Steve Christ - Angel Publishing

The Mortgage Bankers Association Takes a Bath on Headquarter Sale

The irony here is so rich that it speaks for itself.

As it turns out, The Mortgage Bankers Association is more qualified to rent than it is to own.....

From the Washington Post by V. Dion Haynes entitled: Mortgage bankers group sells D.C. offices to Bethesda company

"Even the pros are taking a beating. The Mortgage Bankers Association, its membership expert in real estate, sold its $90 million headquarters in downtown Washington on Friday for $41 million.

The three-year-old, 10-story building at 1331 L St. NW — built just before the office market soured — was bought by the CoStar Group, a commercial real estate information firm that plans to move its headquarters from Bethesda to the District. The city, which has been negotiating with CoStar for several months, offered the company a $6 million break on its property taxes to lure it from Maryland.

The sale comes as commercial real estate troubles are rapidly multiplying in the Washington area. At least 20 percent of commercial properties in the region are worth less than their mortgages, experts say, compared with less than 1 percent before the recession.

The Mortgage Bankers Association moved into the building in 2008 just as the real estate market was crashing, and ended up paying millions of dollars more when interest rates rose. Moreover, the leasing market slowed considerably and the association had trouble getting other tenants into the 168,000-square-foot building.

The industry lobbying group has struggled financially in recent years, as the market collapsed and lending dried up, with members dropping out as they lost their jobs. Its membership fell to 2,500 from 3,000, officials said in 2008.

"It's a little bit of irony that in the middle of the mortgage crisis brought on by the bad lending practices of many members of the Mortgage Bankers Association that they got caught up in the same problem," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal research group."

Chalk up another housing bubble casualty....

We're sorry sir, but the underwriter has denied your loan application. Please feel free to try again in a couple of years or when your financial situation has improved.

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NEWSFLASH: Social Security is Now Cash Flow Negative

The world is full of crooks and liars...

And no ordinary con-man, Charles Ponzi was perhaps the most famous swindler of them all.

A nearly penniless Italian immigrant, Ponzi bilked thousands of investors out millions in 1920.

His bait, however, was as old as the hills. He promised his investors a 40% return in just 90 days. Naturally, it worked like a charm.

In fact, at his peak, Ponzi's promise became so irresistible that he was making $250,000 a day in a time when that kind of haul was off the charts.

But as everyone later came to learn, King Ponzi had no clothes. Behind the curtain there was nothing...absolutely nothing.

The promised investments in postal stamps were never made and Ponzi's scheme collapse of its own weight. Ponzi's magic, as it turns out, was in simply using the money he stole from new investors to pay off the old. He robbed Peter to pay Paul.

And when no more greater fools could be found, Ponzi's investors lost everything and Charles eventually went to jail. Nice mug shot huh?

But unfortunately, Ponzi's scheme was really never put to rest. Others like Bernie Madoff just picked up where Charles left off. One of them is your Uncle Sam, who is now running the greatest Ponzi scheme of them all.

It's called Social Security and for suckers like me who will never see a dime in return, it's the national scam writ large—-one of many.

And while I have no problem with keeping promises to retired folks, the way the program has been bankrupted by politicians irks me to no end. What's more, they continue to insist to the gullible that there is "nothing to see here" when everyone else knows otherwise.

The funny thing is the whole mess is now starting to blow up in their faces—just like it did with Mr. Ponzi himself.

The bad news is that the growing recession is making it happen well ahead of schedule since unemployed people can't be fleeced.

As result, the Social Security system is now paying out more than it receives.

That's called cash flow negative and 78 million baby boomers are only going to make it worse. The numbers in this case will never add up.

Unless, of course, we bail them out too...

From the Washington Post by Allan Sloan entitled: Social Security could be next to need a bailout

"Don't look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system.

A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.

Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing — in other words, a taxpayer bailout.

No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.

The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).

This means that without the interest income, Social Security will be $28 billion in the hole this fiscal year, which ends Sept. 30.

Why disregard the interest? Because as people like me have said repeatedly over the years, the interest, which consists of Treasury IOUs that the Social Security trust fund gets on its holdings of government securities, doesn't provide Social Security with any cash that it can use to pay its bills. The interest is merely an accounting entry with no economic significance.

If you go to the aforementioned pages in the CBO update and consult the tables on them, you see that the budget office projects smaller cash deficits (about $19 billion annually) for fiscal 2011 and 2012. Then the program approaches break-even for a while before the deficits resume.

It would have been a lot simpler to fix the system years ago, when we could have used Social Security's cash surpluses to buy non-Treasury securities, such as such as government-backed mortgage bonds or high-grade corporates that would have helped cover future cash shortfalls. Now it's too late.

But this year's Social Security cash shortfall is a watershed event. Until this year, Social Security was a problem for the future. Now it's a problem for the present."

I wonder if the Chinese have any idea that they are never going to get their $800 billion back?

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Sub Prime Nation

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Here's What Every Wealthy Energy Investor Already Knows...

The U.S. Department of Energy has indicated that enough electric power for the entire country can be generated by covering about 9% of Nevada with solar power systems. This is a plot of land roughly 92 miles by 92 miles.
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The Institute for the Analysis of Global Security has stated that if all cars on the road were hybrids, and half were Plug-In Hybrids by 2025 -- U.S. imports would be reduced by 8 million barrels per day. That's about 80% of our daily consumption!

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OOPS!: The BLS Over Counted 824K New Jobs

Don't look now but the Federal Government is about to admit to gigantic mistake. Apparently, they don't count so well.

Due to its "birth/death" model the Bureau of Labor Statistics (BLS) has undercounted the number of unemployed by over 800,000 jobs in the last 12 months.

OOPS......

You see, somehow throughout the last 12 months of one of the greatest recessions on record, the BLS model showed more jobs were created by imagined new businesses than were lost by those that went under.

All of which would only make sense in the twisted world of a government statistician.

Luckily for the markets, this is a story that has been known for sometime now.

So while this news may shock a few on Main Street in the morning, Wall Street will probably yawn.

Here's the story from CNNMoney entitled: Poof: Another 800,000 jobs disappear

"As bad as the government's jobs readings numbers have been during the Great Recession, we'll soon find out the real situation likely was worse.

Much worse.

Job losses during the recession may have been underestimated by close to a million jobs. So instead of employers cutting just over 7 million jobs from their payrolls since the economic downturn began in December 2007, it's expected that the Labor Department's new estimate will be a loss of 8 million jobs.

"It's an enormous understatement of the severity of the crisis," said Heidi Shierholz, labor economist with the Economic Policy Institute, a union-supported think tank. "It confirms that things were actually worse on the ground than what the reports suggested."

The new reading will come when the economists at the department's Bureau of Labor Statistics release their annual revision of U.S. payrolls from April 2008 through March of 2009 Friday, using data that wasn't available as the monthly readings were being estimated and reported.

Typically the revision results in only a slight change in the previous estimate — about 0.1% to 0.2% of the total number of jobs. But there was nothing typical about the twelve month stretch that ended last March.

But the department has already given a preliminary look at this Friday's revision, and it says it believes it will show 824,000 fewer workers on payrolls than the current estimates.

That would be the biggest downward revision in the 30 years for which comparisons of those adjustments is possible."

It is a comedy I tell you...lies, damn lies, and statistics.

The cleat of reality is out there folks—just don't expect to get it from the government. It is not in their interest.

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Biotech Vaccines Boost the Bull Market

As you might expect, Bill Gates can't stand viruses. Yet it's not malware or Trojan Horses that have earned his ire these days.

Instead, Gates is focused on the kinds of bugs that cause infectious diseases — like malaria, hepatitis, tuberculosis, and HIV/AIDS. Along with his wife Melinda, Gates has left Microsoft behind and since devoted his life to delivering new vaccines to the countries ravaged by these and other diseases.

And unlike a lot of other "big" names, this power couple doesn't just prattle on about these problems when the spotlights are turned up. Through the Bill and Melinda Gates Foundation, they actually work to search for cure and treatment for them — both on the ground and with the power of their personal fortune.

So it wasn't that surprising last week when Bill and Melinda pledged $10 billion over the next decade to help develop and deliver vaccines for the world's poorest countries. And that donation is on top of a previous $4.5 billion gift.

But as they say in their foundation's mission statement: "We take risks, make big bets, and move with urgency. We are in it for the long haul."

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Meanwhile, by Gates' own calculation, his own good works and those of others could save as many as eight million children by 2020 if those efforts eventually hit full stride.

"Vaccines" Melinda Gates says, "are a miracle — with just a few doses, they can prevent deadly diseases for a lifetime."

Vaccines Boost the Biotech Bull Market

However, that revelation is not one that is unique to Bill and Melinda. On the contrary, new vaccine development has become the fastest growing segment of the new biotech bull market.

In fact, while prescription drug sales are forecast to rise by 30% over the next five years, vaccine sales will likely more than double — from $19 billion in 2008 to over $39 billion in 2013.

That's five times the $8 billion in vaccine sales in 2004...

What's more, says Emilio Emini, head of vaccine research at Pfizer, "Even if a small portion of everything that's going on now is successful in the next 10 years it's going to be characterized as a golden era."

Needless to say, that's a far cry from the days when English physician Edward Jenner first noticed that dairymaids who had cowpox had an immunity to smallpox. Testing that premise, it was Jenner who extracted fluid from a blister on a dairymaid and injected an 8-year old boy with it — and the very first vaccination was born.

And sure enough, that little boy, James Phipps, never got smallpox either; this gave way to an entirely new technique to prevent infectious diseases.

A little over 200 years later, those same techniques are now looked upon by Big Pharma as an essential path to growth, since generic competition, shrinking pipelines, and the shadow of a health care overhaul have put a dark cloud on future sales...

Ground-Breaking Vaccine Stocks

As a result, big companies like GlaxoSmithKline (NYSE: GSK) have ramped up vaccine production and are building new vaccine plants to support the possibility of several more drugs. After producing just one vaccine in 1997, Glaxo now sells 30 vaccines worldwide and is currently developing 20 more.

And why not?

With vaccines like Prevnar and Gardasil bringing in sales of $2.7 billion and $2.3 billion respectively in 2008, vaccines have become a major new growth area in the biotech industry — something of a bull market within a bull market.

And it goes without saying that even small successes on some vaccines in development — particularly for Alzheimer's, AIDS, and various cancers — would likely bring in untold billions more is sales.

What's more — as I discussed in an earlier article — new provisions in the health care bill would give developers of ground-breaking biotech vaccines as much as 24 years of statutory protection from generic competition. Currently, that patent protection lasts for only eight years.

That's why companies like Dendreon (NASDAQ: DNDN) can jump by 1,049% in the blink of an eye on positive clinical studies.

Take a look:

That's what happened last spring when the news broke that its lead drug, Provenge, cut the death rate from prostate cancer by a mere 20% (around 5,500 per year). The drug uses a patient's own cells to prompt the body to fight the disease, leading many to call it a vaccine even though it is given as a treatment rather than a preventive.

Even still, if finally approved by the FDA on May 1, sales of the vaccine could easily exceed $1 billion in short order.

But the larger truth is that drugs like Prevnar, Gardisil, and Provenge are just the tip of the iceberg when it comes to biotech vaccines...

Headed down the pike is a third generation of vaccines that holds the kind of promise that will make early investors small fortunes.

They are called DNA vaccines, and not surprisingly, Bill and Linda Gates have been funding some of the research for these groundbreaking new treatments for years now. In fact, I'll explain how these new vaccines have the power to change the medical landscape in next week's article.

As for PC Guy, during a week when Steve Jobs had the ear of the tech world with the iPad, Gates actually trounced his counterpart in matters of much greater weight.

You can decide for yourself which endeavor is more important... but my money is on Bill Gates.

Your bargain-hunting analyst,

Steve Christ, Investment Director

The Wealth Advisory

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Chanos on China

If you're interested in the great Chinese bubble debate, here is an insightful video on the subject from famed short-seller Jim Chanos.

And while the video itself is on the long side, it's a great look behind the argument that the Chinese miracle is about to hit a huge pothole.

Roll the tape...

It looks like Chanos has nailed another one.

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Welcome to Capitalism, Comrades

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We're about to Raid "China's Pantry" for Up to 5,758%

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FHA Defaults: Many More on the Horizon

Here is a story that should interest you....

Because when this one finally comes tumbling down the taxpayers will be on the hook for every single penny of it. You see, those awful subprime loans never really disappeared.

Instead, these folks simply moved into FHA loans—which in most cases are nothing more than subprime deals with the backing of the federal government.

In fact, your Uncle Sam has been using FHA loans to fund non-prime borrowers for some time now--all the way up to $729,750 in some cases.

That's how desperate we've become to prop up home prices (the old limit was $417K). The funny thing is that we are expecting different results this time, which by definition is insane.

However, the cold hard reality is that the agency now expects defaults on 25% of all the loans they insured in 2007, and 20% of those backed in 2008.

Those, by the way, were the default rates that imploded the entire sub prime industry.

As for the FHA it looks like it's only a matter of time now before it needs to be bailed out.

To that end, here is a great story on this unfolding debacle from Washington Post by Dina ElBoghdady and Dan Keating entitled: Rising FHA default rate foreshadows a crush of foreclosures

"The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market's recovery.

About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency's figures show.

The FHA does not make loans but insures lenders against losses. And claims have already spiked. The agency had to pay out on 47 percent more loans in October and November than in the corresponding period a year earlier, according to an FHA report.

The number of loans in foreclosure, including those that have not yet been billed to the agency, has also increased. They were up 26 percent in the last quarter from a year earlier.

FHA Commissioner David H. Stevens, who joined the agency in July, flagged his agency's troubles with the 2007 and 2008 loans in October, when he told a House panel that "rogue players on the margin" immediately migrated to the world of FHA lending after the subprime mortgage market collapsed.

Their aggressive lending tactics attracted borrowers with unusually poor credit profiles to the FHA. "That clearly impacted the books of business in 2007 and 2008, and that performance data is showing up very clearly in today's balance sheet," Stevens said at t

Adding to the trouble was a now-defunct FHA program that enabled sellers to cover the down payments of buyers. This meant many borrowers had no skin in the game and were more likely to walk away at early signs of trouble. The program resulted in excessive defaults before it was ended in late 2008, and it is projected to cost FHA an additional $10.5 billion in losses, Stevens said.

For all these reasons, the FHA projects that it will pay out claims to lenders on one out of every four loans made in 2007 — the worst rate in at least three decades. The claim rate should be nearly the same on the vastly larger volume of loans made in 2008." (emphasis mine).

Of course the bigger problem here is that without FHA financing for the last three years the housing downturn would have been much worse at this point. Even still, all they have really done is kick the can a little further down the road.

Let's face it, bubble gum and duct tape is the only thing holding this market together.....

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25% of the World's Rare Earth Metals...
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On January 1, 2010 -- for the first time in history -- Greenland's $273 billion rare earth resource will turn over to a single company.

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5.7 % GDP Fails to Boost the Markets

The winds of change the that we have been warning about just keep on blowing. Since then the S&P 500 is down about 5.75% after falling from a high of 1150.

Earnings, meanwhile, have actually been pretty good across the board.

Even still, the downtrend has continued as the next big question for the markets seems to be "That's great... but now what?"

That sentiment was only further underscored this morning when the GDP number failed to give the markets a much needed boost.

Following a decent number, the markets have basically yawned again—as in "What's next?"

That's the new $64,000 question the bulls can't seem to answer— even though the economy did grow faster than expected at the end of last year.

In fact, the 5.7 percent annual growth rate in the fourth quarter was the fastest pace since 2003 offering the strongest evidence yet that the worst recession since the 1930s ended last year.

However, even after two straight quarters of growth there is still plenty to worry about since the expansion in the fourth quarter was fueled primarily by companies refilling depleted stockpiles, a trend that will eventually fade.

And while the report did provide an upbeat end to a dismal year, the larger truth is that the U.S. economy declined by 2.4 percent in 2009. That's the first annual decline since 1991 and the largest drop since 1946.

What we are left with then is an economy that most analysts think will only grow by 2.5 percent this year. Better yes.... but no where near enough to put a dent in the unemployment number which seems like it will be stuck in 9-10% range for some time to come.

What's needed, of course, is for consumers to ride to the rescue since 70% of our GDP comes from consumer spending.

The problem is wages and benefits paid to U.S. workers ended the year with the smallest rise on records going back more than a quarter-century. What's more, the Middle Class has been practically squeezed into oblivion by the rising cost of everything on their list of must-haves.

As for raises, they can practically forget it since the loss 7.2 million jobs over the past two years has put a lid on wages. Meanwhile, a separate report from the Labor Department released earlier this month showed that nonsupervisory workers' inflation-adjusted weekly earnings fell by 1.6 percent last year, the sharpest drop since 1990.

The result is an incredible amount of economic slack since you can't get blood from a stone. On top of that, consumers just aren't as willing to bury themselves in debt anymore.

Instead they are actually saving money for a change.

That's the "new normal" the markets are struggling to come to grips with.

In the meantime, the S&P 500 is teetering on support...

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2010 Commercial Real Estate Forecast

Fortunately for President Obama, he didn't have to deliver the State of Commercial Real Estate Address last night...

Because if he did, there is no amount of spin that he could have used to put a good face on the reality of the situation: commercial real estate is a disaster in the making.

In fact, that point was only underscored earlier this week when the owners of the Stuyvesant Town apartment complex announced they would default on the $4.4 billion in loans they used to buy the property at the peak of the commercial bubble.

Now, some four years later, that deal has soured just like the rest of them, as falling rents and plummeting real estate values have turned their big purchase into a no-win situation for everyone involved.

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That left Tishman Spenser and Blackrock with their only option: handing the keys back to the lender after missing a $16.1 million interest payment and watching the value of their property fall 65% from the peak.

Left with a property now worth only $1.9 billion, they simply threw in the towel in one of the most expensive cases of jingle mail on record.

2010 Commercial Real Estate Forecast

But let's face it, the Stuyvesant Town debacle is just one of the many strategic defaults headed down the pike right now, especially in a down economy.

In that regard, says Aaron Bryson, an analyst at Barclays Capital, "Stuytown is a poster child for the type of aggressive lending that characterized CMBS at the peak of the market. This is a prime example of these types of loans not working out, and we expect a lot more to come."

Unfortunately, Bryson is not alone...

FDIC Chair Shelia Bair expects the rates of delinquent CRE loans to continue to rise "in the coming quarters," and she reiterated her belief this week that many more bank failures will occur as a result.

What's more, she says: "There's not a whole heck of a lot we can do about it."

In fact just last Friday, regulators shut down five more banks in New Mexico, Oregon, Washington, Florida, and Missouri — bringing the count of U.S. bank failures so far this year to nine.

And guess what? Commercial real estate losses were responsible for a majority of those failures, according to the Federal Deposit Insurance Corp.

"A lot of them were saddled with commercial real estate loans that went sour. You couple that with weak regional market conditions, and that was a recipe for failure for many of those banks," said Greg Hernandez, a FDIC spokesman.

The Perfect Storm

That trend will undoubtedly grind on as the defaults quicken their pace. Over the past year alone, delinquent CRE loans on income-producing properties have risen by 250% to $44.8 billion.

"Not since the early 1990s have we observed this perfect storm of deteriorating rents and occupancies, deflating sales prices, and tight credit that's leading to a lot of defaults," writes Victor Calanog, director of research at New York-based real estate research organization Reis. "With close to $3.5 trillion of loans outstanding and at least 12 to 24 more months of rent declines, I expect to see more commercial properties defaulting on loans."

But despite this "perfect storm," commercial REITs finished the year strong along with the rest of the markets since reaching a low point on March 6.

According to NAREIT, the FTSE NAREIT Equity REIT Index was up 7.15 percent in December, with total returns of 27.99 percent for 2009.

That has been enough to remind investors that just because something is inevitable, that doesn't mean it's imminent; this is why the commercial real estate sector has confounded the bears since the March bottom.

However, those days may be beginning to wane, since the situation on the ground has gone from bad to worse.

In fact, here's a look the most recent headlines from the shrinking sector:

From Reuters: U.S. apartment vacancy rate hits 30-year high
Fitch: U.S. CMBS Delinquencies up 42bps; Peak Not Until 2012
From Reuters: At 17 pct, US office vacancy rate hits 15-year high
From Reuters: US shopping center vacancies hit records - report
From HousingWire: CMBS Delinquencies Reach New All-Time High

Now does that sound like a sector that is going to have a miraculous recovery anytime soon?

... Of course it doesn't. And those headlines are just a few of the many out there.

In fact, practically every single commercial real estate analyst thinks that — over the course of the next two years — the sector will get much worse before the market bottoms sometime in 2012.

That being said, there are a whole host of reasons for this sector to collapse; on the flip side, there is only one reason for it to go up.

But it's a pretty big one: The Fed's wall of liquidity — which can't go on forever.

In fact, even by the Fed's own admission, its helping hand will return to its pocket over the course of the next six months. When that happens, CRE will fall even further all the way into 2012.

Those are facts that can't be glossed over.

The good news: There is an upside to all of this coming turmoil. To learn more about how to profit as commercial real estate tumbles, click here.

Your bargain-hunting analyst,

Steve Christ, Investment Director

The Wealth Advisory

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The Boom Bust Rap Anthem

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The battle rages on.

Hayek is right by the way, speculative bubbles lead to malinvestment—big time.

Just think what we could have done with the trillions spent on McMansions, granite countertops, and hot tubs.

A consumption based bubble is nothing more than a fools errand.

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Case-Shiller Home Price Index Points to a Double Dip

Just when you thought the real estate market was showing signs of a recovery, reality rears its ugly head.

According to the National Association of Realtors (NAR), existing home sales plunged in December, falling nearly 17 percent in their largest month-over-month drop since record-keeping began. Meanwhile, December's inventory jumped to a 7.2-month supply of unsold homes, notably higher than the 6.5-month supply recorded in November.

What's more, according to the latest figures from the Case-Shiller Home Price Index, prices have started to slip again...pointing to a double dip in home prices.

From Reuters by Lynn Adler entitled: Home prices suggest tenuous housing rebound

"Home prices slipped in November and were softer than expected in the latest sign that a rebound in the U.S. housing market is still tenuous, according to Standard & Poor's/Case-Shiller indexes on Tuesday.

The S&P composite index of home prices in 20 metropolitan areas slipped 0.2 percent in November after a revised 0.1 percent October dip, for a 5.3 percent annual drop.

A Reuters survey had forecast a 0.1 percent November rise. Prices were originally reported as unchanged in October.

"Up until a while ago it looked like home prices might have bottomed," said Suvrat Prakash, U.S. interest rate strategist at BNP Paribas. "There might be a double dip in home prices, which could feed through to the rest of the economy," he said, adding that housing still faces many hurdles.

Several major government supports for housing are soon ending, including an extended and expanded home buyer tax credit for which buyers must sign contracts by April 30.

The end of such incentives just as mortgage rates rise and foreclosed properties start hitting the market could pressure prices anew, economists agree."

That being said, the real test for housing looms large this spring when the Fed exits its program to buy mortgage backed securities (MBS).

Since the inception of the program in January 2009, the Fed has spent $1.148 trillion in the agency MBS market, or 92 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010. When that well runs dry, higher interest rates are practically a given which will send prices even lower.

Needless to say, the headwinds are gathering....

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Art Cashin: "A Critical Two Weeks"

Here's the latest from CNBC's Art Cashin.

According to Art, the next two weeks are going be critical for the bulls as regulatory risk has begun to dominate.

Roll the tape....

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To learn more about Wealth Daily click here

The Plunge Protection Team's Historic "Tip-Off"

Some people think the PPT is an Oliver Stone-style conspiracy theory.

Yet this secretive group is as real as the day is long.

And they recently leaked investors to another bombshell of an opportunity... the fuse, of which, has just been lit.

Click here to learn more about the Plunge Protection Team -- and the once-in-a-lifetime money-making opportunity behind it.

Roubini Predicts A Correction

Here's the latest global forecast from economist Nouriel Roubini.

Needless to say, he's still bearish....

From Bloomberg by Le-Min Lim and Shamim Adam entitled: Roubini Says Stock Rally may End Amid Muted Recovery

"A global rally in stocks may end in the second half of the year amid a muted recovery in the world's largest economies and as deflationary pressures limit gains in corporate earnings, Nouriel Roubini said.

Failure to restrain asset-price bubbles in emerging markets, fueled by loose monetary policies in the U.S. and around the world, may also cause an "unraveling and a significant correction of asset prices which will be damaging to global and regional economic growth," Roubini, the Harvard- schooled New York University professor who in 2006 foresaw the financial crisis, said in Hong Kong today.

The MSCI World Index has surged 73 percent from last year's low in March, adding more than $27 trillion to the equity rally as the global economy rebounds from the worst postwar recession. The World Bank, while raising its forecast for global growth in 2010 yesterday, warned that the recovery may lose momentum as stimulus programs wind down and "high" unemployment persists.

"The real economy is gradually recovering but since March, asset prices have gone through the roof," Roubini said. "If I'm correct, by the second half of the year, there's going to be a slowdown of growth in U.S., Europe and Japan. That could be the beginning of a market correction because the macroeconomic news is going to surprise on the downside."

Europe and Japan have less room to implement counter- cyclical policies compared to the U.S., making it less likely for those markets to lead the world in the global economic recovery, Roubini said. Sovereign risks in Europe are rising because of persistent budget deficits, and the appreciation of the yen and euro against the U.S. dollar are "making things worse," he said.

"Even the earnings news is going to surprise on the downside," Roubini said. Weak economic recovery and deflationary pressures will limit revenue growth as the ability of firms to cut costs runs its course, while losses at U.S. and European financial institutions are going to be larger than those that have been priced by the market amid low growth, a high unemployment rate and still falling home prices, he said."

Is it just me or does Nouriel always show up every time the markets begin to run red?

Have a great weekend. As for the markets, 10200 on the Dow better hold...

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Thank you Arnold Schwarzenegger for making us rich!

Thanks to an executive order from the California Governor, our favorite wind energy stock could now deliver gains of more than 112% in the next 4 months. Click here for more info.

"Volcker Rule" Hammers the Big Banks

A tough week for the markets got even tougher today, after the President took a big shot at the banks this morning declaring: "if these folks want a fight, it's a fight I'm ready to have."

Fresh off of a Massachusetts loss, the President has turned populist, bashing the banks in speech that has now introduced Wall Street to "the Volcker Rule".

What's the Volcker rule you ask?

Well it is the closest reform yet that would work to reinstate the spirit of Glass-Steagall and rein in the risky behavior of the big banks.

That led to these headlines that came across the wire around 11:40:

"OBAMA SAYS NO BANK SHOULD RUN PROPRIETARY TRADING OPERATIONS"

"OBAMA PROPOSES NEW LIMITS ON THE SIZE OF FINANCIAL INSTITUTIONS"

Ever since then, the financials have absolutely been getting hammered.

Here's the text of the speech that has sent the markets into a steep decline:

"Good morning, everybody. I just had a very productive meeting with two members of my Economic Recovery Advisory Board: Paul Volcker, who's the former chair of the Federal Reserve Board; and Bill Donaldson, previously the head of the SEC. And I deeply appreciate the counsel of these two leaders and the board that they've offered as we have dealt with a broad array of very difficult economic challenges.

Over the past two years, more than seven million Americans have lost their jobs in the deepest recession our country has known in generations. Rarely does a day go by that I don't hear from folks who are hurting. And every day, we are working to put our economy back on track and put America back to work. But even as we dig our way out of this deep hole, it's important that we not lose sight of what led us into this mess in the first place.

This economic crisis began as a financial crisis, when banks and financial institutions took huge, reckless risks in pursuit of quick profits and massive bonuses. When the dust settled, and this binge of irresponsibility was over, several of the world's oldest and largest financial institutions had collapsed, or were on the verge of doing so. Markets plummeted, credit dried up, and jobs were vanishing by the hundreds of thousands each month. We were on the precipice of a second Great Depression.

To avoid this calamity, the American people — who were already struggling in their own right — were forced to rescue financial firms facing crises largely of their own creation. And that rescue, undertaken by the previous administration, was deeply offensive but it was a necessary thing to do, and it succeeded in stabilizing the financial system and helping to avert that depression.

Since that time, over the past year, my administration has recovered most of what the federal government provided to banks. And last week, I proposed a fee to be paid by the largest financial firms in order to recover every last dime. But that's not all we have to do. We have to enact common-sense reforms that will protect American taxpayers — and the American economy — from future crises as well.

For while the financial system is far stronger today than it was one year ago, it's still operating under the same rules that led to its near collapse. These are rules that allowed firms to act contrary to the interests of customers; to conceal their exposure to debt through complex financial dealings; to benefit from taxpayer-insured deposits while making speculative investments; and to take on risks so vast that they posed threats to the entire system.

That's why we are seeking reforms to protect consumers; we intend to close loopholes that allowed big financial firms to trade risky financial products like credit defaults swaps and other derivatives without oversight; to identify system-wide risks that could cause a meltdown; to strengthen capital and liquidity requirements to make the system more stable; and to ensure that the failure of any large firm does not take the entire economy down with it. Never again will the American taxpayer be held hostage by a bank that is "too big to fail."

Now, limits on the risks major financial firms can take are central to the reforms that I've proposed. They are central to the legislation that has passed the House under the leadership of Chairman Barney Frank, and that we're working to pass in the Senate under the leadership of Chairman Chris Dodd. As part of these efforts, today I'm proposing two additional reforms that I believe will strengthen the financial system while preventing future crises.

First, we should no longer allow banks to stray too far from their central mission of serving their customers. In recent years, too many financial firms have put taxpayer money at risk by operating hedge funds and private equity funds and making riskier investments to reap a quick reward. And these firms have taken these risks while benefiting from special financial privileges that are reserved only for banks.

Our government provides deposit insurance and other safeguards and guarantees to firms that operate banks. We do so because a stable and reliable banking system promotes sustained growth, and because we learned how dangerous the failure of that system can be during the Great Depression.

But these privileges were not created to bestow banks operating hedge funds or private equity funds with an unfair advantage. When banks benefit from the safety net that taxpayers provide — which includes lower-cost capital — it is not appropriate for them to turn around and use that cheap money to trade for profit. And that is especially true when this kind of trading often puts banks in direct conflict with their customers' interests.

The fact is, these kinds of trading operations can create enormous and costly risks, endangering the entire bank if things go wrong. We simply cannot accept a system in which hedge funds or private equity firms inside banks can place huge, risky bets that are subsidized by taxpayers and that could pose a conflict of interest. And we cannot accept a system in which shareholders make money on these operations if the bank wins but taxpayers foot the bill if the bank loses.

It's for these reasons that I'm proposing a simple and common- sense reform, which we're calling the "Volcker Rule" — after this tall guy behind me. Banks will no longer be allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers. If financial firms want to trade for profit, that's something they're free to do. Indeed, doing so — responsibly — is a good thing for the markets and the economy. But these firms should not be allowed to run these hedge funds and private equities funds while running a bank backed by the American people.

In addition, as part of our efforts to protect against future crises, I'm also proposing that we prevent the further consolidation of our financial system. There has long been a deposit cap in place to guard against too much risk being concentrated in a single bank. The same principle should apply to wider forms of funding employed by large financial institutions in today's economy. The American people will not be served by a financial system that comprises just a few massive firms. That's not good for consumers; it's not good for the economy. And through this policy, that is an outcome we will avoid.

My message to members of Congress of both parties is that we have to get this done. And my message to leaders of the financial industry is to work with us, and not against us, on needed reforms. I welcome constructive input from folks in the financial sector. But what we've seen so far, in recent weeks, is an army of industry lobbyists from Wall Street descending on Capitol Hill to try and block basic and common-sense rules of the road that would protect our economy and the American people.

So if these folks want a fight, it's a fight I'm ready to have. And my resolve is only strengthened when I see a return to old practices at some of the very firms fighting reform; and when I see soaring profits and obscene bonuses at some of the very firms claiming that they can't lend more to small business, they can't keep credit card rates low, they can't pay a fee to refund taxpayers for the bailout without passing on the cost to shareholders or customers — that's the claims they're making. It's exactly this kind of irresponsibility that makes clear reform is necessary.

We've come through a terrible crisis. The American people have paid a very high price. We simply cannot return to business as usual. That's why we're going to ensure that Wall Street pays back the American people for the bailout. That's why we're going to rein in the excess and abuse that nearly brought down our financial system. That's why we're going to pass these reforms into law.

Thank you very much, everybody."

After closing at 15-month highs on Tuesday, the Dow , the S&P 500 and Nasdaq are down well over 2 percent over the past two days.

This gives the Dow its worst 2-day decline since August, and the S&P 500 and Nasdaq their worst 2-day losing streak since October.

Market plunge or not, these are reforms that need are badly needed. As we have said so many time before, the 1999 repeal of Glass-Steagall was nothing more than a gigantic mistake.

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New Trading System Closes a Winner Per Week

One analyst has perfected a new way of trading energy stocks.

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Some have doubled their money already.

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Health Care Stocks 2010

Ted Kennedy must be rolling over in his grave. Holy utopia, foiled again.

A mere five months after being buried, his "cause of a lifetime" now hangs in the balance by the power of his very own seat — which, by most accounts, was entirely unimaginable just a few weeks ago.

Yet in the aftermath of Tuesday's election, the improbable became reality as Scott Brown bolted from a 30-point deficit to defeat Martha Coakley, a candidate most observers considered a shoo-in.

Instead, it was Brown who won the day — and tapped into voter outrage with the "business as usual" bit that has done nothing but bury us.

Armed with the specter of an out-of-control government, Kennedy's old seat turned out to be nothing more than easy pickings for the upstart challenger.

But that's mood these days as more and more people begin to realize just how badly they are being screwed by the political machine south on the Potomac.

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You see, while at times our right to vote can seem irrelevant, when done in force it can change the political landscape in a nanosecond.

Right or left, that has given incumbents plenty to worry about as they scurry to save their own smug butts from a similar fate.

The tide is rising and it's not exactly in their favor.

That has left the same health care bill for which Kennedy fought twisting in the wind, since Brown has vowed to vote against the package and the Democrats may not be unable to shut down efforts to delay its passage.

Health Care Stocks for 2010

Those are the political realities that help make health care stocks a good bet in 2010; it's becoming more apparent that the health care overhaul is now perched on the slippery slope.

Because while the health care business would have gained new revenue from the added number of customers, the bill being considered by Congress also carries with it the risk of higher fees, increased regulation, and narrower profit margins.

And needless to say, all these factors are murder on bottom lines — especially when the government is involved. After all, Uncle Sam's ham-handed approach to practically everything is rarely business friendly...

So it wasn't really all that surprising when health care stocks went on a tear on Tuesday as Brown prepared his victory speech.

In fact, the S& P 500 Managed Health Care Index — which tracks the top six insurers — gained 3.7 percent, almost tripling the S& P 500's gain on the day. What's more, the S&P 500 Pharmaceuticals Index also rose 2.2 percent on the news.

But let's face it; even without the big win by Scott Brown on Tuesday night, there are 78 million other reasons to invest in health care stocks.

Pitch forks and torches aside, when you add the prospect of an army of graying baby boomers into the mix, the long-term growth outlook for health care stocks is practically a no-brainer. Which is one of the reasons we especially like biotech stocks as the top sector of the next decade — especially those involved in regenerative medicine.

In fact, according to recent projections by the federal government, consumers and taxpayers will spend more than $4 trillion on health care by 2017 as our population continues to age.

The result is that health care spending will increase by 6.7% annually over the next nine years, outpacing inflation by nearly three times, according to the forecast.

In fact, it is estimated that by 2017 health care spending will cost an estimated $13,101 per person, versus today's average cost of $7,026 per person.

Better yet, the health care share of gross domestic product (GDP) is expected to increasethroughout the period, reaching 19.5 percent of GDP by 2017.

2 Health Care Stocks to Add to Your Radar

That, needless to say, will provide the type of environment that will keep health care companies growing — no matter who is in office.

Considering these factors, here are two ways to play these trends, while earning a nice dividend along the way:

Go Long Johnson & Johnson (NYSE: JNJ): This is one great company with the demographic tide completely on its side. Moreover, their dividend history is as solid as it gets and is growing. Currently the dividend yield is 3.0%. Warren Buffett, by the way, is among its biggest holders. Buy this one on a pullback.

Go Long Abbott Laboratories (NYSE: ABT): Much like JNJ, Abbott Labs is a diversified health care giant with the wind at its back. On top of that, the 120-year-old company pays a 2.90% dividend and is expected to increase its sales 8% this year to $33.1 billion. This is another one to add on a pullback.

So whether you are right, left, or somewhere in between, that shouldn't stop you from adding diversified health care stocks to your portfolio... long-term, these stocks are certain winners. Besides, the markets always tend do well when gridlock arrives in D.C.

As for me, I love it when the voters rise up and shake politicians by the collar. After all, we're not just citizens, but heirs to the revolution.

Shaking things up once in awhile is our birthright.

Your bargain hunting analyst,

Steve Christ

Investment Director, The Wealth Advisory

P.S. No matter which way the ball bounces in the health care debate, the biotech bull market simply cannot be stopped. In fact, I've discovered a biotech stock that is guaranteed to make 66% by May 1st. To learn more about this opportunity, click here.

The Rare Earth Element Takeover

On Jan. 1, 2010, one tiny company took possession of a vast stretch of property in Greenland.

The area's estimated worth: $273 billion... all due to its immensely valuable Rare Earth Metals.

Now here's the crucial part...

This company's share price is set for a major run-up... as it destroys a monopoly China took 2 decades to create.

Get the full story right here.

Stiglitz: "Moral Hazard Everywhere"

This seems pretty obvious to me. But it never hurts to hear it again...

From CNBC entitled: U.S. Does Not Have Capitalism Now: Stiglitz

"Layers of money managers that don't bear the brunt of losses but walk away with big payouts when things go well have turned the US economy to a type of "ersatz capitalism," Joseph Stiglitz, Columbia University professor and Nobel laureate, told CNBC Tuesday.

"An awful lot of people are not managing their own money," Stiglitz said. "In old-style 19th Century capitalism, I owned my company, I made a mistake, I bore the consequences."

"Today, (at) most of the big companies you have managers who, when things go well, walk off with a lot of money. When things go bad the shareholders bear the costs," he said.

Even worse, those giving the money to the companies are entities like pension funds that are managing money on behalf of other people, so there are "layers and layers of agency costs," Stiglitz said.

It's a system where "you socialize the losses and privatize the gains," which is not capitalism, he said.

There's "moral hazard everywhere," he added.

For 50 years after the depression there was lots of regulation and not one financial crisis and in the last 30 years there have been 100 financial crises, he said.

As for the argument that regulation stifles innovation, Stiglitz cited former Federal Reserve Chairman Paul Volcker, who said: "it's hard to find any evidence from anybody who's not in the industry that can show any clear link between the so-called financial innovations and increased productivity in our economy."

Instead of creating products to manage risks, the financial markets created new products that increased risks, Stiglitz added."

Too big to fail is too dangerous to allow.

It's just that simple. And one of these days that lesson will finally sink in.

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Make Mine Freedom

With the markets closed for the holiday, I thought we would take a trip back today to an earlier time and place.

So here is an old cartoon from 1948 that I came across last week entitled: "Make Mine Freedom"

Produced over 60 years ago, it just goes to show you how there really is nothing new under the sun...

Great stuff....

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Millions of lives saved -- a handful of early investors made RICH...

According to our resident biotech expert, one small American company's "cell-shock" technology will soon be the global Gold Standard for the treatment and prevention of all the major cancers, influenza, malaria, HIV, and more...

Saving tens of millions of lives annually worldwide.

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Jon Stewart's Poorhouse

Sometimes things are so rotten that you just have to laugh. Unfortunately, this is one of them.

So here's another great video from Jon Stewart in his ongoing series entitled "ClusterF@#K to the Poorhouse".

The good news is it will give you a chuckle. The bad news is that like all good comedy its based in truth.

Roll the tape.....

The Daily Show With Jon Stewart

Mon - Thurs 11p / 10c

Clusterf#@k to the Poor House - Wall Street Bonuses

www.thedailyshow.com

Daily Show
Full Episodes

Political Humor

Health Care Crisis

As good as that one is, this video is still my all time favorite...

I'm going to miss those granite countertops....funny stuff.

Have a great weekend.

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48 Recommendations... 1,697% Cumulative Gains... Just 11 months...

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On Tap: Beer Stocks

I must admit that I was never much into chemistry...

Even still, I do know that when you combine hydrogen and oxygen in a certain manner you get water — the vital ingredient for beer. And when you add malted barley, yeast, and some hops... suddenly it's "Miller Time."

Frothy and delicious, generations of people have been rewarding their hard-earned thirst with beer for thousands of years — as far back as 9000 B.C.

Since then, beer has become the world's oldest and most widely consumed alcoholic beverage, the third most popular drink overall after only water and tea.

In fact, some would even go so far as to consider beer a gift from above: "Beer is living proof that God loves us and wants us to be happy." That's what Benjamin Franklin said, anyhow.

And we all know how wise he was... which is one of the reasons I'm bullish on beer stocks.

Here's What Every Wealthy Energy Investor Already Knows...

The U.S. Department of Energy has indicated that enough electric power for the entire country can be generated by covering about 9% of Nevada with solar power systems. This is a plot of land roughly 92 miles by 92 miles.
According to M.I.T., there are over 100 million quads of accessible geothermal energy worldwide. The world only consumes about 400 quads.
The Institute for the Analysis of Global Security has stated that if all cars on the road were hybrids, and half were Plug-In Hybrids by 2025 -- U.S. imports would be reduced by 8 million barrels per day. That's about 80% of our daily consumption!

Want a million more reasons that renewable energy investors have become some of the wealthiest in 2009?

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When You Say Budweiser... You've Said It All

Now before I reveal my favorite beer stock, have a quick look at beer's place in culture through the ages:

The Babylonians loved beer so much that if you served a watered-down batch, your punishment was to be drowned in it.

When the monks in the Middle Ages fasted, they were still allowed to pound a few beers. However, each monk was limited to just five quarts of beer a day. (The monastery must have its limits, right?)

The Pilgrims on the Mayflower stopped at Plymouth Rock rather than continuing on to Virginia because they were running out of beer. What's more, while there wasn't any cranberry sauce, mashed potatoes, sweet potatoes, or pumpkin pie to eat at the first Thanksgiving... we know for a fact that there was beer.

The Vikings drank so much beer before battles that they sometimes forgot to put their armor on — or their shirts. In fact, we can thank the bare-chested antics of the Vikings for the phrase "to go berserk." The Norse translation for berserk is bare shirt.

What's more: according to Norse mythology, the Vikings believed that a giant goat whose udders provided an endless supply of beer was waiting for them in Valhalla.

It is believed that beer was one of the provisions Noah placed on the ark. (Come to think of it, if I'd known what Noah knew... beer would have been at the top of the list.)

If an ancient Egyptian gentleman offered a lady a sip of his beer, they were considered betrothed.

George Washington was a devout beer lover and stopped off at the old Bull's Head Tavern for a sud when New York was finally evacuated in 1783. In fact, his ragtag group of rebels in the Revolutionary Army received daily rations of a quart of beer.

If you collect beer bottles, you're a labeorphilist. And, if you collect beer coasters, then you're a tegestologist.

Arnold of Soissons (ca. 1040 — 1087) is the patron saint of brewing. He encouraged the locals to drink beer instead of water due to its health benefits. He is also considered the patron saint of hop pickers because of the region in which he preached. Hops originated in Brabant region of Belgium; Belgians reportedly sent the first hops to England for use in making beer. No wonder they made him a saint!

A British man who was the victim of a car accident sued the other driver, claiming he had lost his ability to taste beer as a result of his injuries. The judge agreed that this was a "great loss" and awarded the man $14,076.

And finally, if you're a serious beer lover, you may suffer from a condition known as cenosillicaphobia, the fear of an empty (beer) glass.

Bullish on Beer Stocks

Needless to say, that urge to tap a keg has created one of the biggest worldwide markets today, which is why beer stocks deserve a place in every investor's portfolio as a defensive position against a renewed downturn.

And beer stocks could get a little frothy over the second half of the year if things play out according to the 2010 forecast, and if the consumer staples sector begins to heat up. A double-dip recession or not, worldwide beers sales should continue to rise.

In fact, by 2013, the global beer market is forecast to have a volume of 162.3 billion liters — an increase of 11% since 2008.

For the United States, that means beer sales will remain buoyant. This is important, since according to an economic impact study, the beer business directly and indirectly contributes more than $200 billion annually to the U.S. economy.

According to the study, that translates into more than one million jobs provided by the industry paying $28 billion in wages. Additionally, beer sales help support roughly 888,000 retail jobs, including those at supermarkets, convenience stores, restaurants, bars, stadiums, and other outlets and generate more than $25 billion in economic activity in the agriculture and manufacturing sectors.

Those are trends that are likely to continue, since a whole new generation of potential beer drinkers (age 24 and under) is now entering their peak years of beer consumption.

Believe it or not, these Generation Y drinkers even outnumber the Baby Boomers by over a million... and will likely out-chug their elders over time, as the market for beer expands both at home and abroad. Beer, after all, is a big global business.

Just this week, Heineken announced that it would buy the beer operations of Femsa, one of the biggest brewers in Mexico, in an all-share transaction that values the business at $7.6 billion. For that tidy sum, Heineken earned a bigger foothold in Latin America — including the highly profitable Mexican market.

But the Heineken deal was just part of the ongoing trend in the business. All of the big three American brewers — Anheuser Busch, Miller, and Coors — have either been acquired or entered into joint ventures with other brewers to beef up their market share.

In its wake, the number of companies in the U.S. brewery industry (excluding independents) has declined 30% over the last five years; two companies, ABInBev and MillerCoors, now account for 94% of U.S beer production.

What's more, these recent mergers and joint ventures in the beer industry have given the consolidating sector the power to raise prices, even in the face of an economic downturn. That makes them strong defensive stocks in an otherwise bad economy.

Samuel Adams: America's World-Class Beer

That being said, one of the sector's top brewers remains the sole publicly traded American-owned brewer: Boston Beer Co. (NYSE: SAM), maker of Sam Adams.

Here's why: The company's per share earnings are expected to increase 52% over the next two years — up from a projected $2.48 a share in 2009 to $3.78 a share in 2011. Additionally, the company increased its fourth quarter guidance for fiscal 2009, the second time in the quarter that the company had increased its full-year outlook.

What's more, the company also has no debt, a large cash position, and the ability to boost production by 10% without expansion.

Those are fundamentals that I will drink to anytime, especially since SAM can easily add to its 1% market share.

In the meantime, I'm sure it's BEER:30 somewhere... and that first frothy pint doesn't stand a chance.

But remember, always drink responsibly. The life you save may just be your own.

Your bargain hunting analyst,

Steve Christ, Investment Director

The Wealth Advisory

P.S. Speaking of Sam, our own Sam Hopkins is in Peru this week tracking down his next international moneymaker and, I'd suspect, a cold beer of his own. You can read more about Sam's latest money-making investment trip right here.

"The # 1 Oil Play in the Country"

With the rest of the nation in recession, one state is enjoying a real live oil boom.

It's all happening in North Dakota, where the Bakken -- a massive oil formation -- has already become a major force in our domestic energy picture.

And now, geologists tell us, we may be looking at a "second Bakken"... one that could easily double the Bakken's 4.3 billion barrels of recoverable oil.

Read on to learn more about what's being called "the #1 oil play in the country"... and the profit-making stocks behind it.

Ron Paul: Fed Secrecy is Wrong

Here is Ron Paul making too much sense again, which is why the elites will do anything they can to marginalize him.

But let's face it folks, the status quo cannot possibly be maintained.

From Forbes by Alexandra Zendrian entitled: Ron Paul's Golden Rule

Forbes: Why do you think the Federal Reserve needs to be audited?

Dr. Ron Paul: For lots of reasons. I don't believe in secrecy. I don't think anyone should have so much power that they can create money out of thin air and spend it and interfere in the markets and do central economic planning without any oversight. Congress has a responsibility to know what they're doing because they created the Fed, they're very, very important, and people benefit from their actions. And I'd like to know who benefits and who suffers the consequence. I just think that it would be in the interest of the people to know exactly what the Fed is doing.

Forbes: Why don't we know what's going on with the Fed?

People have been pretty complacent, generally complacent, over many, many years because it's been an insidious problem. I mean, in 1913, they came into existence and a lot of people didn't know much about it. And they didn't call for it. But over the years, there's always been one or two saying, "We should know more about it."

And in the 1970s, when we had a pretty serious economic crisis with inflation and interest rates at 21%, there was a demand for an audit. So they passed an audit bill and what they did exactly was they put prohibitions in. Before that, it was a little vague, but they made it instead of opening up the doors for an audit, they made it absolutely much more difficult for us to find out what they were doing. And my bill essentially repeals what they put in place in 1978, the prohibitions against auditing the Fed.

And they work in secrecy. They're allowed to make arrangements with foreign governments, foreign central banks, international organizations, and they've really abused their power, although their power's been on the books, to deal with corporations. It's been this recent crisis that has really brought this to a head. They have literally bought over a trillion dollars' worth of securities. And we don't know who benefited from that or how much they paid for them. So I think it's time that the people know what they've been up to.

The Fed is all-powerful and they scare people and tell people "the world will come to an end." That's exactly what they're doing right now. "This would be so horrible, we would lose our independence." But all they're talking about independence is secrecy. They argue, "Oh, no, we don't want any political influence." Well, what other kind of influence is there? Presidential politics has influence on the Fed. The president appoints the federal board chairman and other members.

There's lots of influence behind the scenes. Companies like Goldman Sachs have influence. So there's a lot of political influence. Deficit financing is a political influence. Congress runs up debt and that puts a lot of political pressure on the Fed.

But the transactions are secret, and that's what I consider wrong."

So here is my take....

Whether you agree with the Fed or not, it is imperative to our democracy that powerful institutions are not allowed to operate in the dark.

The fact is the further we stray from our founding documents, the bigger our problems become.

Of course, the rest of the interview is also well worth your time. You can find it by clicking here.

Again...

"All the perplexities, confusion and distresses in America arise not from defects in the constitution or confederation, nor from want of honor or virtue, as much from downright ignorance of the nature of coin, credit, and circulation."

-John Adams

Enough said.

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Art Cashin Warns on the VIX

Here's the latest look at the markets from CNBC's Art Cashin.

As usual Art covers it all including a developing technical sign from the VIX which he thinks may spell trouble

Roll the tape....

As for that VIX sell signal Art referred to in his comments, here's the skinny on the technicals that has everyone watching the fear gauge today.

From the Wall Street Journal by Paul Vigna entitled: The (Inevitable) Correction

"Now, everybody's been making hay out of the VIX, the so-called "fear gauge" that measure options volatility. It's been down so far every day this year, to levels not seen since April 2008 (when it was, incidentally, on its way up, not down.) But it's also brought the VIX to near a rare technical sell signal, according to Robert McHugh of Main Line Investors (which comes to us via UBS' Art Cashin.)

The VIX, he notes, fell through "its bottom-boundary two-standard-deviations Bollinger Band Monday." He notes other sell signals were triggered in September 2007, February 2008 and May 2008, and each one led to a big selloff. Yesterday, the VIX closed at 17.55, with the Bollinger Band at 17.70. What you'd have to see next is a move back above that lower band, and with the VIX up 4% this morning at 18.29, that's happened,

"Are sell signals in the VIX reliable and significant? Oh, yes they are. Sell signals from the daily VIX are rare."

For more on this, the Evil Speculator lays out the ground rules of this sell signal, and adds "the sell signals are far more accurate than the buy signals" and if the signal is actually coming, it'll come in the next two days."

Food for thought....

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