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Things aren’t looking good on the debt crisis front in Europe … just a few days after the “great bailout!” Why? German officials continue to express concern about bailing out their profligate euro-zone neighbors.
Finance Minister Wolfgang Schaeuble warned that the European Financial Stability Facility shouldn’t get a “blank check” to bail out everyone and anyone. The fund currently stands at 440 billion euros. Schaeuble’s comments caused bonds issued by Spain, Italy and other countries — as well as bank stocks across Europe — to tank anew.
What about our debt crisis here in the U.S.? Not much good news there either! With each passing hour, the August 2 debt ceiling deadline gets closer and closer. But the Republicans and Democrats continue to get farther and farther apart when it comes to hammering out a deal!
My take?
We might get a last minute debt ceiling deal, but it won’t satisfy the ratings agencies. So they’ll strip the U.S. of its AAA rating. Or we won’t get a deal, and all heck will break loose!
And the economy?
All signs point to an ongoing slump. In June new home sales fell for the second month in a row, while home prices plunged more than 4.5 percent from a year earlier, the biggest drop in 18 months. The Richmond Fed index slipped back into negative territory in July, at -1 versus 3 in June.
Most importantly, durable goods orders dropped 2.1 percent in June against expectations for a 0.3 percent rise. A key gauge of business spending fell 0.4 percent.
Bottom line: If you’re looking for macroeconomic or political catalysts for a rise in stocks, you’re going to need a magnifying glass! Worse …
The “Earnings Stool” Is Now Being
Kicked Out from under the Market!
Over the past few months, every time we bearish analysts talked about the slowing economy or the debt crisis, the bulls trotted out a counterargument: Yeah, sure that stuff is bad. But corporate EARNINGS remain rock solid!
The implication? Just stick your head in the sand and buy, buy, buy! Who cares if several countries are going broke and big-picture indicators suggest a new recession is right around the corner!
But now, even that fallback argument is proving to be pure hogwash. With the exception of a few company-specific success stories (Apple, Amazon.com, etc.), there isn’t much positive coming out of corporate America!
Prime examples:
==> Diversified manufacturer 3M (MMM) makes everything from Post-it Notes to auto parts disappointed some analysts on the profit margin and sales front in the most recent quarter. Moreover, it forecast full-year earnings of $6.05 per share to $6.25 per share, the mid-range of which missed the average analyst forecast of $6.31 per share found in a Bloomberg survey. That caused the stock to tank by the most in nine months.
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| Market bellwether Caterpillar said dismal second-quarter earnings were the result of slow economic growth in the U.S. and developed markets made worse by lower-than-expected demand in China. |
==> Or how about Caterpillar (CAT)? The company makes heavy mining and construction equipment, and it sells into every major market around the globe. So Wall Street sat up and paid attention when the company missed profit estimates for the first time in 10 quarters a few days ago. The company warned of slower economic growth overseas, and its shares plunged the most in a single day in more than two years.
==> Then there’s United Parcel Service (UPS), the biggest shipping company in the world. Its shares fell the most in 13 months after the company warned of an “extremely sluggish” U.S. economy and weaker growth in select foreign markets.
==> Juniper Networks (JNPR), the second-largest maker of networking equipment? It whiffed on earnings and sales, causing its shares to plummet as much as 20 percent. Paccar (PCAR), the maker of heavy trucks under the Peterbilt brand? It plunged more than 10 percent after missing earnings targets.
==> Goldman Sachs (GS), the pre-eminent “Too Big to Fail” bank and brokerage firm? It slumped after missing by a country mile. And Boeing (BA), the gigantic military and commercial jet maker, forecast earnings per share of $3.90 per share to $4.10 per share for 2011. That missed the average forecast of $4.12 per share.
What to Do as Recovery Peters Out
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| For millions of Americans, hopes for a recovery have vanished. |
My take here folks? The economic “recovery” that never really felt like a recovery to many Americans is petering out. Growth is slowing around the world. Europe is still embroiled in sovereign debt problems, despite spending hundreds of billions of euros on bailouts. The Federal Reserve is out of bullets to boost the economy. And the politicians in Washington can’t tackle the U.S. debt crisis to save their lives!
So if you still … still … haven’t heeded my warnings on the stock market, I urge you to do so now. Transport stocks … retail stocks … financial stocks … and cyclical stocks all look vulnerable to me, now that earnings are coming up short. Either sell down your equity exposure, add inverse ETFs as hedges, or both!
Also, make sure you own some gold.
With both Europe and the U.S. embroiled in debt crises, it’s absolutely essential that you hold gold bullion, the SPDR Gold Shares (GLD), or related investments.
We’ve been recommending gold in Safe Money Report for years. And our subscribers have had the opportunity to make money hand over fist on that advice! If you would like to join them, and get ALL of our “buy” and “sell” signals, just click here or call 800-236-0407.
Until next time,
Mike
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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Mike,
Too bad you wrote this before today’s GDP #’s came out, another big miss, now anyone correct me if I’m wrong, but we have had 2 consecutive quarters with GDP contracting, arent we offically back into a recession(even though we never were out in the first place).
The short you recommended is a dog and the stock you told us to dump is up 4.5% today. I’m glad I didn’t listen to either recommendation. You’re “safe money” trades in and out much to quickly to be considered “safe” or effective and the shorts are all wasting derivatives that lose daily due to compounding. The longer you hold them., the more they waste away.
THINK?
Either party, Democrat, Republican are completely ignorant or just intentionally remain unconcerned about the massive expenditures for pandering to the illegal alien invasion. The federal debt ceiling and all 50 States have huge deficits from the illegal immigration occupation. Schools, health care and programs that is reducing America to a pauper nation. You as the American people must start yelling at the politicians in Washington, to demand they recognize that this issue is part of the discretionary spending. Only Rep. Michele Bachmann R-MN) Leader of the Tea Party Caucus, dares to speaks out about this issue, with a conviction that this is part of our national issues. The TEA PARTY membership can now be counted in the tens of million of ordinary citizens, who are black , Hispanic, White and other races. Bombard Congress with you voices, tell them no Amnesty, No Immigration Reform, no Sanctuary cities or States and No Dream Acts.
REMOVE ILLEGAL ALIENS AND THAT WILL CONSERVE TAXPAYER MONEY, AND MOVE US ON TOWARDS A BALANCED US TREASURY BUDGET AND THAT INCLUDES ALL 50 STATES WILL ARE SUFFERING AS WELL.
This needs to be repeated that When (Fair) analyzed the cost of illegal immigration and its nationwide deficit, they came up with a stunning figure of $113 billion dollars annually, while illegal alien revenue to the government coffers was a total amount of $13Billion dollars and change. Not included in these illegal foreign labors is wages leaving the country to foreign nations, estimated to be 46 Billion dollars? Our economy is sinking and the Obama administration is insisting on passage of another Amnesty failure. Heritage Foundation has stated that cost for processing another Amnesty expenditure is another 2.5 Trillion dollars.
Break down of revenue to support illegal migrants and illegal immigrants.
Federal Expenditures on Illegal Aliens
Education Title 1 program $1,332,900,000
Migrant education program $236,900,000
Title 111 program $538,000,000
Education Subtotal $2,107,800,000
Medical Emergency medical care $250,000,000
Fraudulent use of Medicaid $1,235,000,000
Medicaid cost of childbirth $1,238,100,000
Medicaid for children $1,626,800,000
other medical outlays $1,600,000,000
Medical Subtotal $5,949,900,000
Law enforcement Scaap compensation $330,000,000
Federal incarceration $678,400,000
Byrne grants $24,300,000
Detention and removal $2,545,000,000
Project safe neighborhoods $39,500,000
Residual ice functions $2,824,000,000
Exec. Office of immigration review $222,500,000
Southwest border prosecution $33,000,000
National Guard $642,000,000
Coast Guard $500,000,000
Law Enforcement Subtotal $7,838,700,000
Public assistance Free and reduced meal program $2,264,600,000
Temporary assist. Needy families $1,030,000,000
Housing assistance programs $637,000,000
Child care & development fund $633,000,000
Public Assistance Subtotal $4,564,600,000
General expenditures $8,184,400,000
TOTAL EXPENDITURE FOR US GOVERNMENT $28B, 645,400,000
State/Local Expenditures on Illegal Aliens ($ M)
Alabama $298 Illinois $4B,592 Montana $32 Rhode Island $278
Alaska $139 Indiana $608 Nebraska $262 S. Carolina $391
Arizona $2B,569 Iowa $350 Nevada $1B,191 S. Dakota $33
Arkansas $244 Kansas $442 New Hampshire $123 Tennessee $547
California $21B,756 Kentucky $280 New Jersey $3B,478 Texas $8B,878
Colorado $1B,451 Louisiana $224 New Mexico $608 Utah $453
Connecticut $957 Maine $41 New York $9B,479 Vermont $38
Wash D.C. $312 Maryland $1B,724 N. Carolina $2B,063 Virginia $1B,905
Delaware $305 Massachusetts. $1B, 862 N. Dakota $32
Washington State $1B, 510; Florida $5B,463 Michigan $929,
Ohio $563 W. Virginia. $31; Georgia $2B; 399 Minnesota,
$744 Oklahoma $465 Wisconsin $883.Hawaii $155 Mississippi.
$106 Oregon $705 Wyoming $51, Idaho $188 Missouri $338,
Penn. $1B,378
TOTAL STATE AND MUNICIPAL $83B,851
REVENUE INTO FEDERAL AND STATE TREASURIES FROM ILLEGAL ALIENS
Category federal State/local
Income -$2,302,800,000 $244,200,000
Social security $7,000,000,000
Medicare tax $1,637,100,000
Excise and miscellaneous $2,489,700,000
Employer (FUTA & income) $632,600,000
Property tax $1,378,000,000
Sales tax $2,333,000,000
TOTAL FEDERAL,STATE, LOCAL GOVERNMENT FROM ILLEGAL IMMIGRANTS $ 13B, 235.000.000
NOW CALCULATE THIS! TAKE $13.235.000.000 FROM $113.296.000.000 = ( $110.061.400.000 )
IN TAXES AMERICANS SUPPORT ILLEGAL ALIENS ANNUALLY $110.061.400.000
If you as a taxpayer wants to keep paying financial support for 20 million illegal aliens outlaws, then you deserve higher taxes and loss of jobs. Read the projections of future years if our borders remain unsecured, or no tracking system for 40 percent of visa over stays, who disappear and all take American workers jobs. Go to the Heritage Foundation website, NumbersUSA or Judicial Watch and read for the dollar figures that will turn your stomach sour. This is a patriotic chance to help your fellow jobless countryman by Calling House and Senate Leadership NOW Call the Capitol Switchboard at 202-224-3121
COPY THIS INFORMATION AND DISTRIBUTE TO FAMILY AND FRIENDS.
Dear Mike
This started with the complete mismanagement of the Bush era. Then there was hope with ‘YES WE CAN’. But since those days it has been no we can’t. The consuming public will not have confidence until they can have faith in the political establishment which has been bought by the banks. Why has there been no action against wall street or legislation to reign it in. Why do we still have CDO’S, CDS in the still unregulated derivatives market. No one is to blame, Nothing has been done to fix it. The polies are supported to look the other way unlike savings and loans. All this rubbish debt has been added to the national debt. That’s why we feel such a lack of confidence. SO WHY ALL THIS PREAMBLE. Whoever gets the leadership next, it must be someone who can inspire confidence, can’t be bought, or have ties to the military industrial complex. Someone who walks and not talks, leads and not follows. This is someone who at this desperate time in history does not need the money, the prestige or feels as though they have to bow to foreign leaders. We don’t need bullshit. Nothing is going to change until some of these things are fixed.