Tag Archives: bear market

The Economy And Stocks: Someone Is Smoking Crack

Privately compiled and reported economic indicators started rolling over in 2012, which is why the Fed continued to “re-up” its money printing. With most S&P 500 companies having now reported Q4 2015 earnings, there’s been four consecutive years of declining net income – both GAAP and “non-GAAP.” If I had told you two years ago that the S&P 500 revenues and earnings would decline but that stock prices would continue higher, you would have asked me if I was smoking crack.  –  Short Seller’s Journal

A big driver of the economy for the last four years has been the auto and housing markets. While it may not be evident in some areas yet, both sectors of the economy are starting to seize up.

Auto sales in February missed analysts’ forecasts and were down from January.  Not mentioned in the still-bullish reports was the fact that GM’s and VW’s sales declined, while Ford’s jump in sales was driven by a big bulge in rental fleet sales.  Note to crackheads: rental fleet sales are not the best measure of the demand for autos.  At the same time, new car inventories at dealers soared to a 14-year high.    With subprime auto loan delinquencies beginning to spike up, along with repo rates, on whom will the dealer/lending syndicate unload all this inventory?

Similarly, the housing market in previously red-hot areas is starting to fizzle, led by a rapid escalation in listings in the higher end of the market.  Housing market expert Mark Hanson describes the popping bubble in Silicon Valley:  Tech-Head Housing Cities Seizing Up.  This article describes the collapsing Houston housing market:  Oil crash is crushing Houston’s housing market.   The virus popping Houston’s real estate bubble is now spreading throughout Texas.   Miami’s market was white hot for a few years.  Of course, as is par for the course, Miami is now perilously overbuilt:  Miami’s Epic Condo Boom Turns Into Glut. That same market condition is hitting the southwest coast of Florida, as a flood of existing home listings are helping the continuous  “price reduced” notices chase the market lower.

The same scene is now starting to play out in many major MSA’s – NYC, Washington DC/northern Virginia, etc.  While the lower end of the market is still somewhat firm in many areas because the Government is proliferating the availability of low credit rating subprime nuclear mortgages to first-time buyers who can barely afford a pot to piss in, the upper-middle and high end of the housing market is being perilously flooded with listings. In one high-end enclave south of Denver that is averaging at least one listing over $800k per block, a friend of mine who lives near there asks:  “who is going to buy these homes?”

Not only is the stock market not even remotely discounting the underlying economic reality, but the S&P 500 spent the last four weeks clawing back 78% of the 249 point (12%) drop that occurred just after New Year’s despite the continued plethora of increasingly negative economic reports.

At some point the Fed is going to lose its ability to jump-start the stock market with its monetary defibrillator.  There is a lot of money to be made taking the other side of NewSSJ Graphicwhomever is chasing stocks higher right now.   The Short Seller’s Journal will help you take advantage of the highly overvalued stock market with weekly ideas for shorting stocks.  Each issue includes exclusive market commentary, a minimum of two short-sell ideas plus strategies for using puts and calls.  Subscribers will also have free access to all future IRD short-sell research reports plus a discount to the Mining Stock Journal.   You can subscribe by clicking HERE or on the image to the right.

The U.S. Economy Is Headed Into A Deep Recession

A reader contacted me earlier today after seeing the absurd article on the Wall Street Journal heralding in the “7-year bull market” in stocks:

Absolutely amazing they can put out crap like this:   “Still, with GDP growth expected to be 2.3% this year, according to a group of more than 60 economists surveyed by the Journal, market strategists project the current bull market has more room to run.”  The WSJ editors just lost all credibility they may have had with that end to the article. How could they find more than 60 delusional [or shill] economists that all say the sky will be blue for years?  I’m tired of worrying for myself and my family. Where can I find what they are smoking? Must be some really good hopium.

It has not been a seven-year “bull market” in stocks or housing prices, it  has been the biggest bull market in money printing and credit creation in history.

While the media clowns and Wall Street shills celebrate the seven year “bull market” in stocks, the fundamentals underlying the U.S. economic and financial system continue to deteriorate – quickly.

The most recent economic activity “end zone” dance was over February’s domestic auto sales, which seem to be occurring at an all-time high when viewed on an “annualized rate” basis.  Of course, no one wanted to discuss the fact that Ford’s sales would have been flat or negative if their huge jump in rental fleet deliveries were stripped out of their numbers.  GM’s sales were down slightly, and dealer inventories continue to balloon.

What’s worse, subprime auto loan delinquencies are spiking up to their 2008 pre-financial collapse level (click to enlarge):

UntitledIt’s no secret that the banks have been willing to extend to auto loans to anyone who can fog a mirror.  Credit score is largely irrelevant and there’s no requirement to show proof of income.

The prelude to the 2008 de facto financial system collapse, washed by trillions in QE and added credit, is now starting to repeat again.  An article in the Wall Street Journal (source: Zerohedge) is reporting that used car prices are headed lower again.   With over 32% of all car “sales” accounted for by leases, as these cars come off lease and flood the used car system, prices fall.  This in turn affects the amount for which someone with a used car can get paid in order to “buy” a new car.  Add that inventory to the already sky-high repo inventory, and the auto sector is set-up for a huge “pile-up” crash.   But go ahead and just conveniently ignore the record level new car inventory sitting on dealer lots…

Meanwhile, the wholesale trade “gap” – the difference between the level of wholesaler Untitledinventory and sales – is now at a record level.  Furthermore the wholesale inventory to sales ratio has spiked up to its late summer 2008 level (click to enlarge):

This ratio is spiking up from both excessive inventory accumulation at the wholesaler level of the distribution system and declining sales of this inventory to the retail sector, reflecting weak consumer spending and an outlook for continued weak consumer spending.

What’s perhaps the biggest factor contributing to what I believe is a rapid deterioration in economic activity?  “Americans are buried under a mountain of debt:”  LINK  Per findings in the article from Gallup:  “The amount of debt Americans carry is staggering and grows every day.”

The “celebration” of the seven year “bull market” is emblematic of the degree to which propaganda is being used to cover up the truth.   If you give me a printing press to print money or an ability to issue an unlimited amount of credit, I can make any object increase in value.  The big run-up in the stock market and home prices and in auto sales was enabled by $4.5 trillion in printed money from the Fed and the enabling of an insane amount of credit creation, including derivatives which are nothing more than another form of credit.

When this hits a wall – and I think the gold market action is telling us that the collision is occurring or is imminent – it will cause a systemic upheaval that will make 2008 look like a civilized tea party.  

Insanity Engulfs The Stock Market

I have no idea who is throwing cash into this highly overvalued stock market to push it higher right now. Any registered financial advisors or pension managers who are buying into this stock market right now are in serious breach of their legal fiduciary duty.  While there’s likely a modicum of retail daytraders and momentum-chasing “hedge” funds chasing the upward velocity, I have a an educated hunch that the Fed and the Treasury’s Working Group on Financial Markets – headquartered in the same building as the NY Fed – are behind this insane thrust higher in the S&P 500 and the Dow.

But as Shakespeare once said (in Macbeth) “nothing is but what is not.”  Beneath the facade of the S&P 500 index spike up over the past 2 weeks, smart money appears to be unloading long positions before this “Titanic” hits the iceberg (click to enlarge):

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With good reason, too. If GAAP earnings were calculated the way they were calculated 20 or even 10 years ago, the p/e ratio for the S&P 500 would be at its highest in history. Furthermore, “smart” investors would not be chasing stocks higher while earnings and revenues are declining, as they have been for several quarters.

The on-balance volume and positive volume indicator signals in the graph above show an extreme divergence from the direction of stock market.  This indicates that – away from the key stocks used to push the S&P 500 and Dow higher – big money is unloading stocks while the SPX/Dow appear to show strength.  It’s brings to mind the “Rome burns while Nero fiddles” metaphor.

In the graph above, you can see that the S&P 500 appears to be carving out a pattern similar to the path it took from last August through early November, before it dropped off a 12.5% cliff.  No one knows if this same pattern will repeat, but there’s always the chance that the Fed is trying to push the S&P 500 back up to its 200 dma (red line).  We’ll know if this gets accomplished soon enough.

Meanwhile, it’s still possible to make a lot money shorting the stock market as long as you are “nimble.”  On Monday mid-day, I emailed my subscribers with what I call a “quick hit” trade set-up that had developed in Big Five Sporting Goods ((BGFV) – click to enlarge:

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The suggested trade was to buy puts or short BGFV before the close on Tuesday and cover it or sell the puts right after the open on Wednesday (today).  I had some additional analysis to support the trade idea.  BGFV actually “beat” its earnings number but it required some hard-core GAAP engineering to accomplish this.  Revenues were in-line but the stock was hit for over 18% at the open today.

Several subscribers emailed me today with their success on this trade:  “Good call on BGFV. Scalped it twice…Thanks for this trade, 117% return in less than 24hrs, not too shabby, lol…Got small position in the $12.50 puts just before the close. Sold this a.m. as instructed for 112%…We did this trade-our first with your service–and got a little better than a triple!!

You can subscribe to the Short Seller’s Journal here:   LINK  or by clicking on the image to the right.  It’s been a difficult stretch for shorting this market but most of my emphasis and NewSSJ Graphicideas are focused on longer term trade ideas (12-18 month). I always include ideas for using options with specific examples.

The intra-week email “alert” was not originally part of the service but I tried it out several weeks ago and had a great response.  I only send them out when I come across an idea that merits doing so.  Finally, SSJ subscribers will be able to subscribe to the coming-soon Mining Stock Journal (hopefully Friday) for half-price.

Coming Soon To Your Local Economy: Oil Rout Hits Houston’s Rich

To be sure, oil executives are not alone in feeling the pain. Many blue collar jobs in oilfield equipment production have disappeared. So have thousands of middle management jobs in oil exploration and production. A regular Uber customer is likely at some point to ride with a former energy industry professional. – Reuters article on Houston economy

The effect of the collapse in energy is starting to exert its force on the financial system and economy. JP Morgan warned last week that it will need to reserve more against its energy assets. These “assets” are loans that the bank was unable to “syndicate,” meaning JPM was stuck with these loans because it was unable to sell these loans to other banks or investment funds. Thousands of energy sector jobs have been cut with likely 10’s of thousands more to come. These are the “direct” job losses. “Indirect” job loss will occur as the wide swathe of economic loss in the energy sector begins to reverberate widely through the economy, especially in the housing, auto and service sectors.

A colleague of mine who is an energy banker told me that the President of a major regional bank in Houston confessed that full force of economic damage from the collapse in the energy sector is just now beginning to pummel the greater Texas economy. I am certain the same can be said for all other energy-producing regions of the country.  – excerpt from the Feb 28 issue of the Short Seller’s Journal

The jobs bloodbath is just getting started.  Morgan Stanley announced that it is cutting 25% of fixed income operations;  several other big Wall Street firms have announced plans for large job cuts this year;  major U.S. retail chains have announced the closing of 6,000 stores nationwide.  Outplacement firm Challenger-Gray reported a couple weeks ago that, according to its job-cut data, layoffs in January jumped 200% from December.

It’s been estimated that at least a third of the 175 oil producing companies in the U.S. are at risk of slipping into bankruptcy this year. At some point banks are going to have to start foreclosing on defaulted loans and many companies will be forced to liquidate. Shell Oil announced this past week that it is exiting its North American shale operations. The writing is on the wall. This is going to inflict a significant amount of damage to the U.S. economy – an amount of damage that is not yet being anticipated by investors or by the policymakers.  – Short Seller’s Journal

This week’s issue of the Short Seller’s Journal features an extraordinarily overvalued restaurant industry stock that is aggressively issuing debt to buyback shares so insiders can dump their restricted stock units. This company has a huge negative book value.  The issue also features a homebuilder short that has, minimally, another 65% of downside ahead of it in the next 12-18 months.  Insiders are dumping shares of this company likeNewSSJ Graphic there’s no tomorrow.   There have been zero open market purchases of this Company’s stock by insiders over the last 12 months.  The Company has more inventory and more debt than it did at the peak of the housing bubble but its revenues and number of units delivered are running about 2/3’s of what they were at the bubble peak.  Finally, the issue features  a silver mining company which is now a big silver mine plus two potentially highly prolific gold mines plus some ideas for using puts to replicate shorting AMZN, which I think is ready to roll over again and head lower.

“I am just writing to let you know that I enjoy SSJournal and especially examples of how trading strategies could be executed, with actual described cases – to me that is the best way of learning.  I think that is most valuable for me. “

The Writing Is On The Wall: Latest Issue Of Short Seller’s Journal Is Up

It’s been estimated that at least a third of the 175 oil producing companies in the U.S. are at risk of slipping into bankruptcy this year. At some point banks are going to have to start foreclosing on defaulted loans and many companies will be forced to liquidate. Shell Oil announced this past week that it is exiting its North American shale operations. The writing is on the wall. This is going to inflict a significant amount of damage to the U.S. economy – an amount of damage that is not yet being anticipated by investors or by the policymakers.  – the February 28th issue the Short Seller’s Journal

This week I feature a two stocks that can treated either as a “quick hit” or positioned as a long term short. I’m also going to include a highly undervalued silver mining stock as a “contra” stock market idea. For new subscribers, because the precious metals sector tends to move inversely to the stock market, going long mining shares is similar to shorting stocks.

I also review some strategies for using puts to either speculate on a big move lower or replicating a longer term short position in AMZN – see AMAZON dOT CON.

You can subscribe by clicking on this link – SHORT SELLER’S JOURNAL – or on the image below.  Subsribers to SSJ will be able to subscribe to the Mining Stock Journal for half-price.  The debut issue should be out this upcoming week or the following week at the latest.

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Fundamentals Uber Alles – Are You Prepared For The Next Leg Down?

Certain aspects of this market have become relatively easy to predict. I told my partners yesterday that they would take silver below $15 once the U.S. paper market was the only market open market on Friday (today). Soon as the London p.m. fix was set, the NY paper market manipulators went to work and they hammered silver.  Interestingly the mining stocks have been very reluctantly going down these past two trading sessions. This is quite remarkable given that, from the HUI’s low-close of 100.77 on January 19, the index has run up as much as 67%. It’s due for a “technical” pullback but it seems to be yielding rather grudgingly.

There may be a message in that. I’ll be rolling out a Mining Stock Journal next week to complement my Short Seller’s Journal. Subscribers the SSJ will be able to join the MSJ for half-price.

Everyone is getting frustrated with this bear market rally.  In 9 trading days the S&P 500 has gone up 122 points, mostly in big “chunks,” despite increasingly negative economic developments.  If anything points to the fact that this stock market is broken, it’s the fact NYSE circuit breakerthat exchange operators had to “unplug” the electronic markets early yesterday morning to halt an imminent rout in stock futures.  At it’s nadir yesterday during the NYSE session, it looked as if the S&P 500 was about to drop off a cliff but mysteriously a big buyer appeared and stimulated a “V” rally.

“The mispricing of assets across world markets has reached epidemic proportions” – This Is Why You Can Expect Another Global Stock Market Meltdown (Marketwatch).

When the fundamentals don’t “fit” the valuations, eventually the valuations “regress” toward the fundamentals.  This is not an opinion – this is a law of markets.  Currently the global Central Banks are attempting to change this law.  It’s a pretty pathetic visual of Ben Bernanke or Janet Yellen confronting Atlas, who merely shrugs.

As an example, in my January 3rd issue I defied CNBC and Oprah and issued a short recommendation on Weight Watchers (WTW), which had spiked over $22 when Oprah was dropping stock pump bombs on Twitter (for which she should be investigated by the SEC but won’t be):

After selling back down to $18 from $28 by Dec 24, Oprah tweeted out a video ad promoting her participation in Weight Watchers (“come join me ladies”). The stock jumped 26% from the December 24 close, to close out 2015 at $22.80. Based on the December 31 close, the stock trades at 26 p/e and 13x trailing EBITDA. The Weight Watchers brand name is quite stale with little to no growth prospects despite Oprah’s “quick fix” presence, the stock is significantly overvalued. Especially given that the stock was trading at $4/share in August. I find it testament to the insanity of the current stock bubble that the market value of a company like WTW can move up 700% in four months based on the presence of Oprah Winfrey on its board of directors.

The stock dropped down below $11 by Feb 8, when Oprah again tried to pump the stock (note: she owns 10% of the stock and her promotional pump was 2 weeks before earnings). The stock ran up over $15.  WTW announced earnings after the close last night and the stock is getting drilled for 27% back down to $11 today.  Nothwistanding the fact that I’m calling for an investigation of Oprah and her stock manipulation games, WTW fundamentally is not worth $5, let alone $15.

I wanted to use this example to illustrate my point that, regardless of the short term zigs and zags in the stock market, eventually the gravitational pull of fundamentals take over and the stock market will seek its intrinsic value.  There’s still a plethora of stocks trading at insane multiples of revenues, cash flow and book value.  The market bottom won’t be seen until all of these stocks have either gone out of business or are trading at valuation levels which reflect the ability of their business models to generate bona fide  – not “adjusted non-GAAP” – cash income based on the actual demand for their products or services.

Rest assured we are a long way from that level on the Dow/S&P 500.  The Short Seller’s Journal is a weekly research and trading report which presents at least two short ideas per issue.  It also provides ideas for using put and call options and capital management/trading advice.  It emphasizes a long term, fundamental approach to shorting the market.   You can access it clicking here:   Short Seller’s Journal.

Hey Dave,   Loving your SSJ service. In fact it is just what I was looking for as the market rolls over. I expect to have my best year in the market ever, assuming the powers that be don’t step in to halt trading just when things are heating up, or some other such manipulation.   I think the journal provides just the right amount of depth, and your writing style makes me chuckle. Keep the great tips coming.  – Ken

Let’s Have Lunch With The Mad Hatter

I’m trying to free your mind.  But I can only show you the door.  You’re the one who has to walk through it.   – The Matrix

The overnight computerized stock market futures trading systems mysteriously “broke” once again as the futures were heading south (see this and this).   This  glaringly overt intervention reeks unmistakably of desperation.

Corners of the global economy – and specifically the U.S. – are collapsing behind the smoke and mirror cloak of ebullience emanating from a sharp bear market dead-cat stock market bounce and from absurdly manipulated data reports on employment and housing.

I was looking at a daily graph of AIG earlier today and comparing it to a couple other insurance company stock charts (Allstate and Progressive).   Contrary  to other insurance Untitledstocks, AIG has not participated at all in this stock market bounce.  In fact, it’s been hitting new 52-week lows almost everyday since early February.

The same problems that caused a temporary systemic collapse in 2008 are back in full force again.  Only they are much larger and much more insidious because rules were changed in a way that enabled the big financial firms to better disguise their Ponzi schemes.   AIG is the born-again poster-child of this evolving financialized nuclear melt-down.   I was chatting with a colleague earlier who told me that a  contact of his at the Company said that everyone who stayed on at AIG after 2008 are now being let go. Something ominous is going on there…

The Kansas City Fed survey reported today that its index has dropped to 7-year lows.  Yes, the Government reported today a bounce in durable goods, but it was driven by a huge order for aircraft parts from the Dept of Defense (great, we’re preparing for war in the Middle East).  Here’s what the real economy looks like:

Untitled While the Government insults our collective intelligence with tall tales of 5% unemployment and Janet Reno Yellen lobbies the public on the view the economy is improving, the actual numbers coming from Main Steet show an economy slipping into recession. Treasury yields continue to compress. This is not the signal that it’s time to take out a 100% mortgage from a private lender and overpay for a crappy house, it’s the unmistakable onset of economic collapse.

Today both Dominos Pizza (12%) up and Lending Tree (up 22%)  spiked up after “beating” their earnings.  Here’s what was missed in the reporting:  Dominos trades at 16x EBITDA and Lending Tree trades at 25x EBITDA.  This is sheer insanity.  Oh, by the way, TREE’s trailing EBIDTA is “adjusted,” which means EBITDA  after the financial Kreskins at the Company add back all of the recurring “non-recurring” expenses.

It’s incomprehensible the way the market can ignore the bad news piling up.  JP Morgan admitted earlier this week that it is woefully under-reserved against defaulting energy loans it was unable to unload onto the market.  Bloomberg News featured a story today which reports that “the biggest wave of oil defaults looms as the bust intensifies” – LINK.   I think this is already becoming a hidden problem in the financial system and it explains why we seeing financial firms like AIG (credit default swap issuer) and DB (lender to defaulting energy companies) not participating in this bear market bounce.

We know that the middle class is running out of money – “more subprime borrowers are falling behind on their auto loans”  and “Retail Apocalypse: Major US Chains Closing 6,000 Stores Nationwide” – but Restoration Hardware yesterday told us that upscale shoppers have stopped spending money now as well.

The “Minsky Moment” occurs when too much borrowed money has fueled too much asset valuation speculation.  The market will no longer absorb increasing levels of debt and the current borrowers can no longer support what’s already been borrowed.  A severe collapse in asset values ensues.

In early 2015 the Government allowed Fannie Mae and Freddie Mac to offer 3% down payment mortgages.  This is because the system had run out of borrowers capable of taking down a 5% mortgage.  Later in the year the Government began offering a zero-percent down payment program.   Private, non-Government pools of capital are offering  reconstituted versions of the type of mortgages which led the collapse in 2008.  The mortgage market is now searching for the last non-mortgaged stragglers who can still fog a mirror and are willing to overpay for a chance at the American dream.

Currently we are seeing the Minsky Moment swarm the energy market and begin to engulf the auto loan market.  Soon it will start creeping into the housing mortgage market.  The gerbil is almost dead but it’s still making the wheel spins albeit slowly.  Not surprisingly the stock market is looking at the gerbil as it dies and interpreting any sign of life as a reason to party on…

A Flock Of Black Swans Hovers Over This Bear Market Bounce

The Dow has spiked up nearly 1,000 points in six trading sessions.  Similarly, the S&P 500 has shot up 6.4% in the last six trading sessions. Nothwithstanding the continued flow of increasingly bearish economic data, stock market moves like this do not occur in a bull market.  The economic indicators continue to get worse – much worse.  Maybe the markets are giddy because they are anticipating more money printing – I don’t know.

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.  – Ludwig Von Mises,  “Human Action”

I don’t care what so-called Wall Street scam artists, financial media imbeciles and the  charts are saying.  The basic underlying economic, financial and geopolitical fundamentals continue to show two developments brewing:   the onset of a Greater Depression and war.

The black swans are right in front of our eyes in the form of debt at every level of our system:  Energy industry, student loans, auto debt, personal and credit card debt, corporate debt and real estate/commercial property/housing debt.

The energy debt crack-up boom is here and now. The Government can somewhat hide the SLMA debt problem but I’ve seen estimates that as much as 40% of the $1.3 trillion is in technical default. The Government lets people go into deferment or enables as little as no monthly payments with a new income based test that Obama initiated. But the Government still has to make payments on the debt as a the pass-thru guarantor to entities that hold the student debt.

The auto debt will become a problem this year:  More Subprime Borrowers Are Falling Behind On Their Auto Loans.   Repo rates are already at historically high levels.  The enormous glut of new cars will begin to push down the resale value of repo’d vehicles, forcing big losses on banks and auto loan-backed asset-trust investors.

The rate of delinquency on all of the new 3/3.5% down payment  mortgages issued over the last 5 years will begin to move up quickly this year as well.  In fact, the banks are still sitting on defaulted mortgages from the last housing market collapse.  But the liquidity pushed on to the banks by the Fed has enabled them to endure non-performing loans on their balance sheet.

And then there’s the tragically underfunded pensions…the State of Illinois has openly admitted to a $111 billion underfunding problem.  Several other States have disclosed 40-50% underfunding of their State-employee pension plans.  The problem with these estimates is that they rely on projected future rates of return that are too high.  Most funds assume a 7.5-8.5% ROR in perpetuity.   Last year most funds were flat to negative. YTD pension funds are quite negative.

How is it even remotely possible that any pension fund is underfunded given that, since the 2009 low, the stock market has tripled in value and the bond yields have fallen to record lows, which means bond portfolios should have soared in value?   Pension funds should be, if anything, over-funded right now.

Furthermore, those underfunding estimates assume bona fide, realistic mark to market marks on illiquid investments such as CLO’s, CDO’s, Bespoke Tranche Opportunites (think “The Big Short”), private equity fund investments, real estate, etc. – you get the idea.  I would bet most pension funds, public and private, are fraudulently over-marked on at least 20% of their holdings.   I know many pensions have allocated  in the neighborhood of 20% of their investments to private equity funds.  Most of these funds are in the early stages of becoming little more than toxic waste.

Pension underfunding is no different from a brokerage account that is using margin.   “Underfunded” is a politically acceptable term for “we are using debt to make current payments.”   The “debt” incurred will be owed to future beneficiaries.   But here’s the rub: with assumed rates of return too high and investments already overvalued for political purposes, it is highly likely that future pension fund beneficiaries – private and public – will be left holding little more than an “IOU.”

In other words, the pension underfunding problem is, in reality, another massive chunk of debt has been cleverly disguised and layered into our system.  It has been yet another mechanism by which the Wall Street racketeers have sucked wealth from the middle class.

By all appearances, this recent dead-cat bounce in the stock market is quickly losing steam.  Macy’s stock is up 1% because it “beat” estimates using “adjusted” EPS. “Adjusted” is a euphemism for “recurring non-recurring expenses that we strip out of our reported net income calculation to make the headline earnings report look better.”  Of course, hidden in between the lines is the fact that Macy’s revenues and net income (any way you want to calculate it) has dropped precipitously year over year.

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It’s impossible to know for sure how much longer this parabolic spike up can last. It might even run up to the 200 dma (red line). But inevitably the market take another parachute-less base jump off a tall building and remove another chunk of money from daytraders, retail investors and their moronic advisors and, of course, pension funds.

If you want ideas on how to take advantage of a market that is inevitably headed much lower, please visit the  Short Seller’s Journal.

The Latest Weekly Short Seller’s Journal Is Now Available

The stock market (S&P 500) jumped 97 points the first three days of last week.  That’s an average of 32 points per day for those three days.  The economic news continues to show quickly deteriorating U.S./global economic conditions.  U.S. Treasury debt is now over $19 trillion.  There is a near-100% probability that the U.S. Treasury will hit the new $20 trillion debt ceiling limit before the March 2017 borrowing authority extension date arrives.

I have no doubt that the Fed will re-ante its money printing program – aka  “QE” – before Labor Day.

My latest issue of the Short Seller’s Journal features a highly overvalued construction industry stock plus a tech/media stock with big operating losses. Click HERE or on the image below to subscribe.

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Hey Dave, loving your SSJ service. In fact it is just what I was looking for as the market rolls over. I expect to have my best year in the market ever, assuming the powers that be don’t step in to halt trading just when things are heating up, or some other such manipulation.

I think the journal provides just the right amount of depth, and your writing style makes me chuckle. Keep the great tips coming.   – Ken

The Corruption In The U.S. Has Reached Insane Levels

The U.S. financial and political system has become possibly the most corrupt system in recorded history. But even worse is the willingness of the American public to endure and even accept the blatant corruption that has engulfed the system. The latter attribute is best explained by the psychological phenomenon known as “Stockholm Syndrome.”

The poster-child for this analysis, of course, is Hillary Clinton. Clinton should be spending all of her time defending herself from being thrown in jail for life.  Instead, she gets annihilated in the New Hampshire primary voting and yet comes away with the same number of delegates as her opponent.  It’s almost as if the more evidence is released which shows that Hillary Clinton broke laws and seriously compromised national security the more popular she becomes with ideologically blind Democrats.

Same for Trump.  The only reason he has achieved some measure of support is because he’s willing to challenge the long running corrupt establishment politicians and there’s enough people who sense that the crux of the problem is Washington DC.  But Trump is not the solution to the problem – he’s part of the problem from the Wall Street side of the equation.  Trump is the guy who has run his casino “empire” into bankruptcy three times – “Chapter 33” (Chapter 11 x 3).  He’s no more qualified to run the country than is a pedophile to run a daycare center.

As for Wall Street, I’m watching in horror as the same problems that blew up the financial system in 2008, problems which were never fixed, have become even bigger and more dangerous.  Yet the public whistles by the graveyard as they are about to be subjected to money market fund gates and a cashless monetary system.   The EU is getting ready to abolish the 500 euro note.  And Larry Summers, one of the most insidiously corrupt public officials I’ve seen in my lifetime, has proposed abolishing the $100 bill.  And no one cares.

A digital currency system not only will enable the Government to monitor everything you do with your money, it will also enable them to more easily “corral” any money you keep in a bank in order to use that capital for the bail-ins which will inevitably hit the system when 2008 Redux hits the system.

It’s not  a secret to anyone paying attention, but the Government spending deficit is on the cusp of going parabolic.  The one-time accounting games and fleecing of Fannie Mae and Freddie Mac to help “fund” Government deficit spending and to enable the appearance of of a smaller deficit are now used up.  No one seemed to care, but the amount of Treasuries outstanding jumped up by about $700 billion to $19 trillion right after Congress and Obama raised the debt ceiling limit to $20 trillion. Folks, that’s money that has been already spent but which was hidden from the actual 2015 spending numbers by Jack Lew’s magic accounting wand.

Now that China is openly liquidating its Treasury holdings, the U.S. Government will need to find another source of funding for its Ponzi schemes.  Enabling “gates” on money market funds will help the Government channel big waves of capital into Treasury bonds via Treasury mutual funds.   Notice there have not been any proposals to gate those.  It’s another backdoor bail-in that will be implemented on a complicit public.

I said back in 2003 that the powers that be would hold up the system with printed money and credit until they were done sweeping every last crumb of wealth off the table and into their pockets.  But I had no idea what that process would look like.  Now I’m starting to see how my prediction is unfolding and I will admit it’s clever.  It’s the “boiled frog” strategy being executed with near-perfection.

Money market mutual fund gates, which go into effect in Q3  – and a digital currency system – which could go into effect before the end of the year – are nothing more than totalitarian capital controls in disguise.  I have no expectations other than that the public will embrace them with eagerness as I suspect they’ll be shoved down our throats in the name of national security.

For anyone who “gets it” and who is paying attention to what’s happening, my best advice is to start moving as much of your money out of mutual funds, retirement accounts and banks and into physical gold and silver that you safekeep yourself.  Ironically, at a time when the eschewal and ridicule of precious metals by the media and the clueless masses has reached an epitome, now is the best time since the bull market began to convert fiat currency and custodial-held wealth into gold and silver bullion.