|
||||||||||||||
I’ve never held a tenge coin or bill in my hand. I doubt you have either, unless your travel plans or work responsibilities have sent you to Kazakhstan.
But overnight, the Central Asian nation that does a lot of trade with Russia and China delivered another emerging market shock. It abandoned its currency peg, and in the blink of an eye, the tenge plunged 23% to an exchange rate of 257.2 per U.S. dollar. That means every one of its citizens just lost almost a quarter of their purchasing power — in an instant.
The move came within hours of news from the International Monetary Fund (IMF) regarding the Chinese yuan. The IMF said the yuan wouldn’t be added to its basket of reserve currencies for at least a year, and maybe longer. That move is another kick in the teeth for China’s markets and China’s currency, and it clearly opens the door to more depreciation.
These developments set off yet another round of carnage across world markets. South Africa’s rand currency dropped to its weakest level since 2001. Turkey’s lira plunged to an all-time low. And Malaysia’s ringgit sank to yet another 17-year low.
|
|
| Getting that tenge feeling all over. |
That, in turn, helped push the U.S.-traded iShares MSCI South Africa ETF (EZA) to an 18-month low. The iShares MSCI Turkey ETF (TUR) and the iShares MSCI Malaysia ETF (EWM) both sank to their lowest levels in more than six years.
The bulls on CNBC say you don’t have to pay attention to this stuff. They claim it doesn’t matter. But obviously these events are starting to weigh on investor sentiment and capital market pricing. The S&P 500 fell sharply today, and it is banging away at downside technical support with more vigor. At the same time, more and more sectors are continuing to wilt.
Some will argue the worst is behind us, and it’s time to go bargain hunting. But despite today’s sharp decline, I’m still seeing few signs of outright panic. Yes, people are starting to come around to the cautious, negative view I started adopting months ago and raising cash. But they aren’t selling very aggressively yet. The major averages are down just a handful of percentage points from their recent peaks.
Heck, volatility as measured by the VIX fell to near multi-year lows just a couple of weeks ago. And in the 17-18 area, it’s still far, far below several panicky peaks seen in previous crises both big and small.
| “It’s NOT too late to sell down some exposure.” |
So I do NOT believe it’s too late to sell down some exposure, and take protective steps. That’s what I’m doing, and once again, I think it’s a smart move for you too.
What about your thoughts? Ever held a tenge in your hand, much less heard of it? Do you think we should just ignore what’s happening in far-flung parts of the world like Kazakhstan? Or is the cumulative pressure of all these falling dominoes going to prove too much for U.S. stocks? What about the economy here? Is it going to get hit by these developments in Asia and elsewhere?
These are critical questions. So please do share your answers over at the Money and Markets website.
|
The economy, stock market, oil prices and Big Pharma – those were just a few of the topics you were discussing online in the past 24 hours.
Reader Billy offered this view on the big picture: “As we have said before, we are seeing worldwide deflation take the upper hand despite more than $15 trillion of fiat-based, paper-based money, debt and derivative printing. Canaries are all over the coal mine. This could be the worst set up for a deflationary crash in decades. It’s THAT bad.”
Reader Mike S. said he knows where he’d put the blame for the current mess, noting some historical parallels. His take: “The concentration of too much money in too few hands has occurred twice in the past 100 years. First in the run up to 1929, and second in the run up to November 2007.
“Interestingly, BOTH where periods of Republican domination and high speculation because of the absence of laws prohibiting that kind of trading. There was a really good law enacted in 1933 that forbid that kind of trading. It was called the Glass-Steagall Act.
“It was brought by a Democrat majority in 1933 and it worked really well to stop a re-occurrence of 1929. Unfortunately, it was removed by a Republican majority in 1999.”
Meanwhile, on a different health-care topic, Reader Tommr said: “Don’t we all ‘love’ the way Big Pharma invents ‘disorders’ and then comes up with a pill to treat them? What a huge SCAM!”
And on the strength in housing, Reader Bob S. said: “I see a lot of remodeling being done, both by home owners and those who buy, renovate, and rent or resell. With loan rates for those activities low but predicted to rise, I suspect many are doing those projects now before they rise.”
Finally, in response to a couple comments about oil, Reader Jim said: “We seem to be stuck in a cycle where heavily indebted oil companies keep producing more oil to try and maintain cash flow to service debt. At the moment it looks like we may have a long way to the bottom. I’m not sure it’s an investable trend, however.”
Thanks for weighing in. To try to hit as many of these topics as possible, here is what I would say:
1. The market looks sick. Much sicker than a few months ago. That’s why I’ve been urging caution for a few months now, and why I actually just sent out yet another actionable Flash Alert to my Safe Money subscribers today.
2. The repeal of Glass-Steagall proved to be a big mistake. Then during the housing and credit market bubbles, we had an utter lack of oversight and regulation by bought-and-paid-for government officials. They were looking forward to cushy jobs in the private sector after putting in their time in government, and their inexcusable behavior helped exacerbate the last crisis.
3. Oil and oil stocks offer tremendous value – the most I’ve seen since the mid-1980s. But global economic weakness and the Saudi refusal to push a production cutback through OPEC is obviously weighing heavily on prices anyway.
I bagged some nice profits in the energy run up between December-January and the spring. Since then, I’ve been taking active steps in the model portfolios I guide to hedge energy risk and cut exposure. But I’m still holding on to some longer-term names that should ultimately prosper hugely from a longer-term recovery. Hopefully that makes my thoughts on energy crystal clear.
If you have any additional investment ideas, questions, or comments you’d like to share on these or other topics, don’t hold them in. Share over at the website so your fellow investors can benefit.
|
Just days after privately held Sprout Pharmaceuticals won FDA approval for its female libido pill Addyi, Valeant Pharmaceutiticals (VRX) said it would buy the company for $1 billion. Valeant has been an active deal-maker, and is projecting sales of as much as $11.1 billion as a result.
Real estate values in New York have been surging, prompting yet another round of fast-money flipping in commercial property. Previous buyers are cashing out to lock in windfalls much earlier than expected, while new buyers are paying ridiculous prices to snap up buildings that are yielding near-record lows.
Bloomberg reports that a whopping $29.4 billion in deals were closed in the first six months of 2015 alone on the island of Manhattan. I’m sure this will end even better (cough, cough) than the mid-2000s frenzy fueled by too much easy money. Aren’t you?
I’ve described an increasing amount of bond market turmoil in recent weeks, and said it was a key warning sign for stocks. Now, there’s another troubling signal coming from fixed income: Future inflation expectations are tumbling.
So-called TIPS spreads that measure the difference between yields on nominal Treasuries and yields on Treasury Inflation Protected Securities are plummeting. That’s a sign bond investors are worried about future growth, falling commodities, and potential recessions in many parts of the world. As a matter of fact, the 10-year TIPS spread is within a basis point or two of five-year lows.
* Wildfires out West are a regular summer occurrence, and unfortunately, they often claim firefighters’ lives. We just got grim news out of Washington state, where three U.S. Forest Service firefighters died when shifting winds enveloped them in flames.
Should we be even more worried about the future, given the plunge in future inflation expectations? What about the frenzy in New York real estate? Is that a troubling sign? Let me hear about it over at the website.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 60 comments }
Mike: I am very much on the same page as you and think the nastiest is still ahead. It’s late in the cycle, but take profits, counter balance with selling losses to offset tax liability and hold tight… to me it’s a tsunami in process.
This market and the entire world’s economy has become central bank dependent. They may have the right idea about re-inflation but are going about it the wrong way. The need to put money into the hands of those that will actually spend it by buying things, not banks to raise their tier levels or corporations to buy back stock or even investors who just want to see their portfolios grow. Demand is the key and when the Fed realizes it they will aggressively raise rates to normal. A Fed rate of 1.5% should not retard expansion but will put more money to middle class savers and seniors who will spend. Besides, most of the world’s money will flow here seeking yield.
I want to hedge my assets with Aggressive Bear ETF’s. Do you like any of these SPXS, FAZ, TZA, SQQQ. Would these ETF’s still trade in a total economic crash? Where do you put your Cash, Swiss account? Some precious metal?
And now we have the Dodd-Frank Consumer Protection Act of 2009 as signed by Obama.
Many refer to that as Glass-Steagall Light… Sadly, many wanted to return G.S. to law, but the Republicans at the behest of Big Banking fought it all the way… Dodd-Frank is a weak second choice… Incidentally, Elizabeth Warren has been trying to get Glass-Steagall re-enacted, but to no avail because of the GOP opposition…
I completely agree that an updated version of Glass-Steagall or something like it is needed. Dodd-Frank was not the answer, but that is where we are today; and it was signed by Obama.
Mike,
I remember more than a few of the “old hands” coming on CNBC after Glass-Steagall was removed in 1999 who forecast 2007… One old fellow said “all that have a memory will get out of the markets now, then within about two years, the removal will bring in so much fraudulent liquidity that the markets will rally until they blow up like the did in 1929” .When asked how long he thought that would take, his reply was “Oh about 7 years”!
Secondly, if one was to look at the Congressional Record, one would find that Barney Frank’s bill to reduce home lending requirements was limited to the Inner Cities which was a good idea…. Sadly, before the Republican Majority passed his bill, the “Inner City Restriction” was removed. That allowed the “Liar Loans” to go Nationwide, which made the Banks Billions… Today the few, still performing loans, under that program are in the Inner Cities!…
Putin, Thatcher, and Bush died and went to Hell. Upon arrival they noticed a phone and asked what it cost to use it. The Devil told Putin and Thatcher it was $1000 a minute but it only would cost Bush $1 a minute. When the Rusky and the Brit protested the Devil replied that it only cost Bush a buck because since Obama took over America his was a local call. Jim
I should hope that the very recent IMF statement that the Chinese Yuan will not be made a part of the basket of currencies comprising the SDR for at least another year has at long last laid to rest the hype that it was cast in stone to happen this year. I remain skeptical that this will happen even a year from now, although strange things happen all the time. China simply can not afford to float its currency until their domestic market is more developed; and that does not appear to be in the cards for a while. And you can not have a basket of currencies with all but one floating; and floating the Yuan at this time would destroy even their export market. Those who wish for the Yuan to be strengthened by this means should be careful what they wish for if they do not want to be their own undertaker to their financial demise; since this could affect the reserve status of the dollar.
oil stocks=====crystal.
I’ll take Chrystal’s over toast any day.
It looks like we are heading for another Great Depression like in 1929 where Gold is the last standard of value.
I agree James. But I am worried that this time we could end up with stagflation.
More like hyperinflation somewhere down the line, as the Fed and other politicians over-react to de deflation that is just getting going good. I just hope some Hitler type politician doesn’t show up to “save” us.
What do you mean “show up”? Are you sure a carbon copy has not already been delivered.
I understand the logic of dramatic statements to enhance newsletter readership, but a drop of slightly more than 2% in the DJ Average is hardly worth hyperbole. It is, after all, a marketplace where investor sentiment can oscillate by several percentage points. Right now the stock market is like a herd of restless cattle before a big thunderstorm. Ready to bolt at the least provocation. But sooner or later they settle down and go back to grazing when the perceived threat has disappeared.
Just don’t get trampled in the stampeded.
By my records the Dow is more than 8% off it’s high… I think the cattle are
beginning to smell blood !!!
If you subscribe to Wave Theory…..the drop in 2008 was apparently 1st (cycle) Wave down. The recovery and rebound from 2009 was Wave 2 up.
Now or soon PROBABLY comes Wave 3 down. Wave 3 is always the worst. A common Fibonacci relationship for Wave 3 is something on the order of 2.8 X the severity of Wave 1 down.
And then there is the Dow Theory. This century old theorem has proven quite accurate in predicting big market downturns…google it if you are not familiar. The decline of the market today triggered a Dow Theory sell signal by most market statisticians.
Just to stoke the fires of angst, throw in the repeated “death cross” signals in the major averages if one likes to contemplate technical indicators that have been overidden by market manipulation by central banks, IMF, and hedge funds since 2008-2009 mini-correction, after which the world debt level exploded beyond comprehension as to how it may be resolved (NOT) without severe economic pain to debt holders and societies alike.
Hey Mike S-
I don’t think reasonable to politicize one way as you seem to suggest. Actually, a couple of changes shepherded through by Clinton and his cronies contributed significantly to great recession depth and severity, I’ve read a few times. Probably too simplistic to blame one party only.
The Mike S. broken record with no sound track. LOL
Reader Micheal S. has selective memory syndrome referring to
the repeal of Glass -Stegall. A bipartisan effort in the Congress
was eagerly signed by President Clinton. We all can agree it’s
repeal was probably a huge mistake.
I think Ben Carson removed the right half of his brain. Jim
Bipartisan? Perhaps you need to go back and look at the numbers… Every Republican (the Majority Party) and a few Democrats… Bipartisan sounds like 50/50, but the reality was something like 85/15, aye?
How do the AMERICAN people protect them selves when the government has a cash flow problem like they have I grease now?
What is the best bet(s) for smaller investors. With only a few thousand I have diversified to the best of my ability and fear the worst is yet to come. Any suggestions? Thanks
Junk Silver!
Mike, welcome back! I think that for a time the markets will lose investors since there are so many global issues as well as unwelcome Fed policy prospects here at home. I think this is the time to take advantage of the falling indices and buy puts or inverse ETFs.
Blessings to you!
Mike: These currency devaluations are accelerating. The race to the bottom is accelerating! We started this currency war in 2010 when the President set a goal of increasing exports by 50% in five years. Every Central banker as well as the bank of international settlements knew what that meant. It meant that the dollar would be devalued. What people need to understand is when currencies are devalued, the devaluation is subtracted from purchasing power. This is the tax that we call inflation. Since QE started, we have lost an additional 26% of our purchasing power. QE is nothing more than a back door bail out of wall street and the Federal government. Keeping interest rates exceptionally low has enabled the Federal government to continue in essence borrowing money for free! The working poor and the middle class are America’s forgotten people! We are the heart and soul of our economy. It is time to audit the Fed and repeal Humphrey Hawkins. We need a national conversation on the return of the Gold standard. Regards, Robert Calabro.. .
Your perceptions are clear & proposed conversation are laudable. Unfortunately, the news media and money mongers who control the media seek advertising $, so they continue to promote the likes of Donald Trump for “student council president”, except the President of USA has more influence on world events than all other persons on the planet, until the Chinese gain more traction and financial control (gold). The cliche “the voters get what the voters deserve” from a base of ignorance and caring more about reality shows or America’s Got talent performances, will leave us wishing for candidates and elected officials who can rise above the juvenile politics of “popularity”.
Here’s one from the base of ignorance:
Here’s one from the base if ignorance: VOTERS GET WHAT VOTERS DESERVE !!!
Aloha Friends! stop by now and then…to put in an Observation or two..lol OK..here goes this is Highly Technical…ALL Markets seem to be Seeking EQUILIBRIUM…Whatever that Point may Be..no Applause just throw..Bitcoins lol thanks for reading
Reader Mike S.has it wrong. I refer you to the GLBA and it is Bill Clinton that signed the repeal of The Glass-Steagall Act. The Gramm–Leach–Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999 and commonly pronounced ″glibba″, (Pub.L. 106–102, 113 Stat. 1338, enacted November 12, 1999) is an act of the 106th United States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the bipartisan passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate. Furthermore, it failed to give to the SEC or any other financial regulatory agency the authority to regulate large investment bank holding companies.[1] The legislation was signed into law by President Bill Clinton.
A year before the law was passed, Citicorp, a commercial bank holding company, merged with the insurance company Travelers Group in 1998 to form the conglomerate Citigroup, a corporation combining banking, securities and insurance services under a house of brands that included Citibank, Smith Barney, Primerica, and Travelers. Because this merger was a violation of the Glass–Steagall Act and the Bank Holding Company Act of 1956, the Federal Reserve gave Citigroup a temporary waiver in September 1998.[2] Less than a year later, GLBA was passed to legalize these types of mergers on a permanent basis. The law also repealed Glass–Steagall’s conflict of interest prohibitions “against simultaneous service by any officer, director, or employee of a securities firm as an officer, director, or employee of any member bank”.
Clinton made two mistakes:
1. He signed the Republican brought NAFTA from the Bush era.
2. He signed Gramm/Leach/Blyle (all powerful Republicans) which removed the last of Glass-Seagall which allowed the ownership of banks by Insurance companies… Basically, it was the collusion of Banking/Brokerage and Insurance that brought 1929 and 2007.
You are mistaken. Terry Weill of Travelers WANTED to buy Citibank, but could not because of the last of Glass-Steagall… $400 million was brought to “lobby” for the removal by the cabal of Banking, Brokerage and Insurance… It was voted on by EVERY Republican (who had the majority) and a few Democrats…
I am primarily invested in short instruments: SCO, DUG, DXD, and EUM, and a these have done well. The only things I hold long are virtual inexpugnable fortresses: MO, STZ, JNJ, RAI.
I am not a Republican! I am not a Democrat. I am a Commonwealth of Virginia Voter!
Now that we have that out of the way, concerning “Glass Steagall”: Who wrote the legislation (hint: Larry Summers)? Who was he (hint: not a Republican)? Who did he serve (hint: He who was leader of “the free world” at that moment in history)? Who could not wait to pass a law allowing crony confiscation of the little guy’s wealth said legislation allowed (hint: the Party opposing – at least according to the oligarch owned media – the people who proposed the anti middle class legislation in the first place)? Consider this & other blatantly bank supporting executive action & then try to argue that Billy did not out Republican the Republicans!
When will Americans finally wake up to the reality that the guy next door with the bumper sticker they hate has much more in common with them than either distant “elected” millionaires or ivory tower academics who can not distinguish the real world from a professorial economist’s polemic.
Here’s a clue: The Iranian deal (follow the potential oil lease money) has about as much to do with nuclear weapons as the TPP (consider the abdication of national sovereignty to a foreign power (bank) a la Greece) has to do with trade!
The EU (Fourth Reich) is a perfect example how, given the right tool (DEBT), one nation need not employ Panzers or Stuka Dive Bombers to enslave a continent. PLEASE WAKE UP! While your at it, please see Benito Mussolini’s definition of Fascism. Hmmmmm?
Good luck to all!
1. “Everything in the State”. All must conform 2. ” Nothing Outside the State” all must submit. 3. “Nothing Against the State”. Questioning the Government is not tolerated. Benito Mussolini Resembles political correctness doesn’t it? Jim
Just to be clear, Manhattan real estate has not undergone the market crash seen by many parts of the real estate economy in the 2007-2009 time period. Like London, there is much foreign and domestic support for higher prices and fancier digs within limited space. Please note, however, the “Manhattan miracle” did not extend to the rest of New York City, which did see pullbacks in pricing, although long since recovered.
Give it a little time. this thing is just starting.
For those castigating the Fed for not having already raised rates, for fear the Fed won’t be able to fight future recessionary situations, all the Fed needs to do is impose negative interest rates. Then people have to choose between spending their money, or seeing it erode to the tune of the negative rate. And going to cash won’t be possible as an overall economic strategy, even if cash is still allowed to circulate. And buying gold or other precious metal is also easily stopped, although it will have little value in the face of no inflation.
They are already talking about doing just what you suggest in Europe. It’s one way to stimulate velocity. The cashless society is probably a lot closer than most of us think. Jim
2 weeks ago I said gold and silver and look at the move it’s made .the dollar going down for the count. So don’t hole on too your cash because in a year it’s going to be worthless.buy gold silver oil houses something that’s worth something.
Cash is trash. Every country is racing to the bottom u going too wake up one morning and realized u cash is trash.
Mike- How’s that victory lap on oil going? I think you were way premature snapping your suspenders because oil bounced up. I’d encourage you to listen to Larry more- he seems to have a better handle on the macro picture. Sorry to be harsh, but I said it more gently at the time.
Now you seem to be excited that the sky is falling on equities. Yes, maybe near term. I suspect Larry will be right again, and we are just reacting to the noise of the moment. I’m glad I didn’t get into oil when you were pushing it. I can afford to be patient. I’d encourage you to take a longer view.
Caine
The fiat money “experimentation” of central banks & “wild west” (unregulated) hedge fund gamesmanship for >30 years will burst just like the dot.com bubble in 2001 and the housing bubble in 2008, in shock and awe to those who least expect it. The collective ponzi schemes imposed the world around will unravel in ugly ways not witnessed since the Great Depression. Anyone with basic comprehension of markets and business cycles who elects to ignore the warnings of Weiss and like pragmatic services is playing ostrich. Contrarily, using investment tools like inverse ETFs, not created or widely known in 1987 or 2001, to PROFIT from market declines will distinguish the “survivors” from the “sheep” when the advertsing media wakes up after the carnage and declares “no one saw it coming”. Red index days are green basket days to those who have the courage and conviction to act upon the “tea leaves” in today’s manipulated financial markets.
Spoken like a true pragmatist! Jim
Hello Sir, I would like your views on inter-market relations (correlation) between Bond and Equty and commodites and currencies.
Couple of days back Larry edelson your colleague said that Dow will touch 31000 by 2017 and beyond. he says bond market there will be sell off and money will flow into US equities. But this is not view held by Bill gross (janus funds.) According to him if Fed hikes rate everything will tumble.
Please clarify. You are sayin take protection as there will be market crash, but Edleson your collegaue says just the opposite.
With global markets foundering, it would seem foreign investors would seek the relative safety of U.S. markets… Just for the record, the housing collapse and the banking crisis of 2007 were a direct result of the Affordable Housing Act and the repeal of Glass Steagle, both of which took place during Bill Clinton’s (he’s a democrat, right?) administration.
Brad,
I am sitting here at my desk in Almaty with Tinge in my pocket (and also USDs). Such dramatic changes in rates (I also live part of my time in Moscow and the USA) of exchange do not always end up as dramatic increases in the local COL for countries with their own energy resources like Russia and Kazakstan have.
However it does make – Made in the USA – things (or those imported and priced in USD) go up in price and as a consequence these items get cut from the list of things we see on the local store shelves rather quickly. Lets be frank – exactly what did any of us buy recently that was actually made/produced in the USA? TV? DVD Player? iPhone? desk chair? HP printer? A4 Paper? Furniture from IKEA? Nope not a one. Seems they all say China somewhere on them. How about Chicken, hot dogs, eggs, milk, fresh fruits and vegies etc? Nope all locally grown.
Also people in Russian and Kazakhstan are not as indebted as we are in the USA and a lot of them keep cash on hand (and not just the local paper). Why? well for example, if you buy an apartment in Moscow, it is most often priced in dollars or euros and paid in cash. Cash in USD or Euros not Rubles (yes a backpack of Bens may be required).
Thanks for your great reporting and insights.
yes we should we worry about the future AMERICA is being moved AWAY from GOD that is BAD for the whole country …. more meteors are falling all over AMERICA , more sink holes are being opened.. the one in Florida swallowed a man whose last name was “bush” so the Markets are the least to worry about we should worry about Bringing AMERICA back to GOD YEHOVAH .. wake up AMERICA . .
I might not realise that I have held a tenge, Kazakh currency in my hand. Someone in a shop gave me a coin that looks exactly like a two euro coin, I am not really sure what currency it is.
And look what happened today during the last our of trading. No one can convince me that there isn’t a lot of “games” being played on Wall Street. Short the market, then tell everyone that things look bad, even have their computerized program start a selloff, next we have John Q Public go into panic mode and sell their stocks before it goes even lower, and the Wall Street weasels pick up the gain on their short selling. Hold the line and don’t fire until you see the whites of their eyes !!!!
Why’s their no Friday morning and Friday evening edition of Money and Markets, I was really looking forward to it. Do they still print the Financial Times? Or did they run out of money to print that too.
The VIX ended Friday I believe at 26, perhaps not panic, but close.
North Korea was pushed to the brink of War Friday, with an ultimatum deadline of 5 PM Sat, fortunately, I think Obama, rescued Peace, as both sides are talking today.
i have written many times that our structure called Democracy, without major structural changes, will continue, to push us further, into the New Dark Age.
The Nursery rhyme – Humpty dumpy, guarantees that needed structural changes will not occur.
BAH HUMBUG
Mike, We are in our mid to late 80’s and no way can we recoup a loss in our portfolio through future savings. We follow you in Safe Money and have made the hedge moves you suggested, but they are just a drop in the bucket against what we are seeing on a daily basis. We can tighten our stops, but I’m afraid that means we will just lose even more than if we were to sell outright. But if we do sell, what do we do with the money. We no longer feel secure to put it into CD’s or Money Market accounts at our bank. You used to recommend keeping extra money in US Treasury bills. But I’ve not seen that recommendation lately. Are you still recommending that?
Maybe we could understand things a bit more if those who control the financial system — the coinage of the realm — were just referred to as ‘kings and queens’.
On deflation / inflation: normality went out when the amount of bad debt in the system became so large and so un-repayable it totally threatened the whole system. The answer was of coarse is to loan money to selected friends to pay their interest and keep bad debt from liquidating. The poorer the fundamentals on the debt — the lower the interest rate must be. Finally printing money to pay interest on never recoverable debt stagnates the whole system. At some point bad debt must be ‘bankrupted’ out of the system — but it is being done too slow and controlled. Banker friendly entities are extended credit to buy out selected targets who will bankrupt the moment credit is withdrawn; very easy since they are insolvent and owe their existence to their creditor. Meanwhile controlled bankruptcies and liquidations by other entities have a major influence stopping price inflation. Unemployment helps keep prices down too. Now that the sell down cycle is nearly complete the next ‘liquidations’ will have to be in paper wealth. This explains the real estate booms in the most secure and desirable markets. (This precludes viable farmland for the middle class since its cost even in a ‘depressed time’ is still huge, way beyond the average family’s resources.) For the middle class there is not much to invest in except low level real estate, collectibles, precious metals and maybe very small niche business. Probably a good idea to invest in one’s self too — like skill up on everything and take good care of your body./// good idea at any time. The next question is: what are the rulers of the realm going to organize to employ the millions of un and under employed subjects? I wonder if Brazil is a good model? I can’t even think of Mexico.
The Dow fell 358 points to below 17,000 and the S P 500 ended at 2,035, in the red for the year so far. The SPX broke down from a triangle pattern yesterday on a significant increase in downside volatility.