Chart of The Day: Where A Bank's Revenue Comes From...

Housing Double Dip Has Officially Arrived...

Unfortunately, it is official.

Home prices have double dipped nationwide, now lower than their March 2009 trough, according to a new report from Clear Capital. It was inevitable that a surge in sales of foreclosed properties and a big push by banks to facilitate short sales would force home prices down dramatically.

Sales of bank-owned (REO) properties hit 34.5% of the market, according to the survey, resulting in a national price drop of -4.9% quarterly and -5% year-over-year. National home prices have fallen -11.5% in the past 9 months, a rate not seen since 2008.
Add short sales, where the bank allows the borrower to sell for less than the value of the mortgage, and prices have nowhere to go but down. 

"With more than one-third of national home sales being REO (bank owned), market prices are being weighed down as many markets have not regained enough footing to withstand the strain of the high proportion of REO sales," says Clear Capital's Alex Villacorta.

If prices continue to fall further, which they likely will in the short term, the number of so-called "underwater" borrowers, those with negative equity, will rise even higher, which could in turn result in more loan delinquencies.

Nationwide more than 25% of all homeowners with a mortgage are in a negative equity position, but in some markets, that number is far higher. 46% of Massachusetts borrowers are underwater, according to LendingTree. The last time home prices fell at this rate, 3 years ago, they were then boosted by government stimulus in the form of a home buyer tax credit. 

"A note of caution to those looking for a strong end to 2011: The last time no incentives were in place and distressed inventories were this high, home prices fell sharply," warns Villacorta."

Bullish Omen: A New All-Time High for Market Breadth...

When the NYSE Advance/Decline Line makes a multi-year high, stocks tend to do quite a bit better than average in the intermediate- to long-term.
 

It doesn't mean there won't be any corrections, but the probability of a -10% plus decline during the next 6 months is greatly reduced.

Chart and Analysis Courtesy of SentimenTrader.com

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, May 13, the S&P 500 closed @ 1338, and that was...
  
     +7.3% ABOVE its 12-Month moving average which stood @ 1247.
     +7.9% ABOVE its 40-Week moving average which stood @ 1240.
     +0.9% ABOVE its 10-Week moving average which stood @ 1326.


Therefore, the INTERMEDIATE-Term trend IS NEUTRAL to Moderately BULLISH and the LONG-Term trend is BULLISH.

A Millionaire Boom Is Coming...

Despite the Great Recession, which wiped out $15.5 trillion in household wealth in the United States alone, the number of millionaires in this country and abroad will grow rapidly over the next decade.

In the U.S., the total number of families with a net worth of over $1 million, including real estate, will double by 2020, according to a report by the Deloitte Center for Financial Services.

Overall, the U.S. and Europe have the greatest concentrations of wealth than any other region, although emerging markets are narrowing the gap.

China will lead the way in millionaire growth, the report said, followed by Brazil and Russia. By 2020, China and South Korea will rank in the top 10 of countries with the greatest total number of families worth more than a million dollars.
"There is going to be very fast growth, but it will take a lot longer to reach anything like the wealth in the developed world," said Andrew Freeman, lead author of the report.

With 10.5 million, the U.S. has -- by far -- the greatest number of millionaire households in the world, despite the financial crisis and ensuing recession which knocked more than 3 million millionaire families off the map between 2006 and 2008.

The number of millionaire households is expected to return to pre-crisis levels by 2015 and reach 20.6 million in 2020, maintaining the U.S.'s position in the top spot. By then, 43% of the world's wealth held by millionaire households will be in the U.S., up slightly from 42% this year, the report said.

Japan is expected to rank a distant 2nd, with 8.6 million millionaire households in 2020 and 9% of the world's wealth. China is expected to be No. 7, with 2.5 million millionaire households in 2020 and 4% of the world's wealth.

A Failsafe Way To Know If A Recession Is Really On Its Way...

The telltale sign of an impending recession is an inversion (short-term rates are HIGHER than long-term rates) of the 30-year yield vs. the 10-year yield spread.

Historically, the stock market and the economy remain healthy as long as the yield curve is STEEP and NOT inverted.

However, when the yield curve becomes inverted, as it was in 2000 - 2001 and 2007 - 2008 (note the yellow shaded area on graph), the economy and the stock market typically take a bear-market beating within 6 months of the inversion.
 
Normally, 30-year bonds yield more than 10-year bonds as a function of people wanting to get paid for not being in riskier assets. But when the 30-year yield collapses below the 10-year yield, watch out!

While 30-year yields have been coming down, and the spread is narrowing, we're nowhere near inversion at present.

Chart of The Day: Total Jobs Still Below Level Reached in 2000...

On Friday May 6, the Labor Department reported that nonfarm payrolls (jobs) increased in April for an 8th consecutive monthly gain.

Today's chart provides some perspective on the U.S. job market. Note how the number of jobs steadily increased from 1961 to 2001 (top chart).

During the last economic recovery (i.e. the end of 2001 to the end of 2007), job growth was unable to get back up to its long-term trend (first time since 1961).

More recently, nonfarm payrolls have pulled away from its 40-year trend (1961-2001) by a record percentage (bottom chart).

In fact, the current number of U.S. jobs was first reached in early 2000, more than 10 years ago!

Chart & Commentary Courtesy of Chart of The Day

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, May 6, the S&P 500 closed @ 1340, and that was...
  
     +7.9% ABOVE its 12-Month moving average which stood @ 1247.
     +8.5% ABOVE its 40-Week moving average which stood @ 1235.
     +1.2% ABOVE its 10-Week moving average which stood @ 1324.


Therefore, the INTERMEDIATE-Term trend IS BULLISH and the LONG-Term trend is BULLISH.

Chart of The Day: Oil's 1-Day -9% Plunge in 15 Minute Intervals...

May 5, 2011.

The worst one-day drop in oil and in the commodity sector over 2 years.

Retirement Income Percentages - Social Security, Pensions, Savings & Investments, Annuities

• 85% — Percentage of retirees ages 55-79 who are dependent on Social Security.
  
  
• 75% — Percentage of retirees who get income from a pension plan.
  
  
• 44% — Percentage of retirees who receive income from investments and taxable savings.
  
  
• 35% - Percentage of retirees who receive income from annuities.
  
  
  

Brace Yourselves for A National Debt Tsunami...

• Our present national debt is $14 trillion.
  
  
• The Congressional Budget Office says we will be $20 trillion in debt by 2015, $25 trillion in debt by 2020 and $27 trillion in debt by 2021.
  
  
• The interest on $27 trillion would consume 50% of all federal tax revenue.
  
  
• By 2026, the rest of the world COMBINED will NOT have enough money available to buy ALL of our debt.
  
  
  

Chart of the Day: Gasoline Prices Near Record Highs...

The only time when gasoline prices were higher than today was during a brief 3-month period in mid-2007, just prior to the Great Recession.

Since the financial crisis lows at the end of 2008, the average U.S. price for a gallon of unleaded has risen +$2.18 per gallon.

As a result of ongoing geopolitical tensions as well and increasing global demand, the price of crude oil continues to trend higher.

Over the past 8 months, the cost of one barrel of crude oil has increased by over $40.

With oil prices oil prices trending higher, it is not all that surprising to find that gasoline prices are following suit.

Chart & Commentary Courtesy of Chart of The Day

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, April 29, the S&P 500 closed @ 1364, and that was...
  
   +10.9% ABOVE its 12-Month moving average which stood @ 1230.
   +11.0% ABOVE its 40-Week moving average which stood @ 1229.
     +3.1% ABOVE its 10-Week moving average which stood @ 1322.


Therefore, the INTERMEDIATE-Term trend IS BULLISH and the LONG-Term trend is BULLISH.

U.S. Dollar Purchasing Power Drops -20% in the Past 10 Years...

Silver (+937%) Trounces Gold (+469%) & the S&P 500 (+7.5%) During the Past 10 Years...

Chart of The Day: Median Single Family Home Is Still -38% Off Its Peak...

For some perspective on the all-important U.S. real estate market, today's chart illustrates the inflation-adjusted median price of a single-family home in the United States over the past 41 years.

Not only did housing prices increase at a rapid rate from 1991 to 2005, the rate at which housing prices increased jumped, too.

That brings us to today's chart which illustrates how the inflation-adjusted median home price is currently -38% off its 2005 peak.

That's a -$100,000 drop!

In fact, a home buyer who bought the median priced single-family home at the 1979 peak has actually seen that home lose value (a -8.5% loss adjusted for inflation). Not an impressive performance considering that more than three decades have passed. It is worth noting that the median priced home is currently in the bottom half of a price range that existed from the late 1970s into the mid-1990s.

Chart & Commentary Courtesy of Chart of The Day

Cancer, Heart Attack and Stroke Stats...

• 61% — Percentage of new critical illness claims caused by cancer.

• 14% — Percentage of new critical illness claims caused by heart attacks.
  
  
  

• 5% — Percentage of new critical illness claims caused by strokes.
  
  

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, April 22, the S&P 500 closed @ 1337, and that was...
  
   +9.1% ABOVE its 12-Month moving average which stood @ 1226.
   +9.4% ABOVE its 40-Week moving average which stood @ 1222.
   +1.3% ABOVE its 10-Week moving average which stood @ 1320.


Therefore, the INTERMEDIATE-Term trend IS NEUTRAL to Moderately BULLISH and the LONG-Term trend is BULLISH.

The Higher Education Bubble Explained...

Survey: Is There A Greater Probability of a +20% Rally or a -20% Correction?

Since the last time this survey of stock market strategists was done in January 2011, the number of respondents who see a -20% decline as being more likely than a +20% rally has reversed.

Now the majority (by nearly 2 to 1) expects a -20% decline    before the next +20% rally.

Survey: Is There A Greater Probability of a +20% Rally or a -20% Correction?

Who Pays Income Tax? How Much? And Is Everyone Paying Their Fair Share?

The Bottom 50% of earners pay almost nothing, and the Top 1% pay close to 40% of the income tax collected.

The Bottom 90%, which in 2008 included all returns with adjusted gross income of up to $114,000, were paying 30%, down from 44% in 1987.

That means that the Top 10% pay a whopping 70%!!!

Are the Bottom 90%, at only 30%, paying their fair share?

Very high incomes are produced not so much by wages and salaries but by capital gains and bonuses, which rise and fall with booms and busts.

In good years, the government gets a windfall and can't resist the urge to take on new spending commitments. In bad years, revenues collapse, but the spending can't be so easily rolled back.

As the tax system has grown more top-heavy, its revenues have also grown more volatile. The income-tax take spiked to an all-time high in 2000, hitting 10% of GDP for the first time ever. In 2010, it sank to 6.2%, its lowest level in more than 50 years.

Source: IRS and Investors Business Daily

"U.S. May Lose AAA Rating In 2018" - Investor's Business Daily

The U.S. is 7 years away from a possible debt downgrade under President Obama's budget, based on Moody's standard for gauging the nation's creditworthiness.

The Congressional Budget Office's (CBO) analysis of the president's plan showed that by 2018, debt service would equal $725 billion, or 18.2% of the $4.0 trillion in projected federal revenue.

That would exceed the 18% threshold that Moody's has said would constrain policy options and would be inconsistent with a triple-A rating.

If an 18% interest-to-revenue ratio were hit due to a steady increase in debt, "the rating would certainly have to be reconsidered," Steven Hess, Moody's lead analyst for the U.S. rating, wrote in an e-mail. "But depending on an assessment of what was being done about the future level of debt, a downgrade would not be automatic."

Over the 10-year period, CBO projected that public debt would double over the coming decade to $20.8 trillion. Debt would reach 87.4% of gross domestic product at the end of fiscal 2021.


U.S. May Lose AAA Rating In 2018 - Chart & Commentary Courtesy of Investor's Business Daily

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, April 15, the S&P 500 closed @ 1320, and that was...
  
   +7.8% ABOVE its 12-Month moving average which stood @ 1224.
   +8.6% ABOVE its 40-Week moving average which stood @ 1215.
   +0.1% ABOVE its 10-Week moving average which stood @ 1319.


Therefore, the INTERMEDIATE-Term trend IS NEUTRAL to Moderately BULLISH and the LONG-Term trend is BULLISH.

The Tax Code Is A Drag...for Taxpayers and on the Economy

This year, it will take the average taxpayer 23 hours just to fill out Form 1040 — up from 21 hours last year, according to the IRS. It now takes 7 hours to fill out the so-called 1040 EZ.

Tax complexity isn't merely a hassle for taxpayers, it's a huge drag on the economy. It takes more than 6 billion hours — or $163 billion a year — for companies and individuals to figure out what they owe, the IRS says. And the Government Accountability Office estimates that the distortions and inefficiencies created by the complex tax code cause up to $733 billion in "dead weight losses." Together, these costs equal 6% of GDP.

The ornate tax code also makes compliance harder and cheating easier, contributing to what the IRS figures is more than $290 billion in unpaid taxes — effectively raising taxes that much more on everyone else.

To get a sense of just how mind-bogglingly complex the federal tax code is, consider:

• More than 80% of individuals hire someone or buy software to help file their taxes, though only 64% of filers owe them, according to the Tax Foundation. So millions of filers pay for help to learn that their tax liability is zero.

• About two-thirds of low-income filers pay to have their taxes done, the Tax Policy Center found.

• The tax code has at least 6 definitions of a child, more than a 12 different education-related tax breaks and at least 16 different kinds of tax-favored savings plans.

Source: Investor's Business Daily

Quote of The Day: On Ignorance

"Ignorance isn't bliss.

It's expensive."

5 Reasons to Be Bullish About America in Long Run

1) The United States is the home of the entrepreneur.

2) The United States is the most open/flexible society the world has ever seen.

3) The brightest minds from around the world dream of coming to the United States.

4) English is the universal language.

5) Americanization remains a powerful and growing – though resented – economic and social trend throughout the world. (To quote the advertising/marketing giant WPP Group’s CEO, Sir Martin Sorrell, “Globalization is a misnomer. The better word is Americanization.”)

~Jeffrey Saut via Real Clear Markets

The Path To An Incredible Shrinking U.S. Deficit...

Last week, Congressman Paul Ryan released his plan for massive budget cuts that would fundamentally alter the spending profile of the U.S. government over the long-term.

The headline number on the cuts: $6.2 trillion over the next 10 years.

In terms of the cut to government spending, Ryan's plan, "Brings government spending to below 20 percent of the economy, a sharp contrast to the President’s budget, in which spending never falls below 23 percent of GDP over the next decade."

They said the cuts were incredible, and they look it. Whether or not a program like this will ever be achieved is unknown, but its proposed impact on debt as a percent of GDP is dramatic.

Read more @ BusinessInsider.com - A Choice of Two Futures

Vantage Point UPDATE: Intermediate-Term and Long-Term Trend Analysis

On Friday, April 8, the S&P 500 closed @ 1328, and that was...
  
   +8.4% ABOVE its 12-Month moving average which stood @ 1225.
   +9.9% ABOVE its 40-Week moving average which stood @ 1209.
   +0.8% ABOVE its 10-Week moving average which stood @ 1318.


Therefore, the INTERMEDIATE-Term trend IS NEUTRAL to Moderately BULLISH and the LONG-Term trend is BULLISH.

Quote of The Day: A Nation of Makers or A Nation of Takers?

"More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees."


- Stephen Moore, Wall Street Journal

S&P 500 Earnings Rise Sharply In The Past Year...

The aggregate annual earnings of the S&P 500 companies are +38% higher today than they were just 1 year ago (source: S&P). 

Bodes well for the economy and the stock market.