The Guillotine Blade, by Robert Gore
For the last six years, US financial markets have conspicuously suspended disbelief. If you keep getting new credit cards and maxing them out without paying them down, you’ll go bankrupt. Incredibly, Wall Street and Washington “economists,” blessed by a majority of academics, assure us that what inevitably leads to ruin for an individual leads to prosperity when followed by governments and central banks. One branch holds that government debt is the key to economic growth; the other branch holds that a central bank exchanging its own conjured-from-thin-air debt for that government debt is the answer. Either branch removes economics from the pretension that the field is a science. Almost as inapt is the reluctant concession by a few that it’s more an art. No, this economics is destined for the Weird and Tragically Deluded Cults bin with the Moonies and the Kool Aid guzzlers.
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This is an excerpt. To read the full article, please click the link above.
Cui bono
Go figure.
Hey, we know your POV and my POV here... :)
2. Cutting current government paid retirements to the military and to social security recipients.
3. Suspending COLA to zero or manufacturing a minus COLA
4. Increasing taxes such as the Value Added Tax on goods and service. A tax on a tax since all the taxes are already embedded each step of the way. Itis a value subtracted tax.
5. Cutting the military and increasing the protective echelon.
6. other forms of enhanced taxes as small as a one quarter percent to one percent to direct taxation bank fees for example and direct taxation through fee increases
7. Raising import duties on goods from other countries by one percent to five percent. China?
8. Desperate is when they let corporations like GMC fail, tax union membership, Cut welfare payments, move money from the military to the protective echelon and militarize the protective echelon.
9. In the meantime inflation, devaluation and debt repudiation which means all or some of the above will continue.
Lots more they can do.
That's why everyone should vote Republican and Democrat =Government Party Right?.
A good dictator however will always pay his security forces first. Chalk up another failure for Obeyme and the Humanoid Party.
I predicted the RE crash in late '04 and sold my house. I met my wife in '05, and we rented, until '10. In '07 around the time of the first talk of fiscal stimulus (after the subprime debacle and just before it spread to so-call Alt-A loans), we moved into what we throught were less volitile dividend-paying stocks. I remember saying, "This RE thing is insane, but the big financial institutions must have a plan." I was dead wrong. The high-yield stocks and covered call strategy did not protect us, and our stocks lost almost half their value. We held no bonds. Our business income doubled during this time by good fortune as the economy tanked, and we poured the money into large cap stocks. That turned out to be a good approach.
We are moving out of anything growth (except emerging markets) and into to income stocks and intermediate bonds. If S&P drops to near 1500 w/o major drop in projected earnings, I will write SPY puts in the 150 range and sell the bond funds to buy SPY if I should get assigned. If I get assigned during a crash where SPY << 150, that will be painful, but I don't care b/c in the really big picture I think automation is increasing return on equity, and I'm willing to pay 15x earnings to get in on that. I try not to obsess about it b/c if we can make our businesses double again (easier said than done), predicting how well big companies do won't matter as much.
I put money in financials in '06 and '07, so you can't trust my predictions. I laughed off Mort Zukerman saying he put his billions all in Treasuries in '07. But I did predict the RE bust.
I'd be interested in a paid area of straightlinelogic that suggests specific porfolios and tracks their performance.
The one move that stumped for a while until it was explained was zero interest T Bills as a replacement for the shortcomings of FDIC insurance. For the people at that level it represented some form of faith in the Government's ability to print money as a plus. Losing some to inflation and devaluation is considered preferable to losing all to the $250,000 limit.
To the desperation list add repudiation to T Bills and currency exchange. Another to add is turning in all gold 'hoardings.'
I'm already experiencing some moves within regulations by not providing certain obvious choices on the application forms. Signing up with VA does require complete disclosure of assets but does include a selection for military retiree and the Tricare/Medicare Part B that goes with it.
I'm waiting for an answer to that little omission. If it comes as fast as their answers to other questions I'll be a long time passing when the letter shows up.
Very cool. It's easy to say this, but it's a lot of work and risk in exchange for providing liquidity to the market and preventing bubbles. If it had been easier to short real estate, the bubble may never have gotten as big as it did.
"Once again the mainstream will treat it as some sort of out-of-the-blue phenomenon, instead of the recognizable consequence of debt growth that has been far greater than underlying economic growth for decades."
I agree completely with this.
Here's the IRA performance for my wife's and my IRA since we handed over our money to Ken Fisher's company to manage...
Time from 06/03/2004 to Today: 11 years 3 months
Avg. % Change/Year (0.96)
That's an AVERAGE Decrease of under one percent Per Year... and includes paying their management fees (quarterly) and pulling a steady flow of cash out for living expenses (to supplement SocSec).
Of course, we started with about $1.09M way back then, but the TOTAL FEES AND withdrawals, as of TODAY came to ($702,324.64).
Yeah, almost a 1% per year "drop"... or, barring SocSec stopping completely, somewhere near 100 years more left to draw... Yep, what the hell does Ken Fisher know?
Try reading some of HIS books, too... he's very repetitious because it seems just telling a consistent story for decades doesn't get through to a lot of people.
We LOVE Ken's Kool-Aid. Works for us...
And he's been wrong... once... in not seeing how badly government regulations could screw up the economy back around the 2005 times... and learned from that.
He (and MarketMinder) say we're in 'volatility times' but the fundamentals really don't warrant the fears and trepidations we always hear from the MSM.
Of course, he (and I) may be wrong, and if the SHTF, we're all screwed, but his view of history and data has been compelling for 'only' the almost-dozen years we've trusted our loot to him.
Hey.... "Whatever."....
And no, I don't get a toaster if you sign up with him... at least, I don't think so.... :)
"Belief ran much deeper back then; now it’s hanging by a gossamer filament."
This article focuses on "faith", "trust", and "belief". What is this belief in? Is it belief in loose monetary policy, belief that structural deficits can be fixed w/o long periods of unused production capacity (i.e. a bad recession), or valuation models for businesses? I'll take those three one at a time.
1. Monetary policy - Faith in the policy doesn't matter. The price of a broad basket of goods and services tells us if we have inflation. We can work out how its affecting (or not affecting) the economic cycle by looking at gov't numbers or by looking at sales of industrial equipment companies like Caterpillar (CAT) to work out where we are in the cycle using independent data.
2. Structural deficits - I believe they could be fixed very easily, but we'll only find the political will when there's a crisis. It's like a family running up a bunch of credit cards and home equity loans, and running a $1500/mo deficit. It feels like there's no way to fix it, but when they hit the limits, they find things they can cut from spending an ways to earn more money.
3. Business Valuation - If a business earns $100k a year consistently, it's easy to see how it's worth nearly $1M. If that $100k is poised to grow significantly, it's easly worth $2M. S&P traces at > 20 P/E, so we're really pushing historical norms. Maybe the market prices in the future impact on earnings from an automation revolution. Maybe we have a few more years of expansion priced in, putting us at a market peak for this expansion. If so, we'll see values drop, and our minds will see that Gaussian noise as a pattern that looks like a saw-tooth (decending staircase) or some other form. I don't see how #3 relates to monetary policy. This pattern of business valuation pricing in predictions about the business cycle is a very old one.
It's when the common people start to accept that view in large numbers that you know we are in a bubble. This has been known for centuries. Several previous episodes of it are recapped in Davidson and Rees-Mogg's Blood In the Streets.
I know I keep referring back to this post,but...
http://www.galtsgulchonline.com/posts...