| MARKET ROUNDUP | |
| Dow | -24.50 to 16,117.24 |
| S&P 500 | +0.27 to 1,862.76 |
| Nasdaq | +2.07 to 4,217.39 |
| 10-YR Yield | +0.063 to 2.153% |
| Gold | -$4.30 to $1,240.50 |
| Crude Oil | +0.94 to $82.72 |
Flying in an airplane with no pilot.
Riding in a roller coaster with no one at the controls.
Watching a hurricane bear down on you, with the local weatherman on vacation.
All of those are scary scenarios. But they describe our current predicament to a “T”! And that helps explain the crazy volatility in the markets right now.
Look, we’ve had eight years of record-low interest rates. We’ve had more than five years of QE in multiple waves. We’ve had an incredibly long laundry list of “alphabet soup” programs (TAF, TALF, LTRO, and so on) in the U.S., Europe, and Japan, all designed to boost lending and bail out banks.
Going back as far as the immediate aftermath of the Great Recession, we’ve also seen massive amounts of stimulus spending on the fiscal side. The idea? Build a bunch of bridges to nowhere and THAT will save us all!
The bottom line? Our “genius” tinkerers in Washington, in Frankfurt, in Tokyo, and elsewhere around the world have thrown absolutely everything against the wall to see what sticks. And yet, despite all of that …Â
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| Ghost cities are popping up across China. |
Global growth remains anemic … Japanese GDP is plunging … China’s real estate market is deflating rapidly … Europe is on the verge of a Triple Dip recession … European peripheral debt yields are blowing out (again) … and here in the U.S., the divergence between how the 1 percent-ers are doing versus everyone else has never been greater.
The bottom line? As this Bloomberg story notes:
“The problem is even with inflation now close to its recessionary lows by some measures, governments and central banks are almost out of ammunition, having exhausted it by swelling budget deficits and cutting interest rates in the aftermath of the financial crisis.”
That doesn’t mean the chowderheads at the Fed and elsewhere won’t occasionally go back to their bags of tricks and try to see if anything is left. In the midst of this morning’s stock market bloodbath, for instance, St. Louis Fed President James Bullard suggested the Fed could maybe put off the last QE tapering step past the October meeting. San Francisco Fed President John Williams said on Tuesday that the Fed could even consider QE4 at some point if the economy runs off the rails.
But let’s be honest. There’s a rapidly dwindling list of people on this great planet of ours who think that will accomplish anything. Heck, we have a half-decade of PROOF that QE and low rates are ineffective when it comes to stimulating real growth.
So when I talk about a potential “October Surprise” for the markets, here’s one major thing to consider: Central bankers launch QE in Europe … delay its end in the U.S. … or re-launch/increase it in Japan or the U.S. — and the markets tank anyway!
Why would that happen? How about the fact the Fed has spent more than a year preparing the markets for the end of QE and the first few interest rate hikes? They’ve been making speech after speech, taking step after step in that direction.
But now, just because of a 1,000-point decline in the Dow (give or take), they’re going to panic and change tacks in a few days? Really? Can you think of a bigger confidence killer — and a bigger sign for the rest of us to join the Fed and panic too? Because I have a hard time doing so.
| “There’s nobody flying the plane or manning the roller coaster controls anymore.” |
Bottom line: The volatility we’re seeing doesn’t just stem from Ebola headlines. It’s not just because of terrorist attacks in the Middle East, or saber rattling by Vladimir Putin. It’s because there’s nobody flying the plane or manning the roller coaster controls anymore.
Government officials and central bankers have tried everything and it didn’t work. Plus, they’re actively killing confidence by changing their forecasts and policy approaches based on every three-digit swing in the Dow.
So I can’t reiterate it enough: Take some profits off the table, cut some losers, avoid economies and currencies where central bankers are the most out of control, and consider hedging against downside market risk.
You have my take on what’s going on out there. Now I want to hear yours right here.
Specifically, do you think policymakers are out of bullets? Is there some “bazooka” left to fire? What would that even mean for markets — markets that are facing several challenges beyond the control of monetary or fiscal policy? Will this wild volatility be with us for much longer, and if so, how should you combat it?
| Our Readers Speak |
With the markets all over the map, it’s no surprise that opinions on what’s coming next are all over the map as well!
At the website, for instance, Reader John commented on the stock market and his positioning by saying: “I bought TZA a couple of weeks ago as insurance. So far, it’s been a very good play. I’ve been adding to it as the Dow has been going down a slippery slope. This Dow correction is long overdue and is healthy unless it drops below 15,000.”
TZA is the Direxion Daily Small Cap Bear 3X Shares (TZA), a 3X leveraged, inverse ETF targeting smaller capitalization stocks. So clearly John is bearish on the markets.
But Reader Mel W. is on the other end of the spectrum, expecting a strong rally to commence — and soon! His comments:
“My bet is we are close to a market bottom. With projected 2 percent growth in the coming six or eight months (not exceptional, but better), I look for a 15 percent to 20 percent market increase in the next six months. I think it wise to hold good solid stocks. If I’m wrong, I’ll go down with the other bulls. But I will not sell the best stocks I hold for the long term, and that includes oil.”
I’ve tried to provide the clearest guidance I can here, and specific steps to take in my Safe Money Report. Specifically, we pared down several positions in recent weeks, maintained a healthy level of cash, and otherwise took steps that should help our investors ride these volatile markets out in the best shape possible.
Finally, Reader Joan weighed in on master limited partnerships in the wake of my column on oil. She said: “As I remember you have been positive for some time on MLP’s. Most have been hit hard lately with decline in crude. What say you?”
Thanks for the question, Joan. There has been an incredible amount of volatility in these normally placid investments. Just look at something like the Alerian MLP ETF (AMLP). It dropped from around $18.75 down to almost $16.60, then surged all the way back up to $18.40 — all in the span of a week!
Certainly a prolonged period of crashing energy prices could jeopardize a handful of these companies. But many of them make money from shipping, storing and transporting oil, gas and gas liquids NOT producing them. So it really shouldn’t matter if oil is $70 a barrel or $150 a barrel — it still needs to be brought to market for refining or sale.
So as long-term investments, I still think MLPs make a lot of sense in a low-yield world — certainly much more sense than alternatives like junk bonds!
If you haven’t already joined the discussion in these volatile times, don’t hold back! Add your comments online here.
| Other Developments of the Day |
More Ebola news hits the transom every hour or two. The latest is that the second nurse, Amber Vinson, who treated the original Dallas carrier patient, Thomas Eric Duncan, flew back and forth to Cleveland, despite having a low-grade fever. The Centers for Disease Control actually approved the trip, too, if you can believe that!
Now I don’t want to be a crazy fear-mongerer or anything. But these missteps have to stop and the CDC needs to get ahead of this thing soon. In the meantime, a handful of schools are closing since their students were on the same Frontier Airlines flight or airplane as Vinson.
That was far better than economists were expecting, and the lowest level going all the way back to April 2000! Industrial production was also healthy — up 1 percent in September. Economists were forecasting a rise of just 0.5 percent. The question, again, is “Will the anchor economies overseas drag us down … or will we drag them up?”
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Now I have no problem with spending prudent amounts of money to fix our nation’s ailing transportation arteries. But is that really going to work long term and “fix” the economy?
Didn’t we borrow and spend more than $800 billion for “shovel ready” projects here in the U.S. in the wake of the Great Recession … and basically get nothing (long-term) to show for it? But don’t think that will stop advocates like former Treasury Secretary Larry Summers from writing op-eds and giving speeches in favor of this plan.
Until next time,
Mike Larson
P.S. In Martin’s FREE Ultimate Retirement Course he can help you claim thousands of dollars of “free money” — money you will control — that you can instantly begin using to grow the size of your nest egg or to live richer in retirement. He will also give you ten easy-to-follow steps that will not only protect you but also instantly explode the size of your nest egg or income. Click here to register while there is still time!
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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.
{ 42 comments }
It’s all about saving the USD. They made a deal with the Saudis…the price of oil collapses (right after the Saudis shorted it) and the dollar soars. Commodities across the board tank…and once again…the dollar is king. Of course at the expense of a “new and unexpected downturn in the economy”…which sets us up for QE4…as if it will work this time. If at first you don’t succeed…
Mike, you seem to be riding along on the mass media’s hype. Are you even on the same planet as the rest of us? You also seem to think that you can time the markets….WHAT? You have to know that that is not possible!
You constantly us the term “Long Term Investments”. What does that mean to you? Why should anyone buy a stock just to turn around and sell it? If you are going to sell a stock, you should never buy it in the first place!!
The EBOLA patient Thomas Eric Duncan, was said to be “in isolation” and yet it was reported that some 75 people were exposed to him in his room! The number of people exposed should have been very limited AND all of those people should have been QUARANTINED for a few weeks to make sure they were safe!
The “Great Recession” was heading into a “black hole depression” if efforts were not undertaken to shore up the banks (real banks, NOT Goldman). Wall Street engineered that latest Purge Cycle (my term) through reckless disregard of prudent choices. Some made out like bandits (they are). Others were disregarded. Supply Side theology would not have stopped the bleeding so stopping Capitalism from committing suicide was the only choice. It did work didn’t it? It’s time to be honest.
The only path forward is “Managed Capitalism” (my term).
Modest growth is the only kind that is sustainable. The Binge and Purge Cycle (my terms) is not.
What suggestions are reasonable for “modest growth”?
Mike,
You said that Gold will go down to $900 just 3 weeks ago but it is going to the reverse direction. What do you think now?
What most Americans don’t understand is that the USA is going down the proverbial tubes!!
The fact is that the US Dollar will loose (Already has) its status as the universal currency of exchange. Russia. China, Brazil, India, Kuwait and a few other countries have decided not to use the US Dollar as currency for exchange. Russia and China are buying oil from the middle east without the use of the US dollar. Five or more countries have agreed to create
a new currency for international trade. This devastating because it will cause a Depression in the US the likes of which we have never seen before. Worse than the Great Depression.
The value of the dollar shall collapse and prices of goods (food, etc,) shall skyrocket!!
Our government will no longer be able to print money!! We will have riots and bedlam in our communities. Banks will close. Bank accounts shall be confiscated by the government. The stock market shall collapse to D.J.of 3500. Buy Silver and gold and store it in a private storage facility. May GOD HELP US!!!
gck
Longer term George your right on the money.
I get a kick out of one of the Greatest Lies told by a Politician to his public – since Hitler.
That being Pres. Obama; while smiling told bald faced to the American Public on National TV, that he was creating “My IRA”.
Yea, he is but the my is in “him”! His IRA as he confiscates all 401K, IRA’s that are into Money markets when the above you describe eventually happens. Yea those IRAs and 401Ks Money Markets just about equal the US Govt. Short Term Debt. Voila instantly the US Dollars has backing again – and you the American Public get the ultimate shafting – you loose your hard earned retirement money and they issue you an I.O.U. of worthless US Govt. Bonds!
You think that’s bad,Weight until they get rid of paper money and give you SDR`S, O.. and by the way this month I here we are going to elect. money on the 26 th when you wake up ;)
So the FEDs are out of bullets,no way,they are just looking for some more some where.They are just looking for a bigger gun,the trouble is they don’t know where to fire it, but they will probably shoot themselves in the foot AGAIN
Hi ian;
Funny thing about the Fed. most people don’t have a clue about. The Fed is NOT Tappering at all! You heard me correctly.
Since, the Chinese, Japanese, Russia and other Country Sovereign Wealth Funds are no longer buying the US Fed’s Junk Bonds = US Treasury Bonds anymore – they’re net sellers. The Fed. then is still taking up the slack created by our Govt.s reckless Deficit Spending.
So the Fed. set up a phony Proxy Account with a Bank in Belgium and that Bank is buying up what supposedly the Fed. is tappering every month. Who’s behind that?
My money – is that it’s the Fed’s money in that Bank and they’re buying those Bonds to help the Fed. mask that they stopped Tappering a long time ago.
If the General Financial Markets knew about this – there would be a 3000 pt. hit to the DJIA in a day, and then tanking to below 3000 on the DJIA within 18 months..
So when the Fed fires back up QE to QE4, it’s just pilling on – and the General Investment public will eventually find out that it never went through with Tappering. Then your US Dollar really will become worthless over night – kind of like Confederate Dollars after the Civil War.
Yes, it is OK to print new money, but spend it on infrastructure projects: roads, rail, airports, bridges, new housing. Construction companies hire and the new money eventually cycles back through the economy into taxation to extinguish the initial outlay. At such times, investments in construction industries are a good bet, too.
First I’d like to say with mainly the Main Wall Street Banks Trading Desks and Hedge Funds making up the majority of the players in these markets – you have to look for “the non obvious”. These players make so much false noise disguising their trades you have to out think them. Hard but doable.
This noise for instance – I believe i disguising that we’re bottoming in a Wave I Down in most markets and about to have a huge rally back up in a Wave II correction up. It’s not very obvious as it’s like watching these Roller Coasters grind slowly to a halt before reversing back up – unlike usual, where we’d expect huge reversals almost instantaneously.
But it will only be a correction for a few weeks maybe a month – then look out below.
Funny thing though this Deflation that is hard on us by the crash in the Energy Markets mainly Oil, although it’s exactly what the Fed. is trying to fight against may actually help revive the US Economy to a greater degree. That is if this Deflation unfolds gradually and not suddenly.
Me, I still think Oil Markets and General Stock Markets after the correction are headed to unprecedented horrific low – I’m betting on Natural Gas in the short to intermediate term. We’ve hit the summer lows, and now a more severe than last Winter is quickly approaching that will eat up a lot of the overstock piles we have of Natural Gas, and more and more Electric Generation Plants are switching from coal to Natural Gas, and by first half of next year we will be exporting LNG via the new ports in Sabine Texas. So even though Oil will eventually probably get down to $75.00 per barrel after the coming up correction – Natural Gas should be a very good investment. I’m into the 300% Long ETF “GASL”. I got in at $11.93 and I expect probably to sell about $40.00 in 6 months time? I found it by chance, reviewing stocks not doing so well in my portfolio and checking through about 200 stocks to watch in my Portfolio.
Cash Will Be King. Job growth – Ha. All part time. Lay offs? Already downsized. Wait til the Obamacare mandates finally kick in. Bye bye disposable income. All these jobs and no wage growth?? Most people are too young to know what a healthy economy looks like.
Mike,
While I applaud your foresight and could not disagree at all, your investment timing is zero, like me. We all know what’s going to happen ultimately but will we have any money left in hedge to work with? Your Bond & Interest Rate scenario was a BUST. So too, was my TSA. How do we conserve our funds for best timing?
Ebola. Iraq. Syria. ISIS. Al-Qaeda. Illegals. Underemployment. Low wages. Add these all up and the total in NO CONFIDENCE by voters, investors, and workers.
This artificial market will go the way of 2008 and 2001; it’s just a matter of time, probably when the Middle East blows sky-high or before, IMHO
The Federal Reserve had hoped to get something for nothing.
Hi!, Mr. Larson, Dr. Weiss, Mr. Marksman & Mr. Edelson:
I’m having a mental abuse problem with your reports that report ideas how we can make thousands of $’s in FREE money by investing in such and such ways. Which way do we invest other than fleeing from the US $ into gold and silver themselves that will create gold money out of Federal Reserve Note interest bearing debt? If we were capable of doing that then we will have beat the alchemists who were totally unable after many experiments in their attempts to turn lead into gold. However, if we had those magical skills and could do it, we would still be in total violation of Article 1; Section 10 of the US constitution which does not demand we try any such controversial maneuvers but instead decades ago received OUR National Gold Treasure now stored we are told in Fort Knox, Kentucky etc. as minted gold coins FREE from the US Mint, to be used over and over in daily trade for goods and services add infinitum. In the interim decades between today and August 15, 1971 when President Nixon Closed OUR US Gold Window against foreign creditors holding billions of OUR US $’s for redemption in gold at $35 per troy oz., we the people have not seen hide nor hair of OUR gold kept secretly away from OUR physical possession including no audits but why not? Had OUR gold been in OUR physical possession we the people would not have seen any President close OUR Gold Window, our gold could not have been pledged towards backing any paper money, the Federal Reserve could not have been adopted as OUR Nations’ banker and Bretton Woods would have NEVER been contrived. Now, is it any wonder that we the people are targeted by terrorists demanding their forms of retribution against us for robbing them of their how many tons of gold as promised when our notes owned by them said:”THIS NOTE IS LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE AND IS REDEEMABLE IN LAWFUL MONEY (GOLD) AT THE US TREASURY OR ANY FEDERAL RESERVE BANK.” That’s when we earned the nickname of SATAN as liars and thieves overtly demonstrated on 9/11 isn’t it? Let’s say we had $35,000 when OUR notes read the same and we took them and redeemed them for 1,000 troy oz. of gold wouldn’t we have well over $1,000,000 today or essentially in most cases at least have OUR homes paid for with threat of foreclosure? If on August 15, 1971 the entities holding those redeemable notes had of been accommodated, who would have the leverage arising from the rise in the price of gold today from $35 to well over $1,200 which any third grader could determine.
Now, guys, I’ve sent several emails outlining my thoughts and objectives without hearing anything meaningful back from either of you; except your standard commentary that you send out to everyone stating for example you can’t provide investment advise etc. I already know what your e-mail feedback will say and so please don’t send any more for me to automatically delete OK? Nobody in the US should have to be buying and selling precious metals paying anyone commissions for their purchases or sales but decades ago we should have continued using the gold and silver coins of the realm as per our promise found in Article 1; Section 10 of OUR US Constitution which explains we are to be using only gold and silver (specie) coins for FREE from the US Mint without the Mint being in the business of selling same…..period!! Therefore, in my humble estimation, isn’t your agency promoting unconstitutional sales activities using Gresham’s Law as your overall leverage while the Gresham’s Law leverage is hidden manna from the masses? This for me is entirely a legal description of economic duress isn’t it? Therefore, gold and silver coins in the pockets of all American citizens represents a no stress and no duress approach to wealth accumulation doesn’t it? Middle class wealth stolen by stealth just doesn’t get it does it guys? Perhaps sometime in the not too distant future this Nation founded upon liberty and justice for all will somehow be enabled to again stumble upon the TRUTH and follow it only?
RUSS SMITH, CA. (One Of Our Broke, Fiat Money States)
resmith1942@gmail.com
Ive been in the real estate business as attorney ,board member and developer for 45 years. I ve seen recessions come and go. I believe the best way for the US to jump start the economy is the residential housing market.Home ownership has dropped fro over 70% to the mid 60%. A rise in home sales always leads to an expansion in many related industries such as furniture,lumber ,paint etc. Just as the clunker program helped the dying car industry ,programs which help home sales will generate growth every where else. There is a choke point in the mortgage lending industry because of the strict underwriting controls in place and the fact that banks can make money by not lending. Starter homes are impacting the market which prevents people from moving to larger homes which prevents people from downsizing to empty nester retirement homes. A small change in the economy would free up these homes and take the dead inventory off the banks. Properly constructed , new regulations or changes in the interest rate structure would create large pools of mortgage money to energize the housing sector and create safe higher yielding investments. One of our strongest institutions is the home ownership as the bedrock of individual wealth for the middle class. This area should be freed up for a tremendous backlog of growth.
Dear Richard
for as long as majority of people will not have enough money to pruchase nothing that you have outlined has even marginal chance of working. It used to be a good solution and it would work for the Country but, sorry to say, we already passed that bridge when you were a slip and become EMPIRE. Unfortunately, things work differently now.
Remember – when stock prices go down, yields go up (unless they cut dividends). So stick with the blue chips, take some profits if you have them, stay the course until the market reverses, which it always does.
We need inflation for what again? One scenario is to pay down the national debt accumulated with bogus, inflated dollars.
You hit the nail on the head when it comes to the global economic situation regarding monetary policy, and the crazy fluctuations in almost every market from stocks to commodities and hard currencies. However, I disagree with you on subject concerning “control” with monetary policy.
No one person or organization is in control of monetary strength or weakness even if said person or organization is recognized as its authority. It is only as good as its demand to be used. Controlling the value of mass produced currency is limited to the minor influence it plays in any economy whether it be macro, micro, or both. Paper money is only used for one thing and that is STRICTLY convenience. The FED never had control over the value of the dollar since its inception. They just have(had) a really good influence on it. In conjunction with the US DoD we were able to dominate our currency worldwide in every nation on the planet by invading anyone that opposed our almighty dollar even more so after WWII. It has worked for the better part of the last 100 years. That is until the US Government’s grip started to slip with our two most recent conflicts in the Middle East minus our next target in Syria, which is now another source for contention currently. The point is, our dollar’s might was proven through a nation due to the reach with our military assets. However, the tide is now turning, and other sovereign states are properly preparing for the transition.
Necessity will dictate where trading goods and services will be in the future when fiat monopoly money comes crashing down like an airplane without a pilot. The only real question to ask here is what will rise out of the ashes?
In every crisis there is an opportunity, and this phrase was coined by the Chinese. I unfortunately hate to say this because I wholeheartedly believe in America, but I think the current conditions we are living in is allowing the Chinese to pull the proverbial wool over the entire world’s eyes.
Yes they have ghost cities that don’t make any sense causing their real estate to be viewed as extremely messed up. How did they fund their housing? Was it with our dollars? Who cares? Should we care? What does it matter?
Did the chinese get paid with gold from Fort Knox? Possibly. Germany wants their gold back, though, not for this maybe possible reason, along with most other countries with gold in our vaults. We should go check to make sure we still got gold. Oh wait, nevermind, the FED says it’s still there so we can trust that. I’m not worried that the FED could be lying although they owe the Chinese, Europe, and who else nows so many gobs of bucks that they could print all that they owe in a day. They can just print their way out remember?
Look, this is what it comes down to. When no one wants your money anymore, and wants payment in something else what do you do? What is the only other convenient way to exchange something you need like food or housing for the medium the seller wants?
The answer is simple. Gold. Silver. Platinum, diamonds, works of art, civil war coins and the like are further down on the list, but all of those will be worth more than the US dollar, the Pound, the Euro, and any other major currencies that doesn’t survive a SEVERE correction that resembles an almost collapsing crash.
When, not if, the major currencies become hyperinflated after of course super deflationary/ short term sub inflationary periods also known as just a bunch of noise, the crap will fly off of the fan. Panic will be worldwide, and people will do some stuff they wouldn’t have imagined the year before. As nations people will say this:
US: Crap! I can’t buy anything because my money is worthless and I have to trade my house, car, gas, and land for food!
UK: Crap! I can’t buy anything because my money is worthless and I have to trade my house, car, gas, and land for food!
Europe: Crap! I can’t buy anything because my money is worthless and I have to trade my house, car, gas, and land for food!
Russia: Davay! Everyone here is still living the same, but our billionaires are just millionaires now. I got some frozen gas in the back yard I can sell you, though. Here’s a chisel now go dig up how much you want, and I’ll check you out over here at the Kremlin. Don’t try to steal it or I’ll shoot you. It’s just business.
Australia: Crickey! I can’t buy anything because my money is worthless and I have to trade my house, car, gas, and land for food! Wait a minute. I got gold in my backyard. Nevermind. As a matter of fact forget I said anything. By the way if you want anything from me I only take gold backed australian money now. Cheers.
Japanese: クラップï¼ç§ã®ãŠé‡‘ã¯ä¾¡å€¤ãŒãªã„ã®ã§ã€ç§ã¯ä½•ã‹ã‚’購入ã™ã‚‹ã“ã¨ã¯ã§ãã¾ã›ã‚“ã—ã€ç§ã¯é£Ÿã¹ç‰©ã®ãŸã‚ã«ç§ã®å®¶ã€è»Šã€ã‚¬ã‚¹ã€åœŸåœ°ã‚’交æ›ã™ã‚‹å¿…è¦ãŒã‚ã‚Šã¾ã™ï¼
Chinese: Our currency is worthless just as we suspected, and yours is just as worthless. However, we are taking all of the gold you gave us for your crap money, and are now incorporating our currency to be backed by it. If you want anything you will have to use our currency because it is the only thing that has real value. We are also setting the exchange rate to our best interest. Remember those ghost cities you scoffed at a few years ago? Through the world wide panic of almost currency collapse our people, too, were filled beyond fear. However, through a government mandate we have offered to give our people good paying jobs resembling the service oriented jobs in the US and Europe for small doses of our gold backed currency allowing them to afford our now strategically located real estate in ghost cities A through ZZZ, which has now quintupled in our currency’s price. You can have our currency too, for the right price, or you can make the items we have been making for you in mass quantity for our pennies on the dollar, er I mean Renmenbi, to get it. Thank you for not believing that the balance of power would not come in our favor, and falling for all of the smoke and mirrors displayed to you at the bitter end of your golden age in economic power. At this point I would say to kneel down to me in subservience lest I destroy you, but I can see that you have been cut off at the waist. Welcome to the new age, and as always in China I trust.
US: you may have coined the phrase that in every crisis there is opportunity, but I will find a way back up the ladder.
Very few people control our economy and is hard at work to control the world. The same group of people control our political process. Those are facts and not a suppositions or theories. This is like a paradigme: you see it or you do not. In my humble opionion we can: go with the flow, stand up or do nothing and complain a lot. At this stage of the implementaion of the New World Order we just begin to notice volatility in everything. Stock market is just the minor example where, most of the people have nothing vested or very little to loose. It will however, get worse much worse. Is there any receipe? I do not think so. Short of standing up much like Hong Kong population and demand dramatinc change? Nothing. We may as well prepare ourselves for rollocoaster and do our best to enjoy the ride. Alternatively, we may reserve our place on Golden Gate Bridge to jump………
I would like to read something about proposed solutions, are there any? All pundits do is criticize something, somebody…. How about, showing a new direction? any one????
How about we go back and re-read the General Theory by that Keynes guy. Then take a look at the work done by Simon Kuznets and friends and colleagues. And just for fun re-read Morris Copeland’s 1952 book on the flow of funds analysis he created to see where the money goes.
Did you guys sleep through graduate school?.
Mike, glad to see the price of oil come down and along with it the price of gasoline. And the village idiots said that we could not produce enough oil to affect the price. A real crock of horse crap that is another example of the incompetence of those who have been leading the country over the last 6 years. I have been shorting oil and have had a pretty good run with it, By the way, I don’t think the correction is over with either. Too many negatives going on at this time.
Most investors now believe three things about the Federal Reserve, money and interest rates. They think that the Federal Reserve is artificially depressing rates below what would be a “normal” level. They believe that in the process of doing so the Federal Reserve has enormously increased the supply of money and they believe that the USA is on a fiat money system.
All three of those beliefs are incorrect. One benchmark rate that the Federal Reserve has absolute control of is the rate paid on reserves deposited at the Federal Reserve. That rate is now 25 basis points, after being zero since the inception of the Federal Reserve in 1913 until recently. If the Federal Reserve had left that rate at zero t-bill rates would now be even lower than they are now. The shortest t-bills rates would now be probably negative.
Paying interest on reserves combined with the subsidy to the banks of providing free unlimited deposit insurance on non-interest bearing demand deposits is keeping t-bill rates positive. Absent those policies the rate on t-bills would be actually negative. The Chinese and others all over the world are willing to pay anything for the safety of depositing funds in the USA. Already, Bank of New York Mellon Corp. has imposed a 0.13% charge on large deposits.
An investor who believes that interest rates are headed up may respond that the rate paid on reserves is a special case and that the vast increase in the money supply resulting from the quantitative easing must result in higher rates when the Federal Reserve reverses its course. The problem with that view is that the true effective money supply is still far below its 2007 level.
Money is what can be used to buy things. Historically money has first been specie (gold and silver coins), then fiat money which is paper currency and checking accounts (M1) and more recently credit money. The credit money supply is what in aggregate can be bought on credit. Two hundred years ago your ability to take your friends out to dinner depended on whether or not you had enough coins (specie) in your pocket. One hundred years ago it depended on the quantity of currency in your pocket and possibly the balance in your checking account if the restaurant would take checks.
Today it is mostly your credit card that allows you to spend. We no longer have a fiat money system. Today we have a credit money system. Just because there is still some fiat money does not negate the fact that we are on a credit money system. When we were on a basically fiat money system there was still a small amount of specie in circulation. Even today a five cent piece contains about 5 cents worth of metal, but no one would claim we are still on a specie money system.
Fiat money is easy to measure; M1 was $1.376 trillion in 2007 and was $2.535 trillion in May 2013. The effective money supply is the sum of fiat money and credit money. Credit money cannot be precisely measured. However, When the person in California whose occupation was strawberry picker and who had made $14,000 in his best year was able to get a mortgage of $740,000 with no money down and private equity could buy a company like Clear Channel in a $20 billion leveraged buyout, also with essentially no money down, the credit money supply was clearly much higher than today. A reasonable ballpark estimate of the credit money supply is that it was $70 trillion in 2007 compared to $50 trillion today.
The effective money supply is the sum of the traditional fiat money aggregates plus the credit money supply. Thus, despite the claims of Ron Paul and Rick Perry to the contrary, the effective or true money supply has fallen drastically over the last few years….”
http://seekingalpha.com/article/1514632
Its kinda funny watching all the rhetoric going on in the financial sector. I’ve never had money to invest, and for that reason, I might be more fortunate than those who have lived their lives playing the biggest gambling racket on this planet. It should be obvious that TPTB use fear to manipulate the minds of each countries citizens. As a student of history, (including history being made daily), we are in the midst of a financial Armageddon. The roots of the word Armageddon implies ‘a house of many rooms’, or more correctly, ‘a battle with many fronts’. Regardless of a complete understanding of Armageddon, either of these definitions suffice to show the idiocy of a monetary system built upon a system put into place on December 22nd, 1913, a system propagated by ‘financial wizards’ of that era which only enriches those who understand the manipulation of our monetary supply.
Who were the ones who jumped from skyscrapers during the Great Depression of the thirties? Those whose lives revolved around finances and the prestige and privileges it afforded them. Of course, many others died from starvation and numerous other maladies caused by the depression. But the point I’m trying to make suicides was the most direct route taken by those who couldn’t face the future. TPTB, in the meantime, have developed their fear-mongering to a great art.
But fear actually has two sides, just like the bogus money we have called ‘federal reserve note’. Note? A note is a promise to pay back. All Americans and a very large part of the world have been blindsided by this charade that dwarfs the Madoff ponzi scheme. It has nowhere to go. The implosion of the financial world is part of history we are witnessing daily. And this is the fear of the manipulators; that the citizens discover their manipulations en mass. No one can predict the day or time this implosion reaches its critical mass, but we’re in the era of the present financial systems demise.
I no longer believe msm. Most of my information is gleaned from internet media and I try to discern truth from various other, (considered by some), unorthodox sources. Truth has a way of shining its light through the cracks of falsehood regardless of the source, if you’re looking for it and not blinded by the trinkets and baubles presented by ‘accepted sources’. We need a miracle, and some sources indicate the possibility of a financial jubilee. Will it happen? I don’t know. But what I do know, there are players who are also trying to prevent the worst that could happen.
There is an idiom; a castle built upon sand will not stand. It might not fall in an orderly fashion like the Twin Towers, but is falling as we are now witnessing. There is a much better source to put one’s faith in than the financial market, and that is called ‘prayer’.
A long time ago-sometime in the 2009 year a person stated that the Fed can do anything it wanst-like buy the market(buy equity futures, buy equities like aapl, and of course we know they buy treasuries and mortgage back securities(all the QE)). The Fed does not have an issue with available funds(are they transparent(LOL)-why does Ron Paul want the Fed audited???? The question is how far will they let this market fall before they start buying the market-for that fact are they trading the market now(do they have multiple trading for the lack of a better word-platforms and is that why we have the current volatility?).
The “notch” is in the charts (to make them look real) and now they can pump things back up in a few days, as always, and covered with the usual spin. There should be new highs by election day.The 40-45 degree long term climb will continue to 31,000 or higher and Larry will probably be correct.
I had funds ready to jump in when the long predicted decline in the market, and when it started down I waited too long watching the Dow and missed my low get in of AMPL. Now I wonder what it all will look like in the morning.
The Fed has morphed into our central planning bureau. We better pray that they self-destruct or we are done for. We have experiencing a chronic condition of sub-normal activity for a considerable period of time now, otherwise known as a depression. The stock market has done well, but at the expense of savers and about everyone else, much the same as in the Great Depression where FDR did about the same approach.
We will get through this depression when we learn that healthy economies are based on production and not consumption as Keynesian theory wrongly states. Supply side is the only way out. Say’s law states that production creates its own demand and the employees have paychecks too. We also need to look at the drag on our economy from the 22 million government workers who produce mostly nothing but the biggest drag of all, tons of regulations.
I hope somebody in a position to change things eventually sees the obvious way forward.
Hi Mike,
Thanks again for being one of the few and rather successful financial gurus that really cares about us! Feel like you are running beside trying everything possible to help us to the other side with some sanity and dignity. Just wanted to say “thanks and keep up the good work”.
Massive UNemployment because manufacturng jobs have gone overseas. The classic defense of domestic manufacturing is TARIFFS. But no one even mentions tariffs, not Chomsky, not Krugman, not Reich. Why not? Because Big Money wants to manufacture overseas, so it won’t let the media which it controls say “tariffs”? But Big Money doesn’t control Chomsky or Krugman or Reich. Tariffs may be a good idea or a bad one, but why don’t we even debate it? Afraid of reprisals and “trade war”? Who will stop buying American-made weapons or food? They NEED them! Let’s end the depression NOW!
Drastic Unemployment as manufacturing jobs go overseas. The classic defense of domestic manufacturing is TARIFFS. But no even MENTIONS tariffs; not Chomsky, not Krugman, not Reich. Why not? Do the media censor tariffs off the air because the Big Money that owns them wants to use cheap foreign labor? But Big Money doesn’t control Chomsky or Krugman or Reich. Is it fear of “trade wars” and reprisals? Who would stop their purchase of American weapons or food? They NEED them! So ban manufactured imports! If you want to sell it here, MAKE it here! End the depression NOW!
30 countries ban “Ebola (air) travel” but not US. ‘nuf sed.
30 countries “ban (ebola) air travel – but not US. ‘nuf sed.
Okay, there are 2 approaches to government policy towards the economy, and they are not mutually exclusive: Monetary policy and fiscal policy.
Our attempt at monetary policy was to expand the money supply. For that to work to expand the GDP the money has to be spent (that keeps the velocity up). What I see is the money going into excess reserves and inflated securities (velocity hass been fine, there) If the money had been loaned out by receiving banks in a normal way, we would se a large increase in home loans and business capital loans and housing and manufacturing would be going gang-busters. That is how the standard multiplier works.
We have made no attempt to use fiscal policy in any reasonable way. There is a large transfer to entitlement programs, but that is nothing new. You could inflate the economy by increasing SS payments, disabilities, etc, and this would go straight to demand. Recipients aren’t big savers in general. Or you could lower taxes by raising the threshholds for $200k down since that money is mostly spent. These are very immediate pumps. The most effective way of moving cash directly from money printing to demand is to decrease the social security withholding. This is socially acceptable (it is out most regressive tax), will impact the cash to spend of our poorest workers, and takes a month to implement. At the same time, remove the upper limit on income included to remove some of the ‘revenue-neutral’ sting.
Long and short of it, after a century of failing to fix anything, the Fed should stop trying. Like the boy who cried wolf, they are losing credibility faster than Solyndra.
It is very hard to have confidence in our Govt or the CDC right now. A travel ban is imperative- 30 other countries have done that already. And their assurrances about how hard it is to tansmit are very inaccurate. It is abvious the virus is aerosolized in droplets from cough or a sneeze, and they can survive for some time on surfaces(I have read for up to 2 days- tho sunlite and bleach will kill it). I have also read that the incubation period can be up to 42 days in 3% of the cases. We must all make our immune systems as strong as possible now. And there are many natural things that can kill viruses- herbs and essential oils for instance- that they don’t develop resistance to. Not to mention mega doses of IV Vit C, and hydrogen peroxide that have been used very successfully in the past to kill all kinds of deadly pathogens. Sadly- we can’t depend on our medical system to protect us at this scary time in our country- we must be proactive ourselves.
Here we go. mario Draghi is about to embark on the same disastrous approach as the Federal Reserve QE program. Einsteins definition of “Insanity: doing the same thing over and over again and expecting different results.” – would appear to be applicable to the Central Bankers of the world.
If the purpose of QE is to stimulate economic activity, why would use a distribution system, the banks, that was largely responsible for the collapse of economic activity in the first instance? Unless of course this is just to be a direct subsidy to bankers through ‘gimme yield curves’ and subsequent massive bonuses. Capital adequacy requirements provide absolutely no incentive for bankers to distribute loans down the food chain. (Mortgages aside are there any bankers left who know what a loan is?)
The burden of regulation aligned against people, companies and institutions in the smaller financial size categories is juxtaposed with the desire to stimulate economic activity.
Is it a surprise that we are looking at a deflationary environment when all the wealth creation since the advent of QE has gone to an incredibly small group of the general population? Hardly. $50,000 each to a million people is going to provide a shed load more stimulus than $50 Billion to one person.
Ben Bernanke had it right with QE but made the mistake of using the system to implement it. When he first said they could print money and drop it from helicopters, he just didn’t know how close he was to a better solution.
Here we go. mario Draghi is about to embark on the same disastrous approach as the Federal Reserve QE program. Einsteins definition of “Insanity: doing the same thing over and over again and expecting different results.” – would appear to be applicable to the Central Bankers of the world.
If the purpose of QE is to stimulate economic activity, why would use a distribution system, the banks, that was largely responsible for the collapse of economic activity in the first instance? Unless of course this is just to be a direct subsidy to bankers through ‘gimme yield curves’ and subsequent massive bonuses. Capital adequacy requirements provide absolutely no incentive for bankers to distribute loans down the food chain. (Mortgages aside are there any bankers left who know what a loan is?)
The burden of regulation aligned against people, companies and institutions in the smaller financial size categories is juxtaposed with the desire to stimulate economic activity.
Is it a surprise that we are looking at a deflationary environment when all the wealth creation since the advent of QE has gone to an incredibly small group of the general population? Hardly. $50,000 each to a million people is going to provide a shed load more stimulus than $50 Billion to one person.
Ben Bernanke had it right with QE but made the mistake of using the system to implement it. When he first said they could print money and drop it from helicopters, he just didn’t know how close he was to a better solution.
So, if our Central Banks continue to define Einstein’s interpretation of insanity, let’s get the into the US Mental Health System…..Yikes!!! Talk about broken systems!
The unemployment rate is a complete farce in America–complete propaganda. If Weiss wants any credibility, it needs to be like Peter Schiff’s outfit where they actually explain that the unemployment rate does not include the millions who gave up looking and it does not reflect the fact that many of the “new” jobs are part time, which is a crushing disappointment when you have a family to feed and are not real “job growth”. Weiss really should know better by now than to use the mainstream propaganda.