Baltimore — (TFN): You don’t believe all the hype do you? As we close out another year and another decade, the pundits are busy rehashing the action of the past ten years.

The political types are discussing the rise and fall of the Bush administration, a couple of wars and the nation’s first black president. The Hollywood folks are talking about the end of the sitcom, the death of an icon and the phenomenon that is American Idol.

And, of course, the financial types are talking about the decade that never happened. You know, the fact that at the start of the decade, the Dow was actually worth more than it is today.

Sure, if you happened to be the poor sap that bought the Dow on January 1, 2000 and held it until today, you’d be down about 9.5%. But I’m willing to bet that is not you.

As a contrarian investor, you are more likely to be holding a pile of gold. In that case, you are sitting on gains of about 300% over the past decade.

But again, I don’t think that is you, at least not entirely. If you are anything like me, you are sitting back, wondering if the next decade is going to be as good as the last.

Think about it. We had high interest rates, record low rates, a housing bubble, a tech bubble, record high oil prices, ultra-low natural gas prices, a couple of wars and the biggest government bailout you could ever imagine.

If you can’t make money in that kind of environment, you flat-out aren’t trying. Even if you racked up 300% gains from gold, you could have and should have done better.

The only thing the last decade proved was buy-and-hold investing is dead. But that’s why we have exchanges, so you can buy and sell assets when the mood strikes.

If you were a true contrarian investor – bought when nobody else was buying and sold when nobody else was selling – you probably just locked in monstrous gains on gold, you are rolling in cash at the moment and are looking for the just the right opportunity to hop back in.

If so, the next year and the next decade are going to treat you very, very well. If you think the last ten years was full of upside downs, wait until you see what’s in store.

Government healthcare, more bailouts, more regulations, more taxes, more government control, more investing options, more interest rate movement, more bubbles, more international exposure… the list goes on and on.

Yeah, we may be back to where we started, but it took one hell of a journey to get us here.

Take my word for it; the next ten years will be the decade for contrarians. Gold will soar. The dollar will fall and interest rates will rise. Better yet, the exact opposite will happen during calculated, short-term blips.

That means we have the kind of market active forward-thinking traders yearn for.

Now is the time to make your move. If you have been sitting on the fence, waiting for the right time, take the end of the year to approach a new starting line and join one of our three services, TFN Strategic Trader, Hot Stock Confidential or Penny Stock Confidential.

All three perfectly play the contrarian viewpoint, and better yet, as a member, you’ll never have to worry about saying, “where’d the last year go?”

You’re at the start of the best decade of your life.

*** As contrarian investors, we like hard assets, the more down and out, the better. Right now, there is no better tangible good, with a worse reputation than good ‘ole American coal. Politicians hate the stuff, factories love it and investors have yet another shot to get rich off of it.

In 2006, I was a bit of a coal industry junkie. I read books on the stuff, wrote countless articles about my research, even went on the radio, TV and the seminar circuit talking about the nation’s dirtiest fuel source.

In today’s world of “green energy” and global warming scares, coal is a nasty four-letter word. But with a couple centuries worth of the stuff buried underground, we all know that’s going to change. Come the next political campaign or environmental hype, coal will launch back into the foreground.

You know it. I know it. And the folks at Bucyrus (NYSE:BUCY) know it. That is why the heavy equipment maker is placing a $1.3 billion coal-industry bet this week.

In a move that tells Caterpillar (NYSE:CAT) and Joy Global (NYSE:JOYG) that they had better pay attention, Wisconsin-based Bucyrus is cutting a check to Terex (NYSE:TEX) in exchange for the company’s mining business.

Again, this is the kind of far-sighted, buy-when-nobody-else-will move that pays incredible dividends in upcoming years. It’s the kind of stuff contrarians dream about.

Just when the coal industry could look no worse, the sector’s biggest names move their bishops in an ever-lasting game of chess.

Today’s move is beneficial for both sides of the bargain. Terex gets a cash infusion that allows it to concentrate on its core business and Bucyrus gets a hunk of assets that allow it to up the ante versus the industry’s behemoths like Cat and Joy Global.

Here’s what you can expect out of the coal industry over the next year: more consolidation, greatly increased share price, strong demand growth, and, most importantly, better representation amongst the nation’s politicians.

Now’s the time to make your move.

*** I wish I had better news for the gold bugs. It has been dang near a month now since I said to sell the stuff and prices have gone ever since. Don’t blame me. I’m merely the messenger.

There is good news. The downturn won’t last long. It’ll be just enough to get the speculators and the hyperbolic masses off the wagon and then prices will turn north once again.

As soon as the magical metal bars are selling for less than $1050 an ounce, put in your buy orders once again. My take is we’ll see $985 by mid-January, but just in case China makes more waves between here and there, $1050 is a good entry point.

When the stuff is selling for $1250 in April and $1,500 this time next year, the cushion won’t matter so much.

This story goes well beyond Murdoch’s decision to start charging for his company’s online news content. It is a debate about monopolies and the government’s role in protecting or destroying them.

In case you missed it, there is a great editorial in today’s Wall Street Journal by the CEO of Google, Eric Schmidt (scroll down for link). In the piece, the doctor doesn’t necessarily lash out at Murdoch and his recent attacks aimed at Google, but the desire to call Murdoch a crybaby is obvious.

Schmidt makes it clear that Murdoch’s woes are not Google’s fault, but are the fault of an industry that has sat on its hands for the last decade as competition quietly, but firmly snuck up to the back door.

Now that Murdoch owns a very expensive media empire, his plans are to use his massive industrial weight to keep the media industry from swaying in any direction. He’s certain that charging for his content will force his customers from straying to competitors.

Of course, Schmidt has something very different to say. Essentially, the CEO tells Murdoch to start getting creative. His company is dumping 100,000 clicks a minute onto the online news sector. If the industry can’t find a way to profit with some four billion hits a month, well, it’s not Google’s fault.

The answer lies somewhere in the middle. But of course, Washington thinks it can solve the problem. As you read this, Murdoch and his gang are discussing the “future of journalism,” with the Federal Trade Commission.

They are not down there asking for a bailout or inquiring about tickets to the next state dinner. They are asking for (or flat-out buying) protection from the anti-trust gang.

Just like a Manhattan businessman goes to Guido looking for some “fire insurance,” Murdoch and company are in Washington asking for protection from the ankle-biting competition.

What does Murdoch want from Obama?

He wants what every man wants, the ability to buy more. Under current regulations, Murdoch is unable to make purchases in certain rival publications and media outlets. But with the notion of critical mass on his side, if he could get the right to buy and control his rivals, he would have a much better shot at coercing the industry to move in the “right” direction. He could save journalism as we know it.

Will Washington bite?

Um, let’s see. With a horde of newspaper and television ad space on his side, does Murdoch have anything to give to politicians in exchange? This one’s a no-brainer.

If politicians can get on the good side of Murdoch or his competitors, the political campaign process may not be quite so expensive in 2012.

So here’s my first official prediction for 2010: Washington is going to take action and the media industry is going to be a hot one.

We got a first glimpse of what’s to come early today with the finalized deal from GE and Comcast. The next year, especially if Murdoch makes the right moves, will be filled with similar stories of consolidations and acquisitions.

Giants like Time Warner and Liberty Media are going to be players. And little guys like Virginia’s Media General and McClatchy will be in play.

It is going to be an interesting year as the industry finally gets serious about finding a clear strategy for the future.

Smart investors will make good money from the action and smart contrarians will know the money flows right back to Washington.

*** You have got to love the action from the natural gas markets these days. Even I, the bear of bears, wasn’t expecting yet another injection into the nation’s gas storage facilities this week, but what’s investing without surprises?

Thanks to today’s news, we were sitting on gains of as much as 415% on one of our three remaining natural gas plays. The lower gas prices go, the higher that figure will climb.

Here’s what I told TFN readers today about the nation’s natural gas glut:

“I am about as bearish as it gets when it comes to natural gas, but even I underestimated how bad the situation really is.

“While most analysts were expecting the year’s first official drawdown in the nation’s natural gas inventories, I conceded and said they were right. I expected a drop in supplies of one, maybe two, billion cubic feet of gas.

“Most analysts expected twice that figure as the nation starts to crank up its thermostat. After last week’s smaller-than-expected gas infusion, a withdraw this week looked like an easy call.

“I was so certain, I recommended TFN Strategic Trader members lock in gains on a couple of our natural gas plays. We locked in gains of 56% by selling half of our position in one play and 50% gains by unloading another play in its entirety.

“It looks like we jumped the gun.

“According to the Energy Information Agency’s latest report, released at 10:30 this morning, the nation managed to produce more gas than it consumed once again.

“This time last week, the agency showed a gain of one billion cubic feet. This week, the figure doubled to a weekly increase of two billion cubic feet.

“Under normal circumstances, this would not be much of an issue. But the nation’s storage facilities are 99.9% full and pipeline pressures are rising as suppliers try to squeeze in as much of the fuel as possible.

“So far, natural gas futures have not reacted too strongly to the news (which helps prove my theory about selling yesterday). December gas contracts are down by just $0.035 so far, which puts the price at $4.495.

“As the winter rolls on and investors and analysts finally realize this winter will be unlike any other for the natural gas market, that price will sink lower and lower.”

Keep reading here to read about several of the ways to take advantage of the situation.

*** Finally, there’s a celebration in my hometown tonight. We got word early this morning that Harley Davidson has officially decided to keep the doors open at the factory that employs nearly 2,000 local workers.

Of course, at least half of those workers will be asked to leave over the next couple of years and the remaining workers will be working harder and getting paid less, but isn’t that the way it works these days?

Maybe we shouldn’t blow up the celebratory balloons just yet.

Since I first scraped my knee chasing the neighbor’s cat across the street dozens of years ago, I have been a fan of the get-it-over-fast strategy. Rip the stitches, dry the tears and move on. Dilly-dallying is for sissies and I’m no sissy.

But the nitwits in Washington beg to differ.

After the first round of trillion-dollar stimulus failed to ignite anything but tempers, Congress is hitting us with a slow, but steady stream of economy-boosting spending. They won’t call it a bailout or stimulus, those terms have been politically wasted, but they continue to pour money into the economy like its water on a broiling fire.

They are pulling the Band-Aid off one painful follicle at a time. And I’m getting sick of it.

We’ve got homebuyer incentives. Business loans. Green tax incentives. Car interest deductions. And now more deadbeat homeowners are getting off easy as Obama takes more money from my wallet and gives it to some McMansion owner.

All this hoopla in Dubai proves the point the markets have no clue as to proper valuations. Given just one minor hiccup in the global economy, Wall Street was poised to sell off like never before. The over-leveraged, over-hyped Dubai World comes to the world on Friday and asks for a delay in paying its $60 billion obligations and pundits react like Iran launched “the bomb.”

Come on folks. Dubai’s financial situation is little removed from Donald Trump’s recent woes, including the funky head piece. That much leverage and something will eventually snap.

Even with this notion, the markets were ready to succumb with just one headline.

“Give me just one reason,” you could hear the investors muttering as their nervous finger hovered over the sell button. In the back of their mind, every investor is nervously awaiting the one final catalyst that sends this top-heavy market back where it belongs.

The words “double-dip recession” are on the tip of everyone’s tongue, even Obama’s, but nobody is ready, or politically willing, to call a spade a spade. They’d rather leave the Band-Aid in place for just one more day.

Instead, we are going to sit back, watch unemployment remain over 10% for the next eighteen months and let our government get away with murder. Just like G.W. used 9/11 as a springboard for his defense initiatives, this administration is using a nasty economy as an excuse to move us one mandate away from socialism.

And we are taking it. We are taking it like a herd of cattle take an invitation to a feed lot. This is not a free lunch, folks. Someday soon we’re going to get slaughtered.

*** Investors had better be prepared for what lies ahead. The swift reaction after the news from Dubai proves the markets are uncertain.

Uncertainty creates problems.

If I had to pick just one sector of the economy to be the model of uncertainty, it would be consumer spending. With Black Friday data looking lackluster at best, retailers have little idea what to expect going forward.

Instead of watching the six o’clock news for a hyped up version of the antics at the local mall, I fired up Ole Betsy and drove to a friend’s local shop. What I saw was far different than the frenzied lines at the local Best Buy.

Sure, there were sale signs everywhere, but two customers hardly form a line worth photographing.

When I asked how many of the big sale items were pulled off the shelf, the answer was a big fat goose egg. The big names may draw a crowd, but with razor thin margins they need crowds. To get a scaled-down view, take a look at the little guy.

That scene isn’t pretty.

But there is good news today. Early reports show that Cyber Monday traffic is up by more than 40%. While clicks don’t equal sales, buyers are at least scoping the deals.

That is good news for the online world and is part of the reason shares of Amazon hit new record prices this morning.

Before Jeff Bezos and his troops were celebrating, I was writing a piece for TFN that highlighted a company that will likely be a winner as cash-strapped consumers search out the best deals.

Here is a bit of what I wrote:

“One stock all traders should be aware of on this so-called “Cyber Monday” is ValueVision  Media (NASDAQ:VVTV), the home of ShopNBC.

“As consumers cut back this holiday season, shoppers will diligently search for the best deals. One place they will find them is on the company’s home-shopping network and the ShopNBC web site.

“I have tracked ValueVision for numerous holiday seasons. It is a predictable, cyclical play with the holiday season the catalyst for strong swings in either direction.

“Historically, buyers that got in before the holiday season and got out early in the New Year made sizeable and reliable gains. But predictability kills Wall Street.

“Over the past several years, buyers that got in on December 1 and out on January 1 lost money. That’s because after years of predictable gains, the bandwagon become overloaded.

“But this year I am expecting another turnaround in the trend. We’re back to buy now and sell in January. You won’t get rich from the play (20% upside), but you will find a way to eliminate most market volatility and put weaker consumer spending on your side.

“ValueVision is a small, $107 million company. It has no long-term debt and is poised to rebound to positive cash flow this quarter.

“The real kicker to this stock, however, is its high beta score.” Keep reading here.

*** And now for a new feature this week. Over the past month (it’s been thirty days now since I took the helm), I noticed that Notes readers are incredibly unique. They don’t follow the herd. They think for themselves. And they have interesting insights.

My kind of people. I like it.

That’s why each week, I am going to toss out a “question of the week.” I trust I won’t even have to ask for your thoughts on the subject. Let me have it and we’ll discuss the varying opinions as the week goes by.

This week’s question: Is it a coincidence the weekly political roundtable programs air at the same time churches offer their weekly services?

Looking forward to your thoughts.

But we’re not…yet.

Classic economic theory says that money supply can be used to stimulate the economy and our central bankers seem to agree. That’s why they’ve pumped more than $1 trillion dollars into the economy, engineered countless bailout bonanzas for zombie institutions, put Detroit on life support, and delivered a bunch of financial Band-Aids to the trauma ward — all in a desperate bid to make Americans feel better about the global financial crisis.

To their way of thinking, the trillions of dollars have been a success. That’s why any meeting of the Group of Eight (G8) nations looks more like a mutual affection society with central bankers anxious to claim credit and backslap each other in congratulations for having avoided the “Great Depression II.”

But by taking the Federal balance sheet to more than $2 trillion from $928 billion 2008, they’ve created a situation that should have resulted in an epic inflationary spike to accompany the 137% increase in liabilities.

Yet that hasn’t quite happened.

Core inflation — which denotes consumer prices without food and energy costs — has actually decreased from 2.5% in 2008 to 1.5% presently. And that has many investors who have heard the siren call of the doom, gloom and boom crowd wondering if they’re worried about nothing.

So what gives?

Well, there are four reasons we haven’t yet seen hyperinflation:

Click here to continue reading Mr. Fitzgerald’s article.

There’s one antidote for this problem … remembering a few basic rules. Just embrace the 10 ideas that follow and you’ll be in line to make some serious money in the months ahead.

Rule Number 1: Invest on the Right Side of Major Economic Trends:That old investing adage “Don’t fight the Fed” serves as a good example here. Rising interest-rate environments make meaningful gains difficult to sustain – unless you know what to look for. Far too many investors got it wrong in the 2000-2003 and 2008-2009 periods by betting on growth stocks in a recessionary economy, and they’re still getting it wrong. Those investors are likely to get burned again should the economy slow even more, despite the government-bailout and federal-stimulus efforts. Make sure to analyze all of the other major global trends, as well – and ride the ones that are truly unstoppable. You’ll know them when you see them, because they’ll have trillions of dollars in new capital flowing directly at them – investment plays in such areas as infrastructure, inflation, energy, food, and water (both supply and purity) are great examples.

Rule Number 2: Sell Your Winners: This may seem counterintuitive, but – if you want to succeed – you must sell your winners. Rule Number 6 – thinking like a plumber to prevent losses – is only part of the success equation. To be really effective, you have to take profits, too. That way, you get more capital that you can put to work. Think of it this way – Safeway Inc. (NYSE: SWY) regularly replenishes the inventory in its

Produce Department to keep it fresh. You should do the same with the “inventory” in your portfolio because, if you let your stocks sit on the shelf too long, they’ll eventually go bad – just like fruit that’s past its expiration date.

Click here for rules 3-10 from Keith Fitzgerald, Chief Investment Strategist of The Money Map Report.

Throughout the “sh*t hitting the fan” events of last fall, and the subsequent policy response, we’ve listened intently on what this Canadian had to say. The picture he paints today is one of bearish conviction. That’s exactly the reason he’s come under recent criticism as his ilk of ivory tower economists have started calling an end to this recession.

Though we don’t think he has anything to prove, he released a special report reaffirming his key points. You can read it in full here. But if you don’t have the time to peruse the twenty-two page (slightly wonkish) document, we’ve broken down the basic takeaway for you.

The equity markets have moved too far, too fast, and a correction is coming. Rather than buy into this rally, you should look at commodities. That’s because David believes that since 2001commodities took off on a secular bull market run.

Also, rather than hold US dollars, Rosie bets that the Canadian buck is a safer bet due to Canada’s smaller national debt (26% of GDP vs. 62% in the US), smaller budget deficit (-3.4% of GDP vs. -11.2% in the US), stronger banking sector (no Canadian bank needed a bailout), lower unemployment, and an economy more reliant on commodity exports like lumber, oil, natural gas and precious metals.

But the scariest–for holders of US dollars—forecast Rosie makes is that the US has yet to use a power policy tool: the devaluing of the greenback.

As Obama continues to take pages out of FDR’s playbook, he’s yet to devalue the dollar as FDR did in 1933. Rosenberg doesn’t say that the US policy wizards will directly devalue the dollar. Rather, he thinks it will happen by the expansion of the Fed’s balance sheet and the creation of freshly printed dollars.

We think he’s dead on about this call. The US’s “strong dollar” policy has become the latest oxymoron to enter the American vernacular. There is only one direction the value of the US dollar is going over the long-term—down.

Where exactly should you invest amidst this economic malaise? Here are the seven places to park your cash. Not surprisingly, our favorite precious metal tops the list.

1.) Gold

2.) Commodities

3.) The Canadian dollar

4.) Resource sectors of the stock market

5.) US sectors that have high foreign exposure (materials, tech, staples, healthcare)

6.) Canadian sectors that benefit from lower import costs (consumer stocks) but lose export competitiveness (manufacturers)

7.) Canadian bonds (a higher Canadian dollar will keep inflation low, hence reinforcing positive fixed income returns)

But the reality is that this tectonic shift in global finance – and the economic shockwaves that will result – could provide investors with some of the greatest profit plays they’ll ever see in their lifetimes.

No matter which camp you’re in, the China-spawned changes are headed our way.

In 1990, the U.S. banking system was 2.3 to 2.7 times the size of its counterpart in China. Today, however, the situation has been reversed, and there is much more of an imbalance. In fact, China’s banking system has 25 times the reserves of the U.S. Federal Reserve.

At some point, the United States will no longer be able to dictate international monetary policy. Unfortunately, as our monetary policy aptly demonstrates, Washington seems to be the only player involved in this game of high-stakes global finance to not understand just how this is destined to play out.

U.S. leaders continue to employ monetary policy as a weapon – despite the fact that most of the rest of the world views the U.S. dollar as a liability.
At the end of World War II, virtually the entire world functioned on dollars. By some accounts, 100% of the world’s money supply was the dollar. Today that figure has dropped all the way down to 19%, says Rochdale Securities LLC analyst Richard Bove, a noted expert on the U.S. banking system and Federal Reserve.

Now that the federal government has deployed a few trillion dollars more as bailout bucks, it’s clear that the greenback has lost its mojo and the U.S. government has lost its international monetary leverage.

Why is this worrisome? History tells us that the countries with the strongest economies tend to also have the strongest currencies. It may take awhile for the latter to catch up with the former, but the relationship is highly correlated relationship – suggesting that China’s on the rise economically, while its currency is advancing with the unstoppability of a diesel locomotive operating at full throttle.

So if the U.S. dollar gets derailed as the world’s chief reserve currency – as we’ve repeatedly predicted is destined to take place – the world’s next reserve currency is likely to be China’s yuan, known officially as the renminbi.

Washington says that won’t happen, since Beijing takes steps to keep the yuan from being fully tradable. That’s true enough. But Beijing also understands that the dollar is a liability – which is why China’s leaders are going to great lengths to establish the yuan as a viable currency all its own, while simultaneously minimizing the Red Dragon’s dollar-based exposure.

In the last six months, for example, China has signed at least $95 billion in swap agreements, under which it can trade directly with countries for payment in yuan. The countries that sign these deals are getting huge discounts from China in exchange for their participation – and for buying goods from China. And the deals enable China to do an end run around the entire dollar-based currency trading system.

When it comes to this long-term plan to boost the yuan’s importance, China is waging a campaign on multiple fronts. This past spring, for instance, China organized a meeting in Moscow – attended by representatives from Brazil, India and Russia – where the main goal was to supplant the U.S. dollar as the world’s main reserve currency, replacing it with a yuan-led market basket of currencies, one that is simply backed by China’s renminbi, or perhaps even one based on the International Monetary Fund’s so-called Special Drawing Right (SDR).

Created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system, the SDR was redefined in 1973 as a basket of currencies. Today, the SDR consists of the euro, Japanese yen, pound sterling, and U.S. dollar.

My guess is that this gathering in Moscow was merely the first of many such meetings that we’ll see take place around the world in the years to come. Expect the list of attendees to grow, as well.

Given all that we now know, the real question becomes: What happens if China succeeds and the yuan displaces the greenback as the world’s top transactional currency?

The list of potential implications is very long, and includes several scenarios that are almost apocalyptic. But most of the outcomes raise as many questions as they answer.

Let’s consider the Top Five:

• Global Gloom Leads to U.S. Doom: The U.S. dollar goes into freefall for the simple reason that if no country has to hold dollars any longer, they won’t. Instead – thanks to the ragged state of the U.S. government’s finances – many countries will dump greenbacks fast as they can, which will only put additional pressure on an already-strained U.S. financial system, which in turn will further damage our economy.
• Inflation Inflates: Inflation will strike here with a vengeance, as anything bought, sold or priced in dollars will instantly rise in price to offset this fall.
• Repatriation Risk: With the dollar serving as the world’s de factocurrency, U.S. companies bear very little exchange rate risk when the time comes to repatriate assets or make currency-related adjustments. That would change overnight and prices throughout the value chains would rise sharply to compensate.
• Money Costs More: The cost of money itself would rise. If the dollar falls, not only will there be massive selling pressure against it, but the cost of borrowing it will rise dramatically as lenders raise rates to cope with the increased risk of dollar-based transactions.
• Death By Debt: And finally, if there is another reserve currency, other countries will no longer have to buy our debt, and you can guess where that will leave us – especially given the fact that we’ve taken on trillions in new debt to help finance our way out of our current mess.

My best guess is that we won’t see any one of these things in isolation, but will instead experience a blending of several or all of them. To the extent that China continues to absorb our inflationary influences, buy our debt in measured doses and maintain its reserves, we’ll probably have a measured decline in the value of the dollar – but not the catastrophic fall many in the doom, gloom and boom crowd are predicting. At the same time, I also see the IMF change course in the next few years to reflect China’s increasingly substantial influence and monetary power.

On the individual investor level, this clearly provides a new set of influences that most investors have yet to grasp. Most will perceive what I have said as a threat, but I believe the correct way to view this is that there will be a whole new set of opportunities coming our way.

Some of those opportunities will be obvious – like the need to invest in currencies and commodities that are of interest to China. Others, like direct investments in China’s yuan, will require special insight, a good investment guide, or a leap of faith.

The bottom line – and the most important thing to remember – is this: No matter how this plays out, there will always be an upside for investors who are willing to seek it out.

Source:  The Five Financial Shockwaves to Expect When China’s Yuan Swaps Places with the U.S. Dollar

“It is critically important that Congress act before the [debt] limit is reached,” Tim Geithner wrote over the weekend in a letter to lawmakers, “so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations.”

Sounds like our Treasury Secretary is finally putting his foot down, insisting that Congress pull back its lavish spending programs and start addressing our incredible $11.6 trillion national debt.

Wait… what’s that? Oh, Geithner’s actually asking for Congress to raise the debt ceiling. If Congress authorizes our government to dig deeper than $12.1 trillion in debt (our current glass ceiling) our partners here and abroad will somehow “remain confident.” How perverse is that?
The U.S. budget deficit rose $181 billion in July, to a record $1.3 trillion, the Congressional Budget Office reported over the weekend. You know the drill by now… tax receipts are plunging while bailout spending is soaring. In budget parlance, revenues in this fiscal year are down 17% while outlays are up 21%.

That’s a $530 billion increase in spending from fiscal 2008.

The CBO still projects the government budget deficit to exceed $1.8 trillion, about four times 2008’s record $455 deficit. More to come tomorrow, when the Treasury unveils official budget numbers.
Sounds like a great time for the government to buy a bunch of fancy jets! Congress recently earmarked $550 million in a defense funding bill to buy themselves eight private passenger jets. That would be the same Congress that went out of their way to publicly embarrass Big Three execs for jet setting from Detroit to D.C.

Prepared for a public backlash, Congress has a several lame talking points at the ready… that the current fleet of private jets is outdated… that having new high-tech planes will be better for the environment and ultimately lower cost… and that these planes will be used mostly by the Pentagon and only about 15% of the time for lawmakers.

But here’s our favorite: Legislators are eager complete the transaction so that they can have a new fleet in time for the busiest congressional travel period of the year… August, when they are all on holiday!

Here’s the crucial difference between 2009 and 2007: While the government is still spending with reckless abandon, the consumer is rapidly deleveraging. Consumer credit fell for the fifth consecutive month in June, the Fed announced Friday. Credit outstanding fell by $10.3 billion in the month, to a total of $2.5 trillion. That’s more than double what the Street expected. Revolving credit, namely credit cards, fell by $5.2 billion — a record 10th month in a row of decline.

Now in a state of contraction since February, the average American is embarking on the longest credit pullback since 1991.
“We are clearly in an economy-wide deleveraging process that will last for years,” writes Strategic Short Report’s Dan Amoss. “We are not in a typical inventory-led recession. Sure, the next few years will not mirror the 1930s, because the government and central bank are debasing the currency to prevent a dreaded debt deflation spiral. We probably won’t have 1930s-style bank runs (although the FDIC is running dangerously close to needing to tap its line of credit with the Treasury to replenish its Deposit Insurance Fund).

“But make no mistake: We will pay for the inflationary bailouts at some point down the road with a currency crisis. Central banks cannot keep abusing savers and the bond market to this extent without eventually provoking a collapse in demand for paper money.

“A collapse in demand for paper money, not a decline in the ‘output gap,’ will eventually bring about inflation. We’ll see signs of it as real Treasury bond investors keep balking at these low rates at Treasury auctions, leaving the Fed to step in and monetize the debt. Eventually, there’s a risk that the Fed will lose the tiny bit of independence it has left and the printing press could come under the control of Congress, which would accelerate the endgame for the U.S. dollar. The market for gold-related assets will look ahead to this possibility.”

Dan’s Strategic Short Report readers own calls on GDX, and recently took on a short position in a very well-known bank. We’ll be telling you much more about this fishy financial soon… keep an eye out tomorrow.
The benchmark 10-year Treasury bond just suffered its worst week since 2003. Investors forced yields up 38 basis points last week, to as high as 3.88%.
But the stock market continues to climb. Friday’s better-than-expected jobs report (more on that in a minute) bumped the major indexes up about 1.3%, to their highest levels since October. The Dow and S&P 500 finished up over 2% for the week.

The market looks a bit timid today. After opening down, the Dow and S&P are near break-even as we write
“It’s been a rough year for dividends,” says our income analyst Jim Nelson, “but if you know where to look, your income will be just fine. Below is a breakdown of S&P 500 yields by sectors:

“As you can see, the biggest loser on the list is financials, which shouldn’t be a surprise. The segment’s dividend yield fell 300 basis points (right-hand column) from last year to now.

“The sector that pays the most is doing so under the radar: telecommunication services. This is a favorite of ours. That 14 basis point increase is primarily due to AT&T and Verizon — both paying out around 6%.

“These dividends aren’t nearly as safe as we’d like, though. Instead of gunning for the U.S. telecom industry, we like to play that game in emerging markets. We already have a Pacific Rim telecom in the Lifetime Income Report portfolio, and we’ll be adding another this week. Even after that, we’ll continue to keep our eyes peeled and noses to the ground in case something else pops up in that industry.

“Going back to that table, you can see the next two best-paying sectors are utilities and consumer staples. Our portfolio is already loaded with these, and we’ll continue looking in these directions as well.”

If you seek stable, dividend yielding stocks with serious upside potential, Jim’s Lifetime Income Report is where it’s at… details here.
It’s Monday… time to check in on the annual bank failure tally: Two in Florida and one in Oregon bit the dust over the weekend. That brings the 2009 running total to 72. The three took a $185 million chunk from the FDIC’s war chest. So far this year, the agency has lost over $15 billion from its bank insurance fund.
The dollar is holding onto its surprise Friday rally today.As we mentioned then, we were taken aback when the dollar index jumped from 78 to 79 after the better-than-expected jobs report.

“For months now,” explains Bill Jenkins, “every time there was good news for the economy (like Friday’s jobs report), it was bad news for the U.S. dollar. But not on Friday. The initial reaction to the good U.S. news was to sell the dollar. Then suddenly, the market reversed its course and began selling the other currencies with both hands, and buying the U.S. dollar, instead. In other words, the tide shifted, and good news for the U.S. economy also became good news for the U.S. dollar.

“So has the U.S. dollar put in a bottom here? Are we about to see a knee-jerk reaction favoring the greenback to other currencies? Only time will tell. But FX traders better be on alert. My readers saw a 42% profit in the Swiss franc on Friday’s move.”

42% in one day? Nice. There’s plenty more where that came from… just check out Bill’s Master FX Options Trader.
Since the dollar remains strong, gold is still under pressure. The spot price is down about $20 from Friday’s high, to $945 an ounce.
“Why is every analyst, yourselves included,” a reader asks, “so quick to believe the government’s unemployment and GDP figures, when the political interests of the White House are at stake in the numbers and the White House controls the executive departments that generate these figures? We know from past unhappy experiences (e.g., weapons of mass destruction in Iraq) that the White House is capable of lying when it suits political purposes. Not to mention that GE, Murdoch and the other oligopolists who control the news we get are politically and financially motivated to play along and hype the figures.”

The 5: We’ve talked about the dubious nature of the jobs report so many times (like here, here or here) that we thought we had gotten our point across. Guess not.

Uncle Sam — though the power of statistical ploys like the birth/death model, seasonal adjustments and margin of error — can put the jobs numbers just about wherever he wants. We follow ’em because they can greatly affect the prices of your investments, they influence policy and public opinion and there are very few viable alternatives. We quote folks like John Williams often so you get a worthy alternative point of view. We could only be more contrarian by ignoring government stats altogether, which would be a disservice to you, whom we promise to inform, enrich and entertain.

And speaking of Mr. Williams:

“Heavily distorted seasonal adjustments have artificially reduced the levels of new claims for unemployment insurance,” writes John in his latest Shadowstats alert. “They appear to have flowed through not only to July unemployment and payroll reporting, but also to the July purchasing managers manufacturing survey.

“July usually sees a regular pattern of planned automobile production line shutdowns to accommodate retooling for the new model year, but recent disruptions to the auto industry have changed the pattern this year. Without the usual pattern of shutdowns, the government’s computers nonetheless responded by creating the usual offsetting boost in jobs, not only in the auto industry, but in supporting industries, as well. The auto industry itself was alone among durable goods manufacturing industries in showing a reported seasonally adjusted monthly gain in July, up by 28,000 jobs…

“The severity of the ongoing economic contraction has started to generate other distortions in data reporting:

• Year-to-year comparisons will begin to see a flattening in annual declines, as year-ago numbers used in comparisons were in severe contraction.
• Extreme economic disruptions have distorted patterns of regular activity and related seasonal-adjustment processes.
• The birth-death model overstates payroll levels during recessions.
• Short-term discouraged workers begin to disappear from the broader BLS unemployment measures as their “discouragement” extends beyond one year…

“While Wall Street likely will hype the July employment results as confirmation that the economy has turned the corner, such hype and resulting overly optimistic expectations should be slammed in the months ahead, when the positive reporting distortions reverse out in a normal catch-up process.”

Source:  The Debt Ceiling, Dividend Plays, A Currency Sea Change and More!

It brings back the question, which has loomed dimly at the margins of America’s collective consciousness, as to whether we can get through the long emergency ahead without going through a wringer of domestic political convulsion. At this rate, sooner or later, anything identified with wealth could become a target for the wrath of the unemployed and foreclosed. The first rock that flies through an East Hampton window, or the first firebomb tossed into the lobby of Goldman Sachs Manhattan headquarters could ignite a chain of events that shoves all economic policy out of the political arena and quickly divides everyone at the center of power into armies out for blood.

What the nation — including President Obama — can’t seem to get through its head is that the USA has entered a period of epochal economic contraction. Instead of growth, as measured in conventional econometrics, we can only expect (in the best case) transformation to a different economy within the limits of real contraction. The president has got to stop promising renewed growth. While this would affect the perceived “standard-of-living” as measured in things like shopping mall sales and vehicle miles driven, it would not necessarily mean diminished “quality-of-life.” It would mean different ways-of-life for a lot of people — for instance, young adults who had expected lifetime employment as corporate executives but who, instead, find themselves ten years from now working at farming. We have an awful lot to get real about.

A genuine reorganization of the US economy seems beyond the ken not just of all US politicians but of the entire US news media and business leadership. A wonderful example a couple of weeks back was the idiotic press conference by General Motors marketing chief, Bob Lutz, who thinks he can revive the American Dream with electric cars. (By the way, this is pretty much the same thinking I encountered at the Aspen Environmental Forum among the Green celebrities.)

From a purely practical standpoint, the electric car is absurd. If they were produced on a mass basis, they would crash the electric grid — assuming that the masses could afford to buy them, which assumes a lot. We simply don’t have the electric generating capacity to run even one-quarter of the current car fleet on volts, and building the necessary nuclear or coal-fired power plants in five years is also an absurdity. (Don’t expect wind, solar, biomass, or anything else to pick up the slack.) If electric cars were produced as just a niche product for the elite (e.g. Goldman Sachs employees), they would soon provoke the resentment of the non-elite left to the mercy of the oil markets.

Anyway, America’s motoring dilemma has gone beyond the issue of how we power the cars — and even beyond the insanity of blindly maintaining our extreme car dependency per se. The continuation of Happy Motoring now hinges on two other big quandaries: 1. the likelihood that there will be far less capital available for car loans, and 2.) the likelihood that there will be far less government money for road maintenance. The problem of Peak Oil — and the prospect of price-jackings and shortages — is just the cherry on top.

By the way, for practical purposes Bob Lutz of GM is an employee of the US taxpayers now, since the US owns 60 percent of the “new” General Motors, so he must be considered a spokesman for national policy. Since a transformation of the US car fleet to electric vehicles is absurd, what would be an appropriate response to profound economic contraction? How about walkable communities connected by public transit? Why is that not a focus of the “new” General Motors? In 1941 the company made the transformation from cars to armaments in a matter of months; why can’t it produce the rolling stock for a renewed passenger rail system? Or trams? Is this not enough of a crisis? The answer is that there is no leadership in this direction. If President Obama declared this to be a policy objective, and stuck to it for more than one business day, he could drag the sleepwalking American public in this direction, and the rest of national leadership in government, business, and media with it.

This kind of thing is what prompts casual observers to wonder if the president is a cynical shill for business as usual, or a victim of the worst conventional thinking with no real vision, or just another clueless sleepwalking bozo with a charming veneer.

In circles that pass for “progressive” these days, the natives are getting restless. Their agitation seems pretty inchoate for the moment — still resting on vague, poorly-defined wishes for “change.” These vague promptings need to be focused on specific action that is realistic within the context of comprehensive contraction and transformation. A big piece of this would be the recognition that our suburban sprawl economy is dying, and that we now have to bend our efforts to reorganizing American life on the most fundamental physical terms. We have to inhabit the landscape differently, move around it differently, generate food out of it differently, and make things on it again. Whatever remaining real capital there is in the system can’t be squandered on cash bonuses for Wall Street employees.

Source: Wobble Time

[Note: For more of Mr. Kunstler’s inexhaustible work, including art, articles and links to his books, be sure to check out his webpage here.]

The Wall Street Journal recently reported that Andrew J. Hall, head of Phibro LLC – Citigroup’s energy trading unit - is pressing the company to honor a 2009 compensation package that could be worth as much as $100 million. Such a lofty payout would put Citi at odds with Kenneth Feinberg the Treasury Department’s newly appointed pay czar.

Citigroup, which reported a net loss of $27.7 billion in 2008, received $34 billion in funding from the Troubled Asset Relief Program (TARP). That means Citi, along with six other financial firms, will have the compensation for its one hundred highest-paid paid employees reviewed by Feinberg.

“Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives,” said a Treasury Department official. “That process is just beginning now, and Mr. Feinberg has begun consulting with those firms about their compensation plans. We are not going to provide a running commentary on that process, but it’s clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance.”

The pay czar cannot force companies to break contracts with their employees, but he could ask those companies to reduce an employee’s future pay to compensate for a single large payment or factor the amount of a contract into an employee’s overall pay and use that calculation to bring down total compensation.

However, Hall’s compensation will be particularly tricky. According toThe Journal report he has long had a profit sharing contract with Citi entitling him to a sizeable portion of Phibro’s gains. Hall’s 2008 compensation totaled more than $100 million, people familiar with the matter told the paper. And while we’re only halfway through 2009, Phibro is reportedly having a good year.

Also, until this year, Phibro’s financial year ended in September. But now the firm’s pay will be calculated to a full calendar year. That means Hall’s pay period will run a full 15 months from September 2008 to December 2009.

According to The Journal report, Hall and others on his team earlier this year threatened to leave if their pay was cut to accommodate government mandates.

Hall’s departure would be a huge blow to Citigroup’s effort to return to profitability.  The Phibro unit has at times accounted for the bulk of revenue at its parent company. Hall himself is credited with anticipating the sharp run up in crude oil prices and producing a healthy track record of large and profitable investment bets.

Citigroup does not report the details of Phibro’s financial dealings. However, the company’s annual report indicated that $667 million of Citigroup’s 2008 revenue from “principal transactions” related to commodities was largely the result of Phibro’s performance.

Regardless of Hall’s contributions, the government says $100 million in compensation seems excessive.

“One could easily come to the conclusion that that’s probably a bit out of whack on any pay scale,” said White House Press Secretary Robert Gibbs. “The justification of setting outsized salaries is this notion of simply a series of unique skills or traits that can’t be replicated by anybody on the planet. I don’t know that the president would necessarily buy that notion.”

Source: Will Citigroup Lose its Top Energy Trader?