Category: Investing

Trading Advice: What Most People Don’t Realize About The Fed’s Superpowers

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Bob Prechter’s Conquer The Crash reveals whether the Fed really can rescue the US economy
January 27, 2011

By Elliott Wave International

Since its creation in 1913, the primary intended role of the U.S. Federal Reserve Bank has been that of protector. In theory, the central bank was bestowed with the power to shape monetary policy in a way that would keep both booms and busts in check. The two main tools at its disposal — interest rates and money creation — would provide a “ceiling of normalcy” above expansions AND a “net of safety” below contractions.

To this day, the financial mainstream holds great faith in the Fed’s ability to fulfill its save-the-day duties — as these recent news items make plain:

  • “Why Raising Fed Funds Rate Is Positive For Equities.” (Seeking Alpha)
  • “Fed’s Moves Lift All Asset Classes.” (Associated Press)
  • “US Stocks Erasing Losses: The aggressive moves of the Fed have been an important driver for the stabilization of stock prices.” (Bloomberg)

But of all the variables the Fed creators took into account, there’s one glaring factor they neglected to consider: Namely, it cannot force consumers to spend, creditors to lend, or businesses to borrow. The events of 2007-2009 “credit crunch” and the subsequent “Great Recession” made that obvious. Remember how the government was upset at banks for sitting on the bailout funds instead of lending them out to consumers? And consumers weren’t exactly lining up on the street to get a loan, either.

The Fed’s inability to change social mood is the central theme in Chapter 13 of EWI President Bob Prechter’s NY Times business bestseller book Conquer the Crash. There, Bob describes the Fed’s strategy of lowering the federal funds rate to stimulate spending to be as effective as “pushing on a string.” Writes Bob:

“The primary basis for today’s belief in perpetual prosperity and inflation with an occasional recession is what I call the ‘Potent Directors Fallacy.’ It is nearly impossible to find a treatise on macroeconomics today that does not assert or assume that the Federal Reserve Board has learned to control both our money and our economy. Many believe that it also possesses the immense power to manipulate the stock market. The very idea that it can do these things is false.”

And so begins one of the most groundbreaking studies into the very real INABILITY of the Fed to fell the great bears of economic declines, or to feed the great bulls of economic vigor.

The best part is, you can read Chapter 13 of Conquer the Crash in its entirety FREE via a Club EWI resource “You Can Survive And Prosper In A Deflationary Depression.” The free report also includes SEVEN other chapters of Conquer the Crash that shed equal light on some of the most misleading notions of mainstream economic wisdom.

Don’t stay in the dark. Read all 8 chapters today by joining the rapidly expanding free Club EWI community today. Here’s what you’ll learn:

  • Chapter 10: Money, Credit and the Federal Reserve Banking System
  • Chapter 13: Can the Fed Stop Deflation?
  • Chapter 23: What To Do With Your Pension Plan
  • Chapter 28: How to Identify a Safe Haven
  • Chapter 29: Calling in Loans and Paying off Debt
  • Chapter 30: What You Should Do If You Run a Business
  • Chapter 32: Should You Rely on Government to Protect You?
  • Chapter 33: A Short List of Imperative “Do’s” and Crucial “Don’ts”

Keep reading this free report now — all you need to do is create a free Club EWI profile.

Video: Ron Paul talks with John Stossel on the SOTU address

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This comes via The Daily Paul:

Part 1:

Part 2:

Comments are Welcome!

Stock and Trading Advice: WARNING TO OPTIONS TRADERS LOOKING AT NETFLIX EARNINGS

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One of the hardest things for me to remember is not to believe everything I see. I am a sucker for the latest “can’t lose” strategy supported by the experts. This morning I ran across a trade that looked too good to be true. I think it is, but I think it is instructive to walk through the potential hidden land mine. The event is the Wednesday afternoon release of NFLX earnings but there is a hidden trap for option traders using one commonly used earnings play structure.

The construction of the play is that of a “double calendar” spread. The underlying profit engine is an attempt to exploit the routinely seen spike in implied volatility (IV) of the options series most closely following earnings release. In this case, NFLX has weekly options which expire 48 hours after the scheduled announcement.

In order to understand the situation, let’s walk through the components step-by-step. First, is the routinely observed spike in IV seen as earnings release approaches present? As shown in the options pricing matrix below, the IV of the weekly options is substantially higher than the next series in time, the February monthlies:

Next, we need to get an idea of the magnitude of the price movement expected by option traders. This price range can be imputed from the break even points of the at-the-money straddle in the front most options. As shown in the graph below, this analysis gives a current expected price range of 167-203 following earnings release.

Now let us consider a double calendar spread with strikes selected to encompass this anticipated price range. To review quickly, a calendar spread consists of selling a short dated option while buying a longer dated option at the same strike price. An example of such a trade in NFLX is presented below:

That looks pretty sweet, right? We have projected break even points of 147.3 and 238.86 and a probability of profit (P.P.) of 100%. So all we have to do is put this on, wait for earnings, and barring any huge surprise, we take profit of 100% or more home.

What could possibly go wrong? Unfortunately there is a high probability of a sequence of events that will totally erase any profits and likely result in a loss. Go back and look at the option pricing matrix above and focus on the IV of the options we are buying. These options trade at a volatility of 60%. Is that high or low? You tell me from this historic graph of volatility in NFLX options:

As you can see, the current level of volatility that you are buying in the long legs of the calendar is quite elevated on a historical basis. Furthermore, the spread between statistical (historical) and implied volatilities has rarely been greater. This combination of events sets up a high probability of a “volatility crush” on the options you hold long as part of the spread. The moving parts of this crush are:

1. Cessation of the “bleeding” of juiced IV from the weeklies into the monthly series as the weekly option IV deflates massively.

2. Convergence of IV toward the value of historical volatility in order to close the huge divergence in the levels currently present.

This situation sets up a high probability for a negative impact on the trade which will almost certainly result in a loss. Do I know these events will transpire? Absolutely not, and I may be 100% wrong. Survival as an options trader is all about recognizing high probability events and structuring trades accordingly. No free cheese here; time to move along to the next trade.

If you would like to receive these reports please join my free newsletter: http://www.optionstradingsignals.com/profitable-options-solutions.php
J.W. Jones

Quote of the Day

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But 8 million homes are today in foreclosure or their owners are delinquent in their mortgage payments. Some 5.5 million are occupied by families whose mortgages are at least 20 percent higher than the value of the property, making them prime candidates for foreclosure.

This weekend, Bank of America reported fourth-quarter losses of $1.6 billion and a 2010 yearly loss of $3.6 billion. Its credit card unit took a $10 billion write-down, and its home loan business is still reeling from the fallout of the exploded housing bubble.

Now, facing trillion-dollar deficits as far as the eye can see, House Republicans are balking at agreeing to raise the debit limit of $14.3 trillion, though the national debt just crossed the $14 trillion mark.

Are the happy days really here again?

How a Simple Line Can Improve Your Trading Success

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Elliott Wave International’s Jeffrey Kennedy explains many ways to use this basic tool
January 19, 2011

By Elliott Wave International

The following trading lesson has been adapted from Jeffrey Kennedy’s eBook, Trading the Line – 5 Ways You Can Use Trendlines to Improve Your Trading Decisions. Now through February 7, you can download the 14-page eBook free. Learn more here.

“How to draw a trendline” is one of the first things people learn when they study technical analysis. Typically, they quickly move on to more advanced topics and too often discard this simplest of all technical tools.

Yet you’d be amazed at the value a simple line can offer when you analyze a market. As Jeffrey Kennedy, Elliott Wave International’s Chief Commodity Analyst, puts it:

“A trendline represents the psychology of the market, specifically, the psychology between the bulls and the bears. If the trendline slopes upward, the bulls are in control. If the trendline slopes downward, the bears are in control. Moreover, the actual angle or slope of a trendline can determine whether or not the market is extremely optimistic or extremely pessimistic.”

In other words, a trendline can help you identify the market’s trend. Consider this example in the price chart of Google.

That one trendline — drawn between the lows in 2004 and the lows in 2005 — provided support for a number of retracements over the next two years.

That’s pretty basic. But there are many more ways to draw trendlines. When a market is in a correction, you can draw a trendline and then draw a parallel line: in turn, these two parallel lines can create a channel that often “contains” the corrective price action. When price breaks out of this channel, there’s a good chance the correction is over and the main trend has resumed. Here’s an example in a chart of Soybeans. Notice how the upper trendline provided support for the subsequent move.

For more free trading lessons on trendlines, download Jeffrey Kennedy’s free 14-page eBook, Trading the Line – 5 Ways You Can Use Trendlines to Improve Your Trading Decisions. It explains the power of simple trendlines, how to draw them, and how to determine when the trend has actually changed. Download your free eBook.

Latest 2011 Gold and S&P prediction… not what you think

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The end of 2010 is rapidly approaching and the pundits and commentators continue to make their 2011 market predictions. I for one believe predicting future market moves is a futile endeavor where if you are right one year later you are viewed as a sage; if you are wrong nobody seems to remember or care.

In fact, I try not to read any predictions for fear that it might place a bias in my subconscious. I am a trader and thus have no need for emotions, bias, or opinions when trading. I try to stay away from the media and the pundits as often as possible.

With that being said, the managed money crowd will be finishing up their window dressing and the performance anxiety of 2010 will slowly shift to assessing their portfolio risk and making appropriate adjustments for the coming year. Based on current market sentiment it would make sense that most money managers are bullish as cash levels remain quite low when looking at mutual funds and institutional money managers’ portfolios.

S&P 500

The S&P 500 is extremely overbought in almost every time frame and headline risk remains high. At current price levels I would not be interested in being long the S&P 500, in fact I would likely be taking some money off the table before 2011 rolls in.

I think opportunities are going to present themselves in 2011 for outstanding longer term entries into the equities market, however a disciplined approach will be required. Headline risks such as continued monetary and fiscal issues in the Eurozone, municipal budget concerns and potential defaults, potential for rising interest rates, inflation / deflation, and rising energy prices to name just few. Unfortunately some, if not all of the headline risks listed above will likely come to pass. Having fresh capital ready to deploy and developing a trading plan ahead of time for solid entry points will likely lead to a positive trading outcome in 2011.

I believe there are going to be some outstanding trading setups in 2011 regardless of market conditions or economic factors, but in order to be prepared we need to have trading capital available and a trading plan prepared. The weekly chart below illustrates some key support levels on the S&P 500 e-mini contract.

At some point in the future, the S&P 500 is going to suffer from a correction and I intend to be prepared to take advantage of lower prices in my longer term investment accounts as well as in my short term option trading accounts. While I am generally a contrarian when sentiment and bullishness are this high, deep down I am hopeful that the economic recovery continues. However, I am not blind to believe that the worst is over and it is smooth sailing from here. There is nothing about financial markets that is ever easy, and when the directional bias is this strong I tend to step back and develop contrarian strategies just in case the crowd is wrong.

Oil

I try to stay away from opinions and focus on facts when conducting analysis regarding financial markets. However I am going to break my rule briefly to point out that in my humble opinion, the single largest threat to the U.S. domestic economy is not unemployment or housing, but energy. If energy prices continue rising, it causes nearly everything to rise in price in the United States as producers and manufacturers pass down rising fuel costs to the consumer. Essentially we have leveraged the ability to support our substantial population and tremendously high standard of living with the ability to use cheap and plentiful oil.

Some of the reasons that oil prices could rise have fundamental and technical foundations. From a fundamental standpoint, supply appears to be declining and will continue to decline going forward unless some oil fields that are currently unknown are discovered and make available immense supplies of oil. Additionally, the basic principles of supply and demand are present as emerging market countries are needing more and more energy to keep their economies growing and to satisfy the concurrent rising standard of living. Countries like China, India, and Brazil are only going to see their need for energy increase and other countries in the world need to recognize that demand is rising and supply is falling.

While the argument among economists rages on regarding inflation versus deflation, if inflation were to rise suddenly this would also be bullish for energy. Most investors may not have considered that oil prices are over $90/barrel and the economy is relatively sluggish. Where would prices be if the economy were to boom in 2011?

From a technical standpoint, the Great Recession pushed oil down from the all time highs in 2008. Many economists believed that the rise in oil prices is what really caused the market to crater in early 2009. If we view a weekly chart of oil, it would appear that we are continuing to trend higher and that in the longer term this trend will likely persist.

I would be shocked if oil prices do not reach at least $100/barrel in 2011. Some analysts are saying that it could reach $115-$120 by the summer and could probe all time highs as early as 2012. The fundamental and technical analysis is mutually supportive and in the longer term I think rising energy prices is not only a near certainty, but also a major threat to the global recovery.

Gold

The recent pullback offered a nice entry around the $133/share on GLD. In full disclosure, I purchased GLD around 133.25 and sold a slew of naked puts on silver and gold which I have closed for solid gains. Argument surrounds gold and silver as economists bicker over whether we are going to see hyperinflation or deflation in 2011. I for one do not know or claim to know. What I do know is that gold appears to be nearing a final wave of buying which could push it to all time highs.

However, I do believe without question that the volatility in the price of gold is likely to increase dramatically. Large price swings are likely in 2011 as headline risks will drastically impact the price of gold and silver and cause volatility to increase. While this is somewhat speculative, the various headline risks in Europe and in the United States will have a significant impact on precious metals prices.

Gold continues to trend higher and fighting the trend makes little sense and could be a great way to lose precious trading capital. I will continue to play the rising trend until it fails which at some point in the future is inevitable. Neither gold, nor any other asset can continue rising forever. A pullback at some point is not only likely, but would be healthy. Obviously gold remains in a bullish uptrend as illustrated by the weekly chart below:

I do believe that gold is a solid hedge against currency risk and higher inflation based on recent price action, but I am not willing to buy into the world is ending philosophy that many gold bugs envision.

I do not believe that the entire financial construct will fail and that a barter system will be created with gold becoming currency. Through a variety of emails from all over the world I have been presented with all kinds of analysis and data that all fiat currencies fail, that gold is a store of value, and that gold will protect investors from currency manipulation and inflation. While all of these things may be true, I am unwilling to abandon hope for peace, prosperity, and a better future.

Conclusion

I am optimistic about the domestic and global economy in the long term. I believe that great opportunities for long term investment will be offered in 2011 and I intend to take advantage of the price action. I am an options trader at heart, but in the end I am an eternal optimist. Being pessimistic is not only depressing, but it offers very little in the form of solutions. Consequently an absolute pessimistic forward looking view serves to only create biases that are not conducive to success in financial markets. Let’s forget about predictions and pundits and focus on what really matters – price action

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For more Great Advice, click here.

What Really Moves the Markets: News? The Fed?

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By Elliott Wave International

“There is no group more subjective than conventional analysts, who look at the same ‘fundamental’ news event a war, interest rates, P/E ratio, GDP, economic policy, the Fed’s monetary policy, you name it and come up with countless opposing conclusions. They generally don’t even bother to study the data.” — EWI president Robert Prechter, March 2004 Elliott Wave Theorist.

If you watch financial news, you probably share Bob Prechter’s sentiment. How many times have you seen analysts attribute an S&P 500 rally to “good news from China,” for example — only to focus on a different, supposedly bearish, news story later the same day if the rally fizzles out?

You need objective tools to make objective forecasts. So, we put together a unique resource for you: a free 118-page Independent Investor eBook, where you see dozens of examples and charts that show what really creates market trends.

Here’s a quick excerpt. For details on how to read the entire Independent Investor eBook online now, free, look below.

Independent Investor eBook
Chapter 1: What Really Moves the Markets? (excerpt)

Action and Reaction

In the world of physics, action is followed by reaction. Most financial analysts, economists, historians, sociologists and futurists believe that society works the same way. They typically say, “Because so-and-so has happened, such-and-such will follow.” … But is it true?

Suppose you knew for certain that inflation would triple the money supply over the next 20 years. What would you predict for the price of gold?

Most analysts and investors are certain that inflation makes gold go up in price. They view financial pricing as simple action and reaction, as in physics. They reason that a rising money supply reduces the value of each purchasing unit, so the price of gold, which is an alternative to money, will reflect that change, increment for increment.

Figure 4 shows a time when the money supply tripled yet gold lost over half its value. In other words, gold not only failed to reflect the amount of inflation that occurred but also failed even to go in the same direction. It failed the prediction from physics by a whopping factor of six, thereby unequivocally invalidating it.

Investors who feared inflation in January 1980 were right, yet they lost dollar value for two decades… Gold’s bear market produced more than a 90% loss in terms of gold’s average purchasing power of goods, services, homes and corporate shares despite persistent inflation!

How is such an outcome possible? Easy: Financial markets are not a matter of action and reaction. The physics model of financial markets is wrong. …

Cause and Effect

Suppose the devil were to offer you historic news a day in advance. … His first offer: “The president will be assassinated tomorrow.” You can’t believe it. You and only you know it’s going to happen. The devil transports you back to November 22, 1963. You short the market. Do you make money? …

[…continued in the free 118-page Independent Investor eBook]

Read the rest of the eye-opening report online now, free! All you need is a free Club EWI profile. Here’s what else you’ll learn:

  • The Problem With “Efficient Market Hypothesis”
  • How To Invest During a Long-Term Bear Market
  • What’s The Best Investment During Recessions: Gold, Stocks or T-Notes?
  • Why “Buy and Hold” Doesn’t Work Now
  • How To Be One of the Few the Government Hasn’t Fooled
  • How Gold, Silver and T-Bonds Will Behave in a Bear Market
  • MUCH MORE

Long-Term Bonds: The Best Possible Investment? Think Again

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A free Club EWI report reveals why bonds do not provide shelter from the storm
December 23, 2010

By Elliott Wave International

TREASURIES — the very name conveys a thing that is secure, protected, and will appreciate over time. Otherwise, it’d be called something like “TRASHeries” or “Mattress Stuffers.” Then, there’s the official seal of the US Department of Treasury: its image of a scale and a key symbolize “balance” and “trust.”

And, finally, there’s the mainstream economic experts who have it on good authority that long-term bonds increase in value during financial instability and uncertainty.

On this, the following news items from November-December 2010 reflect the enduring faith in fixed-income assets as the ultimate safe-havens:

  • “Bonds Tumble On Signs of Economic Recovery” (Reuters)
  • “US Treasury Prices Rise as traders positioned for negative headlines….” (Associated Press)
  • “Treasury’s rise as investors sought shelter in safe haven assets amid rising fears about sovereign debt woes in the eurozone. The slow motion train wreck is likely to play out over year end as each country plays musical chairs with solvency. The market’s concern here is ‘What is next?’ The 10-year Treasury yield will fall if the problems get worse from here.” (Wall Street Journal)

There’s just one problem with this notion: namely, bonds (of any denomination) do NOT have a built-in disaster premium. This is the myth-busting revelation of the latest, free report from Elliott Wave International. The resource titled “The Next Major Disaster Developing For Bond Holders” includes a thoughtful selection of various EWI publications that expose the very real vulnerability of bond markets to economic downturns.

The premier study on the subject comes from Chapter 15 of EWI President Robert Prechter’s book Conquer The Crash by way of this memorable excerpt:

“If there is one bit of conventional wisdom that we hear repeatedly with respect to investing, it is that long-term bonds are the best possible investment [in downturns]. This assertion is wrong. Any bond issued b a borrower who can’t pay goes to zero in a depression. Understand that in a [major contraction], no one knows its depth and almost everyone becomes afraid. That makes investors sell bonds of any issuers that they fear could default. Even when people trust the bonds they own, they are sometimes forced to sell them to raise cash to live on. For this reason, even the safest bonds can go down, at least temporarily, as AAA bonds did in 1931 and 1932.

The first chart (see below) shows what happened to bonds of various grades in the deflationary crash. And the second chart (see below) shows what happened to the Dow Jones 40-bond average, which lost 30% of its value in four years. Observe that the collapse of the early 1930s brought these bonds’ prices below — and their interest rates above — where they were in 1920 near the peak in the intense inflation of the ‘Teens.”


That’s just the tip of this myth-busting report. “The Next Major Disaster” uncovers flaws in other widely-accepted bond lore, including these two assumptions:

  • High -yield bonds rise during economic expansions
  • AND — municipal bonds provide a steady refuge in times of economic stress.

Read more about Robert Prechter’s warnings for holders of municipals and other bonds in his free report: The Next Major Disaster Developing for Bond Holders. Access your free 10-page report now.

You think it is bad now? Wait till the States start collapsing!

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This is totally unbelievable: (H/T to HotAir.com)

Speaking of money and taxes, here is Congressman Ron Paul talking about Taxes, Money and of course, the Federal Reserve: (H/T Lew Rockwell’s Blog)

Needless to say, the next couple of years are going to be very interesting to watch. 😯

Investing Advice: Trading the Holiday Grind

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It’s that time again when volume dries up and prices rise into the new year. A lot of individuals are scrambling to prepare for the holidays, even though we had a year to prepare. The big money has already done most of their year end shuffling and will be taking it easy until January.

The market is overbought and sentiment readings are at extreme levels which in the past have been the start of large sell offs and even bear markets. While I am keeping a close eye for a top, there is not much we can do but stay long stocks and commodities until the market tips its hand and distribution selling is in control. The U.S. federal government is the only wild card going into year end that should be on traders’ radars. They have been doing a great job boosting prices in the equities and commodities market, but can they continue to hold things up when the big money and the proverbial herd start unloading positions in 2011?   — Please, Click here to read the rest.

Gold and Stock Advice: Playing new fear in equities markets

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So far this week we have been seeing fear creep in the equities market. This Wednesday we started to see fear (green indicator) reach a level which tells me to start looking for the market to bottoming. I do follow a few other charts and indicators which warn me of a possible trend reversal (high probability setup) before it takes place but the US Dollar and selling volume are key.

As we all know, when the market is trying to top and roll over it tends to be more of a process than a couple day event. It’s this lengthy topping process which has a lot of choppy price action sucking traders into a position much to early or shakes you out of the position before the market does what you anticipated. Knowing that tops tend to drag out for an extended period of time is critical for an options trader simple because of Theta (time decay)

On the flip side, bottoming is more of an event because it tends to happen after a strong wave of panic selling. Fear is the most powerful force in the market (other than the Fed/Manipulators.. but that’s another topic). That being said, when you know what to look for in bottoms you can generally see the market starting to bottom and prepare for it. — Read More Here

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Disclosure: If you follow the link and sign up, I get a small amount of compensation at no extra cost to the customer.

Disclaimer: Quite bluntly, I post these articles to make money; period. The posting of this and other articles is in no means to be considered a endorsement of the ideas and investment strategies. In other words, if you try this and lose your butt; do not come crying to me or wanting me to refund your money. Because it is not going to happen, period.

New Report: It’s Dangerous to Diversify — Find Out Why

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New Report: It’s Dangerous to Diversify — Find Out Why

A free report from Elliott Wave International reveals the risks of portfolio diversification
By Elliott Wave International

Despite near-unanimous endorsement among mainstream advisors, the strategy of portfolio diversification has a huge, glaring flaw: Namely, when large sums of liquidity begin to flow into global investment markets, formerly disparate trends become strongly correlated. And markets that go up together ultimately go down together; in turn, the value of diversified portfolios goes down with them. Read more.

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Disclosure: If you follow the link and sign up, I get a small amount of compensation at no extra cost to the customer.

Disclaimer: Quite bluntly, I post these articles to make money; period. The posting of this and other articles is in no means to be considered a endorsement of the ideas and investment strategies. In other words, if you try this and lose your butt; do not come crying to me or wanting me to refund your money. Because it is not going to happen, period.

Personal Advice from ME: If you are small time stock investor, GET OUT NOW!

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…and here is why….

This comes via Gateway Pundit, who is one hell of a great blogger:

The story via the U.K. Telegraph:

US Treasuries last week suffered their biggest two-day sell-off since the collapse of Lehman Brothers in September 2008. The borrowing costs of the government of the world’s largest economy have now risen by a quarter over the past four weeks.

Such a sharp rise in US benchmark market interest rates matters a lot – and it matters way beyond America. The US government is now servicing $13.8 trillion (£8.7 trilion) in declared liabilities – making it, by a long way, the world’s largest debtor. Around $414bn of US taxpayers’ money went on sovereign interest payments last year – around 4.5 times the budget of America’s Department of Education.

Debt service costs have reached such astronomical levels even though, over the past year and more, yields have been kept historically and artificially low by “quantitative easing (QE)” – in other words, Federal Reserve Chairman Ben Bernanke’s virtual printing press. Now borrowing costs are 28pc higher than a month ago, with the 10-year Treasury yield reaching 3.33pc last week, an already eye-watering debt service burden can only go up.

Few on this side of the Atlantic should feel smug. The eurozone’s ongoing sovereign debt debacle has pushed up Germany’s borrowing costs by 27pc over the last month – to 3.03pc. The market has judged that if Europe’s Teutonic powerhouse wants the single currency to survive, it will ultimately need to raise wads of cash to absorb the mess caused by other member states’ fiscal incontinence…

…Some say that growing signs of a US economic recovery are positive for stocks, which means money is being diverted out of Treasuries, so lowering their price, which pushes up yields. That’s wishful thinking. Sovereign borrowing costs have just surged in the US – and therefore elsewhere – because a politically-wounded President Obama caved-in and extended the Bush-era tax cuts, combining them with a $120bn payroll tax holiday…

…The market is increasingly alarmed at the rate of increase of the US government’s already massive liabilities. America’s government debt is set to expand by a jaw-dropping 42pc over the next few years, reaching $19.6 trillion by 2015 according to Treasury Department estimates presented (amid very little fanfare) to Congress back in June. Since then, government spending has risen even more. So US debt service costs, like those of many other Western nations, are expanding rapidly in terms of both the volumes of sovereign instruments outstanding, and the yields on each bond.

You know what that means? It means that if you are a small time investor; that you need to get out of the Market NOW! This could have a huge impact on the market, and you could lose very big. I do virtual trading and so far, I have done well on my trades. But I am not about to lose my shirt, so, I ordered a sell off of everything. Now the big time guys will be able to afford to ride this out, because they have the wealth to spare. But the small time people will get burned. The best thing I can tell you small times investors, is to dump your shares and put it all into Gold. That would either be into EFT‘s or real actual Gold.

Disclaimer: I do not claim to be a expert on the subject of stocks, trading or even Gold. However, it does stand to reason that when such news as this is report, that it will affect the U.S. markets and the United States financial system. I do however, promote a great investment advice service called Elliotwave. You might want to check it out.

Video: Representative Ron Paul on Fox Business

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The main subject: The Federal Reserve and it’s printing of money.

It is a great video to watch: (Via the Daily Paul)

Investment Advice: How a “Dull” Investment Can Be a Great Investment

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How a “Dull” Investment Can Be a Great Investment

…until it isn’t any more. An important story for today’s bond investors.

December 9, 2010

By Elliott Wave International

I spent my childhood discussing the stock market at the dinner table. My dad was a stock broker, and he loved to “tell the story” of the stocks he recommended to customers — a story that included critical information about the industry, the products, earnings, and the outlook for the future. Most children might find it dull, but I was mesmerized.

As I got older and talked with friends about investing, I’d light up when the topic was stocks. Who in the world couldn’t get excited about analyzing companies to decide which ones could make you money! When the conversation turned to bonds, however, I would shut down. Bonds? How dull; how utterly boring. There’s no story to tell, no industry trends to follow. I saw bonds as an interest check every six months, then a return of principal when they mature. BORING.

Over the past few years, I’ve read article after article about investors getting out of the stock market in favor of bonds. I understood the reasons for getting out of the stock market, but the thought of moving into bonds baffled me. Interest rates were very low, and I knew that when the rates started going up, bond prices would go down; a simple inverse relationship. I started investing in the mid-80s, when rates were at the highest point of the past 50 years — who would buy bonds now, when yields are at the lowest levels in half a century? There’s no place for your principal to go but down, I thought.

So I went back and talked with my friends some more, to see if there was something I was missing with these “dull investments.”

Turned out, my friends had moved their money into bonds after they lost over 30% in stocks during 2008. They told me that bonds had gone up in value. I was astonished.

So I started looking into it. They were right! I thought bond yields could go no lower than they were two years ago, yet they did, In turn, that brought the prices — i.e., the principal on their investment — up!

I asked what kind of bonds they got into. “High-yield bond funds,” was the answer. What kind of bonds are these funds invested in? To this question I got blank stares. How long do you plan on staying in these funds? This got the reply I was afraid I’d hear: “Why would we get out when they are so much safer than stocks?” That’s when my new interest in these once boring investments turned to fear — for my friends.

First of all, the simple idea that a rise in interest rates would cause their principal to fall worried me. But my greater fear was that they did not even know what types of bonds they were invested in!

Elliott Wave International’s president Robert Prechter has followed this new investment trend closely in his monthly Elliott Wave Theorist. This quote is from the October 2010 issue:

A fifth consecutive major disaster is developing for investors. History shows that investors have been attracted like moths to a flame to four consecutive pyres: the NASDAQ in 2000, real estate in 2006, the blue chips in 2007 and commodities in 2008. Now they are flitting across the veranda to a mesmerizing blue flame: high yield bonds.

Bonds pay high yields when the issuers are in deep trouble and cannot otherwise attract investment capital. The public is chasing a large return on capital without considering return of it.

You can learn more about what Prechter’s market analysis says for bond investors now — free. We’ve recently released a 10-page report, “The Next Major Disaster Developing for Bond Holders” free to members of Club EWI.Discover why Prechter says that, “The public always does the wrong thing.” Follow this link to access this free online report right now.

Gold & Stock Trading Advice: Is The Herd Trading Gold & SP500?

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Over the past 2 weeks we have seen the market sentiment change three times from extreme bullish to bearish and back to bullish as of today. Normally we don’t see the herd (average Joe) switch trading directions this quickly. Over the past 10 years I found that the average time for the herd to reach an extreme bullish or bearish bias takes between 4-6 weeks in length. It is this herd mentality which makes for some excellent trend trading opportunities. But with the quantitative easing, thinner traded market, and lack of trading participants (smaller herd) I find everyone is ready to change directions at the drop of a hat.

The old school traders/investors who don’t use real-time data or charts, and who dabbled in stock picks, and options trades here and there have mostly exited the trading arena from frustration or losing to much money. This group accounted for a decent chuck of liquidity in the market and was also the slowest of the herd to change directions.

The new school, today’s smaller herd is much more aggressive and quicker to act on market gyrations. I think this is because the only people left in the market are those who make a living pulling money from the market and those who feel they are really close to mastering the stock market. It is these individuals who are using trading platforms with real-time data, charts and scanners to help get a pulse on the market so they can change directions when the big boys do. I feel this is the reason why the market is able to turn on a dime one week to another over the past 8 months… The easy prey (novice and delayed data traders) are few and far between and the fight to take money for other educated traders seems to be getting a little more interesting to say the least.

Anyways, enough about the herd already…

It’s been an interesting week thus far with stocks and commodities. The week started with a large gap up only for strong selling volume to step in and reverse direction the following day. It is this negative price action that starts to put fear into the market triggering a downward thrust in the market. During an up trend which we are in now, I look for these bearish chart patterns to form as they tend to trigger more selling the following days which cleanses the market of weak positions. Once a certain level of traders have been shaken out of their positions and are entering positions in order to take advantage of a falling market, that’s when we get the next rally, catching the majority of traders off guard as they panic to buy back their short positions. It’s this short covering which sparks a strong multi day rally and kicks off the new leg up in the market.

Currently we getting some mixed signals. The market sentiment is the most bullish it has been since 2007, just a little higher than the Jan & March highs this year. This makes me step back and think twice about taking any sizable long positions. Any day now the market could roll over. Another bearish signal is the fact that we just had a very strong reversal day for stocks and metals to the down side. That typically leads to more selling.

But if we look at the positive side of things, the trend is still up, this is typically a strong time for stocks as we go into Christmas/Holiday season, also the market breadth is really strong with the number of stocks hitting new highs has really taking off.

SP500 – Daily Chart

Below you can see the reversal candles along with short term and intermediate support levels. Although the market sentiment is screaming a correction is near, we must realize that sentiment can remain at this level for an extended period of time while the market continues to trend. This is one of the reasons why we say “The Trend Is Our Friend”.

I am hoping for a pullback and would like to see market sentiment shift enough on an intraday basis to give us a low risk entry point.

Gold – Daily Chart

A reversal candle is seen as a sell signal or a profit taking pattern. Short term aggressive trades use these to lock in quick price movements. With so many traders watching gold, it caused a flood of sell orders to push gold down today.

Mid-Week Conclusion:

In short, each time we see some decent selling in the market its get bought back up. Today was another perfect example as we had an early morning sell off, then a light volume rally for the second half of the session and a end of day short squeeze during the last 30 minutes. Gold has pulled back to the first short term support level. Because of the large following in gold I would like to see if there will be another day of follow through selling before possibly looking to take a trade.

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For more stock and gold trading advice, please, check out The Oil and Gold Guy’s website!

Yes Please: Ron Paul says Wikileak the Fed!

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Via Alternative Right:

Update: Thank you to voters at Reddit! You all are amazing… 😀

Here’s my stats screen as of a few hours ago:

Thanks so much you all. I will try to continue to post stuff like this, that everyone over at Reddit can enjoy. 🙂

Stock, Gold and Oil Trading Advice: Gold/Silver – Controlling Your Trades, Money & Emotions

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Last week we had typical pre-holiday light volume trading going into US Thanksgiving. The previous week I warned every one to trade with extreme caution because of the light volume and the fact that the market is on the verge of a sizable drop for both stocks and commodities. Any price action could not be taken seriously because of the light volume. We will not know until later this coming week what the big money wants to do… Buy or Sell, also what the manipulators will do… Seems like there are a lot of wild cards out there with Europe issues and both unemployment and payroll numbers out on Friday morning.

Below are a few charts showing my intermediate term outlook for gold and silver.

Gold & Silver Futures – Daily Chart
You can see both metal are showing a possible reversal head and shoulders pattern. While they have yet to confirm and close below the neck line we must be aware of this pattern and the risk/potential it provides us with. Both metals are still in an uptrend but showing signs of weakness.

US Dollar Index – Weekly Chart
This chart is not really that helpful for trading stocks, commodities or options right now but I wanted to post it because it allows me to show you how I analyze the market and my trades.

As you can see, the past 3 weeks have been in a strong uptrend reaching the first resistance level. The point of this chart is to show you that if you step out to the next longer time frame you can get a solid feeling of where an investment will find major support and resistance levels. Any investment not matter if it’s a stock, commodity or currency, if the price is trading in the middle of a large range like this chart you should not be taking large positions because it almost becomes a 50/50 bet on the market which is not a good winning strategy unless you are very experienced at managing your trades and money.

If you are going to trade then you want to focus on the underlying trend and you do that by looking at the next larger time frame. For example: if you focus on trading the daily chart, then you must step back each week and review the weekly chart to be sure you are trading with the underlying trend which is up for the dollar right now.

Weekend Trading Ideas:
Tuesday morning we saw the SP500 gap lower and continue to sell off. Traders started panicking out of their long positions and we could see it using the intraday market internals charts, which I cover each morning in the pre-market trading videos. Me being a contrarian (buying into market fear, selling into market strength) I used that high level of fear in the market along with the expected light volume holiday week ahead as an excuse to book profits near the lows on SP500 using the SDS bear fund allowing us to profit from the falling market. I feel we are going to have some crazy moves on the markets going into year end and it should be a lot of fun if done correctly.

Trading in general is a very difficult task especially if you are doing it for a living and planning on using your monthly income to pay bills, salaries etc… We all know the stress which comes with trading and if do not have a solid trading strategy, rules and cannot properly manage yourself (emotions) then you are most likely running into problems like over-trading, getting shaken out of trades easily, and taking bigger risks than your account can handle. Each of these cause more traders to blow up their accounts and big up on trading.

I am giving away my book on how you can control your trades, money and emotions. This short and to the point guide is full of my trading techniques, tips and thoughts which will help you get a handle of your emotions turning the market noise into music.

—

For great stock, gold and oil trading tips; Please, click here to sign up for this great service for the day trader!

Video: Max Keiser’s Call: Crash JP Morgan Buy Silver

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This comes via GoldSilver.com:

Quote:

Mike Maloney was recently in Europe working on his next top-secret project. While passing through France, Mike got the chance to visit with the one and only Max Keiser.

Intelligent, witty, and never bashful, Max Keiser is pure financial entertainment. With over 25 years of experience with markets and finance, Max often draws from first hand experiences when providing his listeners explicit insights on how the financial markets truly operate.

He has been described as a film producer, a journalist, and as JP Morgan and friends are now finding out, an activist investor with powerful ideas on how the masses can help themselves in taking their financial power back.

The Video:

The time in invest in gold and silver is now! Click here to find out how!

Stock Advice: S&P 500, Treasuries, Gold, & Dollar are At Key Price Levels

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A new article by a new author:

Thursday was another example of Mr. Market playing games with traders and investors as equities and precious metals took part in a strong rally. Some market prognosticators noted short-term oversold conditions across the board while others discussed the potential for a strong reversal that could potentially take out recent highs. In addition to the regular banter, to the average retail investor the market sure looks rigged when the government decides to sell a large stake in a massive IPO offering and a shaky tape suddenly becomes stronger than garlic.

There is a lot going on in the news as of late, and the expiration of the Bush tax cuts looms large on the minds of many, particularly small business owners. So the real question becomes, what should traders be watching or paying attention to before the light volume Thanksgiving week? The answer is simple, watch the tape! The market will provide plenty of clues and it will eventually tip its hand, experienced traders will wait for this process to unfold.

At this point in time, it is a bit early to begin making predictions as to which direction the equities market will go. What we do know is that the market was oversold in the short-term, so this could be a pause before prices turn lower. In contrast, this could be the beginning of another bullish move breaking recent highs on its way to a “Santa Claus” rally. My stance is neutral at this point in time; S&P 1200 should offer significant overhead resistance while S&P 1170 / 50 period moving average is near term support. The chart listed below illustrates these key levels:

S&P 500

If price were to break out above S&P 1200 on strong volume, it is likely that we will see a retest of the recent highs around the 1220 area. Consequently, if price tests the S&P 1170 area and fails price will likely be magnetized to the 1140-1150 area. We will have our answers in due time, but until a definite direction is known, patience is warranted.


Treasuries

As discussed in my previous article, the ProShares Ultra Short 20+ year treasury ETF (TBT) bounced off of the 36 level and put on a short lived rally only to settle toward the bottom 1/3 of its recent price range. After the recent breakout, it would be constructive to see TBT consolidate before confirming a direction. The chart below shows the key levels on TBT:

U.S. Dollar

Instead of illustrating a gold chart, let us focus our attention on the U.S. Dollar Index. The chart below shows the dollar has pulled back and is now testing the 50 period moving average. I am anticipating a retest of the recent breakout over double tops and this key level is illustrated below. If support holds firm, higher prices for the U.S. Dollar in the near term will be likely.

The Contrarian Trade

Thursday’s price action in the S&P 500 offers a great example of the power of options, which are traditionally overlooked by most equity traders or investors. While I did not personally enter this trade, I did enter a short position with tight stops around the S&P 1197 level using futures contracts for a short term trade. I was looking for a short term decline which we subsequently received in the aftermarket and my limit orders were triggered.

The option trade that I discussed with one of my trading buddies and mentor, involved getting short Apple (AAPL) when its price was around $309.50/share. While I did not place this trade as I felt I had plenty of short side exposure via my e-mini futures position, the trade would have worked quite well. So the trade listed below is not a recommendation, but an illustration of how options can be a contrarian traders’ best friend.

AAPL has been trading in the $300 – $320 per share range for several weeks having broken out above $320 only to be smacked down into the range. During the recent selloff, AAPL crossed down through the $300 level only to encounter strong buying that pushed it above the key $300 area by the close of trade that day. Thursday’s rally had AAPL trading above $309.50/share and the 20 period moving average was right around the 310 level as can be seen from the chart below.

The 20 period moving average provides an adept option trader with a key level which he/she can define the risk of a short position using options. Through the utilization of a contingent stop based on AAPL’s stock price, a trader using this setup could place a stop around the $311.25 area to define their ultimate risk. As of Thursday, the AAPL weekly options that expire November 26 began trading.

The trade listed below is a put debit spread:

Buy 1 AAPL Nov. 26 310 Weekly Put – $5.00 / contract based on Thursday’s close
Sell 1 AAPL Nov. 26 300 Weekly Put – $1.47 / contract based on Thursday’s close

AAPL stock closed around $308.43 / Share

The profitability chart reflecting this trade is below:

The maximum risk this trade has per leg was around $350, however through the use of the contingent stop around $311.25, the risk per leg is around $150. The maximum gain would be $650 per leg if at expiration in one week AAPL was trading below $300/share. In the first hour of trading, AAPL sold off below $306 per share. If an option trader had more than one contract on, he/she could take partial profits and place a stop at the entry price insuring a winning trade and allowing room for the trade to run.

Obviously the trader may want to adjust his/her stop based on market conditions, but this is simply an example of what can be accomplished with options. Once the trader understands how to determine the risk that an option trade assumes, he/she can build trade constructions to fit nearly any trading style or strategy. For a contrarian trader, options offer an unbelievable opportunity to mitigate risk and maximize profits. Learning how to trade options does take time and effort, but the potential returns options offer when they are used appropriately are unparalleled.

Get more great articles like this, by going here.

Disclosure: Clicking on this link and signing up for the service results in a small compensation to yours truly at not additional cost to the consumer

MarketWatch engages in Federal Reserve propaganda

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This is pretty sad considering who owns the website:

Then there is this:

Gold has become highly prized bling, as anxious and astute buyers alike, from hedge-fund players to central bankers, flock to the “currency of fear.” Gold at around $1,400 an ounce is almost double what it commanded two years ago, and gold’s price is up almost 25% so far this year alone.

It’s been a great ride. Except gold is a bad investment.

Gold’s feverish run has made a lot of people a lot of money, and though the rally has taken a breather in the last few days, there’s no shortage of flag-waving supporters who claim gold is on a march to $1,600, $1,800, $2,000 and beyond. After all, gold is still well below its 1980 peak, when it was worth around $2,300 an ounce in today’s dollars.

….and this:

“Mercury poisoning,” is the answer from Barry Ritholtz, the very outspoken CEO and director of equity research at Fusion IQ, when asked where Zoellick’s idea might have come from.

Zoellick, also a former Treasury official in the Reagan administration and managing director at Goldman Sachs, made his suggestion in an op-ed in the Financial Times last Sunday, just days ahead of the Group of 20 major countries meeting in Seoul.

The suggestion was made to world leaders in order to address “global imbalances,” the diplomatic expression being used to refer to the impact of China’s vastly undervalued renminbi on other countries’ competitiveness.

All of the above is pure garbage. Gold is a hedge against inflation and the dollar. Do not listen to the Statists who want to seize all of the gold and give you a worthless dollar.

By the way, here is some SOUND investment advice pertaining to Gold:

There have been some major trend changes recently and it looks as though more investments are about to follow. The real question though is… Are You Ready To Take Advantage Of It?

It has been an exciting ride to say the least with the equities and metals bull market and the plummeting dollar. But it looks as though their time is up, or at least for a few weeks. Traders and investors will slowly pull money off the table to lock in gains or cut losses and re-evaluate the overall market condition before stepping back up to the plate and taking another swing.

Below are a few charts showing some possible money making trade ideas in the weeks ahead.

TBT 20+ Treasury Note Inverse Fund

This fund moves inverse to the price of the 20yr T.N’s also known as bonds. Looking at the chart you can see the recent reversal which took place. We had a great entry point shortly after this reversal took place using my low risk setup strategy.

Falling bond prices are considered to have a negative impact on equities because it implies that interest rates may start rising which means more investors will pull money out of stocks and put that money into a safe interest earning investment. You will typically see bonds change direction before equities. That being said the chart below is an inverse fund, so when this bond fund goes up, it means actually indicates bond yields are falling. I will admit these inverse funds really throw my brain for a loop at time… I prefer the good old days, buying long and selling short… so simple and clean… —- Read the rest Here

I ask you, go read the rest of that; listen to people, like the man at this link, who want to see you make and keep your money. Not force you to trust in an unsound money system, like the United States Dollar.  If you are not interested in FTS’s and would to buy actual Gold, then try this link here.

In fact, here is a video that explain why you should own Gold and Silver:

Is it not just good common sense to have a backup plan? Do not delay, invest in Gold and Silver today.

Please Note: In the interest of full disclosure — There are links in this blog posted that if click on and product bought or signed up for, will result in the compensation of myself. This will come with no price increase to the customer at all.  Think of it, as an easy way to support this blog and yours truly.


Stock, Oil and Gold trading advice: How long and how high for Gold, and how to play it

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Regular readers of my articles on Gold over the past few years know that I have a theory on this Gold Bull market. In summary, it’s that we are in a 13 Fibonacci year uptrend that started in 2001, and now we are in the final 4 years of that uptrend. It is in this last 5 year window that I theorized started in August of 2009 that investors really get involved. As the crowd comes in, prices push higher and higher, and then more and more investors come in and so forth.

The very recent rally has pushed us up to about $1,420 per ounce, on the way to my projected $1480-$1520 pivot highs on this leg from the $1040 area in February of this year. Subscribers to my TMTF newsletter have learned about Elliott Wave Theory and how to properly apply it to benefit from both the ups and the downs in various parts of the markets, as well as commodities and precious metals. If I am correct, we are in the 3rd wave up of 5 total waves from the August 2009 $900 per ounce levels. The first leg went from $900 to $1225, the second leg was corrective to $1,040, and now this 3rd wave should complete at around 150% of the 1st wave’s amplitude. In English, the probabilities are for Gold to continue higher to about $1527 per ounce, possibly a tad higher if the typical Elliott Wave patterns take hold, and also assuming again that I am correct in my read of those patterns.

One of the better ways to play this next 4 years of upside with intervening corrections is to look at prospect generator companies. These are Gold, Silver, and Copper explorers that do the early field work in identifying prospects for drilling. They then farm out these projects to willing partners and retain equity stakes and /or percentiles of the project itself. This reduces their need for capital while retaining nice upside for shareholders, and diversifying. When you are a tad long in this current wave pattern’s tooth, this is way to stay onboard, but not go overboard. I have personal ownership positions in a few of these types of companies, and my subscribers are aware of the few that we really prefer. Should one of the projects not pan out, you are not placing your entire shareholder bet on one drill project, and yet if they hit on a few, the upside can be substantial.  – Read the Rest

Stock Trading Advice: SPX’s Running Correction, Gold’s Setup, Oil Explodes!

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The financial markets continue to climb the wall of worry on the back of more Fed Quantitative Easing. Those trying to pick a top in this choppy bull market may prove to be correct for a couple hours but over time the shorts continue to get clobbered.

Quantitative easing was enough to turn gold back up and gave oil just enough of a nudge to breakout of its cup and handle pattern explained later.

The past few weeks the number of emails I receive on a daily basis about what individuals should do about short positions they took on their own has growing quickly. Usually when my inbox starts to fill up with traders holding heavy losses trying to pick a top I know something big is about to happen and its not going to be in the favor of the herd (everyone shorting). In the past couple week there have been some great entry points for the broad market whether its to buy the SP500, Dow, NASDAQ or Russell 2K. I focus on trading with the trend and entering on extreme sentiment readings as shown in the chart below.

Extreme Trend Trading Analysis

Below are my main market sentiment indicators for helping to time short term tops and bottoms. That being said I don’t pick short term tops in hopes to profit on the down side. Rather I wait for a extreme sentiment bottom to be put in place, then enter long with the up trend (Buy Low).

Once there is a 1-2% surge in price and sentiment indicators are showing a short term top I like to pull a little money off the table to lock in some profits while still holding a core position (Sell High). This is exactly what I/subscribers have done over the last couple weeks. This is a simple yet highly effective strategy and works just as well in a down trend except I focus on shorting extreme sentiment bounces. Subscribers know what these indicators are as I cover them each week in my daily pre-market trading videos as we prepare for the day ahead. —- Read The Rest Here

Video: Rick Santelli on what the Tea Party means to him

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Via OUR LIVES, OUR FORTUNES & OUR SACRED HONOR:

President Barack Obama delivers the President’s weekly address

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Transcript Via The White House:

Remarks of President Barack Obama

Weekly Address

The White House

November 6, 2010

This week, Americans across the country cast their votes and made their voices heard. And your message was clear.

You’re rightly frustrated with the pace of our economic recovery. So am I.

You’re fed up with partisan politics and want results. I do too.

So I congratulate all of this week’s winners – Republicans, Democrats, and Independents. But now, the campaign season is over. And it’s time to focus on our shared responsibilities to work together and deliver those results: speeding up our economic recovery, creating jobs, and strengthening the middle class so that the American Dream feels like it’s back within reach.

That’s why I’ve asked to sit down soon with leaders of both parties so that we can have an extended discussion about what we can do together to move this country forward.

And over the next few weeks, we’re going to have a chance to work together in the brief upcoming session of Congress.

Here’s why this lame duck session is so important. Early in the last decade, President Bush and Congress enacted a series of tax cuts that were designed to expire at the end of this year.

What that means is, if Congress doesn’t act by New Year’s Eve, middle-class families will see their taxes go up starting on New Year’s Day.

But the last thing we should do is raise taxes on middle-class families. For the past decade, they saw their costs rise, their incomes fall, and too many jobs go overseas. They’re the ones bearing the brunt of the recession. They’re the ones having trouble making ends meet. They are the ones who need relief right now.

So something’s got to be done. And I believe there’s room for us to compromise and get it done together.

Let’s start where we agree. All of us want certainty for middle-class Americans. None of us want them to wake up on January 1st with a higher tax bill. That’s why I believe we should permanently extend the Bush tax cuts for all families making less than $250,000 a year. That’s 98 percent of the American people.

We also agree on the need to start cutting spending and bringing down our deficit. That’s going to require everyone to make some tough choices. In fact, if Congress were to implement my proposal to freeze non-security discretionary spending for three years, it would bring this spending down to its lowest level as share of the economy in 50 years.

But at a time when we are going to ask folks across the board to make such difficult sacrifices, I don’t see how we can afford to borrow an additional $700 billion from other countries to make all the Bush tax cuts permanent, even for the wealthiest 2 percent of Americans. We’d be digging ourselves into an even deeper fiscal hole and passing the burden on to our children.

I recognize that both parties are going to have to work together and compromise to get something done here. But I want to make my priorities clear from the start. One: middle class families need permanent tax relief. And two: I believe we can’t afford to borrow and spend another $700 billion on permanent tax cuts for millionaires and billionaires.

There are new public servants in Washington, but we still face the same challenges. And you made it clear that it’s time for results. This a great opportunity to show everyone that we got the message and that we’re willing, in this post-election season, to come together and do what’s best for the country we all love.

Thanks.