If USA was a stock, I'd short it

[nodoodahs]

... and its bonds would have junk status. The U.S. is in absolutely horrible financial condition, if measured by the standards you and I measure companies we chose to invest in. If you found a company with the same financials as the U.S., with a unreasonably high price, would you short it? I would.

The government misleads you into believing the deficit is lower than it is, and that we had surpluses in the '90's - but this is because they report in public on a cash basis. Were they to report on an accrual basis according to GAAP, the situation would look far more dire. On a GAAP basis we haven't had a surplus since LBJ was in office. Would you invest in a company that, for 40+ years, reported "pro forma" earnings while recording GAAP losses???

Go to http://www.gao.gov/financial/04frusg.pdf and download the PDF. This is the " 2004 Financial Report of the United States Government" and is published by the Government Accounting Office.

See page 34 which is the beginning of the letter from the Comptroller General. "As in the seven previous fiscal years, certain material weaknesses in internal control and in selected accounting and financial reporting practices resulted in conditions that continued to prevent us from being able to provide the Congress and American citizens an opinion as to whether the consolidated financial statements of the U.S. government are fairly stated in conformity with U.S. generally accepted accounting principles." I wouldn't like seeing that in a 10-K.

Page 35. "The federal government’s gross debt as of September 2004 was about $7.4 trillion, or about $25,000 for every man, woman, and child in the country. But that number excludes such items as the gap between promised and funded Social Security and Medicare benefits, veterans’ health care, and a range of other unfunded commitments and contingencies that the federal government has pledged to support. If these items are factored in, the current dollar burden for every American rises to about $145,000 per person, or about $350,000 per full-time worker. GAO’s fiscal policy simulations illustrate that the fiscal policies in place today—absent substantive entitlement reform or unprecedented changes in tax and/or spending policies—will result in large, escalating, and persistent deficits that are economically unsustainable over the long term. Without reform, known demographic trends, rising health care costs, and projected growth in federal spending for Social Security, Medicare, and Medicaid will result in massive fiscal pressures that, if not effectively addressed, could cripple the economy, threaten our national security, and adversely affect the quality of life of Americans in the future."

On page 39 the auditors disclaim responsibility for the filing ! Shades of Enron! "As a result of the material deficiencies in the federal government’s systems, recordkeeping, documentation, and financial reporting and scope limitations, readers are cautioned that amounts reported in the consolidated financial statements and related notes may not be reliable."

It's obvious from perusing the report that USA Inc has a profoundly negative net worth, and can't turn a profit, in spite of the fact that it can use guns to make its customers buy the product! Would you buy this stock???

[rffrydr]

Top of the "Sell on Strength" index today, MSCI World ex US, Vanguard Total Stock ETF.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Letter in St. Peterburg Times

Dear Mr. President,


Please find below my suggestion for fixing America 's economy.

Instead of giving billions of dollars to companies that will squander the money

on lavish parties and unearned bonuses, use the following plan.


You can call it the "Patriotic Retirement Plan":

There are about 40 million people over 50 in the work force.

Pay them $1 million apiece severance for early retirement with the following stipulations:

1) They MUST retire. Forty million job openings - Unemployment fixed.

2) They MUST buy a new AMERICAN Car. Forty million cars ordered - Auto Industry fixed.

3) They MUST either buy a house or pay off their mortgage - Housing Crisis fixed.

It can't get any easier than that!!
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

CNBC's "Fast Money" now has a segment: "Panda or Chinese Company" where these hardcore traders "test" their knowledge of china markets. I see this as re-embracing the good 'ol USofA after three years (esp. this one) of underperformance of this $3T fortress balance sheet.
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Today is the Tomorrow you worried about Yesterday!

[diesel]

Hmmm, the non-commercials are holding there smallest spreading position in gold futures since July 2006 at the moment. No fear!

[nodoodahs]

I guess it depends on the timeframe you calc momentum on and the parameters of the MACD (or PPO if you prefer). I'm still on the GLD and looking at the GDX again this month.

Rotational model is looking at a "stagflation" trade, from what I'm seeing.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[diesel]

[rffrydr]

Fiscal Stimulus on the way:

http://www.nytimes.com/2008/02/08/washington/08fiscal.html?pagewanted=2&_r=1&ref=washington

Jumbo cap raise on the way. This will really give a boost to CA real estate and its beaten representative like Countrywide along the way.

Gold is skeptical.
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Today is the Tomorrow you worried about Yesterday!

[Dubious]

[quote="Dubious"]Great post.
I am currently long.
Will be shorting around noon-2pm on Monday.
[/quote]

Oh it was over here?

Hmmm.

Old age.

Take care and happy trading!!!

[Gizmo]

Hi, all.

Naz looks like a bull flag continuation pattern. http://www.msnusers.com/Mycharts/shoebox.msnw?action=ShowPhoto&PhotoID=93

Pattern description and examples. http://www.chartpatterns.com/flagsandpennants.htm

A closer look. http://www.msnusers.com/Mycharts/shoebox.msnw?action=ShowPhoto&PhotoID=94

And be aware that this looks like a 4th wave correction with 5 up to come.
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Gizmo

[Dubious]

Great post.
I am currently long.
Will be shorting around noon-2pm on Monday.

[nodoodahs]

http://moneycentral.msn.com/content/invest/extra/P120624.asp

The overlooked $2.3 trillion deficit

If the government were held to the same standards as public companies, its accounting methods would make Enron's misdeeds pale in comparison. Here's how they obfuscate the truth.

By Scott Burns

Let me be circumspect: Government accounting is vile garbage. It understates the true federal deficit by a staggering $2.3 trillion, an amount equal to the total market value of the 10 largest companies in America – General Electric (GE, news, msgs), Exxon Mobil (XOM, news, msgs), Microsoft (MSFT, news, msgs), Citigroup (C, news, msgs), Wal-Mart (WMT, news, msgs), Johnson & Johnson (JNJ, news, msgs), Pfizer (PFE, news, msgs), Bank of America (BAC, news, msgs), IBM (IBM, news, msgs) and Intel (INTC, news, msgs).

Blessed by historical habits that have no relationship to what our government does today, our legacy of cash accounting now serves to mislead and confuse. The April issue of Economic Indicators, a publication prepared by the Council of Economic Advisers, for instance, projects a unified budget deficit -- the one that lumps the Social Security surplus in with the rest of government -- of $427 billion. (New reports this week that we may be on track for a smaller deficit don't change the fact that the accounting methods are misleading. We'll stick with the $427 billion figure until they make the new estimate official in midsummer.)

The $427 billion deficit, however, is a massive understatement of our true deficit. The real deficit is $2.3 trillion larger. That's more than five times the publicly discussed $427 billion figure -- but it never enters public discussion.

If the executive branch of government were held to the standards of Sarbanes-Oxley, it would be on a fast track to a criminal trial. We would forget about Ken Lay because the crimes at Enron are mere rounding errors compared to what our government does.

A bipartisan problem
Some readers will expect a diatribe against President George W. Bush to follow.

It won't.

This is a bipartisan problem. Both the Democrats and the Republicans, in or out of office, have been using accounting methods that are, at best, quaint and, at worst, criminal. And they have been doing it for decades.

You can understand what's going on by comparing our government to a large corporation like General Motors.

When General Motors (GM, news, msgs) files its annual report, it must report on the condition of its pension fund and other obligations to current and retired workers as well as its profit or loss. If the pension liabilities -- the retirement benefits it has promised workers -- exceed pension-plan assets by more than a certain amount, General Motors must make contributions to the pension fund, reducing its profits. The two, profits and pensions, are deeply linked. General Motors also has substantial health-care obligations to its retired workers.

Sound familiar?

Our government is in a similar position -- but with a lot more zeros on the numbers it uses. It reports its annual profit and loss as a surplus or a deficit. Separately, it reports on its long-term pension, disability and health-care obligations. Unlike General Motors, however, the government doesn't include these figures in the annual statements of surplus or deficit.

The buried details
You can find them only in the trustees' reports for Social Security and Medicare.

The 2005 reports (each over 200 pages) show the programs to be underfunded by a total of $33.7 trillion (in today's dollars) over the next 75 years. That's four times the $8 trillion in formal debt shown in regular government accounting.

You learn still more when you compare the 2005 reports with the reports from 2004. In 2004, the combined unfunded obligations of Social Security and Medicare were $31.4 trillion.

That's an increase of $2.3 trillion in a single year. The trustees' examination of the plans over a longer time period, termed the infinite horizon, shows an even larger change, $7.2 trillion (see table below).

But let's not look so far in the future. Let's stay with the traditional (if inadequate) 75-year measure, that $2.3 trillion. It isn't mentioned in other government documents. It is missing from Economic Indicators. Indeed, it is absent from virtually all discussion of the federal budget -- the one currently estimating a piddling deficit of $427 billion for fiscal 2005.

The overlooked $2.3 trillion deficit*
Program 75 years Infinite horizon Difference
Social Security $4.0 $11.1 $7.1
Hospital Insurance $8.6 $24.1 $15.5
Part B (from general revenues) $12.4 $25.8 $13.4
Part D (from general revenues) $8.7 $18.2 $9.5
Total $33.7 $79.2 $45.5
Comparable total, 2004 $31.4 $72.0 $40.6
Year over year increase $2.3 $7.2 $4.9

*All $ figures in trillions.
Source: 2004, 2005 trustees' reports for Social Security and Medicare.

The unfunded liabilities measure the value, in current dollars, of the amount by which promised benefits exceed expected tax collections. In all three Medicare programs, the financing gap will grow year by year during the 75-year period. It will continue to grow after the 75-year period traditionally used by the trustees of Social Security and Medicare.

Until more accurate figures are presented, neither party knows what it is talking about or where the country is going.

For whatever reason, the problems of the USA are getting more attention recently. This is one of several pieces in the last week or so ... and no, I didn't write any of them!
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.