Bears Beware: S&P 4000 by 2016

“Since stocks rise when the Fed is adding assets and tank when the Fed pauses…

Now that financial pundits are claiming the current stock market rally is good to go until 2016, it’s appropriate to see where the market will be in 2016 if current trends hold.

Let’s start with the well-known correlation between the Federal Reserve’s balance sheet and the stock market: stocks rise when the Fed is adding assets and tank when the Fed pauses. (Chart courtesy of STA Wealth Management)

Courtesy of Market Daily Briefing, let’s look a little closer at the Fed’s ballooning holdings of home mortgages (MBS) and Treasury bonds, and extend those trends into the future:

By mid-2016, the Fed will have nearly doubled its Treasury bonds from $2.16 trillion to over $3.5 trillion, and its mortgage holdings will double from $1.44 trillion to $3 trillion…..”

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[youtube://hhtp://www.youtube.com/watch?v=k_jZ-Nmx9lU 450 300]

 

 

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“The virtual currency craze is on a tear, with new virtual currencies emerging every day. The New York Times just ran a series of articles about them last week. “Charles Ponzi would be so proud!” one person appropriately commented at the bottom of this article.

Before going any further, let’s learn a bit more about the bitcoin system (also here and here). There are three components to this system:

1. A unit of account—the Bitcoin (BTC)—in which all transactions are recorded and goods and services are priced.

2.  A payment system, supposedly secured and anonymous.

3. A means of payment—bitcoins—that is needed to complete all transactions in the payment system (there are coins of several denominations and the coin with a face value of one BTC is called the “bitcoin”).

Given the craze over bitcoins, their price in US dollars (USD) has soared with a BTC 1 coin going for as much as USD 1200 at one point, leaving Business Insider’s Joe Weisenthal saying:

“At this point, I have zero idea what a ‘fair’ price for Bitcoin is.”

I have an answer to that question, but before I reveal it (pretend you did not read the title of this post), let’s spend a bit of time getting to know the Bitcoin, starting with its payment system.

All transactions that have occurred since the beginning of the bitcoin system are recorded on a ledger called the “blockchain.” The system is setup so that every ten minutes or so a new page—called a “transaction block,” or just “block”—is added to the ledger. This new page refers to all past transactions requests (by referring to the immediate previous block) and records all the new transactions requests.

The ledger is crucial to the system because it allows users to verify that a transaction request between two parties is not fraudulent. For example, Mr X. uses the bitcoin payment system to send a request to buy a pizza from Joe’s Pizza. Joe’s Pizza wants to make sure that this is a valid transaction.

That requires verifying that Mr. X holds enough bitcoins to pay for the pizza (the ledger will tell from which past transactions he got his bitcoins), and that he is not trying to double spend the bitcoins. This verification process is done by the accountants of the system, who are called the “miners.”

Usually Joe’s will wait for confirmation from several miners (the rule of thumb seems to be six confirmations) before agreeing to sell the pizza (“confirmation” means that a recorded transaction request is included in following blocks). Anybody can be a miner, you just need a computer.

Adding a page on the ledger is extremely difficult (more here) and requires time and CPU power. A miner can only add a page to the ledger after meeting a specific encryption requirement called the “proof of work.” The proof of work involves encrypting new transaction requests in the form of a 16-digit hexadecimal number—called “hash” or “digest”—that must be no greater than a target value set by the system.

For example…”

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Come get your $0.29 rags yo….

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Full article on margin debt hitting new highs

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Silicon Valley is starting to catch Bitcoin fever – though the entrepreneurs and venture capitalists being drawn to the virtual currency claim that the biggest profits will come from using it to build a new digital finance industry rather than just as a vehicle for speculation.

Digital currency companies that have attracted early rounds of venture capital in recent weeks include Circle Internet Financial, headed by Jeremy Allaire, a serial entrepreneur from the media technology industry, and Ripple Labs, whose founder, Chris Larsen, was behind pioneering peer-to-peer lending company Prosper.

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Prominent investors who have been drawn to the field include Jim Breyer, a partner at Accel and early backer of Facebook, as well as Google’s venture capital arm, which has invested in Ripple and Buttercoin, a Bitcoin exchange.

Bitcoin’s tech industry backers argue that the shared protocols and common technology standards on which it is based echo the open technologies that lie at the heart of the internet. That could make it the foundation for a low-cost, standards-based financial system independent of the traditional banking industry.

“It reminds me of the internet protocols in the mid-1990s,” said Mr Breyer, who is also a director of retailer Walmart. Bitcoin was an “enormous ecommerce opportunity” for merchants, because it could greatly reduce transactions costs and make it easier to buy online, said Mr Breyer, who contributed to a $9m investment in Circle – the biggest first-round financing for a payments start-up, according to the company.

“It’s sort of like we’re in 1996,” said Mr Larsen. That could make possible the same sort of disruption in finance that the media and communications worlds faced with the rise of the internet. While riding the Bitcoin wave, his company has also created its own virtual currency, Ripples….”

 

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(FORBES) “Amazon CEO Jeff Bezos unveiled a new plan by Amazon to deliver packages to customer’s homes within 30 minutes using drones.  The plan was announced on the CBS show 60 minutes, and Amazon has since posted a video:” Read More

 

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“It was an incredible November for stocks in what’s been an amazing year for the market. Will the rally continue in December?

The Dow Jones industrial average and the Nasdaq both ended November with a gain of about 3.5%. The S&P 500 advanced almost 3%. The Dow and S&P 500 are near record highs, while the Nasdaq rose above 4,000 last week for the first time in 13 years.

So far this year, the S&P 500 has soared nearly 27% in the latest phase of a bull market that started in March, 2009.

If history is any guide, stocks should head even higher in December. Over the past 30 years, the S&P 500 has gained in December 80% of the time, according to data from Schaeffer’s Investment Research.

Stocks often benefit in the last month of the year as fund managers bulk up on the best performers in an attempt to “window dress” portfolios.

But with prices at record highs, there are growing concerns that stock valuations are becoming stretched. The S&P 500 is currently trading at more than 15 times next year’s earnings estimates, which is slightly above the long-term average…..”

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Amazing way to pick up some free coin…Bitcoin that is

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“Among McAlvany’s worries is low stock market volume. Trading activity has dropped 50 percent to 60 percent from about five years ago, he says.

In addition, “we have more people speculating in the stock market with someone else’s money,” McAlvany said. Margin debt hit a record of $401 billion for members of NYSE Euronext in September.

Those borrowings “increase what appears to be an absolutely sure bet in terms of upside in the stock market,” McAlvany said.

But, “another way of looking at that is we’ve got $400 billion of hot money that can come out of the market very quickly, and that’s enough to precipitate a major decline,” he said.

“We’ve anticipated 15 to 20 percent as a minimal move lower in the stock market, with as much as 40 percent being there if we begin to take out stop losses and really see a cascade effect in that market.”

Another bearish factor is the aggressive insider selling that has occurred amid the stock rally, McAlvany says. There’s a conflict between corporate executives selling their personal holdings as quickly as possible and their companies buying back shares, he says….”

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“The amount spent by the Transportation Security Administration (TSA) since 2007 on a program to identify suspicious airplane passengers: $900 million.

The number of terrorists arrested as a result of this expenditure: zero.

That is the inescapable conclusion of a General Accountability Office (GAO) study released in November and subsequent congressional testimony by GAO’s director of homeland security and justice, Stephen M. Lord….”

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“Pope Francis issued an apostolic exhortation Evangelii Gaudium (The Joy of the Gospel) November 24 that explicitly condemned free market economics with an epithet against “trickle-down” economics, causing establishment socialists to gloat prolifically.

Evangelii Gaudium — largely about evangelization within the Catholic Church — touched on a sweeping variety of issues, including pastoral care, the mentality of evangelists, international immigration, why women can’t be priests, and many other issues. But the brief parts condemning the free market have caught the attention of the press.

Francis wrote:

Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.

“Trickle down economics” has never been a term ever used by supporters of a free market to describe their views, but rather it has always been an insult deployed by opponents of free markets to ridicule their opponents. Thus, the pope’s letter received choruses of amens from the Washington Post’s leftist Eugene Robinson and huzzahs from the far-left ThinkProgress; and The Atlantic cheered the “Vatican’s journey from anti-communism to anti-capitalism.”

The “apostolic exhortation” (which is not an “infallible” ex cathedra pronouncement, and is even lower in authority than an encyclical letter) is a teaching document issued by a pope to address Catholics, but it doesn’t define any doctrines. As such, Catholics are not bound to accept the details of the letter. In practice, however, many Catholics will be persuaded they must do so by the mainstream media.

But was Pope Francis….”

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“While what little remains of America’s middle class is happy and eager to put in its 9-to-5 each-and-every day, an increasing number of Americans – those record 91.5 million who are no longer part of the labor force – are perfectly happy to benefit from the ever more generous hand outs of the welfare state. Prepare yourself before listening to this… calling on her self-admitted Obamaphone, Texas welfare recipient Lucy, 32, explains why “taxpayers are the fools”…”

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“Tensions are emerging within the Organization of the Petroleum Exporting Countries over which member countries should trim oil production to make room for a resurgence in Iraqi exports and the possible return of more Iranian crude to world markets if sanctions are eased.

There is no expectation of a decision to cut back at the OPEC cartel’s meeting in Vienna on Wednesday. The group of 12 of the world’s largest producers, though long riven by squabbling, has kept its overall production ceiling at 30 million barrels a day since December 2011.

OPEC expects overall demand for its crude to drop by about 300,000 barrels a day next year and some members are pushing to trim output, according to people familiar with the debate.

Members will have to decide whether to cut production as early as the first half of the year, with the risk that short-term global supply might build to a level where prices fall, an OPEC official said…..”

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“Sharp discounts and earlier hours drew slightly more shoppers into U.S. stores on Thanksgiving and Black Friday, according to preliminary results from market researcher ShopperTrak LLC, but tight budgets may have weighed on growth.

Foot traffic climbed 2.8% on Thanksgiving and Black Friday, the firm said, bumping sales up 2.3% to $12.3 billion over those two days. The jump was more pronounced on Thanksgiving after many chains lengthened their hours or opened their doors for the first time during the holiday.

Black Friday, meanwhile, lost out with traffic dropping 11%, while sales fell 13%, ShopperTrak said, as more customers got a jump on their shopping, in some cases at the expense of their turkey dinner.

ShopperTrak’s estimates provide a sense of how much consumers spent in stores and exclude online sales….”

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[youtube://http://www.youtube.com/watch?v=rOfz8RxJtog 450 300]

References

 

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?U.S. borrowers are increasingly missing payments on home equity lines of credit they took out during the housing bubble, a trend that could deal another blow to the country’s biggest banks.

The loans are a problem now because an increasing number are hitting their 10-year anniversary, at which point borrowers usually must start paying down the principal on the loans as well as the interest they had been paying all along.

More than $221 billion of these loans at the largest banks will hit this mark over the next four years, about 40 percent of the home equity lines of credit now outstanding.

For a typical consumer, that shift can translate to their monthly payment more than tripling, a particular burden for the subprime borrowers that often took out these loans. And payments will rise further when the Federal Reserve starts to hike rates, because the loans usually carry floating interest rates.

The number of borrowers missing payments around the 10-year point can double in their eleventh year, data from consumer credit agency Equifax shows. When the loans go bad, banks can lose an eye-popping 90 cents on the dollar, because a home equity line of credit is usually the second mortgage a borrower has. If the bank forecloses, most of the proceeds of the sale pay off the main mortgage, leaving little for the home equity lender.

There are scenarios where everything works out fine. For example, if economic growth picks up, and home prices rise, borrowers may be able to refinance their main mortgage and their home equity lines of credit into a single new fixed-rate loan. Some borrowers would also be able to repay their loans by selling their homes into a strengthening market…..”

 

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A grain of salt might be needed here:

Source

“The following notice and question was sent to the US embassy in Tokyo, Japan two weeks ago:
“A group of influential Asian banking families possesses large amounts of US government bonds, verified as genuine by the BIS, with a face value of many trillions of dollars. These bonds were issued in the 1930’s and 40’s in exchange for Asian gold evacuated to the US during those decades. They would like to cash the bonds and use the money to finance a massive campaign to end poverty and stop environmental destruction. Will the US government support such a plan?”

So far, there has been no reply.

At the same time, detailed information was sent to Prime Minister Shinzo Abe of Japan telling him exactly how to enact the release of $700 trillion for the benefit of humanity. There has been no reply from him either.

For this reason, pressure against these two illegal regimes, both selected through fraud, will increase until they agree to this goal. That is why China announced it would stop buying US dollars last week.

It is also why they are increasing military pressure on Japan and the US first by upping the ante over disputed Islands with Japan and second by announcing China will no longer buy US dollars.
The next big move against these regimes is expected to be…”

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