The No. 1 problem with the situation in Syria is that it shows that the so-called military-industrial complex has gotten completely out of control. There is no strategic interest we can possibly imagine in Syria. There is no reason for us to be involved in a Syrian civil war. There are no angels on either side of the conflict.
Ron Paul has said Syrians had attacked Syrians. So as a result, we were going to attack Syrians. That makes no sense. Show me the positive outcome in any civil war. Show me what we accomplished in eight years of involvement in Vietnam. Nothing good comes out of any of this... and it amazes me that the leaders of our country are either this naïve or stupid.
There's intense lobbying on the behalf of the folks who sell bombs, planes, bullets, and guns for us to get involved in any conflict anywhere in any way possible because it's good for their business. We have to step back and think that this has gotten out of control – this ability for people to lobby Congress and in return to get huge quantities of spending on violence. It's unbelievable. If you can lobby Congress to attack Syria, you can lobby Congress to do anything. That's scary.
I can't figure out what's going on with Syria. There has not been a single attempt to explain to the American people why we have an interest in a Syrian civil war. We've only heard this nonsense about some sort of "red line." It's crap. It's just idiotic political language. It makes no sense. We shouldn't care when Syrians kill other Syrians.
Rising interest rates are already dampening mortgage activity... And the big banks are getting gloomy...
This week, Wells Fargo, the nation's largest mortgage lender, said third-quarter home loan originations could fall 29%. JPMorgan, the No. 2 lender, said it expects to lose money on mortgages in the second half of the year as volumes could drop as much as 40%.
Wells plans to cut 2,300 jobs. JPMorgan could cut 15,000 by 2014.
Bank of America, the fourth-largest lender last year, is cutting 2,100 staff from its mortgage department and will close 16 offices by October 31.
The biggest reason for worry is the massive drop in refinancing activity since the Federal Reserve warned it may taper its bond purchases in May. Refinancings have dropped in 16 of the last 18 weeks... Activity has fallen 70%-plus since May. It's the lowest level of refinancing activity since June 2009 and the lowest total mortgage activity since October 2008, according to financial blog Zero Hedge.
True Wealth editor Steve Sjuggerud remains bullish on real estate. In the July issue, he shared his bullish argument... and explained why he's putting a large portion of his personal wealth into the sector...
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Despite rising interest rates and slowing mortgage demand, Steve isn't worried. As he wrote in an e-mail to me this week...
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As we wrote in Monday's Digest, Steve still believes his "script" for the market is accurate... The Bernanke Asset Bubble – the asset price inflation resulting from Fed Chairman Bernanke's bond-buying program – still has room to run.
Right now, Steve says we're just beginning Act III (the final act) of his script... That's when Mom-and-Pop investors start buying riskier stocks like gold miners and emerging markets. And that's where the big money is made – he's predicting triple-digit gains from here.
In the September issue of True Wealth, Steve shared one of his favorite opportunities in the market today. It's in one of the largest and most profitable sectors in the world... But right now, it's trading at a massive discount. These stocks are so cheap, Steve says you're only risking 12% downside for the potential to make 100%. To learn more about True Wealth – and how to gain access to Steve's newest recommendation – click here.
Remember, Steve's Bernanke Asset Bubble thesis is based on the continuation of quantitative easing. Already, the Federal Reserve has said it's preparing to taper its monthly bond purchases (currently $85 billion). Bernanke said it could halt purchases by mid-2014 if the economy cooperates. So what would happen if the Fed exited the market completely?
That's the question billionaire trader Stanley Druckenmiller asked on Bloomberg TV yesterday...
"How in the world does anyone think when the actual exit happens that prices are not going to respond?" he said.
The Fed simply announcing that it's thinking of reducing monthly purchases could send yields on the 10-year Treasury soaring. If that happens, its exit from quantitative easing would have much more severe consequences.
"I really don't care whether we go to $70 billion or $65 billion in September," Druckenmiller said. "But if you tell me quantitative easing is going to be removed over nine or 12 months, that is a big deal."
The Fed's money printing has inflated all asset prices. Record-low interest rates have forced folks into riskier assets.
And if the purchases stop, Druckenmiller says "the market will go down."
Given all the uncertainty in the market today and the looming possibility of the Fed slowing its bond-buying, it's amazing the Volatility Index (the "VIX") – the market's "fear index" – is still at record lows.
The VIX measures the prices people are willing to pay for options that protect the value of their stock holdings. That's why we call it the market's "fear index"... The higher the VIX, the more people will pay to insure their stocks... hence, the more scared they feel.
As you can see, the VIX touched 80 in the depths of the 2008 crisis. It moved above 45 as the European crisis unfolded in 2011. Today, the VIX is at 14. It could stay depressed for some time before it eventually spikes higher.
But for now, there's no denying we're in a bull market. Markets across the world are trading at new highs. Exchange-traded funds for the S&P 500, Spain, France, the U.K., gaming stocks, aerospace, medical equipment, basic materials, and industry are all trading at 52-week highs.
Or as the wise trader "Old Turkey" said in Edwin Lefevre's Reminiscences of a Stock Operator, "It's a bull market, you know!"
New 52-week highs (as of 9/11/13): Automatic Data Processing (ADP), American Financial Group (AFG), Chicago Bridge & Iron (CBI), Chesapeake Energy (CHK), EnerSys (ENS), Ericsson (ERIC), iShares Germany Index Fund (EWG), Expeditors International (EXPD), SPDR Euro Stoxx 50 Fund (FEZ), Fidelity Select Medical Equipment & Systems Fund (FSMEX), Laredo Petroleum (LPI), 3M (MMM), PowerShares Buyback Fund (PKW), Steel Dynamics (STLD), Constellation Brands (STZ), and Triangle Petroleum (TPLM).
We received some of the normal angry notes about yesterday's discussion of The Atlas 400, but we also got some notes of support. Either way, send your thoughts to feedback@stansberryresearch.com.
"I think that your passion for the Atlas 400 is well positioned. I wish I had the financial means to be part of a group like yours. While I am not financially poor, I don't have the means to travel as the group does. That said? I believe your group is marvelous. I enjoy reading about it. I enjoy reading damn near everything you write. And while we may not agree on everything point-by-point (and hell, what fun would that be anyhow?), I share your views on government and the fiscal mess in which we find ourselves. As I have written so many times before, your digests, particularly the Friday digests, are some of my favorite reading." – Paid-up subscriber Jeff
Regards,
Sean Goldsmith
Delray Beach, Florida
September 12, 2013