to rise. The Direxion 20-Year Treasury Bear 3x (NYSE:TMV) seeks daily results that correspond to three times the inverse (opposite) of the daily performance of the NYSE 20+ Year U.S. Treasury Bond Index.

The non-diversified fund creates short positions by investing at least 80% of its net assets in futures contracts and derivatives that in combination provide leveraged exposure to the index. It’s a “contra” type of fund, which means its purpose is to move in the opposite direction of the 20-year U.S. Treasury bond. If interest rates rise, bond prices should fall and TMV should rise.

Click to Enlarge

This fund isn’t rated by Morningstar. Net expense ratio is 1.14%. Yesterday on an intraday basis, TMV broke from a triple top, and last week its 20-day moving average crossed through its 200-day moving average triggering a short-term buy signal. The target for this trade is $90. This ETF is also suggested as a long-term hedge against rising interest rates.

Chart of the Day

Stocks have had an incredible run so far since the beginning of the year. The S&P 500 is up a whopping 6.7% during the period, closing at 1342 on Friday.

In December, we surveyed 16 of Wall street's top strategists who told us that the S&P 500 would close at just 1363 by the end of 2012. At the time, five of those strategists had targets below 1342.

Why were they so conservative?

Well, some of the key risks cited included deterioration in the eurozone debt crisis, turmoil in the US political system, and slowing in the Chinese economy. All of which ultimately threatened corporate earnings, which is the key driver of stocks.

Here's the thing: earnings growth expectations have come down sharply. According to FactSet data, year-over-year earnings growth expectations for Q1 2012 have plummeted from 8.0 percent on September 30, all the way down to 0.0 percent this week.

Meanwhile, stocks roared ahead during that same period (See the chart below). This has the bears going nuts.

Have investors gone completely crazy? Maybe. As the saying goes, 'markets can remain irrational longer than you and I can remain solvent.' Credit Suisse's Andrew Garthwaite has written about numerous anomalies occurring in the global financial markets.

There is, however, one explanation for this bizarre disconnect between stocks and earnings expectations: valuation. Indeed, low valuations was one of the key reasons why BlackRock's Larry Fink recommended being 100 percent invested in stocks.

Soaring stock prices (numerator) amid falling earnings growth expectations (denominator) is a very quick way for valuations to rise back to historical norms.


Lindsey Williams - 2012 Events on Flow of WIsdom Radio

A few key points he mentioned during the show is that - “they want to create massive debt before they allow the financial crisis to take place.” “you can survive the New World Order if you know what to do” and “the only thing they fear is people waking up!” Take notes as you listen to this show and share with others.During the interview, Pastor Lindsey Williams covers The Federal Reserve, CHEMTRAILS, Vaccines and Fluoride. This show is very informative and eye-opening.Pastor Lindsey Williams has a number of petroleum industry sources, one of them a former CEO and two BP employees who are so distressed at what is happening in the Gulf of Mexico that they’ve turned whistleblowers. Williams was a pastor at Prudhoe Bay, where he learned about oil drilling. He’s written a book some years ago called The Energy Non-Crisis, which apparently has proven accurate in its conclusions and predictions.

David Morgan: More Bullish on SILVER NOW Than Ever Before

I like Chris Duane and David Morgan. No fear mongering, good analysis and facts. It's guys like these that turn people onto silver stacking...the amount of work required to mine Gold and Silver, plus it's nonrenewable nature places it much higher than those others. You can't just go scalp a bunch of new people to increase your wealth of Gold and Silver. Nor can you walk the beach and increase your holdings I've a similar viewpoint on the value of silver. The paper dollar price is only a consideration in relation to whatever my budget is at the time. After it comes into my physical possession the criteria used for valuing it changes. In my case it's potential utility, personal enjoyment, and lastly store of wealth. People need to move away from the dollar value mentality, imo. Why value it in something that really doesn't have much value anymore?

Chart of the Day - Alexion Pharmaceuticals (ALXN)

The "Chart of the Day" is Alexion Pharmaceuticals (ALXN), which showed up on Thursday's Barchart "All Time High" list. Alexion on Thursday posted a new all-time high of $83.10 and closed up 4.85%. TrendSpotter has been Long since Dec 20 at $68.99. In recent news on the stock, Alexion on Thursday reported Q4 EPS of 41 cents, well above the consensus of 34 cents. Goldman Sachs on Feb 3 upgraded Alexion to Conviction Buy and raised the target to $91 from $83 citing high growth potential, an attractive drug portfolio, and status as a potential M&A buyout candidate. Alexion Pharmaceuticals, with a market cap of $14 billion, develops pharmaceutical products for the treatment of heart disease, and inflammation, diseases of the immune system and cancer in humans.


US Weekly Economic Calendar

time (et) report period Actual forecast previous
None scheduled
Tuesday, FEB. 14
7:30 am NFIB small-business index Jan. -- 93.8
8:30 am Retail sales Jan. 1.0% 0.1%
8:30 am Retail sales Jan. 0.7% -0.2%
8:30 am Import prices Jan. 0.4% -0.1%
10 am Inventories Dec. 0.5% 0.3%
Wednesday, FEB. 15
8:30 am Empire state index Feb. 15.0 13.5
9:15 am Industrial production Jan. 0.8% 0.4%
9:15 am Capacity utilization Jan. 78.6% 78.1%
10 am Home builders' index Feb. 26 25
2 pm FOMC minutes 1/26
Thursday, FEB. 16
8:30 a.m. Jobless claims 2-11
365,000 358,000
8:30 am Producer price index Jan. 0.5% -0.1%
8:30 am Core PPI Jan. 0.2% 0.3%
8:30 am Housing starts Jan. 683,000 657,000
10 am Philly Fed Feb. 9.5 7.3
8:30 am Consumer price index Jan. 0.3% 0.0%
8:30 am Core CPI Jan. 0.2% 0.1%
10 am Leading indicators Jan. 0.5% 0.4%