Tuesday, June 9, 2015

Did You Realize This?

As June is the season for weddings and graduation, I came across these words of advice from an unlikely source. It does not render itself to nuptials, but speaks loudly to the class of 2015 and the rest of us.
Peyton Manning, the QB of Denver reminded us all that an amateur built the Arc and "experts" built the Titanic.
In our so-called modern society we have segregated jobs with education. We classify it as specialization. Then, through time, a certain degree of recognition is gained from experience in the different fields. Of course, doors open faster if you know someone and thus the saying, it is not what you know, but who. Then again, any time one uses the word segregated, it implies another level of difficulty and some doors never open. Dear reader, it is not just minorities that have doors shut on them, but a whole level of society. People, who continue to grow and develop products or ideas have the same doors shut to them. This is a serious problem in America. We are losing our social mobility. This is the problem why my book goes unpublished. Furthermore, almost all the new technology advancements came from venture capitalist, not companies. Shark Tank is a reality. Innovators give up so much just to get a chance. This is very sad for America.
Yes, I'll have some cheese with my whine.
Putting that aside another tidbit has come to focus and the focal point of this piece. Did you know that margin debt pertaining to stocks is included as growth in our economy when the GDP is reported? You see, according to the "experts" margin is credit and credit is considered growth. This obscured manipulation of GDP gets more unreal and dangerous when I add this important aspect to it.
You see, dear reader, that margin debt is off the charts.
Record Level
Yes, it broke the old record of 2007 which broke the previous record back in 2000. Funny thing about those two previous record, the market crashed on both occasions.
This time will be different. Great BS by the pundits and this time, they're right. No, not what they imply, but the fallout will be more devastating than 2008. Margin debt in correlation to our GDP is at 97% in the US which is almost 1-to-1. This is why markets crash. No one challenges the experts that this margin could go south, leaving the investor with debt and losses not to mention what that aspect will do to this manipulated use of credit to be classified as economic growth. With all the people running for office in 2016 not one dares to debate this scary situation. People only spin positives with half truths like this is not another dot.com bubble, now we have earnings. What they don't say is that the buybacks are used to cover shortfalls in revenues, put the company in debt because they use borrowed money from the cheap rates by the Fed. Many, many other examples like Apple taking a loan to provide a dividend.
In addition to this margin debt there is business loans and consumer credit. When you add all three to the picture, you would think that Steven King wrote the script in this economic horror.
Margin debt is 2.89% of our GDP.
Business loans are 10.57% of our GDP.
Consumer credit is 19.04% of our GDP.
of our economy is nothing but debt and credit loans. Is it no wonder that America does not create wealth for all its citizens? Is it no wonder that we have a class/wealth gap? And all this hoopla over the market, blinds one to this next very important point.
Market Cap
In relationship to GDP is at its highest peak since 1991 according to a report by NIA(National Inflation Ass.). They looked at the top 24 countries and the average ratio is 90%. Stocks are considered overvalued at 75%. Presently, the US is at 97% and many countries like Japan are at 100%. In fact, over half are at 95%. The last time this occurred was in 2007. Enough said!
If you think or believe the above is bad, I will remind you, dear reader that government
manipulation to GDP is off the charts when you consider the next recent changes.
Lights, Camera, Action...
if you are a movie or television producer and whatever work you perform in your environment is now considered economic growth. All the costs are included as gains in the economy. It doesn't matter whether the movie fails, the show is dropped by a network or even the fact that it was so bad that it didn't even get completed. Yeah, this helps America and promotes the general welfare of... lobbyists and the connected. How about a new computer with all the bells and whistles? This gets a double category. It lowers the CPI because it makes you more productive and this productivity increase is a plus to GDP. All our agencies have been poisoned by appointments as favors, the government only spins positive lies and even with all its manipulation, the economy contracted in the first quarter.