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September 18, 2010
Issue 114  -  I Thought Things Were Getting Better?
 
By now, things were supposed to better.  The good stuff was going to start happening.  A turn-around was just around the corner.  All that money was going to bring good times.  How is that working out?
 
 
Banks take over record number of homes in August

NEW YORK (Reuters) - A record number of U.S. homeowners lost houses to their banks in August as lenders worked through the backlog of distressed mortgages, real estate data company RealtyTrac said on Thursday.
New default notices decreased at the same time, suggesting that lenders managed the flow of troubled loans and foreclosed properties hitting the market to limit price declines, the company said.
Root problems of high unemployment, wage cuts, negative home equity and restrictive lending practices persist, however, pointing to lingering housing market pain.
RealtyTrac sees a record 1.2 million repossessions this year, up from just under 1 million last year, with more than 3.2 million homes in some stage of foreclosure.
In 2005, before the housing bust, banks took over just about 100,000 houses, according to the Irvine, California-based company.
"It really does look like we're seeing a slowdown of new foreclosures being initiated as part of a means to manage inventory levels on the market," RealtyTrac senior vice president Rick Sharga said in an interview.
Banks foreclosed on 95,364 properties in August, topping the May 2010 record by 2 percent. These repossessions, or real estate owned (REO) homes, jumped 3 percent in the month and 25 percent in the year.
At the same time, a similar amount -- 96,469 homes -- got a default notice. Defaults declined 1 percent from July and 30 percent from August 2009 after peaking at 142,064 properties in April 2009.
It will take about three years to work through the stockpile of distressed housing, Sharga said, resulting in a market that moves sideways.
"I don't think it gets any better really until the end of 2013," he said…
 
A record in foreclosures doesn't exactly scream recovery.  Or that 2013 date for things improving.  How about unemployment, that's getting a little better, or is it?
 
 
That's one ugly chart.  The unemployment situation is worsening.  The average duration of unemployment is now 35 weeks....ouch!  The only way the PTB can make the numbers look better is statistical chicanery. (from Midas) 
 

Dave from Denver…
Thursday, September 9, 2010
BLS BS: Jobless Claims Data Released Today Was A Complete Farce
"
Nothing is but what is not" (Macbeth, Act 1, Scene 3).

True Orwellian deception once again rules the day. The stock market is bouncing with vigor on the weekly jobless claims report, which showed about 27k less new jobless claim filings than was expected.

But let's examine the report itself to see what's going on. Because of the holiday week, NINE States ended up not reporting their jobless claims, including California. The jobless claims number reported was estimated for these 9 States. That completely invalidates, from a statistical sampling context, anything reported and celebrated (how the hell do you celebrate a few less claims for unemployment welfare than was expected anyway?). As Bloomberg reports:
For the latest reporting week, nine states didn’t file claims data to the Labor Department in Washington because of the federal holiday earlier this week, a Labor Department official told reporters. As a result, California and Virginia estimated their figures and the U.S. government estimated the other seven, the official said. (Here's the article link: Another Govt Joke)

Sneaky, huh?  Not having all the data will make the numbers look smaller, when in fact they're not.  Now couple that with this bleak outlook:
  
Retirement on Hold: American Workers $6 Trillion Short

On Wednesday September 15, 2010, 9:10 am EDT
A new study obtained by CNBC says Americans are $6.6 trillion short of what they need to retire.
The study, conducted by Boston College's Center for Retirement Research, says savings have been squeezed by declines in stock and housing values.
The study was commissioned by Retirement USA, a coalition of organized labor and pension rights advocates that hopes to use the study to push for a more stable retirement system. The group plans to unveil the study at a news conference in Washington on Wednesday.
The $6.6 trillion figure is based on projections of retirement and income for American workers ages 32-64. The study's authors say they arrived at the amount using conservative assumptions, including a 3 percent rate of return on assets and no further cuts in pension coverage or increases in the Social Security retirement age.
"Using other assumptions, it could be much higher," said Maria Freese, Director of Government Relations and Policy for the
National Committee to Preserve Social Security and Medicare. For example, the study notes, if the rate of return matches the return on U.S. Treasury Inflation-Protected Securities (TIPS), currently 1.87 percent, the deficit balloons to $7.9 trillion.
This announcement comes on the heels of other sobering news:
Milliman Inc., a Seattle-based actuarial and consulting firm, reported this week that the funded status of the 100 largest corporate defined benefit pension plans dropped by $108 billion during August 2010.
This comes amid recent reports indicating that a White House-created panel is considering proposals to cut Social Security benefits and raise the retirement age.
"The 'Retirement Income Deficit' should be a wake-up call to Americans everywhere," Freese said.
 
Only 6 trillion short?  I'm sure we'll make that up in the next few years, a little overtime here and there, and we'll be all set........sigh.  This country is in such dire shape and no one seems to care!  Why aren't people alarmed?  I was at a mall this past week and it was packed!  No worries mon.  Maybe the government thinks it can make up the shortfall with a fresh pile of leveraged cash:
 
 From Zerohedge…
Primary Dealers Prepare To Invest $27 Billion In Fed Money, Levered 30x Over The Next Month, To Buy High Beta Names
Submitted by
Tyler Durden on 09/13/2010 14:24 -0500


The forced melt up higher once again resumes with no correlation to the recently prevalent Treasury butterfly, as whatever stat arb desks have not blown up in the September move are now once again correlating stocks exclusively with the AUDJPY in yet another chicken-or-egg catch 22. For those who prefer the comfort of a catch 33, we would be far more concerned why the butterfly has collapsed even as stocks are glued to VWAP as if with a tractor beam straight from Darth Vader's toilet. Of course, ES still have to close about a 25 point gap from earlier this month, when the ramp brigade just went truly apeshit. Daily divergences will close, but the real move will be when that particular gap with both the AUDJPY and the 2s10s30s is finally closed. Until then let's just all pretend we have a market. Here some may ask what's the point in fighting the Fed's almost daily stock ramping, and they may well be on to something: the
New York Fed has just disclosed it will buy $27 billion in Treasurys between mid-Sept and mid-October. Using the Basel III blessed 30x leverage, this money, once it makes its way to the Primary Dealers, should be sufficient for a $750 billion leveraged push higher in risk assets. And just to prove that point, there will be a POMO on both Wednesday and Thursday. You didn't think a politically "impartial" Fed would allow a market crash before the mid-terms now, did you?

 
This is the problem with our banking system.  They are in CONTROL.  They hold a gun to our head.  Do this or else.  The Fed relies on these banks to perform the manipulation so they can do whatever they want.  They take crazy huge risks knowing that if they pan out, they get rich, but if they don't pan out, they run to the government to bail them out.  Perhaps this chart will be used to "explain" a rally in stocks if this $27 billion has the desired effect:  (from contraryinvestor)
 
 
 
 
This is an averaged plot of the Dow stock returns in relation to the presidential term.  You can see that we are entering a huge up period.  It kind of makes sense as the newly elected president is liable to be much more accommodating as they approach an election.  The president basically tries to implement their agenda in their first two years, so they will do the "tough" things, which generally don't add to stock appreciation.  As the election approaches, they start to do magical things like "stimulus checks."  This, of course drives stocks higher.
 
This appreciation, which I may try to take advantage of, will likely me short lived as our demographics have reached an inflection point:  (again from contraryinvestor)
 
 
 
This chart shows 45-55 year old population in the U.S.  This is the largest spending, largest earning age group.  This is now starting to shrink and that can't be good for the economy.  As these people age, they will reduce spending and sell stocks to supplement their reduced incomes.  This will happen NO MATTER WHAT!  There is no way to avoid this pain.  That doesn't and won't, stop the government from implementing their "solutions".  Too bad the results are likely to be similar to this:
 
Report: Los Angeles spent $70 million in stimulus funds to create 7.76 jobs
By John Cook 
– Fri Sep 17, 12:15 pm ET
A new piece of evidence has emerged in the debate over the effectiveness of President Obama's 2009 stimulus package, and it's not good for Democrats. According to two newly released audits performed by the Los Angeles controller, L.A. spent enormous portions of the $594 million in stimulus funds it received on projects that created or saved just a handful of jobs. All told, the audits — available here and here [pdf] — examined $111 million in stimulus spending by the city's Department of Transportation and Department of Public Works, and found that the money went to projects that created or retained just 54 jobs. That works out to roughly $2 million per job.
 
God, if they had just given the money to these people they could have retired!   This nonsense will not work.  Yet, we keep electing the same two parties over and over again.  This will not change with the same old people in charge. 
 
Gold and silver are continuing their rise and this is typically the strongest time of year for their performance.  It seems Ebay is confirming this:  (GATA)
 

The Rant Man…
eBay!
BTW, gold and silver supply has MASSIVELY dried up on eBay. There is almost nothing for sale, excepting my buddy DBS Coins out of Boston that sells for prices well above market (but with no hidden fees, as APMEX does).
Just as silver prices rose on eBay this weekend, gold prices for what’s left clearly rose, with the few trades in the $1,360-$1,385/oz level. And don’t even ask what 1/10 oz. gold coins are going for, in the spot + $200-$250 range!
Never have seen so little for sale in two and a half years.
If you don't have a core position in gold and silver, please get started today.  The current prices will pale in comparison to those in the future.  Don't get stuck without a life raft!
 
MEXUS Gold
 
Since this past week brought a large gain in Mexus, I wanted to discuss it.  As I warned, just a few people buying this stock can cause huge swings in the price.  The stock literally rocketed up as high as .48 last Monday.  Since then it has backed off to the mid twenties.  I still think this is a good buy (not investment advice) under .30.  I have looked into this issue further and I think the positives greatly outweigh the negatives.  Time will tell.  I haven't sold any and still believe $2 a share is a possibility in the next two years.  This is a very small company, and I expect delays in hitting their goals, so patience is a requirement.  I expect the stock to drift lower if no news is released.
 
I'll close with a video of some more adrenaline junkies, and their attempt at kayaking a 107 foot waterfall, have a great week!