Free Republic

Let's discuss value investor Jeremy Grantham's thesis on "super bubbles" and his target for the S&P 500. For almost a half-century, value-investing icon Jeremy Grantham has been calling market bubbles. Now, he says U.S. stocks are in a “super bubble,” only the fourth in history, and poised to collapse. Please do yourself a big favor and play the above interview in entirety. It's not a fluff interview. Bloomberg's Erik Schatzker grills Jeremy Grantham right from the get go about Grantham's view a year ago. Q&A Snips Schatzker: At the risk of putting words in your mouth, you are as certain...

The "recovery" news in Spain keeps piling up. Via translation from El Economista, Government has already taken 37% of the total 'pensions piggy bank'. If extractions continue at the current rate, the fund would be exhausted in 4 years. The Government of Mariano Rajoy has released 24.65 billion euros of the Social Security Reserve Fund in less than two years. Such amount represents nearly 37% of the total 66.815 billion fund accumulation. That figure marks the highest cumulative piggy bank draw-down in history, following its commissioning in 2000 and after eleven years in which successive governments did not need to...

Proving that neither party really wants to do anything about escalating costs of anything, in typical D.C. compromise action, the House Passes $956B Farm Bill in a bipartisan vote. Speaker John Boehner (R-Ohio), and Majority Leader Eric Cantor (R-Va.), and Minority Leader Nancy Pelosi (D-Calif.) all voted for the bill. Democrats are howling over minuscule cuts in SNAP (food stamps). For example, an inane headline on the Daily Koz reads House passes food stamp-slashing farm bill. Supposedly there will be $8.6 billion in devastating food stamp cuts. Even if that happens it is less than a 1% cut in an...

Please note that the current debt limit is $16.699 trillion. Debt to the Penny Interestingly, the US Treasury website Debt to the Penny and Who Hold It shows the current public debt as 16,747,429,285,635.12 (the same as Nick shows in the above chart). Treasury Stops Updating National Debt You do not have to be a math genius to figure out that "debt to the penny" already exceeds the debt limit. I asked Nick about that and he replied ... Since mid-May, "debt to the penny" hasn't been rising. When they postponed raising the debt limit they stopped showing any increase...

As noted previously, it is crystal clear to everyone but bankers and brain-dead analysts that banks need to be recapitalized, in Europe and the US as well. The crucial question is "how?". In 2008, US taxpayers bailed out AIG (Goldman Sachs really), Fannie Mae, Citigroup, Bank of America and scores more financial corporations of all sizes, too numerous to mention. Why? Ben Bernanke, Hank Paulson, Tim Geithner, Larry Summers, and a parade of bankers and ex-Goldman employees all said this had to be done to spur lending. It was a lie. The bailouts were nothing but a gigantic transfer-of-wealth scheme...

Once again the bond markets have spoken, and once again the message is the same: default. Greek two-year bonds are near 44%, having touched as high as 46%. The interest rate on 1-year Greek government debt is a stunning 59.8%.  Greece Not Saved  Supposedly "Greece was Saved" on that blue circle when yet another bailout (throwing more good money after bad) was approved.  The deal unraveled for numerous reasons but demands by Finland for collateral are at or near the top of the list. Austria, Slovakia, and the Netherlands now want collateral as well.  Under great pressure from Germany, the...

WASHINGTON, DC - House Speaker John Boehner (R-OH) released the following statement today regarding ongoing debt limit discussions with the White House: "Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes. I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase."Conflicting stories from Reuters and the New York Times suggests that the sides are at least still...

Gov. Christie today declared that New Jersey had veered to the edge of bankruptcy and ordered a broad array of state cuts in an effort to make up a $2.2 billion deficit in the current budget amid falling revenues. Christie froze aid to more than 500 school districts and public colleges and universities, ordered the end to several state programs and the Office of Public Advocate, and seized unspent money across state government. "Today, we come to terms with the fact that we cannot spend money on everything we want,'' Christie told a special joint session of the legislature. "The...

Inquiring minds are interested in figuring out how long it might take to get back to "full employment" defined as 5%. John Mauldin touched upon this theme in Welcome to the New Normal. John's analysis stopped short of making actual projections as to when full employment would return, or the detailed path it would take to get there year by year. However, I thank John for providing a nice starting point for discussion. In Scarred Job Market Expected to Weigh on Economy The Wall Street Journal offers this look at how long it would take to return to employment levels...

I have been talking about the Job Loss Recovery for quite some time. Here are a few recent examples. July 14: Bernanke Sees Chance of Jobless RecoveryGiven that the Fed's first mission is to delay, confuse, hope, and otherwise attempt to buy time while engaging in wishful thinking along the way, that Bernanke is willing to admit this may be a jobless recovery is a sign that things will likely be at least that bad. In other words, prepare for a job loss recovery.August 3: Thoughts On The "Recoveryless Recovery" Most know that I am in favor of an "L...

There were over 900,000 foreclosures in the third quarter as Foreclosures rise 5 percent from summer to fall. The number of households caught up in the foreclosure crisis rose more than 5 percent from summer to fall as a federal effort to assist struggling borrowers was overwhelmed by a flood of defaults among people who lost their jobs. The foreclosure crisis affected nearly 938,000 properties in the July-September quarter, compared with about 890,000 in the prior three months, according to a report released Thursday by RealtyTrac Inc. That puts foreclosure-related filings on a pace to hit about 3.5 million this...

I wholeheartedly endorse Peter Schiff for Senate. To understand why, in spite of previous differences between us, please consider the following compelling case, starting with a look at government bailouts, the moral hazards of too big to fail, the current rise in the stock markets, and the "great government advance" of corporate welfare and bailouts at taxpayer expense. Robert Reich, former Secretary of Labor, Professor at Berkeley, discusses government intrusion in Why the Dow is Hitting 10,000 While Everyone Else is Cutting Back. So how can the Dow be flirting with 10,000 when consumers, who make up 70 percent of...

For the first time since the great depression (and possibly even then), US wage earners suffered through A Decade With No Income Gains. The typical American household made less money last year than the typical household made a full decade ago. To me, that’s the big news from the Census Bureau’s annual report on income, poverty and health insurance, which was released this morning. Median household fell to $50,303 last year, from $52,163 in 2007. In 1998, median income was $51,295. All these numbers are adjusted for inflation. In the four decades that the Census Bureau has been tracking household...

Inquiring minds are wondering How Overpriced Is The S&P? It's an excellent question given bulls feel the market is headed much higher while the bears feel the opposite after a remarkable 50% rally. Let's start off with a look at the financial sector where Allowances for Loan and Lease Losses (ALLL) have plunged even though non-performing loans soar. To understand the importance of ALLL, inquiring minds are reading a description of Allowances for Loan & Lease Losses. Businesses try to predict, on an ongoing basis, the amount of loss in their accounts. They take periodic charges to earnings to better...

When it comes to foreclosures, there is no such thing as a "safe state". Even states that did not engage in widespread use of liar loans and other silly mortgage lending practices are struggling with foreclosures. The issue is jobs, and unemployment is rising everywhere. Please consider Foreclosure Woes Spread To Areas Once Thought Safe. Amid record levels of home foreclosures nationwide, there are worrying signs that the foreclosure crisis could be spreading to parts of the country that had previously been relatively unscathed. Last month, for example, RealtyTrac, a private firm that tracks foreclosure data, recorded sharp spikes in...

The Department of Labor Weekly Unemployment Report is now so skewed by abnormalities, it is difficult to get a clear picture. First, let's take a look at the data. Seasonally Adjusted Data In the week ending July 25, the advance figure for seasonally adjusted initial claims was 584,000, an increase of 25,000 from the previous week's revised figure of 559,000. The 4-week moving average was 559,000, a decrease of 8,250 from the previous week's revised average of 567,250. The advance seasonally adjusted insured unemployment rate was 4.7 percent for the week ending July 18, unchanged from the prior week's unrevised...

Hotel owners are facing the same problems as homeowners, being upside down on their properties with no good escape. Please consider Hotel foreclosures jump in California. In California, 175 hotels are in default -- the first stage in the foreclosure process -- according to a report from Atlas Hospitality Group, an Irvine-based brokerage firm. Another 31 have been foreclosed, nearly one third of them in the Inland region. Of those in default or foreclosure, about 75 percent obtained new loans between 2005 and 2007 for construction financing, re-financing or to buy the hotel, according to the firm. Atlas Hospitality estimates...

The peak in initial claims might be in but the peak in unemployment is nowhere close. Continuing claims hit 6.56 million, setting a record for the 15th straight week. Please consider the Department of Labor Weekly Claims Report. SEASONALLY ADJUSTED DATA In the week ending May 9, the advance figure for seasonally adjusted initial claims was 637,000, an increase of 32,000 from the previous week's revised figure of 605,000. The 4-week moving average was 630,500, an increase of 6,000 from the previous week's revised average of 624,500. The advance seasonally adjusted insured unemployment rate was 4.9 percent for the week...

Time For Mankiw To Resign On Saturday I checked my watch to verify the date. A quick check showed it was April 18. Just to be sure I asked my wife Joanne and she assured me it was the 18th. Likewise my computer said it was the 18th. For a brief moment, I thought we had flashed back in time and it was April 1. April Fool's day was the only rational explanation I could come up with for a column in the New York Times by Gregory Mankiw, professor of economics at Harvard.

Everywhere you turn there is news that the Fed, the Treasury, or Congress is attempting to "get credit flowing again". Kevin Depew was discussing this situation in Five Things: Credit is the Lifeblood of the Economy? These are heady times we are living in. Collectively, our national intoxication runs deep and fierce. From moment to moment no one really knows whether to laugh, cry, or do both at the same time, and so the air on the street is juiced with a mildly psychotic hum. Consider the assertion - made almost daily by politicians and monetary policy figures - that...