Pensions become Ponzi, Recess becomes recession and eventually depresses into depression. There's a natural progression to these things and trying to stop them is like throwing water back over a broken dam. There's some temporary relief, a feeling that it may all work out for the best, but eventually, the dam bursts, flooding everything and drowning most. This is the situation in which most of the world's economies - but mainly the United States - currently find themselves. Patches have been applied to the broken dam, but, even though all the experts know that it will eventually burst, they will not, either from some misguided confidence or fear of what may occur should they reveal the truth.
Either way, they'll look bad when it does, but they'll probably be long gone, either dead or expatriated.
Since there's nothing worthwhile happening in the equity markets other than the usual churn associated with the Fed's POMOs (Permanent Open market Operations), today we offer some background, which only took a little bit of searching on the internet. (Apparently, there are quite a few skeptics on the loose these days.)
First, though, let's make sure we know what really happened today.
Any and all trading centered around the FOMC statement at 2:15 pm, in which the Fed neither raised nor lowered rates (Actually, they can't lower them below ZERO, where they currently sit.), but they did change some of the wording in their release.
The salient points were, "the pace of recovery in output and employment has slowed in recent months.", "Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months." and "The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate."
That final quote is a mouthful, though most have interpreted it to mean that the Fed is ready to engage in further quantitative easing (i.e., printing money), to keep the economy from falling off a cliff. Ouch! Ohh!
The market reaction was odd. Stocks first went straight up, as in "Happy days! More free money!" and then did an about face when moron buyers realized they had been taken and that the reason the Fed is printing more money is because the economy sucks. There, it's been said. The economy sucks, and the Fed writ that large today.
Dow 10,761.03, +7.41 (0.07%)
NASDAQ 2,349.35, -6.48 (0.28%)
S&P 500 1,139.78, -2.93 (0.26%)
NYSE Composite 7,245.95, -20.07 (0.28%)
Once again, the markets delivered a split decision, with the Dow up and everything else down. In contrast to the soft headline numbers, declining issues far outpaced advancers, 3612-2095. New highs ramped past new lows, 428-38 and volume was actually a bit on the strong side (poor timing).
Commodities took a hit, too, though they were trending lower prior to the Fed statement. Crude oil slipped $1.34, to $73.52. Gold fell $6.60, to $1,272.40 and silver dropped 16 cents, to $20.62, all of which makes perfect sense if we are actually going to slide quietly into a deflationary depression. Shhh! Don't tell anybody.
NASDAQ Volume 2,148,134,500
NYSE Volume 4,403,680,500
Please note, this following little piece is someone else's work. It is not my intent to plagiarize.
Here's a step-by-step look at the banks and bailouts.
1) All the global banks were up to their eye-balls in toxic assets. All the AAA mortgage-backed securities etc. were in fact JUNK. But in the balance sheets of the banks and their special purpose vehicles (SPVs), they were stated to be worth US$ TRILLIONS.
2) The collapse of Lehman Bros and AIG exposed this ugly truth. All the global banks had liabilities in the US$ Trillions. They were all INSOLVENT. The central banks the world over conspired and agreed not to reveal the total liabilities of the global banks as that would cause a run on these banks, as happened in the case of Northern Rock in the U.K.
3) A devious scheme was devised by the FED, led by Bernanke to assist the global banks to unload systematically and in tranches the toxic assets so as to allow the banks to comply with RESERVE REQUIREMENTS under the fractional reserve banking system, and to continue their banking business. This is the essence of the bailout of the global banks by central bankers.
4) This devious scheme was effected by the FED’s quantitative easing (QE) – the purchase of toxic assets from the banks. The FED created “money out of thin air” and used that “money” to buy the toxic assets at face or book value from the banks, notwithstanding they were all junks and at the most, worth maybe ten cents to the dollar. Now, the FED is “loaded” with toxic assets once owned by the global banks. But these banks cannot declare and or admit to this state of affairs. Hence, this financial charade.
5) If we are to follow simple logic, the exercise would result in the global banks flushed with cash to enable them to lend to desperate consumers and cash-starved businesses. But the money did not go out as loans. Where did the money go?
6) It went back to the FED as reserves, and since the FED bought US$ trillions worth of toxic wastes, the “money” (it was merely book entries in the Fed’s books) that these global banks had were treated as “Excess Reserves”. This is a misnomer because it gave the ILLUSION that the banks are cash-rich and under the fractional reserve system would be able to lend out trillions worth of loans. But they did not. Why?
7) Because the global banks still have US$ trillions worth of toxic wastes in their balance sheets. They are still insolvent under the fractional reserve banking laws. The public must not be aware of this as otherwise, it would trigger a massive run on all the global banks!
8) Bernanke, the US Treasury and the global central bankers were all praying and hoping that given time (their estimation was 12 to 18 months) the housing market would recover and asset prices would resume to the levels before the crisis. . Let me explain: A House was sold for say US$500,000. Borrower has a mortgage of US$450,000 or more. The house is now worth US$200,000 or less. Multiply this by the millions of houses sold between 2000 and 2008 and you will appreciate the extent of the financial black-hole. There is no way that any of the global banks can get out of this gigantic mess. And there is also no way that the FED and the global central bankers through QE can continue to buy such toxic wastes without showing their hands and exposing the lie that these banks are solvent. It is my estimation that they have to QE up to US$20 trillion at the minimum. The FED and no central banker would dare “create such an amount of money out of thin air” without arousing the suspicions and or panic of sovereign creditors, investors and depositors. It is as good as declaring officially that all the banks are BANKRUPT.
9) But there is no other solution in the short and middle term except another bout of quantitative easing, QE II. Given the above caveat, QE II cannot exceed the amount of the previous QE without opening the proverbial Pandora Box.
10) But it is also a given that the FED will embark on QE II, as under the fractional reserve banking system, if the FED does not purchase additional toxic wastes, the global banks (faced with mounting foreclosures, etc.) will fall short of their reserve requirements.
11) You will also recall that the FED at the height of the crisis announced that interest will be paid on the so-called “excess reserves” of the global banks, thus enabling these banks to “earn” interest. So what we have is a merry-go-round of monies moving from the right pocket to the left pocket at the click of the computer mouse. The FED creates money, uses it to buy toxic assets, and the same money is then returned to the FED by the global banks to earn interest. By this fiction of QE, banks are flushed with cash which enable them to earn interest. Is it any wonder that these banks have declared record profits?
12) The global banks get rid of some of their toxic wastes at full value and at no costs, and get paid for unloading the toxic wastes via interest payments. Additionally, some of the “monies” are used by these banks to purchase US Treasuries (which also pay interests) which in turn allows the US Treasury to continue its deficit spending. THIS IS THE BAILOUT RIP OFF of the century.
The rest is all original, and mine.
Ah, well, that's not even the worst of it. In order to stave off imminent implosion of the entire global banking system, some believe the Fed will have to print (and waste) some $30 TRILLION. Now, that happens to be just an round estimate, but it does amount to twice the annual GDP or twice the existing debt (choose your poison). Since the Fed is already in somewhere between $2 and $11 Trillion, depending on your level of pessimism and how you choose to crunch the numbers, we are only, at best, one third of the way down the path of complete, utter and final desolation.
If this first third of the way took three years (2007-2010), then we should finally be soup by 2016, though anybody with the uncanny ability to think that far ahead would probably be living in Brazil, China or Belize by then. The rest of us will just have to "suck it up" so to speak. The good/bad news is that you will be able to buy a traditional, three-bedroom home in a good suburb for about $30,000; a pound of tomatoes will be only $8.00, your utility bill will be 40-70% higher because usage will be very low and you have to take up the slack and your property taxes will be at least triple your mortgage payment (at least in the Northeast).
However, you won't be paying any taxes since there will be no jobs, but, for all you 50-and-60-somethings out there, that Social Security check you planned on receiving monthly will no longer be available. The overwhelming debt the nation has built up will see to it that almost all entitlements will have to be curtailed or, at a minimum, severely curtailed.
Soooooo, the lifestyles you've so carefully planned for yourselves and your children will go entirely up in the smoke of debt and default. The world will be a poorer place, you will be old and decrepit and the minions from nations to which we owe money we can never repay will be scouting the streets and byways of America for choice deals, to which they feel entitled!
The problem is that most Americans took it for granted that our government and our leaders were telling us the truth, not lying through their collective teeth in order to keep being re-elected. We - and I'm speaking mostly to the baby boomers - allowed them to tax us to the max, spend every last penny and then borrow more. we've brought it upon ourselves, you see.
And, just in case you're not convinced that we're well upon a path of self-destruction, in order to keep the public in the dark and at ease through our economic nightmare, the government is manipulating the stock market.
Tuesday, September 21, 2010
Monday, September 20, 2010
OK, So Now What?
Stocks just pushed higher through resistance on Monday as traders searched for clues that either the economy was improving or the Fed would change some wording in Tuesday's FOMC rate policy meeting.
Rates are expected to remain unchanged, at ZERO, which, if one were to look at it objectively, would consider it a glorious time to take on additional risk. After all, borrowing money without any interest - or marginal at best - is accommodative to speculation, just the kind of easy credit policy which has created all the other prior bubbles.
From certain perspectives, it makes perfect sense to invest in US equities. On the side of caution are those who believe the entire Fed operation is nothing more than a grand illusion, destined to fail. In the meantime, investors simply cannot refrain from buying stocks with cheap money. Buy, buy, buy was the message delivered today, loud and clear.
The major indices have rallied through their 200-day moving average and are testing the high end of the recent range. Whether this current rally has enough impetus to surpass the highs of Spring will be known in a number of days or weeks, though there seems to be nothing standing in the way of new highs heading into the elections, despite what cynics might be assuming about the political nature of the markets.
Dow 10,753.62, +145.77 (1.37%)
NASDAQ 2,355.83, +40.22 (1.74%)
S&P 500 1,142.71, +17.12 (1.52%)
NYSE Composite 7,266.02, +111.37 (1.56%)
Advancing issues buried decliners, 4693-1152. New highs soared past new lows, 531-45. Even volume was a little improved from the sluggish levels of the past six weeks.
NASDAQ Volume 2,027,424,375
NYSE Volume 4,064,069,750
Commodities participated in the overall euphoria. Oil gained $1.20, to $74.86. Gold closed up $3.40, to another new record, at $1,279.00. Silver slid just a penny, to $20.78. Today's rally - and the general rally of the past two weeks would be more believable if commodity prices were more contained. The gains in commodities are only proving that while stocks may be favored in the short run, there's no scarcity of skepticism among investors, who are buying the precious metals and oil as protection... against exactly what, nobody seems certain. But, whether it's inflation or deflation, commodities and bonds have been rallying right alongside the stock market.
All asset classes usually do not gain or fall at the same moments in time, but, with the massive amount of liquidity being suppled constantly by the Federal Reserve, anything is possible, including re-flation, inflation and even hyper-inflation. The Fed is swimming in some very dangerous water, indeed.
Rates are expected to remain unchanged, at ZERO, which, if one were to look at it objectively, would consider it a glorious time to take on additional risk. After all, borrowing money without any interest - or marginal at best - is accommodative to speculation, just the kind of easy credit policy which has created all the other prior bubbles.
From certain perspectives, it makes perfect sense to invest in US equities. On the side of caution are those who believe the entire Fed operation is nothing more than a grand illusion, destined to fail. In the meantime, investors simply cannot refrain from buying stocks with cheap money. Buy, buy, buy was the message delivered today, loud and clear.
The major indices have rallied through their 200-day moving average and are testing the high end of the recent range. Whether this current rally has enough impetus to surpass the highs of Spring will be known in a number of days or weeks, though there seems to be nothing standing in the way of new highs heading into the elections, despite what cynics might be assuming about the political nature of the markets.
Dow 10,753.62, +145.77 (1.37%)
NASDAQ 2,355.83, +40.22 (1.74%)
S&P 500 1,142.71, +17.12 (1.52%)
NYSE Composite 7,266.02, +111.37 (1.56%)
Advancing issues buried decliners, 4693-1152. New highs soared past new lows, 531-45. Even volume was a little improved from the sluggish levels of the past six weeks.
NASDAQ Volume 2,027,424,375
NYSE Volume 4,064,069,750
Commodities participated in the overall euphoria. Oil gained $1.20, to $74.86. Gold closed up $3.40, to another new record, at $1,279.00. Silver slid just a penny, to $20.78. Today's rally - and the general rally of the past two weeks would be more believable if commodity prices were more contained. The gains in commodities are only proving that while stocks may be favored in the short run, there's no scarcity of skepticism among investors, who are buying the precious metals and oil as protection... against exactly what, nobody seems certain. But, whether it's inflation or deflation, commodities and bonds have been rallying right alongside the stock market.
All asset classes usually do not gain or fall at the same moments in time, but, with the massive amount of liquidity being suppled constantly by the Federal Reserve, anything is possible, including re-flation, inflation and even hyper-inflation. The Fed is swimming in some very dangerous water, indeed.
Sunday, September 19, 2010
Best spots for fishing in South East PA
Post contributed by Buford Downs
If you love fishing as much as I do then you always want to find a great spot to catch some fish. You also probably don't have tons of money to go rent a boat or travel long distances from your home to find an ideal fishing spot. It took me a long time before I found a spot locally that I could count on to always deliver a nice fish or two without costing me and arm and a leg.
The best spot that I have found is Valley Creek over near the Downingtown area. This is a very fun spot for bluegill and brown trout. I have a number of friends who also love this particular area and we will often spend an entire day there. I will usually leave at the crack of dawn after I set my house alarm system so that I don't have to worry. That way my friends and I can just relax and fish until late into the evening and share some beers and simple conversation. To me, there are few things in the world that help to relieve the stress of a hard week at work like having that casual time with my friends.
If you love fishing as much as I do then you always want to find a great spot to catch some fish. You also probably don't have tons of money to go rent a boat or travel long distances from your home to find an ideal fishing spot. It took me a long time before I found a spot locally that I could count on to always deliver a nice fish or two without costing me and arm and a leg.
The best spot that I have found is Valley Creek over near the Downingtown area. This is a very fun spot for bluegill and brown trout. I have a number of friends who also love this particular area and we will often spend an entire day there. I will usually leave at the crack of dawn after I set my house alarm system so that I don't have to worry. That way my friends and I can just relax and fish until late into the evening and share some beers and simple conversation. To me, there are few things in the world that help to relieve the stress of a hard week at work like having that casual time with my friends.
Friday, September 17, 2010
Quotes for a Friday Afternoon
Before getting to the important part of this posting, a quick recap of the day on Wall Street is the usual requisite, so...
Here's what happened:
Dow 10,607.85. +13.02 (0.12%)
NASDAQ 2,315.61, +12.36 (0.54%)
S&P 500 1,125.59, +0.93 (0.08%)
NYSE Composite 7,154.64, -14.84 (0.21%)
NASDAQ Volume 2,174,708,250
NYSE Volume 4,437,062,000
Not much, even for a quad-witching options day, which is supposed to be "volatile." US markets are, if anything, operating on borrowed money and borrowed time. The money's been borrowed from the Fed and the time is just a matter of when somebody with a large enough stake says, "good-bye." It's a game of chicken and nobody wants to be the last one in the room.
Note that the NYSE, the broadest measure of equities, was the only one down, and also the only index usually not quoted by the major news services.
Advancing issues beat decliners, 3321-2395, but it's mostly just churning. New highs maintained their daily edge over new lows, 413-58, another meaningless metric, due to the large, unannounced number of issues de-listed in the past six to nine months. Volume was higher than normal, but still not of any degree anyone would get excited about. Most of the additional trading was due to the aforementioned quadruple-witching in options.
There was probably more action at Belmont Park than on the floor of the NYSE, and it was certainly more fun to watch.
Oil was hammered down another 91 cents lower, to $73.66, but remains stuck in a trading range, emblematic of the global economic condition. Gold closed up $3.70, at $1,275.60, another all-time high. Silver gathered only a nickel higher, to $20.79.
Then there was word on the housing market, from a number of economists, including the widely-quoted Mark Zandi of Moody's, who's been proven wrong so many times that most people have stopped counting.
Zandi believes housing prices will drop another 5% by 2013, and then says, "After reaching bottom, prices will gain at the historic annual pace of 3 percent..." He's probably wrong on the magnitude by a measure of three or four times. Residential real estate likely has 15-20% more to decline. As to his predicted annual growth pace of 3%, it's already well-established that home prices normally rise by about one per cent, not triple that.
Somebody ought to hand Zandi a golden parachute and shove him off a skyscraper so he can stop deluding himself that he's making sense. After all, he does work for one of the rating agencies which said all that toxic, sub-prime, re-packaged, securitized mortgage garbage was AAA-rated. The guy ought to be in jail rather than on CNBC.
The upshot is that the banks have such a monster of a problem on their hands that they and the courts cannot handle it in a reasonably timely manner. The absolute implosion of the US housing market has left a crater in the economy the size of Rush Limbaugh's ego, and that's enormous. The basic paradigm for buying a house these days is to offer 30% below the asking price, and see how badly the owners - either a bank or a homeowner or a combination of both - want out of it.
Then try and get a mortgage. A million more laughs.
The glut of homes - unoccupied, unrented, in need of repair, under-water financially - is mammoth and everywhere. Count on a minimum of three and probably more like five more years of pain, price declines and associated nonsense about finding "the bottom," which will only be reached when the banks realize that it's not worth their time or expense to pursue further exposure and foreclosures and they become the party which "walks away." When the banks no longer want the properties, no longer feel there's any gain in bleeding consumers dry with fees and interest, and the property taxes, maintenance and insurance exceed what they can hope to recover on unsold inventory, there will be a bottom, and it's going to be one heck of a lot lower and a heck of a lot further out than most people anticipate.
Too many houses at prices too many people can't afford. Simple math.
Following are the promised quotes. Have a lovely weekend.
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
-- Thomas Jefferson, (Attributed)
3rd president of US (1743 - 1826)
"Permit me to issue and control the money of a nation, and I care not who makes its laws."
-- Mayer Amschel Rothschild
"Income tax is nothing but wage slavery. If you have payroll deductions, you are a slave. Only way to fix it is for everyone to quit, or, as in Europe, the whole nation goes on strike. It won't happen here. Americans are too stupid and too frightened by their own government. I am not. I could care less. Let them come and take my house and my belongings. I will start over, stronger. I love this country, but I hate the people who run it."
-- Ed.
Here's what happened:
Dow 10,607.85. +13.02 (0.12%)
NASDAQ 2,315.61, +12.36 (0.54%)
S&P 500 1,125.59, +0.93 (0.08%)
NYSE Composite 7,154.64, -14.84 (0.21%)
NASDAQ Volume 2,174,708,250
NYSE Volume 4,437,062,000
Not much, even for a quad-witching options day, which is supposed to be "volatile." US markets are, if anything, operating on borrowed money and borrowed time. The money's been borrowed from the Fed and the time is just a matter of when somebody with a large enough stake says, "good-bye." It's a game of chicken and nobody wants to be the last one in the room.
Note that the NYSE, the broadest measure of equities, was the only one down, and also the only index usually not quoted by the major news services.
Advancing issues beat decliners, 3321-2395, but it's mostly just churning. New highs maintained their daily edge over new lows, 413-58, another meaningless metric, due to the large, unannounced number of issues de-listed in the past six to nine months. Volume was higher than normal, but still not of any degree anyone would get excited about. Most of the additional trading was due to the aforementioned quadruple-witching in options.
There was probably more action at Belmont Park than on the floor of the NYSE, and it was certainly more fun to watch.
Oil was hammered down another 91 cents lower, to $73.66, but remains stuck in a trading range, emblematic of the global economic condition. Gold closed up $3.70, at $1,275.60, another all-time high. Silver gathered only a nickel higher, to $20.79.
Then there was word on the housing market, from a number of economists, including the widely-quoted Mark Zandi of Moody's, who's been proven wrong so many times that most people have stopped counting.
Zandi believes housing prices will drop another 5% by 2013, and then says, "After reaching bottom, prices will gain at the historic annual pace of 3 percent..." He's probably wrong on the magnitude by a measure of three or four times. Residential real estate likely has 15-20% more to decline. As to his predicted annual growth pace of 3%, it's already well-established that home prices normally rise by about one per cent, not triple that.
Somebody ought to hand Zandi a golden parachute and shove him off a skyscraper so he can stop deluding himself that he's making sense. After all, he does work for one of the rating agencies which said all that toxic, sub-prime, re-packaged, securitized mortgage garbage was AAA-rated. The guy ought to be in jail rather than on CNBC.
The upshot is that the banks have such a monster of a problem on their hands that they and the courts cannot handle it in a reasonably timely manner. The absolute implosion of the US housing market has left a crater in the economy the size of Rush Limbaugh's ego, and that's enormous. The basic paradigm for buying a house these days is to offer 30% below the asking price, and see how badly the owners - either a bank or a homeowner or a combination of both - want out of it.
Then try and get a mortgage. A million more laughs.
The glut of homes - unoccupied, unrented, in need of repair, under-water financially - is mammoth and everywhere. Count on a minimum of three and probably more like five more years of pain, price declines and associated nonsense about finding "the bottom," which will only be reached when the banks realize that it's not worth their time or expense to pursue further exposure and foreclosures and they become the party which "walks away." When the banks no longer want the properties, no longer feel there's any gain in bleeding consumers dry with fees and interest, and the property taxes, maintenance and insurance exceed what they can hope to recover on unsold inventory, there will be a bottom, and it's going to be one heck of a lot lower and a heck of a lot further out than most people anticipate.
Too many houses at prices too many people can't afford. Simple math.
Following are the promised quotes. Have a lovely weekend.
"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
-- Thomas Jefferson, (Attributed)
3rd president of US (1743 - 1826)
"Permit me to issue and control the money of a nation, and I care not who makes its laws."
-- Mayer Amschel Rothschild
"Income tax is nothing but wage slavery. If you have payroll deductions, you are a slave. Only way to fix it is for everyone to quit, or, as in Europe, the whole nation goes on strike. It won't happen here. Americans are too stupid and too frightened by their own government. I am not. I could care less. Let them come and take my house and my belongings. I will start over, stronger. I love this country, but I hate the people who run it."
-- Ed.
Thursday, September 16, 2010
Wheels Coming Off Global Economy
Today may have been a watershed day for the demise of the global economy. There were any number of troubling events - most of which were completely overlooked by the computers making trades on US markets - that signal a major event could decouple governments from their economies, people from their money, banks from credits, and on and on...
Take, for instance, the activity in the Forex markets, where the Bank of Japan decided to intervene for the first time in six years, to keep the Yen from appreciating. The intervention actually took place on Wednesday, but it's effects will be far-reaching and continual. All currencies are seeking levels at which they can find comfort in trade - cheap imports, value on exports - but, not everybody can have it their way, obviously. These kinds of things lead to crises, political, economic and sometimes military.
But that's probably not going to get too many people worked up. Maybe the thought of foreclosures on the rise might suffice. The banks are apparently trying to manage the foreclosure process, in other words, slowing it down so that they don't create a glut of homes on the market and cause prices to fall even further.
It's a gamble that isn't likely to work out, however. Prices do what they're supposed to do. Mismanaged properties sell for less. Homes which were overpriced to begin with will find their correct level. Despite what the bankers holding most of the mortgages (Bank of America) believe, Americans are smarter than they think, and with an economy suffering from 20% real unemployment, keeping prices suspended artificially is probably more wishful thinking than prudent planning.
The real estate market has gone through this before, as in the past two years the flood of foreclosures was partially stemmed by various government programs and tax bribes, modifications and work-outs. Home prices fell precipitously, nevertheless. So, as with anything having to do with banks these days, we offer a hearty, "good luck with that!"
How about thinking ahead a bit, like how much you'll be taking in every month when you're retired? The news there isn't very rosy either. Here's a report that offers the sobering conclusion that at the end of 2008 (hey, that was almost two years ago!), public pension funds were experiencing a shortfall of anywhere between $1 Trillion and $4.4 TRILLION! That's a lot of money that people are unlikely to be receiving in their "golden years."
But, that's just the start of it. Of the more than 1700 publicly-traded companies which operate pension plans for employees almost all of them are seriously underfunded. "The assets of corporate pensions relative to their deficits, known as the funded ratio, fell to 70.1% in August..." says a report by the Milliman 100 Pension Funding Index.
And that's without even looking at Social Security or Medicare, both systems hopelessly bankrupt and already bleeding red ink. When baby-boomers begin retiring in droves in the next two to five years, the systems will be beyond repair and likely need major modifications, such as no COLA, raised retirement ages and lower benefits. (Ed. Note: Being 56 myself, this doesn't make me necessarily happy, though my choice to not pay into any kind of pension plan and avoid SS tax at all costs now seems a prudent maneuver.)
OK, had enough? How about chewing on an arcane document of the American Monetary Institute from 2004, delivered by Director Stephen Zarlenga to the British House of Lords, which outlines, among other things, how government issuing money (not the Federal Reserve, a private bank), without the backing of gold or silver, has been the most fruitful.
This shoots major holes in the argument that "gold is money," and a true store of value and all the other clap-trap that have made gold the most speculative, over-priced commodity on the planet. As I and some non-gold-infused friends like to say, "you can't eat a gold bar and you can't buy a candy bar with it", or, "try buying a loaf of bread with a Kruggerand. Ypu've have better luck buying the whole bakery."
So much for the bad news. There was some good news, somewhere, but nobody seemed able to locate it. Nonetheless, the computers trading US stocks (You do know that 70% of all trades are executed without human involvement, don't you?) managed to issue forth another split decision, with the Dow and NASDAQ up, but the S&P and NYSE down, that, in itself, troubling. market divergence is almost always a telling sign that a correction isn't far off. Making matters more complex and compelling, trading volumes were down to absurdly low levels once again, running at a rate 30% below last year.
Dow 10,594.83, +22.10 (0.21%)
NASDAQ 2,303.25, +1.93 (0.08%)
S&P 500 1,124.66, -0.41 (0.04%)
NYSE Composite 7,169.48, -10.31 (0.14%)
In opposition to the benign headline numbers, declining issues pounded advancers, 3419-2260. The number of new highs to new lows remained static and statistically insignificant, at 308-48.
NASDAQ Volume 1,703,297,625
NYSE Volume 3,354,712,000
Crude oil futures were slammed down $1.45, to $74.57, but gold made another all-time high, at $1,271.90. up $5.20. Silver kept climbing in stride, up 20 cents, to $20.74.
Now, if there's anything we should have learned from first, the tech bubble of the late 90s and second, the housing bubble of the 2000s, that when the object of the bubble is advertised heavily on TV - remember Pets.com? How about 125% home equiy loans? - it's usually safe to say the asset is overpriced and due for a fall. It happened with tech stocks. It happened with houses, so it's probably going to happen with gold (and probably silver) because of the rampant number of ads telling us to buy gold, cash in our gold and get gold or cash in some manner. It's a mania, pure and simple. Gold and silver have increased in value by 400% or more over the past decade. When will it end? Nobody really knows, but buying at these nosebleed levels is the stuff of fools. Real estate looks much better, especially if you're assigned to the basic tenet of all investing, "buy low, sell high."
Take, for instance, the activity in the Forex markets, where the Bank of Japan decided to intervene for the first time in six years, to keep the Yen from appreciating. The intervention actually took place on Wednesday, but it's effects will be far-reaching and continual. All currencies are seeking levels at which they can find comfort in trade - cheap imports, value on exports - but, not everybody can have it their way, obviously. These kinds of things lead to crises, political, economic and sometimes military.
But that's probably not going to get too many people worked up. Maybe the thought of foreclosures on the rise might suffice. The banks are apparently trying to manage the foreclosure process, in other words, slowing it down so that they don't create a glut of homes on the market and cause prices to fall even further.
It's a gamble that isn't likely to work out, however. Prices do what they're supposed to do. Mismanaged properties sell for less. Homes which were overpriced to begin with will find their correct level. Despite what the bankers holding most of the mortgages (Bank of America) believe, Americans are smarter than they think, and with an economy suffering from 20% real unemployment, keeping prices suspended artificially is probably more wishful thinking than prudent planning.
The real estate market has gone through this before, as in the past two years the flood of foreclosures was partially stemmed by various government programs and tax bribes, modifications and work-outs. Home prices fell precipitously, nevertheless. So, as with anything having to do with banks these days, we offer a hearty, "good luck with that!"
How about thinking ahead a bit, like how much you'll be taking in every month when you're retired? The news there isn't very rosy either. Here's a report that offers the sobering conclusion that at the end of 2008 (hey, that was almost two years ago!), public pension funds were experiencing a shortfall of anywhere between $1 Trillion and $4.4 TRILLION! That's a lot of money that people are unlikely to be receiving in their "golden years."
But, that's just the start of it. Of the more than 1700 publicly-traded companies which operate pension plans for employees almost all of them are seriously underfunded. "The assets of corporate pensions relative to their deficits, known as the funded ratio, fell to 70.1% in August..." says a report by the Milliman 100 Pension Funding Index.
And that's without even looking at Social Security or Medicare, both systems hopelessly bankrupt and already bleeding red ink. When baby-boomers begin retiring in droves in the next two to five years, the systems will be beyond repair and likely need major modifications, such as no COLA, raised retirement ages and lower benefits. (Ed. Note: Being 56 myself, this doesn't make me necessarily happy, though my choice to not pay into any kind of pension plan and avoid SS tax at all costs now seems a prudent maneuver.)
OK, had enough? How about chewing on an arcane document of the American Monetary Institute from 2004, delivered by Director Stephen Zarlenga to the British House of Lords, which outlines, among other things, how government issuing money (not the Federal Reserve, a private bank), without the backing of gold or silver, has been the most fruitful.
This shoots major holes in the argument that "gold is money," and a true store of value and all the other clap-trap that have made gold the most speculative, over-priced commodity on the planet. As I and some non-gold-infused friends like to say, "you can't eat a gold bar and you can't buy a candy bar with it", or, "try buying a loaf of bread with a Kruggerand. Ypu've have better luck buying the whole bakery."
So much for the bad news. There was some good news, somewhere, but nobody seemed able to locate it. Nonetheless, the computers trading US stocks (You do know that 70% of all trades are executed without human involvement, don't you?) managed to issue forth another split decision, with the Dow and NASDAQ up, but the S&P and NYSE down, that, in itself, troubling. market divergence is almost always a telling sign that a correction isn't far off. Making matters more complex and compelling, trading volumes were down to absurdly low levels once again, running at a rate 30% below last year.
Dow 10,594.83, +22.10 (0.21%)
NASDAQ 2,303.25, +1.93 (0.08%)
S&P 500 1,124.66, -0.41 (0.04%)
NYSE Composite 7,169.48, -10.31 (0.14%)
In opposition to the benign headline numbers, declining issues pounded advancers, 3419-2260. The number of new highs to new lows remained static and statistically insignificant, at 308-48.
NASDAQ Volume 1,703,297,625
NYSE Volume 3,354,712,000
Crude oil futures were slammed down $1.45, to $74.57, but gold made another all-time high, at $1,271.90. up $5.20. Silver kept climbing in stride, up 20 cents, to $20.74.
Now, if there's anything we should have learned from first, the tech bubble of the late 90s and second, the housing bubble of the 2000s, that when the object of the bubble is advertised heavily on TV - remember Pets.com? How about 125% home equiy loans? - it's usually safe to say the asset is overpriced and due for a fall. It happened with tech stocks. It happened with houses, so it's probably going to happen with gold (and probably silver) because of the rampant number of ads telling us to buy gold, cash in our gold and get gold or cash in some manner. It's a mania, pure and simple. Gold and silver have increased in value by 400% or more over the past decade. When will it end? Nobody really knows, but buying at these nosebleed levels is the stuff of fools. Real estate looks much better, especially if you're assigned to the basic tenet of all investing, "buy low, sell high."
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