6/10/2010 – Again, we shall warn our clients/readers/friends that the manner in which the US market closed yesterday was hardly to be construed positively, for as we’ve said, bear markets historically open each day higher and close hard upon their lows, while bull markets open lower and close hard upon their highs. Clearly what has been happening in the course of the past several weeks in the stock market here in the US is not of the latter form and is much of the former – Dennis Gartman

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From Richard Russell 6/09/10 – “A switch — Suddenly, traders and investors believe that the market is weak and that more downside action is just around the corner. As a result, they’ve piled into puts on the S&P which is insurance against downside losses. In fact, the price of puts has surged, meaning that downside insurance has become crowded. When this happens, you can bet that the stock market is ready to rally and cross up those who are betting on more immediate downside action.” “I don’t like the picture. Selling pressure continues powerful and in the driver’s seat, while buying power is weak”. Dow Theory Letters

Go to Cash: Facts and Fiction

In a surprising development, the most bearish, and easily most comprehensive, report that we have read in a long time on the broader markets, comes from Canada of all places, via BMO’s Quant/Tech desk. The report’s title is simple enough: Go To Cash – In Plain English. Not much clarification needed – via ZeroHedge

Here is the gist:

“We advocate switching out of equity positions and going to cash. The European sovereign debt crisis appears to be nowhere near over. The global credit environment is worsening. Cost of capital is going up and availability is going down. There are large gaps between where the credit market prices risk and where the equity market is priced. Equity is lagging the deterioration in credit conditions. Moves in currency, equity and commodity markets are mirroring the moves in the credit market. Global growth, in a credit-constrained environment, will slow. Profits will be squeezed by the higher cost of capital…We advocate a zero weight toward equity, and that investors convert their equity positions to cash.”

……read the whole BMO report HERE

Last Wednesday, I met the “Oracle of Omaha” in Sing Sing penitentiary – the notorious maximum-security prison “up the river” from Manhattan.

The occasion was the graduation ceremony for prisoners who had completed their college degrees at the correctional facility. Buffett’s sister, Doris, is a donor of the college program and invited Buffett to the event.

~ The European Crisis & Wall Street Selloff: Despite these two major events, Buffett told me he was quite bullish about the markets and expressed optimism about employment and the recovery: “It’s bound to go up,” he said.

~ The Debt Crisis: In response to his bullishness, I asked Buffett whether the growing budget deficits concern him. His sister, Doris, expressed deep concern about the debt crisis, but Buffett was less worried. With regard to the massive unfunded Social Security and Medicare liabilities (which Alexander Green mentioned in yesterday’s column), he told me he favors means testing as a way to reduce the costs of these entitlements: “I get Social Security and Medicare, but I don’t need it.”

~ Gold: I asked Buffett about the “ultimate salvation investment” – gold. Does he believe it’s a good long-term investment?”

“No – I’ve never invested in gold.” Buffett’s father, Howard, a conservative Republican congressman from Nebraska, believed in the gold standard and gave Buffett some gold coins. He told me he still has them, but “only as a keepsake, not as an investment.” He told me he’s no gold bug and instead prefers to invest in well-run businesses, on the belief that investing in free enterprise does more social good than investing in gold. He’s not interested in gold even as a speculation, although he did take a position in silver several years ago (not as a monetary metal, but as an industrial metal).

“So are you a collector of anything?” I asked Buffett. “Stamps, cars, art work?”

His response: “I collect businesses and friends.” (And with his Berkshire Hathaway stock is worth at least $50 billion, I’ll bet he has plenty of the latter!)

f you want to buy a value stock that Buffett currently favors, buy Goldman Sachs (NYSE: GS). It’s selling for only six times earnings and has profit margins exceeding 30%.

Good trading – AEIOU,

Mark

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Most Americans know that the U.S. economy is in bad shape, but what most Americans don’t know is how truly desperate the financial situation of the United States really is.  The truth is that what we are experiencing is not simply a “downturn” or a “recession”.  What we are witnessing is the beginning of the end for the greatest economic machine that the world has ever seen.  Our greed and our debt are literally eating our economy alive.  Total government, corporate and personal debt has now reached 360 percent of GDP, which is far higher than it ever reached during the Great Depression era.  We have nearly totally dismantled our once colossal manufacturing base, we have shipped millions upon millions of middle class jobs overseas, we have lived far beyond our means for decades and we have created the biggest debt bubble in the history of the world.  A great day of financial reckoning is fast approaching, and the vast majority of Americans are totally oblivious.
But the truth is that you cannot defy the financial laws of the universe forever.  What goes up must come down.  The borrower is the servant of the lender.  Cutting corners always catches up with you in the end.

Sometimes it takes cold, hard numbers for many of us to fully realize the situation that we are facing.

So, the following are 50 very revealing statistics about the U.S. economy that are almost too crazy to believe….

#50) In 2010 the U.S. government is projected to issue almost as much new debt as the rest of the governments of the world combined.

#49) It is being projected that the U.S. government will have a budget deficit of approximately 1.6 trillion dollars in 2010.

#48) If you went out and spent one dollar every single second, it would take you more than 31,000 years to spend a trillion dollars.

#47) In fact, if you spent one million dollars every single day since the birth of Christ, you still would not have spent one trillion dollars by now.

#46) Total U.S. government debt is now up to 90 percent of gross domestic product.

#45) Total credit market debt in the United States, including government, corporate and personal debt, has reached 360 percent of GDP.

#44) U.S. corporate income tax receipts were down 55% (to $138 billion) for the year ending September 30th, 2009.

….read the other 43 HERE

….read David’s summary HERE

…..read full article HERE

In today’s issue of Breakfast with Dave

• While you were sleeping: global equity markets are rallying today, shrugging off yesterday’s reversal in the U.S. markets; strong economic data out of Australia and China; bonds selling off modestly

• Yield theme continues unabated: bond funds saw inflows of $4.25bln last week, while equity funds posted a $654mln outflow

• Market thoughts: the critical 1,040 threshold on the S&P 500 has indeed held, but for how much longer?

• Demand for gold … coming from many sources: it is no longer about investor demand through ETFs driving the gold price, physical demand for gold coins and bars are also very strong

• Apps slaps: it is truly amazing to contemplate a sustainable recovery in U.S. housing when mortgage applications for purchases are down significantly

• Leading the leader

….read David’s summary HERE

…..read full article HERE