“If The Yield Goes Significantly Higher The Market Is Going To Freak Out”

Freak Out - Photo by Alex ProimosIf yields on U.S. Treasury bonds keep rising, things are going to get very messy.  As I write this, the yield on 10 year U.S. Treasures has risen to 2.51 percent.  If that keeps going up, it is going to be like a mile wide lawnmower blade devastating everything in its path.  Ben Bernanke’s super low interest rate policies have systematically pushed investors into stocks and real estate over the past several years because there were few other places where they could get decent returns.  As this trade unwinds (and it will likely not be in an orderly fashion), we are going to see unprecedented carnage.  Stocks, ETFs, home prices and municipal bonds will all be devastated.  And of course that will only be the beginning.  What we are ultimately looking at is a sell off very similar to 2008, only this time we will have to deal with rising interest rates at the same time.  The conditions for a “perfect storm” are rapidly developing, and if something is not done we could eventually have a credit crunch unlike anything that we have ever seen before in modern times.

At the moment, perhaps the most important number in the financial world is the yield on 10 year U.S. Treasuries.  A lot of investors are really concerned about how rapidly it has been rising.  For example, Patrick Adams, a portfolio manager at PVG Asset Management, was quoted in USA Today as saying the following on Friday…

“I am watching the 10-year U.S. bond,” says Adams. “It has to stabilize. If the yield goes significantly higher the market is going to freak out.”

If interest rates keep rising, it is going to have a dramatic effect throughout the economy.  In an article that he just posted, Charles Hugh Smith explained some of the things that we might soon see…

The wheels fall off the entire financialized debtocracy wagon once yields rise.  There’s nothing mysterious about this:

1. As interest rates/yields rise, all the existing bonds paying next to nothing plummet in market value

2. As mortgage rates rise, there’s nobody left who can afford Housing Bubble 2.0 prices, so home prices fall off a cliff

3. Once you can get 5+% yield on cash again, few people are willing to risk capital in the equities markets in the hopes that they can earn more than 5% yield before the next crash wipes out 40% of their equity

4. As asset classes decline, lenders are wary of loaning money against these assets; if the collateral for the loan (real estate, bonds, stocks, etc.) are in a waterfall decline, no sane lender will risk capital on a bet that the collateral will be sufficient to cover losses should the borrower default.

In addition, rapidly rising interest rates would throw the municipal bond market into absolute chaos.  In fact, according to Reuters, nearly 2 billion dollars worth of municipal bond sales were postponed on Thursday because of rising rates…

The possibility of rising interest rates rocked the U.S. municipal bond market on Thursday, with prices plunging in secondary trade, investors selling off the debt, money pouring out of mutual funds and issuers postponing nearly $2 billion in new sales.

“The market got crushed,” said Daniel Berger, an analyst at Municipal Market Data, a unit of Thomson Reuters, about the widespread sell-off.

We are rapidly moving into unprecedented territory.  Nobody is quite sure what comes next.  One financial professional says that municipal bond investors “are in for the shock of their lives”…

“Muni bond investors are in for the shock of their lives,” said financial advisor Ric Edelman. “For the past 30 years there hasn’t been interest rate risk.”

That risk can be extreme. A one-point rise in the interest rate could cut 10 percent of the value of a municipal bond with a longer duration, he said.

Many retail buyers, though, are not ready for the change and “when it starts, it will be too late for them to react,” he said, adding that he was encouraging investors to look at their portfolio allocation and make changes to protect themselves from interest rate risks now.

Rising interest rates are playing havoc with other financial instruments as well.  For example, it appears that the ETF market may already be broken.  Just check out the chaos that we witnessed on Thursday

The selling also caused disruptions in the plumbing behind several ETFs. Citigroup stopped accepting orders to redeem underlying assets from ETF issuers, after one trading desk reached its allocated risk limits. One Citi trader emailed other market participants to say: “We are unable to take any more redemptions today . . . a very rare occurrence due to capital requirements we are maxed out on the amount of collateral we have out.”

State Street said it would stop accepting cash redemption orders for municipal bond products from dealers. Tim Coyne, global head of ETF capital markets at State Street, said his company had contacted participants “to say we were not going to do any cash redemptions today”. But he added that redemptions “in kind” were still taking place.

These are the kinds of things that you would expect to see at the beginning of a financial panic.

And when there is fear in the marketplace, credit can dry up really quickly.

So are we headed for a major liquidity crisis?  Well, that is what Chris Martenson believes is happening…

The early stage of any liquidity crisis is a mad dash for cash, especially by all of the leveraged speculators. Anything that can be sold is sold. As I scan the various markets, all I can find is selling. Stocks, commodities, and equities are all being shed at a rapid pace, and that’s the first clue that we are not experiencing sector rotation or other artful portfolio-dodging designed to move out of one asset class into another (say, from equities into bonds).

The bursting of the bond bubble has the potential to plunge our financial system into a crisis that would be even worse than we experienced back in 2008.  Unfortunately, as Ambrose Evans-Pritchard recently noted, the bond market is dominated by just a few major players…

The Fed, the ECB, the Bank of England, the Bank of Japan, et al, own $10 trillion in bonds. China, the petro-powers, et al, own another $10 trillion. Between them they have locked up $20 trillion, equal to roughly 25pc of global GDP. They are the market. That is why Fed taper talk has become so neuralgic, and why we all watch Chinese regulators for every clue on policy.

This is one of the reasons why I write about China so much.  China has a tremendous amount of leverage over the global financial system.  If China starts selling bonds at about the same time that the Fed stops buying bonds we could see a shift of unprecedented proportions.

Sadly, most Americans have absolutely no idea how vulnerable the financial system is.

Most Americans have absolutely no idea that our system of finance is a house of cards built on a foundation of risk, debt and leverage.

Most Americans have complete and total faith that our leaders know what they are doing and are fully capable of keeping our financial system from collapsing.

In the end, most Americans are going to be bitterly, bitterly disappointed.

Chaos

Mass Carnage: Stocks, Bonds, Gold, Silver, Europe And Japan All Get Pummeled

Car AccidentCan you smell that?  It is the smell of panic in the air.  As I have noted before, when financial markets catch up to economic reality they tend to do so very rapidly.  Normally we don’t see virtually all asset classes get slammed at the same time, but the bucket of cold water that Federal Reserve Chairman Ben Bernanke threw on global financial markets on Wednesday has set off an epic temper tantrum.  On Thursday, U.S. stocks, European stocks, Asian stocks, gold, silver and government bonds all over the planet all got absolutely shredded.  This is not normal market activity.  Unfortunately, there is nothing “normal” about our financial markets anymore.  Over the past several years they have been grossly twisted and distorted by the Federal Reserve and by the other major central banks around the globe.  Did the central bankers really believe that there wouldn’t be a great price to pay for messing with the markets?  The behavior that we have been watching this week is the kind of behavior that one would expect at the beginning of a financial panic.  Dick Bove, the vice president of equity research at Rafferty Capital Markets, told CNBC that what we are witnessing right now “is not normal. It is not normal for all markets to move in the same direction at the same point in time due to the same development.”  The overriding emotion in the financial world right now is fear.  And fear can cause investors to do some crazy things.  So will global financial markets continue to drop, or will things stabilize for now?  That is a very good question.  But even if there is a respite for a while, it will only be temporary.  More carnage is coming at some point.

What we have witnessed this week very much has the feeling of a turning point.  The euphoria that drove the Dow well over the 15,000 mark is now gone, and investors all over the planet are going into crisis mode.  The following is a summary of the damage that was done on Thursday…

-U.S. stocks had their worst day of the year by a good margin.  The Dow fell 354 points, and that was the biggest one day drop that we have seen since November 2011.  Overall, the Dow has lost more than 550 points over the past two days.

-Thursday was the eighth trading day in a row that we have seen a triple digit move in the Dow either up or down.  That is the longest such streak since October 2011.

-The yield on 10 year U.S. Treasuries went as high as 2.47% before settling back to 2.42%.  That was a level that we have not seen since August 2011, and the 10 year yield is now a full point above the all-time low of 1.4% that we saw back in July 2012.

– The yield on 30 year U.S. Treasuries hit 3.53 percent on Thursday.  That was the first time it had been that high since September 2011.

-The CBOE Volatility Index jumped 28 percent on Thursday.  It hit 20.49, and this was the first time in 2013 that it has risen above 20.  When volatility rises, that means that the markets are getting stressed.

-European stocks got slammed too.  The Bloomberg Europe 500 index fell more than 3 percent on Thursday.  It was the worst day for European stocks in 20 months.

-In London, the FTSE fell about 3 percent.  In Germany, the DAX fell 3.3 percent.  In France, the CAC-40 fell 3.7 percent.

-Things continue to get even worse in Japan.  The Nikkei has fallen close to 17 percent over the past month.

-Brazilian stocks have fallen by about 15 percent over the past month.

-On Thursday the price of gold got absolutely hammered.  Gold was down nearly $100 an ounce.  As I am writing this, it is trading at $1273.60.

-Silver got slammed even more than gold did.  It fell more than 8 percent.  At the moment it is trading at $19.57.  That is ridiculously low.  I have a feeling that anyone that gets into silver now is going to be extremely happy in the long-term if they are able to handle the wild fluctuations in the short-term.

-Manufacturing activity in China is contracting at a rate that we haven’t seen since the middle of the last recession.

-For the week ending June 15th, initial claims for unemployment benefits in the United States rose by about 18,000 from the previous week to 354,000.  This is a number that investors are going to be watching closely in the months ahead.

Needless to say, Thursday was the type of day that investors don’t see too often.  The following is what one stock trader told CNBC

“It’s freaking, crazy now,” said one stock trader during the 3 p.m. ET hour as the Dow sunk more than 350 points. “Even defensive sectors are getting smoked. The super broad-based sell off between commodities, bonds, equities – I wouldn’t say it’s panic, but we’ve seen aggressive selling on the lows.”

Unfortunately, this may just be the beginning.

In fact, Mark J. Grant has suggested that we may see even more panic in the short-term…

Yesterday was the first day of the reversal. There will be more days to come.

What you are seeing, in the first instance, is leverage coming off the table. With short term interest rates right off of Kelvin’s absolute Zero there was been massive leverage utilized in both the bond and equity markets. While it cannot be quantified I can tell you, dealing with so many institutional investors, that the amount of leverage on the books is giant and is now going to get covered. It will not be pretty and it will be a rush through the exit doors as the fire alarm has been pulled by the Fed and the alarms are ringing. There is also an additional problem here.

The Street is not what it was. There is not enough liquidity in the major Wall Street banks, any longer, to deal with the amount of securities that will be thrown at them and I expect the down cycle to get exacerbated by this very real issue. Bernanke is no longer at the gate and the Barbarians are going to be out in force.

If we see global interest rates start to shift in a major way, that is going to be huge.

Why?

Well, it is because there are literally hundreds of trillions of dollars worth of interest rate derivatives contracts sitting out there…

The interest rate derivatives market is the largest derivatives market in the world. The Bank for International Settlements estimates that the notional amount outstanding in June 2009 were US$437 trillion for OTC interest rate contracts, and US$342 trillion for OTC interest rate swaps. According to the International Swaps and Derivatives Association, 80% of the world’s top 500 companies as of April 2003 used interest rate derivatives to control their cashflows. This compares with 75% for foreign exchange options, 25% for commodity options and 10% for stock options.

If interest rates begin to swing wildly, that could burst the derivatives bubble that I keep talking about.

And when that house of cards starts falling, we are going to see panic that is going to absolutely dwarf anything that we have seen this week.

So keep watching interest rates, and keep listening for any mention of a problem with “derivatives” in the mainstream media.

When the next great financial crash comes, global credit markets are going to freeze up just like they did in 2008.  That will cause economic activity to grind to a standstill and a period of deflation will be upon us.  Yes, the way that the Federal Reserve and the federal government respond to such a crisis will ultimately cause tremendous inflation, but as I have written about before, deflation will come first.

It would be wise to build up your emergency fund while you still can.  When the next great financial crisis fully erupts a lot of people are going to lose their jobs and for a while it will seem like hardly anyone has any extra money.  If you have stashed some cash away, you will be in better shape than most people.

Crushed Car By UCFFool

The Waste List: 66 Crazy Ways That The U.S. Government Is Wasting Your Hard-Earned Money

The U.S. CapitolWhy did the U.S. government spend 2.6 million dollars to train Chinese prostitutes to drink responsibly?  Why did the U.S. government spend $175,587 “to determine if cocaine makes Japanese quail engage in sexually risky behavior”?  Why did the U.S. government spend nearly a million dollars on a new soccer field for detainees being held at Guantanamo Bay?  This week when I saw that the IRS was about to pay out 70 million dollars in bonuses to their employees and that the U.S. government was going to be leaving 7 billion dollars worth of military equipment behind in Afghanistan, it caused me to reflect on all of the other crazy ways that the government has been wasting our money in recent years.  So I decided to go back through my previous articles and put together a list.  I call it “The Waste List”.  Even though our politicians insist that there is very little that can still be cut out of the budget, the truth is that the federal budget is absolutely drowning in pork.  The following are 66 crazy ways that the U.S. government is wasting your hard-earned money…

#1 The IRS is about to pay out 70 million dollars in bonuses to employees even though discretionary bonuses are supposed to be cancelled due to the sequester.

#2 According to the Washington Post, the U.S. government is going to leave 7 billion dollars worth of military equipment behind in Afghanistan.

#3 It is being projected that the trip that the Obamas will be making to Africa will cost U.S. taxpayers $100,000,000.

#4 The NIH plans to spend $509,840 on a study that “will send text messages in ‘gay lingo’ to methamphetamine addicts to try to persuade them to use fewer drugs and more condoms.”

#5 The National Science Foundation has given $384,949 to Yale University to do a study on “Sexual Conflict, Social Behavior and the Evolution of Waterfowl Genitalia”.  Try not to laugh, but much of this research involves examining and measuring the reproductive organs of male ducks.

#6 The IRS spent $60,000 on a film parody of “Star Trek” and a film parody of “Gilligan’s Island”.  Internal Revenue Service employees were the actors in the two parodies, so as you can imagine the acting was really bad.

#7 The NIH has given $1.5 million to Brigham and Women’s Hospital in Boston, Massachusetts to study why “three-quarters” of lesbians in the United States are overweight and why most gay males are not.

#8 The NIH has also spent $2.7 million to study why lesbians have more “vulnerability to hazardous drinking”.

#9 The U.S. government is giving sixteen F-16s and 200 Abrams tanks to the Muslim Brotherhood in Egypt even though the new president of Egypt, Mohammed Morsi (a member of the Muslim Brotherhood), constantly makes statements such as the following

“Dear brothers, we must not forget to nurse our children and grandchildren on hatred towards those Zionists and Jews, and all those who support them”

#10 During 2012, the salaries of Barack Obama’s three climate change advisers combined came to a grand total of more than $370,000.

#11 Overall, 139 different White House staffers were making at least $100,000 during 2012, and there were 20 staffers that made the maximum of $172,200.

#12 Amazingly, U.S. taxpayers spend more than 1.4 billion dollars a year on the Obamas.  Meanwhile, British taxpayers only spend about 58 million dollars on the entire royal family.

#13 During 2012, $25,000 of federal money was spent on a promotional tour for the Alabama Watermelon Queen.

#14 The U.S. government spent $505,000 “to promote specialty hair and beauty products for cats and dogs” in 2012.

#15 NASA spends close to a million dollars a year developing a menu of food for a manned mission to Mars even though it is being projected that a manned mission to Mars is still decades away.

#16 During 2012, the federal government spent 15 million dollars to help the Russians recruit nuclear scientists.

#17 Over the past 15 years, a total of approximately $5.25 million has been spent on hair care services for the U.S. Senate.

#18 The U.S. government spent 27 million dollars to teach Moroccans how to design and make pottery in 2012.

#19 At a time when we have an epidemic of unemployment in the United States, the U.S. Department of Education is spending $1.3 million to “reduce linguistic, academic, and employment barriers for skilled and low-skilled immigrants and refugees, and to integrate them into the U.S. workforce and professions.”

#20 The federal government still sends about 20 million dollars a year to the surviving family members of veterans of World War I, even though World War I ended 94 years ago.

#21 The U.S. government is spending approximately 3.6 million dollars a year to support the lavish lifestyles of former presidents such as George W. Bush and Bill Clinton.

#22 During fiscal 2012, the National Science Foundation gave researchers at Purdue University $350,000.  They used part of that money to help fund a study that discovered that if golfers imagine that a hole is bigger it will help them with their putting.

#23 The U.S. government is giving hundreds of millions of dollars to the Palestinian Authority every single year.

#24 Federal agencies have purchased a total of approximately 2 billion rounds of ammunition over the past couple of years.  It is claimed that all of this ammunition is needed for “training purposes”.

#25 During 2012, the National Science Foundation spent $516,000 on the creation of a video game called “Prom Week” which apparently simulates “all the social interactions of the event.

#26 If you can believe it, $10,000 of U.S. taxpayer money was actually used to purchase talking urinal cakes up in Michigan.

#27 When Joe Biden and his staff took a trip to London, the hotel bill cost U.S. taxpayers $459,388.65.

#28 Joe Biden and his staff also stopped in Paris for one night.  The hotel bill for that one night came to $585,000.50.

#29 If you can believe it, close to 15,000 retired federal employees are currently collecting federal pensions for life worth at least $100,000 annually.  That list includes such names as Newt Gingrich, Bob Dole, Trent Lott, Dick Gephardt and Dick Cheney.

#30 The U.S. Department of Agriculture has spent $300,000 to encourage Americans to eat caviar.

#31 The National Institutes of Health recently gave $666,905 to a group of researchers that is conducting a study on the benefits of watching reruns on television.

#32 The National Science Foundation has given 1.2 million dollars to a team of “scientists” that is spending part of that money on a study that is seeking to determine whether elderly Americans would benefit from playing World of Warcraft or not.

#33 The National Institutes of Health recently gave $548,731 to a team of researchers that concluded that those that drink heavily in their thirties also tend to feel more immature.

#34 The National Science Foundation recently spent $30,000 on a study to determine if “gaydar” actually exists.  This is the conclusion that the researchers reached at the end of the study….

“Gaydar is indeed real and… its accuracy is driven by sensitivity to individual facial features”

#35 In 2011, the National Institutes of Health spent $592,527 on a study that sought to figure out once and for all why chimpanzees throw poop.

#36 The National Institutes of Health has spent more than 5 million dollars on a website called Sexpulse that is targeted at “men who use the Internet to seek sex with men”.  According to Fox News, the website “includes pornographic images of homosexual sex as well as naked and scantily clad men” and features “a Space Invaders-style interactive game that uses a penis-shaped blaster to shoot down gay epithets.”

#37 The General Services Administration spent $822,751 on a “training conference” for 300 west coast employees at the M Resort and Casino in Las Vegas.  The following is how the Washington Post described some of the wasteful expenses that happened during this “conference”…

Among the “excessive, wasteful and in some cases impermissable” spending the inspector general documented: $5,600 for three semi-private catered in-room parties and $44 per person daily breakfasts; $75,000 for a “team-building” exercise — the goal was to build a bicycle; $146,000 on catered food and drinks; and $6,325 on commemorative coins in velvet boxes to reward all participants for their work on stimulus projects. The $31,208 “networking” reception featured a $19-per-person artisanal cheese display and $7,000 of sushi. At the conference’s closing-night dinner, employees received “yearbooks” with their pictures, at a cost of $8,130.

You can see some stunning pictures of GSA employees living the high life in Las Vegas right here.

#38 Do you remember when credit rating agency Egan Jones downgraded U.S. government debt from AA+ to AA?  Well, someone in the federal government apparently did not like that at all.  According to Zero Hedge, the SEC planned to file charges against Egan Jones for “misstatements” on a regulatory application with the SEC.

Normally, the SEC does not go after anyone.  After all, when is the last time a major banker went to prison?

No, the truth is that the SEC is usually just a huge waste of taxpayer money.  According to ABC News, one investigation found that 17 senior SEC officials had been regularly viewing pornography while at work.  While the American people were paying their salaries, this is what senior SEC officials were busy doing…

One senior attorney at SEC headquarters in Washington spent up to eight hours a day accessing Internet porn, according to the report, which has yet to be released. When he filled all the space on his government computer with pornographic images, he downloaded more to CDs and DVDs that accumulated in boxes in his offices.

An SEC accountant attempted to access porn websites 1,800 times in a two-week period and had 600 pornographic images on her computer hard drive.

Another SEC accountant used his SEC-issued computer to upload his own sexually explicit videos onto porn websites he joined.

And another SEC accountant attempted to access porn sites 16,000 times in a single month.

#39 According to InformationWeek, the federal government is spending “millions of dollars” to train Asian call center workers.

#40 If you can believe it, the federal government has actually spent $750,000 on a new soccer field for detainees held at Guantanamo Bay.

#41 The U.S. Agency for International Development spent 10 million dollars to create a version of “Sesame Street” for Pakistani television.

#42 The Obama administration has plans to spend between 16 and 20 million dollars to help students from Indonesia get master’s degrees.

#43 The National Science Foundation spent $198,000 on a University of California-Riverside study that explored “motivations, expectations and goal pursuit in social media.” One of the questions the study sought an answer to was the following: “Do unhappy people spend more time on Twitter or Facebook?”

#44 In 2011, $147,138 was given to the American Museum of Magic in Marshall, Michigan.  Their best magic trick is making U.S. taxpayer dollars disappear.

#45 The federal government recently spent $74,000 to help Michigan “increase awareness about the role Michigan plays in the production of trees and poinsettias.”

#46 In 2011, the federal government gave $550,000 toward the making of a documentary about how rock and roll contributed to the fall of the Soviet Union.

#47 The National Institutes of Health has contributed $55,382 toward a study of “hookah smoking habits” in the country of Jordan.

#48 The federal government gave $606,000 to researchers at Columbia University to study how heterosexuals use the Internet to find love.

#49 A total of $133,277 was recently given to the International Center for the History of Electronic Games for video game preservation.  The International Center for the History of Electronic Games says that it “collects, studies, and interprets video games, other electronic games, and related materials and the ways in which electronic games are changing how people play, learn, and connect with each other, including across boundaries of culture and geography.”

#50 The federal government has given approximately $3 million to researchers at the University of California at Irvine to fund their “research” into video games such as World of Warcraft.

#51 In 2011, the National Science Foundation gave one team of researchers $149,990 to create a video game called “RapidGuppy” for cell phones and other mobile devices.

#52 In 2011, $936,818 was spent developing an online soap opera entitled “Diary of a Single Mom”.  The show “chronicles the lives and challenges of three single mothers and their families trying to get ahead despite obstacles that all single mothers face, such as childcare, healthcare, education, and finances.”

#53 Last year, the federal government spent $96,000 to buy iPads for kindergarten students in Maine.

#54 The U.S. Postal Service once spent $13,500 for a single dinner at Ruth’s Chris Steakhouse.

#55 In 2011, the Air Force Academy completed work on an outdoor worship area for pagans and Wiccans.  The worship area consists of “a small Stonehenge-like circle of boulders with [a] propane fire pit” and it cost $51,474 to build.  The worship area is “for the handful of current or future cadets whose religions fall under the broad category of ‘Earth-based’, which includes Wiccans, druids and pagans.”  At this point, that only includes 3 current students at the Air Force Academy.

#56 The National Institutes of Health once gave researchers $400,000 to study why gay men in Argentina engage in risky sexual behavior when they are drunk.

#57 The National Institutes of Health once gave researchers $442,340 to study the behavior of male prostitutes in Vietnam.

#58 The National Institutes of Health once spent $800,000 in “stimulus funds” to study the impact of a “genital-washing program” on men in South Africa.

#59 The National Science Foundation recently spent $200,000 on a study that examined how voters react when politicians change their stances on climate change.

#60 The federal government recently spent $484,000 to help build a Mellow Mushroom pizzeria in Arlington, Texas.

#61 At this point, China is holding over a trillion dollars of U.S. government debt.  But that didn’t stop the United States from sending 17.8 million dollars in foreign aid to China in 2011.

#62 The U.S. Department of Agriculture gave the largest snack food maker in the world (PepsiCo Inc.) a total of 1.3 million dollars in corporate welfare that was used to help build “a Greek yogurt factory in New York.

#63 The National Science Foundation recently gave a whopping $697,177 to a New York City-based theater company to produce a musical about climate change.

#64 The federal government once shelled out $2.6 million to train Chinese prostitutes to drink responsibly.

#65 The U.S. Department of Agriculture once handed researchers at the University of New Hampshire $700,000 to study methane gas emissions from dairy cows.

#66 The federal government has spent $175,587 “to determine if cocaine makes Japanese quail engage in sexually risky behavior”.

The Financial Markets Freak Out When The Fed Hints That It May Slow Down The Injections

Panic Button By John On FlickrU.S. financial markets are exhibiting the classic behavior patterns of an addict.  Just a hint that the Fed may start slowing down the flow of the “juice” was all that it took to cause the financial markets to throw an epic temper tantrum on Wednesday.  In fact, one CNN article stated that the markets “freaked out” when Federal Reserve Chairman Ben Bernanke suggested that the Fed would eventually start tapering the bond buying program if the economy improves.  And please note that Bernanke did not announce that the money printing would actually slow down any time soon.  He just said that it may be “appropriate to moderate the pace of purchases later this year” if the economy is looking good.  For now, the Fed is going to continue wildly printing money and injecting it into the financial markets.  So nothing has actually changed yet.  But just the suggestion that this round of quantitative easing would eventually end if the economy improves was enough to severely rattle Wall Street on Wednesday.  U.S. financial markets have become completely and totally addicted to easy money, and nobody is quite sure what is going to happen when the Fed takes the “smack” away.  When that day comes, will the largest bond bubble in the history of the world burst?  Will interest rates rise dramatically?  Will it throw the U.S. economy into another deep recession?

Judging by what happened on Wednesday, the end of Fed bond buying is not going to go well.  Just check out the carnage that we witnessed…

-The Dow dropped by 206 points on Wednesday.

-The yield on 10 year U.S. Treasuries shot up substantially, and it is now the highest that it has been since March 2012.

-On Wednesday we witnessed the largest percentage rise in the yield on 5 year U.S. Treasury bonds ever.  It is now the highest that it has been in nearly two years.

-It was announced that mortgage rates are the highest that they have been in more than a year.

-We also learned that the MBS mortgage refinance applications index has fallen by 38 percent over the past six weeks.

If the markets react like this when the Fed doesn’t even do anything, what are they going to do when the Fed actually starts cutting back the monetary injections?

Posted below is an excerpt from the statement that the Fed released on Wednesday.  Please note that the Fed is saying that the current quantitative easing program is going to continue at the same pace for right now…

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.

So why doesn’t the Federal Reserve just stop these emergency measures right now?

After all, we are supposed to be in the midst of an “economic recovery”, right?

What is Bernanke afraid of?

That is a question that Rick Santelli of CNBC asked on Wednesday.  If you have not seen his epic rant yet, you should definitely check it out…

On days like this, it is easy to see who has the most influence over the U.S. economy.  The financial world literally hangs on every word that comes out of the mouth of Federal Reserve Chairman Ben Bernanke.  The same cannot be said about Barack Obama or anyone else.

The central planners over at the Federal Reserve are at the very heart of what is wrong with our economy and our financial system.  If you doubt this, please see this article: “11 Reasons Why The Federal Reserve Should Be Abolished“.  Bernanke knows that the actions that the Fed has taken in recent years have grossly distorted our financial system, and he is concerned about what is going to happen when the Fed starts removing those emergency measures.

Unfortunately, we can’t send the U.S. financial system off to rehab at a clinic somewhere.  The entire world is going to watch as our financial markets go through withdrawal.

The Fed has purposely inflated a massive financial bubble, and now it is trying to figure out what to do about it.  Can the Fed fix this mess without it totally blowing up?

Unfortunately, most severe addictions never end well.  In a recent article, Charles Hugh Smith described the predicament that the Fed is currently facing quite eloquently…

One of the enduring analogies of the Federal Reserve’s quantitative easing (QE) program is that the stock market is now addicted to this constant injection of free money. The aptness of this analogy has never been more apparent than now, as the market plummets on the mere rumor that the Fed will cut back its monthly injection of financial smack. (The analogy typically refers to crack cocaine, due to the state of delusional euphoria QE induces in the stock market. But the zombified state of the heroin addict is arguably the more accurate analogy of the U.S. stock market.)

You know the key self-delusion of all addiction: “I can stop any time I want.” This eerily echoes the language of Fed Chairman Ben Bernanke, who routinely declares he can stop QE any time he chooses.

But Ben, the pusher of QE money, knows his addict–the stock market–will die if the smack is cut back too abruptly. Like all pushers, Ben has his own delusion: that he can actually control the addiction he has nurtured.

You’re dreaming, Ben–your pushing QE has backed you into a corner. The addict (the stock market) is now so dependent and fragile that the slightest decrease in QE smack will send it to the emergency room, and quite possibly the morgue.

We are rapidly approaching a turning point.  We have a massively inflated stock market bubble, a massively inflated bond bubble, and a financial system that is absolutely addicted to easy money.

The Fed is desperately hoping that it can find a way to engineer some sort of a soft landing.

The Fed is desperately hoping to avoid a repeat of the financial crisis of 2008.

Federal Reserve Chairman Ben Bernanke insists that he knows how to handle things this time.

Do you believe him?

32 Facts That Show How Men Are Being Systematically Emasculated In America Today

32 Facts That Show How Men Are Being Systematically Emasculated In America TodayWhat is wrong with men in America?  Why isn’t our country producing lots of strong, independent, hard working men of character like it once did?  Well, many believe that it starts at a very young age.  When compared with girls, boys in the United States get lower grades, they are much more likely to get into trouble at school and they are much more likely to be put on behavior-modifying drugs.  When it comes time to pursue a higher education, most of our young men are ill-prepared to do that.  Today, nearly 60 percent of the students enrolled at U.S. colleges are women.  And of course it has become much more difficult for men to find good jobs.  In fact, less than 65 percent of all men have a job right now.  Without a good job, a man is not considered to be “marriage material”, but a large percentage of our young men don’t want to get married anyway.  Society has told them that it is okay to be a “slacker”.  Today, far too many of our young men are far more interested in their various addictions (beer, drugs, sex, video games, gambling, etc.) than they are in starting a family.  But the truth is that men are far more happy when they have a purpose.  When men are raising families, starting businesses or doing something to transform society they feel fulfilled.

Sadly, the message that our young men are getting from our television shows and our movies is that men are idiots.  Instead of being portrayed as leaders that are eager to get married and raise strong families, young men are often being portrayed as passive slackers that love to party and chase women.

Start paying attention to how men are portrayed in the media.  In particular, pay attention to how they are portrayed in our commercials.  Our boys and young men are exposed to thousands upon thousands of hours of this “programming”, and it has a dramatic affect on them.

Our system beats up our boys and young men so badly that only a relatively small percentage of them emerge into adulthood as strong, independent young men that are able to take care of themselves and start families of their own.

In America today, the percentage of men in prison is at an all-time high, the percentage of men with a job is near an all-time low and the percentage of children living without a father is at an all-time high.

Do we have a crisis on our hands?

Yes, we most definitely have a crisis on our hands.

The following are 32 facts that show how men are being systematically emasculated in America today…

#1 The labor participation rate for men has been steadily declining over the years…

In the 1950s, nearly every man in his prime working years was in the labor force, a category that includes both those who are employed and those actively applying for jobs. The “participation rate” for men ages 25 to 54 stood at 97.7% in early 1956, but drifted downward to a post-war record low of 88.4% at the end of 2012.  (It ticked up very slightly at the start of this year to 88.6%.)

So where have all the men workers gone?

Some went into prison. Others are on disability. And still others can’t find jobs and have simply given up looking.

#2 Back in 1950, more than 80 percent of all men in the United States had jobs.  Today, less than 65 percent of all men in the United States have jobs.  The chart posted below illustrates this stunning decline…

Men - Employment-Population Ratio

#3 During the last recession, men lost twice as many jobs as women did.

#4 According to Time Magazine, unemployed men are significantly more likely to get divorced than employed men are.

#5 According to the Economic Policy Institute, the “real entry-level hourly wage for men who recently graduated from high school” has declined from $15.64 in 1979 to $11.68 today.

#6 Between 1969 and 2009 the median wages earned by American men between the ages of 30 and 50 dropped by 27 percent after you account for inflation.

#7 Thanks to government policies which are killing off small businesses in America, the percentage of self-employed Americans is at an all-time low today.  This has had a disproportionate impact on men.

#8 In 1982, 1.9 percent of all men were receiving disability benefits.  Today, 3.1 percent of all men are receiving disability benefits.

#9 According to one very surprising study, “young, urban, childless women” make more money in America today than young, urban, childless men do.

#10 More than half of all middle management jobs in America are now held by women.

#11 More than half of all health care jobs in America are now held by women.

#12 The United States has the highest incarceration rate on the entire globe by a very wide margin.  Overall, the U.S. has approximately 25 percent of the entire global prison population even though it only has 5 percent of the total global population.  Men make up the vast majority of those that we are holding in our prisons.

#13 Incarceration rates for men in America have been steadily increasing over time.  The following is from a recent CNN article

Looking at those born just after World War II, some 1.2% of white men and 9% of black men had been to prison by 2004, according to Bruce Western, a Harvard sociology professor. But looking at those born 30 years later, some 3.3% of white men and 20.7% of black men had been to prison.

#14 According to the Pew Research Center, only 51 percent of all American adults are currently married.  Back in 1960, 72 percent of all adults in the United States were married.

#15 Males account for approximately 70 percent of all Ds and Fs in U.S. public schools.

#16 About two-thirds of all students in “special education programs” are boys.

#17 The average American girl spends 5 hours a week playing video games.  The average American boy spends 13 hours a week playing video games.

#18 The average young American will spend 10,000 hours playing video games before the age of 21.

#19 One study discovered that 88 percent of all Americans between the ages of 8 and 18 play video games, and that video game addiction is approximately four times as common among boys as it is among girls.

#20 In 2011, SAT scores for young men were the worst that they had been in 40 years.

#21 According to the New York Times, approximately 57 percent of all young people enrolled at U.S. colleges are women.  That means that only 43 percent are men.

#22 It is being projected that women will earn 60 percent of all Bachelor’s degrees from U.S. universities by the year 2016.

#23 Once in college, women are much more likely to complete their education and get a degree…

Women born in 1975 were roughly 17% more likely than their male counterparts to attend college and nearly 23% more likely to complete a four-year degree, according to data in Wayward Sons.

#24 Young men are nearly twice as likely to live with their parents as young women the same age are.

#25 Back in 1950, 78 percent of all households in the United States contained a married couple.  Today, that number has declined to 48 percent.

#26 The marriage rate in the United States has fallen to an all-time low.  Right now it is sitting at a yearly rate of 6.8 marriages per 1000 people.

#27 Today, an all-time low 44.2 percent of Americans between the ages of 25 and 34 are married.

#28 The U.S. family is rapidly breaking down.  100 years ago, 4.52 were living in the average U.S. household, but now the average U.S. household only consists of 2.59 people.

#29 At this point, approximately one out of every three children in America lives in a home without a father.

#30 The United States produces more pornography than any other nation in the world.  Men consume far more of that pornography than women do.

#31 An astounding 30 percent of all Internet traffic now goes to pornography websites, and one survey found that 25 percent of all employees that have Internet access visit sex websites while they are at work.

#32 In the United States today, political correctness reigns, and any reference to the male gender is being stamped out of our language.  For example, all over the country the term “manhole” is being replaced with the terms “utility hole” or “maintenance hole”.

So what do you think?

Do you believe that men are being systematically emasculated in America today?

Please feel free to share what you think by posting a comment below…

Farewell Bernanke – Thanks For Inflating The Biggest Bond Bubble The World Has Ever Seen

Barack Obama And Ben BernankeFederal Reserve Chairman Ben Bernanke is on the way out the door, but the consequences of the bond bubble that he has helped to create will stay with us for a very, very long time.  During Bernanke’s tenure, interest rates on U.S. Treasuries have fallen to record lows.  This has enabled the U.S. government to pile up an extraordinary amount of debt.  During his tenure we have also seen mortgage rates fall to record lows.  All of this has helped to spur economic activity in the short-term, but what happens when interest rates start going back to normal?  If the average rate of interest on U.S. government debt rises to just 6 percent, the U.S. government will suddenly be paying out a trillion dollars a year just in interest on the national debt.  And remember, there have been times in the past when the average rate of interest on U.S. government debt has been much higher than that.  In addition, when the U.S. government starts having to pay more to borrow money so will everyone else.  What will that do to home sales and car sales?  And of course we all remember what happened to adjustable rate mortgages when interest rates started to rise just prior to the last recession.  We have gotten ourselves into a position where the U.S. economy simply cannot afford for interest rates to go up.  We have become addicted to the cheap money made available by a grossly distorted financial system, and we have Ben Bernanke to thank for that.  The Federal Reserve is at the very heart of the economic problems that we are facing in America, and this time is certainly no exception.

This week Barack Obama publicly praised Ben Bernanke and stated that Bernanke has “already stayed a lot longer than he wanted” as Chairman of the Federal Reserve.  Bernanke’s term ends on January 31st, but many observers believe that he could leave even sooner than that.  Bernanke appears to be tired of the job and eager to move on.

So who would replace him?  Well, the mainstream media is making it sound like the appointment of Janet Yellen is already a forgone conclusion.  She would be the first woman ever to chair the Federal Reserve, and her philosophy is that a little bit of inflation is good for an economy.  It seems likely that she would continue to take us down the path that Bernanke has taken us.

But is it a fundamentally sound path?  Keeping interest rates pressed to the floor and wildly printing money may be producing some positive results in the short-term, but the crazy bubble that this is creating will burst at some point.  In fact, the director of financial stability for the Bank of England, Andy Haldane, recently admitted that the central bankers have “intentionally blown the biggest government bond bubble in history” and he warned about what might happen once it ends…

“If I were to single out what for me would be biggest risk to global financial stability right now it would be a disorderly reversion in the yields of government bonds globally.” he said. There had been “shades of that” in recent weeks as government bond yields have edged higher amid talk that central banks, particularly the US Federal Reserve, will start to reduce its stimulus.

“Let’s be clear. We’ve intentionally blown the biggest government bond bubble in history,” Haldane said. “We need to be vigilant to the consequences of that bubble deflating more quickly than [we] might otherwise have wanted.”

Posted below is a chart that demonstrates how interest rates on 10-year U.S. Treasury bonds have fallen over the last several decades.  This has helped to fuel the false prosperity that we have been enjoying, but there is no way that the U.S. government should have been able to borrow money so cheaply.  This bubble that we are living in now is setting the stage for a very, very painful adjustment…

Interest Rate On 10 Year U.S. Treasuries

So what will that “adjustment” look like?

The following analysis is from a recent article by Wolf Richter

Ten-year Treasury notes have been kicked down from their historic pedestal last July when some poor souls, blinded by the Fed’s halo of omnipotence and benevolence, bought them at a minuscule yield of 1.3%. For them, it’s been an ice-cold shower ever since. As Treasuries dropped, yields meandered upward in fits and starts. After a five-week jump from 1.88% in early May, they hit 2.29% on Tuesday last week – they’ve retreated to 2.19% since then. Now investors are wondering out loud what would happen if ten-year Treasury yields were to return to more normal levels of 4% or even 5%, dragging other long-term interest rates with them. They know what would happen: carnage!

And according to Richter, there are already signs that the bond bubble is beginning to burst…

Wholesale dumping of Treasuries by exasperated foreigners has already commenced. Private foreigners dumped $30.8 billion in Treasuries in April, an all-time record. Official holders got rid of $23.7 billion in long-term Treasury debt, the highest since November 2008, and $30.1 billion in short-term debt. Sell, sell, sell!

Bond fund redemptions spoke of fear and loathing: in the week ended June 12, investors yanked $14.5 billion out of Treasury bond funds, the second highest ever, beating the prior second-highest-ever outflow of $12.5 billion of the week before. They were inferior only to the October 2008 massacre as chaos descended upon financial markets. $27 billion in two weeks!

In lockstep, average 30-year fixed-rate mortgage rates jumped from 3.59% in early May to 4.15% last week. The mortgage refinancing bubble, by which banks have creamed off billions in fees, is imploding – the index has plunged 36% since early May.

If interest rates start to climb significantly, that will have a dramatic affect on economic activity in the United States.

And we have seen this pattern before.

As Robert Wenzel noted in a recent article on the Economic Policy Journal, we saw interest rates rise suddenly just prior to the October 1987 stock market crash, and we also saw them rise substantially prior to the financial crisis of 2008…

As Federal Reserve chairman Paul Volcker left the Fed chairmanship in August 1987, the interest rate on the 10 year note climbed from 8.2% to 9.2% between June 1987 and September 1987. This was followed, of course by the October 1987 stock market crash.

As Federal Reserve chairman Alan Greenspan left the Fed chairmanship at the end of January 2006, the interest rate on the 10 year note climbed from 4.35% to 4.65%. It then climbed above 5%.

So keep a close eye on interest rates in the months ahead.  If they start to rise significantly, that will be a red flag.

And it makes perfect sense why Bernanke is looking to hand over the reins of the Fed at this point.  He can probably sense the carnage that is coming and he wants to get out of Dodge while he still can.

10 Disturbing Tales From The Side Streets And Dark Alleys Of America

Dark Alley - Photo by Joe MabelEvery night Americans prove that they are willing to do absolutely horrible things to their fellow human beings.  Most of the time, we never even hear about the sick and twisted things that happen on the side streets and dark alleys of America.  Once in a while a particularly twisted story will get picked up by the news, but usually most Americans are pretty much able to isolate themselves from the depravity that is happening all around them.  Unfortunately, the social decay that is eating away at our society like cancer is spreading.  It is getting harder and harder for average Americans to keep the darkness at bay.  When it suddenly reaches out and touches your family, it can be absolutely shocking.  America is not the kind, loving and gentle place that is portrayed in our movies and on our television shows.  The sad truth is that America is becoming colder and meaner with each passing day.  Yes, there are definitely some Americans that are kind and compassionate, but they are in the minority.  As our economic decline becomes even more severe, the hearts of even more Americans are going to grow cold.  And people with cold hearts can do some absolutely terrible things.  The following are 10 disturbing tales from the side streets and dark alleys of America…

#1 Beaten, Robbed And Left Naked In A Cow Pasture In Florida

A Florida man says that a first dated ended with him being beaten, forced to strip at gun point, robbed and then left in a cow pasture.

A Flagler County Sheriff’s Office case report obtained by NBC News indicated that 34-year-old Shaun Paul Williams was found naked and bloodied on State Road 100 in Bunnell. Williams told deputies that he had met a woman named “Tree” about two weeks ago in Dayton and agreed to go out on June 14.

When the woman picked him up on Friday, he discovered that two other men we also inside the vehicle. The woman explained that one of the men was her brother. She said that she needed to drop the men off at the brother’s home.

But instead of going to a home, the brother instructed the woman to stop at an “empty cow pasture.” Williams said that he exited the vehicle to urinate and was struck in the head with a “hard metal object.”

“Give me all your money and your clothes,” one of the men told him.

#2 Wendy’s Customer Totally Loses It When They Put Cheese On His Hamburger

In recent months there have been a lot of videos posted on YouTube of crazed people yelling wildly at employees of various fast food chains.  The most recent example of this phenomenon to go viral is a video of a middle-aged man totally losing it after he discovered that Wendy’s employees had put cheese on his hamburger.  You can watch the video here, but please be aware that it contains quite a bit of profanity and it is not appropriate for children to watch.  This is yet another example of how seemingly average people in America are becoming consumed with anger and frustration.

#3 Women Throwing Bleach Into The Eyes Of A Man On A City Bus In Boston

MBTA Police are searching for three young women who they say threw bleach in the eyes of a bus passenger after robbing him of his money.

The victim was returning home from work early Sunday morning, riding the #28 bus on Blue Hill Avenue through Roxbury, when it seems the trio sized him up.

Officials say one female slapped the man about the head, while one went to work to search him for money.

“One of the women puts her knee on top of his legs so he can’t get up and takes the money from his pockets,” MBTA Superintendent-in Chief Joseph O’Connor told WBZ-TV.

#4 The Wild Dogs Of St. Louis

Dangerous dogs are becoming more of a problem in parts of north St. Louis County.

It’s so bad, some people say they’re afraid to go out for a morning jog.

Resident Carolyn Immer says she was attacked and now has a hole in her leg.

“I felt like I was out in the middle of nowhere and there was nobody around to help,” Immer says. “I was screaming for a long time – it seemed like a long time lets put it that way.”

#5 Homeless In Dallas

So as of today I am officially homeless.

I won’t bore you all with long sob stories.

About a year ago lost my job of twelve years, couldn’t find new work, made some bad financial choices, and today I sit in the public library on my old laptop typing away as all my posessions lay in three small suitcases very close to where I am sitting.

I think this might possibly be the worst place to be homless, given the horrible heat.

So I have seventy-five cents to my name, am not sure where I’ll be putting my head down to sleep tonight, and was wondering if anyone else out there has been in a similar prediciment.

#6 Detroit – Dumping Ground For The Dead

From the street, the two decomposing bodies were nearly invisible, concealed in an overgrown lot alongside worn-out car tires and a mouldy sofa. The teenagers had been shot, stripped to their underwear and left on a deserted block.

They were just the latest victims of foul play whose remains went undiscovered for days after being hidden deep inside Detroit’s vast urban wilderness — a crumbling wasteland rarely visited by outsiders and infrequently patrolled by police.

Abandoned and neglected parts of the city are quickly becoming dumping grounds for the dead — at least a dozen bodies in the space of 12 months. And authorities acknowledge there is little they can do.

#7 Impaled On A Wrought Iron Fence In Chicago

A man was murdered Sunday night by someone who struck him in the head, causing him to become impaled on a wrought iron fence in the South Side Burnside neighborhood.

The 48-year-old victim was involved in a dispute with unknown individuals near his home in the 9100 block of South Greenwood Avenue about 8 p.m. Sunday when a male struck him in the head, police said.

The victim’s head was then impaled by a wrought iron fence near the eye, police said. He then fell to the ground and struck his head again.

#8 Robbery Victims Locked In The Trunks Of Their Own Vehicles In North Miami

CBS4 has learned of a horrible crime that has happened four times in the past two months in the city of North Miami. Gunmen have been forcing robbery victims in to the trunks of their cars while trying to get cash.

North Miami Police Major Neal Cuevas says he is worried about “copycat criminals” who may one day take a life.

One victim is speaking out exclusively to CBS4’s Peter D’Oench after being driven around in the trunk of his Mercedes Benz for two hours on Wednesday night. He was abducted at 8 p.m. while leaving his job and was finally rescued by police at 10 p.m. after discovering he had a cell phone in his trunk and after calling 911.

#9 Female Teacher Has Sex With Three Students In Oregon

A Sherwood High School teacher has been arrested and faces sexual abuse charges, stemming from accusations of sexual contact with at least three students.

A grand jury indicted Denise Keesee, 38, Monday on six counts of second-degree sexual abuse, according to the Washington County Sheriff’s office. Keesee turned herself in this evening, said Sgt. David Thompson, a sheriff’s office spokesman.

#10 A Police Officer That Shot Five Kittens While Children Were Watching

The Ohio Society for the Prevention of Cruelty to Animals wants Humane Officer Barry Accorti fired for allegedly shooting five kittens in a home’s back yard on Monday.

—–

Accorti responded to a home Monday afternoon where a feral mother cat and her five kittens were living in a woodpile.

He allegedly told the homeowner that shelters were full and that the cats would be going to kitty heaven. He then pulled out his gun and shot the five, 8- to 10-week-old kittens.

Accorti allegedly told the homeowner that he isn’t supposed to do this, but it was justifiable. The woman ran into the house to shield her children, who were screaming and crying.

So what do you think about these stories?

Do you have any tales like this to share?

Please feel free to share your thoughts by posting a comment below…

Whenever Margin Debt Goes Over 2.25% Of GDP The Stock Market Always Crashes

Bubble - Photo by Jeff KubinaWhat do 1929, 2000 and 2007 all have in common?  Those were all years in which we saw a dramatic spike in margin debt.  In all three instances, investors became highly leveraged in order to “take advantage” of a soaring stock market.  But of course we all know what happened each time.  The spike in margin debt was rapidly followed by a horrifying stock market crash.  Well guess what?  It is happening again.  In April (the last month we have a number for), margin debt rose to an all-time high of more than 384 billion dollars.  The previous high was 381 billion dollars which occurred back in July 2007.  Margin debt is about 29 percent higher than it was a year ago, and the S&P 500 has risen by more than 20 percent since last fall.  The stock market just continues to rise even though the underlying economic fundamentals continue to get worse.  So should we be alarmed?  Is the stock market bubble going to burst at some point?  Well, if history is any indication we are in big trouble.  In the past, whenever margin debt has gone over 2.25% of GDP the stock market has crashed.  That certainly does not mean that the market is going to crash this week, but it is a major red flag.

The funny thing is that the fact that investors are so highly leveraged is being seen as a positive thing by many in the financial world.  Some believe that a high level of margin debt is a sign that “investor confidence” is high and that the rally will continue.  The following is from a recent article in the Wall Street Journal

The rising level of debt is seen as a measure of investor confidence, as investors are more willing to take out debt against investments when shares are rising and they have more value in their portfolios to borrow against. The latest rise has been fueled by low interest rates and a 15% year-to-date stock-market rally.

Others, however, consider the spike in margin debt to be a very ominous sign.  Margin debt has now risen to about 2.4 percent of GDP, and as the New York Times recently pointed out, whenever we have gotten this high before a market crash has always followed…

The first time in recent decades that total margin debt exceeded 2.25 percent of G.D.P. came at the end of 1999, amid the technology stock bubble. Margin debt fell after that bubble burst, but began to rise again during the housing boom — when anecdotal evidence said some investors were using their investments to secure loans that went for down payments on homes. That boom in margin loans also ended badly.

Posted below is a chart of the performance of the S&P 500 over the last several decades.  After looking at this chart, compare it to the margin debt charts that the New York Times recently published that you can find right here.  There is a very strong correlation between these charts.  You can find some more charts that directly compare the level of margin debt and the performance of the S&P 500 right here.  Every time margin debt has soared to a dramatic new high in the past, a stock market crash and a recession have always followed.  Will we escape a similar fate this time?

S&P 500

What makes all of this even more alarming is the fact that a number of things that we have not seen happen in the U.S. economy since 2009 are starting to happen again.  For much more on this, please see my previous article entitled “12 Clear Signals That The U.S. Economy Is About To Really Slow Down“.

At some point the stock market will catch up with the economy.  When that happens, it will probably happen very rapidly and a lot of people will lose a lot of money.

And there are certainly a lot of prominent voices out there that are warning about what is coming.  For example, the following is what renowned investor Alan M. Newman had to say about the current state of the market earlier this year

“If anything has changed yet in 2013, we certainly do not see it. Despite the early post-fiscal cliff rally, this is the same beast we rode to the 2007 highs for the Dow Industrials. The U.S. stock market is over leveraged, overpriced and has been commandeered by mechanical forces to such an extent that all holding periods are now affected by more risk than at any time in history.”

Unfortunately, most Americans never get to hear such voices.  Instead, most Americans rely on the mainstream media to do much of their thinking for them.  And right now the mainstream media is insisting that we are not in a stock market bubble…

Forbes: “Why Stocks Are On Solid Footing And This Is No Bubble

ABC News: “AP Survey: Economists See No Stock Market Bubble

Businessweek: “Prognostications: It’s Not a Stock Bubble

Yahoo: “This Is NOT a Stock Bubble! Says Ben Stein

MarketWatch: “Is a stock bubble coming? No, say economists

So what do you think?

Do you believe that we are in a stock market bubble that is about to burst, or do you believe that everything is going to be just fine?

Please feel free to express your opinion by posting a comment below…