The Mike Gasior Blog

My most recent newsletter has caused a flood of emails on a host of different issues.  The most obvious controversial topics were my suggestion that deflation is still a serious prospect for the U.S., my suggestion that the Dow Jones Industrials might someday soon begin with the number 4 and finally the prospect that the Federal Reserve may be responsible for the massive rally in the U.S. stock market.

I recieved the below email a couple of days ago and the person who wrote me managed to weave all three issues into their concise note:

Mike-
 
I’m a financial planner in (State name removed).  I really enjoy your blogs, although I feel my mind always wanting to “not want to believe it” which fits right into the prevailing mood of the marketplace as you describe it.  I’m not a trained economist, but I shudder to think of what would happen to the equity markets if a Glenn Beck got wind that the Fed was artificially inflating the stock market with its printed up monopoly money.  There is already a huge distrust and uncertainty among everyday Americans.  If there was a “run” on Wall Street similar to the “run” on banks during the Great Depression, I can’t imagine the fallout.  I’m presuming that is the premise of your Dow four-handle, but for us simpletons out here in the sticks it might be good to have you expand on how you think that could play out.  Just out of curiosity, have you heard from anyone in the political sphere since posting the blog?  Also, I’m curious about why the 10-yr. treasury was one of your possible recommendations; won’t that get killed in a higher-rate, inflationary environment.  My feeble understanding is that we are going to be like a group of people locked in a room where one person has a candy bar and the other nine have $1 each, and then the Fed is going to drop in several $100 bills and the things that have any intrinsic value are going to appreciate.  Ok, lousy example, but the idea is that the money supply / velocity of money will pick up in the next decade- to me it’s the only feasible possibility with the American mindset (both politicians and beneficiaries) will go along with.  Your feedback is greatly appreciated.
  
Thanks again,
 
(Name removed)

Let me me give some concise and perhaps inelegant explanations for my feelings that inflation is not as big a worry to me as it seems to be for everyone else and why I think the Dow is going to the 4,000’s.

First, the Dow prediction is not at all scientific.  I have argued for many years now that we have been traveling down an extremely familiar road to me since I have watched the Japanese for the previous 20 years and I know how this story ends.

Here are some facts for you to quickly consider:

–The Nikkei 225 Index reached 38,957 on December 29, 1989

–The Nikkei 225 Index reached 7,603 on April 28, 2003

–The was a total of an 80.5% decline from top to bottom and it took 4 years to acheive.

–As of this morning, the Nikkei stands at 10,092, which is 74% below its peak over 20 years ago.

Now make this application to the U.S. markets:

–The Dow Jones Industrials peaked on October 11, 2007 at 14,279.

–80.5% of 14,279 is 11,494 points.

–If the U.S. were to suffer the identical drop as Japan (which is statistically improbable) the Dow would stand at 2,785.

–If the timing of this drop was identical to Japan’s (41 months), this drop in the Dow would occur by March of 2011.

Now of course I am not predicting the Dow is going below 3,000 in the next 13 months, but I am simply making the case that Americans should stop the arrogance that causes them to dismiss the possibility it COULD happen.  Japan is not some Banana Republic/Third World country, but is still the 2nd largest industrial economy in the world…and it happened to them.  With all that we have endured during the past two years are we really so foolish to think it couldn’t happen to us too?  Gosh, I hope not.

So my “prediction” of a Dow Jones in the 4,000’s is actually giving myself a lot of room for error actually.

The prediction of possible deflation is also tied to the correlation to Japan.  For the past 20 years Japan has been issuing MASSIVE amounts of government debt and their short term interest rates near zero.  And do you know what happened?

Severe deflation.  Deflation that has even been accelerating in recent quarters.

I’ll finish by pointing out something all of you should already know. 

Whenever EVERYONE is in agreement that something is absolutely going to happen (I think you’ll notice an almost universal consensus among investors and economists about inevitable inflation) than you can almost be guaranteed that it’s never going to happen.

“Life is what happens when you’re busy making plans.” – John Lennon

As all of you probably have noticed, the U.S. stock market has jumped up this morning on what appear to be a couple of positive stories.  Oddly, both stories didn’t strike me as particularly wonderful, but we are all aware of the fact that the stock market needs no true reason to do anything.  In this case however, I ask you to consider some simple and quick points.

One story that seemed positive was Caterpillar stock receiving an upgrade with Morgan Stanley raised its rating on the industrial sector to “attractive” from “in-line”.  While this was certainly a nice thing to hear if you are an investor in Caterpillar, it immediately struck me odd.  I fully admit that I do not follow Caterpillar whatsoever and know literally nothing about their balance sheet.  However, I do know that the company relies heavily upon exports and as the dollar strengthens it will become increasingly difficult for Caterpillar to keep their pricing competitive around the globe and maintain profit margins.  But this story didn’t honestly bother me very much.

The story I found VERY troubling was the reports that there might be something in the works to bail out Greece.  Not that I have any problem bailing out Greece or anyone (unless it were to somehow involve U.S. tax payers, but that would be the final straw for many, many Americans) but it was the below quotation I got from a news story that bugged me:

“Rumors are swirling that (the European Union) is going to cause the Greek debt holders to take a haircut on some of their prices and shore up Greece,” said Jeffrey Saut, Raymond James Financial chief investment strategist in St. Petersburg, Florida.

You may notice there was no mention of Greece getting its fiscal house in order.  The bailout will effectively be the poor investors who were foolish enough to lend the country money who will be asked to take the hickey and eat their losses.

The reason I titled this post “Our New Perverse and Inconsistent World” is simply because it is starting to appear as if the whole world is off its rocker at this point.  Consider the events of the past 24 months and notice how there is no disernable pattern that can be counted on.

–Bear Stearns is bailed out in a deal brokered by the Treasury and Federal Reserve (with the Federal Reserve financing 95% of the purchase price at effectively 0%) and Lehman Brothers is let go.

–General Motors and Chrysler senior creditors are thrown under the bus with even the unions being moved ahead of them in line and suffering staggering losses (and the president of the United States calling them out in a live press conference, referring to them as “greedy speculators”) while AIG creditors, who include the world’s largest financial institutions get 100 cents on the dollar paid by U.S. taxpayers.

–Every politician in Washington D.C. has spoken that the economic disaster was caused by too much debt and that we need reform while at the same time planning to increase the government’s debt by double over a ten year period.

–And now Greece, Spain, Portugal and whomever else you’d like to name…who have managed their finances badly and put their countries at peril will somehow be magically saved if the investors who lent them all money get screwed and are forced to accept losses.  How lovely.

So I’ll leave it there.  I can only wonder when someone…homeowners, corporations, municipalities, sovereign governments or anyone is going to FINALLY have to live with the consequences of their actions.  Or will there always be a bailout for them with the people who enabled them stuck holding the bag at the end?  Stay tuned.

I’m sorry I couldn’t make the title of this blog post more descriptive, but I’ve received multiple emails about my theory that it might have been the Federal Reserve using their Open Market Trading Operation to drive up U.S. equities from March of 2009 through January of 2010.

To save me going over the information I laid out in my January newsletter, please visit this link to refresh your memory:

http://afs-seminars.com/newsletter_Jan_2010.html

Here is the Cliff Notes version of my research of the time period between March 9th, 2009 and January 7th, 2010 (which is the time period of all the increase in the U.S. stock market):

–80% of all the market gains occurred on just 30 Mondays.
–70% of all Mondays during that time period were “up” days.
–Most recently, in the 18 Mondays immediately prior to January 7th, 16 were “up” days, or 89%.
–Literally almost ALL of the gains actually occurred during the overnight futures trading sessions and no gains occurred during daytime U.S. trading hours.

My general contention is that it is quite odd from a market and statistical point of view that this would occur and I speculated as to any entity that might have the ability to cause this, and there was only one possible culprit: The Federal Reserve.

The questions that I’ve been receiving via email since my January newsletter went out allege that perhaps I conveniently left out what occured on the Fridays that proceeded the Mondays.  The thesis is that maybe traders were simply closing out their positions on Friday (meaning they would sell out and move to cash prior to the weekend) and perhaps the markets were generally down on Fridays and that would cause the phenomenon I uncovered on those Mondays.

But consider this:

–There were 40 Fridays during this time period.

–Of those the market was up 23 of those Fridays and down on 17.

–Overall the market increased several hundred net points during those 40 Fridays.

–So basically 57.5% of the Fridays were up days and 42.5% were down days.

These findings can only lead to the conclusion that the statistics relating to the following Mondays is that the Monday action is unrelated to any Friday sell-offs.

On an administrative note, I recently found out that when we updated the blog software that we disabled all you users who had registered and used to participate (much to my enjoyment) by commenting on the blog.  PLEASE drop me a note and I will send you your new user name and password if it wasn’t sent to you automatically.

mike@afs-seminars.com

I love reading your comments more than I like reading my own.

This is what I heard throughout the market declines of yesterday, as many blamed the slide on the worries that perhaps Greece, Portugal or Spain may be at risk of default.  The parade of pundits on television tried their best to assess the situation and how important, or unimportant, a credit crisis in one of these countries would actually be to the global economy.  As I listened I was at first amazed at how dismissive many of these talking heads were of the situation.  The comments were fairly striking:

“It’s only Greece.”

“The Greek economy is about the same size as Mississippi.”

“Portugal represents only about 6% of the Euro zone.”

“It’s really unlikely we’ll actually see any defaults from these countries.”

These sorts of comments continued throughout the day and slowly but surely I began to think that I had watched this movie before.  As Yogi Berra would say, it was “deja vu all over again”.

Maybe you remember some of the commentary about the looming subprime crisis from about two years ago and how unimportant it would be to the overall economy:

“The subprime market represents an extremely small component of the mortgage market.”

“The likelihood of a substantial decline in real estate prices is very small.”

“Lehman Brothers is just one company.”

“There is little chance that foreclosures will increase in the prime mortgage markets.  The subprime situation is contained.”

I wrote an entire newsletter a couple of years ago titled “And The Band Played On”, referencing the Titantic and my attempted association was how so many people at the time were dismissing ominous economic warning signs about an oncoming crisis.  I think Greece, Portugal and Spain will all prove to be pretty important.  When California begins to teter on the verge of default, I think that will be important too.

My argument is that they’re doing it again.  Dismissing important signs that there may very well be serious trouble brewing in the global economy.  No less of a moron than Jim Cramer was on the Today Show this morning claiming that this whole situation is no big deal and that everything will be fine so we should be plowing our money into the stock market with both hands.  I (and common sense) would argue that this might be a moment in history that might be better watched with your money on the sidelines.

Sort of in the same vein, I had a wonderful email from a faculty member from Emory University the other day in response to my recent newsletter.  It displayed an elegantly efficient use of words:

“i don’t need mail from nutcases.”

You also have to appreciate the text message feel of the email also.  But nonetheless, although I’ve developed a fairly thick skin by now, I still felt compelled to inquire about the harshness of the “nutcase” comment, so I replied back to ask.

Wow, XYZ.

Nutcases??  Somewhat harsh, no?  And spoken by someone obviously associated with the wonderful business school at Emory University.  One might have thought you would have considered my somewhat carefully laid out case for the three possible outcomes.

Nonetheless, this nutcase will see to it personally that you’re removed.

Best of luck on the feedback you receive on your published works.

Cheers!

Mike Gasior

As I expected, I received a response that I found somewhat more disconcerting than the original 6 word email:

hey mike, sorry you are offended.  the “nutcase” comment was a result of my googling your name and reading about your views and activities, and not solely based on the specific message you sent me that espouses fringe political views.  surely you understand that thinking people won’t necessarily agree with you about the source of the problem or the best solution.  i could perhaps have been more circumspect.

still, i do appreciate being removed from your list.

thanks

At least the lack of capitalization remained consistent, but I was taken aback at the comment about my “fringe political veiws” and how “thinking people” won’t necessarily agree with me.  It made me wonder if this is the sort of attitude that had infected Washington D.C. in recent years.  This disconnect between an agenda they believe in and the undeniable numbers that clearly show the agenda will be fiscal suicide.  Truthfully, I have seldom espoused any political views whatsoever and I have made my general disdain for politicians of all ilk extremely clear for many years. 

So even with this professor’s clear dislike of me I pushed on with one more email to see if they could explain what the “thinking people” were thinking:

Well, since you’ve now engaged me XYZ, and I will assume you consider yourself amongst the “thinking people” you reference, I would be very curious to hear where you think the source of the problem is and what the solution  might be.

My degree in economics and Masters in Finance are now nearly 30 years old and I have spent my entire adult lifetime working in the finance industry, but I never claim to have a monopoly on ideas.  And quite frankly, I’m pretty sure I didn’t make a single political comment in the newsletter that began this dialogue between us.

If you suspect me of being a fringe political “nutcase”, I encourage you to read my newsletter of September 2008, which predated President Obama’s election by several months.  It will quickly show I’ve been fairly dissatisfied with the workings of our elected officials for quite a long time in matters regarding the direction of the economy.

Here’s the link to it if you’d like:

http://afs-seminars.com/newsletter_Sep_2008.html

You are correct that I do have plenty of opinions, but I also try to bring my facts with me to explain my view and don’t just resort to abrupt name calling.

I’d love to hear what the “thinking people” thing will right our economic trajectory and the reasons that make you think these ideas have more merit.

Thanks again for writing.  Always good to hear from my friends at Emory.

Cheers!

Mike Gasior

Silence.  Fade to black…..

It did.

I spent an excessive amount of time last evening pouring over the new Obama budget to the point that it became obvious to me that I could really use some sort of hobby.

My opinions about the economy and markets going forward are pretty well known if you’ve read anything I have written during the past 5 years.  I believe we’re on a very familiar path if you have any knowledge of the travails of the Japanese economy going back the previous 20 years.  Our economic future over next 10 years was going to be challenging enough and it is my concern that any growth at all will be extremely difficult to achieve with the enormous debt burden that’s still being carried by consumers and corporations, and now the staggering amount being taken on by local, state and federal governments.  Paying interest on that debt as well as making principle payments does nothing to benefit the current moment in time nor help build for the future.  It simply pays for the past and equates to a dead body we’ll be dragging behind us for the foreseeable future.  The past is dead and tomorrow has yet to be born.

But if you consider some of the tax proposals in Obama’s budget it makes it almost impossible to imagine any investment being made by the people and companies who might actually have any money to invest.  I know some of the comments I am going to make in this blog might anger some of my readers because it will seem as though I’m advocating giving the rich and corporations a break  at the expense of the “working class”.  But this comment by Senator Grassley yesterday summarizes a point I would have made in this post if he hadn’t:

“The proposed budget’s $300 billion in tax relief over the next 10 years for individuals, families, and businesses is mostly targeted and limited, often to people who don’t have to pay any taxes,” said Senator Charles Grassley of Iowa, the ranking Republican on the tax-writing Senate Finance Committee.

This sort of tactic is the typical bait and switch that politicians pull on the public: pass legislation that appears to benefit the “working class” which accomplishes almost nothing and taxes the group that actually has money to spend and invest.  With all the discussion of “stimulus”, this budget and the tax proposals will the biggest killer of growth for the past 100 years and maybe longer.  Let’s take a simple look at just some of the proposed increases:

–Overall, a $970 billion tax increase over the next decade on Americans earning more than $200,000 and an additional $400 billion on corporations.

–Proposes to eliminate preferences for oil and gas companies, life-insurance products, executives of investment partnerships and U.S.-based companies that operate overseas.

–The top two individual brackets to revert to 36 percent and 39.6 percent, from 33 percent and 35 percent currently.

–Capital-gains and dividend tax rates would increase to 20 percent for people earning more than $250,000.

–The budget assumes the federal estate tax, which expired January 1st and was replaced with a capital-gains tax, will be reinstated retroactively with a 45 percent rate applied when married couples’ estates exceed $7 million. If Congress doesn’t act, the estate tax in 2011 will be reinstated to a 55 percent rate applied to estates valued at more than $1 million.

Truthfully, I could go on and on about this budget, but I will spare you this sort of torture and save it for myself.

My simple summary problem with this budget is that it contains literally NO reductions in discretionary spending at all (at least nothing meaningful or material) and the White House themselves project a budget deficit this year of $1.6 trillion and another  $1.27 trillion deficit in 2011.  And as always, the projections that estimate those deficits are the typical rosey scenarios politicians love to use.

Understand one thing…the people and companies who will NOT have $1.3 trillion available to spend or invest anymore will NOT be spending it.  Period.  Paragraph.

The politicians will defend the budget with talk about proposals that will create jobs and provide economic stimulus.  My problem is that in capitalistic societies there are corporations and successful individuals.  Not the government.  And please remind yourself that all the numbers I mention above do NOT include any sort of health care mandates that may be passed or the “cap and trade” tax on energy, which might involve trillions more dollars.

This is a very sad moment in my adult life because I have seldom felt so helpless to watch a train wreck happening right in front of me with the ability to do literally nothing about it.  No matter how loudly this budget gets debated in Washington, we all know too well that the Congress will pass something that looks damn close to what Obama just proposed and the president will sign it.  Worst of all is that the momentum of the current move in the economy is massive and becomes more difficult to slow down or reverse every day.

And for those of you who think this blog is simply yet another example of Mike defending the “rich” and throwing the “working class” under the bus, I will share a wisdom I got from my paternal grandfather (who also gave me a first hand account of the depression throughout my ENTIRE childhood).  Grandpa Gasior made it through the 8th grade and held a series of “working class” jobs until his passing. 

There was a VERY wealthy man who lived only 1/4 mile from our neighborhood (His father had started a construction company that would ultimately construct nuclear power plants.  He used to land his helicopter in his back yard and had a horse farm on my street with horses he’d fly around the world to competitions.  Pretty heady stuff to a kid like me who could only dream of flying on an airplane someday).  For reasons I don’t even remember, I made some sort of snotty comment about this guy in front of my grandfather and some derogatory comment about “rich people”.  I’ll end this blog post with EXACT words Grandpa Gasior said to me about 40 years ago:

“Mikey.  No poor man has never given me a job.”

My plan for 2010 is to be revive the monthly issuance of my newsletter and I’m officially off to a rolling start.

Although a somewhat depressing title for what is my “Happy New Year” edition, I wanted to express my concern over the macro direction of the economy by titling it:

“The Doomsday Scenario”

If you are on my mailing list to receive the newsletter, it is being sent out as I write this blog post.  It’s only 9:00 a.m. and I already have a lovely response from a gentleman in the Netherlands with a succinct summary of my message of “Man what a load of sh**”.  Always nice to hear from my fans in Europe.

Nonetheless, if you are not on my mailing list, you can view it on the website at the below link and if you’d like to be added to my subscribers simply email me your address at mike@afs-seminars.com

http://www.afs-seminars.com/newsletter_Jan_2010.html

Also, I will be a guest once again on “The Naked Short Club” out of London tonight at 4:00 p.m. New York Time and you can tune in via the Internet at this link:

http://resonancefm.com/

As usual, the guests are all members of the hedge fund industry and tonight’s topics will range from what’s been going on in Davos, new regulations on banks, the outlook for the global markets and the economies and Lord knows what else might come up.  It’s always a bright and lively group and I truly enjoy my appearances on the show.

And finally, although the market appears to be prepared for a bit of bounce this morning, I think we are preparing (FINALLY!!) for the move downward and I wouldn’t be surprised if this is a substantial move lower.

Truthfully I don’t really feel like reviewing the nonsense that transpired last night, which was supposed to pass as the State of the Union address.  I am actually part of that majority of Americans who like President Obama personally, but disapprove of his policies.  I think he is extremely bright and likable guy as well as a true America success story.  His speech of last night was almost hard to watch and had me screaming at the television on several occasions.  As I sat there thinking about it after its conclusion, I decided I felt the same way after watching Michael Jordan’s acceptance speech as he entered the Basketball Hall of Fame.  If you didn’t see perhaps the greatest basketball player of all time that day, he not only invited his high school basketball coach but also the student who remained on the team after the coach cut Jordan from the team.  Basically, 30 years after high school, Jordan is still so bitter and petty that he found the need to rub the coach’s nose in his decades old decision over his player choices.  This, on a day when Jordan should have been basking in the glow of his greatness.  A few other individuals who ticked Jordan during those 30 years were also taken to the woodshed in his “acceptance” speech.

If you watched the speech yourself last night, ask yourself who was spared the woodshed in Obama’s speech.

–He wagged his finger at the Supreme Court Justices in the front row for their foolish bench decisions.

–The Republicans got a scolding for being obstructionist.

–Senate Democrats took a beating for not passing legislation as he wanted it passed.

–Bush was once again reminded (along with everyone else) that Obama inherited this whole mess but luckily the new President saved us from another Great Depression.  Actually, Obama reminded us that he saved us from a second Great Depression a bunch of times.

What caused my loudest outburst was when he announced he would set the goal of doubling U.S. exports in five years.  As an economist is was the most ludicrous of his many claims or promises (the 2,000,000 people who supposedly got or kept jobs thanks to the stimulus package was pretty funny too).  A couple of worthwhile facts to understand is that it took us 230 years to arrive at the export level we currently enjoy and that the fastest the United States has ever doubled exports was 12 years.  And that 12 years just so happened to be the greatest period of economic and industrial expansion in American history.  In summary, I thought last night’s speech was just foolishness and fiction.

With all of that said, I will have a newsletter sending on Monday morning and I will wait for that longer format to outline my real feelings and reasons for the direction of the economies and markets.

On another note, I was sent a YouTube video featuring an interview with Robert Kiyosaki who authored the best seller “Rich Dad, Poor Dad”.  This is actually a book I bought and read when it was published and there was a few decent nuggets that many non-financial readers would benefit from.  My only beef was that the book really only needed to be about 12 pages long, plus I find him personally tedious to listen to.

The reason it was sent to me was because one of the comments envoked my name in reference to the fact that Kiyosaki is now only mimicing things that I and others were  saying three years ago.  Here is the comment and the link if you would like to check it out yourself:

——————————————————————————————————- 

http://www.youtube.com/watch?v=tfx43J0wzlU

CaronteEmpire (2 weeks ago)

Bahia82 (2 weeks ago)

First, before I explain with facts to reinforce my case about how your government is outright lying to their people, I apologize for being so neglectful of this blog. I literally just returned from Washington D.C. moments ago from my last business trip of the year and I am pleased that my neglect was caused by how busy I have been in the second half of this year. Given the horrifying state of the economy I cannot help but be thankful that gainful employment was the culprit for my absence rather than any other reason. In my defense, I did put out a decent newsletter last month (or at least I thought it was decent) and I’ve been fairly active on Twitter should you follow me there. I also have already begun composing my year-end 2009 newsletter and I’d love to think I would have it sending by next week.

But the situation that has set me off began last week when the government announced that employment fell by only 11,000 jobs and the unemployment rate had fallen to 10% from 10.2% the month before. I posted several Tweet voicing my skepticism about those numbers and alluded that perhaps we shouldn’t be trusting the numbers the government gives us anymore. Since last Friday I have been getting a massive amount of emails and phone calls asking me to explain myself further and lay out my case for why I harbor such distrust. Although my background for the past 30 years is economics and finance, I hope that literally anyone from any background that considers the facts I will share next will concur with me that there is just something rotten in Denmark. So here goes….

The simple facts reported by the government last week was that the economy became 11,000 jobs smaller and that unemployment had actually DROPPED by .2% from October to November. If you are unaware of the method by which these figures are calculated you might already be smelling a rat. After all, it doesn’t seem to make sense that the number of jobs DECLINES and somehow the unemployment rate improves. If the net figure for any month shows that we lost jobs, it seems obvious that the unemployment rate must rise as a result. I won’t cover this explanation again in the blog since I dedicated a large portion of a newsletter earlier this year to the subject (http://www.afs-seminars.com/newsletter_Aug_2009.html), but I will quickly explain the Department of Labor Statistics method here. What people don’t realize is that when unemployment is calculated, the only people that count toward the results are adults who are either currently employed OR actively looking for work. Once people stop even trying to find a job, they are no longer counted and are considered “discouraged”. So while I cannot use this part of the date release as evidence of the government lying, it is sobering news to consider that while the economy MAY have only lost 11,000 jobs, in order to cause unemployment to drop as it did, there was several hundred thousand Americans who gave up looking for work last month. Yet more wonderful news about our robust recovery.

The true basis for my accusation of lying stems from these statistics, which you can feel free to verify for yourselves at this release from the United States Department of Labor on December 3rd:

http://www.dol.gov/opa/media/press/eta/ui/current.htm

I’ll quickly total a few numbers for you and I will be using the NSA statistics (Non-seasonally Adjusted) since I prefer my data pure and not adulterated by any random humans. These are the weekly NEW claims for unemployment for November:

Initial Claims (NSA)

November 28 – 460,989
November 21 – 539,252
November 14 – 475,700
November 7 – 531,743

These numbers show that a total of 2,007,684 Americans filed NEW claims for unemployment last month. While it is extremely difficult to retrieve hard statistics on the numbers we all know that plenty of Americans lose their jobs weekly and either don’t, or are ineligible to file for unemployment. According to this article in today’s Wall Street Journal the combined job losses in November (those who filed for benefits and those who didn’t) was 2.12 million people:

http://online.wsj.com/article/SB126031880194482751.html?mod=WSJ_hpp_sections_news

The above article also reports that the number of job openings remains weak and that the pace of hiring is dismal and will likely remain that way for an extended period.

So please do the simple math yourself and tell me what you think. If employers did indeed lay off or fire 2.12 million individuals (the Department of Labor itself confirms 2,007,684 or 95% of that number) then for there to be ONLY 11,000 fewer jobs by the end of November, U.S. employers would have had to HIRE 2,109,000 people into jobs. At this point I will defy you to bring a statistic to me from ANY source that suggests that level of hiring last month and I will publish an amazingly contrite retraction and apology to anyone in the government whom I offend.

But you can’t. Because there wasn’t that many jobs filled last month. Period. Paragraph.

So while Americans sit at the edge of their seats wondering how many more Tiger Woods girlfriends are going to pop up and the news media gladly cover it, the government is purposefully lying to the general population hoping that a public relations campaign will lead us into recovery since the trillions of dollars they’re spending isn’t doing it. And the mainstream news media who seem collectively as dumb as a bunch of bricks allows the charade to continue. It didn’t take me particularly long to articulate the facts to you here, nor was it all too difficult to do the math and establish the fraud here. Why doesn’t Brian Williams, Katie Couric or Charles Gibson mention such things to their viewers? Better still, why doesn’t the supposed “financial press” at CNBC, Bloomberg or my friends at the Wall Street Journal connect these dots and tell this story? Don’t worry, I have no idea either.

At the end of the day I am no Woodward or Bernstein, but simply a corporate trainer/consultant and somehow it all appeared obvious to me within 5 minutes of the governments release I gave you above.

Do your friends a favor and forward this post to them (or better still a reporter or one of your elected officials) and perhaps someone with a larger megaphone than myself will pick up this mantle and run with it. My ego is secure and I don’t need any credit for figuring this out. What I would like is for someone to make our government accountable.

While I’m at risk of beating a considerably dead horse at this point, it just AMAZES me that the markets are actually flabbergasted at the “surprising” drop in new home sales announced this morning. If you missed the news, it was expected by most that new home sales would INCREASE 2.6% in September, but they instead DECREASED 3.6%.

But why is everyone “surprised” at this? After all, almost 17% of adult Americans are currently out of work. The credit markets, although somewhat stabilized, are still only a shadow of their former self and securitizing anything but the finest quality mortgages is nearly impossible.

Most of you who have followed me for any length of time know too well that I’m not at all surprised. But my vision of the future is not based upon hope and dreams and instead born from raw and plain facts. Let me take a moment to share with you a few of the FACTS about the housing market that seemingly few people know.

–In 2009, $17 billion of floating rate Alt A mortgages reset their interest rates, which usually spells doom for the homeowner since the new interest rate is often in the 10% to 12% range. For those who don’t know, Alt A were those “no documentation” loans, where the borrower didn’t have to prove their employment or income. Well in 2010 there will be $67 billion of these types of loans resetting their rates followed by another $67 billion in 2011.

–Fannie Mae, who is involved in more mortgage originations than any other entity on the face of the planet, is expecting foreclosures to TRIPLE in 2010 over 2009.

–Several months ago, Deutshe Bank (who is one of the largest mortgage servicers in the U.S.) announced that they expect over 50% of U.S. homeowners who have mortgages to be underwater on their loans by the end of 2010 (meaning that they owe more on their mortgage than their home is currently worth).

–Moodys estimates that by the time the decline ends in 2010, residential property values will have declined 43% from the 2006 highs and that nationally, home prices won’t regain the 2006 levels until 2020. In harder hit markets like California, Florida and Nevada, prices will not recover until 2030.

None of those statistics are from Mike Gasior plucking numbers from thin air. All of them are actually from entities who are as close to the real estate market as anyone can be and will be very negatively affected if their predictions come to pass.

So for anyone who is genuinely “surprised” by the decline in housing sales this morning, all I can wonder is who have you been listening to? It certainly wasn’t me or the parties listed above.

Because when it comes to the current situation in the residential real estate market, there is only one thing you have to remember: It isn’t over-built. It’s under-demolished.

Sorry for the extended silence in here everyone, but I’m quite proud to say the the cause was the fact that business has actually been quite good and I’ve been traveling a lot.

If you haven’t had the opportunity to read my October newsletter, it is titled “A Wonderful Fiction” and you can view it on my website at this link:

http://www.afs-seminars.com/newsletter_Oct_2009.html

I titled it “A Wonderful Fiction” because most Americans walk around their daily lives with the belief that the financial system was saved from certain ruin and that the economy is showing sure signs of recovery. I argue that the financial system is still functionally bankrupt, but thanks to political pressure from various directions, we limp along with a zombie banking system with our collective fingers crossed that there is no other bad surprises lurking ahead. I have submitted this edition of the newsletter to various newspapers as an OpEd and have yet to find one willing to print it. I’ll keep knocking on doors though.

Tonight I will be once again appearing with my hedge fund friends on the radio from London via “The N@ked Short Club”. I am really looking forward to tonight’s show since my friend, and host, Dr. Stu has promised me the chance to discuss where the origins of this crisis began, and that is something that I always like to talk about.

For a show about finance and investing, we try hard not to take things too seriously and Dr. Stu always has a surprise in store with his musical selections. I’ll be streaming in digitally from the U.S. but the show originates from Resonance104.4fm in London, a station that the Village Voice has called “the best radio station in the world”. The show is on at 4:00 p.m. New York time and 1:00 p.m. on the West Coast and you can listen via the Internet at the following link:

http://resonancefm.com/

I’ll be Twittering while on the broadcast so catch me there too and drop me a note with comments or questions.

http://twitter.com/MikeGasior