Congratulations on the seemingly inevitable passing of a financial “reform” bill that does not reform anything of consequence and has ZERO CHANCE of preventing the next financial crisis!

Oh yeah, and it violates the 4th amendment.

“But Dan, I heard on the the news that…”

STOP!…There is no good way to end that sentence.

My calls have worked out pretty well as you can read here, here, here, and here as well as other posts you are free to read. It’s almost like I know exactly what I’m doing. Oh wait, It’s exactly like that!

I point this out because I feel it necessary to establish some credibility with you as I now have a track record that can be read and seen here. You are being sold a bill of goods literally everyday by the Lame Stream Media and they will bankrupt you and destroy this country economically with their reckless Keynesian policies if you aren’t careful. This economy is a tinderbox. Big things are coming, and I will warn you about them. I hope my track record gets you to listen or at the very least gets you to think about it.

Here is David Rosenberg’s latest take on things. I really like David and think he makes alot of sense. I would not say I agree 100%, but his overall theme the last year has been in line with mine. I have posted some charts over the past year that show what he is essentially talking about which is that these de-leverage cycles last longer than the media would have you believe.

Global debt issues and investor fear have the US mired in a “meat grinder” stock market that likely will last another six to eight years, economist David Rosenberg said Thursday.

Debt-cleansing cycles generally last six to seven years and the current run is in about its second year. Global economies are trying to shed debt, with varying levels of success as several European countries run risk of defaults and uncertainty grows over the effect debt will have on the US.

“The sharp down was the 57% slide from October 2007 to March 2009. The reflexive rebound was the 78% runup from March 2009 to April 2010,” Rosenberg said. “And, Stage 3, the re-emergence of the fundamental downtrend, in classic Carpenter fashion, has only just begun.”

At the same time, broad cycles of low market returns and wild stock swings usually last 16 to 18 years, and this is the 10th year of those conditions, Rosenberg, chief economist at Gluskin Sheff, said in his morning note.

Neither trend, if kept intact, would bode well for stock prices.

“It will not be a straight line down but the fundamental trend line is down as far as US equity prices are concerned, and racked with intense volatility,” Rosenberg said.

He pointed out that 22 of the past 26 trading sessions have seen swings of 200 points or more in the Dow Jones Industrial Average, while positive moves often are accompanied by low volume.

“Look at what has happened just this cycle-the worst stock market since 1937 followed by the best stock market since 1932 followed by the worst May for the Dow since 1940,” Rosenberg said. “There’s a word for this type of market. It’s called a meat grinder. No return for a decade and yet plenty of sleepless nights on this roller-coaster ride.”

For investors, “classic long-short strategies” should be the order of the day in which investors protect themselves against lower moves in the market.

“This is an environment extremely conducive to income-oriented investment strategies,” Rosenberg said.

He referenced legendary analyst and investor Bob Farrell’s 10 Market Rules to Remember, particularly citing Rule 8 which says bear markets run in three cycles: a sharp downturn, a reflexive rebound and “a drawn-out fundamental downtrend.”

I had a conversation with someone yesterday about the FED’s interest rate policy and the booming expansionary recovery that our corrupt media tells us is taking place. He is a huge Obama fan and a Keynesian. Here is how it went…

HIM: I really think this is a real robust V shaped recovery. Obama’s stimulus worked and he saved us.

ME: OK, if that is true then we should raise interest rates back to a normal level so we don’t get hit with inflation.

HIM: Whoa, we can’t do that . That will kill the economy!

ME: You just said we had a robust recovery. If it was so robust, we wouldn’t need virtually zero interest rates.

I could have talked about so many other economic issues like unemployment for example, but why? My point here cuts to the core flaw with the argument that we are in a robust recovery. I see this on CNBC all the time. People say the economy is great and getting better and then bristle when higher interest rates are proposed.

The recovery is not real if it only can exist in a basically zero interest rate environment. A complete idiot could make tons of money if they were allowed to borrow unlimited money from the FED at .25%.

As of the close Friday, oil is $75.11 a barrel. Remember that the market has been crushed the last 5 days on fears of huge debt and continued economic weakness and oil fell right along with the market. Until this latest drop it had been above $80 for almost 3 months and was on the way to $90.

We still have a weak economy here in the USA and the dollar has actually held up pretty well lately. Yet, oil has climbed. Remember the last time that oil was climbing like this towards $150 we had an extremely weak dollar and a strong economy with much lower unemployment than we have now. This is a big problem.

While the economy in the USA is still limping along, most of Asia is booming. Bubble or not, for now they have a demand for commodities including oil. Top notch investors know that all paper money is suspect right now. Government around the world to varying degrees have spent trillions of dollars they do not have to bail out everyone and engage in massive government intervention. Oil (and gold) is being used as a de facto currency right now which means more accumulation by professional traders, countries, and even the people who run pension funds. This puts upward pressure on the price.

Obama’s latest sham announcement of new drilling is a complete lie from top to bottom. Net, it is a loss for oil production. He locked up tons of resources and said in a few years their will be lease sales. Yeah, good luck with that guys. Even if Obama was really interested in this, he would get rolled by the oil companies. He’s already been rolled by Wall Street and all our enemies. Sarah Palin kicked the oil companies asses and in the process got more oil to market for the people. She would lift all restrictions and play hard ball. She would cut good deals that incentivize new production while making sure that we aren’t getting ripped off. She has done it before! Of course, she’s the dummy according to the media and Obama is the genius. I want you to remember that when you are cursing up a storm as you fill up your gas tank.

With the terrible oil spill in the gulf, idiots are out in force declaring that no more offshore drilling be allowed. Their stupidity will actually result in more oil spill accidents and higher prices. Less offshore drilling here means far more oil tankers from overseas will be needed to bring us IMPORTED OIL. Tankers are far more likely to have accidents. Lack of production means upward pressure on price, and our current government has no interest in increasing production. Actions speaks louder than words.

The dollar has been stronger lately, but do not be fooled. This is happening because the Euro is in full meltdown as the European socialist welfare state collapses into riots and anarchy. By comparison right now, I suppose the dollar is good. Eventually, the dollar will return to its weakness. After all, are the fundamentals for the dollar strengthening or weakening? Trillions of new debt is obviously a sign of weakness. Other countries forming a cabal to replace the dollar with a currency that is backed by commodities is obviously a sign of weakness. I could go on.

Now, what happens when the economy does actually pick up and demand increases? What happens when the weakened dollar returns to put more pressure on commodities priced in dollars like oil?

Do I have to answer this question? Isn’t it obvious?

As you see here, had you listened to me you would have made alot of money the past year or so. If you did, you are up huge right now and should get out. Could the market go higher? Of course it could. I have said that the FED and the Obama administration are both engaged in a reckless free money agenda. This agenda can drive stocks up, but is doing incredible damage long term. It is a bubble, but bubbles can last a long time so the market moving higher is not impossible. When the bubble pops though, look out.

So, you are up if you took my advice and now you should take your huge profits and be happy. You won’t go bankrupt making a profit.

This is one of the most entertaining people I know who talks about the economy and makes serious points at the same time. He hits a few important issues here and does it with his typical delivery. Trust me, the video is five minutes you should see as there are too many gems for me to highlight. These quotes are great, but it is ALL in his delivery.

On those responsible: “They buried the American financial system, and they’re all working for Obama.”

On Chris Dodd: “His record is just a tad shaky.”

On March 13, 2009 I told you I had bought positions in…
MO,BP,NOC,LVS,MGM,T,NTGR,CHK,RIG,DE,UA,INTC,COP,DHIL,GD,BA,LMT,RTN,GROW

That was just over a year ago. Excluding dividends, here is how those stocks have done since then.

When I invested in these stocks on March 13, 2009 I did not distribute my cash evenly like I show in this chart, but you can see that even if you did with the hypothetical dollar amount I show here you outperformed the market by a wide margin. I used the same dollars invested for each stock so you could see the percentage gain without any distortion. For example, if you put more into LVS then you would have made more overall.

Below are two charts of the Down Jones Index and its similar counterpart in Japan the Nikkei 225. Notice how horrific the Nikkei has been since 1990. In the last 20 years, it is down roughly 70%. In the last 26 years it is flat. Our last 10 years in the DOW were essentially flat.

The steady drop since 1990 in the Nikkei can be described as a debt deleverage cycle. This has happened before all over the world including in the USA, but the last 20 years in Japan is an extreme example. The USA economy is far more dynamic than Japan ever was, which means it will be more difficult to repeat their anemic market performance.

However, we are making many of the same mistakes Japan made in dealing with our current economic crisis and therefore the economy will sputter along for years until we get our act together. What shape that sputtering takes is still in question. Just how bad will it get, and how long will it stay that way is a question that has a wide range of outcomes.

I have studied this situation non stop for years. I knew it was coming and I acted accordingly. I warned everyone on the blog and everyone who would listen to me in person. Here’s the problem…

Every scenario that I give a decent chance of happening going forward is bad. The staggering deficits and low interest rates (free money) from the FED point to serious inflation at some point in the future. At the same time, residential housing still has not bottomed, wages are doing anything but rising, unemployment is still a disaster, and credit has been cut and may still be contracting for consumers which all point to deflation. There is also the possibility that we enter into 1970′s style stagflation where inflation picks up and growth lags. Oh yeah, or the whole ponzi scheme the government calls the economy could just blow completely.

I have worked every number and model I can and I cannot see a good scenario playing out. Now, a less bad scenario could certainly occur, but that is still not good. People in America have gotten used to rising standards of living and luxuries most countries can only dream about, but that is changing due to inept government policies finally blowing up in our faces.

Does anyone believe the DOW would be up the way it has been the last year without the FED’s next to zero interest rate FREE MONEY policies? If you don’t, then what happens when these rates rise?

By the way, lately bond auctions have not gone that great and rates have started to climb.

It is is said that history may not always repeat itself, but it often rhymes.

You think nothing as bad as Japan the last 26 years can happen in America? Remember, it could happen to you.

This must be said.

Warren Buffet is celebrated throughout the media, and by CNBC in particular. Given the events of the past 18 months you would think they would have asked the great oracle a tough question or two, but that never materialized.

This is a man who champions himself a great capitalist. He also advocates liberal economic policies like high taxes on “the rich” while decrying wealth inequality. He seems like a nice man, but that does not change the fact that he is a fraud and a hypocrite of the highest order.

This is a man who calls his annual shareholder meeting, “Woodstock for capitalists.” Yet, he was on the phone with congress in late 2008 advising them to pass the $700 Billion bailout that was going to directly impact his very own portfolio. Take a look at the all the TARP companies my friends and you will find that Mr. Buffet benefited probably more than any single person in regards to the bailout. His investment portfolio was invested to the tune of billions and billions of dollars in companies that needed bailouts. So, Mr. Buffet who decries wealth inequality, lobbied for the richest man in the world (himself) to get a taxpayer funded bailout for his investment portfolio. What a guy! What  man of the people! Odd, how no one at CNBC thought this was worthy of questioning?

They were not interested since he pushes their social agenda and is useful as a club against true capitalists like myself and others when they are actually given air time.

When his money was on the line, all of a sudden he was not interested in protecting the middle class taxpayer. No, this time he was fine with looting them in order to bail out his bad investment choices. Had the TARP not been passed, the oracle would have lost billions.

Remember that the next you see him sitting with Barack Obama with his big smile and his “man of the people” routine as he praises Obama’s policy of wealth redistribution.

Below is a condensed version of a longer interview with Thomas Sowell. He is my favorite economist/commentator and is also the author of several books. I have them all in my library.

President Obama has complained for a year that “the banks aren’t lending.”

So, the morons in the White House have a brilliant plan to deal with it. They are going to slap the banks with a punitive tax amounting to $90-$100 billion. Since banks lend at a ratio of a minimum 10:1, this means that $1 trillion less will be lent to small business, corporations, and individuals.

If Obama thinks bank lending is bad now, wait til he removes $1 trillion of loan capital.

If the architects of the bailout (like Tim Geithner) wanted to prevent these bonuses and spur bank lending, they would have demanded that the TARP funds be used to improve their balance sheets, and if any profits were made from the investment of these funds, then those profits would be used to offset rising loan losses further strengthening the banks. The administration also would not be engaged in wealth destroying policies that have made entrepreneurs reluctant to get loans in the first place.

As it stands now, many banks are still suffering, but the profits they are earning are being paid out as bonuses and not being used to rebuild their balance sheets since they know the government will not let them fail since as in Citigroup’s case they are owned by the taxpayer.

Also, our investment in Citigroup is taking a beating today as Obama pushes this bank tax. So Mr. Taxpayer, you bought Citigroup and now Obama is causing that investment to go down in value! Wow! Is he available for financial consultations?

This is all one big ponzi scheme so the government can pay for the limitless bailout they have guaranteed Fannie and Freddie and the tens of billions we have put into GM.

One last thing, Warren Buffet who was a huge supporter of Obama’s pap has come out strongly against the bank tax. He of course owns shares in Wells Fargo and other financials. Hmmmmmm.

If every plumber in the USA disappeared tomorrow, what would happen? We would be in deep shit.

If every intellectual mainstream economist/columnist/thinker/pundit disappeared tomorrow, what would happen?

NOTHING.

For whatever reason, I have good instincts when it comes to the stock market, economy, and investments. I always look at the numbers, but even if the numbers are as good as can be, if my instincts tell me to stay away then that is what I will do.

I often watch TV and see an “expert” on the economy bombard the viewer with data points that back up whatever his or her forecast is. Lets take commercial real estate as an example. The trendy forecast lately seems to be that commercial real estate has bottomed or is in a nascent recovery already. I have seen this forecast made countless times over the last month or two. Had I been on the show when this “expert” gave this forecast I would have replied with this little story.

For the past 12 months I have been driving past a newly constructed strip mall. It looks very nice and has ZERO tenants. For the past 9 months, there has been a huge sign out front saying they will give you 12 months free rent if you sign a lease there. Today, there are ZERO tenants. They are literally giving away free retail space for a year and can’t get one tenant! This is a good neighborhood with good average income and a below average crime rate. Does this square with a commercial real estate recovery?

Inevitably, the “expert” would tell me that while there certainly are still some areas struggling, my ANECDOTE is just that and does not represent the overall commercial real estate market as the “data” clearly shows.

Let me tell ya something…If it ever comes down to my instincts and anecdotes vs. “expert” data or government (BLS) statistics; I’ll take my instincts and anecdotes EVERY SINGLE TIME.

Don’t be afraid to trust your instincts, especially when you have the track record to back it up.

(By the way, be on the lookout for the possibility of a LUDICROUS seasonal adjustment to the unemployment report upcoming. The government can and will make the jobless rate literally ANYTHING IT WANTS.)

I resolved a few years ago to literally never believe government statistics. After years of study, I have come to the conclusion that the government produced unemployment rate should almost always be 50% or so higher than what it is purported to be.

We now sit around 10%, meaning that it should be closer to around 15%. Other statistics minded people think it should be even higher than that, but hey I’m a nice guy. And no, I am not talking about the U6 number which includes underemployed people. The U6 number should also be 50% higher taking it from around 17% to around 25%.

The problem is, the government and their media allies have a virtual stranglehold on the data and information flow. The Internet is breaking their monopoly up, but it remains a tough nut to crack.

“Stranglehold” - Ted Nugent (via YouTube)

Here is Senator Judd Gregg’s take. (from National Review Online-The Corner)

Gregg: Welcome to a New America   [Robert Costa]

American government changed last night. “We are now functioning under a parliamentary form of government,” says Sen. Judd Gregg (R., N.H.) in a conversation with NRO. “An ideological supermajority in Congress, along with a government run by community organizers, has taken over.”

“They’ve taken over the student-loan program, they’ve taken over the automobile system, and now they’re taking over the health-care system. There is no limit to their belief that people should be controlled by smart bureaucrats in Washington,” says Gregg. “They’re putting our country on a path that will reduce the quality of life for the next generation, undermine our nation’s wonderful exceptionalism, and Europeanize our economy to curb its growth.”

Harry Reid’s health-care bill “was purchased,” says Gregg. “Our system of checks and balances is gone. We now have a government that lurches with great speed even though our system is founded upon incremental change.” And don’t hope that the House stops the runaway train, he says. “I think the House is ideologically even further to the Left than the Senate. There are many people there who are committed to taking us down the road toward nationalization.”

“In the future, discretionary dollars won’t be able to be spent on college or a new house, but on this massive new burden for Americans,” says Gregg. “Eventually, at some point, the pressures on the private sector will tip the scales so that employers offering private insurance send people over to the health-care exchange. It’s all part of their ultimate goal to get a vast amount of people subsidized by the government.”

This is an “unsustainable course for our nation,” says Gregg. “We can’t sustain the debt we’re adding. Soon we’ll reach banana-republic status.”

I agree. Actually, it is worse.

http://blog.american.com/?p=7572

Here is a very bearish case for the economy being made by Martin Hutchinson at prudentbear. You can read the whole piece here.

Here is the part where he lowers the boom…

At some point, probably before the end of 2010, the bubble will burst. The deflationary effect on the U.S. economy of $150 plus oil will overwhelm the modest forces of genuine economic expansion. The Treasury bond market will collapse, overwhelmed by the weight of deficit financing. Once again, the banking system will be in deep trouble. The industrial sector, beyond the largest and most liquid companies and the extractive industries, will in any case have remained in recession – it is notable that, in spite of the Fed’s frenzy of activity, bank lending has fallen $600 billion in the last year. Unemployment, which will probably enter the second downturn at around current levels, will spike further upwards. The dollar will probably not collapse, but only because it will have been declining inexorably in the intervening year, to give a euro value of $2 and a yen value of 60 to 65 yen to the dollar.

In the next downturn, the Fed will not be able to cut interest rates, because inflation will be spiraling, as in 1980. Instead it will need to raise them while dealing with a profound crisis in the bond markets. Capital in the U.S. will become still more difficult to come by, and unemployment will approach 15%. The U.S.’s only saving graces will be that the inflation will have prevented much further decline in the nominal prices of houses, while the decline in the dollar will have finally swung the payments deficit towards balance. U.S. real wages will be forced downwards by high unemployment, while banks’ relief on the home mortgage front will be balanced by a tsunami of collapsed credit card debt and other consumer debt.

2011 and 2012 will be very unpleasant years, as the Obama administration struggles to get closer to budget balance without pushing up taxes so far as to cause yet a third recession. Stock prices will be at or below their March 2009 lows, and will stay there even as earnings of export-oriented companies will be robust. (Conversely, retailers dealing in cheap imported goods, such as Wal-Mart, will be devastated.)  Wages will be generally declining relative to prices, although may show some growth in nominal terms as inflation will be considerable. Foreign goods and services will be inordinately expensive in dollar terms.

If he is right, and he certainly could be, then this is bad, real bad. Even if he is close, it is still incredibly bad. If true, it will also mean that Obama will be in deep trouble come 2012. Even the media might not be able to save him if this scenario plays out.

I bet you hear on TV how the market “looks forward.” When it is going down the market is telling us that tough times in the economy are coming, and when it is going up it tells us that things for the economy are looking up.

This is a myth.

Here is the proof. What was the market telling us at 14,000 on the DOW? It was hitting all time highs so by the pundits logic it would mean that the economy was looking good going forward. Uh Oh!

What happened next was a precipitous drop to well below 7,000 on the DOW and the worst recession (depression) than most have seen in their lifetimes. So, how prescient was the market at 14,000 exactly?  

There are many examples of this, but this is the latest that everyone saw.

Here is the truth. In the short to medium term, the stock market has almost nothing to do with the real economy at all. It can go up and down violently with no real correlation to REAL economic strength or weakness. There are countless reasons why this happens and of course you can pick out individual stocks that have their own unique story.

Sometimes the market is accurate in forecasting the future and sometimes it isn’t. It all depends on a variety of factors so each case has to be looked at separately. Just know that the market as a forward looking indicator is not always a good barometer of current or future economic strength.

When asked whether she was worried about how her resignation as Governor of Alaska might effect her political career, Sarah Palin responded, “Politically speaking, if I die, I die. So be it.”

She is not afraid, which is one of the reasons I like her. She knows everyone in the media is literally out to destroy her both personally and professionally and she is now ready for the onslaught.

Do what is right and if it does not go the right way, at least you can sleep well knowing you did it right. I am willing to go down guns blazing with someone like that.

Remember when the “expert” pundits on TV said a few months ago when she resigned that she is finished and how she has no future? Well, a weird thing happened on the way to obscurity. Within 48 hours of the date announcement, and before there was even a cover, Sarah Palin’s book “Going Rogue” rocketed to number one at both Amazon and Barnes and Noble.

It comes out in a little over 6 weeks and is already number one!

This reminds me of the time when Larry King asked Jerry Seinfeld if “Seinfeld” got cancelled. Jerry humorously reminded Larry that there is a big difference between being cancelled and being number one.

Take it from me, Sarah Palin is far from being cancelled.