The parallels between the market action so far in 2016 … and the action during the bear market of 2007-09 … are uncanny.
Market Roundup
The powerful waterfall declines.
The massive oversold readings they generate.
The intense (but short-lived) bear-market rallies that follow, usually inspired by some policymaker somewhere trying to come up with a “solution.”
It’s déjà vu all over again, folks.
Yesterday, European Central Bank President Mario Draghi tried to sell investors on the idea that there are “no limits” on what monetary magic he can perform. That apparently is his next catch phrase, now that “whatever it takes” was already used up.
Then overnight, we heard increasing chatter that Bank of Japan Governor Haruhiko Kuroda will act next week. Then he said in Davos, Switzerland that he has “many options” and “further room” for more QE. The comments gave asset prices another boost.
But here’s the thing: Draghi already threw the kitchen sink at the markets in December. Investors weren’t impressed, and stocks tanked not long after. The BOJ did the same thing, launching so-called “supplementary” easing steps. Investors weren’t impressed with those, either, and stocks tanked not long after.
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| Something may be coming soon out of the Bank of Japan. |
This refusal to buy (for more than a few hundred points or a few hours/days) what central bankers are selling is a key reason we’re in a bear market. Investors now appreciate the important point I’ve been making for awhile: If any of this spaghetti being thrown against the wall actually worked, we wouldn’t need more central bank pasta every few months.
But enough about my philosophical views. Today, I want to do something different for you. I want to share a couple pages from my “Bear Market Playbook.”
Let’s go back to December. I saw the markets trying to rally on positive seasonality and a temporary cessation in the selling in key markets like junk bonds. But I also continued to see signs of behind-the-scenes turmoil in corners of the credit market, in foreign equities and bonds, in leveraged loans, and elsewhere. I also saw ongoing underperformance in more credit-sensitive small capitalization stocks and financials.
Those were the very same indicators that first warned of trouble in stocks last spring. They were some of the very same indicators that alerted me in 2006 and 2007 that a major bear market was looming. So I concluded, based on my playbook, that the rally was total bunk – a brief respite amid a broader downturn that was nowhere near over.
My course of action: Refuse to let the bounce shake us out of longer-term bearish positions. I recommended my subscribers hold on to virtually all of them. I even went a step further, adding a couple fresh bearish positions — focusing in particular on the most vulnerable names. That included European mega-banks and companies with outsized exposure to emerging markets.
That approach was richly rewarded as reality came crashing down for overinflated stocks in early 2016. So I pulled out the playbook again and shifted into high gear. I used the waterfall declines in vulnerable stocks to recommend subscribers peel off rounds of profits.
But I also continued to see a lack of panic selling. The declines were weirdly orderly, and the VIX remained relatively tame — despite several days where the Dow swung by a few hundred points.
That wasn’t what I’ve seen in true short-term selling crescendos in past bear markets. So I only recommended people take partial profits on some positions. I also recommended they “grab and roll down” to lower strike prices on select options. That helped them pocket some gains, while still leaving them with skin in the game.
As we got more and more oversold, I shifted to a strategy of lowering their overall exposure. Then as some of my targeted stocks got closer and closer to my original downside targets, I implemented one last strategy. I recommended they place some above-market, limit sell orders.
| “Stocks can move very fast and very far, but sometimes reverse in the blink of an eye.” |
The idea: In crescendo selling phases of bear markets, stocks can move very fast and very far, but sometimes reverse in the blink of an eye. Better to have some pre-set targets out there so you don’t miss out. Sure enough, my targets on a few positions were hit … then the market bottomed out amid hope for more central banker happy talk.
That brings me to the late-week oversold rally, spurred on by the factors I mentioned earlier. Will it last? Will it go further? What does the playbook say to do next?
Frankly, it looks like all of the rallies I saw in 2007-09 along the way to the ultimate low. Some were spurred by Federal Reserve rate cuts. Some were spurred by comments from the likes of former Fed Chairman Ben Bernanke or Former Treasury Secretary Henry Paulson that the housing crisis was “well-contained.”
Others simply came out of the blue after you had temporary selling crescendos. I remember one in early 2007 when mortgage lender New Century Financial went broke, and another when troubled investment bank Bear Stearns collapsed and had to be rescued by the government and JPMorgan Chase (JPM) in early 2008.
But none of them held — not until all the policy mistakes and economic excesses of the bubble were wrung out … all the vulnerable companies who went crazy during the boom went broke or got taken over for pennies on the dollar … and all the bullish investors who kept chasing every short-term rally finally gave up.
I don’t see signs of that being the case yet. I still see too much hope, too little panic, and too much blind trust in failed policies that we know don’t work. So my advice is as follows:
Let the rally run its course. It could last for a few more days since the BOJ and Fed meet next week. We could even see 16,500-16,600 on the Dow if enough momentum buyers glom on.
But don’t get sucked in. Use any significant bounce like that to lighten up on any vulnerable positions you didn’t unload when I warned repeatedly last spring, summer, and fall that we were facing a potential market crunch.
Then when the short-term momentum runs out … when the next supposed “solution” is actually announced … and when the oversold condition is worked off, pounce. Add new positions designed to help you profit from the next leg down.
Does that make sense to you? Or do you think global policy actions here will put a lasting floor under asset prices? Did we get enough selling earlier this week to set the stage for more than an oversold bounce? Or do you think there’s more to come?
How are you positioning your portfolio in light of this massive volatility? Please let me and your fellow investors know in the comment section.
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With another crazy week coming to a close, the market discussions are really heating up online.
Reader Josephus offered this take on the tumultuous sell offs and rallies:
“This financial storm will hit bad. As with weather, you have to stock up with a lot of energy to keep warm, so stock up with real money and cash and let it rip. Once the storm spins itself out, you will still have plenty left, unless you give it away to the spendthrifts.”
Reader Steven said: “The problems with Europe’s financial markets appear to be systemic. They are the expected result of their policies. They only have two choices: Continue their policies until all of the liquidity is concentrated into what will become a financial black hole OR admit failure and defeat and walk the ‘belt line’ of public scorn and consequences.
“The latter is hardly likely to happen, so I would advise positioning your finances and assets well beyond the event horizon as it were.”
On the flip side, Reader James C. offered a bit of optimism about the outlook, particularly in Asia. He said:
“China will lead the recovery in the world economy. Even if its economy slows sharply over the next few years, its long-term prospects remain bright. China faces many obstacles to growth, like its fragile banking system and the lack of a transparent legal system. But if reforms continue, there are good reasons to believe that rapid growth can be sustained.”
If you’re looking for investing strategies beyond what I’ve offered, Reader Jason suggested the following: “Load up on 2016 American Eagle Silver Dollar coins and batten down the hatches. The Dow’s little mini-spike higher is nothing but a lull before the storm!”
Or you could try Reader Jim’s tongue-in-cheek suggestion: “My new retirement plan is to stash my rubles in an Italian bank.”
Thanks for sharing! We could all use a little humor in these trying times. Make sure you add your trading ideas to the mix this weekend when you get a chance. You’ll find the discussion section below.
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I haven’t had much to say about the gathering of millionaires, billionaires, policymakers, and press in Davos, Switzerland this week. The reason: The World Economic Forum always involves a bunch of speechmaking, debate, and chit chat – but little real news. Events are highly scripted and no one really speaks out of tune.
But I’m definitely seeing and hearing more reports about increasing worries behind the scenes. And if you are looking for a Davos fix, here’s one item quoting International Monetary Fund head Christine Lagarde and her concerns about the global economy. Here’s another discussing intensifying worries about the fate of the European Union.
The snow, ice, high winds, and rain is really coming down across a wide swath of the Mid-Atlantic and Northeast now. Dubbed Winter Storm Jonas (unofficially) by the Weather Channel, it’s causing accidents, power failures, school and work closures, and airport delays and cancellations in several states.
How much does Google (GOOGL) pay to have its search bar show up on Apple’s (AAPL) iPhone? Apparently $1 billion in 2014 alone. That’s one shocking bit of news from a lawsuit that Oracle (ORCL) is pursuing against the search giant. Google fought to have that information kept out of the public domain.
Staying ahead of the game as always (Ahem), Moody’s said it’s reviewing the credit ratings of 175 major energy and mining companies around the world. That includes energy giants like Royal Dutch Shell (RDS.A), as well as extremely troubled domestic producers like Chesapeake Energy (CHK). Debt downgrades may follow at any time.
Do you think the policymakers gathered in Davos have a handle on what’s going on – or are they clueless about the turmoil to come? What do you think about Moody’s decision to reconsider its energy credit ratings? Are you surprised by how much tech companies pay each other for things as simple as search bar placement? Let me know in the comment section here.
Until next time,
Mike Larson
Recommended Articles by 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.
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Buy into the bleeps going up, for me that being as much as 90% invested. Sell after 2-3 weeks of up blips; for me that’s going down to 75% invested. Use some skim for R&R. Do the same drill until the market comes out of correction; let the bear have some rest. When the bull appears, get on the bull and ride until the bull needs some rest. Nature keeps us in good health !
I don’t try to time the markets. My strategy is a long term one that started around 1990. I buy bullion gold on a regular basis. To date I have sold only one coin -at 500% profit. Just recently I bought back the same type of coin and will continue to buy.
And the Chinese bank threw, what was it, 60 billion yuan at it, and the Chinese market yawned……………
This market will soon nosedive. I look at the order books and all the fake bids. The blackboxes are trying to pump up the market and when they give up there will be no bids. They all have similar algorithms and this will happen all at the same time. Look for ginormous blocks being sold in the order books. They won’t be able to disguise it. Also the data from this corrupt administration is pure fiction at best.
Don’t you mean impure fiction? Bordering on obscenity, at least.
I agree and any razzle dazzle re stress testing wil go towards entities the govts have no legal option but to bail out worse case scenario as for meaningful enforcement of protections for the small retail investor this is so not high on the priority list since the govt has no obligation to bail them out
Jbizzle
Its good to see someone doing their homework. GE just announced (ouch) 8% loss. I guess their CFO,s just could not find enough salad dressing to dress up this wilted information. Yes it is the battle of the algorithms. I wonder where all the Treasury bills are going that foreign investors are selling to stay afloat? Could the US government be buying them up with funny money and shuffling them into a secret drawer somewhere. They obviously have no shame. At least the ladies of the night have to perform a service for money.
My strategy is to short all rallies as long as there is a debate in the media about whether this is a bear market or not.
Trusting media information to invest by. Interesting philosophy.
Davos is a yawn and almost always wrong at turning points. See the recent piece by Marc Chandler (via his Twitter feed) and listen to the interview on Bloomberg with Bill Rhodes.
They eat drink and make Mary. Its a gathering of the clan so to speak. After its over they spread to the 4 winds and tells the world is in wonderful shape.
Please keep as new
January is a good month-with very high volatility
PUTs and CALLs (OPTIONS)is the way to go !!
Bought TQQQ at 1:45 on 10/20 on a trendline violation….. Up 14.5% at Friday close
Make sure you keep us up to date on your losers as well. We like balanced information not just bragging.
Will do…. That was not bragging…. That was my actual trade….. On that day I sold TZA (from 1/13) and bought TQQQ as the Q’s were gaining faster than IWM….. You might remember that on the 1st trading day of January, I also gave a long term SELL signal and said I was taking a long term position in SQQQ….
Please return to your practice of including all of the Money and Market Afternoon Edition within the email that you send us. I am blind and it is time consuming for me to navigate thru the website with my text-to-speech reader to get to the rest of the Money and Market discussion each day. It is much easier for me when you include all of the content within the email.
Look for DOW 12,483 or a 50% retracement according to Fibonacci. 2009 DOW 6,667. It grew to 18,300. Fifty percent retracement comes to DOW 12,483. Lets see if we get there. The first retracement level was 15,554. We hit 15,400 and are now having a dead cat bounce. More room to go on the downside.
I think your 2009 numbers at 6,667 are still above Harry Dent’s numbers by 50%
I’m a little confused. Weren’t you guys the ones who kept urging us to pile into the stock
market ’cause all these scared rich Arabs and Europeans had nowhere else to put their money
to work safely? Now all of a sudden you called the correction over a year ago. Give me a break.
Its hard to drag a camel across the desert loaded with bags of money. Much easier to invest in the American stock market. You can lead a camel to water but you cannot make him drink. Its a little early to call this a correction. I want to see some positive news from American companies when they report I mean real honest numbers not those fudged numbers after share buybacks and M & A to goose profits you know the real number that show factories being built employees hired and products sold not stored as inventory. This kind of market reminds me when as a kid we went to the fun house and looked at our distorted bodies and laughed. After these fun houses went out of business I guess the corporations bought up the mirrors.
Good analogy….. That said, you are actually better off to let the camel go and he will lead you to water….. Of course you might want to tie a rope from you to the camel as he can go a lot longer without water than you can and hopefully he will drag your unconscious body into the lagoon pond when he finds it…….
Robert I totally agree….however, you must remember that there’s more than one “you guys!” You have the “bull guy, bear guy, interest rate guy, commodities guy, etc…” all barking up different trees of differing market direction(s) we’re headed. All the bases are covered! Speaking of Davos & “billionaires” you would “think” that at least ONE of these “tree huggers” would be worth more than Buffet and Tepper combined and attending the “conference” for their infinite wisdom. Well, how bout it “guys?”
I closed out many of my positions this week and did OK on most. As I watch the market and many individual stocks move, I feel they are erratic and tense. We truly are seeing bear market rallies. Thanks for your steady hand on tiller preventing me from being drawn in before the final plunge.
The markets peaked in May of last year, found a low in August, rose to a lower high in November, then a lower low in January of this year. the chart forms a slowly descending channel, which seems likely to break to one side or the other fairly soon. If there aren’t fundamentals that would put it higher, it can only go lower. I don’t see those positive fundamentals.
Chuck
The central banks have already played their best hands and the fundamentals stink. I agree that we are more heavily weighted to the down side.
Ah yes Chuck one of the more gifted posters. If your not an old timer like me living in Thailand you have a bright future. Your like an onion peeler who with tears in his eyes can peel back the layers and see the market for what it is. Sadly I do not see a naked core only a rotten one. The problem with the market is from the inside out. Its rotten to the core. A lot of that is due to government manipulation which should be illegal. With the market it is drink champagne on the way up on the way down well lets intervene to slow down the pain. To have some gain you must have pain.
Steady hand? Read the above, they cover all angles, and all possibilities. No real advice. nor positions. They cover all bases, and this is hardly helpful when looking for advice on market futures, and positive investments. Looks to me like a lot of hot air!
Well, I missed some good moves since going into cash in early November. But, I’m waiting to get on the Oil Train. I feel like 15 to 20 is a good time to start buying options, my theory is oil will bottom in the next 60 days, probably 15 to 20, then move up to 65 by Sept. pulling back, then continue gradual move up by the end of 2016, holding 60 to 70 this year. Any suggestions from the option traders? I’ve never used options before this.
Wyndell
What is the basis of your theory that would suggest an oil bottom in the $15-$20 range n the next 60 days?
He got a Ouija board for Christmas.
The world is running out of empty oil tankers (ships). There are huge fleets lying at anchor around Malaysia. During the coming months the owners of that oil are going to run out of maintenance-money and will have to unload. Others will be able to hold on longer.
Along with all the oil being produced by the existing producers, as well as Iran, there’s no fundamental reason for the price to go up significantly. The risks are to the downside.
Meanwhile manufacturing and economic activity is declining, so worldwide oil-use also goes down.
In addition, several countries have reached the point where personal solar PV cost has declined to below parity with the grid. That will further decrease the scope of the oil market.
The oil producers will keep on boosting their production as long as their marginal costs are covered, or until they run out of storage space.
The bottom in the oil-price will only be reached when we start hearing of significant volume of producers actually stopping production. The frackers may be top of this list, but there are many others.
My take is that the oil-price will continue to bump-and-grind its way down for several years.
The fact that the Saudis are discussing the possibility of a public offering for Aramco indicates that they too feel their normal oil revenues aren’t going to return any time soon. Taking their trillion dollar company public would bring in a lot of extra cash they need without higher prices. Jim
The only reservation I have is Doug Casey’s truism. “When dealing with commodities you are a contrarian or you are broke.” Jim
The other wild card in future oil demand is whether or not the climate change threat is real. I hear the crescendo of doom and gloom from politicians and press that fossil fuels are estroying the planet. On the other hand, I read a credible report saying that approximately 150 gigatons of CO2 are released into the atmosphere every year and that only 5 were a result of human activity. It almost reminds me of the Roswell Incident. Many sources on each side of the debate seem credible. The truth would really help. Politics seems to taint every aspect of human endeavor. Jim
Jim, Pick up any recent geology book. The most reliable data on global warming and colling, which corresponds to understanding of glaciers and when they occurred from studying the earth’s surface, shows that the earth has been warming for 75,000 years and that warming and cooling has seen greater variation for 800,000 years. While the rumored 95% of scientists agree that man causes global warming they must not be reading any of the latest geologic data.
Plus another factor is human caused global warming is big business in educational environments.
I have also read that the Malinchovich Cycle rigidly controls global warming and cooling trends. We are indeed in a warming trend, but this is predictable according to this theory. The mean distance from the sun in our elliptical orbit combined with the variable tilt of Earth’s axis toward the sun coincide precisely with periods of glaciation in the past. The angle that the sun strikes the Arctic pole is the variable in long term ice accumulation and thusly Northern American weather trends. This also accounts for the current drought in California. If this theory is correct and members of the scientific community are aware of it we are being had. I’m suspicious of all political activist motives to begin with. Jim
Global warming is the newest religion on the planet
Yes, the researchers affiliated with the Weiss Research org. cover all angles (and their derrieres too). Please keep in mind that we are in a bear market. It started in Oct. 2015 and usually a bear market lasts about nine months. I’ve been investing in the stock market since I was 19 years old. I am a senior now and I’ve learned over the years how to deal with the ups and downs of the bear/bull markets. For now, the best way to invest your money during this bear market is to purchase safe/defensive Blue Chip stocks such as GE or PFE.
Hi Mike
Since the climate change conference, the climate has changed many times. Little can be expected from the Davos talkfest either. It is these same politicians who have given us the mess our countries are in now. I’ve never been able to accurately to pick market bottoms. Maybe they could run a conference on this topic and do something useful??
Davos is a nice place to visit. What they should be doing is reading some different economic theories till they find something that coincides with what we have been seeing.
There are a number of approaches and theorists who show greater debt isn’t the solution but the problem.
As Yogi said: “It ain’t over till it’s over!”…….and there’s a long way to go until the “Fat Lady Sings!”
When we get to the fork in the road we should take it! Jim
I am hitting the LIKE button
Can you please tell me how safe money markets are for the upcoming bail-in? Is it better to have a non-retirement money market or a Roth IRA money market during a bail-in? A year ago I took my money out of the stock market and put in in money markets anticipating the worst. Is a place like Vanguard or Fidelity better than the banks for bail- ins? Is there a safer place? I have also been investing in physical gold. Thanks.
How can we be at “The massive oversold readings they generate” if the VIX is less than half of it’s 2008 levels?
jjjpjr Its those keep buying on the dips dipsters talking. They can be dippy at times. If your selling stocks like they are what do you want them to say. You say what benefits and profits you the most not your customers. Look at Goldman Sachs back in 2008 they were trading against their own clientele. You never talk down your product any good salesman knows that.
In the Uk when we had a coalition government the Liberal Democrats boasted that they stopped a lot of tory cuts and now we are paying the penalty for the lack of real Austerity George Osborne has to wake up and get a real grip on our economy and the Debts.
Real austerity hmm. Seems like another sinkhole to swallow up the poor and fatten the rich. I think the 1% ers who now own half of the worlds money are doing OK on their own thank you but their paid for government representatives seem to insist that they need more. Its a vicious circle the more the rich make the more they contribute to their flunkies in power the Conservatives being among the worst. Sadly its a vicious circle who tolerate a certain party for a few years and then kick them out in favor of a party they discarded in past years. The truth of the matter is politicians do not get better after a period out of power they just get more innovative at lying to get their turn at bat. We are in the ninth inning folks.
This correction has a long way to go yet. I’m only a partial short term market timer as long as the timing is consistent with the overlying trend. This overlying trend is down now… I agree with all 3 of Mike Larsen’s bullet points of advise. Relevant to his statement in point 3 (“…Add new positions to designed to help you profit from the next leg down.”). I assume he is referring to inverse etf funds. I have done that profitably and exit upon either short term profit goals or change in fundamental news that I speculate will prop the market up again. Good luck to all.
I’m following Larry Edelson’s advice here: Expect volatility, and don’t be too heavily invested in equities right now.
Mike, What about the derivatives in the system its madness, these bankers are psychopaths.
Martin or you have never mentioned reserve fraction banking which to me is fraud, which all governments get away with.
this is an absolutely brilliant article by mike larson. his bear argument is logical and his strategy is sound. we’re at a very difficult moment in the markets. are we at a bottom? should we buy? or, is there more downside? mike pulls no punches and lays his views on the line backed by solid, fundamental evidence. if mike is proven right in the days and weeks ahead, in my book he’ll be respected as the new stock guru of the weiss group. folks, here’s a guy willing to take the markets head on and tell us straight up what he thinks is going happen when most analysts cower behind a wait-and-see attitude. everyone should read this article at least twice.
i’ll give you an example. here’s my wishy-washy prediction. the technicals suggest this may be the bottom of the bear trap, in spite of the fundamentals that say we go lower. i have no conviction on this, just a maybe. i place myself in the cowering, amateur analyst group. i wish i could have mike’s expertise and convictions, but i don’t.
I agree, this is the best article he has ever sent me. Jim
Well at least the Planet X has been found. As a subscriber to the least expensive Weiss product, Mike’s Money & Markets. I think I get my subscription worth. My only negative comment about Mike is he allows certain positions to drop 20% before issuing a sell recommendation. When the knife begins to fall it only costs $7 to let it go! The current market top of 18,400 was incredibly overvalued and I am currently out of all stocks. Who cares about a dividend when you are taking a huge loss in the price. I followed some of Mikes short positions and have done well. My oil short has done better than anything in the past 4 years! If the FED goes back to zero or negative, starts printing money, we may see a brief run. I am not risking the possible short term gains for the horror of the downside losses in the flash crashes as the dow descends to 7000.
Stansberry, Casey, Sprott, Davidson, and especially Harry Dent all have valid observations. They are all right at one time or another. The Dent argument of demographics pulling down the US and Global markets is valid. I find humor when I see them stealing each others research. How about the 76 to 1 silver / gold ratio? I think silver will be a good move for physical when it tanks below production cost. And I am amazed at the historic bottom of the Baltic dry shipping index. Talk about the canary in the mine.
Charger John
Harry dent has been calling for a crash since 2010. Broken clock is correct twice a day. If you followed dent last five yrs would have been wasted
Why not put cash in cefs paying 10-15 percent monthly and reinvest dividends over long haul.
Mike I think your most important point is if any of this QE worked we wouldn’t need any more of the spaghetti being thrown against the wall.
Government spending requires one of two things to happen, greater taxes or greater borrowing, both of these take money away from taxpayers who would spend it on their own needs and desires. So the government is taking money away from those who earned and saved it to proceed with their personal political views of where money should be spent. That is exactly what is weakening the economy and creating instability.
Political leaders have no idea how to strengthen an economy. All their creations simply create conditions for a greater fall and as we have seen the poor, who supposedly are being helped, are the people taking the brunt of political economic stupidity.
I find it very illuminating that not one presidential candidate of either party has seriously addressed the $19 trillion national debt in any meaningful way. I gues its going to fix itself. Jim
ive noticed obamas idea on debt is that it is good our soon to be 19 trillion debt is coming up fast before Obama leaves its going to be well in the 20+ trillion category when Obama took office it was 10 1/4 trillion and it took several hundred yrs to get there Obama is going to more than double it in his 2 terms worst president ever
Al and Jim, politicians know how to spend money, especially if that may help their chances in the next election. They do NOT care that their spending may make it tough on the voters, as long as they can blame it on someone else, especially an opponent. Our whole political system needs an overhaul to make it obvious that WE the sheeple pay the cost of government – that all the grandiose dreams of politicians mean money out of OUR pockets. Of course the politicians will never let that happen!
Vote for the candidate that will look out for the 97% and things will get worked out….. I remember another Politician who found himself in much the same situation in 1932…. That was FDR and our grandparents elected him more than any other President in American history…… He also had to take on a lot of debt in order to turn the economy around then….. Lucky for him, he did not inherit a HUGE NATIONAL DEBT, like Obama did, which had built up since 1981….. If I remember right, the ONLY time between 1981 and 2009 that the debt did not increase was during the administration of Bill Clinton……
It’s a nice idea Eagle495, but I would still like to see an honest open debate between the candidates and hear what they are going to do to fix the place up.
If the 97% get represented by the majority and the President, the taxes on the wealthy will have to go back to where they were before 1981, corporations will have to be forced to return to America and the tax havens for the Ultra Wealthy will have to be forced to close and return to America, again, like they were before 1981, along with Citizens United removed and Glass-Steagall returned to law…….
The 3% only got to where they had more wealth than the 97% three times in the past: 1929, 2007 and now….. In my opinion, the 3% have bought off the current majority of politicians and that has to change….
The only candidate that has this right is Mike Huckaby. We have an incomprehensible tax code. The K street lobbyists have carved out so many tax credits and exceptions for their wealthy clients that even though we have a nominal corporate tax rate of forty percent, well connected companies like GE pay virtually nothing. If we implemented a simple and competitive tax code with no loopholes companies and capital would pour back into this country, no matter who the President is. Big companies fear the innovative little people so they tilt the playing field with regulations and taxes only they can afford. These Crony capitalists must be brought under control or we are sunk as a Republic. As much as I hate to suggest it, an apolitical outsider with extensive business savvy may be our best hope. Jim
Graphs I’ve seen show debt has increased steadily since Reagan and accelerated lately. It increased in all administrations since Reagan.
But I don’t see it as a Democrat versus Republican issue even though debt has doubled since Obama took office. Reagan had the discipline, through Volcker to beat inflation, though certainly those high rates shouldn’t have helped the economy. My view is that starting primarily around that time all countries have played the export game. NAFTA and the WTO and world trade have been the PLAN amongst world politicians. Perot lost the election and that battle. World trade has been the primary economic game. There have been many other consequences such as loss of American jobs to cheap labor world wide. Probably the primary reason for income differential. Of course corporations lobby for their interest and pay off politicians to support their cause. They are fighting against world competition. It’s there. The world isn’t a completely fair place. Around 2000 it cost 1/10 the cost to build a silicones chemical plant in China than it did in the US. My point is it isn’t as simple as Democrat or Republican. The world competition changed what the game was. I think the game changed from moral views in America to survival in the export game and world devaluation of currencies to stay in the game if you were an exporter and everyone wanted to be that. Capital became free as every country played the easy money game in an attempt to survive.
I think the game even played out in the financial industry and hence Glass Steagall was removed. Now it looks like a big error but then it was likely survival instincts that ruled the decision. America had to defend itself and stay in the game with any industry it could. It also appears the financial industry has been given too much help, derivatives for example, but again competition likely at the heart of it.
Ricardo’s Theory of Comparitive Advantage doesn’t take into account the vast differences in incomes or culture. It seems every time world trade has thrived there comes a great debt collapse. As Americans we develop Democrat or Republican theories as to right and wrong but it’s probably more likely a world we don’t recognize and competition we only partially understand.
Some good points Al
The removal of Glass-Steagall ALWAYS was a huge sell out… Amazing what $400 million in lobbying can do to win votes of the politicians (for the 3%) that are supposed to be supporting the 97%…….
If ever there was a reason that Hillary should NOT be elected, we look no farther than to her husband who signed the Republican Legislation (Gramm/Leach/Blyle) to remove Glass-Steagall which allowed the cabal of Banking/Brokerage and Insurance to run wild, and bring the Crash of 2007, just as they did in the 1920’s which resulted in the Crash of 1929! The other reason is that he signed the Republican legislation from the HW Bush Administration that brought NAFTA and robbed America of millions of good paying Middle Class jobs at great profit to the 3%!….. :(
I’m totally with you, Eagle495, on Glass Steagall. I don’t think we need banks to compete with other nations. We don’t need derivatives or having banks compete with individual investors. That makes the whole game no longer investment but trading even to the tune of thousands of trades per second. What does that have to do with investing in America?
Similarly I’m with you on NAFTA, not that I don’t support free trade, but that when you have Chinese workers and others making less than 1/10 the salary of US workers why kill your work force, just as Ross Perot stated with the giant sucking sound of jobs lieaving this country. When wages were similar sure condone free trade. But that’s all over now and there are new ramifications of removing trade.
The big trust busters where FDR and Teddy Roosevelt who refused to sell out to the 3% and they were BOTH Progressive Liberals…..
I can’t get past the proposition that those who don’t follow the rules and make bad decisions are entitled to the same things as people who do follow the rules and make good decisions, who are then asked to pay for it all. The Progressive Ideal is a pathway towards spreading and reinforcing the misery rather than everyone improving their lot by following the rules and making good decisions. The fact that their is just as much if not more poverty and social injustice after fifty years of Progressivism is proof of that. The Progressives mean well, they are just wrong. Their way eventually leads to financial and moral bankruptcy. It’s also a matter of prioritizing individual liberty or collectivism. I’m for individual liberty. I guess that makes me a Conservative. Jim
I hear you’ve you got rubles in your 401k Jim???
Taxes alone are not going to repay the debt.
The reason I believe that Mr Trump has half a chance are as follows.
1. No one owns him
2. He has a proven track record in business and it’s the business world we need to reconnect to.
3. He is not directly aligned to and failed political ideology.
4. He knows how to get things done and is an American first
Yes we need to reign back in effective controls
This is bigger than just shoving around the tax burden. Tax on its own is not the answer. The idea that you can’t get congressional approval to build a new school or a new bridge without another $1 billion worth of add-on’s in congress to get it through has to be reconsidered. We spend too much, we waste too much, we pander too much to special interest groups and the little guy trying to raise a family has his kids stuck with the tax bill and the immorality of it all. It stinks. Gay rights has more of an ear in Washington than the little guy. These are the things we need to change
one caveat. there’s a big spike in the m2 money supply. as bearish as thing are, a spike in the m2 like this can dramatically prop up the stock market. this is a behind the scenes money printing rescue by the fed. it’s worked many time in the past. like they say, don’t fight the fed. a bottom in the bear trap now would solely be a trump card move by the fed.
For the past 45 years we have seen government inspired and mandated inflation. What if the markets somehow have come to realize the stupidity of this, and are simply giving it up and returning to something like the balance we had before? Dream on, you say, markets are impersonal and non-political. Non-political? Think again. Markets are the soul of politics. Markets have far more power than politicians and bureaucrats. Like a surgical operation to remove a cancer, it could be messy, but cleansing, too.
Now it is time to get out and start working on about 30 inches of wind-packed snow. A little at a time, at my age.
Same here Chuck…… Got about two feet….. :( Thank god for snowblowers…… In reference to your point about politics and the markets let me repeat this FACT:
Stock Market returns based on the Political Party of the Administration in power 1929-2012:
Democratic Administrations: Annual average return: 10%
Republican Administrations: Average annual return: o.4%
Difference in accumulated returns difference during the above time period: 167 TIMES greater returns under Democratic Administrations.
Source: Alan Grayson- Economist, Attorney and Florida Representative. Earned degrees from Harvard University (worked his way through as a janitor on campus). New York Times: “Poor Dumb Rich People”
Relative to the claims above about Donald Trump being a good businessman, there are a number of articles out there that point out that Trump would be MUCH richer now if he has simply taken the money his Father left him and invested it into an S&P fund rather than attempt to make more money with all of his developments…….
Now I have to go blow snow myself…… :(
I hope your blower worked better than my arms and back, Eagle. I got less than half done. Yes, Trump HAS gone bankrupt several times, I believe. He would no doubt lead this country into bankruptcy also. Maybe that is what a lot of us want, as a people. The start over syndrome, or something.
I believe you re a veteran…. Can you imagine what would happen to the world, if overnight, America, the Great Protector, went bankrupt? What do you think the Chinese or the Russians would do?….. I shudder to think…..
Snowblower worked fine…. Got a bunch of widows in our neighborhood, so it is about a 2 hr. job… Pretty tiring, just the same….. I’m no Spring Chicken either!….. :(
We will be fine… We are just making a turn like we did from 1932 forward… Sadly, the 3% and their paid off Quisling have made things a lot worse this time….. That said, we still make the turn and slowly the 3% will have less and less wealth and the 97% will have more and we will get our bills paid again….. And, if history is any predictor, our great grandchildren will forget the stories we told them and they will let the Quislings to the 3% back in and another cycle will begin again….
The thing is Chuck and Eagle, is that we are already broke and still kicking the can down the road. We have almost no hope of repaying this debt and the forward estimates. Mr Trump knows what it is like to be broke and has survived. Maybe he can help us all survive.
We’ve “been broke” for a long time…. He’s NEVER been broke… Only the corporations he has formed and the contractors that did business with him were left broke…… You think a rich, narcissistic kid like him would all of a sudden give a crap about the common citizens? Personally, I see him as a Classic Carny Barker and would not trust him with a plug nickle!… :(
Sure Dems return more they are willing to create debt and run without a balanced budget. Republicans balance the budget and then the Dems run up the debt again. Reagan fights off inflation and then Clinton captures the growth.