Friday, July 2, 2010

Record Tax Hikes are Right Around the Corner

Just a quick blurb tonight folks.

I wanted to share the new taxes hikes that are set to go into effect starting next year.

A few Highlights(or should I say lowlights):

Taxes on dividends will rise from 15% up to 39.6%!

Personal income taxes will rise no matter what tax bracket you are in:

Here are the increases included in the report above:

"Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:

- The 10% bracket rises to an expanded 15%

- The 25% bracket rises to 28%

- The 28% bracket rises to 31%

- The 33% bracket rises to 36%

- The 35% bracket rises to 39.6%

Income taxes will rise o"

Quick Take:

They always say the stock market is 6 months forward looking.  Perhaps this 2011 tax hike is why stocks took a faceplant this week. 

Folks, how on earth our senior citizens going to survive when they lose an additional 30% of their dividend income? 

Also:  What effect is this going to have on dividend paying stocks?

The pressure on the market is bad enough as it is!  This is guaranteed to trigger another viscous round of selling at some point before the end of the year as desperate retirees sell stocks and scramble for alternatives.

God help us if the interest rates on treasuries rise up to 6% or so by the end of the year due to to our rising deficits.  The senior citizens in this country will bail out of the stock market faster than the Fed bailed out AIG when the financial system was about to collapse.

Remember, many retirees survive on dividend income.  Also: as the baby boomers retire their investing habits are going to have an even more dramatic effect on all markets moving forward.


The income tax increases are also going to kill small businesses.  Many will reign in hiring as a result at a time when we need jobs more then ever.

When it comes to we the people: The tax increases will be devestaing.  I expect  to see another wave of personal bankruptcies as the debt knoose tightens around the neck of our citizens.  

Most of the debt slaves in this country are hanging on by a thread as they try and pay their bloated mortgages every month.  This will tip many over the edge

Higher taxes will also be a huge blow for consumer spending as disposable income dries up.  This is not good when you have a consumer driven economy!

The Bottom Line

The timing of this is absolutely awful.  The markets losing streak has been amazing. We haven't seen one bounce.  Not one!  I expect to see some type counter trend rally next week(let's all hope). 

Folks: If we don't see a rally then the risk of a collapse has to seriously be put on the table.

Perhaps we shouldn't be surprised by the price action that was seen on Wall St this week.  The emperor has no clothes and it appears the sheeple are finally realizing it. 

The collapsing of the stock market has never been a question mark for me as long as we failed to acknowledge our problems. Palying "hide the sausage" has been a hostorical failure just like it was in Japan. 

The economy will not turn around until the losses are taken  and the excesses of the 30 year credit boom have been purged. 

The government has chosen denial over prudence and we are all now paying the price.

What has surprised me is the speed in which this is all happening.  Now could this just be another headfake where the bulls buy on the dips which delays our day of reckoning?  Sure!  However, the catastrophic popping of the debt bubble is not in question if we fail to make dramatic changes.

The challenges that we face us as we head into 2011 are absolutely mind numbing.  Get prepared folks.  Pay off your debts and get liquid.
Have a happy 4th of July and enjoy the fireworks! 

Thursday, July 1, 2010

June Home Sales Evaporate as Wall St's Losing Streak Continues

I wanted to start with a great video here from Howard Davidowitz. This is one of the best reality checks I have heard in awhile.

My Take:

I couldn't have said it better myself.  We will see peaks and troughs over the next several years, but the trend will remain downward because we have dug ourselves such a deep hole.

The data that came out this morning was flat out ugly although the markets managed to pare it's losses later in the day..


Geez...Does it get any worse than this?:

Quick Take:

This isn't a collapse folks it's a total meltdown.  Housing is so beyond screwed it isn't even funny.  We pulled all of the demand forward via the housing credit.  We are now left with a wasteland that has no buyers.

Some mortgages friends that I speak to say the phones are not ringing and many properties have not even been looked once at despite multiple price drops.  Home sales fell at least 20% in all regions of the country according to the june report..

Like any other bubble we will see complete capitulation in housing.  I suspect if the numbers continue to look like this it will be much sooner rather than later. 

Jobless Claims

Another ugly chart:

From Haver:

"A modestly rising trend to initial claims for unemployment insurance has become apparent. Claims rose 13,000 last week to 472,000 following a slightly-revised 17,000 decline during the prior week. Consensus expectations were for 455,000 claims and they've inched higher from the February low of 439,000. Nevertheless, last week's figure was down from the recession peak of 651,000 reached in March of 2009. The four-week moving average of initial claims also has crept up to 466,500."

Quick Take:

Keep in mind the jobless claims trend is rising as millions of unemployed are falling off of their claims because they ran out of benefits.

I thought we were in an economic recovery?  This has become the biggest joke.  This country was sold a bag of false promises by the talking heads in Washington DC and the media.

Isn't it time that we stop listening to these clowns?

I expect the jobs number will be quite bad tomorrow.

The Bottom Line

It was another red day on Wall St.  We are pretty oversold here so I wouldn't be surprised to see a bounce here if the jobs number is anywhere close to expectations.

Longer term the outlook just keeps getting uglier by the day.

I wanted to chat a little bit about gold and the Euro before I finish up.  The recent short Euro/long gold trade looks like it may be unwinding. 

Gold got crushed today.  There was talk of forced liquidations on Zero Hedge.  Not sure if this is true or not.  I think gold was due for a bit of a correction myself.  The panic first seen in the European debt crisis seems to have abated(although I believe this is far from over).  This could have had an effect on demand for gold. 

There was also a lot of chatter in the credit markets about austerity and the Euro.  It appears that traders are betting that the severe austerity cuts in Europe are going to make the Euro move higher versus the dollar.  This made a lot of sense the more I thought about it although many questions still remain across the pond.

IMO...The US better hop on the austerity train because the dollar could get crushed here if deficits start to shrink in Europe as ours continues to soar.

Let me restate that there are a lot of "if's" in this equation, and the huge move that we saw on the Euro today could turn out to simply be a blip on the radar.

However, I found today's move in the Euro to be very interesting and something worth watching.

That's it for today all.  I might have something small up tomorrow.  Off for the holiday.


Wednesday, June 30, 2010

Financial/Tax Reform Paralyze Wall St

It was another bloody day in the markets as concerns around the economy along with the unknowns around financial and tax reform overwhelmed Wall St.

The DOW closed down 96 points and the S&P violated the much talked about 1040 level by closing at 1030.  I am surprised with this price action.  I expected to see a bit of a bounce today after yesterday's route. 

The bulls did get a decent rally going overnight as worries around the ECB debt seemed to have been abated as the ECB agreed to lend more money to the banks.

Then this morning the market then violently reversed after the ADP monthly jobs report was announced:

"ROSELAND, NJ -- (Marketwire) -- 06/30/10 -- According to today's

ADP National Employment Report(R), private sector employment

increased by 13,000 from May to June on a seasonally adjusted basis.

The ADP National Employment Report, created by Automatic Data

Processing, Inc. (ADP(R)), in partnership with Macroeconomic

Advisers, LLC, is derived from actual payroll data and measures the

change in total nonfarm private employment each month."

The expectation according to Bloomberg was a rise of 60,000 so this was a huge swing and a miss.  The lowest estimate in Bloomberg's survey on the jobs number was 23,000 so no one was expecting anything anywhere near this bad.

This does not bode well moving forward folks.

Financial/Tax Reform

Stocks did manage to come back for most of the day as the bulls attempted to hold 1040 but the market once again unravelled late in the day.

There really was no catalyst for the late sell off.  After hours however we got a sniff of what could have possibly triggered it:

"Finally, Gov. David A. Paterson and legislative leaders have found something they can agree on: that hedge fund managers from Connecticut and New Jersey should pay the state of New York millions more in taxes.
As they grapple with a gaping budget shortfall, Mr. Paterson and the lawmakers plan to enact a tax change that will treat much of the compensation earned by the fund managers who work in New York but live outside the state as ordinary income.

However, industry observers say the move could open up fund managers to double taxation and take some of the shine off New York as a hedge fund destination, The New York Times’s David M. Halbfinger reports."

My Take:

Ouch!  The pigmen didn't like this news.  I did though:)  It's about time these criminals who held the financial system hostage and demanded bailouts are forced to part ways with some of their billions. 

The states are broke folks and they will now proceed to look underneath every rock in order to find tax revenues.  The hedge funds are easy target.  NY is especially broke so I would be surprised to see this get passed.

Senetor Reid also came out late in the day and announced there would be no vote on the Financial Reform Bill until after July 4th. 

Wall St didn't appreciate this news either.  We all know the market hates uncertainty and these potential laws and regulations have the potential to cripple Wall St.  Expect to see some shaky markets as Congress debates this issue because know one knows what this will look like.

I am skeptical because the bankers have had their way in DC to date.  However,  I do believe that as the economy continues to rapidly fall apart the politicians are beginning to ask themselves whether or not they need to take down the bankers before they get taken down by them.

AIG's testimony today wasn't helpful for the bankers when their CEO came out and said he could have cut a better deal for the taxpayers if he didn't have a gun held to his head by the NY Fed forcing him to pay back the banks 100 cents on the dollar on their derivative bets.

Wall St is clearly becoming a huge liability for the politicians on both sides of the aisle.  Obama's approval rating has now fallen below 50% and he is clearly going to be a 1 term President if he doesn't change his strategy.

It will be interesting to see how this financial reform develops, and I do not rule out the possibility of strong radical financial reform.

The President and the rest of DC know that the sheeple are getting restless.  They all understand that heads are going to roll in November if the economy continues to get worse.

David Rosenberg

I wanted to share this economic report from my favorite economist.  Some of the housing data in here is shocking.  It now takes a builder around 15 months on average to sell a new house versus the historical average of only 2-4 months.

He calls housing BROKEN.  I couldn't agree more.

Breakfast with Dave 062410

The Bottom Line

The market is spooked for a variety of reasons.  Wall St is being attacked from all sides. 

Additionally, the stock market is forward looking and it obviously doesn't like what it sees.  Why would it?  The economic data continues to worsen.  Some traders are predicting that the economy lost 150,000 jobs in June.  There are some Census losses in there so you need to be careful when you look at that number.

The bond market is keeping the 10 year below 3% which is extremely bearish.  Basically this tells you that the bond traders are betting the economy will have little to no growth.  Japan is the bet in bonds right now instead of a Greek like default.  We will see

Why would the traders want to own bonds in this environment?  Without growth the risks for inflation are low so owning the 10 year bond looks pretty good to them at a 3% yield(for now).

When it comes to the breaking 1040 on the S&P I think some caution is warranted here.  We could see a head fake here before moving lower.  Futes are down -2.75 after hours but it's very early.  I still expect the bulls to make another run to get over 1040 here before we head south.

I trade from a macro perspective so I am not too concerned about a bounce.  If you daytrade be careful the next few days.

If we have another ugly day tomorrow there is a good chance we break down to 875 pretty rapidly.

Be careful out there!  Until next time.

Tuesday, June 29, 2010

Looking Over the Edge of a Cliff: Can The Bulls Hold S&P 1040?


What a day.  Let's get right to it.  As you all know, I am a macro guy when it comes to the economy.  However, there are times when the charts become extremely important when you are analyzing the markets.

Lets take a look a chart of the S&P:

My Take:

I drew a couple lines here that represent key resistance levels.  As you can see above, we closed a1041 which is right on the line of a key support level.  We currently sit a bit below that on the futes.

Essentially the market is looking over the edge of a cliff here folks.  Tomorrow will be extremely important day because if we close firmly below 1040 then the chances are high that we will test the next level of support which is around 875ish on the S&P.

If we get down to 875 it darn well better hold because there is basically nothing but hot air in between there and the low of 666 on the S&P that was set back in March of 2009.

I think the technicals will have a lot to do with where we head from here in the short term. We could quite possibly see a bounce tomorrow if this level holds.  If we bread it things could get rather ugly. I expect quite a tussle between the bears and the bulls here at S&P 1040.

European Debt Crisis

Alrighty, let's talk a little about what caused the equity dump today. 

The ECB's debt roll over failure was the key trigger today:

"The ECB failed to auction the €55bn in fixed term deposits it had planned to, and what it did auction (€31.86bn) was at a much-higher rate (0.54 per cent) than what it offered at the start of its Securities Markets Programme (SMP). The market seems to be holding tight to liquidity.

As Barclays Capital’s Cagdas Aksu pointed out before the results of the FTD:

Also ahead of the 3m LTRO on Wednesday, the ECB will conduct two operations today. First, there will be the normal weekly MRO: amounts have increased there to stand at EUR152bn, and some of that might be rolled over into the 3m LTRO tomorrow, maybe up to EUR50bn. Effectively, the less the roll today in the weekly MRO, the higher the chance that we might get a higher roll in general in the 3m LTRO tomorrow."

My Take:

Translation:  No one wants to buy the ECB's worthless debt.  Well some did, but they demanded a higher interest rates on the $31 billion that was bought.  Banks are focusing on liquidity.  In other words, the European debt markets have basically hit the wall.  More on this in "The Bottom Line" segment below.

Essentially, the is game over for Europe if they can't roll over their debt.  You will see an immediate panic in the stock market if this issue isn't resolved.  Looking back at recent history, we all know that the world's central bankers somehow find a way to "hide the Ponzi" so lets see if the ECB finds a creative way out of this with a little help from a few friends.

The ECB debt sales over the next couple of days are critical and that is an understatement.  keep a close eye on them.

The bottom line here folks is the game is about up without printing money which Bernanke has said in the past that he will never do....Yeah..OK..We'll just see about that. 

People tend to panic when the doo doo hits the fan, and I wouldn't expect anything different from a group of central bankers who are rapidly beginning to look like a group of "deer in the headlights". 

The "moment of truth" in the markets is right around the corner folks.  Get ready.

Consumer Confidence Collpases

We also got this bit of lovely news today:

"The Conference Board Consumer Confidence Index® Drops Sharply

PROVIDED BY PR Newswire - 10:00 AM 06/29/2010

NEW YORK, June 29 /PRNewswire/ -- The Conference Board Consumer Confidence Index® which had been on the rise for three consecutive months, declined sharply in June. The Index now stands at 52.9 (1985=100), down from 62.7 in May. The Present Situation Index decreased to 25.5 from 29.8. The Expectations Index declined to 71.2 from 84.6 last month."

Ouch!  This is a huge miss.  Let me add that I don't put a lot of stock into this number because it's just a psychological indicator based on a phone call to consumers.   What it does tell you though is people are not feeling good about where things are heading.

The Bottom Line

The trading the rest of the week should be very interesting to say the least.  The economy is essentially rotting and the stench is finally being smelt by Wall St.

I am extremely nervous about the situation in Europe.  Their banks leveraged themselves higher than any of the banks in the world including the investment banks on Wall St.

This combined with the debt crisis is a recipe for disaster.  The Euro cannot be printed and the banks do not appear to not have the liquidity to soak up the ECB's rotting debt.  This is a HUGE problem and I don't see an answer unless they get some help.

The problem here is simple:  We have hit the wall when it comes to liquidity.  There isn't enough money out there to support the insane amounts of debts that the governments of the world have run up.  There is no answer to this problem other then to just let it collapse. 

Deflation is coming and so is austerity.  Be prepared because it's not going to be pretty or comfortable.  Every one of us is going to feel it.  Pensions and jobs are going to get slashed.  Companies are going to go bankrupt.

As austerity sets in, global growth is then going to plummet and stocks are going to get flushed down the toilet as a result.

I will end with a little trading idea.  Shorting treasuries is beginning to look very interesting.  There is no way I will get in front of this move up in bonds given the problems out there but a great entry point is currently getting set up for TBT.

Some may not agree but I believe Treasuries are going to get called out as a result of insolvency issues with our debt.  Short term I can see bonds continuing to rise.  Longer term however there is no way rates will remain this low. 

This may look and smell like Japan folks but this situation is different because we run the serious risk of going bankrupt which was not an issue that Japan had. 

The bond market is not going to have the appetite for treasuries over the longer term at these rate levels unless we implement severe austerity plans.

I don't believe the political will is there to do this so our solvency will be a consistent risk that eventually will have to be priced into bonds. 

Shorting treasuries is starting to look really juicy as a result.

Disclosure:  Small holding of TBT that was held before the publication of this article. 

Monday, June 28, 2010

Treasuries Soar as Investors Flock to Safety

Intersting day today folks.  Investors are spooked.

Let's take a look at the 10 year bond today:

My Take:

This is interesting price action in the bond market given how quiet the market was.  The DOW and the S&P were essentially flat today.

You have to wonder why investors were flying into treasuries on such a quiet day?  The yield on the 10 year hasn't been this low since 2009.

Some serious questions as to why this is occurring need to be asked here:

-  Is the market starting to price in a deflationary depression?  Yields on long bonds in Japan are now under 2% following their deflationary death spiral.  I believe mortgage rates currently sit at 1.6%.

-  Are bond traders positioning themselves for another potential massive QE by the Fed?  Front running the Fed is a popular game that the boys in Chicago like to play.  Perhaps the RBS report on the Fed QE that I spoke about last night triggered some buying.

-  Did someone in Europe blow up?  There were  some unconfirmed reports coming out of Europe that someone or something could have been liquidated.  Gold reversed violently this morning so the possibility that something or someone blew is very real.  When you see large forced liquidations gold tends to suffer because whoever blows up needs to raise cash  The yellow stuff ended down around $17.00.

-  Are investors simply just afraid?  It is becoming more and more evident that there is simply nowhere to hide in this market.  Treasuries appear to be the safest option for investors as the debt crisis in Europe rapidly intensifies. Europeans are flying into treasuries as a result. 

The lack of positive action in the stock market could also be forcing investors over here to re-allocate their portfolios into more fixed income.

My Take Continued

Whatever the reason, bonds appear to be the "sweet spot" for investors right now.

Short term, this action is not surprising given all of the potential land mines the world economy faces. 

Day after day, all investors hear about right now is all of the gloom and doom:  The BP oil spill, state budgetary nightmares, unemployment, foreclosures, fears around the US deficit.  I could name others but I will leave it there.

The "green shoots" mantra that dominated the airwaves in 2009 as the market rallied has now been replaced with talk of an oncoming depression.

Paul Krugman had a piece in The New York Times that discussed what he called "The Third Depression".  I would link you to it but the article was hogwash because he is using the fear of a depression as a way to call for more Keynesian spending which we all know does not work.

Regardless, the gloom and doom is definately beginning to have a psychological effect on investors IMO.  Remember:  The market has alwas been about confidence and psychology.  It's no different this go around.

Right now, people are afraid for this country and our future and they have every right to be in my opinion. 


This has already hit the blogoshpere today so I won't spend to much time on it, but I wanted to comment on the a piece from one of the economists at the Fed who is warning everyone that they should avoid listening to financial bloggers.

Can you say Paranoia?  Perhaps the Fed is worried that the serfs are actually hearing the truth versus listening to the constant "the economy is recovering" propoganda that comes out of the Fed on a daily basis?

Are there some websites out there that are full of Moonbats?  Of course...WOuld you expect anything else from the interenet?

However, It doesn't take a Phd to understand that this isn't working.  All it takes is a little common sense.  When it comes to economists author  P.J. O'Rourke said it best below:

"P.J. O'Rourke, writing in "Eat The Rich" (1998), observed that: "Economics is an entire scientific discipline of not knowing what you're talking about." The only quibble may be with the "scientific" part."
I'll leave it at that.

Let Me End With A Warning

The recent move in bonds is not fundementally sound.  People are flocking to treasuries because they believe this safe haven is the best of the worst.  This is not a sound reason to invest on something but all risk is relative so you hold your breath and buy it. 

For now moving into bonds makes sense.  Longer term I believe it does not.  In fact, moving into bonds could be a colossal mistake if we do not get our fiscal house in order. 

I show this chart a lot because it's very important.  We saw the same type of action in bonds before we fell into a deflationary death spiral back in the early 1930's:

The Bottom Line:

As you can see above, bonds soared after the crash of 1929 as investors flocked to safety.   This turned out to be a big mistake when stocks crashed in 1932.

Bonds collapsed along with stocks as investors lost confidence in the solvency of just about all financial instruments. 

Ater losing confidence, investors began to believe that the safest place for their money was under the mattress.  The only bull market left during these times was cold hard cash!

I think we are seeing a similiar psychology develop right now although I doubt it will come to throwing money under the mattress once again(at least I hope not).

The point here is make sure you spread out your fixed income risk into a variety of assets because treasuries are far from a safe haven with the way the Fed is spending money.

Keep an eye on bonds in the short term because this move into treasuries could be a warning that things are about to really get ugly on the equity side.

 Disclosure:  Owner of PTTRX and BPRAX in longer term accounts.  Small position in TBT in shorter term trading accounts.

Sunday, June 27, 2010

RBS Warns Clients: Get Prepared for the Fed's Printing Press

Another video tonight after a few comments.

The video is from a fan of The Automatic Earth which is one of my favorite reads on the Internet. 

There is some great advice in the piece and I hope all of you listen to it in its entirety.

The reset button is about to be pushed and we all need to be prepared.  My gut has been telling me that things are about to unravel. I am starting to see some extremely accomplished people out there that are starting to warn of the same thing.

As we saw in Greece, things can unravel in a matter of days. 

Ambrose Evans Pritchard wrote a piece tonight about a RBS warning that went out to their clients:

"RBS tells clients to prepare for "monster" money printing by the Federal Reserve

As recovery starts to stall in the US and Europe with echoes of mid-1931, bond experts are once again dusting off a speech by Ben Bernanke given eight years ago as a freshman governor at the Federal Reserve.

Published: 5:11PM BST 27 Jun 2010

By Ambrose Evans-Pritchard

Entitled "Deflation: Making Sure It Doesn’t Happen Here", it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.

The speech is best known for its irreverent one-liner: "The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost.

Related Articles

Ben Bernanke: the man determined not to preside over a second Great Depression
Markets rally on Ben Bernanke's optimism over global economy
Bernanke began putting the script into action after the credit system seized up in 2008, purchasing $1.75 trillion of Treasuries, mortgage securities, and agency bonds to shore up the US credit system. He stopped far short of the $5 trillion balance sheet quietly pencilled in by the Fed Board as the upper limit for quantitative easing (QE).

Andrew Roberts, credit chief at RBS, is advising clients to read the Bernanke text very closely(

because the Fed is soon going to have to the pull the lever on "monster" quantitative easing (QE)".
We cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable," he said in a note to investors.

Roberts said the Fed will shift tack, resorting to the 1940s strategy of capping bond yields around 2pc by force majeure said this is the option "which I personally prefer".

Societe Generale's uber-bear Albert Edwards said the Fed and other central banks will be forced to print more money whatever they now say, given the "stinking fiscal mess" across the developed world. "The response to the coming deflationary maelstrom will be additional money printing that will make the recent QE seem insignificant," he said.

Despite the apparent rift with Europe, the US is arguably tightening fiscal policy just as hard.

Congress has cut off benefits for those unemployed beyond six months, leaving 1.3m without support. California has to slash $19bn in spending this year, as much as Greece, Portugal, Ireland, Hungary, and Romania combined. The states together must cut $112bn to comply with state laws."

The Congressional Budget Office said federal stimulus from the Obama package peaked in the first quarter. The effect will turn sharply negative by next year as tax rises automatically kick in, a net swing of 4pc of GDP. This is happening as the US housing market tips into a double-dip. New homes sales crashed 33pc to a record low of 300,000 in May after subsidies expired.

It is sobering that zero rates, QE a l'outrance, and an $800bn fiscal blitz should should have delivered so little. Just as it is sobering that Club Med bond purchases by the European Central Bank and the creation of the EU's €750bn rescue "shield" have failed to stabilize Europe's debt markets. Greek default contracts reached an all-time high of 1,125 on Friday even though the €110bn EU-IMF rescue is up and running. Are investors questioning EU solvency itself, or making a judgment on German willingness to back pledges with real money?"

My Take:

I guess it's time to get prepared for another blast of QE if Ben gets his way.  I usually enjoy Pritchard but the conclusion of this piece is essentially hogwash.  Most of the quotes are from RBS who obviously wants to see this happen.

The idea that Bernanke thinks that he can pull off another huge round of QE without rates soaring is completely delusional.  Folks:  The Fed does not control interest rates.  The bond market does.  They will tell you otherwise but history has shown us that this is a crock.

Just look at the PIIGS bond markets if you need some proof.  When the end is near the bond market always calls you out by running away from your debt because they know that they will likely never be paid back.  The risk of default is simply too high to hold the paper.

Greek rates are soaring once again even after the ECB back stopped them.  If the bond market have called out the ECB then why wouldn't they call out the Fed?  The answer is they will.  The Fed arrogantly believes that they won't.   I strongly disagree.

The unintended consequences of the Fed attempting another $2-3 trillion QE spending binge are unfathomable.   First of all the bond market would never accept it.  They would all start dumping treasuries. 

Rates would eventually move higher.  Perhaps not right away.  Rates collapsed the last time they pulled this but our deficit issues were not nearly as severe.  Like any child who is misbehaving, there comes a point where you just put a stop to it.  The way I see it:  The Fed is about to be sent up to their room without dinner by the bond boys.

There are other consequences to worry about: What would happen to inflation in such a scenario?  What happens to the dollar?  Does it collapse?  What happens the price of gas and other commodities if the currency collapses?

This is absolutely crazy!  How could the Fed be contemplating such a move after seeing no economic improvement after already spending 1.75 trillion in QE? 

Let's face it:  Pretty much all of the economic growth that we have seen in the last few quarters has been as a result of government stimulus.  Hardly any of it of it was real private sector growth.  In fact, the private sector is contracting at an alarming rate. 

Folks, we are in a depression right now without government spending.  The reality here is that we can only do this magic act of "hiding the losses" for so long without bankrupting ourselves. 

The reality here is the velocity of money(M3) is collapsing and debt deflation has arrived.  There is no turning back at this point.

The velocity of money is collapsing because we(both the country and the people) are all up to our necks in debt.  As a result, we do not have the ability to borrow anymore.  Once you reach this saturation point its over.  The debt needs to be defaulted on ar get paid off before you can see any real economic growth.

We all maxed out the credit cards on $500,000 houses, $50,000 college educations, and $40,000 SUV's.s The Fed's credit card still works for now but it's days are definitely numbered.

The idea that the Fed would even be considering such a move tells you how much trouble we are in. As you can read above, the doo doo is already beginning to hit the fan.

States face a combined $100+ billion dollar budget deficit.  Unlike the USA, the states must balance their budgets by law.  AS the stimulus money disappears(as explained above) there is only one way to close the budget gaps:  Cutting state workers and benefits. 

The senate voted down another extension of unemployment benefits last week.  I expect Washington moving forward will tell the states that they are on their own.  This will result in a lot of pain.  Some tough cuts will have to be made and they will effect all of us.

If Ben pulls the trigger on this money printing game you can be sure that the end game is near. 

Watch below and get prepared because the fat lady is about to sing.