The election is still more than two weeks away, and already a tremendous amount of evidence has emerged that operatives from both major political parties have been committing election fraud.  There have been reports of dead people being registered to vote, of voter registration Read more…

Either way this election turns out, American jobs are going to continue to get slaughtered by the millions.  During this campaign, Mitt Romney and Barack Obama have both attempted to portray Read more…

Will cities all over America erupt in violence if Mitt Romney wins the election?  Right now we are probably witnessing the most divisive campaign in modern U.S. history, and both sides Read more…

Are we on the verge of societal collapse?  Many of the greatest empires throughout world history were not conquered by outside forces.  Rather, they crumbled inwardly as extreme social decay set in.  There have been many that have compared the last days of the Roman Empire Read more…

The decline of the Christian faith in America is accelerating.  The results of a new survey conducted by the Pew Forum on Religion and Public Life were just released, and the numbers are staggering.  The percentage of all U.S. adults with no religious affiliation at all is nearly up to 20 percent. Read more…

Mac Slavo: In the following video commentary Russian General Konstantin P. Petrov (Ret.) asks some interesting questions and includes his own thoughts (perhaps the non-official Russian position) about a variety of topics that include the end of US dollar hegemony, the orchestration Read more…

The middle class in America is being systematically destroyed.  Once upon a time the United States had the largest and most vibrant middle class in the history of the world.  The rest of the globe looked at us in envy and wondered what we were doing right.  But now everything Read more…

Michael Snyder: If you could live in any state in America, where would you go?  During troubled times like these, what is the best place in the United States to live?  Read more…

Michael Snyder: America is becoming a very cold place.  If you don’t have money, you don’t really matter much in our society.  The ads on television aren’t for you – they are directed at people that actually have good jobs and that can afford to buy the nice little “extras” in life. Read more…

by  Chris Georgopoulos, SmartStops contributor

Reading financial articles can be, let’s say boring at times. This article we are going to try to spice it up, let’s play a game of role playing.  Famed speculator, Jesse Livermore once was quoted…

“If I were walking down a railroad track and saw an express train coming at me at 60 miles an hours.  I would be a damned fool not to get off the track and let the train go by. After it had passed, I could always get back on the track, if I desired.” –Reminiscences of a Stock Operator, Edwin Lefevre.  

For this game let’s rename the train, Best Buy stock (BBY: NYSE), the ““I” in walking down the track” we can call the shareholders of Best Buy and the speed of the train, the issues.  The game is scored by the costs of each decision. Whoever has the best return wins!

It is the end of summer 2005, Best Buy is approaching $80/share and the future couldn’t be brighter. The tech bubble burst is ancient history, the housing market is hot, interest rates are low and every house in America is an ATM for consumer spending.  You are on the railroad track…there isn’t a train in sight! 

It is now the beginning of fall 2008; Best Buy has fallen to the mid $40s in defiance of the market making new highs and there are rumors of problems in Mortgage backed securities.  (Note:  Sidestepping risk is now made possible with the release of SmartStops.net  which if had been available would have had you out in the $70 range in 2005).  Your friend has made a fortune flipping speculative properties in south Florida and Las Vegas, but you see he is worried. He still has five houses on the market with almost no personal income… (You know how this story ends)  You can hear a train coming and it sounds like it’s really moving!

Only a few months later, Best Buy is trading under $18/share!   The rumors are true; the housing market has crushed the stock market. It seems nobody thought housing prices would ever go down and the economy is on the verge of total failure. You can now see the train, its moving fast and finally you start to consider if you should actually get off the tracks.

(SmartStops.net   issued two Long-Term exit signals in 2008 the first January 4, 2008 at $46.80 and on September 16, 2008 at $40.68. That’s a  $22 per share savings by sidestepping risk.)

It is two years later; Best Buy is trading back in the mid $40s. The US Government stepped in and back-stopped the entire financial system, confidence has been temporarily restored. The train has slowed to almost a complete stop; you are relieved and continue your stroll.  

(SmartStops.net   issued two Short-Term reentry triggers starting on December 17, 2008 at $28.88 and on March 17, 2009 at $30.89. Stock protection of $15/share.)

Its September 13^th 2011, Best Buy has once again been cut in half and is trading around $23/share. They have just announced another disappointing earnings release.  Best Buy unlike its failed competitor Circuit city, is still profitable and is forecasted to grow, (Yahoo finance has 5 year growth estimates just over 9%) but their business model has been questioned. Online rivals such as Amazon.com (AMZN: NASDAQ), Overstock.com (OSTK: NASDAQ) andEBAY.com (EBAY: NASDAQ) have taken away market share and lowered margins. These questions are shown in the technical breakdown of the stock which has been in a downtrend since April of 2010 and is now approaching new 52 week lows.  The train has started moving again, at top speed! It’s so close you know what color the eyes of the engineer are!

SmartStops.net   has issued multiple risk triggers in the past year, with the first one on December 14 2010 at $40.19 thus offering protection of $16 per share if the first one was acted upon.

After 6 straight weeks of losses, it looks like the US stock market is ready for a winning week. The Dow rose 123 points. Oil stayed below $100. But the yield on the 10-year T-note rose above 300 basis points.

And here’s the latest from The Financial Times:

“S&P cuts Greece’s rating one step closer to default.”

Want to earn a nice yield on your money? Buy a Greek 10-year bond. It will pay you 17% interest. For a while.

But wait. You say you can’t trust the Greeks? You say they’re not good for the money?

“The Greek political landscape is ingrained with vested interests, endemic kleptocracy and bribery,” writes John Sfakianakis, chief economist of Banque Saudi Fransi.

Unemployment is around 20%. People dodge taxes. Government workers don’t show up for work. Households spend too much. And the government is going into debt so deeply and so rapidly it can’t possibly get out.

Hey… It’s just like the US! No, the US is worse, says Bill Gross. CNBC:

When adding in all of the money owed to cover future liabilities in entitlement programs the US is actually in worse financial shape than Greece and other debt-laden European countries, Pimco’s Bill Gross told CNBC Monday. Much of the public focus is on the nation’s public debt, which is $14.3 trillion. But that doesn’t include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.

The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.

Taken together, Gross puts the total at “nearly $100 trillion,” that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won’t find a solution overnight.

“To think that we can reduce that within the space of a year or two is not a realistic assumption,” Gross said in a live interview. “That’s much more than Greece, that’s much more than almost any other developed country. We’ve got a problem and we have to get after it quickly.”

How do you like that? He didn’t even mention the fact that Americans can’t sell their houses to Germans or turn their country into a retirement home for sun-deprived Scandinavians.

But wait, if the US debt situation is as bad or worse than Greece’s, how come the yield on US 10-year notes isn’t 17% too?

Therein may lay an even bigger opportunity. What if Mr. Market were making a mistake?

Everybody knows that Greece always defaults on its debt. It’s been in default, one way or another, for about half of its life – ever since it gained independence in 1828.

But the USA? If you can’t trust the US to pay up, who can you trust?

So, investors may feel secure lending money to the US…even though the fundamentals are little different from those of Greece. They may think: “the US never defaults.”

And yet, if there’s one thing we can learn from financial history it is that nobody is immune from financial errors. Everyone gets greedy and stupid from time to time. And no paper currency lives forever.

Right now, you can earn 17% on Greek debt or 3% or US debt. We’ll make a prediction that you can take to the bank: that spread will narrow.

The inflation rate in America is a matter of debate. But even the US government’s own number crunchers put it at about 5% for the first quarter of this year. That makes the real return on US 10-year notes a MINUS 2%.

How long will investors content themselves with a negative return? Maybe for a while. But not forever. They usually want a real return of about 3%, with no threat of default. A safe return, in other words.

And when they realize that the inflation rate in the US is really 5%…and that the return on US debt is NOT safe…they’re going to want a higher interest yield.

Say 5%. Or 7%. Or 10%.

Then, all hell is going to break loose.

Bill Bonner
for The Daily Reckoning

The Likelihood of a US Default originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
The Likelihood of a US Default

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Everything is not all right. And things are going to get worse … much worse. The economy is on the threshold of calamity. Wars are spreading like wildfires. The world is on a razor’s edge.

Not so, say world leaders and mainstream media experts. Yes, there are problems, but the financiers and politicians are aware of them. Policies are already in place and measures are being taken to correct them.

Whether it’s failing economies, intractable old wars or raging new wars, the word from the top always maintains that steady progress is being made and comforts the populace with assurances that the brightest minds and the sharpest generals are in charge and on the case. On all fronts, success is certain and victory is at hand. Only “patience” is required … along with more men, more time and more money.

As far as these “leaders” and their media are concerned, the only opinions that count come from a stable of thoroughbred experts, official sources and political favorites. Only they have the credentials to speak with authority and provide trustworthy forecasts. That they are consistently, if not invariably, wrong apparently does nothing to diminish their credibility.

How can any thinking adult possibly imagine that the same central bankers, financiers and politicians responsible for creating the economic crisis are capable of resolving it? Within days of its announcement, we predicted that Bush’s TARP (Troubled Asset Relief Program) was destined to fail, and subsequently predicted the same for Obama’s stimulus package (The American Recovery and Reinvestment Act). They were no more than cover-ups; there would be no recovery.

Meet the New Plan, Same as the Old Plan

Democrat or Republican, it makes no difference. Despite the heated rhetoric, solving economic problems had less to do with the party in power and more to do with professional competence. Both sides had their turn in office. Both used their power to initiate policies that created the problems. Both sides had their shot at fixing the messes they were responsible for. Both sides failed, as we predicted. Given who they are and what they’ve done, we confidently predict an unbroken sequence of bipartisan failures in the future.

The Beltway Incompetents are in the driver’s seat. What person with a healthy instinct for self-preservation would believe the promises of politicians or trust the judgment of central bankers or Wall Street financiers whose only real interest is self interest?

Not “Business as Usual”

In the 1920s, US President Calvin Coolidge declared, “The business of America is business.” Four score and 10 years later, the business of America has become war: The forty-year War on Drugs; The ten-year War on Terror; the Afghan War (longest in American history); the eight-years-and-no-end-in-sight Iraq War; the covert wars in Pakistan and Yemen; and most recently, the “time-limited, scope-limited kinetic military action” in Libya.

While the justifications for engaging in these wars were all different, all were murderous, immoral, interminable, ruinously expensive and abject failures. Why would anyone believe the optimistic battle communiqués issued by the “czars” in charge and the battlefield brass who keep reassuring the public that reapplying previously failed strategies would, this time, lead to success?

Yet even in the face of their proven failures and gross incompetence, anyone daring to challenge the party line or the conventional wisdom is dismissed as an “alarmist,” “fear monger,” or “gloom-and-doomer.” However unwelcome our forecasts may be – pessimism, optimism, like or dislike are all irrelevant – only their accuracy counts. We correctly forecast:

• Afghan and Iraq Wars would be debacles

• Bursting of the housing bubble

• The “Gold Bull Run”

• The “Panic of ’08″

• European Monetary Union crisis

• Failure of US bailout/stimulus packages to revive housing and create jobs

• Falling governments, spreading civil wars and social upheaval on a global scale

We also said that the Federal Reserve’s sighting of economic “green shoots” in March 2009 was a “mirage” and predicted that their much vaunted “recovery” was no more than a temporary solution, a quick-fix to be followed by “The Greatest Depression.” And now, in June 2011, with the Dow on a down trend and the economic data increasingly pointing in the direction of Depression, Washington and Wall Street remain in denial. The only debate among the “experts” is whether or not a “double dip” recession is likely.

However, for the man on the street – pummeled by falling wages, higher prices, intractable unemployment, rising taxes and punitive “austerity measures” – “Depression,” not “recession,” and certainly not “prosperity,” is just around the corner.

To be continued in Part Two.

Regards,

Gerald Celente
for The Daily Reckoning

[Editor's Note: The above Trend Alert is available as part of a subscription to The Trends Journal, which is published by Gerald Celente. The Trends Journal distills the ongoing research of The Trends Research Institute into a concise, readily accessible form. Click here to learn more about and subscribe to The Trends Journal.]

Collapse: It’s Coming! Are You Ready? (Part One of Two) originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Collapse: It’s Coming! Are You Ready? (Part One of Two)

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

“What Recovery?” Time Magazine finally got around to asking in its latest issue.

Better late than never, we suppose. The Daily Reckoning has been asking that question for months already…

“America’s recent economic ‘recovery is just a dismal version of ‘Mother May I,’” quipped Dan Amoss, editor of the Strategic Short Report in his essay “Inflation 1; Economy 0” in early March. “Almost every ‘one step forward’ will succumb to ‘two steps backward.’”

Two weeks later, we reiterated, “America’s economic recovery contains more cracks than Humpty Dumpty…after suffering his ‘great fall.’ Somehow, all of Bernanke’s horses and men managed to slather enough monetary glue onto the fractured pieces of our economy to hold them all together. But the reconstructed economy does not look very much like the original one. Humpty Dumpty is now a Picasso.

“While it’s true that a few ‘headline’ economic numbers – like GDP growth and industrial production – are flashing signs of recovery, numerous other data points are flashing red. Net-net, this recovery is suspect.”

We wanted to see the recovery that everyone else claimed to see, we really did, but we were never able to make out its image, no matter how hard we squinted. Blame us for a lack of imagination.

Most of the folks on Wall Street insist they see plentiful signs of economic growth. But then, a lot of folks insist they see aliens out their windows…or the Virgin Mary in their grilled cheese sandwiches.

Maybe the folks on Wall Street are right. Maybe a recovery is unfolding right below our noses. But to us, the “green shoots” of recovery look suspiciously like the AstroTurf of desperate governmental stimulus efforts. From a distance, the stuff looks like the real deal…or even better. But up close, you find a fake – a parody of economic vitality that will never grow into anything real or self-sustaining. Even worse, the AstroTurf also smothers the soil that could potentially yield productive enterprises.

As a result, the so-called recovery is producing a wide range of severely recessionary phenomena. For starters, according to a recent CNN poll, a whopping 48% of Americans surveyed believe that a 1930s-style depression is “very likely” or “somewhat likely.” That’s the highest reading since the beginning of the 2008 credit crisis.

Aren’t folks supposed to become more confident during recoveries? What’s the problem?

We don’t know precisely, but we can surmise imprecisely. A lot of stuff is broken. Jobs are hard to come by, debts are difficult to repay and household wealth is extremely difficult to regain.

Meanwhile, the US government’s mushrooming debt burden is scaring the bejeepers out of any American with a 5th grade aptitude for arithmetic. According to the latest figures, every American has become a kind of fiscal pack mule – saddled down with nearly half a million dollars of present and future government liabilities.

Those distant liabilities wouldn’t seem so troubling if they did not feel so immediate. But virtually all of America’s wealth-creation trends are moving in the wrong direction: taxes are rising, per capita incomes are slipping, inflation is rising and homeowners’ equity is collapsing.

Since the peak of the housing bubble in early 2006, homeowners’ equity has collapsed from $14.7 trillion to $6.9 trillion – a staggering loss of wealth equal to more than half of US GDP.  In fact, homeowners’ equity is even lower today than it was at the end of 1999!

Not surprisingly, a very close correlation exists between the amount of equity Americans have in their homes and the attitudes of Americans toward the economy. You could say these two data series move tick for tick.

But real estate wealth is not the only disappearing act of the last decade. American households have also lost about $2 trillion of stock market wealth during the last five years.

These aren’t pretty numbers. Very few households are better off today than they were five years ago…or even ten years ago. Many are worse off. This bad news might not feel so bad if the US economy were producing a steady stream of good news. But it isn’t.

To the contrary, the federal government continues to spend the money that no one seems to have, while Ben Bernanke prints the dollars that fewer and fewer people seem to want. When and how this perverse merry-go-round will end no one knows, but it might be a good idea to jump off your pony as soon as possible and find a safer carnival ride…like precious metals or foreign real estate or water (as Chris Mayer explains in his essay “Blue Gold…Still Shining”) or, indeed, any other asset that isn’t a dollar bill or a promise to re-pay a dollar bill at some future date.

“There are already elements of [economic] fragility,” said New York University professor Nouriel Roubini in a weekend interview. “Everybody’s kicking the can down the road of too much public and private debt. The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest… We’re still running over a trillion-dollar budget deficit [in the US] this year, next year and most likely in 2013. The risk is at some point, the bond market vigilantes are going to wake up in the US, like they did in Europe, pushing interest rates higher and crowding out the recovery.”

What recovery?

Eric Fry
for The Daily Reckoning

Life in the So-Called Recovery originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Life in the So-Called Recovery

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Despite the market's miserable performance during the past five weeks, corporate earnings as well as the overall economy have been improving on a quarter-to-quarter basis since mid-2009. The growth pace may be slowing now, but progress is still being eked out.

Interestingly though, a few highly-regarded blue-chip names — Dow components, no less — have simply failed to ride the earnings growth tide. Before buying a Dow Jones Industrial Average constituent simply because it's in the Dow, it may pay to take a step back and realize how far these companies haven't come.

1. Bank of America (NYSE: BAC)
During the course of the past couple of quarters, Bank of America has discovered it's actually no closer to a recovery now than it was two years ago. As of the end of the first quarter of 2011, Bank of America was boasting a trailing 12-month loss of $0.47 per share. This is worse than the trailing loss of $0.25 seen at this point a year ago, and downright alarming compared with the

“Bernanke comments keep equities in check,” says a headline in The Financial Times.

Sure enough. The Dow ended down again – 21 points down. It’s been going down for five weeks. But it’s still above 12,000. So there’s nothing to be alarmed about.

What did Ben Bernanke say? Not much really. He allowed as to how the economy was not as strong as he had hoped. But he said things were getting better. And he didn’t mention QE3.

So why was the market unhappy? What difference did it make what Bernanke said?

Ah…that’s the funny thing. Stock prices are now the responsibility neither of willing buyers nor sellers, neither of the bears nor the bulls…but of the US central bank.

Bernanke said he wanted higher stock prices. He used QE2 to boost them. He said the “wealth effect” would make people feel better off. Then, they’d spend more money. And then, they’d actually be better off.

Of course, you can see the problem with that. If it were that easy to make people richer, why not give them more quantitative easing every day of the week?

Instead, investors know how the game works. They know you “don’t fight the Fed.” So, if the Fed is trying to push up stock prices with cash and credit, you go along for the ride. You buy stocks, confident that the Fed has your back.

The economy actually gets worse…as higher prices sit on family budgets like a fat cowboy on a skinny horse.

And so, the stock market comes to reflect neither the economy nor what stocks are worth. Instead, it shows what speculators think they can make from anticipating Ben Bernanke’s next move. They watch the Fed. If Bernanke looks like he is going to pump in more money, they buy. If they’re not sure, they wait. If they think the Fed is pulling out of the stock market, they sell.

Right now, they’re selling…because they see QE2 ending…and no QE3 starting up.

‘Wait a minute, Bill, are you saying that the Fed is manipulating the stock market?’

Yep.

‘Isn’t that against the law?’

Yep.

‘How does the Fed get away with it? How come the SEC doesn’t come down hard?’

Oh, you silly goose. Stop asking stupid questions. The market is fixed. The SEC is in on it. It’s all part of the zombie system of finance. The dollar pretends to be real money. Debt pretends to be capital. And regulators pretend to be smarter than capitalists. Details to follow.

We promised yesterday to tell you more about what we think Mr. Market may be up to. You’ll recall that Mr. Market is wily. Sometimes cruel. Always inscrutable.

One thing Mr. Market will not do: he will not do what people expect. Why not? Because he would have already done it. In other words, if everyone thought stock prices were headed higher, they would already be higher.

From that bit of logic we infer that Mr. Market will generally do what most people do not expect…the very thing that will cause them most pain and suffering.

What’s that?

Well, what lesson have investors best learned over the last 20 or 30 years? They’ve learned that things go up. Since 1980, stocks are up about 12 times, even after the slipping and sliding of the last 10 years.

After such a powerful performance investors trust stocks, over the long run. Indeed, many analysts refer to the last 10 years as a reason stocks should go higher over the next 10.

‘It is so unusual for stocks to do so badly,’ they say. ‘Surely, they wouldn’t do that two decades in a row.’

Oh yeah? Stay tuned.

We saw yesterday that the federal government’s real debt has risen to $62 trillion. No way are the good citizens of the United States of America going to put their heads down and pay that kind of debt. They couldn’t do it even if they wanted to.

The history of the last 30 years is a history of debt accumulation. The future…perhaps for the next 10 to 20 years…will be a story of debt cancellation, restructuring, write-offs, defaults and foreclosures.

Psst. Want to make some easy money?

If you’re one of the 15 million Americans who is underwater, it’s easy. If your house is worth less than the mortgage outstanding against it, simply walk away.

Why not? Do you think the bank would stick with a losing position? Uh uh. It would cut its losses. You should too.

Bill Bonner
for The Daily Reckoning

The Central Bank Stock Market Indicator originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
The Central Bank Stock Market Indicator

The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.