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  • 2012: Another Year of Uncertainty & Volatility

    Due to the holidays, I have chosen to include a couple of articles I found quite interesting for your reading pleasure today. The first article is from yesterday's The Weekly Standard, which analyzes the outlook for 2012 from two different perspectives, based on the various assumptions one can use. I think you will enjoy it.

    The second article below comes from Barry Ritholtz, the author of the popular book “Bailout Nation.” Barry pokes some fun at the many New Year forecasts we all hear this time of year, and he points out that most of them prove to be wrong. I'll be back to my usual chorus of topics and titles starting next week.

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  • The Latest (Secret) Rescue Plan For Europe

    Over this past weekend, the International Monetary Fund (IMF) and G-20 leaders met in Washington, and the main focus was the deepening financial crisis in Europe. Leaders from around the world called on the stronger nations of Europe to “leverage” their emergency bailout fund, the European Financial Stability Facility (EFSF), by up to trillions of euros if necessary.

    While none of the G-20 leaders will confirm what follows, it is widely believed that a new three-part plan was introduced at the weekend meeting to address the growing debt crisis in the eurozone: 1) increase the EFSF to at least €2 trillion; 2) recapitalize eurozone banks by at least €150 billion; and 3) allow Greece to default on 50% of its debt.

    Since July 19, I have maintained that the European debt crisis would dominate financial markets around the world. Since then, we’ve seen the Dow and the S&P 500 plunge by nearly 20% at the low point. However, the global equity markets rallied strongly on Monday and again today on hopes that the new bailout plan hatched over the weekend will stem the crisis in Europe.

    It is interesting that Europe is preparing to go down a similar path as the US took in 2008 – huge bailouts and a possible Euro-TARP to restructure its ailing banks. The hand of Tim Geithner is all over this one. I hope it turns out better for Europe, but I am not optimistic.

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  • Fed Offers Bailout of European Banks

    Last Thursday we learned that the US Federal Reserve has decided to make unlimited US dollar loans (swaps) to the European Central Bank (ECB) and directly to European money center banks that are in trouble, at least through the end of this year. And what will the Fed get in return as collateral? Eurodollars that are quickly falling in value as of late. So even as our own economy may be falling back into recession, the Fed sees fit to bail out the European banks that are sinking in sovereign debt from the likes of Greece, Ireland and Portugal.

    All eyes are on tomorrow's Fed Open Market Committee policy statement. The Fed is expected to announce its so-called "Operation Twist" strategy that is intended to lower medium and long-term interest rates, which may or may not work. Some people expect the Fed to comment on its latest decision to make unlimited US dollar loans to European banks, but I will be very surprised if they mention a word about it. They're keeping it very quiet (which is another good reason to read my E-Letters and blog postings).

    Speaking of blog postings, I will write about tomorrow's Fed policy decision on my blog before the end of the day tomorrow. Go to www.GaryDHalbert.com and subscribe to read my take on the Fed's announcement.

    Following the Fed discussion, I will bring you the highlights of the latest report on US poverty from the Census Bureau. Poverty is now at an all-time high. Ditto for the number of Americans that depend on food stamps, according to the Department of Agriculture. These two reports are very troubling.

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  • Obama’s Plans to Help(?) Small Business

    IN THIS ISSUE:

    1.  Does Small Business Need a Bailout?

    2.  Obama & the Democrats to the Rescue

    3.  What’s Not to Like About TARP III?

    4.  Higher Taxes Hurt Only 3% of Small Businesses – Wrong!

    5.  President Obama’s “September Surprises” So Far

    6.  My Thoughts on the Surprising Mood of the Electorate

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  • Europe's Trillion-Dollar Bailout - Can It Work

    On April 12, the International Monetary Fund (IMF) increased the capacity of its emergency lending fund from $50 billion to $550 billion, a ten-fold increase. Less than a month later, the European Union announced a near $1 trillion bailout fund to aid Greece and any other countries in Europe that may get into trouble. At the same time, the EU announced that the IMF will be chipping in apprx. one-third ($321 billion) of the near $1 trillion bailout. Since the US is the IMF's largest contributor, this means that US taxpayers will be footing part of the bill to bailout Greece and possibly other European countries. Isn't that just dandy! And it gets even worse, so be sure to read on.

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  • Fannie & Freddie - The Unnecessary Disaster

    Earlier this month, mortgage giants Fannie Mae and Freddie Mac requested an additional $19 billion in government bailout money just to stay afloat. Since Fannie and Freddie were taken over by the government in September 2008, the government has poured $145 billion in taxpayer money into these mortgage agencies. These quasi-government agencies have been out of control for decades, and I will argue that they were largely responsible for the housing bubble, the financial crisis that followed, and the Great Recession. The Bush administration tried to reform these agencies for years, but the Democrats blocked all such efforts. Why? Because Fannie and Freddie were huge political contributors. You will definitely want to read this week's E-Letter, and you will probably want to share it with others. Feel free.

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  • How to Recover From the Bear Market

    As the stock market struggles to hold onto March's gains, many investors are now thinking about getting back into the market. While it's not yet clear whether we've seen the worst of this bear market, there are ways to get a jump on repairing the damage many investors have incurred in their portfolios by using investments that are not historically correlated to movements of the stock market.

    Almost all financial advisors caution their clients to resist the temptation to put all their money into risky ventures that promise to make up lost ground - and I wholeheartedly agree with this advice. However, including aggressive strategies as a small allocation in an otherwise moderate investment portfolio can provide the potential for growth no matter what the market's direction. There are no guarantees, of course.

    To that end, I'm going to discuss two aggressive investment programs that I have previously introduced in my E-Letter. I think either program might be a suitable addition for a portion of a diversified portfolio, depending upon your goals and risk tolerance. However, since we don't know what future market conditions may be, a combination of these programs might be a viable long-term option for a portfolio designed to repair the bear market's damages....
  • Have We Turned The Corner On The Recession?

    While the global recession and credit crisis are still in full swing, at least we have finally seen a few positive economic reports of late. Specifically, we have seen some good news in the housing sector where new and existing home sales actually increased nicely in February, following months and months of decline. We also saw an unexpected jump in durable goods orders for last month. These reports, along with the nice jump in the stock markets, have led several noted forecasters to suggest that we've seen the bottom in the recession and the worst of the credit crisis. I am not so convinced.

    We will also take a close look at Treasury Secretary Geithner's latest bank bailout plan that would partner government and private investors in a scheme to take toxic assets off of the banks' books, but there is no guarantee that this new plan will work. We'll also examine the Fed's latest plans to buy Treasury debt and more toxic assets from banks. Next, we'll examine the latest report from the Congressional Budget Office regarding President Obama's record large budget for 2010, which the CBO says will result in a massive $2.3 trillion deficit. Can I say, I told you so?

    It's a lot to cover in one letter, but I trust you will find it interesting....
  • Who Will Buy America’s Trillions In New Debt?

    Since taking office on January 20, President Barack Obama has proposed new government spending of almost $3 trillion dollars. Yes, $3 trillion consisting of his $787 billion "stimulus" package, up to $2 trillion in bank bailouts proposed by Treasury Secretary Geithner earlier this month, and another $275 billion for homeowners and mortgage companies that Obama announced last week. The question is, who is going to buy this gargantuan amount of US Treasury debt over the next few years? With the global recession, the largest foreign buyers of Treasuries, like China, Japan and Europe, may not be in a position to keep buying our debt. It now appears the US Federal Reserve will be called upon as the "lender of last resort," but the Fed will be forced to print these trillions in new money. That could trigger another round of big inflation (hyperinflation, some predict) in the coming years. This week, I will explore the implications of this record spending and borrowing. Be warned that what follows is not pretty, but it is what it is. The latest plunge in the stock markets is indicative of just how precarious the situation is. As investors, we need to understand what is happening and how to react to it. Let's get started....
  • Throwing Trillions Around Like Crazy

    President Obama will sign into law the largest single spending bill un US history, $787 billion, today in Denver. No one knows if it will work. Last Tuesday, Treasury Secretary Tim Geithner announced a massive bank bailout plan that will spend $1.5-$2 trillion or more, but he failed to provide many details on how this rescue package will work. The stock markets have been in a tailspin ever since. There is growing talk of nationalizing many of our large banks. While I'm against nationalization, I have included a very interesting article by Dr. Nouriel Roubini, a well-known economist. I think you should read it, if for no other reason than to be informed on the subject....
  • Support Wanes For Obama's Huge Stimulus Plan

    The Senate finally passed its version of President Obama's near $1 trillion economic "stimulus" package. But as Americans saw that this so-called stimulus package is loaded with pork-barrel spending and does not include nearly enough in tax cuts and direct incentives, public support for it plummeted. The Republicans' alternative plans that proposed more in tax cuts were ignored (of course). I have numerous problems with the giant stimulus program, especially regarding the "protectionism" elements as you will see. Finally, earlier today Treasury Secretary Geithner announced a new plan to spend $2-$3 trillion to bail out banks, buy troubled assets, unfreeze the credit markets, etc., etc. I will have more to say about this as the details become available....
  • Obama Seeks Multi-Trillion Dollar Bailouts

    This week we start with a review of the latest economic data which indicate that the recession is still deepening. Following that, we will examine the $800+ billion stimulus plan that President Obama requested and the House passed last week. Unfortunately, apprx. two-thirds of that massive plan is pork-barrel spending that will not help the economy anytime soon or at all. Next, we will look at Obama's request for $1-$2 trillion to help the banking system. And finally, we will address the fact that the Fed is gearing up to directly purchase hundreds of billions of long-term Treasury bonds in case the massive bailouts don't work. It should be a lively letter!...
  • Economic & Investment Outlook For 2009

    As we kick off the New Year, let's review the latest dismal economic and financial data and the consensus views of what lies ahead in 2009 for the economy, the credit crisis and the markets. As you might expect, most of my trusted sources believe that the recession will be with us for a while, but there is hope that the economy will begin to bottom out sometime late this year - aided by more huge government bailouts that President-elect Obama has in store for us....
  • The Recession & More Government Bailouts

    Well, the 'R' Word (recession) can now be officially used to describe the US economy since the National Bureau of Economic Research (NBER) declared that we have been in a recession since December of 2007. Considering the back-dated nature of NBER's announcement, we find ourselves in the midst of the third longest recession since the Great Depression, with no end yet in sight. No wonder the Treasury and Fed are pulling out all of the stops to bail out the economy. This week, I'm going to discuss the current bleak economic picture, the Fed's latest bailout and the possible long-term consequences of the Fed's printing money....
  • What To Do About The Global Financial Crisis

    This week, we ponder whether the giant $700 billion bailout plan is large enough. There are some smart people who believe it is not enough, as you will read below. There are also many who argue that the government needs to inject capital directly into the largest banks to get them lending again. This morning, President Bush announced just such a plan to inject up to $250 billion in US banks in return for stock in their companies. I will discuss this latest bank rescue plan as we go along, as well as the progress on the larger bailout plan. Finally, I will give you thoughts on what you should be doing in the stock market in light of the latest historical plunge....