“A world, in which former permabears David Rosenberg, Jeremy Grantham and now Hugh Hendry have thrown in the towel and gone bull retard, and where none other than the Chief Investment Officer of General Re-New England Asset Management – a company wholly-owned by Warren Buffett’s Berkshire Hathaway, has issued one of the direst proclamations about the future to date and blasts the Fed’s role in creating the biggest mess in financial history, is truly upside down.

While the topic of CIO John Gilbert is Twitter, and specifically the investors in the second coming of the irrational exuberance bubble, about which he says that “following such a crowd is an excellent hedge against ever being financially independent. Gravity wins in time“… what Gilbert is really talking about, is the Fed. To wit:

It should be obvious to everybody by now that such stock market largesse is made in Washington. The specific address is the Eccles Building on Constitution Avenue, home of the Federal Reserve. In fact as citizens and U.S. taxpayers, we think it would be an expression of gratitude if Twitter were to take a little pressure off of the Fed and buy some Treasury bonds themselves….

We may be seeing the leading edge of a wave of credit problems among corporate borrowers in emerging market economies. Lest one think it does not affect the U.S. and other developed market countries, recall the Asian crisis chronology. Thailand devalued its currency in the summer of 1997 and few outside of Thailand cared. But contracting Asian demand reduced demand for oil, and Russia (whose exports are 80% oil) defaulted in August of 1998. Risk spreads widened, and five weeks later, Long Term Capital Management was insolvent. That was a systemic event and caused disruption in markets in general, and a stock market decline.So for those who believe that they are protected from loss by central bank behavior, a little history is in order. As usual.…

This is a major component of the downside to the Fed’s program. They have created a systemic risk in the world financial system for which they take little or no responsibility, because that which happens outside the U.S. is not their assignment. But as custodians of the reserve currency, it ends up that way.

Since we obviously agree with everything the GenRE CIO says we can only assume with absolute certainly that he does not speak for his ultimate employer: the man who according to many has benefitted the most from the Fed’s largesse: Warren Buffett.

Full letter below (pdf)

History Ignored, Again

It would seem fair if Twitter were to share. The company’s initial public offering was a staggering success, of course. Priced at $26, the stock closed its first day of trading at $45 per share……”

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“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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“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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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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“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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“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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“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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“The U.S. stock market is at all-time highs. Technology stocks have surged, from TwitterTWTR -2.52% to LinkedIn to FacebookFB -1.01%. Even individual investors who doubted the staying power of the rally are now pouring money into stocks.

About the only people gnashing their teeth are short sellers, the investors who make a living betting that stocks will fall in price rather than rise. Short-selling hedge funds are down nearly 15% from the start of this year through October, according to hedge-fund tracker HFR.

Last week was another miserable one for those hedge funds and other grumpy investors who are skeptical of the market’s rise. The Dow Jones Industrial Average rose for the seventh week in a row, finishing at 16064.77. On Friday, the S&P 500 closed above 1800 for the first time.

There are few investors dedicated to wagering against stocks. James Chanos of Kynikos Associates runs a hedge fund that largely places short wagers, but there are only 24 other such firms, HFR says. Overall, these shorts manage about $6.3 billion, down from a peak of $7.8 billion in 2008.

But many more investors place bearish bets as part of their overall investing strategy. There are nearly 3,700 “long-short” hedge funds that invest in stocks, managing a total of $686 billion. Lately, these traders have had to adjust their strategies in significant ways to squeeze out returns during the market’s rally, or to just keep themselves going.

“Clearly, there’s been a tremendous amount of pain on the short side, and people are giving up on shorting individual stocks,” says Alan Fournier, who runs Pennant Capital Management. The hedge fund manages $6.5 billion, buys and shorts stocks, and is up more than 10% so far this year, according to investors.

Pennant has profited from shorts against BlackBerry Ltd., which has faced pressure on sales, and developer St. Joe Co., which has tussled with short sellers over the value of land holdings.

“Funds that are dedicated to short selling are closing, and others are starting long-only funds,” which buy shares but don’t short them, Mr. Fournier says.

Some bearish investors are exiting short positions more quickly than usual when their bets turn negative, trying to keep losses to a minimum. Others are reducing wagers they had placed against the broader market, to avoid further pain if the rally continues. Some of these investors continue to maintain bearish bets on individual companies they suspect will run into trouble. Still others are shifting to shorting emerging-market stocks and pockets of weakness in the U.S.

In any case, these investors have been licking their wounds.

“Being bearish in the bull market has been, thus far, a mug’s game and a hedge against profits,” says Douglas Kass, who runs hedge fund Seabreeze Partners Management in Palm Beach, Fla., and has been wagering against the market….”

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“$8.5 TRILLION IN TAXPAYER MONEY DOLED OUT BY CONGRESS TO THE

PENTAGON SINCE 1996 … HAS NEVER BEEN ACCOUNTED FOR

Military Waste and Fraud Are the Main Cause of Our Problems

We’ve repeatedly documented that military waste and fraud are the core problemswith the U.S. economy.

For example, we’ve noted that we wouldn’t be in this crisis of hitting the debt ceiling in the first place if we hadn’t spent so much money on unnecessary wars … which arehorrible for the economy.

But it goes far beyond actual fighting.  We could easily slash the military and security budget without reducing our national security.

For example, homeland security agencies wasted money on seminars like “Did Jesus Die for Klingons Too?” and training for a “zombie apocalypse” instead of actually focusing on anti-terror efforts…..”

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“Federal Reserve Chairman Ben Bernanke said on Tuesday the Fed will maintain ultra-easy U.S. monetary policy for as long as needed and will only begin to taper bond buying once it is assured that labor market improvements would continue.

In a speech to the National Economists Club that echoed dovish comments by his nominated successor, Janet Yellen, Bernanke also said that while the economy had made significant progress, it was still far from where officials wanted it to be.

“The FOMC remains committed to maintaining highly accommodative policies for as long as they are needed,” he said in prepared remarks, referring to the policy-setting Federal Open Market Committee.

“I agree with the sentiment, expressed by my colleague Janet Yellen at her testimony last week, that the surest path to a more normal approach to monetary policy is to do all we can today to promote a more robust recovery,” he said….”

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“The Standard & Poor’s 500 Index broke above 1,800 Monday, and it’s only a matter of time before it reaches 2,000, experts say.

The Dow Jones Industrial Index also breached a round number Monday — 16,000. The Dow closed at 15,967 Tuesday, while the S&P 500 finished at 1,788.

It’s a no brainer that the S&P 500 should reach 2,000 before the Dow reaches 20,000, as the S&P is 12 percent away from that target, while the Dow is 25 percent away.

In addition, “I think that the recent announcement and the market’s reaction to [Federal Reserve Chair nominee Janet] Yellen’s Q&A on Friday [before Congress] suggest that stimulus is going to be around for longer,” Gina Sanchez, founder of Chantico Global, told CNBC and Yahoo’s Talking Numbers.

“That is going to benefit smaller companies. The S&P has more small componentry to it than the Dow does.”

Richard Ross, global technical strategist at Auerbach Grayson, told Talking Numbers the S&P 500 could reach 2,100….”

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“The more things change, the more things stay the same.  The Great Depression actually started in 1929, but as you will see below, as late as 1933 the Associated Press was still pumping out lots of news stories with optimistic economic headlines and many Americans still did not believe that we were actually in a depression.  And of course we are experiencing a very similar thing today.  The United States is in the worst financial shape that it has ever been in, our economic infrastructure is being systematically gutted, and poverty is absolutely exploding.  Since the stock market crash of 2008, the Federal Reserve has been wildly printing money and the federal government has been running trillion dollar deficits in a desperate attempt to stabilize things, but in the process they have made our long-term economic problems far worse.  It would be hard to overstate how dire our situation is, and yet the mainstream media continues to assure us that everything is just fine and that happy days are here again.

As I have already noted, the mainstream media was doing the exact same thing back during the days of the Great Depression.  The following are actual Associated Press headlines from 1933…

“Decisive Break from Panic Shown in Business Figures”

“Markets Spurt To New Highs”

“New Farm Bill to End Depression”

And the following is a headline discovery from 1933 that was made by Linda Goin…

I was browsing through old newspapers the other day and discovered a page filled with news about the stock market and banks in the Daily Capital News from Jefferson City, Missouri. The date was March 15, 1933, well into the Great Depression, and the news was cautiously celebratory as a headline read, “Era of Fear is Declared at End Now.”

The Depression-era classic song entitled “Happy Days Are Here Again” was played at the Democratic National Convention in 1932 and it went on to be featured by the Democrats for many years after that.  The following is an excerpt from a Wikipedia article about that song…

Today, the song is probably best remembered as the campaign song for Franklin Delano Roosevelt’ssuccessful 1932 presidential campaign. According to TIME magazine, it gained prominence after a spontaneous decision by Roosevelt’s advisers to play it at the 1932 Democratic National Convention, and went on to become the Democratic Party‘s “unofficial theme song for years to come”.

There is only one huge problem.

The election of Roosevelt didn’t end the depression.  Years of bitter economic suffering and dust bowl conditions were still ahead.  The Great Depression continued all the way up to the start of World War II, and the war years were certainly no picnic for average folks either.

But at least cheery headlines can make people feel better, right?

That is what some believe.

Others believe that giving people false hope is very cruel and that it sets up people for failure.

The following are some actual headlines that were found on mainstream news sites today…

CNBC: “Recession risk gone in all US states but 1: Moody’s Analytics”

CNN: “Foreclosure crisis is drawing to a close”

NBC News: “Stocks close near highs; S&P logs 7-day rally”

Wow, those headlines sound great!

So are happy days here again?

Not quite.

In fact, things continue to get even worse in a whole host of ways.  Just consider the following statistics…

-According to a brand new Gallup poll that was just released, 20.0% of all Americans did not have enough money to buy food that they or their families needed at some point over the past year.  That is just under the record of 20.4% that was set back in November 2008.

-Gallup also found that the ability of American families to meet some of their other most basic needs is near an all-time low…

The Basic Access Index, which includes 13 questions about topics including Americans’ ability to afford food, housing, and healthcare, was 81.4 in August, on par with the all-time low of 81.2 recorded in October 2011.

–More than 90 million working age Americans are considered to be “not in the labor force”.

-The labor force participation rate is the lowest that it has been in 35 years.

–516,000 Americans “left the labor force” last month.  That was a brand new all-time record high.

-The number of private sector jobs dropped by 278,000 last month.

–77 percent of the jobs that have been “created” so far this year have been part-time jobs.

-Approximately one out of every four part-time workers in America is living below the poverty line.

-Right now, 40 percent of all U.S. workers are making less than what a full-time minimum wage worker made back in 1968.

-The U.S. trade deficit with China has hit a brand new record high.

-The U.S. trade deficit with the EU has hit a brand new record high.

-The number of U.S. households on food stamps is at a brand new record high.

-One of the largest furniture manufacturers in America was just forced into bankruptcy…

The maker of furniture brands such as Thomasville, Broyhill, Lane and Drexel Heritage said Monday that it has filed for Chapter 11 bankruptcy protection.

-Total mortgage activity has dropped to the lowest level that we have seen since October 2008.

Yes, those in the top 1 percent are doing very well for the moment thanks to the reckless money printing that the Federal Reserve has been doing.

But for most Americans, the last several years have been a continual struggle.  The following is a list that comes from one of my previous articles entitled “44 Facts About The Death Of The Middle Class That Every American Should Know“…”

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This gets creepy and goes way beyond “surveillance.”

“The federal government is remotely activating the microphones and cameras in Android smartphones and Windows laptops, according to a report published by the Wall Street Journal.

Citing a “former US official,” the Journal says court documents reveal that that the FBI is using a variety of “hacking” tools to ramp up the scope of the surveillance of millions of Americans, keeping many unwittingly under the watchful eye of Washington.

When contacted by The New American, a media spokesperson for Google had no comment.

One of the Journal’s anonymous sources described a part of the FBI called the “Remote Operations Unit.” Agents in this specialized unit prefer, if possible, to install the remote control software by uploading to the target’s computer using a USB flash drive. When the g-men-come-hackers can’t get access to the target’s computer, they install the surveillance software over the Internet “using a document or link that loads software when the person clicks or views it.”

Readers should understand that it is not only possible for the federal government to listen to your conversations using the microphone in your Android smartphone and watch you while you…….., ……,……,….”

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“One of the most powerful myths about Bitcoin — the encrypted, independent online currency that’s become a huge trend in recent months — is that Bitcoin is “secure.”

Bitcoin.org, the semi-official voice of the Bitcoin community, says “the whole system is protected by heavily peer-reviewed cryptographic algorithms like those used for online banking. No organization or individual can control Bitcoin, and the network remains secure even if not all of its users can be trusted.”

But Bitcoin is not secure.

There have been dozens of robberies of Bitcoin banks and exchanges, and millions of dollars have been lost.

To put that in perspective, if robbers were routinely walking into brick-and-mortar banks and taking millions of dollars, with zero consequences and no arrests, it would make huge headlines every day. The media would be on high alert for the next heist.

But on the Internet, Bitcoin thefts worth hundreds of thousands and millions of dollars happen on a weekly basis and no one cares….”

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[youtube://http://www.youtube.com/watch?v=zGv1Nay2z-U 450 300]

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

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DUH!

“Andrew Huszar, who managed the beginning of the Federal Reserve’s bond-buying program in 2009 and 2010, has two things to say.

First, “I’m sorry, America,” he writes in The Wall Street Journal.

Second, the program is a failure.

“The central bank continues to spin QE [quantitative easing] as a tool for helping Main Street,” says Huszar, now a senior fellow at Rutgers Business School. “But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.”

QE has turned into the largest financial market intervention by any central bank in history, he says. And all the Fed has to show for this is a modest addition to economic growth.

“QE isn’t really working, unless you’re Wall Street,” he adds. Thanks to government subsidies, banks have seen their share prices as a whole triple since March 2009.

“As for the rest of America, good luck,” Huszar quips…..”

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