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The Best No-Brainer Idea in the Market Today

By Jeff Clark
Tuesday, November 30, 2010

It's all fun and games until somebody loses an IRA.
 
By now we're all familiar with the games central bankers play... print a little money here, prop up the market there, pass the buck like a hot potato, and do everything possible to keep the charade going.
 
We put up with the games mostly because... well... I don't really know why we put up with them. Maybe it's apathy or laziness. Or maybe we're all so busy trying to keep our own heads above water, we're not paying attention.
 
But we can't ignore what's going on in Europe right now.
 
Last week, Ireland's government announced it would use (confiscate, seize, steal) $30 billion from the country's public pension program to purchase Irish government bonds. Hungarian officials announced a similar program using $15 billion of public pension assets. French officials also surrendered to the idea and are putting $45 billion of pension assets into France's sovereign debt.
 
Just to be clear... Much of the proceeds these governments receive from selling bonds are used to fund social programs such as welfare, health care, and unemployment benefits. So, by using pension fund assets to buy these bonds, the governments are taking long-term savings from hardworking, industrious individuals... and giving the money to those who are currently down and out.
 
What happens years from now when the hardworking, industrious folks decide to retire and discover their money isn't there, or it's worth only a small fraction of its original value?
 
Of course, government officials will argue this is a temporary measure to bridge the funding gap caused by the weak global economy. When the economy improves, tax revenues will increase, and they'll be able to pay down the debt and replenish the pension fund coffers.
 
Bull.
 
The funding problems are systemic. They're not the result of economic downturns. They're the result of stupid politicians making stupid promises to stupid people. "From those who can to those who need" may sound good on paper, but it fails miserably in practice.
 
The real issue, however, goes beyond the politics of socialism and/or communism. What does it say about the quality of a government's debt when the only entity willing to purchase it is the issuing government itself?
 
Now, you can dismiss this as a European problem – just a bunch of Irish, French, and Hungarian politicos doing whatever they can to appease the masses and keep their cushy offices. Why should we care?
 
We should care because it's happening here too – in the good old U.S. of A.
 
The Fed is already using taxpayer money to prop up the bond market and keep interest rates artificially low. Once again, what does it say about the quality of a government's debt when the only entity willing to purchase it is the issuing government itself?
 
And... does anybody remember the trial balloon the current administration floated several months ago? You know... the one about using public pensions to buy annuities backed by U.S. Treasury securities.
 
None of this happens by accident.
 
Central bankers talk to each other. They know the ticking time bomb everyone is trying to kick down the road. And they know if it gets to the United States, it's a dead end. There's nowhere else to go.
 
So what can you do?
 
First, if you're a government employee and have a government pension, you need to do whatever you can to take control of the assets yourself. NOW. Talk to your administrator and find out what your options are.
 
And if you're a speculator and you're willing to bet the jig is up within the next several months, shorting the long-term Treasury bond market is the best no-brainer idea since I wrote about betting on a dollar rally in October.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

Last month, Jeff bet on a rising dollar just weeks before it broke out of its falling-wedge pattern. Reread his last "no-brainer" play of the year here: We Could See a Huge Rebound in the Dollar Right Here.
 
Europe's credit woes could be entirely different had the European Union listened to Jeff back in April. Check out the letter that would have changed history here: A Harsh Reality for the European Union.

In The Daily Crux
Market Notes
Euro falls to fresh two-month low... with no end in sight for the European debt crisis.
 
Online shopping boom sends Amazon and eBay to fresh 52-week highs.
 
Junior gold miner Rubicon Minerals soars 60% over the past month.
 
Uranium Resources and Uranerz jump to two-year highs.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1180.55 -0.6% +7.8%
Oil 36.04 -2.0% -7.9%
Gold 135.42 +1.4% +17.1%
Silver 27.44 +3.4% +51.2%
US-Dollar 80.80 +0.5% +8.0%
Euro 1.30 -1.1% -13.5%
Volatility 23.54 +9.3% -4.0%
Gold Stocks 550.00 +1.4% +15.9%
10-Year Yield 2.80 -0.7% -12.5%

World ETFs
Symbol Price
Change
52-Wk
USA 118.49 -0.6% +7.8%
Canada 29.33 -0.4% +13.2%
Russia 20.43 -0.7% +13.3%
India 35.58 +0.1% +17.4%
Israel 16.25 -0.2% +10.3%
Japan 10.27 -0.5% +7.4%
Singapore 13.36 +0.2% +17.6%
Taiwan 14.09 +0.1% +15.2%
S. Korea 53.97 +0.5% +21.6%
S. Africa 66.72 -1.7% +19.1%
China 43.34 -1.1% -0.8%
Lat.America 51.11 -0.7% +6.8%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 130.19 -0.4% +10.0%
Big Pharma 62.63 -0.8% -4.2%
Internet 70.79 -2.4% +22.8%
Semis 15.21 -1.2% +28.8%
Utilities 30.76 -0.1% +3.4%
Defense 17.84 -0.3% +7.9%
Nanotech 9.74 -1.5% +0.6%
Alt. Energy 9.61 -2.1% -3.8%
Water 17.71 -0.7% +10.5%
Insurance 15.55 +0.0% +16.7%
Biotech 20.10 -1.1% +25.9%
Retail 19.37 +0.2% +29.1%
Software 23.74 -0.5% +21.6%
Big Tech 52.09 -1.2% +19.6%
Construction 12.39 +0.0% +10.3%
Media 13.12 +0.3% +22.7%
Consumer Svcs 65.56 -0.4% +22.0%
Financials 52.51 -0.7% +0.9%
Health Care 62.68 -0.8% +0.4%
Industrials 60.69 -0.4% +16.6%
Basic Mat 70.52 -0.2% +20.0%
Real Estate 54.09 -0.4% +24.6%
Transportation 87.86 -0.9% +24.2%
Telecom 21.83 -0.9% +17.5%

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