Tuesday, August 24, 2010

More Stumbling Along for Stocks as US Economy Slowly Crumbles

Anyone under the age of 60 as of this date (you'd have to be born on or after August 24, 1950) who believes that they'll be getting all of their promised Social Security benefits when they reach the age of 65... what's that? President Clinton and the Republican-led congress raised the retirement age to 67? Oh, that's right, I completely forgot that the government changes the rules as they go along...

So, where was I? Right. If you are under the age of 60 and actually believe that Social Security (already paying out more than it takes in) will pay you, beginning at age 67, what they say you're actually due, you need a reality check, not a government check. The federal government is technically insolvent, has been for years and the situation continues to worsen every day politicians dance around the issues of unfunded liabilities such as Social Security and Medicare. The future obligations of those two entitlements alone amount to something in the range of $53 to $85 trillion, completely dwarfing the more-readily recognized national debt, which itself is an abomination at over $12 trillion.

These debts and obligations are a large part of the problem causing individuals, businesses and investors to stop cold in their tracks when attempting to make buying decisions. The overburden of these debts, brought about by a congress - and a public that allowed it - which binged on debt and the former surpluses in the programs (at least in the case of Social Security) are just one issue facing the US economy. There are many others, but these are the big ones, and they will absolutely kill the US economy, the only question being when.

I don't purport to have an answer to that, though it would be prudent to not rely on any future income promised by the US government, and to a lesser degree, any state or municipality simply because the money just isn't there. Baby Boomers are heading directly into the Social Security pool and the burden on current earners will be unbearable unless remedies are found, and soon.

Unfortunately, nobody in Washington is willing to touch the issue until, at the very earliest, January of next year, when a new congress will be installed. Don't count on any meaningful reforms any time soon, however, as the candidates for federal offices - congressmen and senators - are not even as well-qualified as the ones currently holding office, and this bunch isn't very good at anything.

So, America continues to stumble through the worst recession since the 1930s a ship without a rudder, or a sail. We are just drifting along, nobody knowing exactly which direction we're going, when we'll arrive or what awaits us when we get there.

Consensus opinion is leaning toward believing that wherever we're going, the destination will be a bleak and desolate place, especially when we get economic data like that released by the NAR today, showing existing home sales falling to their lowest levels since the National Association of Realtors began tracking the numbers in 1999.

This kind of bleak economic picture is not welcome to investors of any stripe. People are scared, bordering on desperation from a housing and employment collapse which are symptoms of even bigger ills, debt and dwindling resources.

Dow 10,040.45, -133.96 (1.32%)
NASDAQ 2,123.76, -35.87 (1.66%)
S&P 500 1,051.87, -15.49 (1.45%)
NYSE Composite 6,681.03, -103.94 (1.53%)

Declining issues finished the session well ahead of advancers, 4439-1402. New lows shot past new highs, 416-190, marking a complete turnover in that indicator. Volume was a bit higher than previous slow sessions, though, on a down day, that has to be viewed as a negative.

NASDAQ Volume 1,885,569,250
NYSE Volume 4,631,528,500

Oil continued its relentless slide, which, during the month of August, is alarming. Crude usually improves price-wise during the summer, though this year has remained largely range-bound. Crude fell another $1.47, to $71.63 on the day.

Precious metals were the only safe haven. Gold gained 4.80, to $1,231.80, while silver ramped ahead by more than 2%, up 39 cents, to $18.37.

The litany of sour economic news continues apace, and though it would be welcome for a bit of good news on the economy, none seems forthcoming. The US and global economies are stumbling badly with no apparent end in sight.

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