AARP and That Illegal Garden

I can't say this enough, but I am no longer surprised by anything a person in "government" does anymore.  This is a warning to all of you who like vegetable gardens.  You better make sure it's in your city's "code".  Or you could end up in jail.


Oak Park Michigan Woman Faces 3 months in jail
Their front yard was torn up after replacing a sewer line, so instead of replacing the dirt with grass, one Oak Park woman put in a vegetable garden and now the city is seeing green.

The list goes on: fresh basil, cabbage, carrots, tomatoes, cumbers and more all filling five large planter boxes that fill the Bass family’s front yard.

Julie Bass says, “We thought we’re minding our own business, doing something not ostentatious and certainly not obnoxious or nothing that is a blight on the neighborhood, so we didn’t think people would care very much.”

But some cared very much and called the city. The city then sent out code enforcement.
“They warned us at first that we had to move the vegetables from the front, that no vegetables were allowed in the front yard. We didn’t move them because we didn’t think we were doing anything wrong, even according to city code we didn’t think we were doing anything wrong. So they ticketed us and charged me with a misdemeanor,” Bass said . . .

Full Story
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Obama is losing is touch with reality.  Upsetting the "experienced" voters in America is not the way to get re-elected.  I have an idea, instead of gaming the system by changing the rules, how about government just get out of the way.

AARP Screams Bloody Murder, Warns Against Changing CPI Definition And Cuts To Social Security In Pursuing Budget Compromise
One of the serious proposals to deal with the deficit situation is to make a revolutionary actuarial adjustment and change the way the actual definition of inflation. As we reported: "Lawmakers are considering changing how the Consumer Price Index is calculated, a move that could save perhaps $220 billion and represent significant progress in the ongoing federal debt ceiling and deficit reduction talks. According to congressional aides familiar with the discussions, the proposal would shift how the Consumer Price Index is calculated to reflect how people tend to change spending patterns when prices increase. For example, consumers tend to drive less when gas prices increase dramatically.  Such a move is widely seen by economists as resulting in a slower rise in inflation." Today the WSJ's Damian Paletta follows up on this ludicrous yet serious proposal: "One proposal in the budget talks that is getting a serious look from all sides would switch the government’s way of measuring inflation and delivering a big impact on tax, spending, and entitlement programs. How big? It could save roughly $300 billion over 10 years. That big. The idea of using this different measure of inflation, known as a “chained” consumer price index, has won support from numerous deficit-reduction commissions as well as many liberal and conservative economists." Yet reminding everyone that there is no such thing as a free lunch in finance, the "biggest savings—an estimated $112 billion—would be from slowing the growth in the cost-of-living adjustments for Social Security beneficiaries." Sure enough someone is unhappy. Enter the AARP which is already screaming, justifiably, bloody murder should the administration proceed with what will be an outright slashing of Social Security obligations. "AARP will not accept any cuts to Social Security as part of a deal to pay the nation’s bills,” said Rand.  “Social Security did not cause the deficit, and it should not be cut to reduce a deficit it did not cause." Did Obama's war with America's seniors just enter Defcon 1?
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Here is another version of how companies work the analysts so their earnings announcements look better.

Albert Edwards On Why "The Farce That Is US Reporting Season" May Be Different This Time
As everyone who follows earnings seasons knows all too well, one of the traditional games companies play with sellside research analysts is to push earnings estimates lower just ahead of earnings announcement only to beat by the thinnest of margins, setting off a buying rally in the stock that more than offsets the gradual decline it may have experienced in the preceding run down. This observation is one half of Albert Edwards' note to client from this morning. He says: "It’s that surreal time of the quarter, just ahead of the reporting season, when US companies cajole compliant analysts into reducing their profit forecasts so that on the day the company can record a positive earnings surprise. Companies place so much store on beating analysts’ estimates that they play this ridiculous game of guiding down analysts numbers in the weeks or even days ahead of the announcement, only to beat depressed forecasts by a penny on the day (see chart below). The angle in the press and in analysts’ reports is then that this constitutes ‘good news’ despite, more often than not the outturn undershooting the market estimates of only a few weeks previous.

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Is our current President a latter day Robin Hood?  This chart says it all...

 
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Retirement Fund Plunder Update: $206 Billion So Far, $62 Billion Left

As of today, since the debt ceiling breach on May 16, the Treasury has plundered about $206 billion from the two primary retirement accounts: the G-Fund and the Civil Service Retirement and Disability Fund, according to calculations performed by Stone McCarthy. The full breakdown for sticklers is provided below, however what is more important is that with just 4 weeks left until the D-Day, there is about $62 billion in available debt ceiling stretching options. In other words, Tim Geithner has burned through 75% of his dry powder just 50 days into the debt ceiling breach. What happens in the next few days - Stone McCarthy gives the full breakdown "Based on our projections for marketable borrowing and trust fund flows, we think Treasury would need to use about $37 billion of that $62 billion in July, and would exhaust the rest with the settlement of auctions on August 1. If things go down to the wire, Geithner could create a little more room by declaring that the Debt Issuance Suspension Period will last longer than the original May 16-August 2 timeframe, which would be reasonable if Congress hasn't acted by August 1 or August 2." Said otherwise, with the market still completely ignoring the debt ceiling situation, if nothing has changed by the last week of July, it will once again, very much retroactively, panic.
SMRA reminds us that QE is now over, which means Primary Dealers will now be used as a monetization buffer. "Based on our current cash flow projections, we think Treasury could pay its obligations for the first couple of weeks of August, and probably manage to pay the August 15 coupon interest payment. That assumes that Treasury would be able to roll over maturing debt at auctions in the first half of August, even in the absence of a debt limit increase. We imagine under such a scenario that there would be stepped-up pressure on primary dealers to participate in Treasury auctions."
As for government retirees, here is how the funding backing your retirement accounts if being used:

 

The Quote Edition

I have received several emails with quotes in them over the last few days.  I thought everyone might enjoy them.  The first quote is from our current President.  I've tried to find out if this is accurate.  I haven't seen anything that contradicts it.

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the US Government can not pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”

-- Senator Barack H. Obama, March 2006
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I'm not sure of the moment we quit following the guidelines set forth by our founding fathers, but they had some good ideas.  I love these Thomas Jefferson quotes.

The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.
    ...Thomas Jefferson

    It is incumbent on every generation to pay its own debts as it goes.  A principle which if acted on would save one-half the wars of the world.
   ... Thomas Jefferson

    I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.
    ...Thomas Jefferson

    My reading of history convinces me that most bad government results from too much government.
    ...Thomas Jefferson

    No free man shall ever be debarred the use of arms.
    ...Thomas Jefferson

    The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government.
    ...Thomas Jefferson

    The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.
    ...Thomas Jefferson

 Thomas Jefferson said in 1802:
   I believe that banking institutions are more dangerous to our liberties than standing armies.  If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive
The people of all property - until their children wake-up homeless on the continent their fathers conquered.
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And now a thought of the day.  This is a golf thought but it could be interpreted into any situation.

Stop talking about what you don’t like with your golf game and start telling it like you would like it to be.  That really is the only necessary inner work there is.  Because any time our attention is focused on what we don’t like, all we will see is more of what is.  But as soon as we shift our undivided attention toward what we want - and continually tap into the feeling state as if it is already a done deal - then what we want cannot not come our way.
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Politics Versus Reality: Part II   Sowell

No one is more of a master of political talking points than President Barack Obama. Remember "shovel-ready projects"? These were construction projects where the shovels were supposed to start digging the moment the government gave them the "stimulus" money.
Two years later, Obama can joke about the fact that the shovels were not as ready as he thought. In reality, the shovels were never ready. It can take forever to get all the environmental approvals to build anything in today's political and legal climate.

If Obama didn't know that, his advisers surely did. He can treat it as a joke today but it is no joke for those who are saddled with the debts produced by his runaway spending in the name of "shovel-ready projects."

Nor is it a joke to the unemployed, who remain unemployed despite all the "stimulus" spending.

The talk about the many "green jobs" created by the government is likewise no joke. Since the government creates no wealth, it can only transfer the wealth required to hire people. Even if the government creates a million jobs, that is not a net increase in jobs, when the money that pays for those jobs is taken from the private sector, which loses that much ability to create private jobs.

Back in the 1930s, Franklin D. Roosevelt's administration hired more young men in the Civilian Conservation Corps than there were in the U.S. Army. But that never brought unemployment down into single digits at any point during that entire decade. As late as the spring of 1939, the unemployment rate was 20 percent.

Government-created jobs did not mean a net increase in jobs then -- or now. But this is only mundane reality. What makes a great political talking point is government coming to the rescue of the unemployed by creating jobs. That talking point helps politicians get reelected, even if it does nothing for the economy in general or for the unemployment rate.

Among the biggest triumphs of talking points over reality are political discussions of rent control and gun control. Rent control supposedly rescues helpless tenants from the high rents charged by "greedy" landlords -- at least in political rhetoric.

But the two cities which have the oldest and strongest rent control laws in the country also have the highest rents -- New York and San Francisco. Yet that plain reality has not made a dent in the thinking, or lack of thinking, of those who support rent control.

Nor are they at all interested in other realities about rent control, whether in these two cities or in other cities around the world. These realities include housing shortages and a reduced supply of maintenance and other auxiliary services, such as heat and hot water.

Other forms of price control likewise lead to shortages, and have for literally thousands of years. But such plain realities do not affect the heady social vision conjured up by talking points.

Far from being discouraged by such realities, those who believe in price control for housing often think price control for medicines and medical care is a great idea too.

We need not speculate as to what effects price controls can have on medicines and medical care because there are already shortages of both in countries where a government-controlled medical system includes price controls.

The talking points about gun control are as far removed from reality as the talking points about rent control. But on this issue, at least, the advocates cite some highly selective statistics to go along with their rhetoric.

Gun control advocates often point out countries like Britain that have stronger gun control laws than ours and lower murder rates. But they totally ignore countries that have stronger gun control laws than ours and higher murder rates than ours.

One such country is right on our border -- Mexico. But there are others farther away, such as Brazil and Russia. There are also countries with higher rates of gun ownership than in the United States -- Switzerland and Israel, for example -- that have much lower murder rates than ours. But none of this has the slightest effect on the talking points of gun control zealots.

New Blog Design & Geithner Plunders Retirement Accounts

I hope everyone likes the new design.  Thank you to everyone who sent me their suggestions.  If you like to read this on your smartphone, it is now set up for that.  I started this blog mainly to discuss topics that you won't see on mainstream media.  The first story today is a perfect example.  Nowhere on CNBC will they be discussing the fact that our Treasury is just stealing from Social Security and other programs to fund our deficit.

Another suggestion I received was to give some investment ideas on the blog.  I would love nothing more than to do that, but I would get in trouble with FINRA and Raymond James.  If you would like suggests, please come to me on an individual basis and we can discuss that.

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Instead of Funding Retirement Accounts As Mandatory, Treasury Proceeds To Plunder The Most Since Debt Ceiling Breach

 As the chart below shows, while at the end of every quarter, the US Treasury is traditionally supposed to fund a quarterly payment into the various government retirement funds (previously discussed here), this time around, instead of putting in even one penny into G and CSRD Funds, Tim Geithner has decided to defraud government retirees by the most since the US debt ceiling was breached, or, specifically, since intragovernmental "holdings" became a mere plug to make room for marketable debt. So while the debt held by the public increased by $21 billion following the settlement of last week's auctions, in order to stay under the $14.294 billion ceiling, the Treasury was forced to "disinvest" another $20 billion from retirement funds. At this point the various funds that fall under this umbrella are underinvested by at least $120 billion and likely much more. Of course, this is not an event of default as per Geithner's fine print: as soon as the debt ceiling is hiked, these will be the first funds that are replenished. On the other hand, if there is no debt ceiling hike, and courtesy of marketable debt having priority to intragovernmental debt, government retirees are increasingly becoming the impaired class in what may be shaping up to be the world's biggest bankruptcy filing in history.

 

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Gold's Seasonal Strength & Jim Rogers Shorts the 30yr Treasury

I hope everyone had a safe and fun holiday weekend.  Now it's time to get back to work.

Gold's Seasonal Strength Period

Gold Could See $1,800/oz on Seasonal Strength and Deepening Eurozone and U.S. Debt Crisis
Gold is trading at $1,504.13/oz, €1,039.34/oz and £933.89/oz. 
Gold is higher today and showing particular strength against the euro and the Japanese yen. The relief rally seen in equities since the latest Greek ‘bailout’ is under pressure as S&P have said the debt rollover proposal would be a “selective default”. The ECB may selectively reject the S&P Greek downgrade and arbitrarily select the best credit rating being offered.  

Gold in USD – 1 Year (Daily)
The risk of contagion in Eurozone debt markets and banking systems remains. Portuguese, Spanish and Italian debt has been sold this morning. Systemic risk from contagion in the credit-default swaps market also remains a threat.
In the U.S. political squabbling over raising the $14.3 trillion debt ceiling continues. However, it is likely to be resolved as the massive liabilities incurred (not including unfunded liabilities of over $60 trillion) simply cannot be paid back. It is therefore likely that more debt monetization (creating money to buy government bonds) will occur leading to further currency debasement and the risk of stagflation and severe inflation.

Cross Currency Rates
Gold's Seasonal Strength - July to December Could See $1,800/z Challenged
Gold has been supported in the traditionally weak “summer doldrums” period due to institutional demand and strong physical demand at the $1,500/oz level, particularly from Asia.
The summer months of June and July normally see seasonal weakness and it is thus a good time to buy on the seasonal dip.
Gold is now entering its period of traditional seasonal strength which is seen between July and December.
Gold tends to take a break in October and then has a second period of seasonal strength from the end of October to the end of December.
This has been primarily due to Indian religious festival, store of wealth, demand in the autumn and western jewellery demand prior to Christmas.
Since the liberalization of the gold market in China in 2003, demand for jewelry and bullion from China for Chinese New Year (mid to late January) is also becoming an increasingly important factor.
It is likely that seasonal weakness in equity markets, with both the ‘sell in May’ factor and tendency of stock markets to be weak and occasionally to crash in October may also lead to safe haven demand during this period.
As noted in the chart above, gold rose strongly (by 22%) from July 2010 to December 2010. This trend was also seen the previous year in 2009 when gold fell in June, rose marginally in July, was flat in August and then rose strongly from September into early December.
As shown in the excellent Erste Group report on gold released yesterday, the strongest months for gold are September, August and then November (see table below).

Thackray's 2011 Investor's Guide notes that the optimal period to own gold bullion is from July 12 to October 9. During the past 25 periods, gold bullion has outperformed the S&P 500 Index by 4.7 percent.
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I think the bond market is in for trouble.  Mostly because I think rates are going to have to rise.  We are in a period of negative real interest rates.

Rogers Shorts the 30 year Treasury
Jim Rogers, the noted commodity bull, is shorting the 30-year U.S. government bonds and may consider shorting the 5 and 10-year bonds as well, he told CNBC on Monday.

Getty Images Jim Rogers

Rogers says the Treasurys market is one of the few bubbles that he sees in the world today.

"I cannot imagine or conceive lending money to the United States government for 30-years at 3, 4, 5 or 6 percent —you pick a number — in U.S. dollars," he said.

But he acknowledges that Treasury prices could rally further, given growing uncertainties about a U.S. economic recovery. "There may be rallies, I may be forced to cover, I probably will cover somewhere along the line, but I'm short the bond and plan somewhere in the next week, month or year to short a lot of them."

Investors shorting Treasurys also run the risk of further intervention by the Federal Reserve, which as Rogers admits, may announce further quantitative easing to help the economy in the future. Such a move would push down yields.

But he says quantitative easing cannot go on forever. "Eventually, even the Fed is going to have to throw in the towel because they're turning themselves into bankruptcy as well."

Rogers also doesn’t think using credit default swaps (CDS) is a good way to bet against Treasurys because the U.S. is unlikely to default and will likely choose to inflate itself out of a debt crisis.

"If that happens, they haven't defaulted, I mean you're bankrupt if you own their bonds, but technically they haven't defaulted, so anybody buying a credit default swap hasn't gained anything," he said.

Buy Dollars Over Euros

Despite his bearish views on the U.S. economy, Rogers says he is long on both the dollar and the Euro, but for now is choosing to stock up on the dollar over the Euro.

"The U.S. dollar has been beaten down so much and there are so many bears, including me, that usually when that sort of thing happens, there's a rebound."

Rogers says he bought the Euro almost exactly a year ago at $1.20 and still owns it. The single currency currently trades at $1.45.

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Is corn giving us a sign?

The price of corn is the latest of a series of signals that remind investors about 2008, the year the financial crisis spread across the globe and Lehman Brothers collapsed, Simon Derrick, chief currency strategist at Bank of New York Mellon, wrote in a note Monday.

On June 9, the front month corn futures contract hit a high on $793 before staging a "notable reversal," down 21 percent by the close on Friday, Derrick wrote.

The front month futures contract for corn hit a high of $765 on June 23, 2008, only to plunge 34 percent by the start of August, he added. 

"We are certainly not arguing is that 2011 is a carbon copy of 2008," Derrick wrote. "Nevertheless, it is apparent that a similar set of warning signals continue to emerge from a variety of different markets."

In early 2008, a clear reversal in prices of basic foodstuffs happened well before oil prices peaked in July, with a dramatic fall in wheat prices the most prominent, he reminded.

By the time that oil prices and, a week later, the dollar changed course in mid-July 2008, wheat prices were down more than 30 percent, according to Derrick.

"As we argued in early July of that year, the reason why this mattered was that it signaled a dramatic abatement in global inflationary pressures that would see investors turn from seeking out the currencies with the most hawkish central banks to, instead, favoring those with the most growth oriented monetary policy stance (or, more simply, a retreat from risk)," he wrote.

Analysts at Bank of New York Mellon have stressed the similarities between 2011 and 2008 for a few months, the most notable being the reversal in wheat prices, which have fallen about 35 percent from their peak in February.

Silver also fell 30 percent since the start of May and the Baltic Dry Index, which tracks shipping prices, is half the level it was at last September, Derrick wrote.

"While it may tell us little about what should happen this morning (it is worth recalling that the USD continued to fall all the way through until mid-July 2008), these signals only add to our view that this summer could see some telling reversals in the currency markets," he added.

© 2011 CNBC.com

URL: http://www.cnbc.com/id/43629248/

Independence Day

I hope everyone has a safe and happy 4th of July weekend.  We will be traveling to our annual family reunion.  I might sneak in some golf too.
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The Feds QE2 Scorecard:
Where QE2 Worked and Where it Didn't
Quantitative easing—which ends Thursday—effectively reached some of its goals and badly missed at others, but the unprecedented government intervention program’s final legacy is far from being written.

Fed Chairman Ben Bernanke launched the program with hopes that it would create a “wealth effect”—a rise in asset prices that would help convince Americans that the financial crisis had passed and better days were ahead.

No doubt there has been a considerable rise in a variety of assets, and if you’re lucky enough to own them you probably did quite well in the eight months since the central bank launched the second wave of easing, known as QE2 in market lingo.

But if you were one of those stuck in the mud of the housing market downturn and jobs slump, you didn’t do nearly as well.

A look, then, at five areas where QE2 worked—and five were it failed.
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Here is a portion of Eric's piece:
Eric Sprott on the Truth about Silver
We have a very tough time understanding those bearish arguments against silver. We look at the real silver market, and based on the supply and demand data coming from the real, physical markets for silver, the fundamentals are only getting stronger. And yet there exists another silver market, which as we’ve shown, is not very connected to the physical realm at all. And though silver investors have for decades suffered the tyranny of a rigged paper monopoly over silver price discovery, it appears to us that the tides are turning. In the age of QE to infinity, investors are being more scrupulous with their capital and as such they are demanding physical silver in quantity. With more and more dollars flowing into the silver markets and a finite supply of physical to meet that demand, the theoretical losses for the paper silver short-sellers are near infinite. And with such a skewed and obvious risk/reward payoff vastly favoring the longs, we pose the following question. Who is most at risk in the silver markets: the buyers of a scarce and real asset that serves a growing multitude of purposes, or the sellers, who are short a quantity of silver which may very well not even be obtainable at anywhere near current prices? Let the Seller Beware!

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I read this today from Stansberry Research.  This is an example as to why I like the metal stocks so much.  They have more value that ever.

Today officially marks Financial D-Day – the end of the Federal Reserve's second round of quantitative easing (QE2)… and nothing happened. The yield on 10-year Treasurys jumped just a few basis points.

The market knew it was coming. A friend who runs one of the biggest bond desks on Wall Street said it's business as usual today. The markets are more concerned about Greece.

 But don't get used to this calm. The Fed won't keep its finger off the print button for long. As we've said all along, the Fed will only let the country experience a little pain (inevitable as the largest buyer of U.S. debt steps back) before launching a new round of quantitative easing.

Since QE2 began in November 2010, the Fed has bought around 85% of the net Treasurys issued, according to Morgan Stanley economists. And in each of the first six months of 2011, the Fed bought all but $17 billion of Treasurys sold. JPMorgan estimates private buyers will have to absorb $94 billion a month in the Fed's absence. And only one thing – outside of "friendly" nudging from the government – will attract those buyers… higher yields.

 Rest assured, we'll see a flood of new cash soon. And that's when the fun starts. In a recent Bloomberg interview, market whiz Jim Rogers said the Federal Reserve is his biggest fear today…

They don't have a clue about economics or currencies. They don't have a clue about much of anything. And they are dangerous people. They are not doing good things for the world. And they will probably stop QE2… they said it so many times they will. But when things start going wrong again in a few days, weeks, or months, they are going to start printing money again… And that's not good for the world. That's going to lead to more problems for all of us over the next decade. This is a serious problem facing us.

 So what do you want to own when QE3 begins? Precious metals. Gold and silver, as our friend Doug Casey likes to say, are "going to the moon!" Owning gold and silver bullion is the best way to protect yourself from a currency collapse. However, you can make big money buying gold stocks, as well.

We've written several times about how cheap gold stocks are in relation to the gold price. Gold is currently around $1,500 an ounce. But most gold stocks are priced the same as they were two years ago – when gold was $1,000. In his latest S&A Short Report, Jeff Clark writes:

Gold stocks are cheap. Many of them trade at 12 times earnings or less – a big discount to the S&P 500's earnings multiple – and many of the big name gold companies pay decent dividends. With global economic conditions around the world what they are, it's easy to make a strong fundamental argument for owning gold and gold stocks.

This one-year chart shows the underperformance…