Has the Fed Lost Control of Interest Rates & the Bond Market?

Is the 10 Year about To Breakout of This Long Term Monthly Range into the 5-6% Range?

Is the 30 Year about to Breakout of this Long Term Monthly Range to 8%?

TLT is the 30 Year Bond vs S&P 500

Historical Chart Fed Interest Rates vs SPX 1971 to 2013

This chart alone should tell you how much impact the Federal Reserve has on the overall economy.  The Fed can obviously influence bankers but they have a little trickle-down effect on the overall economy.  Housing market bubbles yes but business growth and jobs no.   

 Is the economy 27x stronger than it was in 1971?  Or is this a Ponzi scheme spending and debt policy that have simply propped up markets artificially. Is the value created over the last 40 years at risk to collapse? 

Historical US Unemployment Rate

Duration of Unemployment 

The labor participation rate is collapsing.  

Is a Currency War about to Cause the Next U.S. Stock Market Crash?

Is the money printing debt ponzi scheme about to come to a crashing end?

In the intricate web of global finance, the notion of a currency war looms ominously over the stability of economies and financial markets. With recent geopolitical tensions escalating, particularly between major global powers, concerns about the onset of a currency war have intensified. But what exactly is a currency war, and could it spell disaster for the U.S. stock market?

Understanding Currency Wars

A currency war can be broadly defined as a situation where countries engage in competitive devaluations or monetary policies to gain a trade advantage. Typically, this involves countries deliberately weakening their currencies to boost exports, protect domestic industries, or reduce the burden of debt denominated in foreign currencies. While each country may have its own justifications for such actions, the collective impact can destabilize global markets and economies.

Current Geopolitical Landscape

As of recent updates, tensions between major economic powers, such as the United States, China, and the European Union, have been strained. Issues ranging from trade disputes to sanctions and geopolitical posturing have heightened the potential for economic retaliation, including currency manipulation strategies.

Implications for the U.S. Stock Market

The U.S. stock market, being one of the largest and most influential in the world, is intricately linked to global economic conditions. A currency war could impact it in several ways:

1. Market Volatility: Increased volatility is a hallmark of uncertain economic environments. Currency fluctuations can exacerbate this volatility as investors react to sudden changes in exchange rates.

2. Corporate Earnings: For U.S. companies with significant international exposure, currency fluctuations can impact their earnings. A strong dollar can make exports more expensive and reduce revenue from overseas operations when converted back into dollars.

3. Investor Sentiment: Currency wars often lead to heightened uncertainty and can dampen investor confidence. This could lead to capital flight from riskier assets like stocks to safer havens, affecting stock prices negatively.

4. Interest Rates and Inflation: Central banks often adjust interest rates in response to currency movements. Higher interest rates to defend a currency can increase borrowing costs for companies and consumers, potentially slowing economic growth.

Historical Precedents

Past instances of currency wars, such as the competitive devaluations during the Great Depression and more recent trade disputes involving China and the United States, offer lessons. These events have shown that currency tensions can escalate quickly and have profound implications for global markets.

Mitigation and Preparedness

While the specter of a currency war looms, investors and policymakers can take steps to mitigate its potential impact:

• Diversification: Maintaining a diversified portfolio across asset classes and geographic regions can help mitigate the risks associated with currency volatility.

• Monitoring Policy Developments: Keeping abreast of central bank policies and geopolitical developments can provide valuable insights into potential market movements.

• Risk Management: Implementing robust risk management strategies, such as hedging currency exposure where feasible, can help protect portfolios from sudden currency movements.

Conclusion

The possibility of a currency war causing the next U.S. stock market crash remains a significant concern amidst current global economic tensions. While the future is uncertain, understanding the dynamics of currency wars and their potential implications is crucial for investors and policymakers alike. By staying informed and prepared, stakeholders can navigate the complexities of a volatile global financial landscape more effectively, potentially mitigating the worst impacts of such a scenario.

In summary, while a currency war may not be inevitable, its potential ramifications underscore the interconnectedness of global financial markets and the importance of prudent risk management in safeguarding investments and economic stability.

New Phony Fed Stimulus Financial Paradigm = Deflation Not Inflation

Fed Stimulus = Long-Term Deflation Not Inflation 

The Fed has created another bubble that will likely pop but this time all the hedge funds are all long the market and not short.  Is the business environment REALLY getting any better with all the Fed Stimulus, QE1, QE2, or QE3?  Not really if you ask me and it has created a phony sense of reality with the over-inflated equity markets.  Historically, investors would value buying stocks based on that company making money.  Today, investors are making stock purchasing decisions based on liquidity, yield, and price action.  The Fed wants investors to chase equities and bonds higher so we feel wealthy and spend more.  But their intentions to create inflation could have the opposite effect on those who actually create the jobs and invest.  

Obama's Views About Business

Translation on Obama's Views About Business

Prop up all big crappy businesses (ie. Auto Industry & AIG) to protect middle-class jobs that will crush all disruptive and innovative start-ups. Bigger businesses are better than free market innovation and smaller more volatile companies. Free market capitalism does not work so let the Government call all the shots about what businesses succeed.

Obama's business plan for the USA might as well have been written by a 5th grader.  His vision is incredibly short term, thinking that roads, bridges, and now runways (ooooh) will somehow create sustainable jobs?  This is ridiculous since that was our business plan from the 1930s and has nothing do with wealth creation or capitalism.  How does this help the United State create jobs and new companies that compete with China, Brazil, and Russia in a global economy?  It does not and has nothing to do with technology, education, healthcare, or environmental innovation.

There is a huge disconnect and this is why IPO's, venture capital, start-up acquisitions are at its lowest levels in decades.  The Democratic National convention should be a rude awakening for all start-ups and investors.  Put your money and checkbooks away if Obama gets elected because it will be a market of big businesses getting bigger.  Protecting middle-class jobs will be more important than letting start-ups innovate that create sustainable jobs and long-lasting companies.

The problem is capitalism is happening 100x faster than ever before and many Democrats are too stupid to get out of the way.  What would the auto industry look like today if we let GM go bankrupt?  We might have fewer jobs but better & cheaper cars?  Companies like Tesla might actually be an industry leader.  Think about all the companies that wanted GM to fail?  That's capitalism and preventing capitalism goes against American ideals.  Democrats call it a "zero-sum" game.  But no . . . the Government decided that GM is better.

Failure is good for business so they can be restructured.  GM was a huge shareholder cram down without restructuring by a shareholder (aka Gov't) with unlimited money. Some call this a Ponzi scheme because the cram down shareholder (Gov't) can print unlimited money and prop up the stock in the free market. GM has the same union problems and will ultimately fail soon as smaller companies slowly catch up to compete.  Obama just delayed innovation in another decade. Slower change is better? F that.

This goes without mentioning that the capital cycle needed to start new companies is broken because of faulty taxation assumptions.  Millionaires and billionaires (limited partners in VC, Private Equity, and Hedge Funds) need to be incentivized more to invest more.  Raising taxes on capital gains will kill the capital cycle flow back into companies drastically.  Making the pie bigger is a far better solution than redistributing money through higher taxes.  Mediocrity will soon become the middle name of the USA. 

Our Government is too big and needs to be restructured as well.

Intuit SiteBuilder Desktop & SiteBuilder Lite Problems

I have been a loyal customer of Homestead for over 12 years and something is very screwed up with the software and tech support at the company.  Ever since Intuit purchased Homestead recently the support and software has gone way down hill.  Ever since the update with the bug I have been unable to edit my sites and feel like I am being held hostage.

I run a few web sites that have heavy traffic and very tech saavy about how to use the software.  I have been trying for 3 months to inform Intuit Homestead that their recent SiteBuilder updates have bugs in them.  After numerous phone calls, emails and chat support nothing has been done to fix the problem.  My problem is very simple and its frustrating that no one at this huge company is aware of the bug or has been able to fix it.  

Intuit SiteBuilder desktop recently did an update to their software 3 months which is preventing me from uploading any lengthy html code.  The Homestead SiteBuilder software freezes and does not allow me to upload or change any of the code.  I have tried uploading 500 to 2000 lines of code into the html snippet and it does not work.

I tried using the SiteBuilder lite hosted version and this does not work either.  Whenever, I try and upload my code to the site it inserts footer code into my page even though the boxes below are unchecked.  The footer code that is mysteriously inserted into my pages creates formatting issues.  The correct format for my site is here (correct page I haven't changed this page in 3 months) and see the footer code that Intuit screws up the formatting of my test page here. 

The solution I was told by a customer support representative was to upload the page directly using the file manager.  However, all my pages are indexed in the search engines under HTML and uploading an HTM file is the only way to do this.   Why can I not create and HTML page and only an HTM page?

Another solution that an Intuit representative told me was to do a clean install of the software.  I did this on two computers and even went to the store to buy a new $1,500 Samsung Series 9 Ultrabook with Windows 7.  Same problem still exists and Intuit can't find a solution.  They can't even let me use an old version of the software which works correctly.   Very bummed and will likely be leaving the company soon.

Vertical Incubators vs Startup Accelerators

What is the difference between a vertical incubator and a start-up accelerator?  First, let me preface my opinions by stating that, most entrepreneurs and investors don't have a clue about how much competition exists or have any appreciation for how long it takes to build a business.  Every entrepreneur and investor should always assume that 1,000 companies are doing the exact same thing and assume it will take five to ten years before the business reaches critical mass.

How to Be Smarter Than The News Media

Financial & Political News Media

Most smart people know that the mainstream media is controlled by huge companies at the highest level and they are simply puppets and not news reporters any longer.  The majority of what we hear is not news but simply filtered PR and sensation stories that have filtered their way to the top of the pile in social media. If you take the time to read these blogs daily below, it will guarantee you to become smarter about interpreting the mainstream liberal news.

Social media is merely a representation of what is popular and not necessarily what is important.  This drives news reports to talk about stupid things that any normal intelligent person would just ignore as a waste of time.  Bloggers have taken over the role of reporting the news in finance, economics and  politics.  Bloggers do the best job of dissecting and interpreting the mainstream liberal media news, which is very hard to do.  Some bloggers are reckless about not checking facts but information does have a way of getting filtered out eventually.  

Here are the best blogger news sources I read that help support my conservative views about politics, economy and finance.  I read them daily because the mainstream news is typically old, non-original and derived from blogger sources.  At the same time it is virtually impossible in depth coverage of to get quality news coverage from NBC, CBS, ABC and even Fox.   You can also follow this list on Twitter at Smarter Political News.  Here are two other Twitter lists I am building that do a good job of interpreting the biased financial press and technology news. Smarter Tech News Smarter Financial News

Facebook's IPO Valuation Should Be $25B

I would like to take you through a simple math equation for determining the fair value of Facebook before its IPO filing tomorrow without comparing growth metrics.  Here are my assumptions when comparing Facebook, while using Google as the benchmark.  Google's annual revenue is $37 billion with a market capitalization of $188 billion currently as of January 31, 2012.

Google's annual display ad revenue from Double Click is only $5 billion + they have $32 billion of additional revenue sources.  That means if Google only had the display ad business similar to Facebook their valuation would be 1/8 or less or around $25B.  Here is the scary part when you start to look at Facebook's proposed IPO valuation of $100B with 88% of its revenue coming from one source.

Facebook simple valuation equation based on current estimates:

Google Market Cap = $188B at $580 per share
Google Total Annual Revenue = $37B
Google Display Ad Revenue = $5B

Facebook Market Cap = $100B
Facebook Total Annual Revenue = $5
Facebook Display Ad Revenue = $4.8
Facebook Fair Value Equation = ($37 / $5 = .135) x $188 = $25B

The latest news sources reported that Facebook's annual display ad revenues were around $3.8B in 2011 and so I will assume this revenue number has grown to $5B in 2012.  $5B in annual revenue for Facebook is 1/8 the size of Google's at $37B.  Facebook has 88% of its revenue coming from display ads only which is not very diversified if you ask me.  Keep in mind this does not factor in growth rates but they cannot be that dramatic to change my valuation estimates. 

S&P Low 666 (2009) x 2 = High 1332 (2012)

S&P Low in 2009 of 666 x 2 = 1332 High in 2012

The rigged stock market will undoubtedly become a key issue in the 2012 Presidential race.  The Obama administration will promote the fact that the stock market is up almost 100% since he took office in 2008.  Mitt Romney is going to attack the fact that the market is up 100% but so is the unemployment rate, which went from 5% to 10%.  Pick your poison.  The Federal Reserve's balance sheet is bloated and helped to rig the stock and bond market game.  How will it end in the next few years and what is the best path to long-term free market prosperity and organic economic growth in the U.S.?

The stock market has become a rigged game in the last few years.  It is being propped up by the Federal Reserve and Ben Bernanke's team by printing unlimited dollars to buy futures and bonds in the open market.  Bond prices are artificially low in order to encourage people to spend and not save.  However, the smart people running big corporations are sitting on hoards of cash earning 0%.  Its because the market has been propped up in a phony way and there is no organic growth.  Executives are expecting a stock market crash of grand proportions that will wipe out all of the Government businesses that have been propped up.  Cash will be king in the future and there will be no safe havens.  It's just a matter of time before the huge "House of Cards" bonds and stocks all fall at the same tim,e wiping out the wealth that has been artificially created.

Yes, the United States can print endless amounts of money in order to create inflation and promote growth.  The experts think we can grow our way out of the debt crisis and reduce the current 100% debt-to-GDP ratio that has doubled under the Obama administration.  However, the austerity in Europe is nothing compared to what we might see in the U.S. if Mitt Romney gets elected and the Federal Reserve money printing press is halted.  It will be painful in the short term but the long term gain for my kids and grandchildren will be tremendous.   The U.S. Government must feel the pain of overspending and let the free markets take over their bloated and egregious spending habits.   Don't forget Mitt Romney has been a private equity / restructuring guy in the private sector and will have the biggest turnaround project of all time on his hands once he pulls the Fed plug.

Mitt Romney knows that a healthy economy will grow through organic investment and capitalism at the local level.  In healthy economies, the Venture Capital & Private Equity industries thrive and so do quality IPO's that foster the cycle of wealth that has built the foundation of the United States.  However, the recent financial crisis has led the Government to step in and act as the market "Big Brother" to prevent big investors from losing money.  The VC industry and private equity industries are shrinking drastically because large LP's (limited partners) have no incentive to invest with below 0% annual returns due to overbearing Government regulations.  We all know in healthy free markets there are winners and losers.  However, now the losers are being prevented from losing and this is not capitalism.  Bailouts have been preventing huge bankruptcies and progress towards creating new and more efficient businesses.  

Thousands of banks should have gone out of business and so should have many of the auto companies like General Motors.  Restructuring and bankruptcies are all part of the free market cycle and we have yet to go through it on a large scale downturn.  The 2009 downturn was prevented by the Government by double its debt load in the trillions and now the next recession could be even worse and deeper.

In summary the only thing that is going to help the economy in the long run build a foundation of growth that is sustainable is if the Government simply gets out of the way.  We investors are all "Big Boys" and taking loses is part of the game.   Trying to impose regulations on the financial services industry to prevent loses only restricts the free market capital flows and prevents investors from doing anything.  We need investors to be excited about investing and now restricted.  These two bills / laws need to be repealed by the next President and then you will see healthy organic investment growth come back to the private sector.

1)  Repeal Sarbanes Oxley
2)  Repeal Dodd Frank Bill