Financials lead us down and they just might do so again. Below is a chart and my predictions. Feel free to go back in the archives and read what I wrote back in March 2009. The DOW has held up a little better than these financials have the last few months, but that changed the past few days. It could be a sign of things to come. Back in March of 2009, I was talking about the overall market and the economy, but since financials lead us down before, this looks like the canary in the coal mine. Notice the last drop of the past few days right at the tail end of this chart. These financials could be opening act for the DOW correction. If only any of our leaders saw this coming as clearly as I did. Remember, they are geniuses (according to themselves and the media,) and we are just mere ignorant commoners. I hope you made money on it!

President Obama has complained for a year that “the banks aren’t lending.”

So, the morons in the White House have a brilliant plan to deal with it. They are going to slap the banks with a punitive tax amounting to $90-$100 billion. Since banks lend at a ratio of a minimum 10:1, this means that $1 trillion less will be lent to small business, corporations, and individuals.

If Obama thinks bank lending is bad now, wait til he removes $1 trillion of loan capital.

If the architects of the bailout (like Tim Geithner) wanted to prevent these bonuses and spur bank lending, they would have demanded that the TARP funds be used to improve their balance sheets, and if any profits were made from the investment of these funds, then those profits would be used to offset rising loan losses further strengthening the banks. The administration also would not be engaged in wealth destroying policies that have made entrepreneurs reluctant to get loans in the first place.

As it stands now, many banks are still suffering, but the profits they are earning are being paid out as bonuses and not being used to rebuild their balance sheets since they know the government will not let them fail since as in Citigroup’s case they are owned by the taxpayer.

Also, our investment in Citigroup is taking a beating today as Obama pushes this bank tax. So Mr. Taxpayer, you bought Citigroup and now Obama is causing that investment to go down in value! Wow! Is he available for financial consultations?

This is all one big ponzi scheme so the government can pay for the limitless bailout they have guaranteed Fannie and Freddie and the tens of billions we have put into GM.

One last thing, Warren Buffet who was a huge supporter of Obama’s pap has come out strongly against the bank tax. He of course owns shares in Wells Fargo and other financials. Hmmmmmm.

If every plumber in the USA disappeared tomorrow, what would happen? We would be in deep shit.

If every intellectual mainstream economist/columnist/thinker/pundit disappeared tomorrow, what would happen?

NOTHING.

The unemployment rate is steady at 10% after a -85,000 jobs number. Of course, there was also another HUGE drop in the labor force which artificially makes the unemployment rate look better than it really is. This has been the real story for the last several months and will continue to be the untold story of 2010.

The Birth/Death model is also a total farce. I will discuss this more in a future post.

For whatever reason, I have good instincts when it comes to the stock market, economy, and investments. I always look at the numbers, but even if the numbers are as good as can be, if my instincts tell me to stay away then that is what I will do.

I often watch TV and see an “expert” on the economy bombard the viewer with data points that back up whatever his or her forecast is. Lets take commercial real estate as an example. The trendy forecast lately seems to be that commercial real estate has bottomed or is in a nascent recovery already. I have seen this forecast made countless times over the last month or two. Had I been on the show when this “expert” gave this forecast I would have replied with this little story.

For the past 12 months I have been driving past a newly constructed strip mall. It looks very nice and has ZERO tenants. For the past 9 months, there has been a huge sign out front saying they will give you 12 months free rent if you sign a lease there. Today, there are ZERO tenants. They are literally giving away free retail space for a year and can’t get one tenant! This is a good neighborhood with good average income and a below average crime rate. Does this square with a commercial real estate recovery?

Inevitably, the “expert” would tell me that while there certainly are still some areas struggling, my ANECDOTE is just that and does not represent the overall commercial real estate market as the “data” clearly shows.

Let me tell ya something…If it ever comes down to my instincts and anecdotes vs. “expert” data or government (BLS) statistics; I’ll take my instincts and anecdotes EVERY SINGLE TIME.

Don’t be afraid to trust your instincts, especially when you have the track record to back it up.

(By the way, be on the lookout for the possibility of a LUDICROUS seasonal adjustment to the unemployment report upcoming. The government can and will make the jobless rate literally ANYTHING IT WANTS.)

I resolved a few years ago to literally never believe government statistics. After years of study, I have come to the conclusion that the government produced unemployment rate should almost always be 50% or so higher than what it is purported to be.

We now sit around 10%, meaning that it should be closer to around 15%. Other statistics minded people think it should be even higher than that, but hey I’m a nice guy. And no, I am not talking about the U6 number which includes underemployed people. The U6 number should also be 50% higher taking it from around 17% to around 25%.

The problem is, the government and their media allies have a virtual stranglehold on the data and information flow. The Internet is breaking their monopoly up, but it remains a tough nut to crack.

“Stranglehold” - Ted Nugent (via YouTube)

Begin the new year with Joe Satriani. The economy is bad, but at least we have good music.