Spain Debt Rating Cut

I am confused that the US rating agency Standard & Poor's cut Spain's debt rating. These agencies usually cut rating waaay too late, when its so obvious a company or country is having issues.

In any event, another country, as mentioned in yesterday's post, joins the Sovereign debt crisis that is building.

Anyone long here the general market needs to put stops on their positions TODAY. As this sovereign debt crisis grows, and as the US government threatens to "reform the financial industry", this market can take a turn over night at any time.

I still have some shorts, and some long gold miners. Long gold miners is not safer than any other play, but it does have the hedge of a lottery ticket play in case things get real crazy.

US 30 year interest rates aren't doing so hot, as concern spreads. The US could be in for trouble in the next 30-60 days with rates. It is impossible to tell how quickly the US debt rating changes. I am still looking at the US having a longer period before getting sucked into the sovereign debt crisis, but who knows.

There are many stocks to look at that are starting to fail, Google, Buffalo wild wings, Panera, Amazon, CheeseCake, Chipolte, and quite a few others. Notice some stocks in the food sector my friend John Chinnock and myself was shorting a YEAR ago are starting to fail!

If S&P500 closes below 1150, I am very concerned we are headed much lower, otherwise waiting to see what happens. A dump in the markets by 100+ points is very possible one of these days.

Sovereign Debt Crisis Starting

I find it unsettling I am no longer in the camp of financial market crisis is imminent, and flipping just recently. My view is the private investment banks and large bank crisis has been successfully transfered to government solvency around the world.

Mission complete for the Federal Reserve Bank, US Treasury, world banks, and the world governments following these institutions.

Now the the focus has been shifted to countries, I don't have a reason to believe that countries unable to pay their debt will fall in succession quickly. However we are starting to see is the government confidence deterioration starting in the worst debt ratio countries.

Greece's debt was cut to junk, putting pressure on Italy and Portugal.

What the result was a stock market decline, with the Vix (volatility index) spiking huge, and Gold prices going higher with almost all other asset classes declining.

So I am sticking to my decision, although poorly timed, to keep my short positions lower, and keep my Gold miners, looking for an opportunity to buy more. What would change my mind is S&P 500 blowing through on a closing basis below 1,100. Also to see gold start resuming a hard swan dive lower.

I have chased these market declines for faaar to long. Fool me once, shame on you market, fool me 10 times, shame on me, and I am going to wait before I try to be the fool the 11th time.

Make no mistake, the world western government currencies and government solvency, including eventually the USA, is where this is headed. Nothing is certain, but without key leadership, I expect to be a multi-year unfolding event.

In the near term, as countries are under financial stress, this is "good news" for American US bonds for now. Hence, my spin that the US market isn't near a collapse as focus is shifted on smaller countries.

This Week in Charts

Updated charts after a DOWN market Monday. Monday's have been up most of the time for the last 8+ months, so interesting that Monday was a down day.

I really feel like going long today was wrong in miners, that the cliff is about to be hit. But then again, I have felt that way for months.

Anyway, charts, nothing really exciting:

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Market Trend

Well, trend is your friend, supposedly. I am entering in long positions in gold miners.

This market just won't die, and i don't see any reason it should.

We have fictional accounting, and a government who is gaining huge control over the corporations through financial backing.

So I am going back into the miners, slowly. Pretty much in hindsight the best play i could have made back in august 2009 is to never leave the miners.

Lets face it, everyone wants the market to go up, and no one cares about the repercussions of the financial decisions today. It is part of human nature. This thing will end once the US Treasuries go parabolic up, and with other countries having issues, that could keep US Treasury rates under control for a while.

I still have some shorts, but lightening up Monday.

So since this "perma bear" is finally flipping, this is the top. But I have to go with the trend, up up up up up up up up up. When this is done, it's one for the record books.
I'll do this week in charts Monday night.

NJ Governor Christie

Interview from about a week ago, with NJ Gov Christie, including death threats.

Sovereign Debt Blowout in pictures

The world by following the US example, will be experiencing government blow-ups, which may result in government failures. Iceland failed spectacularly last year, with very little fanfare in the press.

This year Greece, Portugal, and eventually Italy and Spain will come under attack. The contagion will spread over the year(s), culminating in the USA, if the US doesn't reform before then.

Mish covered Greece's sovereign debt attack in pictures, to show how quickly interest rates can get out-of-control. Notice Greece's rates where inline with all the debtor nations, including the US. Click on Mish's article for complete coverage. Portugal is next up to bat, then Italy. Curious to see how much the German's will be willing to "give" money to these other countries to keep the Euro alive.

General point is, storing wealth in government bonds is also not 100% safe, although for the next few year(s) US bonds is a great bet. I am just not convinced that the US is good for next 5 years.

US – White
Germany – Red
UK – Blue
Portugal – Orange
Italy – Green
Greece – Yellow
Spain - Purple

From WebSufinMurfs FinancialBlog2

Consumer Credit Card Debt

Thanks to Paul Lomba for this link today.
You will find on this web site a nice graphic summarizing various aspects on consumer credit card debt.
Worth a drive by glance. Click on the link here to website billshrink, then click on the graphic for a better view.

The Debt Shuffle

The debt shuffle games the politicians have been playing for decades may be in for a bit of a bump in the road. The politicians have been running trillion dollar deficits, backing trillions of private debt with public debt, and in general total disregard for fiscal restraint.

But I really don't blame the politicians, its the creditors willing to lend to the US government at historically low rates. Why not spend now and pay later, with such low rates?

Well, that game is in for a multi-decade challenge here and now, and its in the 30 year US treasuries. I am very curious to see what happens next, does rates break up, threatening the government debt load (and therefore solvency), housing prices, and corporations living on debt?
Or does the markets decline, causing fear and running money into treasuries, suppressing rates?

In any case, the US treasury interest rates for 30, 10, and 5 year notes below.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Trend line dating back to 1970 hit

I posted on a curious observation of a market trend line dating back to 1970, in March 2010. Back then I pontificated we may see the market hit 1200-1250 range, to hit the long term trend line.

Well we got it, and on the 4-16 the market recoiled. Curious to see in the next few months if this line holds or we can break substantially through it. Before 1995, hitting the line usually resulted in a market retreat.

From WebSufinMurfs FinancialBlog2

This Week in Charts

I really want to ensure I keep "this week in charts" going. I want to keep a general perspective on the market valuations.

Friday had some interesting movement, I wasn't floored, as you will see in these charts.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

SEC threatens to do its job, I don't believe it.

The SEC filed a CIVIL lawsuit Friday against Goldman Sachs, accusing the corporation of fraud.

The NYTimes has an article Sunday stating "SEC puts wall street on notice", I don't believe it.

In general, any attempt, no matter how weak handed, that the law matters is a step in the right direction. Further, now that the SEC has filed a Civil lawsuit against Goldman, I would expect in the weeks to come every other country will start showing it's citizens that it too, is posturing against wall street and try to slap their own suits.

Any country that files a suit after the SEC does, shows it is a spineless sheep, unable to lead, and unable to defend it's own citizens. I will not be impressed. Fraud has been staring everyone in the face, as I have pointed out numerous times. To follow the SEC lawsuit and get a "spine" to do the same in their jurisdiction is laughable. I hate to sound like an arrogant American, but true independent leadership requires LEADING not FOLLOWING an American institution, the SEC. But I digress.

The SEC filled a CIVIL lawsuit, not a CRIMINAL one. This is a critical point. Until I see criminal prosecutions, I remain unimpressed. I wouldn't be surprised if the market resumed its rally in weeks or months to come. I need to see the S&P 500 break below 950 before I even give this downturn any credit.

I still envision that the criminal (if ever) prosecutions will start only AFTER there is financial decimation at these companies, rendering criminal prosecutions too little, too late. Once criminal prosecutions happen, that will be the signal to me the US economy will be on the mend.

So for now, its wait and see, granted the market could have finally topped and started a multi-year downturn, but I doubt it. A day does not make a trend change, nor does a week. For now its watch and see.

Music Video

Music Video on all the change we are witnessing, pretty entertaining.

Oh, Canada, Crack House or Mansion?

I recently spent quite a bit of time in Canada for business. I really liked it there, I can see many advantages for the average person to live there.

But, there is some troubling indicators from Canada. First and foremost, their real estate market hasn't crashed like many other places. But that isn't to say they don't have over-valuation issues.

Mish wrote some good articles linked below, but this link from friend Paul Lomba is by far the most entertaining AND educational site. I highly recommend you play the game:

Crack House or Mansion? (Vancouver Canada real estate)

Mish Articles

California USA vs. Ontario Canada - Which State (Province) Is In Worse Shape? Canadian Banks vs. US Banks Comparison

Housing Bubble Comparison: US, UK, Canada, Spain, Australia, Japan

Parabolic Moves

Looks like the market is entering a parabolic move up.

Parabolic moves end, badly.

There is NOTHING wrong being long here, and its pretty bad to be short.

But be sure to have stops, and stick to those stops if you are long.

Days, weeks, months, years, it is really an unkown where this is going.

But keep in mind, we still have "suspended" normal accounting practices (mark to market), the Fed lending trillions against garbage paper (pennies on the dollar collateral paid out at near full face value), easily 5+ years IF we start a recovery here and now to recover all the lost jobs.

I don't see how a sustained recovery could be starting with many states near bankruptcy, countries near brink of fiscal disaster.

This is the final blow off, when this is done (year , 3?) no one will want to buy a stock for the rest of their lives. I am almost there already. :)

Good luck, and I haven't been posting, but I have been mulling. I will have a series of posts at some point with multiple rants with a new blog format.

Unfunded Pensions

I lifted this directly from Mish, but pretty nifty chart, so here it is.

Unfunded pension liabilities by state.

Powered by Tableau

Too big to Nail

Several bloggers pointed out that a judge held off on a guilty plea from Boston Scientific on covering up they issued defective components in heart defibrillator.

Also that Pfizer was found to break the law by mis-marketing drugs for use other than approved by the government.

While this on the surface seems not a big issue, both are starting to show a a pattern, that I am seeing continually evolve. Too Big to Fail, now too big to Nail. America was once looked upon as a nation of laws, it is becoming what many other countries are, a nation of wealthy privilege.

The Boston Scientific issue is not yet resolved, so there is still hope for Law vs Privilege. But if Boston Scientific isn't held to task on the letter of the law, it will show that corporate privilege ignoring the law doesn't end in the financial sector. One case doesn't prove anything, but time will tell if a pattern is emerging.

What does this have to do with stocks? Well, I have been away from my daily rantings, doing quite a bit of thinking, I hope to issue a series soon.

Dow 11K Monday, skies the limit until 30 year us treasury bond hits 5-5.4% range.

China vs America, a Fraud competition

The US has suspended customary accounting rules, well covered in this blog, to allow companies to remain solvent through fictitious accounting. Further, the government is loaning money at near zero interest rate, and giving higher interest rate for money on deposit.

This has net effect of banks receiving money from the federal government for taking loans, through interest payments. I could rant quite a bit about the lack of law and big money games. Sufficient to say, the US isn't behaving as a nation of laws applying to everyone equally.

Then there is China, issuing propaganda that they are a solid nation, with solid growth, and a spectacular economy. Hardly. I have blogged a few times on China, and the massive fraud games they are playing. China is much more opaque in the games they are playing compared to America, and the real estate boom/fraud/bubble makes America's look like an opening act.

Chinese by the millions are buying real estate, (you cannot own in china, its a 70 year term lease), as an investment. Many of the real estate is not even occupied, it is paper wealth. Sure there are monthly costs, but the increasing valuation is expected to cover those losses. There is no thought of a real estate collapse since the propaganda is believed, that the Chinese government will not allow any bubble to burst. That the upward spiral in real estate is never ending.

Further, for each piece of land bought, it is purchased from the CHINESE GOVERNMENT, since China is communist, the government owns everything. The purchase is a 70 year lease on the property, not ownership. Not that 70 years is close enough to matter anyway.

But the point is, the money goes right to the local government coffers, so there is a direct incentive to keep the boom going.

Chinese banks are centrally controlled through the government, perpetuating the funding.

It is a fraud competition, who falls first so that side can take the blame. There is very high stakes here, if China falls first, I would expect flight to US economics. If US falls first, China may be able to gain international economic ground as their facade is kept as the US falters.

Money as a tool is suppose to represent a work debt note, to be paid back. In these games the work will not be paid back, as the work was over paid for and fraudulent.

Bottom line, this is a game, that in the end, both will blame the other, and someone may get a little pissy. That is how trade wars or real wars start.

This Week in Charts

Chart wise, I see nothing to press markets down, SPX up to 1250 is clear sailing.

Only "downside" is the market has rallied quite a long time. A trajectory that long may have a decent counter trend down, but don't count on it.

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

From WebSufinMurfs FinancialBlog2

Marc Faber video blitz

First video, interesting point, US debt level is so high, the government is at the mercy of the market and therefore it must prop up the market.

In these interviews, Mark touches on wide variety of topics including government failures, USD, gold, Europe, etc.

Government controls significant amount of private economy

I do not know if what is quotes is accurate, nor do I agree with everything in the video.

However, the "fake" recovery I have been focused on is re-enforced with the thought that banks, health care, and private companies like GM, AIG, Fannie/freddie is owned by the government creating a false economy.

Top basic economic beliefs

I have been delinquent on my blog postings, hopefully after I get through this funk I'll still have a few readers.

I have been trying to take a step back, and think on multiple levels about the stock market.

There is some basic premises which I still will not give up on, and they are:

1) There cannot be a long lasting sustained economic recovery without returning to honest accounting and enforcing the law.

2) There are huge losses waiting to be recognized. Even through crooked but legal accounting and "Free money" from the taxpayer to support companies, the losses must be eventually recognized. There is no such thing as a free bailout.

3) The US is the worlds largest debtor nation by a longshot. Not only is the US federal government near maximum debt load, individual states are near fiscal disaster, down to the citizens experiencing over 15% unemployment. This will also have an effect.

4) The US is not the worst off country, there are many other countries much worse off, and insolvency across many countries is very real. Countries like Greece would be wiped out if it wasn't for the EU and Euro. The US is experiencing reasonable support due to being better out of a bunch of bad economics in countries.

5) China is NOT the world's economic saviour, they have topped America on mass economic fraud by a longshot. And China is not the friend America thinks they are.

6) Gold is NOT money. There is NO such thing as absolute wealth, with possible exception of owning land and leadership positions. (power=wealth) Gold however I still believe will be the end game of a very long process, and the final bubble to end all bubbles at the end of this situation.

7) As India and china, and eventually africa and asia have growing economic wealth, those peoples will want more "stuff". America consumes a disproportionate amount of "stuff'. When over 2.3 billion people have more wealth, the cost for goods for 300 Million Americans will increase as globally everyone competes for resources.

8) Western population growth is slowing, and for the first time in human history, will be on a GLOBAL population decline starting around year 2027. In the long term play for my own retirement, this will have huge effects on global economics, as much of wealth is based on a ponzi-scheme design. (growing demand raises value) This will eventually affect previous bullet.

9) Taxes and cost of living for Americans will go up, significantly over the next 20 years, providing dampening of economics as American's lifestyle becomes more inline with new 2.4 billion people rising economically.

10) US interest rates is the real game to watch, and when rates become unacceptably high for 30 year bonds, then there will be pressure for the government to start taking responsibilities seriously.

I could possibly list another 10 items as rock-solid concepts to keep proper perspective.

But as I digest the market events over the last 4 months, I am still grasping what next?

Truth is, the losses and changing economic landscape WILL CHANGE as listed above. The question is, how do we get there? Through massive devaluation of the USD to reset costs for American's to survive? Or through the US Dollar keeping its value and US citizens having their balance sheets fixed over time through fiscal discipline?

I may do another poll Thursday. Keep in Mind Friday there is no stock market. So thursday is the day.