International Forecaster Weekly

Another Meltdown Over Debts Looms

Debt looms for students, industry is idle in the gulf, Drones in the sky, guns in the classroom, Panic in Detroit, stocks to crater, Obama buys tanks to go with bullets, Bloomberg sequestered, US Bonds warning,

James Corbett | March 6, 2013

Student Debt Is Perfectly Following the Financial Meltdown Script

By Hamilton Nolan

Just when the stock market recovers and public optimism returns and you start to lose faith in the power of American capitalism to constantly repeat its past mistakes in the form of foreseeable boom-and-bust cycles that always end in massive losses, the system steps up to reinforce your belief in humanity's fundamental unwillingness to learn from past mistakes, ever. Hello, looming student loan meltdown!

You may recall the last financial meltdown we had, less than five years ago, occurred when the system issued too much housing debt to people unable to repay it, and then packaged that debt into securities and sold it off to investors hungry for "yield" who didn't really care about how fundamentally sound that debt was, like a game of debt hot potato, so that every single layer of person involved in the process was only concerned about their own short term gain, and no one had much incentive to stand up and point out that the whole thing was bound to crumble. Now, the exact same process is happening with our nation's huge and ultimately unsustainable pile of student loans. Not to worry—everything is different this time.


Better out than in

On America’s Gulf coast, massive industrial facilities stand idle. Miles of twisting stainless-steel pipes and huge storage tanks gleam uselessly in the sun. They are a reminder of the hundreds of billions of dollars that America has invested in terminals for handling imports of liquefied natural gas (LNG). Thanks to the boom in domestic shale gas, those imports are no longer needed. America produces nearly as much gas as it consumes, and will soon produce far more.

So the obvious thing to do with those idle terminals is to re-engineer them to handle exports. Instead of receiving shiploads of liquefied gas and re-gasifying it, they should be taking American gas, liquefying it and loading it onto tankers. Converting these plants will not be cheap—each one will cost at least $5 billion. But the potential rewards are much larger.

In America gas sells for around $3.40 per million British thermal units (mBTU). In Europe it costs around $12. In gas-poor Asia, spot cargoes change hands for as much as $20 per mBTU. Since it costs roughly $5 per mBTU to liquefy the stuff, ship it and turn it back into gas, America could be making a fortune from gas exports. To the extent that such exports displaced dirty coal, they would also help curb global warming.


DHS drones equipped to eavesdrop on Americans

The US Department of Homeland Security already has an arsenal of drones to be deployed for whatever the agency deems fit, but the actual capabilities of those vehicles exceed what many Americans may expect.

The unmanned drones being used inside of the United States right now can’t shoot Hellfire missiles like their overseas counterparts. They can, however, conduct surveillance, intercept communications and even determine whether or not a person thousands of feet below the aircraft is armed.

The latest revelation comes courtesy of a DHS document that was recently obtained by the Electronic Privacy Information Center, or EPIC, through a Freedom of Information Act request. After analyzing a partially-redacted drone “performance specification” file received through their FOIA plea, EPIC said that records indicate “the Bureau of Customs and Border Protection is operating drones in the United States capable of intercepting electronic communications.”


South Dakota approves guns in the classroom

Lawmakers in South Dakota have passed a bill that would allow school districts to arm staff and teachers with guns to make their schools “safer”.

State Senators on Wednesday voted 21-14 to pass the measure, despite large-scale opposition from school administrators and personnel, who are largely opposed to bringing weapons into their schools.

Supporters of the bill claim that arming teachers could prevent tragedies like the Dec. 14 massacre in Newtown, Conn. The bill’s sponsor, Sen. Craig Tieszen, R-Rapid City, said that he would leave the decision to arm teachers up to individual school districts, but that he strongly recommends it.


Detroit plunges into financial emergency

The governor of Michigan signaled the beginning of the end for the city of Detroit on Friday, setting up the groundwork for what could become the largest municipal bankruptcy in the history of the United States.

Gov. Rick Snyder, a Republican, told reporters Friday morning that "There's probably no city that's more financially challenged in the entire United States” than Detroit. The governor declared the crisis a financial emergency and started to pave the way for an emergency manager to intervene and take control of the city’s ledger.

“Detroit can no longer afford to wait for a new way forward,” read a brochure handed out to audience members during Friday’s announcement. “An Emergency Financial Manager can more quickly and efficiently reform the finances in the city and stop the cycle of overspending and one-time fixes.”


‘Hard to make ends meet on Main Street? Some bureaucrat is eating your lunch’

The economic system managed by the US government is going to collapse, Euro Pacific Capital President Peter Schiff told RT. All of this is because of Washington’s ‘too big to fail’ policy, Schiff argues.


Warning: Stocks Likely to Crater from Here

By Chris Martenson

I don't relish the job of constantly pointing out the risks to the equity markets. But since few on Wall Street seem willing (or able) to do this, I'm "making the call" for a market correction, as enough variables have aligned to indicate a high likelihood of stocks heading downwards from here.

I've only given one other such warning about equities before, and that was in March of 2008, when I warned of the possibility of a 40% to 60% decline in stock prices by Fall. I am making a similar call today, with the understanding that I am usually a bit early to the game with my views.

Before I get into the details, the broad outline is that I see a case where speculative fevers, propelled by the Fed's $85 billion thin-air money printing program, have more or less run their course, with the Dow and S&P indexes stalled near their all-time highs. That is, $85 billion a month is what it takes to merely keep the Dow near 14,000 and the S&P 500 near 1,500.

On a fundamental basis, I see numerous signs of consumer weakness, political in-fighting and paralysis in DC, high insider selling, and the return of the retail investor (a.k.a. "greater fool") to the stock market.

On a technical basis, there are numerous tell-tale signs of a market top, including too much bullish sentiment, waning momentum on multiple timeframes, and too many NYSE stocks being above their 200-day moving average (at least until recently; that's begun to correct).


Obama Pushing “Most Anti-Second Amendment Nominee” in Recent History

Bt Redhorse

Senators on Capitol Hill are telling Gun Owners of America that Harry Reid is twisting arms to get support for one of the most anti-gun judicial nominees in recent memory.

Her name is Caitlin Halligan, and she has a long track record in favor of gun control.  In fact, one Senate Republican said that she is the most “anti-Second Amendment nominee Obama has ever put forward.”

As New York’s Solicitor General, Halligan was one of the chief lawyers responsible for New York’s baseless and politically motivated efforts to bankrupt gun manufacturers using frivolous litigation. In so doing, Halligan proved that she places liberal political activism above fealty to the law.


Obama DHS Purchases 2,700 Light-Armored Tanks to Go With Their 1.6 Billion Bullet Stockpile

By Jim Hoft

The Department of Homeland Security (through the U.S. Army Forces Command) recently retrofitted 2,717 of these ‘Mine Resistant Protected’ vehicles for service on the streets of the United States.


Mayor Bloomberg: Don’t Panic About the Sequester

By Colin Campbell

“We are spending money we don’t have,” Mr. Bloomberg explained. “It’s not like your household. In your household, people are saying, ‘Oh, you can’t spend money you don’t have.’ That is true for your household because nobody is going to lend you an infinite amount of money. When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money. … Our debt is so big and so many people own it that it’s preposterous to think that they would stop selling us more. It’s the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem. And that’s a problem for the lenders. They can’t stop lending us more money.”


Warning signs for US Corporate bonds

By Vivianne Rodrigues and Michael Mackenzie

Could the bond boom be turning? Warning signs are flashing as investors demand higher yields even on US bonds issued by the world’s largest and safest corporate borrowers.

In recent weeks, big investment grade bond issues by the likes of Philip Morris International and UnitedHealth Group have been sold at higher yields than the levels their older bonds were trading at in the secondary market.

“High cash flow companies issuing bonds are going to find that investors will be wary of risk,” says Jack Ablin, chief investment officer at Harris Private Bank. “No one wants to get stuck holding bonds in that situation.”…Also unnerving investors in the sector is the lack of liquidity in secondary trading.