Monday, March 2, 2015

Mar 6, 2015 We seem to have entered a second long leg down. This time though we may have an opportunity to bottom fish. The price of oil will plummet as soon as all the storage capacity is filled and oil companies will be forced to shut down some production sharply for a few months. There will also be environmental damages to contend with. But finally the truth will be known that demand is also down and energy prices will be low for months. As the level of our economic river gets lower corporations and banks will start hitting the rocks. By fall we still estimate the stock market will be down 20% to 30% from the high and only then will MSNBC and other “Stupid Party” news/economics stations/commentators start to become embarrassed by their stupid leftist disinformation meant to support the “Stupid Party.”


Mar 5, 2015   Here is a highly probable scenario behind the coming economic collapse due to Quantitative Easing, QE.  Let’s exaggerate the numbers to make it very clear.  Boosting the money supply with QE makes business seem more profitable and very cash rich.  And with the low 0% or -0.2% interest on loans make borrowing profitable and that builds corporation cash.   Corporations can use that cash to repurchase say 20% of their own stock.  That boosts the corporate profit per share by 18% even if they lost 2% that year.  If green mailers like Karl Icahn raid the company they can give all the stockholders the cash as a 20% payout or a dividend.  It should be obvious to anyone with any intelligence that these abuses are going on right now and that kind of apparent economic health is just what happens at a major market top.  It is the reason why QE will cause another great recession or a great depression very soon.  It is what Japan has been doing since 1990 and only makes things worse.  But with Europe starting QE now we face a worldwide economic disaster.  Mergers and acquisitions peak as the cash flooded stock market peaks.  Alibaba is the monument to the coming market collapse.  Note that Japan’s economy in constant dollars has gone nowhere since 1990 when they started their QE.
http://finance.yahoo.com/echarts?s=%5EN225+Interactive#%7B%22range%22%3A%22max%22%2C%22scale%22%3A%22linear%22%7D
   As we have pointed out in the past, there is one broad stock market index and then there are several indices that only include certain stocks what advisors think are the best of the pack.   The DOW is noted for picking the long term winners and the NASDAQ is noted for picking the fastest growth stocks which tend to be the new technology stocks.  And quite naturally the selective indices have a self-fulfilling characteristic that when every advisor agrees something is a long term growth stock they buy the stock and it becomes a growth stock for as long as there is a bull market.  But a bear market is another thing.  There is no way to predict the depths of desperate selling that goes on when investment advisors and their herd of followers who are on margin and heavily in debt are wiped out.  And if you use the DJI or the Nasdaq you will be the last to know the end has begun.  No you need to look at the canary in the mine shaft, the canary that is sensitive and will feint before the explosive gases are dangerous to humans.  Sectors are helpful but they continually rotate in and out of favor.  It is the broader market that covers all sectors and includes the weak as well as the strong that is the best predictor.  If you look at the DJI and the NASDAQ you will not know the direction of the whole market until it is too late.  Those two indices warn of a bear market about a year after the broad NYSE gives the warning.   So far the NYSE has been flat-lined since July 2014 and it gave us a sell signal in early Fall when most stocks tumbled. 
   But there are other economic indicators as well.  We pointed out that every recession or depression is preceded by falling commodity and energy prices because production or demand is slowing up faster than supply.   That is happening now in this Obama recession and it only means Obama is causing a deeper recession or an economic depression.   If Herbert Hoover had blamed his predecessor he might have won reelection just like Obama has done.   Now who will Obama blame since all his domestic and international policies have been tested and have failed.   Obama has worn out all his excuses.
   Oil production is still going up while the price of oil is still going down, because only low profit wells are being turned off so that it is still profitable to pump.  In the mean time the oil is filling every empty tanker and many cargo hulls in the world and there are many empty ships because the trade or raw materials (coal, copper, aluminum, iron)  has plummeted as China and other countries face a growing recession or depression.  That stored oil will suppress oil and gas prices until most of the stored oil is sold.
   It should be fairly obvious now that QE is a destroyer of economies and creates temporary wealth for the rich and does nothing to help the middle class or the poor.  That is the legacy of Obama’s “Stupid Party.”  It may well yet impoverish all Americans and it makes us more vulnerable in a religiously insane nuclear armed world.
 
Challenger job cuts in Feb were 20.9% surging to their highest level in nearly two years as U.S.-based employers announced plans to shed 53,041 jobs from their payrolls now. 
About 20,000 jobs of those are related to the oil glut.
Initial Claims 02/28 jumped to 320K from 313K last time.
Continuing Claims 02/21 rose to 2421K from 2401K.
Productivity-Rev. Q4 2014 declined -2.2% not the -1.8% previously reported when Obama was releasing optimistic numbers.  He degrades the numbers after they are first released so that he can inflate the number in the next report.  The stupid people who always vote for leftists don’t know the difference.
Unit Labor Costs -Rev Q4 rose much more than Obama previously reported, 4.1% not 2.7%.
Factory Orders Jan declined -0.2% after declining -3.5% in December 2014 when Obama reported record Christmas growth in orders and sales.   In summary, Obama is probably about as honest as Putin.  But so far Obama at least does not murder his critics.  He only harasses them with the IRS and every other means he can hide from investigation.
 
The noted Swedish leftist leader, Mr. Jagland, has been fired from the Nobel Prize
committee chairmanship after overseeing a number the controversial awards, including the one made to Barack Obama in 2009.   Rahm Emanuel even had criticized the Obama award and told the committee at the time that it was 'fawning'.   That was before Rahm fell out of favor.  No Nobel Prize chairman has ever been ousted since the awards were first made in 1901.   Now the world asks will the NPC demand the return of the prizes in time before Barack Obama toss it in his garbage along with the busts of the American founding fathers and Winston Churchill.
 
Senate Majority Leader Mitch McConnell (R., Ky.) should have used the nuclear option to eliminate the illegal immigrant amnesty filibuster in response to the Stupid Party votes to block debate on the House-passed Homeland Security bill.   That is nothing akin to blocking Presidential appointments.   Is Mitch getting stupid too?  He had better smarten up soon.  Every Republican that blocked the nuclear option should be identified.  The Stupid Whigs apparently included Arizona Republican Sen. John McCain. Sen. Lindsey Graham, R-S.C., Sen. Susan Collins, R-Maine, Sen. Mike Crapo, R-Idaho, and Sen. Jim Risch, R-Idaho among others.  Abraham Lincoln would not have tolerated a corrupted bill that tacked on Obama’s latest vote buying initiative.
 
Mar 4, 2015   Accounting gimmicks are as prevalent now as they were during the DOT-COM bubble of 2000 under Clinton.  For instance even though current Construction Spending in Jan 2015 was down sharply (-1.1%) and still below the level in 2005,  yet a housing construction stock such as W.P. Carey (WTC) is now 180% higher than its stock price was in 2005 due to the accounting manipulations used to justify today’s high stock market prices.  That’s correct!   WTC ‘s price is 2.8 times as high now as it was during the  Obama-Frank liar-loan stimulated housing boom of 2005-2006.   Yes sir folks, this is Obama 2015 stock market bubble is like the Clinton 2000 bubble.  Today stock valuations are more than 100% to 120% higher than we expect they will be in about another year.  We expect a 50% to 60% drop and if Obama puts the USA into a war or a depression the market could be 90% lower before we can elect a competent president.   And this bubble is true not just of construction but every component of the economy.
The Apple Pay service is reported to be fraught with fraud.   Apple apparently shirks responsibility for the fraud happening on Apple Pay.  This is another less than useless application similar in value to the first GPS system Tim Cook foisted on the public.
Mar 3, 2015   From all indications the market correction is about ready to resume.
IServices Index Feb 52.8 down from 53.5 and manufacturing is doing no better under the “Stupid Party.”  Remember it was the “Stupid Party” that called President Regan senile and stupid.  Now most people have had another Jimmy Carter disaster reincarnated as Barrack Hussein Obama.
   House Senate and House Democrats decide to back a short term bill funding Homeland Security.  The Democrats agree with Republicans that the Supreme Court must first decide on the legality of Obama’s order.  What is hilarious is that the Republicans were willing to take the fall for that ridiculous Obama attachment to the bill with the following headline, “Boehner backs down in DHS funding.”  That headline shows the face saving required for the “Hysterically Stupid Obama Administration.”  Jimmy Carter had the most “Historically Stupid Administration.”  And Jimmy’s Stupid Party mocked President Regan who ended the Cold War and the treat of Russian Nuclear Holocaust.  Now Obama’s Stupid Party is planning to allow Iran to develop nuclear weapons in just ten years.   That would cause an arms race in the Middle East and undoubtedly a hot nuclear war.  Obama has made gangster Putin look smart in comparison.  Putin had one of his critics bumped off the other day and such brazen stupidity will no doubt be the beginning of the end for Putin. 
    Bloomberg analysts predict profit at S&P 500 companies will drop 4.9 percent in the current quarter.   Warren Buffett is apparently preparing for a crash. The “Warren Buffett Indicator,” also known as the “Total Market Cap to GDP Ratio,” has breached the sell-alert status indicating a collapse may happen at any moment.   We warned in September-October 2014 that the market was very much like September 2007 and that the market was peaking and the mainstream would probably call the recession late in 2015 similar to their late call in 2008 after the market was already down over 20%. 
Mar 2, 2015   The Fed seems to be just waiting now for the stock market bubble to burst.  To identify when the stock market bubble is ready to burst, Warren Buffet, who was on CNBC’s Squawk Box this morning, said that any company that continually puts out projections of earnings improvements and continually beats them by a penny or more can almost be guaranteed to be using accounting games to manipulate their stated earnings and is part of the final bubble.  That was the practice that created the stock market bubble of the conglomerates of the 1960s and it is still being done.  But Buffet said his firm does not do it.  It is not illegal and he said he has sometimes partners in buy out deals with firms that practice those shaky accounting games.  When asked if it is going on right now he said yes just look at the earnings being reported.   He said he uses a conglomerate structure to manage his multiple companies together but he does not use debt leverage and the bubble accounting games to manipulate his firm's performance.
Feb 28, 2015   Greenspan threw a wet blanket on Obama’s economic growth BS.  He called the overall economic data for the United States "not strong."  The jobs growth is due to the work week hour reduction.  There is evidence of weakened productivity, he said.  "That is a key statistic which tells how the economy is functioning."
"The Stock Market looks great", but the economy is like "The Late Stages of the Great Depression."  Productivity is not increasing fast enough so the economy is shrinking.  The FED is not the cause and cannot help but they are behind the stock markets being oversold at record highs.  Obama entitlements are crowding out savings and hence slowing capital investments causing productivity to decline and the stagnant economy.    Together they are an imbalance that will resolve itself because the FED has stopped pumping up the stock market. 
Hence the stock market bubble no longer has the FED supporting it and will have the FED reverse the process as soon as the market declines.  The Fed already has the lower phony Obama unemployment numbers it wanted that is caused by the reduction of weekly working hours to under 30 hours as is required in order for a corporation’s employees to be eligible for free health care.  Presently the FED is only waiting for stock market to decline first so that the FED does not get the blame for the stock market’s decline.
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