- Greece tanks the market? Again?
- Where’s my recovery? Something much more worrisome than Greece
- Best-case scenario: Stagnation. And wait till you hear the worst case…
- Aerospace spinoff in the works… and Byron King eyes a dark-horse buyer
- Housing market in Denver growing like (a) weed… Tea partier mulls over Occupy… Readers hunkering down… and more!
Well, this is a fine way to begin the week.
As we write this morning, every major U.S. stock index is down nearly 1%. The S&P 500 is holding up best at 2,077.
“U.S. Equities Decline After Greek Talks With Creditors Collapse,” says Bloomberg in one of those irritating headlines that implies the market is tanking because of the mess in Greece without actually saying so.
At the risk of repeating ourselves, Greece will not leave the eurozone.
Our Jim Rickards said so in 2011, and he says so now. “The euro was never an economic project,” he reminded us in this space a month ago. “It was first and foremost a political project. Once the politics were understood, it was clear that the euro and its expanding membership were here to stay.”
Besides, what would happen if Greece left? It would inevitably move closer to Russia, not least thanks to a centuries-long bond of Orthodox Christianity. Western leaders won’t have that, says the estimable Marc Faber in the current Gloom Boom & Doom Report. Greece will stay in the EU “even if this means further meaningful and painful financial concessions by the EU (that is, writing
off Greece’s debts).”
More worrisome this morning is an undeniable slowdown in U.S. manufacturing.
The Federal Reserve’s monthly index of industrial production slipped 0.2% in May… on top of a 0.5% decline in April. That’s weaker than the most pessimistic estimate among dozens of economists polled by Econoday.
The number has been negative four of the last six months… and the other two were flat. Technically, the manufacturing sector is now in a recession. On a chart, it looks like this…
The industrial production number is made up of three components — manufacturing, mining and utilities. Only utilities were in positive territory, and only barely. Within the manufacturing component, the only meaningful sign of life is auto sales — juiced by that subprime zero-down 84-month financing we mentioned a few days ago. And how long can that go on?
The first read on manufacturing in June is no better: The Fed’s Empire State Manufacturing Survey shows the factory sector in New York State is shrinking.
Here too the “expert consensus” blew it: Not one economist polled by Econoday figured on this outcome. We’re looking at nine months of weak numbers now… and two negative readings in three months. Heck, the index was performing stronger during the dead of winter — which is the mainstream excuse for the economy slowing down during the first quarter.
But now?
As Jim has long said, none of this will turn around without “structural change.” This morning, we see a graphical representation of this warning.
“Unless the United States reverses its decline in economic freedom, the best Americans can hope for is middling growth in living standards, and they may not even get that,” write economists W. Michael Cox and Richard Alm.
Cox and Alm have put a new spin on the “Economic Freedom of the World” index put out by Canada’s Fraser Institute, measuring the amount of red tape business has to contend with, country by country. They find the long-standing gap in economic freedom between the United States and the rest of the world is shrinking…
“Where economic freedom falters, capital will be scarce, misused and poorly maintained,” the economists write at Investor’s Business Daily. “Over time, people will become poorer.”
[Ed. note: If today’s downer news were as bad as it got, that would be one thing. But as you’re probably aware, Jim Rickards anticipates much worse. He compares the international monetary system to a “House of Cards” — vulnerable to collapse at the slightest disturbance.
Three days from now, Jim will be with us here in Baltimore… meeting with a small group of our readers who’ve paid upward of $6,500 each. They’ll learn how the collapse will unfold… and what action steps they must take now.
You have the chance to listen in on these sessions for a much lower cost. Through tomorrow at midnight, you can get the best available price on high-quality recordings and full transcripts — nothing will be held back. Take advantage of your early-mover discount and click here.]
The flip side of the safety trade is in full swing today. Bonds are rallying, sending yields down. At last check, the yield on a 10-year Treasury note was 2.35%. Gold is also benefiting — up about eight bucks to $1,189.
Crude is down about a half percent at $59.67. The dollar index is holding steady around 95.
“Most people simply don’t understand this huge opportunity,” says our Byron King, donning his military-tech hat today.
United Technologies (UTX) confirmed this morning it will either sell or spin off its Sikorsky helicopter unit. Sikorsky is the Pentagon’s No. 1 supplier of helicopters. UTX shares are down 2.5% as we write.
“There are several potential outcomes here,” Byron tells us. “Abuzz in the media is talk of a deal with Boeing, Lockheed Martin or General Dynamics.
“Any of these aerospace giants could either buy Sikorsky outright or take a minority stake in a spinout,” Byron goes on.
“But if United Tech goes that way, expect the U.S. Justice Department to place significant restrictions on any plan, based on antitrust concerns. This could stretch out any deal into a months- or years-long ordeal, with time eating up the gains.” Too, UTX would incur a massive capital gain tax bill.
“However, I know a slick legal trick that could let United Tech ‘sell’ Sikorsky to a willing buyer without any of that. It’s called a Reverse Morris Trust, and I only know what it is because of my time in law. There’s really only one company that fits the bill for this kind of move.”
Out of respect to his paying subscribers, we’ll withhold the name this morning. But we’ll mention here that Byron is also on the program for Jim Rickards’ “House of Cards” symposium on Thursday. He’ll spotlight four geopolitical trends impacting the global monetary system… and three military-tech investing opportunities opening up as a result. Again, you can act before midnight tomorrow night to get the best available price on recordings of every session, right here.
Is it possible legal marijuana is driving the real estate market in Colorado?
On Friday, we heard from a reader in Denver who says housing prices have jumped 25-30% in the last year — “over $200,000 for a 1,000-square-foot, two-bedroom, one-bath house in a mediocre neighborhood.”
Here comes CNN Money with a report that says legal weed gets much of the credit and/or blame. “The pot industry is creating jobs we didn’t have before,” says a real estate agent Kelly Moye. “It’s brand-new, it adds a whole new factor to the area; you have real estate needs, housing needs, job needs.”
The story quotes only real estate agents… who have a vested interest in citing any excuse to make it look like a tight market.
But it is a tight market: Moye says in a normal market, Denver typically has about 24,000 listings. Right now? Only 4,000.
“I have wondered about this myself,” writes one of our regulars after we reran that Venn diagram of Occupy Wall Street and the tea party.
“I don’t think, as a tea party supporter, I am all that enamored of big corporations having too much power either. I prefer the rule of law, the Constitution, etc., ‘have the power.’
“The issue is, rather, that the OWS nutcases want to replace everything with communism or the rhinestone version thereof, whereas the tea party is fine with a large corporation insofar as there is competition, which will naturally bring down the Brobdingnagian size of the GEs, GMs, etc., and keep their power tempered. Same logic as division of powers in government. Recall that the formal definition of fascism is the merger of the big corporations with the socialist state.”
The 5: Well, yes.
Interesting thing is liberals weren’t always obsessed with centralizing power — according to Sam Smith, the veteran editor of the online Progressive Review.
Liberals “have forgotten the devolutionary principles of the 1960s leftists,” he writes, “or the fact that many of their favorite issues — such matters as the environment, smoking laws, marijuana, Real ID and gay rights — rose to prominence thanks to local and state action long before there was federal interest. Instead, they tend to see advocates of local decision making as reincarnations of pre-civil rights era segregationists.
“This has all the logic of accusing people who raise children of being pedophiles. In fact, decentralization is not only written into the Constitution — albeit broadly ignored — but local action has been the secret behind every major social and economic policy that has graced this land.
“Imagine if abolition, labor unions, women’s and minority rights or the ecology movement had all been forced to wait until a congressional investigation or presidential candidate found them interesting enough to hold hearings. Doing things at the grassroots — whether as citizens, businesses or as local government — has been what has repeatedly moved America forward.”
Meanwhile, on this 800th anniversary of the Magna Carta, we can think of something else that unifies Occupy and the tea party – the quaint notion our rulers aren’t above the law.
“As a result of the ongoing controversy nationwide concerning the ‘real’ rate of inflation,” a reader writes, “my wife and I have been undertaking, over the course of the past several months, a studied (albeit informal) analysis of our own ‘consumer price index,’ as reflected in those things which we have been purchasing on a consistent basis for many years (groceries, gas, other household essentials, etc.).
“Prior to your invitation last week to visit the myCPI app at the website of the Atlanta Federal Reserve, we had already determined that our ‘real inflation’ rate has been at least 3-4% annually over the course of the past 24-36 months.
“Given our inputs, the myCPI app returns an annual value of 0.768%. Even if we assume that the anecdotal figures resultant to our informal study of the question may be skewed somewhat to the higher side of reality, I can assure you that our ‘real inflation’ is substantially higher than 0.768%.
“In addition, we have also been actively seeking to liquidate many nonessential assets in order to raise capital with which to augment our ongoing investment in precious metals. Although, once again, our report cannot be considered anything but anecdotal in nature, it is our considered opinion that we are simultaneously seeing a notable degree of deflation in many respects and a pronounced lack of liquidity in terms of our being able to attract buyers for goods by way of online classified ads and have been compelled to reduce prices far below what would have been considered reasonable even a year ago as opposed to now.
“We have considerable experience in the used goods markets, and we can categorically state that there simply are not buyers with ready cash to be found in comparison with prior years.
“This, of course, is not that surprising to us, given that we have also radically scaled back our own purchases of virtually everything except day-to-day essentials, in order to save cash (which we are keeping ‘outside the system’) and also to convert into ‘hard assets’ as much of our modest wealth as we possibly can.”
The 5: Sounds as if you’ve done a lot of thinking along the same lines as Jim Rickards…
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. The next phase in our ongoing Jim Rickards project begins Thursday — with a speech he’s never presented before any audience, anywhere.
On Thursday, Jim will join a select group of our readers here in Baltimore to unveil his “House of Cards” thesis — an entirely new way to look at the global monetary system… how its inevitable collapse will affect you… and what you can do to prepare.
If you can’t be with us, there’s the next-best thing — audio recordings of the entire event.
“You’ll reach two crucial milestones in preparing for the coming crisis when you listen in on our private meeting,” promises our executive publisher Addison Wiggin. “First, you’ll understand the scientific reasoning behind Jim’s collapse prediction. It will give you the knowledge you need to be confident in the fact that you need to take urgent action.
“And second, you’ll be armed with a unique investment plan ahead of the tumult. As the cracks in the monetary system grow wider each day to the point of collapse, you’re going to need it.”
Access to these recordings is available right now at the lowest possible price — but only through tomorrow night at midnight. Act here.
