Monday, May 31, 2010

Credit Crisis Indicators Going Bonkers Again! Batten Down the Hatches!

Heads up people. Something very big is happening in the global credit markets — something you darn well better pay attention to.

The very same "Credit Crisis" indicators that were flashing red before the stock market meltdown of 2007-2008 — the ones Martin and I used to get our subscribers out of almost all stocks, and "short" the market via inverse ETFs — are flashing red again.

Pay attention and you might save your portfolio. Ignore them and you could get slaughtered.

What the heck is happening? Why is the market in so much peril? Because governments worldwide did exactly what we warned them not to do!

By bailing out, backstopping, and propping up countless lousy institutions and assets during the private credit crisis ... rather than allowing a quicker, more painful, but ultimately cleansing collapse ... they turned a Wall Street debt crisis into a sovereign debt crisis.

They temporarily postponed the day of reckoning, while failing to solve the underlying problems.

They tried to paper over a private credit crisis brought on by too much bad debt by creating a huge new pile of public sovereign debt.

And now, the markets have had enough. They're rebelling around the world.

Here Are the Warning Signs —
Please Heed Them!

Where's the evidence of this? All around me ...

First, look at this chart of the two-year swap spread.


This is the cost to swap fixed-rate payments for payments based on floating rates in the derivatives market. It's expressed as a spread, in basis points, over yields on underlying Treasuries.

I know it sounds complicated. But you can think of this as a crisis indicator that rises when banks are more leery of doing business with each other. They charge higher premiums at times when they're worried about counterparty credit quality and extreme volatility.

You can see the spread was a paltry 9.6 basis points in March. It has since EXPLODED to as much as 64 basis points — almost a seven-fold increase. That's also a 13-month high!

Second, check out LIBOR, the London Interbank Offered Rate. LIBOR is the rate banks charge each other to borrow money for short periods of time.

When credit markets are functioning normally, short-term LIBOR tends to move in lock step with the federal funds rate. But when they start going haywire, LIBOR costs rise as banks price in the risk that the guys they're lending to won't be able to pay them back.


Lo and behold, as you can see in the chart above of 3-month, dollar-based LIBOR, those borrowing costs are rising sharply. That rate has more than doubled to 54 basis points from 25 points in December.

That's still low on an absolute basis. But it's the highest level in almost a year — and it's coming at a time when both the Federal Reserve and the European Central Bank wouldn't choose to raise interest rates on their own.

Third, there's the credit default swap market. That's where financial players buy and sell insurance against credit risk. When times are good, insurance is cheap. When the credit markets go nuts, the cost goes up ... and right now, it's surging!

An investor would have to spend about $131,000 per year now to insure a benchmark portfolio of $10 million of investment grade corporate bonds against default. That's up dramatically from $76,000 in January.

What You Need to Consider Doing ...

We're already seeing the stock market begin to crack. But the declines so far could be just a walk in the park compared to what lies ahead.

Or in plain English, we've had a "bought and paid for" stock market and economic recovery since March 2009. It was financed almost entirely by massive government borrowing and spending. That was designed to paper over the underlying causes of the credit crisis rather than confront them head on.

Now the markets are taking away the credit card for sovereign nations around the world, which could kneecap the recovery.

So if you haven't already prepared yourself for that possibility by paring back your stock, corporate bond and junk bond exposure, do it now. Yes, now.

Until next time,

Mike Larson
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com/
Epilogue

From time to time I like to give my readers a jump on the market to help you protect your hard earned retirement funds from another devastating blow. As always consult your financial advisor before making any major financial decisions.

Personally, I have learned how to read stock charts and proprietary indicators to give me warning signs of impending corrections. Had you been "following the charts" you would have sold April 30th as I did. Now it's "bottom fishing" time although I personnally would not "pull the trigger" just yet as I believe that any rally we get this week will just be an "oversold" bounce. A retest of the recent index low's is in order...Steve

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Tuesday, May 25, 2010

They Give It All




FOR THE FALLEN

My lead flight attendant came to me and said, "We have an H.R. on this flight." (H.R. stands for human remains.) "Are they military?" I asked.

'Yes', she said.

'Is there an escort?' I asked.

'Yes, I already assigned him a seat'.

'Would you please tell him to come to the flight deck. You can board him early," I said..

A short while later, a young army sergeant entered the flight deck. He was the image of the perfectly dressed soldier. He introduced himself and I asked him about his soldier. The escorts of these fallen soldiers talk about them as if they are still alive and still with us.

'My soldier is on his way back to Virginia,' he said. He proceeded to answer my questions, but offered no words.

I asked him if there was anything I could do for him and he said no. I told him that he had the toughest job in the military and that I appreciated the work that he does for the families of our fallen soldiers. The first officer and I got up out of our seats to shake his hand. He left the flight deck to find his seat.

We completed our preflight checks, pushed back and performed an uneventful departure. About 30 minutes into our flight I received a call from the lead flight attendant in the cabin. 'I just found out the family of the soldier we are carrying, is on board', she said. She then proceeded to tell me that the father, mother, wife and 2-year old daughter were escorting their son, husband, and father home. The family was upset because they were unable to see the container that the soldier was in before we left. We were on our way to a major hub at which the family was going to wait four hours for the connecting flight home to Virginia.

The father of the soldier told the flight attendant that knowing his son was below him in the cargo compartment and being unable to see him was too much for him and the family to bear. He had asked the flight attendant if there was anything that could be done to allow them to see him upon our arrival. The family wanted to be outside by the cargo door to watch the soldier being taken off the airplane.. I could hear the desperation in the flight attendants voice when she asked me if there was anything I could do.. 'I'm on it', I said. I told her that I would get back to her.

Airborne communication with my company normally occurs in the form of e-mail like messages. I decided to bypass this system and contact my flight dispatcher directly on a secondary radio. There is a radio operator in the operations control center who connects you to the telephone of the dispatcher. I was in direct contact with the dispatcher.. I explained the situation I had on board with the family and what it was the family wanted. He said he understood and that he would get back to me.

Two hours went by and I had not heard from the dispatcher. We were going to get busy soon and I needed to know what to tell the family. I sent a text message asking for an update. I saved the return message from the dispatcher and the following is the text:

'Captain, sorry it has taken so long to get back to you. There is policy on this now and I had to check on a few things. Upon your arrival a dedicated escort team will meet the aircraft. The team will escort the family to the ramp and plane side. A van will be used to load the remains with a secondary van for the family. The family will be taken to their departure area and escorted into the terminal where the remains can be seen on the ramp. It is a private area for the family only. When the connecting aircraft arrives, the family will be escorted onto the ramp and plane side to watch the remains being loaded for the final leg home. Captain, most of us here in flight control are veterans. Please pass our condolences on to the family. Thanks.'

I sent a message back telling flight control thanks for a good job. I printed out the message and gave it to the lead flight attendant to pass on to the father. The lead flight attendant was very thankful and told me, 'You have no idea how much this will mean to them.'

Things started getting busy for the descent, approach and landing. After landing, we cleared the runway and taxied to the ramp area. The ramp is huge with 15 gates on either side of the alleyway. It is always a busy area with aircraft maneuvering every which way to enter and exit. When we entered the ramp and checked in with the ramp controller, we were told that all traffic was being held for us.

There is a team in place to meet the aircraft', we were told. It looked like it was all coming together, then I realized that once we turned the seat belt sign off, everyone would stand up at once and delay the family from getting off the airplane. As we approached our gate, I asked the copilot to tell the ramp controller we were going to stop short of the gate to make an announcement to the passengers. He did that and the ramp controller said, 'Take your time.'

I stopped the aircraft and set the parking brake. I pushed the public address button and said, 'Ladies and gentleman, this is your Captain speaking I have stopped short of our gate to make a special announcement. We have a passenger on board who deserves our honor and respect. His Name is Private XXXXXX, a soldier who recently lost his life. Private XXXXXX is under your feet in the cargo hold. Escorting him today is Army Sergeant XXXXXXX. Also, on board are his father, mother, wife, and daughter. Your entire flight crew is asking for all passengers to remain in their seats to allow the family to exit the aircraft first. Thank you.'

We continued the turn to the gate, came to a stop and started our shutdown procedures. A couple of minutes later I opened the cockpit door. I found the two forward flight attendants crying, something you just do not see. I was told that after we came to a stop, every passenger on the aircraft stayed in their seats, waiting for the family to exit the aircraft.

When the family got up and gathered their things, a passenger slowly started to clap his hands. Moments later more passengers joined in and soon the entire aircraft was clapping. Words of 'God Bless You', I'm sorry, thank you, be proud, and other kind words were uttered to the family as they made their way down the aisle and out of the airplane. They were escorted down to the ramp to finally be with their loved one.

Many of the passengers disembarking thanked me for the announcement I
had made. They were just words, I told them, I could say them over and over again, but nothing I say will bring back that brave soldier.

I respectfully ask that all of you reflect on this event and the sacrifices that millions of our men and women have made to ensure our freedom and safety in these United States of America.

I know every one who has served their country who reads this story will have tears in their eyes, including me. Captain...........

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Sunday, May 16, 2010

PLACE YOUR HOPE IN JESUS CHRIST, THE WAY, THE TRUTH, AND THE LIFE!


On April 4, 2010, over 1,300 young people, all of them members of Faith Church celebrated Resurrection Sunday in Budapest, Hungary.

LORD of Lords and KING of kings, We give you all praise, glory, and honor that you died in our place, that we may serve you, the risen King.

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