Joe Shareholder

What the Federal Reserve and Seattle Security Guards Have in Common

2010-02-11T20:51:00.010-07:00

After Fed Chairman Helicopter Ben spoke on Wednesday, investors were again confused about the direction the Fed is leading them. There was a lot of talk (Joe Seattle Security Guards into their walkie talkies), but not a lot of action, (Joe security guards, watching while the poor girl's head was getting stomped on) and seemingly not even a plan of action for the future. (Joe Seattle Transit General Manager Kevin Desmond, who said the security guards were not trained for combat, but might be in the future) Indeed, the Fed and Seattle Security Guards have a lot in common.

Both stand still as beatings happen right in front of their eyes
Both have names that are misleading
Both appear to the uneducated/unsuspecting sheeple as if they're performing a service
Both are condoning criminal behavior
Both turn their backs on the little guy
Both are siphoning public money
Both should be immediately closed down and thrown in jail

Investors were looking for more information regarding the Fed's exit strategy from so-called "quantitative easing" or easy and cheap monetary policies. Security Guards all over Seattle are also looking for an exit strategy, or a rock behind which to hide, or a hole in which to jump.......where they'll have to be careful not to trip over other Seattle Security Guards (Joe oxymoron) who may have found the best hiding places first.

Moving on, since the market dropped 80 points after Helicopter Ben's speech, could it be that the market actually wants a rate increase? Could it be that investors are "Fed" up with the Fed coddling big banks and blowing asset and debt bubbles? YES! The Fed is creating a win-win-win for big banks, giving them cheap money with which to chase high yield bonds at no risk because we keep bailing out failing institutions. They're off the hook with taxpayer freebies so why not chase high risk bonds. (Greece, Portugal, Ireland, Spain, etc) For more depth on a previous post, click here.

And speaking of debt bubbles, where are the credit rating services when you need them? (I don't know Joe, where were the Seattle Security Guards when you need them?) Yes, these same credit rating agencies that stood by as subprime mortgages were getting sliced up and sold all over the world with AAA ratings. The same credit agencies that told us Bear Stearns had plenty of liquidity weeks before they crashed. Yes, these agencies that are supposed to protect us are again turning their backs as bubbles are getting blown all around us.

What does this mean for Joe? Joe, who is currently trying to get JoAnn to settle down with him in Joetown, reminded JoAnn that there has never been a head stomping incident in bus terminals in Joetown -never mind the fact that there are no bus terminals in Joetown, OH. Regardless, Joe also informed JoAnn that he'd never behave cowardly like a Seattle Security Guard and watch while 15 year old girls get their heads stomped in bus terminals. Indeed, Joetown is a safe place. Seattle apparently is not - not only do you have to worry about the Federal unReserve Banking Cartel and blind credit agencies, but ALSO head stompers and defunct security agencies.

Artwork courtesy of Deesillustration.com.

How to Play the Coming Copper Plunge

2010-02-06T19:35:00.006-07:00

They say Copper is the metal with the Phd since it seems to be an excellent economic indicator. (They also say Joe Shareholder is the investor with the Phd since he's an excellent economic predictor) Since mid March Copper has more than doubled in price (Joe Toyota, stuck accelerator pedal) as investors geared up for what they were misled to believe would be a robust economic recovery. Well this is a warning to anyone who's invested in FCX and JJC for copper prices. SELL NOW (Joe Toyota, stuck brake pedal). Not only sell, short it like it's going out of style. Not only short it like it's going out of style, leverage short it 2X, 3X, 4X, or whatever you can. Not only that, borrow money from your mom, dad, grandmother, grandfather, brother, sister, in-laws (then give them advice so they can make money shorting copper too), neighbors, child's piggy bank, kids college fund, your dad's 401K, etc. Sell your car, house (if you're not underwater), have a garage sale, list crap on ebay, etc. Whatever you can do to SHORT COPPER. I looked for a triple short copper ETF, but there's nothing in the US. Ticker symbols FCX and JJC should be a good start, however. See the attached article from purchasing magazine predicting copper will crash down to $1 from where it stands now at about $3.

Buyers' Alert: Copper price could collapse

Traders sees "catastrophe" for copper suppliers

Tom Stundza -- Purchasing, 2/3/2010 12:13:20 PM

World copper prices, which more than doubled last year from $1.46/lb in January to $3.17 in December, are set to plunge as speculators unwind positions and global inventories expand, according to David Threlkeld, president of metals trader Resolved Inc. in Scottsdale, Ariz.
In an interview with Bloomberg, the veteran copper trader, says producers "are going to see a catastrophe in the market," and drop to less than $1/lb. That's about 67% less than this week's London Metal Exchange (LME) average of $3.07/lb.

Some 90% of copper buying in recent months "has been from speculators," says Threlkeld, who has traded the market for more than 40 years. "Whether they are exchange-traded fund speculators or China pig farmer speculators it doesn't really matter, because that buying is going to come back to the market."

Three-month copper futures on the London Metal Exchange, which surged 140% last year after several governments spent billions of dollars to lift their economies out of recession, traded yesterday at $3.12/lb-as compared with spot at $3.11.

China, the world's largest user, imported a record 3.2 million metric tons of the refined metal in 2009, up 119% from the previous year, and says it consumed about 5 million metric tons. However, there are about 3 million metric tons of unreported inventories in China, says Threlkeld, which has kept the price inflated.

"The way the figures are being reported (by the government) is anything that's shipped to China is assumed to be consumed, which is clearly ridiculous," Threlkeld says, noting that stockpiles monitored by the Shanghai Futures Exchange this week are more than three times the level a year ago.

GDP Chocolate Bunny

2010-01-28T22:13:00.005-07:00

Tomorrow morning at 8:30 Eastern Time the Q4 GDP numbers will be released. All indications suggest we'll have positive growth again after a 2.2% increase in Q3. Some economists are suggesting even a 5.5% growth for Q4. This would be the most powerful growth rate since 2006! Great news right? Well, not so fast. (Joe, who licked the Chocolate off of your bunny?) Nobody, Joe's bunny still has its chocolate intact, but he's just a bit skeptical about anything being reporting right now during this depression which is raging stronger now every day. Let's take a look under the hood of this 5.5% growth engine.

1. The US Dollar was extremely weak during the fourth quarter, so everything we made domestically was cheaper abroad, and this likely boosted exports and decreased imports. Since net exports (exports-imports) is a component of GDP, then of course stronger exports will sweeten the GDP.

2. The Federal Government has been auctioning Treasury bills and notes like crazy and the "Federal and UnReserved Banking Cartel" has been cranking up its toys like a kid on Christmas morning. Since Government spending is also a component of GDP, and Congress is more than willing to spend it, we'll likely see a few percentage points due to government spending. Just today Hail Mary Harry's (Joe lame duck) Senate voted to raise the debt ceiling by 1.9 trillion to a staggering 14.3 trillion dollars. This was just raised a month ago by the Senate. What will it be raised to next month?

3. Inventories have been replenished after a long drought for most of 2009. For more on this click here.

What does this mean for Joe? Joe understands this GDP number could look very pretty on the outside, but on the inside it could be quite hollow. (Joe Chocolate Bunny, and it's not even Easter) While a GDP of 5.5% would seem to suggest the economy is nice and solid, a few cracks and the whole bunny could crumble to pieces. (Joe Chocolate Bunny - in the outdated clearance shopping cart a month or two after Easter) Investors have priced in a GDP number of about 5.5%, so if the GDP is less than that, expect another down day tomorrow. A close look at inventory positions within the GDP report will also be quite telling of what we can expect ahead. If inventories are high, look out for a low to negative Q1 growth rate to be reported next time around.

Market Dives 5% in Three Days - Only the Beginning?

2010-01-26T20:31:00.009-07:00

Last week US stocks got taken out behind the woodshed for a 5% thrashing in only three days. Why did this happen? Two reasons:

1. Fooled Investors feared Bernanke wouldn't be retained as FED Chairman when the Senate votes on Thursday or Friday, or whenever Hail Mary Harry calls for the vote to take place. Remember, Bernanke's POA to defeat this depression is to print fiat confetti/monopoly money and blow it around like an Oklahoma twister. Dollar drops, stocks go up. So do nominal earnings of international companies because their overseas' sales translate into more US Dollars here. (which is what is happening right now during earnings season. The US Dollar was extremely weak in the 4th quarter) Real value however? Forget about it. We're still knee deep in a depression.

2. Obama, hotter than a cheap pistol over the Massachusetts election and subsequent ego bruising, came out swinging wildly at the banks like a late round amateur cage fighter in a Vegas casino. This troubled investors because some of his proposals include limiting bank trading activities and equity positions. Investing has been a major source of income for banks in this latest earnings round and many analysts are concerned that more regulations on banks will limit earnings potential and stock performance.

What does this mean for Joe? Is there reason for Joe to worry? Yes of course, because a Bernanke removal is not in the cards. (Joe, can't you just get another deck of cards?) Nope, the dealer of this card game is Ben Bernanke, and the influential players who put him in office are more powerful than Congress. So just like when embattled Merrill Lynch was force FED to Bank of America, and just like when the US taxpayer was force FED 180 billion AIG debt in the famous Goldman Sachs backdoor bailout, and just like when we were force FED TARP casserole, the FED will have its way and Bernanke will be reappointed. As for Obama and the banks? This is any one's guess. Most likely increased regulation will have a negative impact on banks' earnings and stock performance. Keep your family and friends close, and your stop orders closer.....before not only the house of cards falls, but the entire table collapses with it.

What can Brown do for you?

2010-01-18T17:23:00.005-07:00

What can Brown do for you? (Joe UPS) How about deliver (Joe pun intended) a blow to Health Care Reform and send Coakley packing. Brown (R) v Coakley (D) tomorrow in Mass. Brown's now leading in the polls if you haven't been tracking. Looking for an on-time delivery from Obamacare? Then you're hoping Brown dispatches of Coakley. Think UPS. As in, if Brown wins, market goes ups on the good news.

Joe Shareholder Signs ColdandHaten' Treaty

2010-01-14T22:07:00.003-07:00

It's been so cold outside this week, Joe Shareholder saw Obama and Harry Reid with their hands in their own pockets! 27 degrees in Miami! Snow in Orlando! Low teens in Houston, Dallas, and Jacksonville? Tea Party anyone? That'll keep you warm.

Anyway, Joe recently traveled to Reykjavik, Iceland to take part in this year's Coldandhaten' Treaty. For those of you who are not familiar with the Coldandhaten' Treaty, at this treaty the developing countries blindly pledge hundreds of billions of dollars to the developed countries so the developed countries can increase their CO2 output in order to induce Global Warming. Obama won't be attending this year. Neither will Reid. Nor will Pelosi. Joe invited JoAnn to come also, but she declined because Q4 earnings season is just getting started, and earnings season brings increased volatility - a trader's paradise. Hmmm, that was her excuse anyway.......I'm sure she was telling the truth.....or was she just being.....cold? Nah.

Speaking of earnings season, Alcoa officially kicked it off (Joe, no Superbowl pun intended) with a chilly 277 million dollar loss, which cooled global equity markets a few degrees on Tuesday. The markets will bounce back though, as the Federal and UnReserved Banking Union starts reporting on Friday (JP Morgan Chase) and into next week (Goldman, Citi, BAC). Click here for a complete list of the Federal Reserve's Federal and UnReserved member banks.

Speaking of chilly, frigid, glacial, sub-zero ice caps, the Federal Reserve, which has specialized in pouring ice water down the backs of investors for almost a full century now (Joe winning football coach, which, this year will probably be a cold weather team....sorry Arizona)...in the form of bank bailouts, and in the form of housing bubbles, and in the form of future commodity bubbles, and emerging market bubbles, etc - yes, that same Federal Reserve Bank recommitted itself this week to near zero interest rates for the foreseeable future. In other words, the Fed is going to keep blowing bubbles. Here's to hoping the foreseeable future for the Fed is similar in visibility to a windshield in Miami that has yet to be defrosted - because we all know that when bubbles freeze, they usually burst.

Geithner Hides AIG Bailout Funds

2010-01-07T20:39:00.009-07:00

After Time Magazine named Ben Bernanke person of the year, we decided to award him with the wool puller of the year award (here). Honestly, It was difficult to narrow the contest down to just one wool puller among the two well qualified finalists with so much experience - Ben Bernanke and Tim Geithner. (Yes, Tiger Woods was third) It turns out we may have underestimated Turbo Tax Tim Geithner's wool pulling abilities and secrecy as the recent breaking news proves he's just as capable a candidate. Click here for a good explanation of what happened in the Federal Reserve/AIG coverup.

Anyway, turns out the taxpayer bailout money which was supposedly used to help AIG because it was "too big to fail", was simply pipelined right over to Goldman Sachs and other banks. (Joe Backdoor Bailout) Here's how it works. Goldman invests heavily in equities and commodities, then insures its purchases through buying equity insurance from AIG in the form of Credit Default Swaps. Then the market crashes so Goldman outstretches it hand to collect. (Joe Governator) Only problem is AIG doesn't have it, so they get bailed out by the US Taxpayer (Joe Governator again) while we have the AIG-is-too-big-to-fail wool scarf wrapped firmly around our eyes....... er, necks maybe? Yes, there's a lot of sheep shearing going on. The Fed keeps a herd of sheep out back, with three pronged outlets all over the place for heavy duty electric clippers.

I know, you were already aware that the money was funnelled over to Government Sachs and others. We've even blogged about it (here). But what we didn't know is how the Fed ensured Goldman got 100% of what they were owed when everyone else took a haircut, and also that the New York Fed, headed by Geithner at the time, advised AIG to remove this 100% language from the public filing just before it was released. See Below.

What's the problem with this? US Taxpayers own AIG whether we like it or not, and deserve to know where the money is (JoePS), how the money is spent, (Joe idiots guide), and perhaps most confusingly, where the money is sent (Joe Budget Czar with two kids, a pregnant hobby on the side, and a fiance at the same time).

So, what does this mean for Joe? It's extremely cold outside this winter. It's below freezing from Joetown, OH down to the Gulf of Mexico right now. If Joe wants a wool scarf or hat to keep warm while trying to figure out the Federal Reserve Bank, he'd better get one now before the wool is all gone. What else does it mean? It means JoAnn would need some other form of warmth with all the scarves and hats gone (Joe Silver Lining).

Joe Discovers the Only Perfectly Efficient Christmas Gift

2009-12-25T11:22:00.009-07:00

Did you know that Economists hate Christmas? Okay not really, but it does frustrate them. Want to know why? It's not because we get left out at the company Christmas party, although we usually do...... Unless you want to talk about efficient resource allocation at a Christmas party. This would be popular at some Christmas parties, like an economic department Christmas party at a University. However, as hard as it is to believe this, most people don't want to talk about efficient resource allocation at Christmas parties. Or on blogs for that matter - but since you've already had your Christmas party, and now you're bored with nothing better to do so you're still reading this blog, we'll explain.

It's all about efficiency. Economists love efficiency. If you have two resources, labor and capital, you want both to be utilized efficiently while making your product. Suppose you have 10 machines and each requires one person to operate. If you only have one person the process is inefficient. If you have 10 people and only one machine it's also inefficient.

Now let's suppose Joe Shareholder wanted to get a big screen TV for his living room, but not any big screen TV, he wants a Dynex 40" 1080 LCD HDTV listed at $499 on Best Buy online because he knows that LG actually makes this brand so it should be a great product for less money. Okay, suppose Joe's brother Moe gets Joe a Samsung brand television for $200 more? Sure, it's a great TV also, but does Joe derive an extra $200 worth of pleasure from watching this more expensive TV? If not then there's $200 worth of inefficiencies in this gift. What if Joe gets a Christmas sweater with actual reindeer antlers on it? While Joe admits this would be a sweet Christmas gift, he might only wear it once/twice per year to Christmas parties where he will try to corner others to tell then why this sweater was an inefficient gift? He might derive only partial pleasure from this gift whereas a Dynex TV would offer full pleasure.

You see, there are too many inefficiencies in Christmas to fully satisfy efficiency-loving economists. It's a problem. Just give cash then? That's too boring. Give unnecessary gifts? That's too inefficient. So what does this mean for Joe? Joe wants the Dynex TV so JoAnn can come over and watch movies on his big screen TV. Not any movies, but scary movies where he could "calm her nerves" by placing his arm around her and holding her hand to offer help and support in this season of giving. (Even if it is after a Christmas party in which she talked with others about something other than efficient resource allocation, who also don't have reindeer antlers on their Christmas sweaters) Joe understands that not everyone will give each other Dynex TV's, however, so he came up with the perfect idea: A subscription to the JoeShareholder newsletter. Oh wait, JoeShareholder doesn't have a newsletter. All you have to do is give this blog to your friends. There you have it. We've satisfied economists everywhere, and you've satisfied your needs for Christmas gifts. Efficiency = Joe Shareholder.

Time Magazine Names Helicopter Ben Person of the Year! Joe Names him Wool Puller of the Year

2009-12-17T21:50:00.014-07:00

Ronald Reagan once warned to never trust a man who says, "Hello, I'm from the Government and I'm here to help." Joe Shareholder once warned to never trust someone who says, "Hello, I'm from a quasi-government agency and I'm here to help". That's right, the Federal Reserve isn't really a government agency. (Joe, halfway house) It's more like a banking cartel that happens to print money and establish monetary policy for the US Government. Anywho, when Joe Shareholder found out that Time Magazine named Helicopter Ben the 2009 Person of the Year, potato chips went flying at the computer screen, behind the computer screen, down the back of the computer desk, and all over the baseboards. Grease doesn't come off the screen very well by the way. Back to business now. Actually, it's not really that surprising considering how many people think this recession is over, and also how many people have gotten wool pulled down so far over their eyes they get market-disorientation-disorder (MDD). Joe Shareholder gave Ben an award also, "Wool Puller of the year, 2009". Until now, Joe didn't realize one of the main commodity investments of the Fed is wool, which is used to pull down over your eyes. Back to business again. What is surprising, however, is how the Federal Reserve Banking Cartel has been able to pull this off, er, over for so long now. With wool consistently over your eyes, it's surprising the US Taxpayer hasn't struggled to free itself to see clearly yet. Apparently to Time Magazine it's become comforting in this cold weather storm. Which isn't over by the way.

Now for the truth about Ben Bernanke, lift the wool up for a second to see these previous posts:

Newsflash to Time Magazine, the Federal Reserve Banking Cartel doesn't place the US taxpayer first on the priority list. Sure, they care about the US Taxpayer, but kind of like how Tiger Woods cares about mistress #4. He sees her from time to time, and has moments in which the two are very close, but at the end of the day, she's not his top priority. The Federal Reserve and Tiger Woods have other similarities also, but this is a family friendly blog, so you won't find them here. Back to business a third time. The Federal Reserve Bank exists for one reason, and that is to protect the interests of the big banks. Joe Shareholder's brother, Moe, recently discovered the Federal Reserve Bank's priority list:

Goldman Sachs (Fed's AAA minor league ball club)
JP Morgan Chase (Fed, only under a different name)
Citigroup
Bank of America
Morgan Stanley
Destroy the US Dollar
Wells Fargo
Bank of NY
Ruin the US Dollar
Sacrifice Lehman
Turn the US Dollar into fancy green toilet paper
American Express
US Taxpayer (but mainly when bailouts are necessary)

What does this mean for Joe? It means Joe better end this post....and quick. Indeed, black helicopters are starting to swirl up above.....Lincoln Towncars with tinted windows are starting to appear in strange places, from strange places, and Joe's inbox is starting to get flooded by .gov email addresses, which should really be .quasi-gov email addresses. Whoa, what's this? An email from JoAnn saying "Help Me!" An email from JoAnn's mother titled, "strange men in shades standing at my door", and an email from Joe's mother "house broken into, but nothing is gone...strange". Email from Moe titled, "phone's bugged!". Before we all start shouting Kum Bah Yah about the recession being over, first check to see if your eyes are itching.

House Passes Financial Takeover Bill

2009-12-12T15:15:00.012-07:00

Just yesterday the House passed a financial reform bill in order to keep "too big to fail" corporations from wrecking the US economy. This mammoth 1200+ page bill was no different from any other our fearless leaders have passed in the last year. In other words, yes, a warehouse dolly was necessary to transport the bill into the house floor; yes, a propane fueled forklift was necessary to hoist it up to the table; yes, the House members were in the gym the night before lifting weights (the bill tied to the barbel was used in place of weights); and most importantly, NO, NOBODY THAT VOTED FOR THIS BILL HAS READ IT. It's unclear whether the phrase "too big to fail" is in reference to the companies posing systemic risk or simply referring to bill itself. (Joe, if you haven't read it, sign it, and if it's too large, pass it.)

Anyway, this bill still needs to clear the Senate, so don't be surprised if you see DC Senator's coming to a Gold's Gym near you very soon. Especially Harry Reid. Anyway, this bill gives the government unprecedented authority to simply break up any corporation, anytime, anywhere, anyway they want to if they feel it poses "systemic risk" to the economy. Is that confusing to anyone else? Worst of all, it doesn't even need to be a financial company. Any company period. (Joe government over-reach) So who decides whether a company poses systemic risk? They do. Most likely House Financial Services Committee chairman Barney Frank (D-MA) and Senate Banking Committee chairman Christopher Dodd (D-CN) will have a large say in this process as heads of financial regulatory committees, along with the Obama Administration.

Alrighty then, what you don't know is that these two Congressmen actually played a very large part in blowing up the sub-prime bubble in real estate which caused this very depression, or recession, or whatever we're calling it now. There will be much more on this on my next post when I publish a book review on one of the most fascinating books I've ever read. "Architects of Ruin", by Peter Schweizer. Simply an amazingly informative book. Barney Frank blocked several attempts by the Bush Administration to reign in Fannie Mae and accused Bush and several Senators from both parties of "not caring about affordable housing". Fannie Mae and Freddie Mac are quasi-government agencies that were hijacked by the liberal agenda of offering loans to anybody that wanted one.

Here's how they work:

Mortgage Lender or Bank originates a loan with a home buyer.
Mortgage Lender/Bank sells loan to Freddie/Fannie to free up cash to originate more loans.
Freddie/Fannie, then package loans and sell to investment/hedge/pension funds or banks or slice up the loans into derivatives and sell the pieces.

Fannie and Freddie created explicit goals to buy trillions of dollars of sub-prime loans (loans to people who wouldn't have otherwise qualified for a loan) from mortgage brokers and banks. Most of the time these sub prime loans required very little or even no money down, and were even offered to many jobless earning unemployment benefits! Lenders didn't care. They simply immediately sold the loans to Fannie and Freddie, looked the other way, and tucked the commission firmly in pocket. Anyway, Barney Frank covered Mae's Fanny and was defender #1 for this agenda-driven organization. Christopher Dodd was simply bought out by various groups represented by Fannie and Freddie (see attached Coutrywide Scandal) and refused to regulate these government agencies. Bottom line, Peter Schweizer argues that it wasn't runaway capitalism that took the economy down to the canvas, but rather runaway government with an agenda.

So what does this mean for Joe? Barney Frank and Christopher Dodd were supposed to be monitoring financial institutions already.......but they weren't.....so we're giving them more power and oversight.....??? (Joe Einstein, "the definition of insanity is to do the same thing over and over again and expect a different outcome") We'll see what happens, but Joe is skeptical. Speaking of skeptical, JoAnn is nervous because she believes Joe might be ring shopping. (She also caught him talking to his friend Joe Weller the other day.) If it doesn't stop soon, she's going to have to financially regulate him.

Tiger's not out of the Woods Yet - But the US Dollar Might be

2009-12-03T20:22:00.012-07:00

Since early March the dollar has been dropping faster than Tiger Woods' endorsement deals...will; and Congress has been taking a 9 iron to the greenback like scorned Swedish women to SUV windows.

So here's the deal. Normally the stock market dictates the direction of the US dollar. Investors flee to currencies as a safe haven from a falling stock market. (Joe's dog, dog wagging the tail) Lately however, the US Dollar has interestingly been calling the shots and dictating the direction of the stock market (Joe's dog, tail wagging the dog). Indeed, steep drops in the dollar are strongly correlated with a rising stock market due to the fear of inflation. These increases in the stock market are reflecting the nominal value of the dollar, not the real value. Even if the market goes up, the value of your retirement could still be dropping (Joe's dog, tail not wagging at all anymore, but drooped in between its legs and hunkered down in depression).

This can't last forever, however. Despite the Federal Reserve's loose monetary policy and Gov's best efforts to whack the greenback and spend its way out of trouble, (Tiger Joe Woods, yes, Joe's his middle name, or it should be anyway) it appears the US Dollar free fall may be over for now. Why? Just this week Japan - the number two economy in the world - announced a large scale quantitative easing policy (or government spending) which should dilute its currency relative to ours. (Japan wants a weak currency because it strengthens their exports) Also, Japan's debt to GDP ratio is actually MUCH worse than ours right now, so it's bad debt position coupled with a ramped up quantitative easing plan should help soften its currency. So there you have it. The stage is set. The top two economies in the world in a race to see who can beat down its currency harder and faster and turn it into fertilizer. (Joe's dog, tail now straight up in the air, squatting position).

Another interesting phenomenon that happened Friday after I initially wrote this post, was the dollar's surge on a much improved November unemployment report. The diminished job loss announcement launched the dollar like you-know-who's tee off because of rate increase speculation. Ben has previously stated he wouldn't raise interest rates until jobs were actually increasing rather than decreasing. This may or may not happen soon. It will be interesting to see if the jobs report for December drops down again, or if the trend line of improved job numbers continues. Construction and manufacturing job losses were still quite high, but government and health care jobs both saw increases last month.

What does this mean for Joe? An increasing dollar value would ease inflation fears, but also throw cold water on Gold Bugs somewhat. I recently posted a comment on Marketwatch.com to short gold, and received 6 thumbs up and 34 thumbs down, so who knows, I might be way off on my Gold projections. A strengthening dollar would seemingly drop the price of gold, but the future of the US Dollar is very uncertain and fragile still.

What else does this mean for Joe? Joe doesn't have a dog, but could use the companionship since JoAnn hasn't accepted his latest offer yet to marry him before hyper inflation gets a hold of ring prices. Since he believes the dollar might start to stabilize, he's nervous now that she has a pretty good counter argument. The pressure's on for Joe Shareholder. Doggonit.

Credit Crisis is Over, Excess Liquidity Crisis Begins

2009-11-28T10:56:00.019-07:00

Just last week Dubai World announced it can't meet it's debt obligations over the next several months and has asked creditors to accommodate a 6 month "standstill" or postponement in debt repayment of about 60 billion dollars. (Joe, can I do that with credit card!) This announcement pummelled stock markets all over the world on Thursday with some European and Asian markets dropping between 3-5%. The US market dropped almost 2% when trading resumed on Friday. So how did this rapidly emerging economy of Dubai crash? (Joe party attendees at White House) Let's look behind the scenes.

Reason#1: In '95 the financial world was exuberant about the emerging market of Mexico, and invested heavily in Mexican debt which offered a yield of about 12%. Investment banks were all over this 12% offering like Tiger Woods on a fire hydrant at 2:30AM. 12%! Too good to pass up! Well, the bubble popped and the Mexicans had no option other than to default the debt (Jose, left with the check at the end of the mole-sauced meal, but no pesos with which to pay for it). Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley, and Chase Manhattan (now part of JP Morgan Chase), who sprayed out money like water from damaged fire hydrants while ignoring the risks of possible default were on the verge of losing tens of billions of dollars. What happened after that? Robert Rubin, a Wall Street fat cat and executive of Citigroup lobbied for billions in bailout money. The Republican Congress told Rubin to take a hike but Slick Willy Clinton, who had formed strong alliances with Wall St democrats Rubin at Citi and Jon Corzine of Goldman Sachs (who recently lost a gubernatorial bid in NJ), committed bailout money from the US Treasury. (if Joe daddy says no, just ask JoAnn mommy).

This set a dangerous precedent on Wall Street as risk was being spread across taxpayers while reward was still privatized and dished out in large bonuses. Over the next four years, similar instances occurred 3 more times in the form of South Korean bonds, Russian debt and even private institutions which owed money to Wall Street banksters. In all three cases, Rubin was instrumental in siphoning money from the US taxpayer into Citibank and its Wall Street allies under the guise of "systemic risk to the financial world". (Where have we heard this recently?) Fast forward to 2008, when Bush's Treasury Secretary Paulson proposed hundreds of billions of TARP money (Joe up the ante) - ratified by Congress -to these very same investment banks to avoid "systemic risk to the financial world". So where does Dubai fit into this? It's the same thing here - emerging economy gets expansion money and then falls on its face and can't pay it back. NO problem, US Taxpayer to the rescue. So where is Rubin now, who was so instrumental in bailing out Wall St in the '90's? He's an advisor to Obama. Furthermore, Summers and Geithner, who were proteges of Rubin, are in Obama's inner circle. Any guess what will happen to this Dubai World debt if it can't be repaid in 6 months? (Joe Vitale, Bailout City BABY!) This will not be the last government to default bonds during this crisis.

Reason #2: A good chunk of the blame goes to Rubin, Clinton, Treasury Dept and Congress for establishing a bailout culture on Wall Street. But, the Fed is not without blame as it creates excess liquidity when rates are too low LIKE THEY ARE NOW. Indeed, these same investment banks can borrow at .25% right now from the Fed and chase high yields such as Dubai offerings during a time in which banks need cash. Who wouldn't take advantage of this cheap and easy money, especially when the losses are absorbed by taxpayers??? The Federal Reserve bank needs to be abolished if free markets are again allowed to work properly. Because of this excess liquidity, the credit crisis is over now, but a new crisis has emerged. A spending and bubble crisis. ALL OF THIS FREE LIQUIDITY IS CREATING BUBBLES AROUND THE WORLD as investment banks are sniffing out high returns with little regard for risk. Make no mistake about it, these bubbles will pop as we saw this week with Dubai. Then the real pain will begin. (Joe anything getting struck by SUV's at 2:30 in the morning) The Fed should be abolished. Wall Street must become responsible, and Pres Obama and Congress must get tougher on allowing markets to work freely. (Joe, for the good of the kid, tell him no occasionally) The recession isn't over, we're very much still in the thick of things.

So what does this mean for Joe? Joe is very wary of these so called "emerging market" bubbles forming after the Dubai incident. Joe has decided to stay away from emerging markets, but also wonders whether the stock market has become an equity bubble from excess liquidity. Other bubbles could include expensive commodities such as gold and oil. Don't get me wrong, Joe doesn't mind holding the check at the end of the meal (especially if he's eating a meal with JoAnn), but unless he's the one ordering the burritos, he shouldn't be shelling out the pesos.

Abe's Thanksgiving Proclamation

2009-11-26T13:29:00.005-07:00

Washington, DC, October 3, 1863

The year that is drawing toward its close has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added which are of so extraordinary a nature that they can not fail to penetrate and soften even the heart which is habitually insensible to the ever-watchful providence of Almighty God.

In the midst of a civil war of unequaled magnitude and severity, which has sometimes seemed to foreign states to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere, except in the theater of military conflict, while that theater has been greatly contracted by the advancing armies and navies of the Union.

Needful diversions of wealth and of strength from the fields of peaceful industry to the national defense have not arrested the plow, the shuttle, or the ship; the ax has enlarged the borders of our settlements, and the mines, as well as the iron and coal as of our precious metals, have yielded even more abundantly than heretofore. Population has steadily increased notwithstanding the waste that has been made in the camp, the siege, and the battlefield, and the country, rejoicing in the consciousness of augmented strength and vigor, is permitted to expect continuance of years with large increase of freedom.

No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy.

It has seemed to me fit and proper that they should be solemnly, reverently, and gratefully acknowledged, as with one heart and one voice, by the whole American people. I do therefore invite my fellow-citizens in every part of the United States, and also those who are in foreign lands, to set apart and observe the last Thursday of November next as a day of thanksgiving and praise to our beneficent Father who dwelleth in the heavens. And I recommend to them that while offering up the ascriptions justly due to Him for such singular deliverances and blessings they do also, with humble penitence for our national perverseness and disobedience, commend to His tender care all those who have become widows, orphans, mourners, or sufferers in the lamentable civil strife in which we are unavoidably engaged, and fervently implore the imposition of the Almighty hand to heal the wounds of the nation and to restore it, as soon as may be consistent with the divine purpose, to the full enjoyment of peace, harmony, tranquility, and union.In testimony whereof I have hereunto set my hand and caused the seal of the United States to be affixed.

Done at the city of Washington, this 3d day of October, A.D. 1863, and of the Independence of the United States the eighty-eighth.

Abraham Lincoln By the President: William H. Seward, Secretary of State.

Joe's Portfolio gets Fueled by Syntroleum Corporation

2009-11-12T22:19:00.023-07:00

Okay everybody, so maybe my last stock pick (here) hasn't worked out too well..... yet. (Joe Edison, "I didn't fail, I just learned 2000 ways to not invent the light bulb"). Speaking of light bulbs, we're about to head into the dark, cold, winter, where plenty of natural gas will be used for home heating and power. Couple that with a weak US Dollar and UNG should still perform for you even though the ETF has diversified a little and is not completely invested in gas futures now. That's beside the point however - the point here is to make money. That's why Google pays us the big bucks to place ads in margins. So Joe, what's the next stock to double in price? Simple, it's Syntroleum Corporation - stock ticker symbol SYNM. Please do not continue reading if you're not interested in making money, but if you are, turn off the TV, let the dog out, lock the kids in the attic with Balloon Boy, and locate the "buy" button on your computer screen. I can't believe this stock has dropped this low, but it has, so now we get to profit from it. SYNM

Meet SYNM:

Syntroleum Corporation (SYNM) and Tyson Foods Inc (TSN) created a 50/50 joint venture company called Dynamic Fuels LLC. The purpose of this joint venture is to leverage patented technology from Syntroleum to convert Tyson's chicken grease into synthetic biodiesel fuel. Dynamic Fuels LLC is currently constructing a plant in Geismar, LA which is 75% complete now. Construction is scheduled to be completed sometime in February 2010 and full scale production will begin mid-2010. While there are currently facilities producing biofuels from foods/plants such as corn, this is the first large scale plant to produce synthetic biodiesel from waste products. (John, cousin of Joe, one man's trash is another man's treasure) Both Tyson Foods and Syntroleum should benefit from this joint venture, but Tyson has a market capitalization of around 5 billion dollars so a profitable joint venture would have greater earnings impact on a small technology company like Syntroleum with a market cap of under $200 million. Dynamic Fuels already has a contract in place with the US Department of Defense to supply jet fuel for its planes. Click here for more information and a short news clip on Dynamic Fuels LLC.

So how should you play SYNM going forward? It depends on what you think the market will do in the next couple months. There's a strong correlation between the price of oil futures and SYNM, so if you believe Ben Bernanke will continue to destroy the US dollar, it would be a good idea to invest now because we'll soon have rampant Zimbabwe-esque hyperinflation. However, if you think Ben's shell game will flop, global oil demand will stay depressed, the US dollar will stabilize, and commodity and equity prices will crash down again, then you might want to wait. While there's no way to predict the long term future with 100% certainty, we do have some knowledge of what can happen in the short term even in the midst of a stock market crash. Let's turn back the clock to Sept '08. A company called Global Resource Corporation (GBRC) - which extracts oil and gas from petroleum based products such as tires through microwave radiation - finished constructing a large scale reactor in Sept '08. Take a look at the two year graph for GBRC to see how the stock performed leading up to the reactor's start-up date of September 29th 2008. (Dates are at the very bottom of the graph)

As you can see the stock price more than doubled from around $1 at the beginning of September '08 to almost $2.50 by the end. This compared to the Dow Jones which lost around 10% during the same time period. So the stock performed great just before the start-up date, but why did the price crash when production started? No clear answer here, but most likely simply a case of "buy the rumor, sell the news". Long term profitability was in question in the midst of so much uncertainty (Joe Senate Majority Leader in next year's election), so speculators dumped stock soon after production began. The point here is that even if the market tumbles again, SYNM should perform well, especially right before plant completion and large scale production begins. That said, this should be a nice long term hold in Joe's opinion.

So what does this mean for Joe Shareholder? Right now the stock market has ballooned to a 52 week high based on questionable fundamentals. (Joe's fire, leaves burning brightly at the top but no logs underneath) Bottom line, this fire could be doused at any time. So, before plowing blindly into it (JoAnn shopper on Black Friday), and getting trampled at the exits by people trying to get out (JoAnn shopper during Black Friday), and losing all your money, (JoAnn shopper by the end of Black Friday) it might be a good idea to wait and watch this one for a few months and buy any steep dips in SYNM. Joe plans to set "limit" buy marks and enjoy the ride.

Scariest Thing You'll Ever Read on Any Website

2009-10-31T12:19:00.012-06:00

Yes we did pick the orange bar at the top and the black font in the spirit of Halloween. It's okay that it took four months to get to Halloween from the Joe Shareholder launch in July. We like to plan ahead here at Joe Shareholder.

Also in the spirit of Halloween, we thought we'd post a scary video below. It's a little political, but we indescriminately rip on both parties when they misbehave. Don't worry, there's been plenty on Helicoptor Ben in the past. Enjoy!

SCARED YET? READ ON!

The Dow Jones shed 250 points on Friday on high volume. That was kind of scary, but not too bad. The reason? Friday the Gov reported Consumer Spending dropped in September .5% from August; but that wasn't too scary considering cash for clunkers ended in August. The Consumer Confidence guage also dropped from 73.5 in Sept to 70.6 in Oct, but that wasn't too bad considering a similar preliminary number was announced a week ago.

Also Scary: VIX, the fund that measures fear and volatility in the market (And a must-have in your portfolio as a hedge in Joe's opinion) increased 25% on Friday. That isn't too scary - especially if you made money on it. And Finally, yes, it's scary that our fearless leaders Helicopter Ben Bernanke of the Fed, Turbo Tax Tim Geithner of the Treasury, Obama, Pelosi, and Reid all seem to have no clue how to fix this sinking ship and we have many more years of each.

HOWEVER, you want to know what's REALLY, REALLY, REALLY SCARY? It has come to Joe's attention that some of his readers haven't passed this blog on to everybody in their address book quite yet. This is really quite scary because how else will your beloved family and friends be able to navigate through the stormy seas of today's markets? (JoePS) This alone may have sent the stock market down 250 points on Friday as investors fear that some people may not have the proper investment instructions and directions (Joe, recalculating) found only at Joe Shareholder. (Just Joeking)

Harry Reid's Public Option Hail Mary Heave

2009-10-28T07:14:00.011-06:00

Health Care Public Option?
Feeling the squeeze between inter-party clamor for a public option and increasing opposition among Nevada constituents slated to decide his fate in next year's election, Senate Majority leader Harry Reid on Monday shocked the world by raring back and heaving the Public Option hail mary pass into his consolidated Health Care Reform Bill.

First of all (Joe United States of yesterday), nobody knows how much this Health Care Reform Bill with the Public Option will increase the deficit. We have estimates but we don't know how accurate they are. (Joe Twain, "There are three kinds of lies: Lies, 'Darn' lies, and Statistics) Many programs' past estimates including medicare, medicaid, and social security all overshot intended targets (Joe Minneapolis-bound pilots), so why shouldn't we expect the same with this Health Care Reform Bill with the Public Option? Typically, anything the government touches adds inefficiencies and costs and drives down effectiveness and results. Click here for an economic analysis on the costs associated with Health Care Reform by prized economist Thomas Sowell. (It's very interesting and informative. Well worth the read.)

Second of all (Joe United States of today), even if it does accurately hit the $900 billion mark promised by Reid and Obama, we still can't afford this Health Care Bill with OR without the Public Option. Our economy is extremely fragile right now with "green shoots" of growth visible - but currently requiring massive amounts of aid. (Joe fertilizer, sun, water, and tape all the way around the yard to protect from foot traffic). The cost of this Health Care Reform Bill with a Public Option could send the economy right back to where we were. (Joe, a different kind of fertilizer).

So what does this mean for Joe?

Joe has always believed in a "diversified portfolio". Not only is he hoping to add some gold and a diamond to his portfolio someday soon....and the sooner the better, but he's also hoping to add a strong health care package to his diversified portfolio. You can probably guess the most important part of his health care package: A good maternity plan and pediatric coverage as he plans (by himself) for a herd of youngsters together with JoAnn. In order for this to happen, he'd like to choose his own doctors and be in control of his future family's health care. Maybe a "diversified portfolio" of insurance coverage, doctors and physicians free market style would help. For this to happen, however, he's hoping Harry's Health Care Reform Bill with a Public Option Hail Mary Heave will be intercepted by a defensive back.....possibly even the "Free" Safety.

Ben Begs the Chinese to Become Communist

2009-10-20T20:04:00.008-06:00

This past Sunday, Fed Chairman Ben Bernanke emerged from his black helicopter, straightened his black tie, pulled down his black sunglasses, nodded for his bodyguards to open his black briefcase and then delivered a speech on world trade. Within the speech, he specifically cited a need for a "rebalancing" of world trade and encouraged China to spend more and the US to save more. This echoed what the United States Treasury (Joe Oxymoron) Secretary Turbo Tax Timmy Geithner (Joe Oxymoron, minus the oxy) said a few weeks ago about rebalancing world trade.

So what were our fearless leaders really saying? It's unlikely Ben Bernanke really cares whether US citizens save more. If that were the case he'd simply raise interest rates to incentivize (Joe, is that a word?) saving. No, he doesn't care. What he's really doing is begging the Chinese to stop exporting so much and start importing more US products for the "greater good" of the global economy. (Jo-seph Stalin) In other words, the United States is asking the Chinese to become more communist? (Joe upside down world, with Chinese up and US down) If we analyze further, however, we realize he doesn't really care about the global economy - he cares about the US of course.

Here's why

If the Chinese export less and the US slows the import flow, then our trade deficit will improve. If the US trade deficit improves, our GPD will go up and we'll escape depression 2.0. The weakening dollar will help achieve these desired trade effects because a weak dollar makes it more expensive to import, and less expensive to export. When we understand what Ben's doing to the US Dollar (Joe Shell game), it's easy to see the true motives behind his remarks.

So what does this mean for Joe? The Chinese have to be upset about our monetary and fiscal policy aimed at destroying the US Dollar. Therefore, Joe decided to hedge against a future Chinese invasion and take up karate lessons. He told JoAnn he's going to learn hand-to-hand COMBAT just in case; and asked JoAnn if she'd like to help him prepare by giving him hand-to-hand CONTACT while they go for a walk. JoAnn simply told him since there may be some angry Chinese out there, and since he hasn't actually taken any hand-to-hand combat lessons yet, that she'd be safer inside.

Weaker Dollar = Weaker US

2009-10-17T12:55:00.007-06:00

Weaker Dollar = Weaker US? Are the consequences of a weakening currency all negative? Nope, click here for the glass half full version posted earlier this week. Now we get to be depressed (Joe Prozac) and discuss the negative aspects of a weakening currency. Okay great, is everybody nice and depressed and ready to read on?

Joe was depressed after trying unsuccessfully to convince JoAnn to accept a diamond ring before prices shot up. Things are looking better for Joe since the last post however, unlike the US Dollar. The dollar continues to inflate (Joe home-made hot air balloon) with out much of anything to bring it back down. (Joe wasn't inside)

Disadvantages of a Weak Dollar

Inflation - Everybody knows a weakening currency leads to inflation, which subsequently decreases your purchasing power. This was one of the main causes of our current recession. Inflation starts with investors bidding up commodities as a form of hedging against possible inflation - which ironically further aggravates inflation. Commodities such as oil are building blocks for manufacturing; and commodities such as corn, soybean, and wheat (Joe farmers market) are building blocks of food production. Prices of end products are affected as the increased prices of commodities filter up through the economy. Also, inflation is simply a tax on savers because the value of money decreases.

Treasury Auctions - Think the Chinese will be upset if the rate of inflation surpasses the interest on their treasury purchases? Inflation damages investments of fixed interest debt such as US Treasury notes and bonds. The Chinese and various oil-exporting countries are in a pinch right now. If they stop purchasing our US Treasury notes and bonds the interest rates on current auctions will have to increase to attract buyers. This will in turn drive up interest rates - further damaging our housing market and delay the recovery. If they keep purchasing our worthless debt, they increase their exposure to debt that may not be able to be repaid in full with dollars that are worth anything. If we default these notes, the Chinese will seek restitution Jackie Chan style. At what point do we have to start asking permission from our international creditors whether to sign stimulus legislation? We're slowly being bought by some very dangerous creditors. (Joe, check-N-go)

International Positioning - It's no secret that the US is starting to slip a little bit on the international scene. Once the world economic and military superpower, now we're essentially owned by a handful of third-world nations. What was once inconceivable (Joe, hiding in the attic for five hours) is now starting to be realized because of poor fiscal decisions and a financial collapse which lead to a global recession. What we need to do now, however is protect the dollar. We've already ticked off our creditor nations once because of our crashing economy. It might be wise to avoid doing it again by protecting our dollar.

Of Course the Government wants a Weak US Dollar

2009-10-10T08:33:00.018-06:00

It's a stand off with the US Dollar held hostage. Ben Bernanke, the Fed, and US Legislators currently have the US Dollar grasped firmly around the throat with a gun resting against the poor greenback's temples, while China and the rest of our creditors are trying to negotiate a safe and harmless release.

The WSJ reported on Thursday that central banks in Korea, Taiwan, Philippines, Thailand, Indonesia, and Hong Kong have "intervened to slow the dollar's fall against their currencies". Why would they do something crazy like that? Simple, these nations depend on exports, and when the dollar is weak, importing costs more to US Companies. Vice Versa, when the dollar is strong, it becomes easier to import foreign products.

The weaker dollar is very alarming to the rest of the world for other reasons as well. "The Independant", a British news source (here), reported last week that a host of nations met together secretely without the US to discuss how to end the pricing of commodities such as oil in US Dollars. The proposed alternative to the US Dollar is a basket of currencies including commodities such as gold. Absent from the proposed currency basket was the US Dollar, which alarmed domestic currency investors and further intensified the US Dollar decline. So as we can see the US Dollar is in trouble. (Joe Letterman) With this much doubt and uncertainty (Joe weatherman, seven day forecast, especially the seventh day) surrounding the value of the US Dollar, we can cautiously assume this downward trend will continue. (Joe temperatures in the northern hemisphere, Joe real estate values, Joe employment, Joe anything, just pick something and it's probably going down right now)

As we mentioned earlier (here), Ben's monetary plan to escape depression 2.0 is to devalue the US Dollar. Are his devaluation plans working? You bet. (Cha, Joe Palin) The US Dollar hit a new yearly low last week and seems to be firmly entrenched in a downward trend. Below is the one year trend of DXY, the dollar index compared to a basket of foreign currencies.

So this is bad news right? The falling dollar is not good for America? Actually, there are many advantages as well as disadvantages to having a weak currency. Right now, the Fed and Government have incredible incentives to keep the dollar tumbling downward. The rest of this post will outline why this is so.

Advantages of a weaker dollar - as the Fed and Gov see it.

1. Exports are cheaper. Just as imports cost more to pay for foreign goods with a weakened US Dollar, exports become cheaper and exporting companies benefit. Timmy Geithner (Joe Turbo Tax), our current Treasury Secretary, is reportedly okay with a slumping dollar because it "rebalances" our trade deficit. The net trade deficit/surplus is an important component of a nation's GDP, and when a country's exports gain against imports, the final GDP number improves. Since an increase in GDP will most likely signal an end to the recession, It's no wonder that the weaker dollar and resulting increase in exports are considered very important to our current administration and Federal Reserve. Some could argue, however, that the gains in exporting are often offset by the increased costs of importing. (Joe zero-sum game).

2. Inflation leads to increased asset valuations. Indeed, a small amount of inflation is necessary for housing values to increase and to establish consistent economic growth. However, when asset values increase too quickly - as happened this decade - dangerous bubbles result and eventually pop. To deal with the depressed real estate values and their slumping effect on the economy, the Fed has been purchasing hundreds of billions of dollars worth of Mortgage Backed Securities off of banks' balance sheets since early this Spring. These toxic assets are simply bundled home loans whose market values are significantly less than what is owed. Remember, even though the Fed prints US Dollars and has the responsibilty of setting monetary policy, it is not a government-owned bank. Hence, motivation exists to make money through the increase valuations of these assets. (Joe Conflict of Interest)

3. Fixed-Interest Debt becomes Cheaper: Everything from credit cards, home loans, school loans, corporate debt for businesses and treasury bonds on the part of the US Government should become less expensive to pay off - and heaven help us, the US has a lot of debt right now to be paid down. American deleveraging, or the shedding of regular business and household debt, should continue for some time according to many economists. An inflated dollar would help this cause.

Bottom line, the Fed and Gov are not concerned about a falling dollar in the same way our Asian friends are. (Joe, trigger squeezing tighter, dollar starting to sweat, Asians too) The longer term consequences, which will be discussed in the next post, are of lesser concern to the Fed and the current administration because elections create incentives for politicians to be more focused on the short term rather than long. (Joe what have you done for me lately).

So how does this affect Joe Shareholder? Joe doesn't regularly export anything, and the left side of his balance sheet is blank. He does have debt from his three years at St. Joe's University in Philly, however. Even though inflation should allow him to pay off his fixed-interest debt easier, he is concerned that the negative aspects of inflation will offset the positives. (Joe, stay tuned for the next post) Speaking of fixed-interest, his interest in JoAnn has never wavered and is growing ever-stronger (Joe Six-pack abs). Not to let a good opportunity go to waste, he informed JoAnn that now would be a good time to purchase an engagement ring and book a honeymoon cruise since the weakness in the dollar could lead to inflated prices later. Not only that, but fixed-interest rates at low levels won't last forever. Additionally, it would help the economy if he were to buy her a diamond ring and jewelry stores would be able to feed their families. JoAnn told him thanks for the offer, but she was never into expensive rings anyway, and she would be more than happy with a simple honeymoon - should the right opportunity present itself.

Bi-Czar Breakdown Causes CIT's Downfall

2009-10-01T21:58:00.013-06:00

WSJ reported on Wednesday that embattled lender CIT Group offered its bondholders a debt exchange in which soon-to-be maturing debt would be replaced with new CIT asset-backed debt set to expire further down the road. In addition, bondholders would obtain almost all the equity in the firm. Late Thursday CIT management also asked their bondholders to accept a prepackaged reorganization deal in the case CIT decides to file for chapter 11 bankruptcy. CIT Group is a major lender to small and medium sized businesses, one of which is Dunkin Donuts. (Police Chief Joe) Some analysts suggest small businesses will have a difficult time securing credit with new lenders in this difficult economic environment.

So it looks like it could be chapter 11 either way. If the bondholders do not accept the debt exchange they'll likely be forced into chapter 11; and even if they do accept the offer, the deal includes a possibility of bankruptcy anyway. (Joe Donut like either option.....or should we say Dozen like either option)

So why wasn't CIT Group saved by the government? No taxpayer lifeline? Apparently the Bailout Czar didn't feel CIT was too-big-to-fail like so many of its bankster counterparts? Maybe the Bailout Czar didn't feel CIT posed systemic risk? Maybe it's simpler than that. Maybe the Bailout Czar felt pressure from the "Health Czar" or the "Zero Trans Fat Czar" to thin-down America? This might require intervention from the "Law Enforcement Czar" to lobby on CIT's behalf.

But let's back up for a minute. (Joe policeman spots donut shop in rear-view mirror) Where was the "PR Czar" at the time this story was leaked to the public? This kind of information should not be allowed to surface at a time in which the economy is still considered fragile. This breakdown by the "PR Czar" clearly indicates the need for more oversight czars.

Let's dip down into the story a little deeper (Joe donut in milk)

Debt Side:

Where was the "Loan Ratification Czar" when CIT group was offering these loans to small businesses? And why didn't the "Balanced Loan Portfolio Czar" inspect the books to see how diversified they were? Why didn't the "Debt-Roll-Over Czar" intervene with the "Public-Offering Czar" in an effort to raise sufficient cash before these bonds matured?

Asset Side:

After the FASB changed the accounting rules to allow banks to value their assets at whatever price they wanted to, why didn't the "Non-Performing Asset Czar" and the "Mark-to-Market Accounting Removal Czar" get togther and help CIT inflate their assets just like all the other banksters?

In conclusion, CIT Group has fallen victim to not only the US bailout system but they've also fallen victim to the outdated single-tier czar program. (Joe short straw) What we need is more czar oversight in the form of a two or three tiered czar program to help flegling companies like CIT Group stay afloat (Joe, broken off piece of donut in milk) rather than going under. (Joe, broken off piece not floating anymore) If there isn't a new system implemented soon, you'll see a HOLE lot more small businesses get Krispy Kremed.

Public Vs. Private - What we learn from Arctic Exploration

2009-09-23T19:33:00.024-06:00

Public vs. Private ownership, which can more effectively spur economic growth? Can Arctic Exploration give us a preview of what is ahead?

2009 has been Bailout-City as the US Government has saved numerous institutions in addition to seizing large stakes in AIG, Citigroup, Fannie, Freddie, and General Motors. The bailout pie has been prepared, sliced, divied up, and dolled out as effortlessly as leaflets in Vegas. Indeed, the Fed and government have gone "all-in" with not only monetary and fiscal policies but also with a new form of policy, that of bailing out anyone with a good lobbyist. Will these bailouts and gov ownership be beneficial or harmful to the US economy? We don't know how the story will end, but we do have something with which to compare - Results of Arctic Exploration - publicly vs. privately funded expeditions. (Joe Arctic Tundra)

In "Public versus Private Initiative in Arctic Exploration: The Effects of Incentives and Organizational Structure", Jonathan M. Karpoff organized a data set of 92 arctic explorations from 1818 to 1909 to study the successes and failures of privately and publicly funded expeditions. The goal was to determine which expeditions provided better results.

The Purposes of Arctic Exploration:

Navigate the Northwest Passage
Discover the North Pole
Discover the lost (publicly funded) John Franklin Expedition of 1845

The Rewards:

Cash Prizes
Lecture Fees
Larger budgets/funding for future expeditions
Book Sales

The Risks:

Loss of funding/budget shrinkage
Fewer rewards
Sickness
Death from accidents, exposure, scurvy, or starvation

Because the goals, prospective rewards, and penalties were similar for both privately and publicly funded expeditions, Karpoff argues it is possible (and fair) to compare the two subsets. Karpoff summarized: "I find that compared to private expeditions, government sponsored expeditions tended to be large and well funded. By most measures, however, the government expeditions fared poorly. They made fewer major discoveries, introduced fewer technological innovations, were subject to higher rates of scurvy, lost more ships, and had more explorers die."

Quantitative Proof:

Failures

Death of Crew Members per voyage:

Public - 5.9, Private - .9

Loss of Ships per voyage:

Public - .53, Private - .24

Scurvy Presense for voyages > 1 yr:

Public -47%, Private - 13%

Successes:

Navigate Northwest Passage... Private

Discover North Pole... Private

Discover fate of Franklin Expedition... Private

So why did privately funded expeditions fare so much better than publicy funded counterparts? Karpoff suggested publicly funded expeditions suffered from :

Poorly motivated and prepared leaders.
Separation of initiation and implementation functions of executive leadership (aka, too many Chief Joes and not enough Indian Joes).
Slowness to exploit new information (Joey come lately) about clothing, diet, shelter, modes of Arctic travel, organizational structure and optimal party size. (Joe two's company but three's a crowd)

What can Joe Shareholder learn from this study by Markoff? While there's no guarantee that AIG, Fannie, Freddie, GM, and Citigroup will suffer the same fate as these expeditions funded by governments, there is reason to suggest the same bureaucracies that burdened public expeditions will also curtail government owned businesses. Companies that lean on taxpayer assistance (Joe blind man on guard rail) face completely different incentive levels as well as muted risks and rewards. Hence, Joe's sentiment on government-owned stocks is bearish (Polar Bearish....that is.....) because of the possibility of getting frost-bitten by sliding stocks (Joe dogsled.....pulled by publicy funded dogs.....with scurvy).

If anyone wishes to read the entire document, just email marketarty@gmail.com and we'll send it off. Send this to all friends, enemies, family, associates and let's spread the private word publicly!

History of Joe and JoAnn - How they met - Part 1 of 2

2009-09-16T06:27:00.005-06:00

Joe Shareholder was in his third year at St. Joe’s University near Philadelphia when he scored a summer internship at Lehman Brothers in New York. His job was to follow technical trading patterns and trade based on daily fluctuations. He traded all day long, but closed all positions by the end of the day. He was trained by a rookie trader named JoAnn who excelled at the position.

JoAnn grew up in a small community called Joetown in Morgan County, Ohio. She graduated from the University of Ohio State with a finance degree and accepted a job offer from Lehman Brothers shortly thereafter. Before Lehman Brothers fell on hard times and declared bankruptcy in the summer of 2008, JoAnn saw the writing on the wall (Joe Clairvoyancy) and sent her resume to various financial/investment companies in the area. She soon received an offer from “The-Company-Who-Shall-Not-Be-Disclosed”, who happened to be one of the premier investment banks in New York City. At first she thought this was a perfect fit, but later discovered some disturbing things about “The-Company-Who-Shall-Not-Be-Disclosed”.

First of all, she felt like TCWSNBD manipulated commodity markets. She found it ironic that they’d issue press release statements upgrading certain commodities and stocks immediately after establishing strong positions in them. (Joe conflict of interest) Take crude oil for example. Each time TCWSNBD announced crude oil futures would rise to X amount, it eventually did - largely because oil was bid up by investors rather than actual commodity users. (Joe Smoke and his twin brother John Mirrors) This padded the pockets of execs at TCWSNBD, but hurt the average Joe’s filling up their cars and trucks with fuel. (Joe Cruel Oil, not Crude)

Her distaste for TCWSNBD was exacerbated when AIG needed taxpayer support after the stock market crashed in Sept/Oct 2008. Mega-insurer AIG owed TCWSNBD considerable amounts of money when stocks tumbled because of credit default swaps gone sour. Credit default swaps are basically insurance securities protecting an investment in case stocks fail. (Joe high stakes poker) Instead of demanding payment through asset liquidation (Joe face the music), or even simply share in the losses of AIG (Joe - at least turn an ear to the music) she felt TCWSNBD used strong-arm tactics with the gov to bailout AIG so they’d get the full amount owed. Indeed, after AIG received the bailout funds under the guise of “too big to fail”, a good chunk of change was funneled directly to TCWSNBD as well as many other CWSHND either.

JoAnn eventually decided she’d had enough big city banking so she quit her job and returned to Joetown. Upon hearing this news Joe randomly decided he’d pull the plug and move there as well. When JoAnn asked why he also wanted to move there, Joe simply replied he’d always wanted to live there one day and said the town was very “attractive”. Joe soon invited JoAnn to the annual city Joe-Down, which is a hoedown to anyone not familiar with Morgan County. She accepted and they had a great time dancing to the country music with good ‘ol country folk. (Joe, facing the music and JoAnn at the same time).

Natural Gas ETF, the natural way to Double your Cash by Feb

2009-09-02T06:49:00.017-06:00

Okay it’s about time we got to the fun stuff right? Anybody out there want to make a little money? (Joe Oracle of Joetown, OH) If you follow Joe’s advice, you’ll see how it’s very possible to make loads of money investing in this fund. In fact, it could very easily double by Christmas time, or at least by February. (Joe, "already got that month marked on the calendar")

Anyway, back to business.
Natural Gas - Right now the price of natural gas is trading at a seven year low due to the weak economy and enormously large inventory. This is great news for everybody except natural gas suppliers, as heating bills this winter should be quite a bit lower than last. (Joe Nest Egg) Investors have also likely turned a keen eye toward natural gas futures as it has dropped steadily over the last couple of months from about $12/MMbtu to under $3 now. Because actual commodity trading can be complex and difficult for the average investor, a better option in Joe’s opinion is to buy shares of a fund already invested in natural gas. Here at JoeShareholder, we have the perfect fund for all your natural gas needs - UNG. UNG is an ETF (exchange traded fund) which Joe Shareholder has been watching closely ever since it crossed under $20/share from its high of around $63 in July of last year. Now that it’s hovering around $10, Joe simply couldn't stand it any longer, and plunged in. (Joe the Plumber) Granted, commodities were all over-priced in July, but after a sharp drop initially at the beginning of this year, most commodities have rebounded somewhat. Not natural gas, however - it’s still dropping. Below are three reasons why Joe believes this ETF should do quite well over the next several months.

Home heating during the winter:

Typically natural gas follows the same patterns of overstorage during the summer to undersupply during the winter. The reason is simple, people heat their homes and businesses with natural gas. Here’s a supply graph representing the last four years.

As you can see the supply starts dropping in September/October and usually starts to rise again in about February. Since we’re just barely into September, a good strategy might be to wait a few weeks, watch inventory levels released each Wednesday, and buy sometime in late September. (Joe, I hope this isn't the only "investment" I'm buying in late September)

Hedge against inflation:

As we mentioned in the last post, the Fed accidentally lost the keys to the printing press after locking the door with the machines running full tilt. Not only that, but Congress has been active signing bills they don’t read and spending money we don’t have. (Joe, if it’s too thick to read, sign it, and if it’s not yours, spend it) These factors have contributed to a significantly weaker dollar, which signals that investors are very nervous about a possible bout with hyper-inflation down the road. One of the best ways to beat inflation, or at least temper the storm, is to invest in commodities. Although any commodity would be a good investment should the dollar crash, right now natural gas seems to have the best upward potential. (Joe July in Phoenix)

Money has to go somewhere:

Right now the stock market is overvalued according to many analysts. The aggregate price/earnings ratio for the S&P 500 is currently about four times higher than the historical average. (1) Also, insiders - who represent corporate executives as well as large fund managers - are selling more than buying at an astounding ratio of about 30 to 1! (2) (Joe roadside vendor in Tijuana, Mexico) Although not an exact science, usually when insiders sell at this magnitude it represents market peaks. If indeed the stock market begins to drop, money will likely flow into other markets, one of which will likely include commodities because of the pressure on the dollar.

Conclusion

Although Joe considers natural gas his competition for keeping JoAnn warm during the cold winter months, he also understands the need for natural gas as well as the need to hedge against inflation. At around $10/share, it’s just too inviting. (Joe Telepathic Communication) Also, September is the month the leaves start falling, so it's a great time to rake in profits. (Joe no pun intended) If you feel the same way as Joe, send this link to any friends who might benefit from doubling their money by Feb. Click here to see what others are also saying about natural gas.

Joe Disclaimer:

All equities carry inherent risks, invest at your own.

Joe and JoAnn Take a Romantic Walk on the Beach while Analyzing Gov Spending

2009-08-29T08:10:00.017-06:00

Right now the US Congress is spending money like a lottery winner in Vegas. (Joe High Roller) Congress is spending 185% of what it takes in (1), and there's currently no relief in sight. (Joe Sahara) This spending spree is leading us down the path of one or two inevitable consequences, neither of which is appealing:

High Interest Rates: The current spending habits in Congress are simply not possible to sustain. Right now we have plenty of buyers of debt in the form of treasury auctions. However, as the national deficit increases, so does the risk of default, which will cause buyers to flee from the treasury auctions. (Joe bug from Joe Orkin man) Since the US is so heavily in debt already, we depend on the issuance of new debt to cover the principal and interest on the outstanding notes. If the buyers' appetite for our bonds cools off, the government will need to raise bond yields to attract more buyers. Since bond yields go hand in hand with interest rates, (Joe and JoAnn, hand in hand for a romantic walk on the beach....in Joe's head) higher bond yields will consequently raise interest rates of all kinds, including business loans, car loans, and mortgages, and could be a repeat of the 1970's and 80's when interest rates soared to double digits.

Hyper-Inflation: The government can tap the Fed to just print more money to pay the national debt right? The consequences of simply printing money would be rising prises of goods and services as the national money supply grows. (Joe and JoAnn, romantic walk on the beach....but unable to buy hyper inflated drinks from vendors along the way) Inflation slows the flow of economic growth like a rollover accident during rush hour; and increasing the national monetary supply and inflation are extremely tightly correlated. (Anorexic Joe and diet coke).

How long will the "Risk Free" Rate be risk-free?

The US T-Bond has traditionally been the most trusted investment in the world. It's used as a benchmark for many return-on-investment (ROI) opportunities when companies and individuals compare various investment options. (Joe MBA) Although traditionally a lower yield offering than other methods of investing, (stocks, bonds, commodities, etc) the US T-bonds offer a guaranteed yield, hence the name "risk free", and the investor knows that without exception the interest and principle will be paid with perfect regularity. The problem, as mentioned above, is that we're financing old debt with new debt. Currently, China, India, Japan, Germany, and other countries regularly pitch in to feed our congress' appetite for spending by buying these treasuries. However, if we continue on our current course of spending, the US could face a problem of insolvency as wary investors back off, creating a problem of re-paying the debt that we already owe. If this happens, the "risk-free" rate may not be as the name suggests, and the possibility of default could emerge.

What is to be done? Americans need to voice their concerns about the current federal budget, and the sooner the better. Last week the White House raised its ten year budget deficit estimate to 9 trillion. That's nearly doubling the already astronomically high deficit. At an average of 25-40% taxation rate, Americans are doing our part to pay down the national deficit; but we desperately need Congress and Prez Obama to stop spending money we don't have. (Taxpayer Joe fighting the current) If the government doesn't stop the recklessness, talk of an endangered "risk-free" rate could emerge as more of a realistic problem than anyone wants to admit. All one needs to do is to look at California's insolvency crisis as proof (Joe Shareholder in LA, purchasing drinks for the walk on the beach with Joann....still in his head.....but only from vendors accepting state issued IOU's)

Super Ben Saves the World from Collapse

2009-08-26T06:48:00.002-06:00

While speaking to a group of economists and policy makers on Friday, Federal Reserve (Fed) Chairman Ben Bernanke proudly announced that the aggressive monetary policies implemented by the Fed and the Treasury department “saved the world” from a financial meltdown. (Joe Superman) While markets have indeed responded positively since early March ‘09, it’s not clear whether the rally has been based simply on Fed intervention or on strengthening fundamentals. While some economic indicators have shown signs of bottoming, we have yet to see real sustained growth. (Joe Rogaine) Super Benny has, however, managed several accomplishments which we’d like to discuss below.

He screwed small banks
Late last year, when many large banks were insolvent and broken, Super Benny wielded his power and influence over congress (Joe pull down the wool) and served up a large dish of TARP salad (Joe next Food Network Star), with side dishes of PPIP and TALF from the Treasury (Joe “Bam! Kick it up a notch!”). The central banksters and clueless bureaucrats in Washington not only approved immediate TARP funds and monetary injection into large financial institutions, but also pledged to continue to infuse money should the need arise in the future. Even though the Fed and large banksters helped shape this economic crisis due to lax policies and excessive risk taking in the first place, they have been granted the safety net of taxpayer funds while the smaller institutions continue to struggle on their own. (Joe upside down roly-poly) Additionally, nervous depositors at small banks are pulling funds and fleeing to the safety of the too-big-to-fail empire. (Joe Titanic)

He screwed China
Each week the US Treasury auctions off new debt in the form of Treasury bonds and notes. As demand on the bonds increases, the yield, or interest rate decreases. (Joe Econ 101) Therefore, buyers want as little competition as possible to get the best rate. The Fed announced a plan in March to buy 300 billion of US treasuries in an effort to keep US interest rates low. (The housing mortgage rates closely follow the 10 year bond, for more on this China situation click here) This Fed purchase plan undoubtedly angered China, who is the largest foreign purchaser of US debt. In other words, with each dollar of debt the Federal Reserve purchases, the interest rates on Chinese investments drop. This situation of the Fed buying from the Treasury is similar to when Joe Shareholder asked his Mexican investor friend Jose to help bid up the price on the diamond ring he placed on eBay after JoAnn shot him down. (Joe false start)

He screwed the US Dollar….and Taxpayer…..and Saver
Ben’s plan to avoid another depression is to induce inflation to combat the dreaded economic forces of deflation, which he claims caused the Great Depression. (For reasons why click here) The best way to induce inflation is to crank up the printing press and dump it onto the economy - hence the nickname Helicopter Ben. (For his own words on the topic, click here). Since Ben took the reigns in 2006, the US dollar has slipped roughly 16% and 20% to the Japanese Yen and Euro respectively, with both trading near all-time lows. Inflation on the dollar is essentially a tax on anyone saving money. In Ben’s defense, however, he’s had plenty of dollar destruction help from politicians loading debt on the back of the fragile/exhausted US dollar. The Congressional Budget Office announced on Tuesday that the budget deficit earlier estimated at 7.1 trillion by 2019 has been raised to 9 trillion. Can the US dollar sustain such levels of debt or will it begin a free fall? (Joe Petty, brother of Tom) Will countries continue buying our debt even while it’s climbing to new highs daily? If there comes a time when debt investors decide it’s just too risky to hold US debt, there could be a massive sell off which could get quite scary. (Joe, “stay behind the yellow tape kids, nothing to see here. ”)

So the Fed and Super Benny have stabilized the large financial institutions…..but at what cost? Only time will tell (Joe crystal ball) whether the negative impact on these periphery entities will come back to haunt him (Joe October 31st…..2010, 2011, 2012???). Speaking of Halloween, Joe Shareholder likes this time of year because he offers JoAnn his protection from anything scary that might be lurking out there. JoAnn insists that nothing bad ever happens in Joetown, Ohio. This year, however, Joe can remind her that as long as Super Benny is in charge, plenty of scary things could happen.