Whoops! The 13th Bank Failure Of 2013 Was On Tuesday The 14th!

Well now, that's unusual. The 13th bank failure of 2013 occurred this past Tuesday, May 14th. Usually the FDIC waits until Friday late to close a bank. Can you imagine having closed it the day before, on Monday, May 13th? Me either. I guess the Feds are having a little fun with us. Either that or the FDIC is having a baseball game with Goldman Sachs tonight.

The bank in question which failed on Tuesday was Central Arizona Bank, Scottsdale, Arizona, costing the FDIC a measly $8.6 million.

Lefty Rep. Sander Levin Calls For The Head Of IRS' Calculating Snake Lois Lerner

Quoted here:

Sander Levin, the [House Ways and Means Committee's] ranking Democrat, said the IRS and its employees 'have completely failed the American people' by 'singling out organizations for review based on their name or political views, rather than their activity.'

'All of us are angry about this on behalf of the nation,' the left-leaning Michigan congressman said.

Lois Lerner is the civil servant who heads up the IRS division in charge of evaluating charitable and other nonprofit organizations. Levin called for her head.

'Ms. Lerner should be relieved of her duties.' he said.

We must seek the truth, not political gain.'

In what [ousted acting IRS commissioner Steven] Miller called 'a prepared Q-and-A' on May 10, Lerner told an American Bar Association conference about a pending IRS Inspector General report examining the targeting of conservative groups inside the IRS's Exempt Organizations section.

That admission started the media feeding frenzy that has spiraled into a full-blown scandal. The acknowledgement that Lerner went to the event with the intention of publicly disclosing the IG report's existence raised eyebrows on the congressional panel.

The Daily Caller here emphasizes that the disclosure by Lerner was pre-planned and misrepresented as an answer to an innocent question posed by an audience member at the American Bar Association conference when in fact the question was planted:

As it turns out, it was not a spontaneous revelation. The question, said outgoing IRS Commissioner Steven Miller in testimony before the House Ways and Means Committee Friday, was planted, as part of a prepared strategy for the IRS to release this information to the public.

Profiles in Courage, or Something

Benito Curly & Barack, As A Trio They're A Crock

Oh Yeah, That'll Work: Incompetent FBI To Investigate Terrorist IRS

The guys who didn't lift a finger to notify Boston police that Tamerlan Tsarnaev was a potential threat and then committed illegal searches for his brother in Watertown but skipped the place he was hiding are going to put the heat on their own kind whose job it has become to intimidate the American people?

Might as well have the Crips investigate the Bloods.

Reuters reports here that the focus of the investigation would come down to "speech rights", the only rights liberals care about other than abortion:

Analysts said that a federal criminal prosecution of IRS employees for allegedly violating a taxpayer's speech rights - by delaying or rejecting a conservative group's legitimate claim to tax-exempt status, for example - could be unprecedented and that the offense would need to be egregious.

Why you shouldn't feel "forced" to own stocks.

"The perception that investors are 'forced' to hold stocks is driven by a growing inattention to risk. But Investors are not simply choosing between a 3.2% prospective 10-year return in stocks versus a zero return on cash. They are also choosing between an exposure to 30-50% interim losses in stocks versus an exposure to zero loss in cash. They aren’t focused on the 'risk' aspect of the tradeoff, either because they assume that downside risk has been eliminated, or because they believe that they will somehow be able to exit stocks before the tens of millions of other investors who hold an identical expectation that they can do so."

-- John Hussman, here

If QE Were Cash Going Straight To Shareholders, Markets Would Be Up Just 6%/Year

But, of course, stocks are up almost 17% in the last year, and just under 13% annually over the last three years, and QE is NOT reaching the stock markets anywhere near so efficiently as it would if it were a direct cash distribution to shareholders.

So the penetrating thinker, John Hussman, here:

[T]he suppression of risk premiums [is] the remaining and primary effect of QE. In other words, QE has not increased the value of equities. It has only increased the price, but that increase in price has no significant fundamental underpinning.

To see this, first consider cash flows. Imagine that instead of attempting to boost stock prices indirectly through quantitative easing, the Fed took the candy-land approach of literally handing the $85 billion directly to stockholders to reward them for owning stocks. How much would that direct cash distribution benefit a stock market with a $17 trillion market capitalization? Do the arithmetic. Only 0.5% a month. Yet investors have chased prices at a far more rapid pace as a result of quantitative easing. Remember, of course, that the Fed is not in fact distributing cash to shareholders.

Presently the effect of such QE would probably be even less than 0.5% per month if every point of the Wilshire5000 represents a multiple of $1.2 billion, yielding a total market cap far higher than $17 trillion. A 0.4% per month rate of QE on $20.5 trillion of total market cap comes to $82 billion a month.

Rosie May Be Right: Cash May No Longer Be Safe

David Rosenberg points out that financial repression could go on as long as 2018, here:

[T]he Fed said in its December post-meeting press release that it will not budge from its 0% policy rate until the U.S. unemployment rate drops to 6.5%. It is currently around 8%.

We have done estimates based on various assumptions and found that achieving this Holy Grail likely takes us to the opening months of 2018 or another five years of what is otherwise known as financial repression.

People think their money is safe in cash, but it isn’t.

Following on that, just compare cash in the form of Vanguard's Prime Money Market Fund with stocks in the form of Vanguard's Total Stock Market Index Fund over the last five years and you will see that while cash was relatively safe compared to stocks for the four years up to May 2012 with stocks mostly underperforming cash, since then stocks have firmly broken out, as of about May 31, 2012 (the dot on the chart grabbed from Morningstar).

The only problem is that with a Shiller p/e today of 24.26 it's an awfully rich time to be investing in stocks which have reached new all-time highs.

And the alternatives don't look very attractive either.

At this hour the gold/oil ratio stands at 15 indicating that relative to each other their prices may have normalized but both at high levels relative to the long term.

Housing prices also are at the far upper end of the long term trend prior to the bubble.

And the bond market is within 2% of its highest valuations and also remains expensive to buy.

In my humble opinion the smartest thing to buy under these conditions is any long term debt one may be carrying at a rate of interest higher than about 3.5%. To retire it one would have to deploy capital, i.e. savings, but you can hardly lock in say 6.25% for twenty or twenty-five years anywhere else more easily than by retiring a 30yr-mortgage taken out at that rate in 2007. Bonds have returned less than 5% annually over the last ten years, and one year returns have fallen below 3.5%.

Still, there is no substitute for savings.

The surest way to get a 10% return is to save one dollar of every ten earned.

What Do The FBI And The IRS Have In Common In March 2010?

How about a conspiracy against the president's political opponents?

Late March 2010 was when the FBI swatted the Hutaree militia for supposedly subversive activities, and now it turns out also when the IRS explicitly began targeting conservative groups for investigation. It was also the month ObamaCare was very controversially passed and some vandalism erupted in various places around the country.

It's clear the trigger was pulled way too early on the Hutaree militia. The government's case was still too weak at the time, and it subsequently fell apart in court, quite ignominiously for the FBI. The militia members were completely vindicated in court of conspiracy to overthrow the government. Only the charge of illegal possession of a fully automatic weapon stuck. Not even the bomb charges could be proven. The rationale for pulling the trigger early must have been as a shot across the bow of the right wing, so to speak, in the light of the vandalism across the country after ObamaCare passed. The coincidence of the raid on the Hutaree at the end of that week in March 2010 should not be discounted, especially now that it turns out that the IRS also began targeting conservatives in that same month in 2010, according to ABC News, here:

The targeting of conservatives by the IRS started earlier and was more extensive than the IRS acknowledged last week, according to a draft IRS inspector general report obtained by ABC News.

As we reported on “Good Morning America” this morning, the IRS began targeting “Tea Party or similar organizations” in March 2010. That was when the Cincinnati-based IRS unit responsible for overseeing the applications for tax exempt status starting using the phrases “Tea Party,” “patriots” and “9/12″ to search for applications warranting greater scrutiny.

The only other person I know to have called the government's response in the Hutaree affair a calculated response to ObamaCare violence at the time, other than yours truly, is Monica Crowley. But now it appears there is more to it than that, making it look more and more like Obama has been using other organs of government against the people who oppose him, with deliberation and in a coordinated manner.

And George Will, of all people, might as well be calling for Obama's impeachment.

Maybe it's time to subpoena the mayor of Chicago.

Forbes Magazine Calls Keynes A Dead White European Male

Some of us would beg to differ.

All kidding aside, Jerry Bowyer makes some great points about John Maynard Keynes, pederast, misogynist, anti-Puritan immoralist and devotee of the cult of the higher sodomy:

"Keynes was a man who exhibited what most of us would see as an almost pathological preference for exclusively male intellectual and sexual companionship specifically because of the great admiration for the male mind and disdain for the female one, who disapproved of the presence of women in his economics classes, who found women’s thinking patterns repugnant and who associated savings with feminine reticence. Is it really such an unforgiveable sin to take these facts and to surmise that his odd sexual views might be related to his odd economic views? Is it really right that anyone who suggests that they are connected should be drummed out of polite society?"

Much more here.

John Tamny's Libertarian Myopia On The Plan B Pill

John Tamny, libertarian ideologue extraordinaire, asks us to join him in complete denial about reality, here:

"[G]overnments don’t nor can they exist as our Nanny."

An awful lot of people chafing under Nanny Bloomberg in NYC would beg to differ with that statement.

Does it really need to be pointed out that the mayor of New York routinely acts like he's everyone's mother? I think Bloomberg would be just as amused as we are to learn that his own perception that he even exists is as mistaken as is our perception that he exists. The man does exist, and gets away with what he does because there are plenty of people in the world who want him to, at least in New York City. The fact of the matter is that there are plenty of people just like Bloomberg who are all too happy to accomodate those who want to be ruled. Lately these characters also want in the worst way to be president of the United States for some reason. Just because we wish these things were not so doesn't mean that they are not so. The assertions of success of five-year-plan after five-year-plan in the Soviet Union eventually bowed to reality, as must we.

This sort of denial of reality is what lies behind Tamny's analogy between teen use of alcohol and teen use of the plan B pill, which he evidently advocates not because it is necessarily good but because it is not preventable for the same reason we cannot prevent teen use of alcohol. But this is not the proper analogy. The proper analogy is between the alcohol and the sex, both of which are desirable for the sensations which they provide, which is why it is difficult to regulate them. The reality is that a profound difference exists between the alcohol and the plan B pill: the pill is designed to kill, while the beer is not.

The plan B pill provides no pleasure analogous to beer which makes us desire it, except of a psychological sort such as any medication or placebo may provide. For that reason alone it should be as easy to regulate as any other medication. It alleviates a condition like an aspirin does after too much beer, but it does so by taking a human life. The utility of it masks its gravity.

Deregulation of the plan B pill for minors stands in stark relief against the FDA's own labeling regulations: Warnings "to keep product out of children's reach" must appear on over-the-counter medications like aspirin bottles, they say. My bottle says,  for example, "Reye's syndrome: Children and teenagers who have or are recovering from chicken pox or flu-like symptoms should not use this product." My aspirin bottle even comes with a child-thwarting cap in compliance with the FDA regulations: "Many OTC medicines are sold in containers with child safety closures. Use them properly.  Remember—keep all medicines out of the sight and reach of children." Contrary to its own stated mission, the FDA will be placing the plan B pill in plain sight of them.

One would think that a libertarian, being consistent, would be calling also for the abolition of all such age restrictions on medications and on alcohol, if the plan B pill is to be allowed to minors. But that, too, is conspicuously missing from Tamny's argument, which is sort of what one would expect of the perpetual childishness of the libertarian. Johnny still can't tell the truth. 

If government really no longer has any interest in preventing young girls from murdering their unborn children, which is what the plan B pill debate is really all about, then we might as well disband police departments everywhere.

No wonder gun stores are running empty. The people know too many of us have given up just like Tamny.

Boston Herald Calls Obama And Company Biggest Bunch Of Liars Ever

Here:

"Surely there has never been a bigger bunch of liars than the crew currently occupying the White House and the now-departed secretary of state. The steady drip, drip, drip of the Benghazi scandal is now a torrent — one that cries out for a special congressional Select Committee to put it all together email by email, revelation by revelation and lie by lie. ... For eight months the lies have continued. ... There surely must be a special place in hell reserved for those who cried crocodile tears at the death of our ambassador after doing nothing to help keep him safe and everything to cover up the true nature of the attack."

The Anti-Gang-Of-Eight-Bill Lines Of The Day

"A huge amount of American social policy is directed to reducing the number of people in our country who have low levels of skills and education, and it would be bizarre to use our immigration policy to increase that number significantly. Between the temporary-worker program . . . and its increase in low-skill immigration, this bill envisions a very significant increase in that number."

-- Yuval Levin in National Review, here.

Oh well, no more bizarre than imposing new federal taxes on mortgages while we attempt to drive down interest rates to boost home ownership. The ancients called this carding wool into the fire or carrying water in a sieve, the fruitless, eternal occupations of the inhabitants of the infernal regions.

Welcome to hell.

Larry Kudlow Wants To Exploit Immigrant Labor To Help Business, Not People

Here:

The dynamic idea is that immigration significantly increases the size of the U.S. labor force, and that more workers mean more growth.

The labor force has shrunk because there are no jobs, not because there is insufficient labor. If you bring in more labor competition, all you will do is lower the wages available for such jobs as exist, and enrich the employers at the workers' expense.

Sorry pal, more workers means even less opportunity for the Americans already unemployed. The last thing this country needs is more cheap labor undercutting the people who are already here and out of work.

We're all against you, Kudlow! 

The Guaranteed 10% Investment Return

For every ten bucks you earn, save one.

Gold/Oil Ratio Falls To 14.96, Slightly Favoring Gold For First Time Since 2008

Gold is presently trading at 1436.60 in after hours trading, oil at 96.04.

We haven't had a buy gold signal like this since 2008, but it's way too early to really say we should buy gold now. A sustained ratio below 15 is required, and this is just the first week of many weeks required below 15 to say buy gold without qualification.

Still, noteworthy.

Jim Cramer Sucks: Vanguard's Total Market Index Vaults To 41.02

Up 147% since the March 2009 low of about 16.60.

Don't forget, Jim Cramer told you on NBC, the Obama network, the Monday morning after TARP was signed the previous Friday in early October 2008, to sell if you needed your money in five years.

His statement materially contributed to more panic selling and the market lows. Within weeks the market plunged even though TARP was supposed to restore confidence.  By the following April the percentage of the public claiming to own stocks had fallen a full five percentage points from the previous April before the crisis began, according to Gallup, an unprecedented decline of confidence. And the decline has continued another full five percentage points since then.

Let's look at the lows by year as reported by Vanguard, remembering that on Friday, October 3, 2008 VTSMX, a proxy for the total market, closed at 26.62, before Cramer opened his big yap:

Nov. 20, 2008 = 18.00 (a decline of 32% from October 6 when Cramer said "sell"; thanks Jim)

Mar.  9, 2009 = 16.43 (over 38% down after Cramer opened his yap; what's another 6 points, huh?)

Jul. 2, 2010 = 25.36 (this low is already back up to within less than 5% of the pre-Cramer level)

Oct. 3, 2011 = 27.16 (this low for the year firmly 2% above the pre-Cramer level)

Jan. 4, 2012 = 31.75 (this low for the year almost 20% above the pre-Cramer level).

In other words, you had all your money back in three years to the date, despite the damage Cramer caused.

But what if he had just shut up? And what if we just hadn't listened?

Looks Like An Awful Lot Of People Stupidly Took Jim Cramer's Advice In 2008

The percentage of the population claiming stock market ownership plunged dramatically between April 2008 and April 2009 by five points, and has continued to decline by more than a point per year since then as of April 2013.

Jim Cramer told everyone to sell in October 2008 on NBC's Today Show after the panic of September, saying to do so "if you needed your money in five years". Well, if you had just left your money in the market, you'd be sitting pretty right now, four and a half years later. Since March 2009 the broad market is up over 140%, and since October 2008 to March 2013 your real rate of return in the S&P500 index has been +11.88% annually.

Gallup has the story and graph here.

American investing behavior over the long haul is a contrary indicator.

Net Credit Market Debt Contraction In Two Sectors Is Repressing GDP

The domestic financial sector continues net negative in credit market debt outstanding, $3.27 trillion below the October 1, 2008 peak, as of October 2012.

And the household mortgage sector continues net negative in credit market debt outstanding, $1.22 trillion below the January 1, 2008 peak, as of October 2012.

These broken sectors for credit expansion have been large, important channels through which trillions in "money" has historically been created in the economy but no longer is, destroying GDP growth in the process. Until these channels are repaired, or replaced, total credit market debt outstanding will not double every 6-11.5 years as it has since the Second World War, and GDP will not recover to its historic 20th century levels.

TCMDO last doubled between 1999-2007

The level at which total credit market debt owed last doubled starting from 1949 was $49.8 trillion in July 2007. Five years later, in July 2012, the level was only $55.7 trillion when arguably it should have been already $74 trillion.

Something has gone horribly wrong with credit expansion in the United States, and the financial and housing sectors remain ground zero for the problem.

For When "Incompetent" Just Doesn't Convey How You Feel

(see them all, here)