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Sunday, December 15. 2013
The bad news
Also, a recession. I tend to agree, but I don't think we ever really got out of the last recession. The Fed put a band-aid on it to cover up the bleeding and infection.
Posted by Bird Dog in Hot News & Misc. Short Subjects at 16:28 | Comments (12) | Trackbacks (0)
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Given that the entire stock market is kept afloat by the artificial stimulus of "quantitative easing", making a prediction that the markets will tank when QE is "tapered" is about as risky as predicting that the Sun will rise in the east in the morning. It's sort of inevitable.
The big puzzle is the question of who, other than George Soros, is planning to benefit from a general economic collapse?
Anybody who is short, with the right timing. I am 50% cash, FYI. Most of that in my wallet.
I happen to agree with the 'experts'. But it's also fair to say there are some 'experts' who are not calling for a downdraft.
The nice thing about markets and the economy is that it takes the actions of so many people to yield a result, it's hard to really know what will happen.
But, like commenter BD above, I am also 50% cash now.
Assuming something like this is likely, what would be the best strategy to try and protect a 401k as best as possible?
Are we blind to the flash of the mushroom cloud they always told us to duck under the desk to avoid?
If: the individual insurance market saw a drastic increase in premiums with a doubling of out of pocket amounts aided with MORE deferral to the "taxpayer" via the subsidy,
and: next year the employer provided plans get wacked with the same stick, it only stands to reason we will see massive shortages of cash flow in the consumer, insurance companies defaulting because they have to provide the benefit but don't get the premiums as intended, employers dumping their plans because it no longer works for them.
So, yes, a crash is coming.
Start saving up now for your tickets to the Sixth Annual Tour of The Summer Of Recovery! Operators will start standing by January 1 at 1-800-IMAFOOL, or go to the website IMAFOOL.COM.
There are two types of people who successfully time the market...
1. People who are lucky
Ah, THERE'S my problem; I am neither lucky nor a liar.
Which probably why my attempts to "predict" market moves and make the appropriate investments has turned out so laughably poorly.
most who don't claim to think the market's overheated are trying to trick customers into buying in order to overheat it even more so that, when the time comes, they can dump their own stock as high as possible, making the most profit, over the backs of those same customers.
That's the big bucks for "stock market advisers" in the current market, ensuring their customers inflate the very stocks the advisers themselves hold, then the advisers sell out before the bubble bursts.
It makes no sense unless the market is being held up by the dividend yield, in which case it's like a long term bond.
It plummets if the interest rates rise.
The fed isn't putting money in the market. Money can't go into the market, contrary to idiot analysis on the news every night. It goes to sellers, who are in equal amount out of the market to any buyer getting in.
What changes is the value of the market.
1. The present value of all earnings that the company will every make;
2. The present value of all dividends the company will ever pay out.
These two are equal.
The problem is how to discount to present value. That depends very strongly on interest rate that you assume.
So people are mostly speculating on the interest rate.
And mostly seemingly ignoring that it's likely to rise.
The retail public has been liquidating -- like the proles they are -- ALL the way up this bull market.
Folks, you can throw away ALL prior norms when the Fedsury is printing new money like a maniac.
It's CASH you don't want to hold. For in an era of vast money printing -- globally -- it's cash -- and it's sisters that are being debased.
Stocks, in contrast, represent proportional OWNERSHIP of REAL PHYSICAL ASSETS. And the typical corporation is inherently leveraged -- that is -- it holds a SHORT position against the value of the currency/ US Dollar.
This reality was slowly perceived during 1922-23 in Germany. The market whipped all over the place. Only at the end, did investors FINALLY scope to the reality: corporate debts had been wiped out. The firms, themselves, soldiered on. The bond holders were utterly destroyed. The stockholders came on through the other side -- in most cases -- better than ever before! Their money engines were still intact.
The are four types of modern money:
silver and gold coins... perhaps copper and nickel should now be included. No re-assay, no re-weighing required. Government minted to published standards.
Vault/ Warehouse receipts:
the original banknotes... they started out circulating as paper equivalents to specie on deposit in some bank vault... then morphed to bullion... and ultimately expanded to include commodities stored in BONDED warehouses. (3rd party held keys) This last financial device was introduced by the Dutch -- and was THE mechanism that supported the tulip bulb mania. Bonded commodities included: pepper, salt, tobacco, and a slew of spices. These receipts were denominated in round figures -- entirely imitating banknotes. They did require counter-signatures from 3 top ranking local merchants before they passed on without further endorsements -- as if banknotes. Those signatures live on in our modern currency -- which features double endorsements: Treasurer and Secretary of the Treasury. (Yes, that's where and when the legal legacy of said signatures got started; notionally these two high officials are personally responsible for the authenticity of the currency.)
These instruments did not circulate far from Rotterdam -- for obvious reasons. They were turned in to obtain the commodities all the time. In the meantime they circulated like 5th party. endorsed, checks.
At this time, their legacy lives on in Red Chinese BANs ( Bond Anticipation Notes -- see ZeroHedge. The mimicry is astounding.)
(Private -- ie commercial, retail, industrial...) Debt backed money:
-- both electronic and banknotes
This is BY FAR the dominant form of money in the Western World. Up until QE#1 virtually all money came from this one source. It's created the very instant a commercial bank extends credit, retail or wholesale. It's destroyed the second that the debt is paid down. This dynamic has the Fed monitoring bank loans like a vulture. (Dying banks are its speciality.) When banks are on a tear, they spew loans -- and money -- into the economy from every point on the compass. This WIDESPREAD injection of new money is the true source of classic inflation.
(Public ie Federal government) Debt backed money:
-- both electronic and banknotes.
This type of money APPEARS to be the same, it spends the same, etc. BUT it's solely created by the establishment of Public Debt -- that is POLITICALLY driven debt creation. This is anti-rational, economically ruinous, debt generation. It's parasitic, as a consequence.
Critically, this type of money flows from ONE SPIGOT only. It absolutely does not spring out of everywhere as an adjunct to private decision making. When it goes on a tear, we must term in HYPERINFLATION.
It gets its name from history: governments -- unlike private parties -- never back off from the printing press until they flat-line the national economy. The name comes from its END STAGE CHARACTER -- as in totally crazed debasement/ currency rejection and a devolution back down to a barter economy.
Hyperinflation has absolutely nothing to do with inflation. Kind of like elephants and elephant seals. Commercial debt creation NEVER gets as insane as governments do. Private parties pull in their horns.
We have, at this time, flat to declining commercial lending. FICO scores have cratered. Qualified borrowers are scarce. This is the SOLE reason why banks are not lending -- and leaving their cash back at the Fed. This reality is deflationary.
We also have, at this time, a government budget that is being fed by hyperinflating the money supply -- by $85,000,000,000 per MONTH. That's not inflationary -- it's hyperinflationary. This causes strange concentrations: Wall Street is rolling in lucre because all of the new money passes through the Primary Dealers first. The rest of the commercial world is starving for credit -- Wall Street's FICO is now through the roof.
So, the NYSE is blasting ahead, retail is liquidating, and the insiders are loading up huge. They fully realize that to hold cash is to be ruined. US Dollar denominated assets -- ie cash or debt-assets (bonds, notes, pensions, annuities, money funds, t-bills, etc.) is getting wealth taxed by said debasement.
If you must hold cash -- get it into a stronger currency -- say the Canadian Dollar. (Not that I'm recommending even that, it has its own troubles.)
That money is originated from four entirely different sources is NOT a part of MMT. The brainiacs actually think that all dollars are the same.
That crowd include the Fed, BTW.
Which means that the planet is screwed.
One can do worse than be blind. You can view the world backwards.