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April 8, 2012
Issue 193  -  Let's Get Real
I'm growing tired of fake "news" like the absurd Kony video that was blasted over all of Tweeterdom.  Never mind that Kony hadn't done anything of note for YEARS, let's gen up some attention so kids can feel good about themselves for "caring."  Yeah, texting your friends about a bogus video is really helping the world.  Sigh....  (as an aside, how many of these millions of youtube views on this Kony film watched the whole 30 minutes?  I'm guessing not too many....) 
Meanwhile America is in virtual free fall RIGHT NOW.  Of course main stream media can't be bothered with that.  The signs of trouble are writ large, if you know where to look.  You do know where to look, right?  How about looking at the growing pension issues that keep getting worse: (zerohedge)

Union Pension Underfunding Time-Bomb Soars By 75% In One Year, Nears $400 Billion

The shortfall in US labor union pension funds is huge and growing rapidly. The latest data, from 2009, from the PBGC showed that these multi-employer plans were 48% underfunded with $331bn of assets to support $686bn of liabilities - and it has hardly been a good ride for those asset values since then. Critically, as the FT notes today, recent changes by FASB has enabled Credit Suisse to estimate shortfalls more accurately and it paints an ugly picture.
Here's the graphic that goes with the findings:
That's quite the ski slope on that graph.  That probably doesn't bode too well for those folks counting on receiving those pensions.  Don't worry though,  the government is backstopping them.  What?  Our government is broke?  Oops, forgot about that.  But how in the world are the economic numbers looking better in some respects?  Here's one trick used from zerohedge:

The Latest Parabolic Chart - GM Channel Stuffing

Uh, what is going on here? Is GM trying to stuff its dealers with so many vehicles it makes the AAPL parabolic chart appear flat as a pancake?
And somehow GM misses street expectations of a 19% Y/Y increase in March sales, posting an 11% increase to 231,052 total GM vehicles. Total GM sales in February were 209,306. In other words, net of the 46K cars "stuffed", GM would have posted a sequential decline in sales?
Stuffing inventory is a ploy used to make things look better.  GM reports that the cars were sold.  In reality the "sale" was only to their dealers.  Obviously this won't last forever as eventually the "adjustments" to reality have to be made.  It seems that others are beginning to figure this out:
Egan-Jones Cuts U.S. Rating One Step to AA Citing Growing Debt

By John Detrixhe - Apr 5, 2012 5:50 PM ETThu Apr 05 21:50:49 GMT 2012

Egan-Jones Ratings Co. cut the U.S. credit rating one step to AA, the second downgrade in nine months and two levels below its highest grade, with a negative outlook citing the nation’s increasing debt burden. U.S. debt has increased to 100 percent of gross domestic product, while debt climbed 23.6 percent from 2008 to 2010, the credit-rating firm said in a statement today. Egan-Jones lowered the U.S. grade to AA+ in a July. Treasuries have gained 4.6 percent since the company first lowered the U.S. rating, according to Bank of America Merrill Lynch index data.

The downgrade was based on "the increasing debt load coupled with the fact that there has been no tangible progress in addressing the country’s growing debt to GDP" ratio, Sean Egan, president of Egan-Jones in Haverford, Pennsylvania, said today in a telephone interview. "Unfortunately, the debt is growing fairly rapidly while the GDP is not."

Standard & Poor’s cut the U.S. grade by one step to AA+ on Aug. 5 and has a negative outlook on the country’s debt. Moody’s Investors Service and Fitch Ratings assign the nation their top Aaa and AAA ratings respectively and also have negative outlooks.

This downgrading is going to become a slow drawn out affair until there is a waterfall event, when the rates will shoot higher.  Until then, it will be a death of a thousand cuts.  But wait, you say, isn't the job market approving?  In a
HUSSMAN: There's No Jobs Recovery, Just Older Workers 'Desperate' To Grab Any Menial Job They Can

Joe Weisenthal| Apr. 9, 2012 In his latest weekly commentary, fund manager John Hussman takes on a few ideas.First he says that Friday's jobs report wasn't a surprise, and that April will be worse.

Then he talks about the liquidity-fueled bubble, and a market addicted to more Fed sugar.

Then he takes on the idea that there's been some fundamental improvement in the economy since the market bottom.

What looks like job growth, he says, really just reeks of desperation.Last week, we observed "Real income declined month-over-month in the latest report, which is very much at odds with the job creation figures unless that job creation reflects extraordinarily low-paying jobs. Real disposable income growth has now dropped to just 0.3% year-over-year, which is lower than the rate that is typically observed even in recessions." It wasn't quite clear what was going on until I read a comment by David Rosenberg, who noted that much of the recent growth in payrolls has been in "55 years and over" cohort. Suddenly, 2 and 2 became 4.If you dig into the payroll data, the picture that emerges is breathtaking. Since the recession "ended" in June 2009, total non-farm payrolls in the U.S. have grown by 1.84 million jobs. However, if we look at workers 55 years of age and over, we find that employment in that group has increased by 2.96 million jobs. In contrast, employment among workers under age 55 has actually contracted by 1.12 million jobs. Even over the past year, the vast majority of job creation has been in the 55-and-over group, while employment has been sluggish for all other workers, and has already turned down.

For most of history prior to the late-1990's, employment growth in the 55-and-over cohort was a fairly small and stable segment of total employment growth. Undoubtedly, part of the recent increase has simply been a change in the classification of existing workers as they've aged (1945 + 55 = 2000, so the we would have expected to see some gradual bulge in this bracket since 2000 due to aging baby boomers). But the shift is too large to be explained simply by reclassification. Something more troubling has been underway.Beginning first with Alan Greenspan, and then with Ben Bernanke, the Fed has increasingly pursued policies of suppressing interest rates, even driving real interest rates to negative levels after inflation. Combine this with the bursting of two Fed-enabled (if not Fed-induced) bubbles - one in stocks and one in housing, and the over-55 cohort has suffered an assault on its financial security: a difficult trifecta that includes the loss of interest income, the loss of portfolio value, and the loss of home equity. All of these have combined to provoke a delay in retirement plans and a need for these individuals to re-enter the labor force.In short, what we've observed in the employment figures is not recovery, but desperation. Having starved savers of interest income, and having repeatedly subjected investors to Fed-induced financial bubbles that create volatility without durable returns, the Fed has successfully provoked job growth of the obligatory, low-wage variety. Over the past year, the majority of this growth has been in the 55-and-over cohort, while growth has turned down among other workers.

So those older retired/about to retire workers are reentering the job force and taking low paying jobs, and that's supposed to be a good thing?  These people MUST return to the work force and take whatever job they can get.  Things are that bad.  Things aren't looking so good to me.  Read this clip from Midas about the state of the housing market:

Bill H:

To all; new single family home sales for Feb. came in at an annualized pace of 313,000

To put this number in perspective, during the boom years over 1 million homes were routinely sold in a year. If memory serves me correctly, back in 1986, over 1.5 million new homes were sold. For a little more perspective, let's break this number of 313,000 down. Rounding, we get 25,000 homes for the month of Feb., we have 50 states (or 57 depending who you want to believe) in the U.S.. This means that the average amount of new home sales per state was 500 in February. Does this even make sense? 500 homes per state? I had to check the math several times because it just didn't seem correct to me but...this is how bad it really is.

I would almost guarantee without checking that at least 25,000 loans went into default during this timeframe. I would almost guarantee that at least this many homes/loans/homeowners stopped paying and that these will not be reflected in the foreclosure process as banks are allowing people to live in their homes without paying. This is so that they don't have to book more losses/impairmaents on their books. ...And they call this a "recovery"? Recovery, you know, what we have been in since early 2009. I can remember the old days while studying finance that "recoveries" were usually about 6 months long and would then give way to "growth" or "expansion". These housing numbers, this far into "recovery" show a couple of things. First, we have not morphed into an expansion now 3 years out, they also show that the "recovery" is not a recovery at all!

That's quite a drop in new home builds.  It's obvious that things aren't getting better from that construction rate stat and about those foreclosures, those are about start up in earnest again:

Americans brace for next foreclosure wave

GARFIELD HEIGHTS, Ohio | Wed Apr 4, 2012 7:09pm EDT

GARFIELD HEIGHTS, Ohio (Reuters) - Half a decade into the deepest U.S. housing crisis since the 1930s, many Americans are hoping the crisis is finally nearing its end. House sales are picking up across most of the country, the plunge in prices is slowing and attempts by lenders to claim back properties from struggling borrowers dropped by more than a third in 2011, hitting a four-year low.

But a painful part two of the slump looks set to unfold: Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.

"We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010," said Mark Seifert, executive director of Empowering & Strengthening Ohio's People (ESOP), a counseling group with 10 offices in Ohio.

"Last year was an anomaly, and not in a good way," he said.

In 2011, the "robo-signing" scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.

Five major banks eventually struck that settlement with 49 U.S. states in February. Signs are growing the pace of foreclosures is picking up again, something housing experts predict will again weigh on home prices before any sustained recovery can occur.

Mortgage servicing provider Lender Processing Services reported in early March that U.S. foreclosure starts jumped 28 percent in January.

More conclusive national data is not yet available. But watchdog group, which helped uncover the "robo-signing" scandal, says it has turned up evidence of a large rise in new foreclosures between March 1 and 24 by three big banks in Palm Beach County in Florida, one of the states hit hardest by the housing crash

Although foreclosure starts were 50 percent or more lower than for the same period in 2010, those begun by Deutsche Bank were up 47 percent from 2011. Those of Wells Fargo's rose 68 percent and Bank of America's, including BAC Home Loans Servicing, jumped nearly seven-fold -- 251 starts versus 37 in the same period in 2011. Bank of America said it does not comment on data provided by other sources. Wells Fargo and Deutsche Bank did not comment.

Housing experts say localized warning signs of a new wave of foreclosure are likely to be replicated across much of the United States.

Online foreclosure marketplace RealtyTrac estimated that while foreclosures dropped slightly nationwide in February from January and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa (64 percent), Chicago (43 percent) and Miami (53 percent).

RealtyTrac CEO Brandon Moore said the "numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed."

One big difference to the early years of the housing crisis, which was dominated by Americans saddled with the most toxic subprime products -- with high interest rates where banks asked for no money down or no proof of income -- is that today it's mostly Americans with ordinary mortgages whose ability to meet payment have been hit by the hard economic times.

"The subprime stuff is long gone," said Michael Redman, founder of "Now the folks being affected are hardworking, everyday Americans struggling because of the economy."…


The robosigning scandal, which the states effectively brushed under the rug, just bought the housing market some extra time.  That time is now officially up.  Ready for another bump in the recovery road?  You'd better be.  But our "leaders" can't be bothered with what is truly at the heart of our ails (the federal reserve and bogus banking system) so they point fingers at other distractions to keep the masses hypnotized and preoccupied.  How much wasted time goes into texting each and every day in this country?  I'd conservatively estimate it at several hundred million hours.  Sound too high?  Then you don't have any idea how many texts that teenagers and younger adults actually are sending.  This is a time sink, the likes of which couldn't even be imagined by our enemies and yet this is self inflicted.  Fiddling as Rome burns....

A bankrupt empire still trying to police the world is the ultimate act of hubris

- quote is from the article linked below

I woke up today in a bearish mood for some reason and the commentary below from The Burning Platform blog was perfect fuel:

•We’ve increased our national debt by $5.6 trillion in the last three and a half years. It took from 1789 until 2000, two hundred and eleven years, to accumulate the first $5.6 trillion of debt.
•Our average annual deficit from 2000 through 2008 was $190 billion. Our average annual deficits since 2008 have been $1.3 trillion. Our deficits never exceeded 4% of GDP prior to 2008, but now they exceed 9%.

•The national debt will reach $20 trillion by 2015 and if interest rates normalized to the same level they were in 2007 (5%), annual interest expense would be $1 trillion, or 45% of current tax revenue.

•There are 242 million working age Americans and 100 million of them are not working. But don’t concern yourself. The Federal government reports that only 13 million of these people are actually unemployed. The other 87 million are just kicking back and living off their accumulated riches.

•The economic recovery has been so great that the 7.5 million people added to the Food Stamp rolls since the recession officially ended in December 2009 isn’t really an indication of severe stress among the 99%. Only 46.5 million Americans (15% of the population) need food stamps to survive.

•The unfunded liabilities of Medicare, Medicaid and Social Security exceed $100 trillion and cannot possibly be honored, leaving future generations to fend for themselves.

I'm not bearish, mind you, on the prospects for the markets, especially the precious metals. The Fed will print plenty of money to accommodate the Government's deficit spending and debt accumulation. The prospects are hopeless for new leadership that will do what is needed to start saving this country. The Republican choices are beyond dismal (except Ron Paul) and Obama is really nothing more than an extension of his predecessor. Any Obama apologist who believes otherwise is a complete idiot.

Yes, the situation is dire, take a look at this networth chart


With a lower networth, people spend less, leading to economic weakness.  This is not going to get any better for a long, long time.  As is often the case, the answers to these problems for the average Joe are gold and silver.  I highly recommend that you have some gold and silver to protect yourself.  But gold and silver are going down Bill, why do I want to buy them?  Here's why:


*UPDATE: This morning we advised that the CME is estimating total volume in silver yesterday of 53,978.  Marshall Swing has contacted the CME for clarification, and volume estimates ONLY include the pit session which closes between 1:29 and 1:30pm EST, and DOES NOT include access market electronic trading in the afternoon. 
Apparently any cartel shenanigans conducted during electronic trading is free game and goes unreported by the regulating agencies. 

On the now infamous Ron Paul/ Bernanke silver raid of February 29th, we documented how
225 million ounces of silver were dumped on the market over a span of only 30 minutes, smashing silver $4 from $37.62 to $33.68.

In a sign of the diminishing returns of paper market manipulation, on the heels of today's Fed minutes disappointment, beginning at 2pm EST, over 127,000 contracts, or 637.535 MILLION OUNCES OF PAPER SILVER were dumped on the market in only 1 hour, resulting in a massive silver decline of.... TEMPORARY_BODY_TAG.65. 

You read that correctly. 

Nearly 80% of ENTIRE ANNUAL WORLD MINING SUPPLY was dumped on the market (during the thinly traded Globex session), over a single hour, and all the cartel could muster was a lousy .65 decline in the paper price of silver!
Do you see the game being played on you?  Paper trumps physical at this time.  This will change.  When?  I'm not sure, but it WILL change.  Especially as the true state of these markets, and their supply lines comes to light:
 Is the World Tottering on the Precipice of Peak Gold?

Richard A. Kerr


Worldwide, gold production has hardly budged in the past decade. It's not for lack of demand. Gold may not fuel economies the way oil does, but gold for jewelry—its primary use—has been much in demand, and that demand will likely increase. Investors' interest could be intense for years longer. But to judge by the mining industry's modest success of late in finding new deposits of gold, production will not be much higher in the next decade. Miners and analysts agree that most of the easy-to-find, easy-to-develop gold has been found. To discover still-hidden deposits and at least maintain production, let alone increase it, miners will need continued high or even higher gold prices, revolutionary new technology, and the cooperation of often reluctant host countries.

Peak gold is coming and may be here already.  This means that the price of it must rise.  A drop in supply of anything leads to higher prices and the situation is even worse for silver as it is consumed.  Make sure you have stocked up before the realization of peak gold and silver reaches the common man.
I'll close with a video where a young blonde woman rewrites the book on logic...enjoy, have a great week!