Joseph Stiglitz says, “We are headed for another crisis without reform”

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Robert Prechter sees “The Biggest Bubble in History”

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Delinquent Mortgages Hit Record 15%

  • The percentage of loans that were in foreclosure or behind at least one payment hit 15.02%, the most since MBA’s records began in 1972.   Foreclosures will likely stay high in 2010.
  • Real estate Web site Zillow.com recently said one in five homeowners were underwater in Q4!!
  • 4.5 million foreclosure filings are expected this year, up from 2.8 million in 2009.
  • “The bulk of foreclosures are coming in spring and summer, and we do expect home prices to continue falling through the end of this year,” said Celia Chen, director of housing economics at Moody’s Economy.com.

Here Comes The Double Dip Recession

There’s been many letters and symbols used over the last year to describe the shape of the U.S. economic recovery. There’s the strong V-shaped recovery; the square root shaped recovery to connote a strong recovery followed by a period of flat to no growth; and the W-shaped recovery favored by those believing in a double dip recession.Tech Ticker guest Michael Pento has a new twist on the discussion. Pento, senior market strategist with Delta Global Advisors believes this is a tee-pee shaped recovery with the top of that tee-pee having already formed in the fourth quarter.Pento is negative on America’s near term economic prospects for three main reasons: too little bank lending, too few jobs and too much public and private debt. “I’ve never seen a v-shaped recovery occur when commercial bank lending was down 7% year over year. So, small business are not getting loans to create capital goods and to expand and hire individuals,” he observes.Exacerbating the problems at home, is what he describes, as a weak economy abroad. With China looking to clamp down on growth, the EuroZone struggling with its own debt problems, Pento asks, “Where is the growth going to come from in demand from overseas?When he says “demand” he’s referring not only to products and services but also to our growing debt burden. As the price of servicing our deficit grows, when the Federal Reserve tightens monetary policy, Pento is confident others will realize what he already does: the situation in the U.S. is “worse than Greece.”The way he sees it, there’s a strong potential for a bond and dollar crisis when China starts selling Treasuries. “Tell me which shape recovery that will yield for the United States?”

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Do You Know If Your Covered? Learn FDIC Insurance Limits

What does the FDIC do?

The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for up to $250,000 (through December 31, 2013).

What are the basic FDIC coverage limits?

  • Single Accounts (owned by one person):  $250,000 per owner
  • Joint Accounts (two or more persons):  $250,000 per co-owner
  • IRAs and other certain retirement accounts:  $250,000 per owner

What types of accounts are eligible for FDIC insurance?

FDIC insurance covers all deposit accounts at insured banks and savings associations, including checking, NOW, and savings accounts, money market deposit accounts and certificates of deposit (CDs) up to the insurance limit.

The FDIC does not insure the money you invest in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if you purchased these products from an insured bank or savings association.

Need More Information? Go to:  https://www.fdic.gov/edie/fdic_info.html#04

Gary Shilling: Higher Government Pay Will “Likely Lead to a Tax Revolt”

14.8 million Americans are currently out of work and looking for a job, according to a report released today by the Bureaus of Labor Statistics. Even if you do have a job, wages have not increased substantially over the last ten years, with one exception: government workers.Thanks to generous health-care benefits and pensions, it pays – more than ever – to work in the public sector. Economist Gary Shilling fears dubious consequences if state and local workers continue to make more money and at the same time governments raise taxes and cut services.”In good times, nobody really cares that much but now we’re not in good times,” says the President of A. Gary Shilling & Co. “The basic problem is pay differential, as I see it, and that I think is likely to lead to a taxpayer revolt.”Shilling’s point about pay is illustrated well in this recent research by Dr. Mark J. Perry, professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.According to a December report from the BLS, state and local government employers spent an average of $39.83 per hour worked ($26.24 for wages and $13.60 for benefits) for total employee compensation in September 2009. Total employer compensation costs for private industry workers averaged $27.49 per hour ($19.45 for wages and $8.05 for benefits). In other words, government employees make 45% more on average than private sector employees.According to another BLS report, compensation for private industry workers has increased by 6.9% between December 2006 and December 2009, compared to a 9.8% increase for government workers (state and local) over the same period.If that’s not enough, the trend will lead to a lowering of our standard of living, even for the highest paid workers on Wall Street, Shilling tells Henry in the accompanying clip. If reforms like the Volcker Rule take hold, Shilling’s “not sure Wall Street (will be) permanently bidding up the prices of Manhattan real estate and vacation homes in the Hamptons.”

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Howard Davidowitz is Yahoo Tech Ticker’s Best of 2009

Howard Davidowitz – Listen to this guy

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40%-50% Chance Stocks Will Crash To New Low, Says Gary Shilling

Last summer, our guest Gary Shilling of A. Gary Shilling & Co. predicted that stocks would fall 30%.  That hasn’t happened yet, but the extraordinary bull run that made idiots out of many of Wall Street’s greatest gurus last year has now finally reversed, and Gary is sticking by his bearish guns.

At Dow 10,000, Gary says, stocks are still priced to reflect a strong economic recovery throughout 2010 and 2011.  And that’s not going to happen.  Consumers still account for more than 70% of the spending in the U.S. economy, and consumers are retrenching.  The value of their assets has plummeted, so they’re finally saving again.  They’re unemployed.  They’re tapped out.  Put all that together, and consumer spending will continue to be weak, and the overall economy will only grow 2% a year.

When the market finally realizes that its dream of a v-shaped recovery is too optimistic, stocks will go lower–perhaps much lower.  In fact, Gary thinks there’s a 40%-50% chance they’ll crash right through the bear-market lows set last spring.

So what’s an investor to do?

Buy Treasury bonds, Gary says.  Contrary to the concerns of they hyper-inflation crowd, the world is awash in excess capacity.  We have too much production capacity, too many houses, too much labor.  Overcapacity leads to deflation, not inflation.  So today’s 4.5% long-term Treasury yield will go to 3%, making bondholders 25% in the process.

And buy the dollar.  At the end of last year, everyone agreed that the dollar was going to continue to collapse.  That was your queue to get the heck out.  It’s not that we don’t have serious problems with deficits and debt in the U.S., Gary says–it’s that our problems are less bad than the problems facing the Euro.  Gary thinks the dollar will rise back to parity with the Euro, a major move from the ~$1.35 it takes to buy a Euro today.

And sell commodities.  China is overheating, and as it corrects, it will take global commodity demand down with it.

In short, Gary says, do exactly the opposite of what everyone was telling you to do at the end of last year.