November 3rd, not November 2nd

The most important upcoming day is not Election Day November 2nd, but rather, the day after, November 3rd. Why? That is the day the Federal Reserve is expected to announce QE2 (Quantitative Easing #2 – more money for the system.) However, there is currently an internal civil war occurring at the Fed since some believe that QE2 will do more harm than good. Those in opposition argue the banks will simply hold onto the money and not loan it out, choosing to build up their cash reserves as the foreclosure fiasco continues to develop. (This foreclosure fiasco will be worse than the Lehman affair.) The stock market has built QE2 into its expectations. What happens if it doesn’t take place?

November 2nd? Just a sideshow for November 3rd.

Till next time,

Bill

P.S. – In Europe, anarchy can be defined by angry participants taking to the streets. In the United States, anarchy can be defined by not paying your mortgage because it’s a “broken chain of title.” More on this next time.


>>>>>>>>>>>>>>>>>>>>>

A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Foreclosure Fiasco

One year ago, I started talking about Greece (Grease). Most people thought I meant the low fat vs. high fat controversy. That’s an understandable mistake; however, I was referring to the one punctuated with high-fat bloating of governmental budgets and unsustainable indebtedness. It was obvious to me that a crisis was lurking right around the corner, and that crisis quickly unfolded.

Now, an even higher event has raised its ugly head: foreclosures. For years, various institutions created mortgages and held the deeds of trust in their vaults. However, the promissory notes were sold-off in a systematic method known as securitization, a process in which a single promissory note was sliced and diced, resulting in multiple owners. As a result, it’s almost impossible to know the identity of the actual owner. That is where the problem arises. To legally foreclose, both the deed of trust and the promissory note must be in hand by the foreclosing party. This is not a question of whether owners should be foreclosed; it’s a question of the legal right to do so. Bank of America has suspended foreclosures in all fifty states. Forty attorney generals have recommended (here come the lawsuits) a total moratorium on foreclosures. The White House has taken a position that it is only a paper snafu, a reminder of when Ben Bernanke said that subprime mortgages were contained.

This problem will bring any housing recovery to a dead halt. It will create such a firestorm that even I can’t imagine, and it will make us all long for the days of Greece.

Till next time,

Bill


>>>>>>>>>>>>>>>>>>>>>

A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

It's Been a While

The month of September represented a period of time to truly sit back and become awestruck. Not because of the so-called good things that happened, which were implied by the rising stock market, but rather because of all the bad things that were suggested by a rising bond market and the dramatic decline in interest rates. The free-fall of the ten-year treasury to levels not seen since the Dow Jones was in 6,000 territory tells the story of increasing unemployment, rising foreclosures, escalating bankruptcies, significantly more food stamp participants, and a currency war that is just beginning to heat up.

If the Dow is right, and the level of 11,000 is accurate, then all the prior economic problems are simply an illusion that will drift away like a dream. However, if the bond market is right, then that dream suddenly becomes an unbearable nightmare, making 1929, 1987, 1999, and 2008 seem downright mild. Unemployment, foreclosures, bankruptcies, and food stamps are no dream, and the currency war will become a veritable nightmare.

Preservation, protection, and a keen-eye are the watchwords.

Till next time,

Bill


>>>>>>>>>>>>>>>>>>>>>

A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

The Service Sector

Today, the monthly jobs report came out. My guess is that less bad is considered not bad. However, the key component of today’s report was something overlooked by everyone. To me, the announcement that the ISM service industry declined dramatically is the most significant news of the day. Why? Simply put, the United States thrives on service, not manufacturing. In fact, companies are not creating new manufacturing sites, nobody is rushing to build plants in the United States, and businesses are manufacturing overseas. No matter how much the President strong-arms, that trend seems likely to continue.

On this Labor Day, as we celebrate the American workforce, we must keep perspective. As the stock market traders take a weekend vacation, seasonality reigns supreme, and hope fills the air, just remember, on Tuesday, it’s back to reality.

Have a wonderful weekend.

Till next time,

Bill


>>>>>>>>>>>>>>>>>>>>>

A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

It's Lonely at the Top

In December of 1989 the Japanese Nikkei (stock market) hit an all-time high of 40,000; a level many believed was just a stopping-off point for much greater things to come. Unfortunately, for those who bought with that expectation, they were sadly disappointed. The same could be said for the NASDAQ, which closed at an all-time high of 5,048 in March of 2000. In October of 2007, the Dow Jones Industrial Average closed at a record of 14,164. So, have we seen the Dow hit its all time peak?

A case can be made that the Nikkei, the NASDAQ, the Dow, housing, the Beanie Baby, and the tulip bulb, will never reach the heights they once attained. In fact, we may be entering an era where 5-digit Dow Averages are a thing of the past. Could we even conceive of a 3-digit Dow?

Anything is possible when deflation rules the roost.

Till next time,

Bill


>>>>>>>>>>>>>>>>>>>>>

A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Getting on Board

Sometimes, it gets a little too comfortable when others start agreeing with you. That’s the position I now find myself in since I've been saying that economics always wins out in the end. Each day that passes another nail has been driven into the coffin of not only the domestic economy, but the global economy as well. House prices are plummeting again, unemployment is accelerating, Israel and Iran appear to be headed for a showdown, and Nero fiddles (vacation in Martha’s Vineyard) as Rome burns.

Goldman Sachs has just released their trading desk analysis which says in part: “In conclusion, as discussed in recent client meetings, while the timing is difficult, we remain concerned for the larger topping structure that is still being formed on the S& P 500 Index which will eventually lead to another meaningful decline.”

Richard Russell, Dennis Slothower, Peter Eliades, Robert Prechter, and Arch Crawford, are all calling for an historic stock market top that will not be seen again for many years, and a downside that will at least rival 1930 to 1932, and maybe worse.

Suddenly, that simple little boat I've been rowing alone has started to get very crowded.

Till next time,

Bill


>>>>>>>>>>>>>>>>>>>>>

A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Deflation - Ben Bernanke: "Unusually Uncertain" Bill Tatro: "Very Certain"

Ben Bernanke recently called the economy “unusually uncertain.” KKR cancelled their $500 million IPO, saying market conditions were not favorable. Tim Geithner said raising taxes on the wealthy is justified for the economy. Each of these three items could be discussed for hours, and probably will be. However, collectively, they are indicators which point to an economic environment that has not been seen for many years. It’s called classic deflation, characterized by soaring unemployment, excessive bankruptcies, high taxes, and most important, complete lack of confidence in the system. It is this last item which could be the worst. When people give up on the system, strange things happen. The unemployed stop looking for work and drop out. The employers give up because they’re taxed to death. The consumer stops consuming for lack of money, and those that do have money to spend expect prices to be lower in the future, and likewise stop consuming.

And the stock market you ask? Well, after the dust finally settles, many will ask: “Why didn’t I see it coming?”

Till next time,

Bill


>>>>>>>>>>>>>>>>>>>>>

A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.