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Tuesday, January 22, 2008

The meltdown........

As you watch the financial markets melt down...... Hope you are long gold and long puts. Puts for the short term and gold for the long.

The markets are simply telling us that we have borrowed long enough and allowed the fed to inject money into the system to save us too many times. I don't know if this is "the big one" any more than any one else does. However, if you are living on the San Andreas fault, you don't laugh when you feel a serious shake. Eventually, the whopper is coming, whether you know "when," or not.

What we do know is that the fools we have put in positions of power have no answers. Our esteemed head of the federal reserve admitted last week he had "run out of answers" for the presentcredit crisis, which has caused almost a 2,000 point selloff in the Dow over the last six months.

One thing you can be sure of, though, is that we will NOT be willing to undergo the pain of getting our economy back on a stable footing. The grit and resolve needed to do that belongs to past generations. If we were so minded, we would be willing to weather a downturn and a recession, as the fluff is gradually absorbed by a market which returns to sanity and begins pricing investment instruments with principles of sound money. If the present generation of clowns we call "leaders" tells you anything, it tells you that people willingly believe in easy lies rather than hard truths, whether it applies to sexual license, dissolution of marriage, hard work, parenting, our ability to influence and/or rule other countries to our advantage, or easy credit. Once we have chosen to believe these lies, we seek leaders who will reinforce them and tell us that our foolishness is not only true, but that living lives based on lies is a "right." All the hoopla in the markets today is just another example of the effects of people unwilling to accept unpleasant truths, only this time it is in respect to money.

The fed WILL attempt to rig the markets. If we see a serious enough inversion in equity prices, we already know what our government will do. Witness this quote by Bernacke:

"As I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation."

Rest assured, folks. This is helicopter Ben (Bernacke)'s assurance to you that he will continue to destroy the value of the dollar on international markets rather than allow the markets to contract. If you doubt this at all, consider that Bush has a "crisis team" to "deal with" serious market turbulence. That always means only one thing....., printing money to prop up prices, or refusing to let people sell when they want to (shutting down the markets), or a combination of both.

UPDATE: They have just cut the fed funds rate 75 points. This is panic, people, not a considered well thought out strategy. Bank of America just joined the group of banks announcing huge losses.

Dump equities. Buy gold, oil, mining stocks. You might want to buy bullion. The worst is a long way from over.

Sunday, January 13, 2008

US to lose its AAA credit rating

This is unthinkable, yet is projected by Moody's, the formost credit rating institution in the world. For years,the definition of AAA rating, the most secure rating that can be had, has been measured by US government bonds. Now, according to Moody’s, unless the U.S. can curb booming health care and Social Security spending, it could lose its AAA credit rating by 2017. If the government were to lose the ranking -- which it has held since 1917 -- confidence in the U.S.’s ability to pay back debts will be seriously damaged, and the U.S. economy could face a disaster which has been heretofore unthinkable.

Current holders of U.S. government debt include foreign central banks, huge pension funds and sovereign wealth funds. They have traditionally looked to the USA as a "safe haven" for money. If funds (domestic and international) which ONLY invest in AAA rated securities have to eschew the US treasury market, we will be in the interesting position of having no one left to loan us money on the international market...., or at least we will have to pay significantly more for what we borrow.

But enough about that. Let's move on the to the REAL important stuff! Have you seen the latests Brittney Spears video? Isn't she just hot??? Oh My God. She is just soooooo slutty!! And have you seen the Golden Globe awards? And doesn't Hillary just look OLD in her pictures? Isn't the internet wonderful? We can just chat away about all the stuff happening every day in our culture. I might buy a new car if I can get a new credit card with a limit high enough to make the down payment with it.

Thursday, January 10, 2008

Save me, Ben Bernacke!!!

Legend has it that on Jan 24, 1936, Alan Foster, the first black prisoner to be executed by gas in North Carolina, cried out on his way to the chamber "Save me, Joe Louis!!" The event made its way into a speech by Martin Luther King, and since has been researched, debunked, and then resurrected as a historical....., "maybe." Who knows if it really happened.

I first heard it as a powerful illustration in a talk about how men look to false hopes for their security and well being.

The same principle holds true here with the financial big boys and their attitude towards easy money (aka "lower interest rates"). The fact is, that we have a dedicated Keynsian as head of the fed, with a "religious" faith that easy money is the way to stimulate the economy. (In essence, this means simply print more money when we need it) He has seen Japan for the last 20 years and he has a terror of deflationary recession. Thus his famous line about "we will be throwing money out of helicopters if that is what it takes."

Saint Ben

The book of Jeremiah (that is the Bible,folks) talks about the people putting their trust in broken cisterns, which hold no water. Men put their trust and hope in that which cannot rescue them. Thus is the trust of fools who believe that violating the basic rules of fiscal discipline can "save" an economy. The principles are as timeless as Proverbs: Hard work and thrift brings prosperity. Your property is YOURS (more technically correct, it belongs to God, but you maintain a delegated sovereign right to control over it). Wealth gained by deception is an illusion and will not last. Men (including leaders) are corruptible, weak, and untrustwothy. The borrower becomes the lender's slave.

One of the most recurring themes in those timeless principles is that God hates "deceptive weights." In the old days, men "measured" the gold/silver you paid for an item, and corrupt merchants would keep two sets of counterbalances. This allowed them to lie to you about how much your money was worth. Inflating a nation's currency is simply a more technological method of the government progressively changing the weights, thus progressively stealing wealth from its citizenry, and making our currency "worth less." (yes, the double entendre is intended)

The one reliable indicator of how much money there actually is in the economy is the M3. Interestingly enough, the gov't has decided about a year ago that they no longer need to publish it. There are other more abstract indicators out there, but the government chooses to rely on the "consumer price index" to measure the effects of inflation, rather than the source. The problem with the CPI is that it is a crock of manure. No one who fills up with gas or goes to the grocery store believes that our inflation is rising at less than 4% a year. This may be a difficult thing for the "party of the evangelicals" to grasp, but your government is lying to you. They are ruining our economy and the wealth of future generations because of one simple reason: they won't stop spending, regulating, and doing what bureaucrats love to do, accumulating power.

Printing money will NOT stop the slowdown. It won't save the economy, but it will ruin the dollar. If you are too young to remember those happy times of the 1970's (I was in grad school), then you don't know what it is like to have the economy slow (very few jobs, and lots of folks losing theirs) combined with inflation (every month prices are going up, up, up). The problem is that now, inflation is thought of as a cure, rather than a disease, as it will "get the economy going again."

The ultimate evil of inflation is twofold. One, it hits the poor the hardest. Two, it benefits the rich AT THE EXPENSE of the poor. The middle class, although they cannot "keep up," at least have salaries which will index for inflation. The poor do not, nor do the elderly. They don't know why, but they fall further and further behind. However, the flip side is that inflation benefits the very wealthy elite, because they "see" the money first, before it loses its spending power. Nowhere is this more true than the big money managers and bankers on Wall Street. This is an economic evil of tremendous proportions, stealing from the powerless to give to the rich. It is not just unwise. It is evil. Advocates of "social justice" who are perpetually arguing for more government intervention are encouraging you to dive right into the broken cistern. Likewise, those who wave the flag of "terrorism" as a justification for maintaining an empire of over 800 military bases around the world are, in fact, destroying your future security in the name of upholding it.

We have to stop spending, both on the Republican vision of "empire" and the Democrat nanny state. Both are liars who are selling you water from a broken cistern. You can only get away with it for so long. Our time is coming rapidly.

Have you begun to feel the pain?

If you follow the stock market at all, you might sense that something is beginning to go wrong. Or, if you make weekly trips to the grocery store...., or if you are trying to sell your house, or are involved in any number of normal activities.

The Dow is off a thousand points from August, and things are NOT picking up. Just off the top of our heads, we can think of a couple other issues that will continue to make for a weaker economy in 2008:
The current credit contraction is bad, and getting worse.
The collapse of the financial sector (Merrill Lynch just wrote off 15 BILLION in bad debt this a.m)
Two "market corrections" in the last six months
The dollar has declined to an all-time low against international currencies
Oil is at $100 or thereabouts ($94.59 as I post this)
Gasoline is over $3
Unemployment at 5% and rising
Food prices are at all-time highs, and rising
The national debt is over $9 trillion, It rises One Million dollars every 47 seconds, and that rate is accelerating
We have as a nation over $47 trillion more in unfunded entitlement programs
Social Security (what a name!!) will be busted at current spending levels in less than 15 years

....... Just for starters.

Our "conservative" president has gone back to the supply siders' basic argument, which is that the "Laffer curve" has no limits to which it can be pushed. He wants to cut taxes. From his last speech: " seems like Congress ought to be sending a message that we're not going to raise your taxes in the next three years by making the tax cuts permanent."

The idea behind tax cuts is a good one. Idiots have screeched that the tax cuts are for the "rich." My question is, who else can you cut taxes FOR? The poor in this country pay no appreciable income taxes. Arguing against a tax cut because it discriminates against the poor is a fool's argument. That is not the problem. It is the "rich" who start businesses, create jobs, and create wealth for the "oppressed poor." The trouble with the tax cuts in the USA nowadays is that they are NEVER offset by spending cuts, not that they put more money in the hands of the "rich." Ideally, tax cuts should be linked to the choking the REAL problem, which is the growth of government. Unfortunately, we have married tax cuts to the idea of deficit spending ("deficits don't matter" --Dick Cheney).

We have used the fiscal stupidity of collectivists to cut our own throat. Leftists, blinded by class hatred, argued that cutting tax rates reduces government revenue. This is nonsense. The "Laffer curve" is the theory that reductions in marginal tax rates (the higher rates the rich pay) produces GROWTH in federal revenue and not reduction. This is a good argument for reducing the tax rates of the rich. We actually get MORE of their money by taking a lower percentage of it. Leftists don't like it because they view taxes as a mechanism for punishing the rich and making sure they don't keep "too much" money (whatever that is). If we view taxes as a mechanism to raise revenue, rather than some halfwitted tool for social engineering, then cutting the tax rates for the "rich" makes perfect sense. Yeah, ok. Hooray for Rush Limbaugh and all that.

However,. the present bunch of leaders have taken the benefits of tax cuts (money in the hands of the people), which in fact produces more revenue, and failed to even take a passing glance at the necessary flip side of fiscal responsibility, which is restraint in government spending.

The congressional budget office released their report Monday, and the one thing you can be sure of is happening. Federal spending keeps rising by the billions. Our debt is also rising at the rate (checked yesterday a.m.) of approximately one million dollars every 47 seconds, and this rate is rising.

$Loading... = the
National Debt

This is just plain immoral. It is selling out our children for the feelgood present. My generation, the baby boomers, has to be the most selfish, self-absorbed generation in our nation's history.

The effects of our orgy of spending on our failing "empire" and the incredibly stupid attempts to address social programs/policy from a federal level will finally come home to roost (we are seeing the beginnings of it now), Ironically, it will be as the boomers (my generation) are entering the period of greatest need coupled with our time of least power. Do not be surprised if the youngsters decide we just aren't worth the trouble and refuse to shoulder the lion's share of the debt, which is the 47 TRILLION dollars in unfunded Social Security obligations we have racked up.

"Sorry pop, I hate it about that heart valve. I am flat broke. Billy needs surgery to correct his _______ and you know, he has a FUTURE. Yeah, I know you really need it but, ya know.... YOU SPENT IT ALL!"

Wouldn't that be cosmic irony?