Stock Market: Two Biggest Fears Getting Closer

The stock markets remind me of the real estate market in Toronto, Canada. While the U.S. housing market crashed, the real estate market in Toronto is as strong as it has ever been.

In fact, builders can’t find enough lots to build homes on and developers can’t put condo buildings up fast enough in Toronto. In decent areas, the prices of condos have gone up from $400.00 per square foot to well over $1,000 per square foot and buyers are lining up.

Same thing with the stock market: There are so many people out there saying “It’s overpriced,” but stocks just keep rising. Why? Simply, stocks keep rising because there is too much money around, too much liquidity in the system. I can’t see the Fed doing much else other than dropping money from helicopters to increase monetary stimulus. With so much liquidity around, stocks rise.

The S&P 500 companies alone sit on about $1.0 trillion in cash. Stock markets do not fall when with so much cash in the system.

But here is when stock markets do fall: when inflation rears its ugly head, and when interest rates rise.

My dear friend, neither of these two events is far off. All we need to do is look at the bellwether 10-year U.S. Treasury. Last October, the 10-year Treasury yielded 2.4%. Today, despite the crisis we have witnessed in Japan, which should have sent investors running to the security of U.S. bonds, the 10-year Treasury yields 3.4%, up 41% in less than six months. In fact, this bond is up drastically in the last three trading days.

Yes, stocks will continue to rise in the very immediate term, just like the condo and housing market in Toronto. But the warning signs of trouble ahead are getting clearer every passing day. Enjoy the bear market rally while it lasts, because it won’t last forever.

Michael’s Personal Notes:

It is with sadness that we learn this morning about the bankruptcy filing of Harry & David, the gourmet food and fruit basket purveyor.

Each year I look forward to getting Harry & David gift baskets from our various suppliers. I was an especially big fan of their fruit baskets; their jumbo pears being my favorite.

The stark reality today is that, unless you have a sizeable Internet presence, the old traditional mail-order model will no longer work. The U.S. Post Office continues to adopt the wrong model of raising its prices as it fights the Internet.

Harry & David was established around the time of the great depression: 1934. The business thrived as the decades passed (assets of $500 million today), but it was unable to really get the following that other merchandise companies have enjoyed on the Internet. According to compete.com, Harry and David’s monthly web site traffic was less than one percent of the traffic of Amazon.com.

Where the Market Stands; Where it’s Headed:

Not much I can say about the stock market that I already haven’t talked about. We opened Caesar’s most dreaded month of the year at about the same level that stocks are about to end the month, in spite of the Japan disaster and continued lack of focus by the politicians on curbing government spending.

The bear market rally in stocks, which started in March 2009, continues.

The Dow Jones Industrial Average opens this morning up 5.5% for 2011.

What He Said:

“The proof the party is over in the U.S. housing market could not be clearer to me. The price action of the new-homebuilder stocks is telling the true story—these stocks are falling in price daily (and the media is not picking it up). Those who will hurt most when the air is finally let out of the housing market balloon will be those buyers who bought in late 2005. In fact, the latecomers to the U.S. housing market may end up looking like the latecomers to the tech-stock rally that ended so abruptly in 1999.” Michael Lombardi in PROFIT CONFIDENTIAL, March 1, 2006. Michael started warning about the crisis coming in the U.S. real estate market right at the peak of the boom, now widely believed to be 2005.

Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter

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Portugal Faces Severe Fiscal and Economic Crisis as Eurozone Sovereign Debt Fears Grow

The weakest links in the Eurozone chain are known as the PIIGS. This acronym represents five fiscally vulnerable members of the European monetary union: Portugal, Ireland, Italy, Greece and Spain. Already, two of the five members of this august club have capitulated to the dismal reality of their public finances and are receiving a Eurozone bailout, which comes from a fund consisting of borrowed money, borrowed that is by slightly less indebted Eurozone partners. Now, it would appear, Portugal is likely to be the third affiliate of the PIIGS to get a bailout.  Portugal’s Prime Minister Jose Socrates has resigned after Lisbon’s parliament rejected his proposed austerity package. Socrates claimed that Portugal did not need financial aid, and could resolve its fiscal problems through its own austerity measures. That hope appears now to have been abandoned, and the expectation is that Lisbon will soon come crawling for a bailout, as the spread on its bonds gets ever wider.

Standard & Poor’s, S & P and Fitch have all severely downgraded their ratings on Portuguese government debt. In the meantime, a new government in Ireland is stating that it wants to negotiate a less severe austerity package than the one accepted by the previous Dublin government in exchange for a Eurozone and IMF bailout. As Portugal wobbles, Ireland confounds while continuing to bankrupt its citizens as the price for bailing out its reckless banks. In the meantime, the Greek economy is deflating, making it ever more likely that Athens will eventually default on its public debt. That still leaves the two biggest PIIGS without a bailout.

After Portugal, Spain is the next likely candidate for the bond vigilantes. The most significant problem with Spain is that it is so much larger an economy than the previous candidates for a bailout, it is unlikely that the Eurozone and its already indebted taxpayers could sustain the massive public borrowing required to rescue Madrid from its own fiscal follies.

The sovereign debt crisis in the Eurozone is spinning out of control. And not far behind in entering  this vortex of doom is the United Kingdom, which despite massive public spending cuts retains an unsustainable deficit as its economy contracts. And then there is the United States, with a national debt now virtually at parity with its annual GDP, and projected  to have a record deficit in the current fiscal year, exceeding ten percent of its annual GDP.

In my book, “Global Economic Forecast 2010-2015: Recession Into Depression,” I predict that by 2012 a massive sovereign debt crisis in the major advanced economies will plunge the world into a global economic depression. All the recent developments regarding fiscal issues in the Eurozone, UK and U.S. do not give me any reason to alter my forecast.

 

global economic crisis euozone debt crisis, portugal debt crisis, Prime Minister Jose Socrates, sovereign debt crisis

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Radiation Fears Mount Despite Partial Restoration Of Power At Japanese Nuclear Plant

Last updated (GMT/UTC): 20.03.2011 14:02

Workers at Japan's stricken Fukushima Daiichi nuclear power plant have managed to reconnected power to the facility's No. 1 and No. 2 reactors, a step they hope will soon allow them to restart the plant's cooling system and avert a wider nuclear disaster.

The power is crucial to attempts by engineers to cool down all six reactors at the earthquake- and tsunami-damaged facility and limit further leaks of radiation.

The operator of the nuclear plant warned that it may take several days for power to be restored at the No. 3 and No. 4 reactors.

The partial restoration of power came with fears mounting of the deadly spread of radiation, which has already been detected in tap water in Tokyo, crops in the region that houses the Fukushima plant, and Japanese beans exported to Taiwan.

More than 8,000 people have been confirmed dead as a result of the March 11 earthquake and resulting tsunami, with 12,000 still missing. More than 250,000 people are staying in evacuation centers after the tsunami wiped away entire communities along the northern Japanese shore.

How Bad Is It?

Hundreds of demonstrators gathered in the Japanese capital on March 20 to criticize their government for failing to prevent a crisis at the Fukushima plant after the quake hit.

One of the protest organizers, Takashi Misumi, said authorities have failed to acknowledge the true scope of the disaster and called for Japan to abandon its nuclear energy program immediately.

"The government has no intention of stopping its nuclear operations. It says this will never happen again," Misumi told Reuters. "I want to appeal to the world and say that this is very dangerous."

Japan's race to avert a full-scale meltdown at the Fukushima plant has sparked fresh concerns worldwide about the safety of nuclear power.

Those fears are now likely to rise even higher, as radiation contamination has been detected in vegetables, dust, and water near the nuclear zone.

Japan's chief cabinet secretary, Yukio Edano, told a press conference that traces of radiation had been detected in two prefectures near the Fukushima plant.

Edano said the government is considering whether to ban the sale of food items, like spinach and milk, produced in the region.

"We will continue investigating the situation and analyzing what research needs to be done. We will decide by tomorrow [March 21] whether we need to impose restrictions on consumption in a specific region or whether we need to restrict the output of food products."

The news has come to a blow to the region's farmers, who stand to lose their entire harvest.

Much In Doubt

The Japanese government has been careful not to portray the power restoration at the Fukushima plan as a certain success.

It took 300 engineers braving high radiation levels to connect power to the plant's No. 1 and No. 2 reactors, which will aid attempts to cool down the reactor and limit the leak of radiation. The facility contains six reactors, three of which were up and running when the country's largest recorded earthquake struck.

Edano said the efforts were "showing some effect" but added that the government "was not in a position to be able to say anything" more about whether a nuclear crisis has been averted.

Both Japanese and foreign visitors have sought to leave Japan in the wake of the deadly earthquake and tsunami, which has caused widespread power outages and required massive rescue and reconstruction operations.

An 80-year-old woman and a teenage boy were rescued from the wreckage of a house in northeastern Japan a full nine days after the 9.0-magnitude earthquake that set off the catastrophe.

An official from the Taiwanese radiation watchdog said the amount of radiation detected on a batch of Japanese fava beans sent on March 18 was well below Taiwan's legal limit and was not harmful to human health. He did not know where in Japan the beans originated.

compiled from news agency reports

Source: http://www.rferl.org/content/power_back_ japan_reactor_nuclear_crisis/2344059.html

Copyright (c) 2011. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.

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Radiation Fears Mount Despite Partial Restoration Of Power At Japanese Nuclear Plant

Last updated (GMT/UTC): 20.03.2011 14:02

Workers at Japan's stricken Fukushima Daiichi nuclear power plant have managed to reconnected power to the facility's No. 1 and No. 2 reactors, a step they hope will soon allow them to restart the plant's cooling system and avert a wider nuclear disaster.

The power is crucial to attempts by engineers to cool down all six reactors at the earthquake- and tsunami-damaged facility and limit further leaks of radiation.

The operator of the nuclear plant warned that it may take several days for power to be restored at the No. 3 and No. 4 reactors.

The partial restoration of power came with fears mounting of the deadly spread of radiation, which has already been detected in tap water in Tokyo, crops in the region that houses the Fukushima plant, and Japanese beans exported to Taiwan.

More than 8,000 people have been confirmed dead as a result of the March 11 earthquake and resulting tsunami, with 12,000 still missing. More than 250,000 people are staying in evacuation centers after the tsunami wiped away entire communities along the northern Japanese shore.

How Bad Is It?

Hundreds of demonstrators gathered in the Japanese capital on March 20 to criticize their government for failing to prevent a crisis at the Fukushima plant after the quake hit.

One of the protest organizers, Takashi Misumi, said authorities have failed to acknowledge the true scope of the disaster and called for Japan to abandon its nuclear energy program immediately.

"The government has no intention of stopping its nuclear operations. It says this will never happen again," Misumi told Reuters. "I want to appeal to the world and say that this is very dangerous."

Japan's race to avert a full-scale meltdown at the Fukushima plant has sparked fresh concerns worldwide about the safety of nuclear power.

Those fears are now likely to rise even higher, as radiation contamination has been detected in vegetables, dust, and water near the nuclear zone.

Japan's chief cabinet secretary, Yukio Edano, told a press conference that traces of radiation had been detected in two prefectures near the Fukushima plant.

Edano said the government is considering whether to ban the sale of food items, like spinach and milk, produced in the region.

"We will continue investigating the situation and analyzing what research needs to be done. We will decide by tomorrow [March 21] whether we need to impose restrictions on consumption in a specific region or whether we need to restrict the output of food products."

The news has come to a blow to the region's farmers, who stand to lose their entire harvest.

Much In Doubt

The Japanese government has been careful not to portray the power restoration at the Fukushima plan as a certain success.

It took 300 engineers braving high radiation levels to connect power to the plant's No. 1 and No. 2 reactors, which will aid attempts to cool down the reactor and limit the leak of radiation. The facility contains six reactors, three of which were up and running when the country's largest recorded earthquake struck.

Edano said the efforts were "showing some effect" but added that the government "was not in a position to be able to say anything" more about whether a nuclear crisis has been averted.

Both Japanese and foreign visitors have sought to leave Japan in the wake of the deadly earthquake and tsunami, which has caused widespread power outages and required massive rescue and reconstruction operations.

An 80-year-old woman and a teenage boy were rescued from the wreckage of a house in northeastern Japan a full nine days after the 9.0-magnitude earthquake that set off the catastrophe.

An official from the Taiwanese radiation watchdog said the amount of radiation detected on a batch of Japanese fava beans sent on March 18 was well below Taiwan's legal limit and was not harmful to human health. He did not know where in Japan the beans originated.

compiled from news agency reports

Source: http://www.rferl.org/content/power_back_ japan_reactor_nuclear_crisis/2344059.html

Copyright (c) 2011. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.

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In light of radiation fears, I offer this repost

With all the worries over radiation leaks from Japan, and hoarding of Potassium Iodide tablets, I thought it valuable to repost a link to this story from last month which was very popular.

Many people in the USA would be surprised to learn that they will get more radiation from eating a single banana than they would from Japan’s nuclear reactors.

A banana equivalent dose is a concept occasionally used by nuclear power proponents to place in scale the dangers of radiation by comparing exposures to the radiation generated by a common banana.

Full story:

http://wattsupwiththat.com/2011/02/16/going-bananas-over-radiation/

UPDATE: My friend John Coleman of KUSI-TV in San Diego offers this explanatory video:

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