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U.S. Feb. budget deficit $231.7 billion: Treasury: http://www.marketwatch.com/story/us-feb-budget-deficit-2317-billion-treasury-2012-03-12?link=MW_latest_news
Full Text:
WASHINGTON (MarketWatch) -- The U.S. government ran a $231.7 billion budget deficit in February, the Treasury Department reported Monday. This is up substantially from the deficit of $222.5 billion in the same month one year ago. Receipts were $103.4 billion in February, the Treasury said, about $7 billion lower than receipts in February 2011. Outlays were $335.1 billion. This is $2 billion higher compared with a year earlier. The Congressional Budget Office projects that the federal deficit will narrow slightly to $1.08 trillion from last year's $1.29 trillion, but remain above $1 trillion for the fourth straight year. For the first five months of the fiscal year, the government incurred a budget deficit of $580.8 billion, $60 billion less than the deficit recorded during the same period last year.
I do it the old fashioned way
By hand with pencil and paper. I do my taxes over a period months and this weekend I came close to completing it. I owe $23K including estimates for next year. I've paid in $26K already, but due to Roth conversions in 2010, the bill is coming due. Now I just need those Roth accounts to keep on moving higher.
Adding to gold mining positions
I added 6K of the Colossus 11/8/2016 C$8.50 warrants at $1.85 and will add more if the price goes lower. Also added 30K shares of Sienna Gold and will add more if the price goes lower.
US posts $52.6Billion Jan trade deficit
My comment: And with oil rising since January, the Feb imbalance should be even larger. The twin deficits keep rising exponentially. And the trade deficit means slower growth as export jobs are reduced.
U.S. Trade Deficit Widens : http://www.nytimes.com/2012/03/10/business/economy/us-trade-deficit-widens.html
By THE ASSOCIATED PRESS
Published: March 9, 2012
The United States trade deficit surged to the widest imbalance in more than three years in January as imports hit an all-time high, the Commerce Department reported Friday, reflecting demand for foreign-made cars, computers and food products.
American exports to Europe fell, raising concerns that the debt crisis in that region could dampen United States economic growth.
The January trade deficit widened to $52.6 billion, the biggest gap since October 2008. Imports rose 2.1 percent to a record $233.4 billion. Exports were up a smaller 1.4 percent to $180.8 billion. Exports to Europe fell 7.5 percent.
Economists were expecting the deficit this year to widen from last year's $560 billion imbalance, reflecting in part the economic woes in Europe, which represents about 20 percent of America's export market. A wider deficit can depress economic growth because it usually means fewer export-related jobs.
re: Market Technicals
The only problem with technicals is that Bernanke (and other CBs) and the PPT can make them useless at least temporarily. And then there's the geopolitical events like 9/11.
re: Why the miners
Why gold miners? Every time I think of miners, Bre-X comes to mind. Look at a ten year chart of gold and compare it to HUI or XAU. I say buy the metal not paper!
My response: Leverage. The stocks are leveraged to the price of the metal and the warrants are leveraged to the price of the mining shares. Bre-X was a real blessing in that it ushered in some standards that all miners must meet when reporting results, namely the NI43-101 standards. I'll stay with the miners. The real profit potential in the miners is in the exploration companies because when they produce good drill results, the shares can explode higher. And the warrants really magnify the gains in the share price. I bought 80K NGD 2017 $15 warrants in 2008 for $0.18 each and they have been over $5.00 each since then. That's far more than the increase in the POG during the same time frame.
re: gold
I agree that gold will be the winner. But it has to fall with stocks initially and that makes for some real opportunities. I have buy orders in below the market on some gold stocks so I like seeing this pullback. I think this is not a one day pullback and it's just a guess, but I think we'll at least touch 12K on the DJIA.
No fingers until
it is clear that QE3 can be implemented without a political backlash and without crude going ballistic
How high can it go ?
My comment: Of course, the Fed's balance sheet is also about $3Trillion, but both are backed by AAA collateral (haha)
ECB balance sheet tops 3 trillion euros : http://af.reuters.com/article/metalsNews/idAFL5E8E66NR20120306
Excerpt:
It added that the combined balance sheet of the ECB and the 17 national central banks in the euro zone rose by 330.561 billion euros to 3.023 trillion euros after the second 3-year tender where banks took a record-breaking 530 billion euros.
Volts are too expensive
My comment: I certainly would not pay $40K for a Volt. You can buy a lot of $5/gal gas for $40K.
High price soured Chevy Volt sales : http://money.cnn.com/2012/03/05/autos/volt_sales_analysis/index.htm?iid=HP_LN
Excerpt:
But a sticker price starting at about $40,000 made the car a tough sell, especially at Chevrolet dealerships.
"You're in BMW 3-series territory," said David Sullivan, an industry analyst with AutoPacific. "For a Chevy customer, this is really new territory."
GM spokespeople weren't immediately able to comment on the Volt's pricing.
Volt buyers do get a $7,500 tax credit, but that still works out to a price of about $32,000. And customers have wait to get that benefit. It's not like a rebate check they can put toward the price of the car right away.
"It has a rival right next to it in the Chevy Cruze that's about half the price," said Visnic.
The Volt and Cruze are based on the same "platform," or basic vehicle engineering. They're the same size, but the Cruze can seat five while the Volt can only carry four people because of its large battery pack. And the Cruze gets close to 40 miles per gallon in highway.
Japan is facing an economic meltdown
My comment: The focus is on Europe, but Japan, the UK, and the US are in the same boat as Europe. It's just a question of which domino falls first because the failure of any one will cause the others to fail.
Japan Is Now Another Spinning Plate In The Global Economy Circus: http://www.zerohedge.com/news/chris-martenson-japan-now-another-spinning-plate-global-economy-circus
re: Greek CDS
And if the individual private bondholders are not protected by the CDS by declaring the default not to be a forced default but rather a voluntary one, then the European bond market for sovereign debt will suffer with higher interest rates as bondholders flee.
Kalifornia
California Watch:
February 27 – Bloomberg (Michael B. Marois): “California tax collections may be $6.5 billion less than Governor Jerry Brown estimated in his spending plan for the current and following fiscal years -- even with the benefit of about $2 billion from a Facebook Inc. stock offering, the state’s budget analyst said. California will probably collect about $177.5 billion in revenue through June 2013, instead of $184 billion Brown has estimated in his proposed budget… The largest U.S. state by population, and the most indebted, is confronting a $9.2 billion deficit.”
March 1 – Bloomberg (Alison Vekshin): “The bankruptcy that Stockton, California, resisted for three years is now at its doorstep, spurred by the weight of retiree costs, the housing bust and accounting blunders that drained the city’s coffers. Stockton, 80 miles east of San Francisco, rode the boom-and-bust cycle of the 2000s with a surge in new- home construction that attracted buyers seeking an affordable alternative to Bay Area real estate. Then a crash came, as homeowners faced a wave of foreclosures that sapped the city’s tax-revenue gains. The city born in the Gold Rush has struggled for decades, relying on revenue from farming and shipping at its river port. Meanwhile it granted employees some of the state’s most generous benefits, and now has 94 retirees with pensions of at least $100,000 a year… ‘We’re really struggling,’ City Council member Dale Fritchen, 51, said… ‘There were horrible decisions made. City leaders spent money faster than it was coming in, thinking that the gravy train would never go away.’”
And the Post Office and the PBGTF (Pension Benefit Guarantee Trust Fund)
all need government bailouts
Crude at $106.91, up $0.36
Monti: EU crisis is over (until tomorrow)
Italy’s Monti Signals Euro Crisis Abating : http://www.bloomberg.com/news/2012-02-29/monti-signals-europe-sovereign-debt-crisis-abating-as-bond-spreads-narrow.html
Excerpt:
“I don’t think it is likely” that spreads will widen again, Monti, 68, said in an interview today at the prime minister’s 16th-century residence in central Rome. “The unpredictability of spreads is not negligible. But we see now in the case of Italy a steady, although gradual decline in the last several weeks. I don’t see honestly any reasons why this course should change.”
But gasoline stocks were down and
that means higher gas prices.
re: Gold
Yep, I'd like to see it drop more in order to buy into some issues I've been watching because in the longer term gold is going much higher. The ECRI is predicting recession this year, but it's an election year which means the Fed will have to print and print some more.
DJIA struggling at 13K
All that's need to send the market higher is a $1Trillion plus LTRO from the ECB tomorrow. Anything less portends risk-off and lower stock prices. Given the CBs fanatical desire to keep markets up, I would expect a large LTRO.
Absolutely absurd !!!
My comment: The government is doing everything it can to support home prices including bailing out delinquent buyers. The problem is that the markets need to determine the price and home prices need to come down even more for that to happen. House prices do not need to be artificially supported and not doing so will not make the housing market worse. Besides, paying in cash means that the buyer actually holds the deed and there is no question about ownership which is a real problem with bank financed mortgages.
Throwing cash at the housing market will make it worse : http://finance.fortune.cnn.com/2012/02/28/housing-cash-purchases/?iid=HP_LN
Excerpt:
But while all-cash sales might reduce the glut of empty homes on the market, the unintended consequence is that the trend does little to support home prices. Because many sellers prefer all-cash transactions in hopes for a faster closing, buyers often enjoy a discount – approximately 10% on average.
No mention of the real culprit: Excess Liquidity
My comment: That's why the "experts" are to be ignored. Of course, Pelosi says it's due entirely to speculators.
NEW YORK (CNNMoney) -- A combination of trouble with Iran, a recovering global economy, investor interest and a potential problem at refineries are all responsible for the recent spike in gasoline prices, experts say.
The crux of the problem
My comment: Watch the bond market
The Existential Financial Problem Of Our Time : http://www.zerohedge.com/news/guest-postthe-existential-financial-problem-our-time
Excerpts:
The problem is insuperable. More debt has been created in the past forty years than will ever realistically be paid back... which leads us to the existential financial problem of our time:
The modern, debt-based economy requires constant economic expansion if only to service all that debt. So what happens when the modern economy goes ex-growth and stops expanding?
Iceland already found out. Greece is in the process of discovering. But we will all get a chance to participate in this lesson.
Runaway fiscal and monetary stimulus throughout the western economies is in the process of destroying the concept of creditworthiness at the centre of the modern monetary system. Private investors, we suspect, have little or no conception of the extent to which the state is now the predominant player in the financial markets.
Central banks control the money supply and interest rates. Central banking and commercial banking interests have essentially become fused.
The ECB's long-term refinancing operations are banking bailouts by the back door. Central banks are now also the swing players in government bond markets which directly influences the price for corporate credit. Central bank monetary stimulus also directly influences equity market direction and confidence.
Be careful, be very careful about the sort of government debt you hold. You may well end up being paid in whole- but in such depreciated terms that being "kept whole" will be meaningless in real terms.
In all other respects, our investment choices remain what they have always been: high quality, high yielding defensive equities; uncorrelated systematic trend-following funds; gold, silver, and gold and silver mining companies.
There will come a point, and it may admittedly be some time in coming, when a major government bond market goes bang. Perhaps Japan, some peripheral market in the euro zone, some core market in the euro zone, the UK, or even the US.
CRE Extend & Pretend Coming to an End :
http://www.financialsense.com/contributors/james-quinn/extend-and-pretend-coming-to-an-end
My comment: Of course, extend and pretend is the new normal. That is most certainly evident in the actions taken to stave sovereign debt default and to allow the US Federal debt to grow without limit. The sh_t is going to hit the fan within a year as the markets will not allow the can to be kicked down the road indefinitely.
Excerpts:
Andy Miller, cofounder of Miller Frishman Group, and one of the few analysts who saw the real estate crash coming two years before it surprised Bernanke and the CNBC cheerleaders sees a flood of defaults on the horizon. In a recent interview with The Casey Report Miller details a dramatic turn for the worse in the commercial real estate market he has witnessed in the last few months. His company deals with distressed commercial real estate. This segment of his business was booming in 2009 and into the middle of 2010. Then magically, there was no more distress as the “extend and pretend” plan was implemented by the governing powers. The distressed market dried up completely until November 2011. Miller describes what happened next:
“All of a sudden, right after Thanksgiving in 2011, the floodgates opened again. In the last six weeks we probably picked up seven or eight receiverships – and we’re now seeing some really big-ticket properties with major loans on them that have gone into distress, and they’re all sharing some characteristics in common. In 2008 and 2009, these borrowers were put on a workout or had a forbearance agreement put into place with their lenders. In 2009, their lenders were thinking, “Let’s do a two- or three-year workout with these guys. I’m sure by 2012 this market is going to get a lot better.” Well, 2012 is here now, and guess what? It’s not any better. In fact I would argue that it’s still deteriorating.”
Why the sudden surge in distressed properties coming to market in late 2011? It seems the FASB finally decided to grow a pair of balls after being neutered by Bernanke and Geithner in 2009 regarding mark to market accounting. They issued an Accounting Standards Update (ASU) that went into effect for all periods after June 15, 2011called Clarifications to Accounting for Troubled Debt Restructurings by Creditors. Essentially, if a lender is involved in a troubled debt restructuring with a debtor, including a forbearance agreement or a workout, the property MUST be marked to market. Andy Miller understands this is the beginning of the end for “extend and pretend”:
“I believe it’s a huge deal because it means you don’t have carte blanche anymore to kick the can down the road. After all, kicking the can down the road was a way to avoid taking a big hit to your capital. Well, you can’t do that anymore. It forces you to cut through the optical illusions by writing this asset to its fair market value.”
Ben Bernanke and the Wall Street banks are running out tricks in their bag of deception. Wall Street banks created billions in profits by using accounting entries to reduce their loan loss reserves. They’ve delayed mortgage foreclosures for two years to avoid taking the losses on their loan portfolios. They’ve pretended their commercial loan portfolios aren’t worth 50% less than their current carrying value. Bernanke has stuffed his Federal Reserve balance sheet with billions in worthless commercial mortgage backed securities. The Illusion of Recovery is being revealed as nothing more than a two bit magician’s trick. In the end it always comes back to cash flow. The debt cannot be serviced and must be written off. Thinking the American consumer will ride to the rescue is a delusional flight of the imagination.
Andy Miller sums up the situation nicely:
“Well, I think we’re headed into an economy right now where there’s just not a lot of upside. Do we think, for example, in the shopping center business, that retail and consumer spending is going to go way up? Certainly not. I think that as times get tougher and unemployment remains high, it’s going to have a negative impact on consumer spending. In almost in any city in America right now, it doesn’t take a genius to see how much retail space has been constructed and is sitting there empty. Vacancy rates are as high as I’ve seen them in almost every venue that I visit. I’m very concerned about the retail business, and I think it’s extremely dangerous right now.”
Buffett: Banks Victimized by Evicted Homeowners
http://www.bloomberg.com/news/2012-02-27/buffett-says-banks-victimized-by-evicted-homeowners-who-emerged-as-winners.html
My comment: I've heard this argument before. It was those irresponsible home buyers taking on more debt than they could afford. When in reality it was the banks who held the purse strings and who allowed the bad loans to be made.
Excerpts:
Blame for the housing bubble and subsequent slump should be shared among lenders and borrowers, as well as the government, bond-rating firms and the media, Buffett has said. In his letter, read by investors around the world, Buffett praised Jamie Dimon, CEO of JPMorgan Chase & Co., and Bank of America’s Brian T. Moynihan. JPMorgan, Goldman Sachs, Wells Fargo and Bank of America have all repaid U.S. bailout funds.
Warren Buffett, who controls the biggest shareholding of the No. 1 U.S. mortgage lender, said banks were victimized by some homeowners who refinanced their loans before getting evicted.
“Large numbers of people who have ‘lost’ their house through foreclosure have actually realized a profit because they carried out refinancings earlier that gave them cash in excess of their cost,” Buffett, chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A), said Feb. 25 in his annual letter. “In these cases, the evicted homeowner was the winner, and the victim was the lender.”
Kalifornia
February 24 – Bloomberg (Alison Vekshin and Michael B. Marois): “Stockton, California, may take the first steps toward becoming the most populous U.S. city to file for bankruptcy next week, according to a revised City Council agenda… Local officials will consider whether to begin a type of mediation that allows creditors to participate, the first move toward a Chapter 9 bankruptcy filing under a new state law…”
US Economic Rebound ?
My comment: I have long expected the economic data to improve prior to the election regardless of what's happening in the real economy. The statistics can be made (ie manipulated) to show whatever those in control want them to show. I also expect a major financial crisis this year far greater than 2008.
'Double-dip recession inevitable' : http://money.cnn.com/2012/02/24/news/economy/double_dip_recession/index.htm?iid=HP_LN
Excerpts:
Achuthan predicts the recession will happen even without a new shock to the economy, such as a spike in oil and gas prices or a Greek sovereign debt default sparking a financial meltdown. If those things occur, he says they will simply make an inevitable recession more painful.
In fact, Achuthan said data gathered since his September forecast only confirms his view that economic growth has slowed to such a degree that a downturn is now unavoidable, likely by late summer.
He credited stocks' rise to central banks' infusing the global economy with money. He said the so-called velocity of money, the number of times a dollar is spent by consumers, has fallen to a record low in recent months, which he sees as another indicator of underlying weakness.
"The world central banks are printing money as never before in history," he said. "The money is not boosting economic growth, but [it's] still there and it goes into risk assets."
re: Crude price
$103-$105 won't affect gas prices and that's the critical driver now for the stock market. I fully expect crude to reach $200/bbl by 2015 and hold that level as we have passed global peak oil production while consumption continues to increase. Other forms of energy will not be sufficient to offset the crude price increase primarily because they are expensive alternatives and because it takes a long time to implement any meaningful change.
Crude at $109.69, up $1.86
Not good for the stock market
DJIA like a snowball rolling downhill
It should start picking up speed to the downside
DJIA struggling at 13K
Gas prices will bring the whole thing down hard. We're at $4/gal in Washington state and California is at $5/gal. And prices are expected to rise more into Memorial day.
re: What can go wrong ?
I think you are being cynical but I would add the following that could go wrong:
1) High gas prices
2) Bond market failures (ie increasing rates)
3) More financial problems in Spain and Italy (which are now in focus after Greece)
4) More geopolitical instability
5) Overvalued stock prices
Something is about to hit the fan
Virtual Wealth in a virtual economy
My comment: I have often thought of the US economy as a virtual economy (ie not real) since it is not being propelled by real growth but rather by artificial stimulus and Fed liquidity (QEs). The wealth created from the virtual economy is in many cases also not real and that is particularly true in RE. I think of "The Millionaire Next Door" in which some who spend a lot of money on high-end RE and automobiles are really in deep debt.
Million-dollar foreclosures rise as rich walk away : http://money.cnn.com/2012/02/23/real_estate/million_dollar_foreclosures/index.htm?iid=Lead
Excerpts:
NEW YORK (CNNMoney) -- Five years after the housing bubble burst, America's wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country -- and many of them are doing so voluntarily.
Out of all foreclosure activity, the share of foreclosures on properties valued at $1 million or more has risen by 115% since 2007 while the share of multi-million dollar foreclosures -- or homes valued at more than $2 million -- jumped by 273%. Meanwhile, the share of foreclosures on mid-range properties valued between $500,000 and $1 million fell by 21%.
But with a recovery in the housing market still years away, foreclosure has turned out to be a worthwhile option after all. Saddled with bloated mortgages after a long run up in property values, many high-end homeowners have chosen to pursue a "strategic default." Even though they can afford the monthly mortgage payments, they still decide to walk away from their home because they owe more on the property than it is worth.
"In million-dollar homes, you're looking at people who can afford it, but they have to make a business decision: Does it make sense to make payments on a mortgage when the home is worth less than they owe?" he said. In many cases, it often makes more financial sense to walk away.
Gold up $20 is ripping
It must like the Greek bailout
And that day is coming
The bailouts, the money printing, and the sovereign debt is all cumulative and it continues to increase. The bond markets are key to when that day arrives. With interest rates artificially low, the change will not be gradual but rather it will be abrupt. I think rates will increase as the global economy goes into recession because the pressure on the debt will be overwhelming.
re: Miners
I expect the miners to retreat along with the stock market very soon
Rarefied air above DJIA 13K
It will be difficult to get much if any lift from these levels.
Interest rate increases will doom the sovereign debt
5 budget assumptions that won't happen : http://finance.fortune.cnn.com/2012/02/21/unrealistic-budget-assumptions/?iid=HP_LN
My comment: Many of these analyses, such as this one, use the publicly held debt as the measure of the sovereign debt which I think understates the magnitude of the problem.
Excerpt:
Interest rates need to stay low, but will they?
Today, the U.S. is paying an average interest rate of just 2.1% on the $11.6 trillion in debt in the hands of investors. That's one-third of the average of 6.5% since 1986. To keep interest payments down, the Treasury has systematically reduced the average maturity on its bonds to benefit from the extremely low yields on short-term notes. Today, almost 60% of all U.S. debt needs to be repaid within four years.
Gas tsunami about to hit ?
Many are calling for $5 gasoline by memorial day and it's already $5 in California. Imagine what that does to any supposed economic recovery. They'll just have to print more money to offset the higher prices and that will drive prices even higher.
Gold Picks
Colossus Minerals (t.CSI)
New Gold (t.NGD)
Pretium (PVG)
All three are very strong companies
Wildcard: Condor resources (v.CN)
DJIA to 13K before any correction