The Student Loan Debt Bomb
by Chart School - February 11th, 2012 5:35 pm
Courtesy of Doug Short.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
It’s interesting to watch some of the terms bandied about in headline news. For example, the LA Times headline reads S&P says student loan debt could be next financial bubble.
Next? Could Be?
What with the word “next”? Also what’s with the words “could be”? Without a doubt student loans are in a bubble and have been for many years. The source of the problem, as it always is with financial bubbles, is cheap money, loans to nearly anyone, and in the case of student loans, no way to discharge the debt, even in bankruptcy.
From the article:
| “Student-loan debt has ballooned and may turn into a bubble,” S&P said. “There are more defaults and downgrades for some student loan asset-backed securities.” |
Federal and private student-loan debt is approaching $1 trillion and surpassed credit-card debt for the first time in 2010, according to Mark Kantrowitz, publisher of FinAid.org, a college grant and loan website. Under U.S. law, student-loan debt — unlike credit-card borrowings — can rarely be discharged in bankruptcy court.
President Barack Obama last month proposed linking federal aid to a college’s ability to control tuition costs. The plan calls for increasing campus-based aid only for schools that limit tuition-cost increases and penalizing those that don’t.
The Next “Debt Bomb”
The Huffington Post says Student Loans Could Be America’s Next “Debt Bomb”.
| Growing numbers of Americans are finding themselves bankrupt, with their college diplomas partially to blame. |
Slightly more than 80 percent of bankruptcy attorneys say the number of their potential clients with student loan debt have increased “significantly” or “somewhat” in the past three to four years, according to a survey by the National Association of Consumer Bankruptcy Attorneys. And there’s little hope those debtors will get out of their obligations; 95 percent of bankruptcy attorneys surveyed said that very few student loan debtors will be discharged from their loan as a result of undue hardship.
“Take it from those of us on the frontline of economic distress in America: This could very well be the next debt bomb…
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DiggGreece at the Point of no Return
by Zero Hedge - February 11th, 2012 4:11 pm
Courtesy of ZeroHedge. View original post here.
Submitted by testosteronepit.
Wolf Richter www.testosteronepit.com
“The European Union is suffering under Germany,” Georgios Karatzaferis said on Friday. He is the president of the rightwing LAOS. With 15 members in parliament, the party is a minority partner in the coalition cabinet of party-less technocrat Prime Minister Lucas Papademos. Karatzaferis accused German Chancellor Angela Merkel of trying to “impose her will on Southern Europeans.” He called the Netherlands, Austria, Finland, and Luxembourg “satellite states” of Germany. And he said that the center of the EU was no longer in Brussels but in Berlin.
But the true toxin in his outburst was the phrase: “I cannot accept this credit agreement.” With it, he backtracked on his support for the austerity package agreed to amid flickers of hope the day before. And it pushed Greece a step closer to disorderly default and bankruptcy.
To avoid that fate, Greece must make a €14.5 billion bond payment on March 20, but it won’t be able to unless it receives the next bailout payment, this one for €130 billion, a mind-boggling 56% of Greece’s shriveling GDP. That payment process has to be initiated over the next few days, according to ratings agency Fitch, to give all countries and institutions involved sufficient time to deal with the administrative complexities of bailing out a country with taxpayer money.
On Thursday, for a few minutes at least, hope was flying high in the media: the three governing parties had agreed on an austerity package that included cutting the minimum wage by 22% and trimming the bloated public sector. But the fallout was immediate.
Deputy Labor and Social Security Minister Yiannis Koutsoukos, a member of the socialist PASOK, resigned in protest over the cuts in social programs; he hadn’t been informed about them, nor had anyone asked him, he said.
Unions called for protests and a general strike for Friday and Saturday. The measures throw the unemployed, retirees, and young people into misery, said Ilias Iliopoulos, head of the union for civil servants. “We will not accept that, there will be a social revolt.”
Greece’s Police union threatened Troika inspectors with arrest. In a written declaration sent to representatives of the Troika, the union accused them of trying to overthrow democratic order in Greece, injuring national sovereignty, and robbing the Greek people of important…
World Markets Weekend Review: The Rally Slows
by Chart School - February 11th, 2012 3:35 pm
Courtesy of Doug Short.
The 2012 rally slowed last week as the average gain of our basket of eight markets dropped from 2.01% the previous week to a flat finish of 0.06%. Geographic rotation was the dominant pattern, with the world leadership moving from Europe to the Asia Pacific. Thus, the top performing Nikkei 225 had been the worst performer at the end of the previous week, while the three European indexes were demoted from stellar to cellar. The S&P 500 again finished near the middle of the pack, but in the spirit of the overall slowdown, a finish near the middle was a week-over-week close (fractionally) in the red.
The adjacent table shows the 2012 year-to-date performance of our gang of eight. Three markets have maintained their double-digit gains at the end of six weeks, with the BSE SENSEX overtaking the DAXK (i.e., the DAX ex dividends) for the lead with the Hang Seng in a close in third place. The other five markets continue to have healthy single-digit gains with the Nikkei’s strong week moving it out of last place, which now belongs to the FTSE 100.
A Closer Look at the Last Four Weeks
The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. I’ve also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the comparative performance over time.
The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500, CAC 40 and BSE SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.
A Longer Look Back
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Apple at $1000/share? Oh, at LEAST!
by Zero Hedge - February 11th, 2012 3:18 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tim Knight from Slope of Hope.
(Note – I got an invitation from Tyler this morning to contribute to ZeroHedge, which completely made my day. I’ve got a little blog called the Slope of Hope, wrapping up its 7th year. I hope to become a regular here over at ZH; thanks, Tyler!)
Most of you have probably already seen the bullgasm happening over at Barron’s. Here’s their cover for the week:
Nothing sums up the euphoria these days better than Apple, Inc. The stock is up nearly 40,000% since 1982 and, more recently, is up about 500% over the past three years. The company seems unable to do wrong (unlike, say, its former arch-rival RIMM), and the media is awash in predictions of the stock reaching $1,000 per share. There doesn’t seem to be much basis for this except that it is a Big Round Number, which also would make Apple’s market cap an Oh-So-Round trillion bucks.
Now let me make clear I am no Apple-basher. Anyone who knows anything about my background knows I have been an Apple fan since the early 1980s. My first Macintosh was purchased in early 1984; I got my first iPhone (the first of many) on its introduction day (which I chronicled with this video), and my first iPad on its debut day. I’m not one of the crazies that waits in line for four days; I simply show up later in the day, pay for it, and resume with my life.
My fondness for Steve Jobs is well known too. A simple query on YouTube for “Tim Knight Steve Jobs”yields a plethora of hits, and I even worked at Apple for a number of years. So with all of that as a preamble, I have no ax to grind with the good people in Cupertino.
But the long-term chart looks really, really, reaaaaaaaaaaaly extended. Look at this gigantic ascending wedge spanning back to when the stock was in the single digits.
…..look a little closer……..
…..and closer still……..
We are right up against that massive trendline. Does this mean Apple doesn’t have a prayer of
…
ESCaPe FRoM ATHeNS…
by Zero Hedge - February 11th, 2012 1:57 pm
Courtesy of ZeroHedge. View original post here.
Submitted by williambanzai7.
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This Time Next US Presidential Campaign: $24.1 Trillion In Debt, 138.9% Debt/GDP
by Zero Hedge - February 11th, 2012 12:18 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
While Obama may or may not be on the way to winning his reelection, courtesy of a GOP field that is, to say the least, limited, and where the only worthy candidate is more ostracized by the right than even anyone on the left, the bottom line is that whoever wins the presidency, it will matter precisely didley squat. As the US debt clock shows, fast forwarding 4 years, or to February 2016, when the next presidential race will be in its final stretch, America will have $24.1 trillion in debt, about $9 trillion more than it does, now on $17.4 trillion in GDP, for a gross debt to GDP ratio of 138.9% (and Apple’s $1 trillion market cap will account for 150% of the Nasdaq… just as IBM is 125% of the DJIA). Needless to say, it will be long past game over at that point confirming that the current presidential race, with its exciting tangential detours into female fertility, moon bases, LBO IRR maximization courtesy of cost-cutting, is completely and utterly meaningless. Also, keep in mind, “at current rates” for an endspiel that has now entered the exponential phase in virtually every category, is to say the least, optimistic. Yes, interest rates may be negative in 2016, but that means that the liquidity trap endgame has not only begun, but is well on its way to ending, and mercifully putting an end to this whole Keynesian “sustainability” charade. Remember: Japan’s debt-deflation lasted for 30 years only thanks to new pockets of incremental global leverage and inflation: China and the PIIGS. This time, absent the levering of the entire continent of Africa, there is noone who can take the releverage baton and run. Which means the only “buyers” will be the central banks. At least back in the day, Weimar just one nation. This time, it will be the “Weimar World.”
The Cost Of The Combined Greek Bailout Just Rose To €320 Billion In Secured Debt, Or 136% Of Greek GDP
by Zero Hedge - February 11th, 2012 11:02 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Some of our German readers may be laboring under the impression that following the €110 billion first Greek bailout agreed upon and executed in May 2010, the second Greek bailout would cost a “mere” €130 billion. Alas we have new for you – as of this morning, the formal cost of rescuing Greece for the adjusted adjusted adjusted second time has just risen to €145 billion, €175 billion, a whopping €210 billion, bringing the total explicit cost of all Greek bailout funds to date (and many more in store) to €320 billion. Which incidentally is a little more than Greek GDP (which however is declining rapidly) at 310 billion, only in dollars. So as of today, merely the ratio of the Greek DIP loan (Debtor In Possession, because Greece is after all broke) has reached a whopping ratio of 136% Debt to GDP. This excludes any standing debt which is for all intents and purposes worthless. This is secured debt, which means that if every dollar in assets generating one dollar in GDP were to be liquidated and Greece sold off entirely in part or whole to Goldman Sachs et al, there would still be a 36% shortfall to the Troika, EFSF, ECB and whoever else funds the DIP loan (i.e., European and US taxpayers)! Another way of putting this disturbing fact is that global bankers now have a priming lien on 136% of Greek GDP - the entire country and then some now officially belongs to the world banking syndicate. Consider that when evaluating Greek promises of reducing total debt to GDP to 120% in 2020, as it would mean wiping all existing “pre-petition debt” and paying off some of the DIP. Also keep in mind that Greece has roughly €240 billion in existing pre-petition debt, of which much will remain untouched as it is not held in Private hands (this is the debt which will see a major “haircut” – or not: all depends on the holdout lawsuits, the local vs non-local bonds and various other nuances discussed here). If you said this is beyond idiotic, you are right. It is not the imairment on the Greek “pre-petition’ debt that the market should be worried about – that clearly is 100% wiped out. It…
Best Stock Market Indicator Ever: Weekend Update
by Chart School - February 11th, 2012 10:35 am
Courtesy of Doug Short.
The $OEXA200R (the percentage of S&P 100 stocks above their 200 DMA) is a technical indicator available on StockCharts.com that can be used to forecast conservative entry and exit points for the stock market.
The OEXA is used to find the “sweet spot” time period in the market when you have the best chance of making money. See Is This the Best Stock Market Indicator Ever? for a discussion of this technical tool.
The chart below is current through the February 3rd close.
After a major S&P correction, the conditions for safe re-entry into the market are when:
 a) $OEXA200R rises above 65%.
And two of the following three also occur:
 b) RSI rises over 50.
 c) MACD cross (black line rises above red line).
 d) Slow STO (black line) rises over 50.
Interpretation:
The market is tradable.
OEXA200R remained well above 65% all week and closed at 86%.
Of the three secondary indicators:
- RSI is above 50 and positive.
- MACD has crossed and is positive.
- Slow STO is above 50 and is positive.
Conclusion:
The market is tradable, but this could be the last gasp before a serious correction beginning mid to late 2012. The S&P is above both its 140 year trend line and the trend line for the secular bear that began in 2000. In other words, the market is doubly top heavy.
If the technical indicators weren’t reason enough for a correction, take your pick of any number of other negative catalysts, the first of which will probably be Greece.
From U.K. Telegraph finance columnist Ambrose Evans-Pritchard:
| Another normal day at the Hellenic Statistical Authority. We learn that Greece’s manufacturing output contracted by 15.5% in December from a year earlier, industrial output fell 11.3% compared to minus 7.8% in November, unemployment jumped to 20.9% in November, up from 18.2% a month earlier. I have little further to add. This is what a death spiral looks like. |
In my opinion, this is what a lit bomb looks like. Every human being has their breaking point, when they finally cross over the thin line from being friendly neighbor Bob to the guy on CNN holed up in the…
Violent Protests in Greece; 6 Cabinet Members Resign
by ilene - February 11th, 2012 3:28 am
Violent Protests in Greece; 6 Cabinet Members Resign; LAOS leader "I Would Rather Starve Than be Under German Jackboot"; Controversy Over Missing Paragraphs
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Courtesy of Mish
Imagine you are asked to sign a document but three pages were missing. Further imagine the documents you were asked to sign were written in English but you only speak Greek. Would you sign?
That is exactly the predicament Greek officials were placed in by the Troika. Here is the story sent to me by Demetri Kofinas at Capital Account.
Hello Mish
George Karatzaferis leader of LOAS political party gave a speech today addressing why he refused to sign this latest agreement. In his speech, he said that he asked for a translated document of the agreement so that he could read it and sign it since his English is not as good as Papademos'.
When he got a copy, it was not only smaller than the English version, but was also missing pieces, including the last paragraph! He refused to sign it because he felt pressured and wants more time.
Youtube has a video of Karatzaferis where he compares the documents. At the 11:35 mark he translates the last paragraph for the listeners, which was not provided to him in the translated copy that he was to read.
The video is in Greek so not many can understand it. Moreover, the video was somewhat garbled and some things do not easily translate, so I do not have a good account of the missing paragraphs, but it is clearly absurd that anything should be missing.
"I Would Rather Starve Than be Under German Jackboot"
Facing down protests, dissent, Greece vows to push through austerity warns of default 'chaos'
Greece's future in the eurozone came under renewed threat Friday as popular protests again turned violent and dissent grew among its lawmakers after European leaders demanded deeper spending cuts.
The country's beleaguered coalition government promised to push through the tough new austerity measures and rescue a crucial euro130 billion ($170 billion) bailout deal after six members of the Cabinet resigned.
Prime Minister Lucas Papademos promised to "do everything necessary" to ensure parliament passes the new austerity measures that would slap Greeks with a minimum wage cut during a fifth year of recession. He also promised to replace any other Cabinet members who did not fully back
…
Sabrient Risers – 2/11/2012
by Sabrient - February 11th, 2012 12:00 am
Top 5 Risers |
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| Stock | Rating | Analysis | ||
| ICA | BUY | The projected value for Empresas ICA is still rising quickly even though past earnings have already improved significantly. | ||
| X | BUY | The projected value for US Steel is still rising quickly even though past earnings have already improved significantly. | ||
| FEIC | BUY | Projected value continues to rise for FEI while long term increases in earnings growth are also becoming more widely expected. | ||
| ASBC | BUY | Many analysts are expecting higher than previously expected long term growth from Associated Bancorp, and its near-term earnings outlook is also improving. | ||
| RDWR | BUY | Radware has been gaining recognition from analysts as a good canditate for achieving higher than expected earnings along with higher overall projected valuation. | ||
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