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I don’t know about you. But I think I ate enough turkey yesterday to last me until the New Year! Getting family and friends together, watching football, falling into a “food coma” — it’s all part of the Thanksgiving tradition, and I love it!
Unfortunately, many investors are experiencing much worse indigestion than me! They’re loaded up with debt investments here and abroad that are, for lack of a better expression, blowing up! And I continue to believe that you need to heed the message coming from the debt markets … because it has huge implications for stocks.
More European Bond Markets
Sinking as Debt Woes Spread!
Remember the European Investment Bank, or EIB? It’s a European institution that generally lends to development programs, such as those that re-forest land or develop public projects for underserved countries and communities.
Several weeks back, some people floated a potential bailout plan that would involve the EIB buying up bonds issued by troubled European countries. That sparked a brief rally in stocks and other risky assets.
But now, the EIB’s OWN debt is coming under attack. The price of its bonds is starting to fall, and their interest rates are starting to rise. The same thing is happening to the bonds that the European Financial Stability Facility (EFSF) has already issued to fund bailouts of countries like Ireland. The yield on the EFSF’s 3 3/8 percent notes that mature in July 2021, for instance, has shot up to 3.88 percent from 2.68 percent in just two months.
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| The EIB’s role is to contribute to the development of capital markets throughout the EU. But now, it’s having a tougher time borrowing funds to finance these projects. |
In other words, not only are individual European country bonds falling around the continent, but so are bonds issued by the super-national organizations that are supposed to bail those countries out! That drives up the cost of bailouts, and if the yield surge accelerates, it could even call into question the whole premise of the EFSF!
Meanwhile, Spanish 10-year yields just hit a fresh multi-year high. And French bonds fell sharply earlier this week amid talk that Moody’s Investors Service may be getting closer to cutting its AAA rating on that country.
As if that weren’t enough, the Super Committee turned out to be a super disaster, just as I expected. That increases the pressure on the ratings agencies to downgrade OUR credit rating.
End of the Year Rally … or
End of the Year Collapse?
Long story short: The bulls have been betting a lot of money on a year-end rally. But it looks like Santa Claus may fail to show up and give the bonus babies a big fat bounce! That only validates the strategy I’ve been recommending for months now …
- Take profits you may still have from the October rally …
- Add hedges against downside moves in the major averages …
- For your more speculative funds, buy select investments that can deliver major gains from weak markets.
Until next time,
Mike
{ 14 comments… read them below or add one }
Careful following MARTIN & THE DOOMERS! Keep you powder dry and your bets small.
ECB and Federal reserve policy bombs are prepped and readied to be dropped on financial markets. I think there is a growing chance of a “rip your face off” short covering rally in the near future.
S&P 1111 looks like a technical “trampoline” to me!
Forget about bull or bear claptrap, its about making money, i’m good at that with a great track record, to me it is obvious that the public’s mood has changed. Its difficult to even get them to put money in a bank deposit account never mind in stocks and bonds? Do you really think the FED and ECB can keep printing money, especially with commodity and food prices soaring. I’m afraid the bulls have had their day, now its payback time, with slowly moving, declining markets for many years to come. Think Japan 1989 – think the DOW where it is today,only that the Japanese government had money then, now they are bankrupt through their many interventions , failed QE,etc, which got them nowhere but in a massive debt hole. Thats the key difference. The US is bankrupt at the start of the decline and there is not a world economy to export/expand the economy out of trouble in the roaring 90′s. This is why I predict a crash because there will be no more QE on the table. At the very maximum, after a big crash, you may get a small QE package, certainly no bigger than QE2 which will have no effect on the $64 trillion outstanding debt which is the only bomb ready to explode. Understand the facts. Wheres Frances and her 12888 DOW prediction for a year end DOW? It appears my forecast of 11,000 by year end is more accurate.Also 7,000 by June 2012 is the first big crash that I’m talking about.
Hi Mike
Took a taxi to the airport the other day only to have the driver explain to me about complex financial derivitives and a coming debt implosion. The problem for all of us is that now everyone has a view on a problem that the nations leaders refuse to address. By just continuously kicking the can then the ultimate problem will be worse. The least well informed consumers seem to be either de-leveraging or keeping their hands in their pockets waiting for a calamity.
WELL WELL WELL……… here we are the day after thanksgiving some of us were out there shopping for deals on thanksgiving day and i spent a little over 5,800 just in electronics but remember not all is well everywhere HUNGARY AND PORTUGALS SOVERIGN DEBT RATING WAS DOWNGRADED TO JUNK STATUS and BELGIUM just got knocked down another notch and with more to come for them, WHEAT and SOYBEANS are now trading below their 52 week low , the large oil tankers and the vlccfs are losing money every day they operate, most if not all are planning restructuring the EURO IS TANKING AGAINST THE DOLLAR ……. IRELAND , ITALY, FRANCE, SPAIN, PORTUGAL, GREECE, HUNGARY, THEY ARE ALL paying ridiculous and unsustainable rates on their bonds……well look at the bright side only 1 more month to go for 2011 . SO WHERE IS 2012 GOING TO TAKE EVERYONE i see things getting much worse in the eurozone , by the summer of 2012 we will likely see the eurozone start to breakup ………follow the debt from deutsche bank and you will see where it leads ………this is why i know germany eventually will stop bailing out the other PIIGS NATIONS.
I can’t make this up folks….it’s simply fantastically HILARIOUS….
Please…Please..PUHLEEZ go into archives and read some of thier columns…Particularly, Martin’s “grave” warning column of October 17th…….predictng two days that will “shake Wall Street to it’s foundations and change the world forever”….
Okay…let’s see….the DOW was at 11, 378 on that day..and…it’s now….11, 257????…
Run for the doors!!!!…..these cat’s have had everything they have wanted….EVERYTHING….including data that should boost the DOW but didn’t……these cats crack me up!!!!….
4 words:
Double Bottom coming up….
to: Mike Larson
from: Kapt Blasto of Facebook
Subj: Why must we need a National Debt, in the first place?
Look, Mike:
I want a straight answer:
What LAW(s), (or regulation(s) enforced as LAW(s)), in the Federal Code, at this moment, governs the bond trade with the public (or the larger world community), to the extent, that PREVENTS or FORBIDS either…
…the Issuing Government Treasury from attempting to approach a bondholder, or…
…the Bondholder from attempting to approach the Issuing Government Treasury…
for the purposes of entering into a LOAN ARRANGEMENT where the Bond Issuer then becomes “Creditor,” and the Bondholder becomes “Debtor,” (in other words, “switch hats”) under the following conditions….
where the would-be-Bondholder-turn-Borrower, is Borrowing for a “private-side” financial Vehicle that gives that Bondholder a BETTER opportunity to recieve more in Interest, than, what the Bondholder would have gotten in the BOND YIELDS, (also TAX-FREE,)
…and where the Bondholder-turn-Borrower could also SELL SHARES of that Financial Vehicle, in the Marketplace, where the sale of that stock, could also promise a BETTER opportunity of recieving MORE the promised Maturity(ies) could give them…
…and where the Government issuer could allow the Bondholder to secure the loan with a 20% down payment, consisting of ALL the yet-to-be fulfilled promises upon the Bonds they hold, that, normally outside of this would-be arrangement, must be constrained by the time periods set forth in the language of said Bond…thereby, fashioning a voucher-of-sorts (that is FIVE TIMES BIGGER than what the yet-to-be fulfilled promises upon those Bonds, are ) to FILL the aforementioned “financial Vehicle”
…which is, let’s say, a Cerificate of Deposit held at the Federal Reserve, either on account with the Federal Reserve DIRECTLY (pursuant to whatever rules and regulations that govern the FED’s directly holding that CoD, on account,) or on account INDIRECTLY as “symbolic segments” among all the accounts held by the Members of the Federal Reserve, including Banks, Credit Card houses, and all other financial houses, that use the “uniform currency” of the Federal Reserve Note, and note-measure (aka “Dollar”)
The terms of this would-be loan are such that the Collateral to guarantee this loan is the COD itself…meaning that if Bondholder breaks the Agreement in any such way, or breaks the Law in any such way that would constitute a breach in the Agreement…the Collateral is collected (since it would-be Bondholder loaning from Treasury.)
Further, the terms that govern the principal payback, would be situated, so that as long as the Bondholder-turn-Borrowing-COD Holder (or any designate that is recognized as such by the Bond Issuer-turn-Creditor, in the Agreement) does not try drawing down from it DIRECTLY (as is allowed sometimes, by Banks underneath FED Membership, for their own COD holders, as those members own rules govern it) and instead allows either the FEDERAL RESERVE (or the Member Banks if in “symbolic segments”) to LEND to their borrowers and pay back with interest….then, Bond Issuer-turn-Creditor will consider Principal “PAID UP, and TO DATE,” meaning Bondholder-turn-COD Borrower will NEVER have to pay anything out of pocket to satisfy the principal of the Loan arrangement…However…
Any interest accrued that Bondholder-turn-COD borrower gets, 25% of it gets withheld, and sent back to Bond Issuer-turn-Creditor, to satisfy the Interest portion of the Agreement.
The rest of that interest the Bondholder-turn-COD holder recieves is TAX-FREE, where Bondholder-turn-CoDHolder can either recirculate whatever portion desired back into the COD (or, whatever segment desired), or, pocket it, without worrying about TAXES…
.
Now, Mr. Mattive, If there is such a law, (or regulation) that is preventing or forbidding either of these two parties from approaching the other for such an arrangement like this, then, I want you to find it for me.
Because, even if there is, it’s not going to be the end of this. Then we have to find out why that law was put into place, in the first place, and then, depending upon the reasoning given, find a way to have that prohibition removed, so that Bondholders won’t have to constantly wait upon the Government to tax the economy to oblivion to pay them….
Instead of everyone “paying their fair share” to Government, so that they can “pay down” the National debt, ad infinitum….
Bondholders can make a DOWNPAYMENT and help Government retire the debt (as well as the obligations upon future revenues) all the same, without everyone having to constantly “pay their fair share” in order to do it!
Well, Mike, what do you say? Are you ready to help me?
Or…should we just sit back and see the band march and play on, over the cliff, yet again?
I’d like to see the national debt retired, Mike…
However, it seems that the only way this Government of ours will ever allow it, is for the people to pay taxes to obilvion to do it! We however try avoiding paying taxes in ways both LEGALLY (and in ways, I’m sure you’ll agree…NOT-so-LEGALLY) which always seem to cause the vicious circle to continue, where Government tries to pass more laws, and enforce more regulations to get us to pay MORE, and in funding those operations…take out More loans from the FedRsv, and then sell more Bonds, to pay the Fed Back, so that they can then buy up whatever junk to put more money out there for the banks to lend.
Which causes the Government to always work against itself….
which causes us to rob peter to pay paul for the interest…
A new monetary solution MUST be put into place, and I think I have come up with it!
Let me know what you think, Mr. Larson.
Till then,
-Kapt. Blasto
Powerful rally off of 1155…the 50% retracement point after the parabolic rally from 1068 to 1289.
VERY BULLISH!! YEAH BABY!!
I just can’t wait to read the Boy Blunder’s column this week……
“…b..b…b…but….but??..Fitch cut the ratings on banks, right??..I mena..that’s what we said would happen?/..b…b…but….
..b…b…b…but..Europe….it’s..it’s in tatters….umm….ummm..stutter….stutter..stammer…stammer”
Martin and the Boy Blunder just don’t “get it”…..
Here’s one for ya rookies:
Cutting the banks’ ratings is a GOOD thing……but..lame brains don’t know why its good..
There are three things that the perma-Bears just don’t get…threee of the most basic tenets of economics…..and they never will because their bad attitudes lead them astray…
oh, and..yeah….buckle up, Michael….I ain’t done with your lame brain either….
YEAH BABY! How do you like that…this rally is just getting started too! I expect the top to be mid 1300′s in late December.
Come back with your “IMMINENT” or “FLASHING RED” warnings next year DOOMERS! Even if your fundamental analysis is good, how can your readers profit from it if the timing is horrible.
Maybe Weiss Research can investigate the rumors that they coordinated intervention was in response to a certain European (rumored to be French) bank that “hit the wall”…the rumor that the “Lehman moment” was kept secret this time.
Look at the bank stocks soar…told ya the downgrade is a good thing…BUT??..can any lame brain perma-Bear tell me WHY the downgrade is good??..
They just don’t get the fundamental twist….and I truly mean “fundamental”…
Martin and Boy Blunder get EVERYTHING they have sold you on and look at the mess your perma-Bear financial situation is in…..
They don’t get that the things they sold you on ARE ACTUALLY GOOD FOR THE MARKETS!!!!….
I’ll go on and on and on later….but right now I just want to watch this Bull Market knuckle down for the explosive leg up coming….
Thanks, Martin and Boy Blunder for doing to your subscribers portfolios exactly what you said you would protect them from….have their $$ stolen…
oh..and..yeah..I’m still coming for ya Michael….did your parents turn off your internet access from your basement room in their house??..
Here’s a quote from my good buddy , MIchael…from his comment earlier in theis column….
“Understand the facts. Wheres Frances and her 12888 DOW prediction for a year end DOW? It appears my forecast of 11,000 by year end is more accurate.Also 7,000 by June 2012 is the first big crash that I’m talking about.”
what an idiot….
What kinda of a preidction is 11,000 just 10 days ago??..right in the middle of a range..
“please, sir…may I have some more milk toast”
What a buffoon…
Now we’re gonna hear about the NOVEMBER rally…”ahem…ahem…”
“not a bad idea to take profits off the table from the ..umm…November rally…which came…umm…just after the…. umm..october rally…umm..ummm….you know which ones I’m referencing…the ones…umm…I missed..’
Anyway….how can the Bears take profits off the table when they have no assets??..they were instructed to sell them all….
I can’t wait for tomorrow’s “ifs and buts’ column….read how lazily he PREPOSITIONS his comments with PREPOSITIONS….terrible linguistic style…I would expect more from a Boston College grad….certainy couldn’t make it into Iowa’s Creative Writir’s Workshop…although, he is quite creative…
In a debate, you never use prepositions…you use facts to prepostion your side…not ifs and buts
1258 looks like a possible short term top probably today. Choppy trading with a DOWNWARD bias next week to around the bottom of the channel at 1215. This are looks to be powerful bottom where we rally hard. Perhaps another policy bomb gets dropped next week. Rumor is that Fed will cut the discount rate 50 bps very soon.