Jun 7,

2011 ne 17
AVAI InvestmentA Analytics www w.avaresearch h.com MikeStathis ChiefInvestmentS Strategist

[201 YearE micUpd ] 11Mid Econom date

In this report, we dem monstrate the realities of the global e e economy, wit a focus on the U.S. We also th n e discussth hecontinuedmanipulation nofeconomic cbyWashing gton,themed diaandothers,pointingto oboth risksando opportunities s.

011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

ttymuchunc changedrelat tivetowhatI Ihavebeend discussingove erthepastse everal Thestory remainspret months. out arch publicat tions I have been point ing to the impressive earnings from U.S. m Througho our resea corporatio ons. I have also noted numerous upw a ward revision in 2011 E ns EPS, which of course imp f plies a highersto ockmarket.A Asaconseque ence,Ihaveb beenbullisht throughoutth his,aswellas soverthepre evious year.Atth hesametime e,Idiscussedmyexpectati ionsofawea kereconomy yinthesecon ndhalfoftheyear. Although wearenow seeingearly signsofexpe ectedweaken ningofanec conomythat hasbeenpro opped gh m tors have jum mped the gun a bit, perha as an exc n aps cuse to trim down up throug artificial means, invest positionsinadvanceof fwhatishisto oricallyawea akperiodofm marketperfor rmanceinthe esummermo onths. Regardles sshowwellth heU.S.stock markethasr risenoverthe epasttwoye ears,wecann notforgettha atthe U.S.economyremains sinarecessio on,whichisj justonemon nthshyofthe elongestrecessioninove er100 years.

Thatsright.Yourehe earingitfrom mme.Therew willbenod oubledipre ecessionase everyonehas been discussing because su a term has no validit This can easily be co g uch h ty. onfirmed by anyone who truly understan ndseconomic ccycletheory y.Apparently, ,veryfewdo . 1 Copyright 2011.Allrig ghtsreserved.|AVAInves stmentAnalyt ticswww.ava aresearch.com m

June17,2011 [2011MIDYEARECONOMICUPDATE] WhydosomanygovernmentandWallStreeteconomists,analysts,journalistsandbloggerscontinueto discussthepotentialforadoublediprecession? Seeheretounderstandwhytheconceptofadoublediprecessionisinvalid. First,youhavetounderstandthatallgovernmentandWallStreeteconomistsserveascheerleadersfor Americas fascist regime. Thus, they are the last source of reality. Regardless which side of the Washingtonmafiathesehackssidewith,merelybypointingtoorcastingasidethoughtsofadoubledip recessionaccomplishesthesamegoal;foolingAmericanstothinkthattherecessionendedinJune2009. WhywouldopposingsidesoftheWashingtonmafiawanttohidethetruth? IfAmericanstrulyunderstoodreality,theywouldcallforanendtoAmericasfascistgovernment,which wouldthreatenbothfamiliesoftheWashingtonmafia;theDemocraticandRepublicanParties.Already, the tea partymovement, whichwasinitiallyfocusedona call toanendof theWashingtonmafia has beenhijackedbytheRepublicanParty.[1][2][3] WhenyoureadanarticlebytheAssociatedPress,Reuters,theNewYorkTimes,WashingtonPost,soon andsoforth,thepuppetsofpropagandamakecertaintoreferencetheliethattherecessionendedin June2009.AsameanstothwartanyconsiderationthatAmericaisinthemidstofadepression,they utilizeasimplepsychologicaltactic,byreferringtotherecessionastheGreatRecession,asopposed totheanotherGreatDepression.WhenIseethesepuppetsusethistermintheirtypicalmanipulative manner,Igetsicktomystomach. Ontheotherhand,thepermabearextremistsareperhapsevenworse,astheywillneveradvisetheir KoolAiddrinkerstobuyintothestockmarket,regardlesshowmuchitdeclines. Two years ago, I announced a cash reward for the first person who could prove that there was an individualwhocouldmatchmytrackrecordontheeconomiccollapse.Ihaveraisedthisrewardseveral timestoencourageparticipantstogiveittheirbestshot.Still,Ihavenotreceivedasingleentry,despite thefactthatseveralthousandsofindividualshavecomeacrossthisoffer. Today, I would like to announce a $50,000 award for any legitimate economist who can demonstrate that the recession ended last summer. I am willing to go up against anyone with any (perceived) credibilityinordertoprovemycasethattherecessionneverended. Furthermore,Iwilldemonstratethatthiscurrentrecessionisjustoneofatleastoneormorethatwill occurthroughoutthedurationofAmericasSecondGreatDepression. [Theverdictwillbesettledbyanaudiencevoteafteraliveheadtoheaddebate.Theonlycatchhereis thatmyopponentmustalsooffer$50,000ofhisownmoneyifIwinthedebate.Thisisaveryserious offer.Pleasecontactmewithyourqualificationstolearnmoredetails.] Icanalreadytellyousuchadebatewillnevertakeplace,asthepurposeofthepropagandacampaignis nottohaveanopendiscussionaboutissuesthatmattermosttotheAmericanpeople,suchasthewars 2 Copyright2011.Allrightsreserved.|AVAInvestmentAnalyticswww.avaresearch.com

June17,2011 [2011MIDYEARECONOMICUPDATE] intheMiddleEast,healthcare,ortheeconomy.ThepurposeofthemediaistoconvincetheAmerican peoplethatthingsarenotasbadastheyseem,orthatthingsaremuchworsethantheyseeminorder tofueltheiragendas. You see, its all about exposure. By ignoring unbiased experts, their voice is lost in the crowd of the mediawhores,noneofwhichareonyourside.Asaresult,mostAmericanswillnevertrulyrealizewhat is going on until it is much too late. This is the way the game is played. But it only remains effective becausetheAmericansheeplecontinuetopayattentiontothemedia. WhenyoureadthevariousblogsandotherTMZlikesiteslikeYahoo!Finance,AOL,Fortune,etc.,you will inevitably come across misguided individuals who follow the same lines preached these more credible sources, namely government and Wall Street economists quoted in the large corporate governmentbroadcastnetworksandnewspaperssuchastheAssociatedPress,Reuters,theNewYork TimesandWashingtonPost. Invariably,thesebloggers(manyofthemwhomakeappearancesinthebroadcastandprintmedia)have fooledthemselvestothinkthattheyhaveformedindependentviewsontheeconomyandstockmarket asiftheyweredoingrealresearch.Inreality,theyhavecometotheiropinionsbasedonwhattheyhave read from others. Thus, they are nothing more than part of the herd. You see these individuals on virtuallyeverywebsite.Thenamesareendless. Onecommoncharacteristicsharedbythesemarketingexpertswhohavebeenpositionedaseconomic orinvestmentexpertsisthatthemoreexposuretheyreceive,themorecluelesstheyare.Peoplegain mediaexposureforaverygoodreason.AnditsureashellisnttohelpyoubecauseYOUdontspend billionsofdollarsbuyingadvertisements;WallStreetandcorporateAmericado. Itsallpartofthemanipulationprocessthatextendstoeverything,fromthebinLadenbologna,tothe economy.Itstimetofigureouthowthegameworksfolksbecause,quitefrankly,Imgettingtiredof statingtheobvious. While some insist that a doubledip recession is approaching, others insist its not a possibility. Either way, those taking either position have no idea what theyre talking about. Many of them claim to be economists, investment experts and so forth. Once you consider that they spend most of their time blogging and making media appearances, you will understand why they have such a miserable track record;thatis,ifyoubothertoadequatelyresearchtheirtrackrecord. Ifyouconductadequateduediligenceontheseindividuals,youwillinevitablyfindthattheyarenothing more than bloggers, media whores and snake oil salesmen; all clowns whose real expertise is in marketingandsheepherding. Theyaremakingmoneysellinggoldadsontheirwebsite. Theyaremakingmoneybyendorsinggold. Theyaremakingmoneygeneratingtrafficsoastosellotherads. 3 Copyright2011.Allrightsreserved.|AVAInvestmentAnalyticswww.avaresearch.com

June17,2011 [2011MIDYEARECONOMICUPDATE] They are making money by convincing you that they know whats going on so you will invest in their fund. Unfortunately, the vast majority of investors do not bother to or are incapable of conducting adequate due diligence. Otherwise, they would clearly see how terrible the track records are of the medias socalled experts, and how poorly their investment funds have performed. The Prudent Fear FundandHarryDentspreviousfundandcurrentETFserveasperfectexamples.[4] Regardlessoftheirangle,theyarealldishonestbecausetheyhavenoideawhattheyaretalkingabout sotheyrelyontheirmediaconnectionsandInternetnetwork.[5] Theyarenotinvestmentstrategists. Theyarenotcredibleeconomists. Theyarenotresearchanalysts. They are marketers. And they get their ideas by reading what others have written in the media and otherhacksites.Someevenviolatecopyrightlawsonaregularbasisinordertoprovidecontentwith whichtheyarepaidbyGoogleforadclicks.Youknowwhotheyare.Thinkaboutit.Theyarealloverthe place.Itiscriticaltorecognizethisreality. NowthatIgotthatoutoftheway,IwouldliketostatewhatIconsidersomeimportantpoints: TherecessionwhichbeganinDecember2007isstillinprogress. This recession is one month shy of the first and most severe recession during the Great Depression. AmericaisinthemidstofitsSecondGreatDepression. Thisdepressionwilllastatminimumuntil2020;itcouldlastmuchlonger. TherewillneverbearealrecoveryfromthisdepressionformostAmericans. TherewillbenohyperinflationintheU.S.asaresultofthedepression. Thedepressionwillheightenduetoinflation,althoughwewillseeshortdeflationaryperiods. Europefacesahighchanceofalongdeflationaryperiod. TheEuropeanUnionwillmostlikelybeverydifferentby2020thanitistoday. IfGermanyweretoleavetheEU,itwouldsurelycollapse. The vast majority of jobs lost (90%) since December 2007 (more than 9 million) will never return. TheU.S.stockmarketnolongerservesasagaugeofthehealthoftheU.S.economy. The U.S. stock market will remain volatile for many years, with strong rallies and large corrections. Goldandsilverpriceswillcollapseto$300to$400and$7to$12atsomepointwithinthenext severalyears. Withrareexception,realestatehasneverbeenagoodinvestmentfromafinancialstandpoint. OilpriceswillremainhighaslongastheU.S.remainsaswarintheMiddleEast.

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June17,2011 [2011MIDYEARECONOMICUPDATE] ItisverylikelywewillseeWorldWarIIIbyorbefore2020(itcouldbearguedtohavealready begun).

Nowletstakeacloserlookatthestateoftheeconomyandstockmarket. InearlyMay,Idiscussedelevatedpossibilityofatleasta45%correctionincomingdays(Intelligent InvestorandMarketForecaster).BytheendofMay,theS&P500andDJIAhadcorrectedby4.5%and 5.1%,respectively. In the June issue of the Intelligent Investor and Market Forecaster newsletters, I detailed a scenario analysis,providingmybestprobabilitiesforthedirectionofthemarket.Thusfar,thisforecasthasbeen spoton. Letshaveabrieflook. Overall,basedonmycurrentassessment,IexpecttheDowtoremaininabroadtradingrangebetween *******to*******fortheremainderoftheyear.Morespecifically,IexpecttheDowtoremaininthis rangefor90%ofthetime,withabiastowardsthe*******halfofthisrange. Next,werestatedwhatwehavebeensayingforafewmonths Aswemoveintothesecondhalfoftheyear,Iexpectthecombinedimpactofhighoilandcommodity prices,Japan,andrisinginflationtoweighonthemarket. However,ratherthanareversalofeconomicandearningsmomentum,Iexpectthecombinedeffectof these variables to scale down the market upside first discussed in a market update released in mid February(Idiscussedthisdownwardrevisionrecently). Toclarify thelastparagraphforthose whoaremorerecentsubscribers,inotherwords,rather than a Dow*******,Iexpectatrimdownto********duetotheissuesthatwillmaterializeinthesecondhalf of2011. AlsointheMayissue,westatedthefollowing... ThefinaltwochartsinthisseriesillustratehowtheDowcontinuestoremainwithinaverysteepbullish tradingband.Noticethe********madeintheDowbetween*******(fourthchart)and*******(fifth chart).Thisisavery********moveasmentioned.However,italsoincreasesthechanceofatleasta 4%5%correctionincomingdays. Sowhatshouldyoudo? Iwouldnotbeaddinganynewmoneyintothemarketatthispoint.Iwouldwaitforacorrection.

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June17,2011 [2011MIDYEARECONOMICUPDATE] Wealsostatedthatyoumightwanttosellsomepositionstoavoidtheexpecteddownside(exactquote notincludedbecauseitpointstoourlongertermforecastinthemarket). Despitethecontinuationofearningssurprises,Istillfeelthemarketisovervaluedbyaverylargeamount becauseithasralliedstronglyinresponsetoearningsreports.Butonceagain,thevaluationmethodsI focusonarebestutilizedtoforecastmarketbottomsduringbearmarkets. Ontheotherhand,Ialso lookatmoretraditionalvaluationmetricssuchas PEratiosandsofourthin ordertogaugemarketsentiment.Marketvaluationtechniquesalonedonothelpusmuch.Youmustalso lookatsentimentbecauseitcanhelpyouspottrendsearlyon. Ifyouarenotabletogaugemarketsentimentandyouareawareofthemacroeconomicrisks(ofwhich therearemany)thenyoucouldbesittingincashfortenyearswaitingforacollapsewhilethemarket soars.Thisistheprecisesituationmanyinvestorshavefoundthemselvesinafterlisteningtotheperma bearsnakeoilsalesmenplasteredthroughoutthemedia. Atthesame time,manyinvestorswhohavelistenedtothe permabullshavefound themselvesselling towardsthebottom(inpanic)andhaveonlyrecentlyboughtbackintothemarket. Therearenumerousmethodstodetermineearningsandvaluation,soitisveryimportanttounderstand whatthemajorityofinstitutionsutilizeassoyoucandetermineiftheywillbedisappointedorpleased withthedata. Continuing... Sohowdoweplaythis? ThehighertheDowisgoingintothesecondhalfoftheyear,themore**********,andviceversa. Ifthemarketcorrectsdownward(inadvanceoftheserisks)goingintothesecondhalfoftheyear(say backdowntothe*******level),Iwouldbeastrong*******ofUSequities(acorrectiondowntothe *******levelwouldaddtothis****ishstrategy). Incontrast,asthemarket************************,youshould*************************. Then,intheJuneissue,wewrite Currently, the market is entering the second half of the year already having corrected by around 5% overthepasttwoweeks.Thusfar,thiscorrectionhasnotbeensignificantrelativetotheanticipationof aneconomicslowdownintheeyesoftheconsensusofinvestors. The current ~5% correction seen over the past month is **********************. Thus, I expect ************overthenextfewweeks. I feel the odds are quite high (85% certainty) that we will see (the Dow Jones reach) ********. That wouldplacetheDJIAat*******. 6 Copyright2011.Allrightsreserved.|AVAInvestmentAnalyticswww.avaresearch.com

June17,2011 [2011MIDYEARECONOMICUPDATE] Inaddition,theoddsarefairlyhigh(70%certainty)thattheDJIAwillheadto********fromhere.Finally, Iestimatea50:50chancethattheDJIAwill****************,placingtheDowat********. SincethecatastropheinJapanbegan,analystshadbeendownplayingitsimpacttobothJapanandthe global economy. However, I previously stated that the effects of Japans lingering catastrophe were beingdownplayedrelativetoestimatesfromWallStreetandgovernmentofficials.Imaintainthisview. Infact,theIMFhasrecentlymaderadicalmodificationstoJapans2011GDPgrowth,placingthecountry inrecessionterritory.[6] WhileIdonotfeelthat$100+oilhasbeenasignificantdragontheU.S.economy(atthispoint),Ihave beendiscussingthatithasaddedagooddealofpressuretoemergingeconomies,especiallyinAsiaand South America. Not only have high fuel costs excessively increased food and transportation costs in thesenations,theoverallinflationaryeffectshavealsoheightenedwagepressures. Combinedwithpeakcapacityutilizationseeninsomeemergingnations(BrazilandIndonesia),itshould beclearthatinflationarypressuresarespreadingacrosstheglobe,albeitslowly.Additionalinflationary pressurehasmountedastheresultoflargecapitalinflowsfromfinancialinstitutionsandotherinvestors lookingtotakeadvantageofhighinterestratesinBrazil,Indiaandothernations. Thevarioushacksand clownshavechosentofocusonQE2 becauseithasprogressedintoadrama phrase. The reality is that QE2 has not resulted in any DIRECT inflation in the U.S. While it has heightened inflation in many parts of the globe (which has spilled over into the U.S.) there are many otherissuesofhigherconcern.Thus,ifyouhavebeendupedbytheQE2drama,youhavebeenpaying attentiontothewrongsources. Overall, earnings from U.S. corporations continue on a blistering pace, with precrisis highs in sight. However,earningshaveweakenedabitoverthepastfewweeks.Disappointingearningsandforward guidancefromtechnologybluechipslikeHewlettPackard,Microsoft,Ciscoandothersareclearsignsof morestallingahead. Waningguidancefromretailerswasexpected,duetosoaringcottonpricing.Forsomereasoninvestors hadnotadequatelyfactoredthisintothemarketpriortolastmonthwhensoftlineretailerscollapsed after missing earnings and reporting weak guidance. However, aside from a few mishaps, earnings generallyremainstrongalthoughthismomentumisclearlydecelerating. Meanwhile, Southeastern Europe remains in a free fall, while much of northern Europe is doing relatively well for now. Emerging nations in Europe promise to add additional significant burden to advancedEUmembers(Germany,Denmark,Switzerland,andSweden)throughbailoutsforweakerEU members. Moreover, strength seen in the franc and krona continues to weigh on export trade from thesenations.Brazilisfacingasimilarproblem.IseenopositivedevelopmentsintheUK. Fromanabsolutesense,theU.S.economyhasshownverylittleimprovementfrom2008.Wecanonly seearelativeimprovementfromthetroughinlate2008toearly2009.Buttheserelativeimprovements

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

mefromtaxpa ayersubsidies.Evenstill,t therehaveb beenvirtually ynoimprovem mentsinthe labor havecom market.M Meanwhile,th herealestate emarketcontinuestowea ken. Perhaps most worriso ome is the fact that th U.S. econ he nomy has be ecome highly leveraged while y improvem mentshavebe eenabsent. Whatdoe esallofthism mean? Earningsa arestrong,ye ettheeconom myhasshown nnorealsigns sofimprovem ment? Remembe er,earningsa aretheonlyt thingthatma attertothest tockmarket; wellmostly. Interestrate esalso matterbu utitwouldap ppearthatthe eywontbeaconsideratio onforsometi ime. rward Also keep in mind th the stock market mo p hat k oves largely based on ea arnings; repo orted and for estimates Thus, it is critical to understand the ability of corporations to mee future ear s. s et rnings expectatio ons.Thisisw wheretheimp portanceofth heeconomyc comesintopla ay. Isitpossib bletohavest trongearning gsinaweake economy? Witheach hgivenyear, thisisbecom mingmorepo ossibleduet othedecoup plingoftheU U.S.economy ywith thebusine esssideofco orporateAme erica. Howdoes sthatmakes sense?After all,thoseof usresidingin ntheU.S.ha avealwayshe eardthatthe stock marketse ervesasagau ugeofthehea althoftheeconomy,right ? Thatmay havebeentr rueinthepast,butthings sbegantoch hangeonceNAFTAwaspa assed.Asdiscussed ca's Financial Apocalypse nearly 5 ye l ears ago, as U.S. corpora ations shifted millions of jobs d f in Americ overseas, theyhavealsoshifteden ntirefacilities s.Asaresult, ,morethant threebillion consumersin nAsia ith orate Americ has been gradually sh ca hifting its rev venue (many wi high savings and low debt), corpo dependen ncyoverseas.Thistrendw willonlyaddto otheexporta ationofgoodjobsoverseas.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

s s majority of A Americans w be will From this chronic relationship alone, living standards fo r the vast m ratcheted down a cou d uple of notch indefinite As I have discussed in the past, this is a trend that hes ely. e n d promisestostrengthen neachyear.A Anditposesa aparticularly dauntingsce enarioforU.S S.workers. Theconse equencesoft thehistorics securitiesfrau udbyWallSt treet,andW Washingtonsm multitrillion dollar bankingb bailoutandst timuluspacka agesensurea amoredown sidetoliving gstandards.W Washingtonslong standing fiscal irresponsibility and onesided po f olicies suppo rtive of corporate Americ will contin to ca nue whittleaw waytheliving gstandardsfo orthemajorit tyofAmerica ansindefinite ely,oruntilW Washingtonde ecides tostealw wealthfromot thernationst throughwars s. Somemig ghtcountert thattheU.S. hasalreadyb begunstealin ngwealthin theMiddleE East.Howeve er,the wealthit isstealingfro omIraqrepre esentsawash h(atbest)du uetothetrilli ionsofdollar rsbeingwastedon inners here are the insid ders connecte to Washington, who bilk taxpayers via ed this war. The only wi r fiteering. Geo orge Bush Se eniors excessive expenses billed by private contractors and other insider prof onwiththeCa arlyleGroups servesasaro olemodelfor thisotherlev veloffraud.[ [7] associatio

Perhaps the most trag consequence of these wars, second only to the unneeded loss of lives, is the t gic d e fact that Washington and the med have mad puppets o ut of most A dia de Americans. Th hose who sta to and m uallydoing th hedirtywork kfor the prof fiteers.They have manag gedto foolth hetea losethe mostareactu partyandvirtuallyeveryotherAme ericanwhoisfedupandfr rustrated.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

etrustfunda announcedth hatthefund isnowprojec ctedtoexhau ustits Recently, trusteesfor theMedicare 029 mated last year. As well, trustees for the Social S Security trust fund t funds in 2024, not 20 as estim ed S ty t f 2036, not 20 as 037 announce that the Social Securit retirement program wiill run out of money in 2 previously ythought. Thosewh hohavebeen boughtoffb bythehealthcaremafia,t thecorporate eeliteandthefascistregimein Washington have convinced the American peo A ople that they must accep austerity m y pt measures, su as uch cutstoMedicareandS SocialSecurit ty.However, therealityis sthatAmerica ansareallow wingthewar inthe MiddleEa asttosiphonofftheirMed dicareandSoc cialSecurity.

miteditsann Finally,as sIhaveshow wnmanytimesinthepast, ,iftheU.S.lim nualhealthcareexpendituresto thatseenin Canada,t UK,Japan the n,and EuropeonaperG basis,itw GDP wouldactuallybeginreco ording udgetsurplusesstartingin2020. annualbu

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June17,2011 [2011MIDYEARECONOMICUPDATE] Rather than address the real problem threatening the insolvency of Medicare and Medicaid, WashingtonhasfooledtheAmericanpeopletothinkthattheseentitlementprogramsarebloatedand unsustainableduetotheirinherentstructure.Thisissimplynottrue. ThemainreasonforthedirefinancialstateofMedicareandMedicaidisduetouncheckedhealthcare inflation,whichhasrisenbydoubledigitsoverthepastdecade. Meanwhile, Social Security can easily be fixed by raising the payroll tax ceiling to around $150,000 of wages.However,WashingtonhaschosentodelaythissimplefixtoSocialSecuritybecausetheyknow thatthelongertheywait,themoredifficultitwillbetofix.Thiswillbuildmomentumforprivatizationof Social Security, which as I discussed in America's Financial Apocalypse, would add nearly $1 trillion in feestoWallStreet,allwhileplacingtheseassetsinthehandsoftheretailfinancialmarkets.Thatmeans higherfeesandlowerreturns.Aswell,itpromisestoshortchangeminoritiesandwomen. Thismightseemobvioustosome,butdefensespendinghasbeenthelargestbudgetaryitemintheU.S. forseveralyears.Yet,whenWashingtondiscussestheneedtoreducethedebt,theyneverdiscussreal cutstodefensespendingotherthanareductioninVAbenefits. AmericasmediamonopolyplaysalongwiththeillusionspumpedoutofWashingtonbydramatizingthe fakedeathofbinLaden,allwhilespicingitupwithmentionofbinLadensporncollection.Yet,noonein themediaeverbotherstoaskwhatbenefitsAmericaisreceivingfromthewarsintheMiddleEast,TSA and DHS procedures. As a result, most Americans never ask these questions because the media has completecontrolovertheirminds. DoyoureallythinktheterroristorganizationknownasAlQaedaexists? Doyoureallythinkterroristsareouttogetusbecausetheywanttodestroyourwayoflife? DoyoureallythinkMiddleEasternterroristswereresponsiblefor911? Ifyoubelievethisrubbish,Iwouldadviseyoutopullallofyourmoneyoutofthestockmarketforever, becauseyouarelikelytoloseagreatdealmore.Navepeoplestandapoorchancetomakemoneyin thecapitalmarkets. If you want to make money in the stock market, one of the first skills you must have is the ability to decipher criminal psychology and psychological manipulation because these are the primary forces responsibleforsecuritiespricemovements. Attheendoftheday,theAmericanpeopleonlyhavethemselvestoblamefortheirdiminishedliving standards because they have been suckered to believe the countless lies from Washington and the media,allwhileliningupforobviousdistractionsinordertokeeprealnewsfrombeingbroadcast.The currentobsessionwithCongressmanWeinerisaperfectexampleofthistactic.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

outWeinerandhiswiener?Reporton nitonceand letthatbeth heendofit. Move Whogivesadamnabo ontoissuesthatmatte er. WhatwilltheU.S.med diaobsesson asitsnewsc candalonceit thasplayedo outtheWeine ercircusshow w? Willthere ebeanewsexscandal? MaybetheywillexposeBernieM Madoffsobses ssiontoporn .Ithinkyoug getthepictur re. The Zionistcontrolled media mach hine continue to replace celebrity go es e ossip and TM trash with real MZ h news.Thisisbeingdon neofcoursei inordertoke eepthemass esdistracted,uninformed dandtoencourage them to stop thinking so that they will accept without ques s y hing the med tells them This dia m. stion everyth mechanismappliestothefinancialmediaasmuchasthegen neralmedia.

According the Amer gly, rican people are also to blame for los b sing their retirement savings to Wall S Street fraud bec cause they ha not storm Washing ave med gton in prote for crimin indictmen nor have they est nal nts, e demanded real Wall Street reform And they keep watchin CNBC. The keep read S m. k ng ey ding the New York w Times. Have you forgotten how these media organiz u h m zations hid, d denied and l lied about th realities o the he of economic ccollapse?

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

Thenwe hadoneofLa arryKudlows shacksfromCNBC,DonL Luskin,Mr.D Delusion,wh howrotean oped W ost ay r discussing how good the e w economy was See s. for the Washington Po on Sunda September 14, 2008, d here. The next day, Lehman Brothers collapsed while Merrill Ly n ynch was rep portedly purc chased by Ba of ank mmediatelyreportedthe realitythatB BankofAmeri icawasforce edtobuyMerrillin America.However,Iim beledabailou utdisguisedasabuyout,designedbyth heFederalRe eserveandTre easury. whatIlab Thefollow wingday,AIGwasbailedo out. Thefollow wingweek,W WashingtonM Mutualwasse eized(albeit wronglyandillegally).Iim mmediatelys senta formalcomplainttoth heSECregardingtheillegalactivitiessu rroundingthi isscam.[8] Aweekla ater,oneofth heAmericansheeplewho havebeenb brainwashedt tosupportAm mericastwo party mafiainW Washingtonp postedacomm mentonLusk kinsepicartic cle LFforMcCainwrote: Why are en't there MORE like YOU out there? I'm so sick of the gloo & doom when in fac key U ?! k om ct indicators sshowit'sNO OTTHATBAD!Peoplenaile edMcCainto thecrosswh henhesaidth hefundament talsof the econo omy are stron He was absolutely right! But does anyone com out and sa that. Not i the ng. a me ay in MEDIAth heydon't!Howshameless &shameful thatwehave ecometothi is.THANKYO OUFORTRYIN NGTO SETTHER RECORDSTRA AIGHT! 9/21/20088:40:17AM M Youshouldbeaskingt theWashingt tonPost,New wYorkTimes s,Associated Press,Reuters,theWallS Street Journal, Barrons, Forb CNBC, FBN and the other membe of the media monopo why they have B bes, o ers oly y bannedm me.Iftheyhadletmespea ak,noonewo ouldhavelost tadime.[9][10][11]

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June17,2011 [2011MIDYEARECONOMICUPDATE] In fact, people could have made a good deal of money just by shorting Fannie and Freddie, as I recommendedinCashinginontheRealEstateBubble(2007). Asyoumightimagine,itsbecomeemotionallydrainingtoseeyourownpeoplebetakenforthefools theyareoverandoverandover. Beforetherewasanydiscussionbyeconomists,themediaandthemediassocalledexperts,Ilaidouta detailedanalysisforecastingadepressionBEFOREtheeconomiccollapsebegan,showinghowAmericas three entitlement programs would add to Americas Second Great Depression (Americas Financial Apocalypse,2006). Inaddition,Iprovidedaforecastof30%to35%collapseinmedianhomeprices,millionsofforeclosures, Dow Jones 6000, the bailout of Fannie Mae and Freddie Mac and much more in this book. Yet, the media continues to ban me. Whats particularly ludicrous is that this book is still not even known. In contrast, the masses have read useless books written by reporters dramatizing the same events that theyfailedtoreportonwhentheyoccurred.Peopleneedtowakeup. Now that the accuracy of my forecasts has positioned me even further ahead of the pack, I have received absolutely ZERO interest from any form of media whatsoever. Prior to the collapse, I had receivedsomeinterest.Isntthisodd? Letmeexplaintoyouwhatisgoingonhere.Themediadoesntwantorneedarealexpertwhohasno biasandcannotbeboughtoff.Instead,theyhavetheirownhacks,mostofwhichhaveverylittleifany credibility, and all of which have horrendous track records. Instead of airing forecasts and insights of competent and unbiased analysts and strategists, the Zionistcontrolled media has positioned their Jewishcolleaguesasexperts. Inreality,mostarenothingmorethansnakeoilsalesmen.SomearehacksforWallStreet,Washington andcorporateAmerica.Othersareworkingforgolddealers.Inreality,theyareallextremists,allwith agendas,allwithterribletrackrecords. Oneonsideofthedebate,youhavethepermabullextremistsrepresentingWallStreetanddemocratic interests,sellingyouhope.Theymakemoneyleveragingthisbulltotheiraudience.Ontheotherside youhavepermabearextremistsrepresentinggoldbugsandrepublicaninterests.Theytoomakemoney byleveragingthistrashtotheiraudience.Eitherway,allextremistsareuselessandoftendangerous. Youarentgoingtofindanybloggersorselfproclaimedfinancialprofessionalswhospendmostoftheir timebloggingpropagandamakementionofmeortheaccuracyofmyforecastseither,becausemostof them are simply followers of the media, so they only know names like Roubini, Schiff, Cramer, etc. noneofwhichcancomeremotelyclosetomytrackrecord. Theyarealllikemonkeys;monkeysee,monkeydo.ItsthemediaMacarena.[12] OthersknowwhoIamandrealizemytrackrecordisunmatched,buttheywanttostayawayfromme forfearofbeingexposedfortheclownstheyare.Someevenfallintobothcategories.[13] 16 Copyright2011.Allrightsreserved.|AVAInvestmentAnalyticswww.avaresearch.com

June17,2011 [2011MIDYEARECONOMICUPDATE] Ifyouwanttoalignyourselfaheadofthecurve,youneedtostopwastingtimeonchumps.Thatmeans youmustbeabletorecognizechumps. U.S.DebtCreditRatings Last month, Standard & Poors downgraded the outlook for its credit rating of U.S. debt, emphasizing theneedforWashingtontoraisethedebtceilingwhileimplementingausteritymeasurespriortothe 2012election. OnJune2,MoodysfollowedsuitwithwarningsthatU.S.debtwouldcomeunderratingsreviewwith downwardbiasifthedebtceilingisnotraisedandmeasurestocontrolspendinghavenotbeenpassed soon. All this has done is fuel the momentum to effectively squash Medicare. I smell something fishy withregardstothetimingoftheseannouncementsbytheratingagencies. Inflation TheConsumerPriceIndex(CPI)rose0.4%inApril.Ofmorerelevance,theCPIroseata6.2%annualized rate over the last three months. Elevated energy prices continue to drive headline inflation. Although pricesaredownsignificantlyfromApril,energypricingadvancedinMayafterbottomingearlierinthe month.Overthepastthreemonths,energypriceshaverisenata42.8%annualizedrate. ThecoreCPIrose0.2%inApril.In2011,themonthlycorerateofinflationhasremainedstable,varying between1.6and2.4%annualizedsinceDecember.Inpart,thelowrateofcoreinflationcontinuestobe apricerestraintinrentandownersequivalentrentsresultingfromtheoversupplyofhousing.Theprice ofownersequivalentrentshasrisen0.1%ineachofthelastsevenmonthsata1.2%annualizedrate. Transportationpricesrose1.4%inAprilmainlyduetoincreasedfuelprices.Ofparticularinterest,the priceofnewvehicleshasrisenatanannualized10.1%rateinthelastthreemonths,addingonequarter of a percentage point to the 2.1% annualized core rate of inflation. However, manufacturers have changedthetimingofnewcarreleaseswhichislikelytoaltertheseasonaladjustment.Thepriceofnew carshasrisenonly2.2%overthelastyear. Medical care prices rose 0.4% in April, and at a 4.1% annualized rate over the last three months. Medicalcarecommodityprices(mainlyforprescriptiondrugs)haverisenata6.8%annualizedrateover thesameperiod. Apparelpricesrose0.2%inApril.Clothingpriceshavedeclinedbya4.9%annualizedrateoverthelast three months, compared with a 4.9% annualized rate of inflation for the three months ending in January.Thisshouldcomeasnosurpriseifyourecallmydiscussionofthereactionbyretailerstohigh cottonandothertextileprices.

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June17,2011 [2011MIDYEARECONOMICUPDATE] Educationandcommunicationpricesrose0.1%inApril.Educationpriceshaverisenata1.4%annualized rateoverthelastthreemonths,whilecommunicationpriceshavedeclinedbya0.9%rate.Education priceshaveincreasedbya5.8%annualizedrateoverthelast10years,versusadeclineof1.1%annually inthepriceofcommunication. Overthelasttwoyears,inflationintheProducerPriceIndex(PPI)forfinishedgoodshasadvancedmore thanthreepercentagepointsfasterthantheCPI(5.9%versus2.7%).Twomainfactorsaccountforthis difference. First,thePPIisagoodsindex,soitdoesnotmeasureinflationinservices.Asaresult,foodandenergy account for much more of the PPI the CPI. Furthermore, this makes the PPI more sensitive to fluctuations in these prices. When noncore prices collapsed in late 2008 and early 2009, the PPI declinedbya9.7%annualizedrateoverninemonths. Incontrast,theCPIdecreasedtoanannualizedrateofonly3.8%.Thus,themorerecentriseinthePPI relativetotheCPIisaresultofsoaringoilandfoodprices. Second,thelowinflationinrentshashelpedkeepdowncoreconsumerprices,butnotproducerprices sincethePPIdoesnotmeasureservices.Inotherwords,thePPIhasnotbenefitedfromthedeflationary adjustmentduetothecorrectioninhousingprices andequivalentrents.As aresult,overthepast24 months,thecorePPIhasrisenbyonly3.1%(1.5%annualized)whilethecoreCPIminusshelterhasgone up3.8%. ManufacturingandConsumption The Philadelphia Fed manufacturing index dropped to 3.9 in May from 18.5 in April, well below the consensus (20.0) and most Wall Street forecasts. The new orders index fell to 5.4 from 18.8, the shipmentsindexsankto6.5from29.1,andthesupplierdeliverytimeindexdroppedto2.3from11.2. U.S.manufacturingactivityexpandedinMayattheslowestpacein20months,confirmingaslowdown ineconomicgrowth. TheInstituteforSupplyManagements(ISM)indexofmanufacturingactivityfellto53.5%inMayfrom 60.4% in April. Since the index remained above 50, it marked the 22nd straight month of growth (accordingtotheISM).However,thedeclineinMaywasthebiggestsince1984. ConstructionspendingforMarch(slightly)increasedseasonallyadjustedannualrateto$765billion,up byonly0.5%froman11yearlowof$761billionreachedinFebruary. AlthoughmanufacturersinmostindustriesreportedgrowthinMay,theyalsoreportedproblemsdueto therisingcostsoffuel,chemicals,metalsandotherinputs.

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June17,2011 [2011MIDYEARECONOMICUPDATE] Highpricesforoilandothercommoditieshavealsodampenedconsumerspending,whichhasledtoless demand for factory goods. However, consumer spending is still respectable given the rising costs of food,energy,andhealthcareinthefaceofa1.6%declineinrealwagesoverthepasttwoyears. Three industries contracted: printing; furniture; and food, beverage and tobacco. All three are closely linkedtospendingbyconsumers. And an index of manufacturers' inventories swung from growth to contraction. That suggests manufacturersarereplenishingtheirstockpilesatslowerpacesaftersellingoffexcessgoodsthatthey producedduringperiodsofstrongerdemand. Thesurveyalsofoundthattheoveralleconomygrewforthe24thstraightmonth.Thisofcourseispure fantasybasedonanisolatedmetric. HousingMarket On May 31, 2011, Standard & Poors released its data through March 2011 for its S&P/CaseShiller HomePriceIndices.Accordingtothisdata,theU.S.NationalHomePriceIndexdeclinedby4.2%inQ1of 2011,afterhavingfallen3.6%inQ4of2010.TheIndexhitanewrecessionlowwiththeQ1data,and postedanannualdeclineof5.1%versusQ1of2010.Nationally,homepricesarebacktotheirmid2002 levels. Based on the latest data, the 10 and 20city composite pricing has declined from peak to trough by 33.5% and 33.1%, respectively, making the real estate collapse worse than the 31% decline seen in AmericasFirstGreatDepressioninthe1930s(therewasatleastoneotherdepressionpriortothistime in the 1800s, but the characterization is difficult due to vastly inadequate recordkeeping and much difficultmethodsofdatacollectionandcalculation).Thislatestdeclineinhomepricesisinlinewithmy originalforecastofa30%to35%declinemadein2006. Folks, if an individual isnt providing forecasts that hold over time, they are really not providing forecasts.Whenyouseeindividualschangingtheirforecastsmonthaftermonth,youmustunderstand that these are not forecasts. They are broadcasts. The difference is huge. Robert Shiller is not a forecaster,norareanyoftheothersyouseeplasteredinthemedia.Theyarebroadcastersdisguisedas experts.Theironlyexpertiseisinmarketingandsales. TheCaseShiller20Cityindexfellby0.8%inMarch,pushingtheindextoanewpostbubblelow.Over thepriorsixmonthstherateofmonthlydeclineaveragedmorethan1.0%.Innominalterms,theMarch number is 0.8% below the previous postbubble low made in April 2009. In real terms, the March numberis5.4%lower. The recent decline in housing prices has wiped out nearly all of the increase in real prices since the beginningof2000.Therealvalueofthe20Cityindexiscurrentlyonly5.2%aboveitsJanuary2000level.

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June17,2011 [2011MIDYEARECONOMICUPDATE] ThosewhoreadCashinginontheRealEstateBubble(2007)mightrecallmyforecastsforthehousing market and recommendation for buying a home. I basically said that you should look to buy a house basedonpricesseenin2000.Iwentontoforecastthathousingpriceswoulddeclinetopre1999levels inoneormorearticlespublishedin2008.However,thiswaspriortothevarioussubsidiesjettisonedby Washington and the Federal Reserve. While these programs have been ineffective, they have bought sometime.Theeffectofthistimedelayhasextendedtheslope(representingthehistoricalfairvalue) forhousingpricessuchthatthe2000pricinglevelislikelytorepresentabottominmostmarkets. Based on the March data from CaseShiller, prices have declined in real terms for 12 of the 20 cities since2000,withbothPortlandandSeattleshowinggainsofjustover1.0%overthis11yearperiod.The biggest losers have been Atlanta, with a real price decline of 25.1%; Las Vegas at 26.0%; Cleveland at 26.3%;andDetroitwitharealpricedeclineof48.9%. Since 2000, nearly all of the cities in the bottom tier of the housing market have shown the worst performance. In other words, homeownership has been an especially bad investment for moderate incomefamiliesoverthis11yearperiod.Since2000,realpricesforthebottomthirdofthemarketfell inSanFranciscoandTampaby14.7%and15.1%,respectively.InChicago,Minneapolis,andLasVegas therealdeclineswere33.3%,35.8%and39.2%,respectively. ThebiggestdeclinesreportedforthebottomtierofhousingwereseeninPhoenixat46.6%andAtlanta at53.1%.(DataforpricingtiersisnotreportedforClevelandandDetroitbecausethesamplesaretoo small.However,IwouldexpectthesecitiestotoptherealpricedeclinesseeninPhoenixandAtlanta.) RememberthatthesefiguresrefertothedropinrealhousepricessinceJanuaryof2000.Pricedeclines fromthepeakin2006aremuchmoresevereinmostcases. The March data show prices dropping in 18 of the 20 cities, with Seattle (0.1% increase) and Washington,DC(1.1%increase)postingtheonlygains.Pricesarenow4.3%higherinWashingtonthana yearago.Thus,DCistheonlycitywithayearoveryearincrease.Inpreviousissues,Idiscussedwhythe DC housing market has fared relatively well. Remember, Washington has been on a hiring spree (althoughithastrailedinjobadditionsoverthepastyear). ThebiggestpricedeclinesinMarchwereseenintheMidwest.Housingpricesfellby1.8%inCleveland, 2.0%inDetroit,2.4%inChicago,and3.7%inMinneapolis. Overthelastthreemonthspriceshavefallenatastunning22.5%annualrateinChicagoanda34.6% annualrateinMinneapolis.Inbothcitiesthebottomtierhasaccountedforadisproportionateshareof decline,withpricedeclinesinMarchby9.9%and6.4%,respectively. Even more alarming, over the last three months prices in the bottom tier have fallen at a 50.4% and 55.9%rateinChicagoandMinneapolis,respectively. Prices in Charlotte declined by 2.4% in March, boosting the annualized rate of decline to 18.0%. In Bostonpricesfellby1.7%,raisingitsannualrateofdeclineto12.9%.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

cesarelikelytocontinued downwardov verthenexts severalmonth hs,Ifeelthatmanyofthe cities Whilepric inthisind dexareneartheirbottom.TheAprildat taonpending ghomesaleswasextreme elyweak. Thechart tbelowdepic ctstheannua alreturnsoft theU.S.Natio onal,the10C CityComposi iteandthe20City Composite Home Price Indices. The S&P/CaseS Shiller U.S. N National Hom Price Index recorded a 5.1% me x n 011 e decline in the first quarter of 20 over the first quarte r of 2010. In March, the 10 and 20City Compositespostedannualratesofdeclineof2.9 9%and3.6%, ,respectively y. Thirteeno ofthe20MS SAsandboth monthlyCom mpositessaw wtheirannua algrowthrate esfalldeepe erinto negative territory in March. While they did not worsen Chicago, Phoenix and Seattle saw no n, d mentintheirr respectiveannualrates. improvem InMarch2011,12citie esAtlanta,C Charlotte,Chi icago,Clevela and,Detroit, LasVegas,Miami,Minnea apolis, New York Phoenix, Po k, ortland (OR) and Tampa fell to their lowest leve as measur by the cu r els red urrent housingcycle. Therecen ntdatahascausedmany economistst toclaimad oubledipin nthehousing grecession.T Thisis completenonsense,as sweneverre eboundedfromtheslump tobeginwith h.

Asdiscuss sedinpreviousissues,the erelativereboundinprice esseenin200 09and2010 waslargelyd dueto thefirstt timehomebu uyerstaxcre edit.Afterexc cludingthere esultsofthes sesubsidies, therehasbeenno recoveryo orevenstabilizationinhomepricesatanytimesinc cethedecline ebeganinlate2006. The chart below show the index levels for the U.S. Nation Home Pri Index, as well as its annual t ws e nal ice returns.A Asofthefirst tquarterof2 2011,average ehomeprice esacrossthe UnitedStatesarebackat ttheir mid2002levels.TheN NationalIndex xlevelhitan newlowinth hefirstquarte erof2011,de ecliningby4.2%.It 1%belowits2 2010Q1level. isnow5.1

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

Eleven cit and both Composites have posted at least eig consecutiv months o negative m ties h s d ght ve of month overmon returns. Of these, eig cities are down 1% or more. Th only cities to post po nth ght e he s ositive improvem ments in Mar versus th February levels are S rch heir y Seattle and W Washington D with mo D.C. onthly returnsof f+0.1%and+ +1.1%respect tively. The tablebelowsumm marizestheresultsforMa arch 2011.Th heS&P/Case ShillerHome ePriceIndice esare revisedfo orthe24priormonths,bas sedonthere eceiptofaddit tionalsourcedata.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

Here, I show historica Case/Shille condo pric data for t five majo cities (in terms of econ al er ce the or nomic power)sincethestartofthehousingbubble.A theoverallr Asyouwillsee e,relativeto residentialho ousing price decline, condo prices have held up bette The follow p h er. wing data is approximate Since reach e. hing a peak,condopriceshav vedeclined: ...inLosA Angelesby37% % ...inBosto onby18% ...inSanFranciscoby3 32% ...inChicagoby37% ...inNewY Yorkby16%

Before we take a clos look at ea city, it is important to consider po e ser ach o ossible reaso for the sm ons maller declinese eeninthecon ndomarketin nmostofthesecities. First,cons siderthatmo ostcondoow wnerstendto besinglesor ryoungerma arriedcouples swithoutchildren. Moreover both spous tend to be income earners. Thus, overall, the have more money the can r, ses b , ey e ey devoteto ohousing. Second,c condostendt tobesituated dindensely populatedar reaswherejo obsareplentiful,ratherth hanin remotear reas.Thistoo ohelpsincreasethepoolo ofavailablebu uyerswhichb booststhema arketprice. Ifyouare ewonderingw whyNewYor rksufferedth hesmallestd eclineincon ndoprices,Is shouldremindyou thatthev villains(WallS Street)cameoutofthismessaswinner rs.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

e marizes the Case/Shiller housing data for the 10 and 20city composites, from C h a The table below summ peaktotr rough.Based onthelatest tdata,the10 0and20cit tycomposite pricinghasd declinedfrom mpeak totroughby33.5%an nd33.1%,res spectively.It seemsvery likelythatmy yoriginal(wo orstcasescenario) roughforecas stof35%wi illmaterialize eoverthenex xtseveralmo onths. peaktotr Noticethatthelargest tdeclinethus sfarhasoccu urredinLasV Vegas,follow wedbyPhoen nixandMiami.The declinehasbe eeninDallasfollowedbyD Denver. smallestd

NextIsho owtheCase/ /Shillerdatap plottedforea achcityinth he20citycom mposite(sinc ceinceptiono ofthe datafore eachcity)tog giveyouabet tterideahow eachcityhas sfared.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

Asyoucansee,thedat tavariesgrea atlyfromcitytocity. Inordert tounderstand dwherehous singpricesin eachcityare eheadedfrom mhere,one musthavea really good und derstanding of local and broad econom variables. I can tell yo that every single real e o b mic . ou y estate consulting firm I have come acros has been absolutely clu g e ss a ueless. And I have come across some very I e prominen ntfirms. Asexpect ted,thePacif ficregionhas sbeenhitha ardestbythecorrectionin ntherealest tatebubble, along withFlorida. Incontras st,theSunbeltstateshave efaredthebe est.Thereaso onforthisis quitesimple.ThePacificr region experienc the largest increase in housing prices, while th Sunbelt st ced n he tates experie enced the sm mallest priceincre ease. Otherreg gionswhichex xperiencedalargeriseinr realestatepr rices(suchas sNewYorkCity)havebeen nable tokeepagoodpartof fitsrealestat tebubbleinfl latedduetot theimpactof alindustry.Sm maller fthefinancia 27 Copyright 2011.Allrig ghtsreserved.|AVAInves stmentAnalyt ticswww.ava aresearch.com m

011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

h a d, ut or financial centers, such as Boston, Greenwich and Stamford Connecticu have also fared well fo the son. samereas

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

monthsIhave emadement tionofthesh hadowinvento oryofhouses s.Whenthem media Overthepastseveralm makesme entionoftheshadowinventory,ittypic callyonlydisc cussesthoseh homesthata areinlatestag gesof theforeclosureproces ss. The next chart shows the total potential shadow housing inventory b s p g based on payment status and foreclosures.Asyouca ansee,thisn numberisapp proaching6.5 5million,andrising.Thisn numberrepre esents approximately10%ofallsinglefam milyresidentia alhomeowne rsintheU.S.

Certainly,onlyasmall lpercentage ofthe5.3m millionhomesnotalready intheforecl losureproces sswill ntheauction nblock.Furth hermore,the processwill bespreadth hroughsevera alyears.How wever, endupon thisdataa aloneensurestherewillbeseveralmoreyearsofex xcessiveforec closures. Inadditio on,thereare otherelemen ntsoftheshadowinvento orytokeepinmind.Ihav vediscussed these pointsint thepast. First,ther rearemillionsofhomeow wnerswhohav vewantedto osellbuthave echosentow waitforthem market toreboun nd.Theseare ethemorefo ortunatehom meownerswho omerelywishtochange homesorrel locate to anothe city by ch er hoice. Others have been forced to se due to a job loss, re s elocation, financial ell hardship,orformedicalreasons. Second,o overthenext15to20year rs,millionsof fagingbabyb boomerswillselltheirhom mesastheyo optfor condos,retirementco ommunities,o ormoveinw withtheiradu ultchildren.W Whilethistre endisnotlikelyto y i ng ear, me ause a cause any noticeable impairment in the housin market in any given ye over tim it could ca largeinve entorybuildup pifbuildersd donotadequa atelyaccount tforthislong gtermtrend. Wehavealreadyseenhowhomeb buildershave failedtosee ethefullseve erityofthere ealestatecollapse, altingnewhomestarts. astheywerelateinha

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

Second,o overthenext15to20year rs,millionsof fagingbabyb boomerswillselltheirhom mesastheyo optfor condos,retirementco ommunities,o ormoveinw withtheiradu ultchildren.W Whilethistre endisnotlikelyto cause any noticeable impairment in the housin market in any given ye over tim it could ca y i ng ear, me ause a largeinve entorybuildup pifbuildersd donotadequa atelyaccount tforthislong gtermtrend. Wehavealreadyseenhowhomeb buildershave failedtosee ethefullseve erityofthere ealestatecollapse, altingnewhomestarts. astheywerelateinha

Increasing gDefaults Bank Card and Second Mortgage defaults incre d d d eased in the month of Ap as report by S&P In pril, ted ndices andExper rianonMay1 18,2011. S&P/Expe erianConsum merCreditDef faultIndicess showedanin ncreaseinBankCardandS SecondMort tgages defaultra atesforthefirsttimeinat tleastfivemo onths.BankC Carddefaults swentupfro om5.59%inM March to5.91% inAprilandS SecondMortg gagesincreas sedfrom1.42 2%to1.51%.FirstMortga agesexperien nceda

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

ndefaultrate esdownto2. .16%from2. 33%,whileA AutoLoanhad dasmalldec crease fairlylargedecreasein to1.45%. t cross all majo categories and most m or s major cities d during the pri six ior We had seen default rates fall ac months, but given Ap b prils data tha might be coming to e nd. In additi at ion, there are some signif e ificant difference esacross cred dittypesand dMSAs.Bank kCarddefaul trateswent upinApril,a afterhavingf fallen eachofth hepast11months;andth hedataindica atethatther rateofdefau ultoncreditc cardsisstill5 5.90%, morethan ntwiceanyo oftheotherlo oanclasses.W Weseeasimiilarsituation intheMiamiCompositeI Index. While we below the 10.26% rate we saw for Miami in N ell e r November 20 010, that ma arket is regist tering defaultra atesof5.40%. .Theotherfo ourMSAswef followregiste erednohighe erthan2.60% %inApril.Like emost economic recoveries, while there will be gener trends we do expect to see differ c w ral e rences across loan s classesan ndregions. DavidM. .Blitzer,ManagingDirecto orandChairm manoftheInd dexCommitte eeforS&PInd dices. This come from a ma who claim the real estate marke had bottom in late 2 es an med e et med 2008, then la ater in 2009. The table above summ marizes the April 2011 res A sultsfor the S&P/Experia n Credit Defa Indices. T ault These dataaren notseasonally yadjustedan ndarenotsub bjecttorevisiion.

Thenextt tableshowst theS&P/Expe erianConsumerDefaultCo ompositeIndi icesforthefiv veMSAs.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

arketADPPayrollsData LaborMa Private em mployers add just 38,0 jobs in May, down f ded 000 M from 177,000 in April, ac 0 ccording to p payroll processor rADP.It'sthe eweakestmo onthofjobadditionssince September2 2010. A report from the Institute for Supply Manage ement showe manufactu ed uring expanded in May fo the or 22ndstraightmonth, butatitsslow westpacesin nceSeptembe er2009.The ISM'smanuf facturinginde exfell to53.5inMayfrom60 0.4inApril. [Areading gofmoretha an50indicate esthemanufa acturingindu stryisgrowin ng.] Manufact turers have benefited since the recession's end fr b rom stronger overseas de r emand, but C China, Indiaandotherdevelo opingnationsarestrugglingwithinflatio on. LaborMa arketDepartmentofLab bor A.Establis shmentSurve eyData Totalnon nfarmpayroll employment twaslittlech hangedinMa ,followingga ainsthataveraged ay(+54,000), 220,000intheprior3months.Privatesectorem mploymentco ontinuedtot trendup(+83 3,000),althou ughby malleramoun ntthantheav verageforthe eprior3mon nths(+244,00 00).InMay,jo obgainswere eseen amuchsm inprofess sionalandbusinessservice es,healthcare e,andmining g.Localgover rnmentemploymentcont tinued totrendd down.Employ ymentinothe ermajorindu ustrieschange edlittle. B.Househ holdSurveyD Data Thenumb berofunemp ployedperson ns(13.9million)andtheu unemployme entrate(9.1% %)wereessen ntially unchange edinMay.The elaborforce, ,at153.7million,waslittle echangedov verthemonth h.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

mploymentrates(notseaso onallyadjuste ed)foradult men(8.9%), adultwomen n(8.0%),teen nagers Theunem (24.2%), whites (8.0%), blacks (16.2%), and His w spanics (11.9% showed li %) ittle or no ch hange in May The y. joblessrateforAsianswas7.0%. In May, the number of longterm unemployed (those job t m bless for 27 w weeks and o over) increase by ed 361,000to6.2million;theirshareo ofunemploym mentincrease edto45.1%(s seenextpage e). Thecivilia anlaborforce eparticipatio onratewas64.2%forthe fifthconsecu utivemonth. Theemploym ment populatio onratioremai inedat58.4% %inMay.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

rsonsweremarginallyatta achedtothellaborforce,a aboutthesam measayeare earlier InMay,2.2millionper easonally adj justed.). Thes individuals were not in the labor f se s n force, wanted and d (these data are not se wereavai ilableforwor rk,andhadlookedforajobsometimeiintheprior12 2months. Amongth hemarginallyattached,the erewere822 2,000discoura agedworkers sinMay,ade ecreaseof26 61,000 fromayearearlier(the esedataaren notseasonallyadjusted). Discourag workers are persons not currently looking fo work beca ged or ause they be elieve no job are bs availableforthem.The eremaining1 1.4millionpe ersonsmargin nallyattached dtothelaborforceinMa ayhad kin eeks precedin thesurvey ng y(forreasons ssuchassch hoolattendan nceor notsearchedforwork the4 we sponsibilities). familyres Thenumb berofpersonsemployedp parttimeforeconomicrea asons(somet timesreferred dtoasinvolu untary parttimeworkers)wasessentiallyunchangedin nMayat8.5m million.These eindividualswereworking gpart ausetheirhou urshadbeencutbackorb becausethey wereunabletofindafull timejob. timebeca

RealAver rageEarnings sData Realavera agehourlyea arningsforallemployeesd declined0.3% %fromMarch htoApril(sea asonallyadjusted). Thisdecre easestemmedfroma0.1% %increaseinaveragehou urlyearnings, whichwasm morethanoffs setby a0.4%inc creaseintheConsumerPr riceIndexforAllUrbanCo nsumers(CPI IU). Realaverageweeklye earningsdeclined0.3%ove erthemonth h,asaresult ofthedecrea aseinrealav verage arnings combined with the average wo e orkweek rem maining uncha anged. Since reaching a r recent hourly ea peakinOctober2010,realaverageweeklyearni ingshavefall enby1.7%.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

e b sonally adjust ted, from Ap 2010 to A pril April 2011. A 0.6% Real average hourly earnings fell by 1.2%, seas increaseinaveragewe eeklyhoursco ombinedwith hthedecreas seinrealaver ragehourlyearningsresultedin a0.6%de ecreaseinrealaverageweeklyearnings sduringthisp period.

Productio onandnonsu upervisoryem mployees Realavera agehourlyea arningsforproductionand dnonsupervis soryemploye eesdecreased d0.2%fromM March toApril(s seasonallyadjusted).This decreaseste emmedfrom a0.3%increa aseinaverag gehourlyearnings, whichwasmorethano offsetbya0.5%increasei intheConsum merPriceIndexforUrbanWageEarner rsand Workers(CPIW W). ClericalW Realavera ageweeklyearningsfell0.2%overthemonth,asa resultofthe decreaseinr realaverageh hourly earningsc combinedwiththeaverag geworkweek kremainingu unchanged.S Sincereaching garecentpe eakin October2 2010,realave erageweeklyearningshav vefallenby1. 8%. Real aver rage hourly earnings fell 1.5%, seasonally adjuste from Apr 2010 to A e ed, ril April 2011. A 0.6% increaseintheaverageworkweek combinedwi iththedecrea veragehourly yearningsres sulted aseinrealav ina0.9%decreaseinr realaveragew weeklyearnin ngsduringthi speriod.

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June17,2011 [2011MIDYEARECONOMICUPDATE] EstablishmentSurveyData EmploymentinprofessionalandbusinessservicescontinuedtoincreaseinMay(+44,000),withgainsin accounting and bookkeeping services (+18,000) and in computer systems design and related services (+8,000).Employmentintemporaryhelpserviceswaslittlechanged. HealthcareemploymentcontinuedtoexpandinMay(+17,000).Employmentintheindustryhadrisen byanaverageof24,000permonthovertheprior12months. Miningadded7,000jobsinMay.Employmentinmininghasrisenby115,000sincearecentlowpointin October2009. Manufacturingemploymentdeclinedby5000jobsinMay.Themanufacturingindustryadded243,000 jobsfromarecentlowpointinDecember2009throughApril2011. Construction employment was essentially unchanged in May, and has shown little movement on net sinceearly2010,afterhavingfallensharplyduringthe200709period. Employment in local government continued to decline in May (28,000). Local government has lost 446,000jobssinceanemploymentpeakinSeptember2008. Employment in other major industries, including retail trade, transportation and warehousing, information,financialactivities,andleisureandhospitality,changedlittleinMay. Theaverage workweekforallemployeesonprivatenonfarmpayrollsremainedat34.4hoursinMay. The manufacturing workweek for all employees increased by 0.2 hour to 40.6 hours over the month, while factory overtime was unchanged at 3.2 hours. The average workweek for production and nonsupervisoryemployeesonprivatenonfarmpayrollswas33.6hoursinMay. InMay,averagehourlyearningsforallemployeesonprivatenonfarmpayrollsincreasedby6cents,or 0.3%,to$22.98.Overthepast12months,averagehourlyearningsincreasedby1.8%.InMay,average hourlyearningsofprivatesectorproductionandnonsupervisoryemployeesroseby6cents,or0.3%,to $19.43. ThechangeintotalnonfarmpayrollemploymentforMarchwasrevisedfrom+221,000to+194,000,and thechangeforAprilwasrevisedfrom+244,000to+232,000.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

AverageW WeeklyWork kHours Hours and employmen of product d nt tion and non nsupervisory employees (t together, pro oduction wor rkers), whorepre esentabout8 80%ofallemployees,allow whistoricalc omparisonsb backto1964. . As in pre evious recess sions, in the recent rece ession goods producing in ndustries exp perienced steeper employment losses an sharper de nd eclines in the average we e eekly hours o production workers tha did of n an rovidingindustries.Still,althoughless sensitivetot themostrec centcyclicald downturntha anthe servicepr goodspro oducing secto the privat servicepro or, te oviding secto r exhibited substantially g greater reduc ctions inhoursf forproductionworkerstha aninpastrec cessions.Inde eed,decrease esinaggregateweeklyho oursin serviceindustrieswere e4timesgrea aterthaninanypreviousr recessiondat tingbackto1973. As2010c cametoaclo ose,neitherth heaveragew workweekno oraggregatew weeklyhours shadrecover redto theirprer recessionleve els.

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011MIDYEA ARECONOM MICUPDATE E] June17,2011 [20

As bad as things may seem accord s ding to the official data, t fact is tha reality paints a much w the at worse picture.A AsIhavecontinuedtoinsis st,theU.S.ne everrecovere edfromthere tofficiallybeg ganin ecessionthat December 2007. As it stands to oday, the U.S remains iin the longe recession since the Great S. est n on. Depressio

Ifyouwereinthemar rketanddidnottrimyourpositionsin nMayinadva anceofthism marketcorrection, YOUAREBEHINDTHECURVE. Ifyouwanttoremainbehindthec curve,keepdoingwhatyo ouaredoing. Ifyouwa anttomove aheadofthe ecurve,subscribetooneofournews sletterswhile ethepromot tional ratesarestillaround. Institutionalinvestors slookingfor valuableresearchandin nvestmentgu uidancearea advisedtoco ontact ustolearnhowwecanserveyourneeds. info@ava aresearch.com m

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June17,2011 [2011MIDYEARECONOMICUPDATE] This publication has been modified from a portion of the U.S. Economic Overview section of the IntelligentInvestor(Juneissue). ThefollowingisalistofsectionscontainedintheJuneissueoftheIntelligentInvestor 1.U.S.EconomicOverviewfocusonrealestate 2.GlobalEconomicOverviewfocusonrealestate 3.CommodityAnalysisandForecasts 4.CrudeOilAnalysisandForecast 5.NaturalGasAnalysisandForecast 6.PreciousMetalsAnalysisandForecasts 7.ForeignCurrencyAnalysisandForecasts 8.EmergingMarketsAnalysisandForecasts

SouthKorea China India Brazil

9.SecuritiesAnalysis(discussionandtradingguidancefor16recommendedsecurities) 10.MarketAnalysisandForecast

DowJonesIndustrialAverage Nasdaq

11.InvestmentStrategy

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June17,2011 [2011MIDYEARECONOMICUPDATE] AdditionalBackgroundMaterial: 1. http://www.avaresearch.com/article_details663.html 2. http://www.avaresearch.com/article_details668.html 3. http://www.avaresearch.com/article_details431.html 4. http://www.avaresearch.com/article_details672.html 5. http://www.avaresearch.com/article_details618.html 6. http://www.avaresearch.com/article_details639.html 7. http://www.avaresearch.com/article_details444.html 8. http://www.avaresearch.com/article_details154.html 9. http://www.avaresearch.com/article_details83.html 10. http://www.avaresearch.com/article_details605.html 11. http://www.avaresearch.com/article_details74.html

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