It’s official: Our government ran a record $180.7 billion over budget in July, the Treasury Department said today. That’s just a bit over Wall Street expectations and just under the Congressional Budget Office estimate we reported Monday. Thus the government tab so far this fiscal year is a record $1.27 trillion, not the record $1.3 trillion the CBO guessed earlier this week. Phew… what a relief.

A few more scary details:

• The budget deficit is still on track to exceed $1.8 trillion by October, the end of the fiscal year. That would be four times last year’s record budget
• July spending rose to over $332.2 billion, an all-time high
• Government revenues fell 5.6% from last June, to $151 billion
• Those revenues have been lower than the same month the year before for 15 straight months.

And we doubt Uncle Sam will get much help from tax revenues anytime soon… even “cash for clunkers” couldn’t save American retail sales in July. The Commerce Department’s July retail sales number shocked the Street this morning, down 0.1%, despite expectations of a 0.8% rise.

The government’s cleverly acronymed Car Allowance Rebate System (CARS) program did help — without auto sales, the retail gauge would have fallen 0.6%. But the lowly consumer has made his point: Even with free money deals from Uncle Sam, retail is not ready to “get back on track,” as the Obama administration likes to say. In fact, even if the Street’s wish came true, we’d still be a long way from the old status quo.

In a similar vein, Wal-Mart’s latest sales numbers missed expectations this morning. While still profitable, the world’s biggest retailer saw same-store sales fall 1.2% in the second quarter — well below the Street’s forecast of a 1% rise.

Interestingly, Wal-Mart enjoyed 13 straight months of better same-store sales from April 2008-April 2009. Then they suddenly stopped reporting monthly sales and switched to quarterly. Now, in their first quarterly report, sales are down. Hmm… must be a coincidence.
We don’t blame Joe Consumer for resisting retail, even “everyday low prices.” After all, another 558,000 Americans filed for unemployment for the first time last week. Initial claims rose by 4,000, says the Labor Department today. 6.2 million people are now receiving unemployment benefits.
U.S. foreclosures rose to another record high in June,says RealtyTrac today. One in 355 households, or about 360,000 homes, were in some form of foreclosure during the month. As we mentioned yesterday, roughly one quarter of all mortgages are worth more than the present value of the homes they cover.

That’s not good for the average home price, down 15% last quarter to $174,100 (existing single-family home).

Well, at least troubled homeowners can count on the Fed to keeping pinning down refi rates… Uh-oh:
Mark your calendars… the Fed has promised to stop manipulating the bond market by October.

That’s the meat of the news from yesterday’s Federal Open Market Committee meeting. They will “gradually slow” the pace of its official Treasury purchases, but the $300 billion program will now run through October instead of ending in September, as the Fed had previously scheduled.

(Of course, as our friend Chuck Butler often points out, that’s just the official word. The Fed has other ways to skin this cat. For example, they’re rumored to be striking deals with primary dealers for post-auction purchases. Instead of making official bond purchases at the auction, the Fed will have a primary dealer buy the bonds and then sell them to the Fed… same debt monetization, but without that pesky “transparency” and media attention.)

Outside of the Treasury bond announcement, the FOMC statement was about what you’d expect: Interest rates were left at 0% and will remain “exceptionally low” for an “extended period.” While “economic activity is leveling out,” it will “likely remain weak for some time.” And, of course, “inflation will remain subdued for some time.”
“The Fed doesn’t exist to help you,” says our currency man Bill Jenkins.

“Central banks do not exist for the good of economies. They do not exist for the good of citizens. Their sole purpose is to keep the game going, and to profit from it as long as possible. After that, they clear out, leaving the taxpayers to pay off their debts. Their protection and enhancement of economies and citizens is just a means to an end. As long as it helps the profits roll in, helping others is fine. But in the end, they will foist responsibility to others.

“For us, we will trade with all this in mind as each bank assesses its role in the global finance arena… knowing that they will begin raising rates as soon as possible, and sometimes even before. When they do, it will give us huge opportunities to profit. Rising rates almost always guarantee soaring currencies.

“Particularly I would look for the U.S. dollar, Europe, Aussie and United Kingdom. Australia will provide the real runaway as long as China can get some exports up and running. If this recovery gets some legs (which is still problematic in my mind), they already have the upper hand with an interest rate multiple times higher than the others.”

Will you profit from this trend? Have Bill help you reap the benefits by checking out Master FX options Trader.
The Fed’s announcement hit just about every market…bonds, stocks, currencies and commodities.
No surprise that the Fed’s announcement hurt bond prices. Not only did they forecast the end of their official purchases, but that “leveling out” talk also hints of higher interest rates, and thus lower bond prices. The yield on a 10-year jumped as much as 10 basis points, to 3.7%, on the news. But this morning it’s already given it back on the heels of the latest retail and jobless numbers.
Stocks rallied in advance of the FOMC meeting in expectation of some kind of good news. Up 1.3% before the announcement, the S&P 500 seemed content with the Fed’s lilywhite forecast and finished up 1.2%.
The dollar was perhaps yesterday’s biggest loser. That brief “good for the economy, good for the dollar” trade from last Friday is dead in the water. Traders took no comfort in the Fed’s soothing announcement and bid the dollar index down a full point, to 78.2 as we write.
Thus commodities are on the up and up. Gold’s up about $10, to $957 an ounce. Oil gained a buck and is now just below $71 a barrel.
“I had the unique opportunity,” writes Byron King, “to tour two different oil sands operations near Fort McMurray, in northern Alberta. I saw a massive open-pit oil sands mine, and the associated reclamation effort, operated by Syncrude Canada Ltd. I also visited an in situ oil sands recovery project called Surmont, operated by ConocoPhillips.

“When we think about the concept of ’Peak Oil’ today, we need to keep in mind what we’re talking about. The curves show oil output peaking in so many parts of the world. This phenomenon is quite real, as long as you understand that it’s the light, sweet, easy-flowing oil that is getting harder and harder to find, certainly in significant quantity.

“But there are a lot of other hydrocarbon molecules out there. Most of those molecules are not light, sweet crude oil. Indeed, most of the hydrocarbon molecules that the world will use in the future will be ’heavy,’ with lots of carbon atoms and not so many hydrogen atoms.

“Here’s a graph from oil services giant Schlumberger that estimates the world’s heavy oil and bitumen resources. Canada’s 400 billion cubic meters of bitumen translates into something like 1.4 trillion barrels of oil equivalent. How much is that? Well, it’s about SEVEN times the total oil reserves of Saudi Arabia.

“Sure, there are still issues about land disturbance, settling ponds, water usage, gas usage and myriad of other things that come up when you’re spending billions of dollars on a major mining effort. But Syncrude has built its business model around dealing with the ’other’ issues, and not just moving oil sands and recovering oil products. Don’t underestimate the ability of the Alberta government to regulate its energy producers. This is a long way from Appalachia.

“Meanwhile, we’re talking about literally billions of barrels of bitumen (or oil equivalent) that the process makes available to the North American marketplace. And if the United States wants to get onto its environmental high horse about the source of the hydrocarbons from the oil sands — and tax or ban their importation — there are other buyers in the world. Like the Chinese, who have racked up many frequent flyer miles on their treks to Fort McMurray.”

There are stocks to own no matter who wins the battle over Canada’s oil sands… find them here, in the Outstanding Investments portfolio.
One surprise batch of data today: France and Germany are technically out of recession. Both nations reported 0.3% GDP growth for the second quarter today. Given that the two are now Europe’s biggest economies, that’s surprisingly good news.

Should make for some fireworks from the PIIGS (Portugal, Ireland, Greece, Spain and an extra I for Italy) when the two start pestering the ECB to raise rates.
“You mention that the short interest on stocks fell 12% in two weeks,” a reader writes. “No surprise there. With the SEC issuing its rule prohibiting ’naked short selling,’ risking personal insolvency to predict falling prices is now illegal. And just as there is now no ’downtick rule’ or mark-to-market accounting (not to mention the federal government’s interdiction against accurate financial reporting — a.k.a. ‘stress testing’ — and its outright ownership of significant areas of the economy, subsidized by the taxpayers), there is now no investment whistle to blow to sound the alarm for the unsuspecting public.

“Of course, much of the unsuspecting public is now so caught up in the economic game of musical chairs known as the Obama administration that they are too busy (and broke) to pay attention. This does not bode well for the futures of our children or our children’s children … you know, the ones to whom we are passing the buck!”
“I served in the U.S. Navy for 8 years and did my share of ’spending like a drunken sailor,’” another reader writes. “I take offense at the notion that drunken sailors spend like power-mad politicians. Drunken sailors only spend what is in their pocket or what they won playing poker on the ship, but nonetheless once they’re broke, drunken sailors quit spending (and usually pass out).

“Please have your readers try to find a more appropriate analogy to wasteful spending by crooked politicians because those of us who were, and the ones who still are, drunken sailors spend within our means on things that are important to us (booze and babes). Thank you for your attention.”

The 5: Point taken… no sense in giving drunken sailors such a bad name.

Source: Budget Insanity, FOMC Down-Low, Oil Sands Investing and More!

The euro has received some additional love this morning, as the Eurozone’s economic growth printed better than expected, albeit still negative… But… Germany and France showed growth, which I must say is very unexpected! That means that both Germany and France have exited the recession… Well, that is at least for now! For those of you keeping score at home, Eurozone GDP fell -.1%, which is far better than the -.5% that was expected… Oh! And this is for the 2nd QTR… You would have to think that data like this would be very good for the euro, and from the looks of it, that’s exactly what’s happening!

Whenever the Big Dog, (euro) gets off the porch to chase the dollar down the street, all the little dogs get to chase too… And so, the usual suspects have posted gains since yesterday morning, like Norway, Switzerland, Aussie and so on…

The BIG news yesterday was from the FOMC meeting, where the Fed Heads left rates at near zero, but were kind enough to tell us that their Quantitative Easing would remain in place through October… That’s all nice and sweet, eh? So… What, are they going to do here, Buy some Treasuries out in the open and say see we told you we were going to do this, and then go back to the dark, smokey room and buy some more from the Primary Dealers just for GP? That just ticks me off! But there’s not a darn thing I can do to stop them!

What I would like to do is to start a movement to abolish the Fed… OK, who’s with me? I just had a chuckle, because that reminded me of the Will Ferrell Old School movie when he’s trying to get people to streak to the commons… Come on now, if you’ve seen that movie, you know you’re laughing right now!

I had a guy one time tell me, I know of no one that can talk serious one minute and go right into some funny thought, sing a song, or whatever the opposite reaction would be to the serious thought, like you do, Chuck… I thanked him!

But getting back to the thought of abolishing the Fed… Think about this for a minute… What good are they? Have we not had dozens of recession and one Great Depression since they were created? Have we not seen a 95% loss of purchasing power for the dollar since they were created? Let me tell you something else, folks… If the markets set the interest rates based on activity, we would never experience inflation or deflation…

OK, I’ll stop there, I know that I’ve ticked off a few people that think the Fed walks on water, and is here to protect us financially…

Well… In news you won’t hear on radio or TV… The U.S. Budget Deficit swelled to $180.7 Billion in July, from $102.8 Billion in June… Hmmm… Think about that for a minute folks… In June, when quarterly tax receipts should be enough to cover the expenditures, they not only were not enough, but they fell short by $180.7 Billion dollars! This is a combination of slower tax receipts because of the depression were in, and… The unsustainable deficit spending by the Gov’t. Oh! And the Budget Deficit year to date is now $1.27 Trillion… But you don’t see the knuckleheads in Washington D.C. doing anything about it, except for coming up with new things to spend more money on… I say fire them all!

Speaking of tax receipts… My friend, and writer & Marketing genius extraordinaire, David Galland, had this to say recently in one of his most excellent news letters… Here’s David…

“I like the idea of also forcing the government to stop automatically withdrawing taxes from paychecks. Instead, wage earners would be responsible for sending out their tax payments on a monthly basis. By my back-of-the-envelope calculations, it would take about two months of writing out the big checks to Uncle Sam before people came to grips with just what government (or, in this case, one slice of government) is actually costing them… and out would come the pitchforks. We cannot afford our current level of government, and the sooner we get around to cutting it back, the better. Period.” — Thanks David… As always you think on a different level than the rest of us!

The Trade Deficit also grew larger in July as Oil prices rose… The Trade Deficit moved to $27 Billion from $26 Billion… Now, the Trade Deficit is much smaller than it used to be thanks to the depression, but, the fact remains that it is still nipping at the heals of the dollar like one of those small dogs, and whenever it is that the U.S. comes out of this depression, this figure will balloon once again…

Today’s data will be dominated by Retail Sales for July, which because of the CARS program, will be stronger than usual, probably getting quite close to a positive 1% for the month… Less Autos, the data would be quite disappointing at just .1%, but, you know me… I don’t like that taking this, that and the other thing out just so things look the way you want them to look!

It’s also a Thursday, so the Weekly Initial Jobless Claims will also print. Recall that on Monday of this week I told you the data would get going again this week? Well, we’ve got it going on today for sure!

Yesterday, Norway’s Norges Bank met, and while they left rates unchanged, they became the first Central Bank to move to a tightening bias! YAHOO! And the krone was the best performing currency yesterday and overnight on that news, as it should! Long time readers know my affection for the krone due to a number of reasons, but none so important than the fact that Norway has a financial surplus, has had one, has one, and will have one for as long as I can see… Norway didn’t get involved in the sub-prime bond buying game… And they have a very strong Central Bank in the Norges Bank… Last spring, the NY Times, which I don’t read for a number of reasons, but had this sent to me, called the Norwegian krone the safest currency in the world. Now… I like it when someone other than me climbs out on that limb, especially if your going to climb that far out!

Tonight, the Gov. of the Reserve Bank of Australia (RBA), Stevens will provide a testimony to the Parliament regarding the economy, etc. I think that the A$ traders are holding their breath until he speaks, as this could be a real market moving speech! But then it could also be as dull as watching paint dry…

The A$ is back above 84-cents after spending a couple of days down in the 82-cent handle…

OK… So… We had good news from Germany, France and Norway this morning… Not so good news from the U.S. though…

Realty Trac Inc. is reporting this morning that a total of 360,149 properties received a default or auction notice or were seized last month. UGH! Foreclosure filings in the U.S. climbed to a record for the third time in five months in July. All those jobs that were cut and still being cut, are having a real negative affect on this, and personally, I don’t see this getting any better any time soon! UGH!

There’s been a lot of talk about the news the other day that China’s loan growth had seen a huge fall last month… A lot of people think that this is the end of China’s growth… I see it differently… I see it as China just taking some air out of the balloon… They saw their economy moving ahead of the rest of the world at a very fast pace, and didn’t want it to: 1. overheat, and 2. Have nowhere to go with everyone else in recession… Now, I’m sure a lot of you will say, Chuck… Doesn’t China risk the chance of popping their economic bubble altogether? Well… Yes, they do… But, they knew how to administer stimulus to make the economy click, I assume they know how to pull some if back when they need to…

And… I just think about the fact that since 2003, I’ve seen story after story by writers that thought they knew what was happening in China, say the economic growth was going to slow down… And they were WRONG!

And with that thought… No wait! I’ve got another thing from David Galland… He said that Dan Ferris sent this to him… “Members of Congress should be compelled to wear uniforms just like NASCAR drivers, so we can identify their corporate sponsors.” yeah, right on! Now that’s change that’s really change!

Currencies today 8/13/09: A$ .8440, kiwi .6795, C$ .9245, euro 1.4275, sterling 1.6625, Swiss .9315, rand 7.9675, krone 6.0220, SEK 7.1475, forint 188, zloty 2.88, koruna 18, yen 96.20, sing 1.4415, HKD 7.7515, INR 48.10, China 6.8337, pesos 12.84, BRL 1.8385, dollar index 78.50, Oil $71.64, 10-yr 3.73%, Silver $15, and Gold… $957.15

That’s it for today… I had a long time reader send me a note yesterday and tell me that I have enough to worry about with the Fed, Treasury, deficits, etc. and shouldn’t get worked up when the Cardinals lose a game they should have won… HA! Yes, that’s correct! It is just a game… And yes, I’m talking about baseball, not the Fed, Treasury and deficits! HA! Well… I go to the knee doctor today, I’m afraid of what he’s going to find… All I know, is that the pain, swelling and stiffness is much worse in this knee than it was in the right knee that I had scoped in 2003! UGH! My little buddy, Alex is home. He seemed to have grown 6 inches while at camp! OK… I must really be running late, as Mike, Suzy Q, and Mary are all here! So… Get that Tub Thumpin’ Thursday going!

Source: Germany & France Exit The Recession

With the “not-as-bad-as-expected” news surrounding the economy and the initial government stimulus measures have been priced in to the market, we are moving into a period of profound uncertainty. With the release of Alcoa Inc.’s (NYSE: AA) earnings report, earnings season has officially begun.

In most cases each company’s own “easy” restructurings are also behind us.  They have resorted to massive lay-offs and inventory liquidations to bring costs down to the bare minimum required to run their respective businesses.  Those cuts and gained efficiencies also have been priced in.  Now, it is time for these companies to show what they can do organically.

Energy companies appear to have hit a wall now that China has run out of space to store oil. And other commodities businesses are suffering, too, as the U.S. Federal Reserve seems to have found religion and veered toward a much more prudent monetary policy.

After its last meeting the Federal Open Market Committee (FOMC) signaled the end of quantitative easing, at least for the foreseeable future.  This is of paramount importance, because it seems to be a concession to those who worried that the Fed might debase the U.S. dollar with by over-expanding its balance sheet and fanning inflationary forces down the road.

The Fed has done a tremendous job of first restoring some sense of “normalcy” and confidence in the core markets, like interbank lending and money markets, and then proceeding to work outwards to U.S. Treasuries and mortgage-backed securities.  This later step towards more prudent actions is welcome and you are seeing it in the U.S. dollar and renewed confidence in Treasuries.  The latter have been received extremely well by investors and yields have started to move down, reflecting not only the lack of current inflation, but also the confidence that the Fed will not go bananas with quantitative easing.

So, ahead of a very difficult earnings season, I am not going to try to out-predict the market.  The experts have been going around for a couple of months trying to just that by using expensive consultants that do channel-checking and by contacting the companies themselves to clarify statements made under full disclosure.

But the earnings season has extraordinary challenges to surmount, that are deriving from the uncertainty that is hanging over the markets like the proverbial sword of Damocles.

General Motors Corp. (OTC: GMGMQ) and Chrysler Group LLC are emerging from bankruptcy in record time and their costs, debt and massive corporate restructurings will probably make them internationally competitive once more.  But there are still questions about how these companies will cope with the still dormant auto market.

The outlook for the large financial behemoths that are due report earnings is equally uncertain. We still need to see how these institutions play around with their toxic asset valuations, their loan loss reserves and their predictions for the future, particularly given the potential stumbling blocks on the road to recovery.

The three obstacles that I find especially troubling are:

1. The spike in credit card delinquencies.
2. The outlook for commercial real estate.
3. And the pending second wave of residential foreclosures, now in the prime and option-ARM sectors.

But do not discount the possibility of seeing mark-ups in toxic asset valuations that might favor some financials strongly.

Now, with the Fed seemingly on hold and the U.S. government’s stimuli only 30% deployed and showing little traction, where is the growth going to come from, especially since unemployment blew right through the promised 8% peak to the current level of 9.5%? On top of that, last week’s rise in continuing jobless claims and Friday’s drop in consumer sentiment offered little solace.

The good news in all of this is that savings rates spiked to 7% as consumers used their money to pay down debt.  Even though this improvement in consumers’ balance sheets does not show in immediate sales growth, it bodes very well for the future.  And this savings trend, which translates into reduced demand for imported consumer products, together with rising exports, resulted in the lowest trade deficit in nearly a decade.

We are making the difficult progress that we need to make in order to restore the U.S. economy to financial health, and that, in turn, is helping the dollar and Treasuries in the short term.

So, based on these massive uncertainties, waiting to be played out, the best risk-reward ratio appears to be in bonds.  With a massive U.S. Treasury supply well absorbed, we are going to jump into long term U.S. Treasuries for a conservative upside, while we keep waiting for resolution on the healthcare reform, social security, and corporate earnings.

Recommendation: Buy the iShares Barclays 20+ Year Treasury Bond ETF (NYSE: TLT) (**).

(**) - Special Note of Disclosure: Horacio Marquez holds no interest in the iShares Barclays 20+ Year Treasury Bond ETF.

Source: Buy, Sell or Hold: Buy iShares Barclays 20+ Year Treasury Bond ETF For Solid Profit at a Time of Great Uncertainty ]]> http://www.contrarianprofits.com/articles/buy-sell-or-hold-buy-ishares-barclays-20-year-treasury-bond-etf-for-solid-profit-at-a-time-of-great-uncertainty/19017/feed 0 http://www.contrarianprofits.com/articles/bernanke%e2%80%99s-forecast-buffett%e2%80%99s-green-shoots-can%e2%80%99t-miss-data-taking-oil-profits-and-more/18407 http://www.contrarianprofits.com/articles/bernanke%e2%80%99s-forecast-buffett%e2%80%99s-green-shoots-can%e2%80%99t-miss-data-taking-oil-profits-and-more/18407#comments Fri, 26 Jun 2009 18:00:08 +0000 Laura Cadden http://www.contrarianprofits.com/?p=18407 Fed sees the bright side… Bernanke says worst it over, inflation not a worry… Warren Buffett can’t see any green shoots… even after eye surgery… Alan Knuckman on how to survive a sideways stock market… Byron King says now’s a good time to book profits on this sector… Housing still out of whack… one chart foreshadows the market’s next move…

Take two days off and look what happens… the recession has bottomed.

At least that’s what “they” would have you believe. While we locked ourselves in our bimonthly editorial meeting the last two days, we missed some new “the worst is over” calls. Here’s the rundown:
“The pace of economic contraction is slowing,” declared the Federal Open Market Committee yesterday after emerging from a two-day meeting of…

Fed sees the bright side… Bernanke says worst it over, inflation not a worry… Warren Buffett can’t see any green shoots… even after eye surgery… Alan Knuckman on how to survive a sideways stock market… Byron King says now’s a good time to book profits on this sector… Housing still out of whack… one chart foreshadows the market’s next move…

Take two days off and look what happens… the recession has bottomed.

At least that’s what “they” would have you believe. While we locked ourselves in our bimonthly editorial meeting the last two days, we missed some new “the worst is over” calls. Here’s the rundown:
“The pace of economic contraction is slowing,” declared the Federal Open Market Committee yesterday after emerging from a two-day meeting of their own. Even though Mr. Bernanke and his brood say, “economic activity is likely to remain weak for a time,” the vibe from the FOMC statement was decidedly rosy.

Of course, inflation “will remained subdued for some time” and the group will leave rates near zero “for an extended period.” Same old story at the Federal Reserve. The rest of the Fed announcements were nonevents… new age lending programs and quantitative easing will neither increase nor decrease before their next meeting in August.
Despite all the data out this week — new and existing home sales, GDP, jobless claims — only one has given the Street a jolt: durable goods.

Orders for items meant to last a few years increased 1.8% from April to May, smashing Wall Street’s expected 0.4% growth. Never mind that orders in the first five months of 2009 are down 27% compared to 2008… May’s number is another green shoot! Hooray!

“I get figures on 70-odd businesses, a lot of them daily,” said Warren Buffett yesterday. “Everything that I see about the economy is that we’ve had no bounce. The financial system was really where the crisis was last September and October, and that’s been surmounted and that’s enormously important. But in terms of the economy coming back, it takes awhile. There were a lot of excesses to be wrung out and that process is still under way and it looks to me like it will be under way for quite a while. In the [Berkshire Hathaway] annual report, I said the economy would be in a shambles this year and probably well beyond. I’m afraid that’s true…

“I had a cataract operation on my left eye about a month ago and I thought maybe now I’ll be able to see green shoots. We’re not seeing them. Whether it’s retailing, manufacturing, wherever. We have a big utility operation. Industrial demand is down like we’ve never seen it for a simple thing like electricity. So it hasn’t happened yet. It will happen. I want to emphasize that. But it hasn’t happened yet.”
Speaking of Buffett, his annual charity lunch auction is proving to be an annual sign of the times. Last year, the oversized $2.1 million winning bid for a lunch with Buffett came from a Chinese fund manager — three times the previous year’s winning bid. This year, with only one day remaining, bids for the eBay auction are up to “just” $350,000.
The U.S. economy didn’t contract quite as much as reported in the first quarter, the Commerce Department announced today, adding to the optimistic mood. The government arm finalized first-quarter GDP numbers today. Their initial report detected a 6.1% contraction. The first revision was a 5.7% fall, and now Commerce claims the economy shrank just 5.5% in the first quarter of the year.
The OECD has drastically revised its growth expectations for the U.S.

“Signs have multiplied that U.S. activity could bottom out in the course of the second half of this year,” said Jorgen Elmeskov, the OECD’s acting chief economist. The group now forecasts a 2.8% U.S. economic contraction in 2009 and 0.9% growth in 2010 — a huge revision from their most recent call of a 4% decline this year and zero growth in 2010.
As far as the stock market goes, we timed our two-day break well… since Monday’s swift sell-off, major indexes have gone nowhere. Despite all the data and the latest FOMC meeting, the Dow sank 0.2% Tuesday and 0.3% yesterday… yawn… stretch.
“This sideways trade for the last few weeks is typical of summer markets,” writes our commodities trader Alan Knuckman, “even in an anything but a typical year for investors. Everyone is so conditioned for strong moves in either direction it has left many unable to handle an undefined trend.

“The stall has disappointed many market watchers — with some calling for a new downturn. Over my years I have found it better to follow the trend without trying to catch the turn. Don’t be too proud to miss some of it. Most of the money is made in the middle of a trend, and that’s where we’ll stay here at Resource Trader Alert.

“Volume seems light and something is needed to spark movement after the large bull run. The S&P 500 channel — with lows last week at the 899 level (as a support level) and highs at 925-plus — is an area to watch closely for future clues. At the same time, Treasury bond futures weekly highs at 117 and lows at 114 have held traders in check. The breakout for either asset class will light the way down the future path for the markets.

“For now, let’s wait and see what trend develops. Have some wine, and let the market sort things out.”

When the next trend emerges, will you know what to do? Have Alan be your guide, here… at Resource Trader Alert.

(For a closer look into the psyche of our resource trader, be sure to check out today’s P.S.)
Commodities have succumbed to selling pressure. Since peaking at $987 in late May, gold has been in a state of steady decline. It found a temporary bottom early this week at $919 an ounce and has since inched back up to $935.

Oil fell from a recent high of $72 a barrel to as low as $66 this week. While the front-month contract has recovered to about $68 this morning, we detect a dark cloud forming over the sector.
“Oil had a strong climb,” reports Byron King, “and pushed up over $70 per barrel just a few weeks ago. Then oil met with market resistance. So the price of oil retreated into the current $60 range. Could oil go lower? Yes, at least in the short term. Oil could drop back into the $50s, despite its traditional strength during the summer driving season. You might see gasoline prices pull back 10-20 cents per gallon, which will make that trip to the gas station a buck or two cheaper.

“A pullback like that in oil prices will take the steam out of recent stock market gains for oil producers and oil services. So if you want to take any oil profits, now is probably a good time.

“No, this is not a sell recommendation for the oil sector, or any company in the energy side of the Outstanding Investments portfolio. What I’m saying is that we might have a pullback in an otherwise long-term, generally rising trend for energy. Thus, if you are of a trading mind, then take your recent energy gains now. Book some profit, and hold onto the cash for later buying opportunities. Otherwise, don’t be shocked if the energy stocks take a summer swoon.

“Longer term? Oil is headed upward in price. That’s just plain baked into the cake. Half of the world’s daily oil use is now going to developing countries. And by definition, developing countries are… developing. They are using more and more oil, or how else do you think they are developing? So even if oil use in the developed world just stays flat, that oil will still find a market.”

Outstanding Investments remains one of the greatest values of our industry. If you’re not a subscriber, get with the program,here.
The U.S. housing market is back to underperforming expectations. We saw the latest existing home sales and new home sales numbers this week — both failed to meet the Street’s forecast.

The National Association of Realtors reported 2.4% growth in existing home sales Tuesday, to an annual rate of 4.7 million. The stock market — no longer satisfied with meager housing growth — wanted a rate of 4.9 million and suffered a small sell-off.

Even though sales managed to increase in back-to-back months for the first time since 2005, existing home prices are still plummeting, distressed sales are still booming and the market is still saturated with a 9.6-month supply of homes… a positive sign that the free market still works, but hardly reason to call a bottom.
And new home sales are still slipping into the abyss.Sales of new houses fell another 0.6%, to a 342,000 annual rate, the Commerce Department said yesterday. That’s down 32.8% from last year — we hasten to add, a time when the housing market was already in the dumps. Making matters worse, Wall Street analysts were calling for a 2% rise in new home sales. And like existing home sales, the price of new homes is still falling (down another 3%, to $221,600), and inventory is still at a lofty 10-month supply.

Check out this chart of new versus existing home sales. Both have historically moved in near lock step, with the exception of last two years. If this trend is destined for a “regression to the mean,” we wouldn’t be surprised to see new home sales level out and existing sales take a turn for the worse.

The dollar’s still stuck in a range. The dollar index took a quick trip below the infamous 80 score yesterday after the FOMC’s announcement, but has since climbed back up to 80.6… not far from where it’s been for the last two weeks.
Today’s “take it for what it’s worth” dollar quote, from IMF chief economist Olivier Blanchard:

“For the U.S., it is absolutely no question that a sustained recovery has to come from a large increase in exports, that may not be very easy to do. This may require fairly substantial adjustments in the dollar.” Hmm…
“I’m a raving fan of The 5, but come on,” writes a reader, referring to Monday’s issue, “couldn’t you muster a better defense of capitalism to the latest apologist?

“It is not capitalism that allowed derivatives and excessive debt levels. It is the distortion of a fractional reserve fiat currency system that is a statist addition to it that did. In a free market with a gold standard, every security bought must be funded with actual value, rather than leverage levels being allowed to explode. It is the printing press, credit creation and the statist monetary system, and not capitalism, that is the source of this crisis.”

The 5: Heh, well, there you have it.

P.S. We feel obligated to share this photo with you, if only to legitimize Addison’s recent iPhone purchase. During our marathon editorial meeting yesterday at 14 West, the fire alarm sounded. The whole building cleared out to a nearby park. Most were content with a break… we’d been vetting our ideas nonstop for the last few hours, and the alarm was a welcome excuse to relax, grab some coffee, have a smoke, etc.

Not for Alan Knuckman, editor of Resource Trader Alert. We didn’t ask how many trades he managed to fire off during the 10-minute alarm, but it was quite clear that he was in the zone. You can take the man out of Chicago… but don’t expect him to stop trading:

Curbside commodity options, fueled by Big Gulp

P.P.S. Did you learn from 2008? If so, you’re actively seeking ways to hedge your portfolio from another market fall. We’ve gathered our favorite strategies for playing the next bear market here, in our latest special report.

Source: Bernanke’s Forecast, Buffett’s Green Shoots, Can’t Miss Data, Taking Oil Profits and More!

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A steep drop in commodities prices has dampened inflation expectations significantly in recent months. But despite declines in consumer and producer prices, the Fed’s monetary base – the amount of total amount of a currency that is either in the hands of the public or in the central bank’s reserves – has expanded by 80% in the past six months.

Meanwhile, the Fed’s balance sheet has ballooned to $1.8 trillion in assets from $959 billion over the past year.

However, Bernanke argued yesterday that that many banks are opting to keep their capital on the sidelines and that “a significant shrinking of the balance sheet can be accomplished relatively quickly.”

“Some observers have expressed the concern that, by expanding its balance sheet, the Federal Reserve will ultimately stoke inflation,” Bernanke told journalists at the National Press Club. “The Fed’s lending activities have indeed resulted in a large increase in the reserves held by banks and thus in the narrowest definition of the money supply, the monetary base. However, banks are choosing to leave the great bulk of their excess reserves idle, in most cases on deposit with the Fed. Consequently, the rates of growth of broader monetary aggregates, such as M1 and M2, have been much lower than that of the monetary base.”

Bernanke added: “At this point, with global economic activity weak and commodity prices at low levels, we see little risk of unacceptably high inflation in the near term; indeed, we expect inflation to be quite low for some time.”

Still, as credit markets and the economy begin to recover inflation could make a speedy recovery.  Should that happen, the Federal Reserve will have to act quickly, something Chairman Bernanke says he is prepared for.

”The Federal Reserve will have to moderate growth in the money supply and begin to raise the federal funds rate. To reduce policy accommodation, the Fed will have to unwind some of its credit-easing programs and allow its balance sheet to shrink,” he said. “A significant shrinking of the balance sheet can be accomplished relatively quickly, as a substantial portion of the assets that the Federal Reserve holds…are short-term in nature and can simply be allowed to run off as the various programs and facilities are scaled back or shut down.”

To increase transparency and give the market a better sense of the Fed’s expectations, the FOMC will publish long-term projections for the economy, particularly inflation.

The FOMC’s projection of inflation over the next five years, he said, “may be interpreted … as the rate of inflation that FOMC participants see as most consistent” with price stability and maximum employment.

By releasing longer-term projections The Fed seems to be edging closer to an “inflation target,” which is something already utilized by central banks in Europe, as well as an objective Bernanke himself lobbied for in the past.

The FOMC believes that the optimal inflation level over time between 1.7% 2%, according to the minutes from its Jan. 27-28 meeting.

The producer price index (PPI) rose 0.8% in January, after falling 1.9% in December the Labor Department said today. Core prices, which exclude food and energy, rose 0.4%. Consumer price data for January is scheduled for release Friday.

“It is doubtful that the price increases will be able to stick given the weakening economy and rising unemployment,” James O’Sullivan, a senior economist at UBS Securities LLC told Bloomberg News. While “inflation hasn’t collapsed yet, the big concern is still that inflation will fall too much.”

Source: Federal Reserve Chairman Bernanke Not Yet Worried About Inflation

• The Federal Open Market Committee (FOMC), the policymaking arm of the U.S. Federal Reserve, will conclude a two-day meeting today (Wednesday), and investors are expecting members of this key central bank group to determine just what’s the next monetary-policy step needed to jump-start the recession-plagued U.S. economy, Bloomberg News reported.  Back in December, the FOMC slashed the Federal Funds rate to a range of 0% to 0.25% – an all-time low for that benchmark for U.S. borrowing costs.

• The chief executive officers of two top U.S. banks have made big bets on their own institutions, filings with the U.S. Securities and Exchange Commission show. JPMorgan Chase & Co. (JPM) CEO James “Jamie” Dimon bought 500,000 bank shares at a price of $22.929 each on Jan. 16, an outlay worth nearly $11.5 million, the documents show. Four days later, embattled Bank of America Corp. (BAC) CEO Kenneth D. Lewis bought 200,000 shares at prices ranging from $5.98 to $6.06 a share, resulting in a total outlay of $1.165 million, SEC records show.

• Once he was known as Wall Street’s “Mr. Fix-it.” But the once-teflon-coated reputation of ousted Bank of America Corp. (BAC) executive John Thain now needs fixed up. Thain, who joined BofA when that bank took over Merrill Lynch & Co. Inc. at the very end of last year, was fired last week after losses at Merrill led to a $15.3 billion loss at Bank of America, and forced BofA to seek additional government aid. According to Bloomberg News, Thain has reportedly retained public relations specialist Sunshine, Sachs & Associates, whose clients include Ben Affleck and Leonardo DiCaprio – most likely in a bid to rebuild his image.

• Yahoo! Inc. (YHOO) logged a fourth-quarter loss of $303 million, compared with earnings of $206 million a year ago. Sales in the quarter fell 1% to $1.8 billion from $1.83 billion.

• The Conference Board’s Consumer Confidence Index fell to a new record low of 37.7 this month from a revised 38.6 in December. “It appears that consumers have begun the new year with the same degree of pessimism that they exhibited in the final months of 2008,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. “Looking ahead, consumers remain quite pessimistic about the state of the economy and about their earnings.”

• The Standard & Poor’s/Case-Shiller 20-city housing index plunged 18.2% year-over-year in November – the sharpest annual drop on record. Homes in the 20-city index have lost a quarter of their value since their peak in July 2006. The National Association of Realtors said Monday that the median home price fell a record 15% in December to $175,400 – down from $207,000 a year ago.

Source: Global Investment News Briefs Wednesday, January 28th, 2009

Yesterday, we received some really awful data here in the U.S. but the dollar rallied… This just shows to go you that the Trading Theme of rewarding the dollar every time the data shows more deeper, darker, and dangerous times for the economy. What this does, is send the “risk takers” hiding behind rocks, and afraid to come out of the locker, they are as nervous as they can be… And no, it’s not because they’re wearing an itsy bitsy yellow polka dot bikini! It’s because the waters for them are rough when the Trading Theme is in place.

With no risk takers, the currencies just don’t have any support… Except for… Drum roll please… Japanese yen! I’ve explained this phenomenon so many times in the past 6 months that I just can’t get myself to do it again this morning, but you know the story… Risk takers leave, unwind their “risky trades” and this all benefits yen… The yen is trading within spittin’ distance of an 87 handle this morning… WOW! And to think people laughed at me for the last couple of years when I said this would all happen… That the carry trades would eventually unwind, and the high yielders would get sold, and Japanese yen would get bought thus producing a rally for yen…

Yen would tease us, and go to 105, 104, and then back to 110, 115… But I held true to my thoughts that the next leg down for the dollar would be VS the Asian currencies led by Japanese yen.

OK, so the dollar has the other “non-yen” currencies on the run going into the weekend. The data yesterday had a lot to do with this, so let’s review what printed yesterday…

First of all, we had the Weekly Initial Jobless Claims… OMG! The forecast was for 542K Jobless Claims to have been filed last week… But the number was actually 589K! OUCH! That’s crazy folks, nearly 600K people filed unemployment papers last week! First of all, these last two reports (last week was 527K), show that the drop below 500K in the previous two reports were not an indication of any kind that layoffs had bottomed, instead this was caused by the holidays, as I said at the time… A Head Fake as we call it in the markets… I think that this number is going to be maintained in the next few reports too, unfortunately!

Then we had the Housing Starts and Building Permits data… Housing starts for December collapsed to 550K, a new record low. Building permits for December also collapsed to a new record low of 549K. These two pieces of data go back a long way (1959)… You have to go back to 1991 for Housing Starts to show this kind of weakness and even then they were higher than this print… And you would have to go back to 1975 to show this kind of weakness in Building Permits… And again even then they were higher…

This, to me, is the adage that you’re gonna get what’s coming… The massive overbuild of houses in the U.S. in the past decade was bad enough… But then we had the massive credit crisis… I saw a headline somewhere that said the U.S. McMansions, were being “right-sized”…

There are scheduled data prints today… I think we probably need a day to recover from those three reports that printed yesterday!

OK… The tax cheater… Oh, that reminds me of the local guy here that had a big hit back in the 60’s called “The Cheater”… Bob Kuban and the In-Men… Haven’t you heard about the guy, known as the Cheater? He’ll take your money and then he’ll lie and cheat on his taxes…

HAHAHAHA! Our soon to be brand spankin’ new Treasury Secretary, a.k.a. “the cheater” Tim Geithner is already going after the Chinese… I know why he’s doing this right out of the starters blocks… He’s trying to get everyone to get their minds off his personal problems with the IRS, the agency that he now heads! Now… Here’s a memo from me to “the cheater”… Ahem… I would think the Chinese are now laughing their socks off, at least the old Treasury Secretary didn’t have skeletons in his closet, or at least we didn’t know about them!

Now, here’s a guy with little credibility, in the eyes of the Chinese (I believe), telling them that “President Obama believes you are “manipulating” its currency”… Here we go again folks… Blaming the Chinese for our problems… When we should be getting down on our knees and thanking them for buying all our debt the past decade… OK… This has gone on enough, time to go to something else, I could feel my blood pressure rising, and I’m not in the mood to be in that frame of mind today!

The Fed’s FOMC meet’s next Wednesday… I don’t expect the Fed to go the remaining 25 Basis Points (1/4%) to zero, as there’s no reason for them to use the last arrow in their quiver, no matter how small that arrow is… Besides, they’ve done all this cutting and have little to show for it. I think it would behoove them to sit back and give the previous rate cuts a chance to work… That is if they are going to work… Remember, it’s been my stance, that it’s not a case of the cost of credit causing the credit crisis, it’s a case of the lack of liquidity causing the credit crisis… So… In my mind… I didn’t see the need to cut rates all along, and especially not to near zero! But, the longer we’re here at near zero, the better my call for soaring inflation by 2010 to have a chance to come to fruition!

And the beat goes on for the pound sterling… Every day, there’s more and more reason to not touch pound sterling with someone else’s 10 foot pole! The Gloom and Doom is everywhere in the U.K. and analysts, and pundits are lining up to take their turn swinging the stick at the U.K. piñata… The selling of pound sterling has gotten so strong that it is now carrying over to the euro on the crosses… The euro has to deal with being sold on the crosses, and is the main reason the euro is flirting with falling below 1.28 as I write…

And after those last couple paragraphs, I’m going to go to the Big Finish on a good note, and talk about Gold… You know… You can’t always think just about Gold’s relationship with the dollar… Yes, I know, we’re all, for the most part, dollar based investors, so that’s all we care about… But you see there’s more when you pull up the carpet… For instance, earlier this week I talked about how Gold and the dollar were rallying… Well, a look under the carpet tells us that Gold is rallying even more against the Russian ruble… So, knowing this, we can better understand the Gold and dollar rally at the same time. I hope you’re with me on this, as I really don’t know a better way of explaining this relationship…

So… Gold looks as though it will end the week with a weekly gain… I have to say that all this dollar strength is beginning to get pretty questionable, and THAT could be another reason for Gold’s strength. Oh, and it’s up $15 this morning!

Currencies today 1/23/09: A$ .6425, kiwi .5180, C$ .7920, euro 1.28, sterling 1.3570, Swiss .8570, rand 10.35, krone 7.0840, SEK 8.4120, forint 226.25, zloty 3.4525, koruna 22, yen 88.10, sing 1.5080, HKD 7.7570, INR 49.25, China 6.8490, pesos 14.20, BRL 2.3520, dollar index 86.52, Oil $42.84, Silver $11.50, and Gold… $873.60

Source: Gold Ends The Week Strong!

Free money for everyone… forever.

The Fed’s 75-point cut yesterday makes history on two counts. At a “range” of 0-0.25%, the Fed’s rate hasn’t been this low in half a century — and they have never set a range to their target lending rates.

But that wasn’t all. In a monetary version of “shock and awe” policymaking, the Fed threw “all available tools” at the crisis. Other groundbreaking details include:

• An assurance that the nearly nonexistent rate will stay low “for some time”
• Confirmation that the Fed’s $600 billion mortgage-backed security and agency debt repurchase program will roll out “over the next few quarters”
• A hint at the FOMC’s interest in purchasing longer-term Treasury securities
• Promises that the Fed “will continue to consider ways of using its balance sheet to further support credit markets and economic activity.”

“This announcement,” Dan Amoss wrote to his readers, “convinced the markets that the Fed will inflate as much as necessary to stave off deflation. I expect the Fed to work even closer with the Treasury Dept. under the Obama administration. This may include a major mortgage refinancing initiative in 2009. A hint of such an initiative could spark an extension of the stock market rally that began in late November.

“This radical new dollar debasement will not come without consequences; expect further gains in the price of precious metals.”

In anticipation of this “shock and awe” rate decision, Dan helped his Strategic Short Report readers take 245% profits just hours before the Fed’s announcement yesterday. How about you? Learn more here.

Nearly all stocks soared after the Fed’s press release. Expecting a 50-point cut and far less aggressive policy implementation, traders went all in. The Dow rose 4.2%. The Nasdaq and S&P 500 jumped even higher.

Banks, of all freaking things, led the way… now that they can get their money for nothing and their chicks for free. If Greenspan’s 1% rates following the tech bust begat a bubble the size and scale of the housing mess — just imagine what mayhem a few quarters of 0-0.25% rates will do. Oy.

At least… that’s what we suspect the Fed was thinking.

This morning, it looks like the rate cut buzz has already worn off… the Dow opened down 80 points.

“The Federal Reserve wants us to believe,” opines GoldMoney’s James Turk , “that the sole problem reverberating throughout the world is simply a lack of liquidity, but it is nothing of the sort. It is in one of solvency. Most banks and many consumers and companies are overextended, and their precarious financial position cannot be put right with newly created dollars.

“Many loans were made recklessly and imprudently, and the borrowers as well as the lenders are suffering the consequences. Low interest rates and easy money will not make economic those houses built on speculation, those shopping malls built unnecessarily and those companies whose business models rested upon ill-founded assumptions about the health of the U.S. economy. The debts of imprudent borrowers cannot be repaid in a timely way because they own assets acquired in the boom that with the benefit of hindsight are uneconomic even with zero interest rates.

“What’s needed today is the same medicine that has over time inevitably cured every other bust. It is capital and savings, and unfortunately, they are in short supply in today’s America. But the Federal Reserve will not be deterred from pursuing the reckless path it is on. They seem to think that they can avoid the bust, and further, that the economy can emerge unscathed from years of imprudent and reckless credit extension by the banks.

“History says the Fed is mistaken, but history also tells us something else. The consequences of the Fed’s actions will debase the dollar, perhaps irreparably so.”

The U.S. dollar has been falling all week. After a big step down Monday, the dollar got slammed again yesterday following the Fed’s cut. Roll the videotape:

The dollar index has fallen about 1 point every day over the past five… huge moves for the typically sluggish index. This morning, the index is once again battling with 80.

The euro soared after the Fed’s announcement, up a full 5 cents, to $1.41. The pound rose 2 cents, to $1.54.

And the yen found itself a new 13-year high at 88. And why not? Now that lending rates in I.O.U.S.A. are essentially the same as in Japan, what’s to stop the dollar from becoming the new carry trade currency of choice?

(BTW, we’re working on another way for you to profit from the falling dollar… we’ll fill you in Friday.)

But the good news… gold. Our favorite metal is up again today, to around $850.

Oil didn’t get much of a kick from the dollar’s fall yesterday. The front-month crude contract stayed put at $44. Even after OPEC announced they would cut back production twice as much as expected this morning, oil fell. It’s around $41 as we write.

Still, it looks like the bottom may be in for gas prices. The national average price at the pump has been inching up all week, to now $1.66.

50% of American companies are currently planning on reducing labor costs, says a recent survey by human resources firm Hewitt Associates. Companies that tell Hewitt they will be cutting back say the average pay raise for 2009 will be less than 3%… the lowest average hike in the study’s 32-year history. Of all industries, auto-related workers can expect the worst raises — about 1.4%, the survey said. Those in construction and engineering will do best, averaging a 4.5% bump.

So how can you come out on top? Hewitt reports that business will be probably focus on performance-based rewards next year. 69% of companies polled offer incentive-based pay, while 24% say they’ll add such plans next year.

Facing a $15 billion budget gap, New York Gov. David Patterson called for 88 new fees and taxes in his newly revised state budget. Included in this reform are new taxes on movie tickets, taxis, soda, beer, wine, massages and cigars. All kinds of motor vehicle licensing, registration and ticketing fees will rise… there’s even an “iTunes tax” that will nickel and dime “digitally delivered entertainment services.”

“We’ve made too many promises and asked for too few sacrifices,” said Patterson. “We’re going to have to change our culture as we know it.”

Whoa, David… you want to tone it down a bit? This is America. Home of the brave. Land of the free (and easy credit).

So the former chairman of Nasdaq bilked investors of $50 billion dollars… what’s the big deal?

The sum pales in comparison to the unfunded liabilities of the government. And at the very least, “investors” had a choice whether to give him their money or not.

Uh-oh… keep this off Capitol Hill, too: According to a USA Today survey, 67% of potential car buyers would consider buying GM, even if it entered bankruptcy. The newspaper’s poll (in conjunction with Gallup) flies in the face of the data we hear touted by congressional Democrats almost daily… 80% of their respondents said they wouldn’t buy from a bankrupt auto biz.

“I don’t think,” writes a reader, “the results we have seen so far in this downturn are anywhere near as bad as they are going to get. My partner and I have been traveling quite a bit recently, including three weeks in India, and we have found Fortune 100 companies for the most part all acting the same way worldwide. No new hires. No raises. No bonuses, no parties, no kickoffs. Basically, battening down the hatches. This is going to have a huge impact on all the service- and support-related industries — conventions, party planning, hotels, advertising, etc. And once the fallout from the bad retail Q4 sales kicks in, bankruptcies, etc., commercial real estate bubble will be caving in.

“There really isn’t going to be anywhere to hide. All the industries that have been fueled by the easy-credit binge are going to be seriously effected, and quite a few will go by the wayside. It is the companies that have strong balance sheets and CASH that are willing to invest in themselves and keep their heads down and grind out their particular value that will survive and, once we come out the other side — and we will — flourish. Innovation and value are the keys to survival.”

“Thanks for the snapshot,” writes another, “of the govt. income statement and balance sheet . Love the quirky accounting. I would suggest, however, that all is not as bad as it seems. I am a commercial banker by trade and enjoy the ‘hidden value’ analysis often used by Chris Mayer when making his recommendations.

“Although it in no way excuses the ridiculous spending spree our government has undertaken, I would venture to say that the asset side of our balance sheet is seriously understated. There is probably enough ‘hidden equity’ in the good ole USA to offset the negative equity position shown. Again, not trying to justify what is happening, but instead of being ‘really ugly,’ it’s just ‘ugly.’”

The 5: We’d like to agree with you, but wonder what — and whose — assets you might be referring to. Who is “our” in your assertion?

The quirky accounting, by the way, comes compliments of the U.S. Treasury.

“This CBS News 60 Minutes segment ,” writes a reader, “does a really good job of explaining some of the mortgage problems that wait for us in our very near future. You guys should include a link to this in The 5 Min. Forecast. They state that the worst has yet to come, but still contend stocks are a great buy right now. I would be interested to hear your comments on this.

The 5’s comment: They’ve got 60 whole minutes to forecast, and that’s the best they can do? We commented on this Credit Suisse data in May and again in June.

Source: Fed “Shock & Awe,” What 0% Means, 2008 Pay Raises, Controversial Auto Survey and More!