The Federal Reserve is not only a sickness to sound money which rewards hard work with the fruits of labor, but it affects the mentality of a nation. When rational people see how it operates, they succumb to the thinking of easy money and credit to act irrationally.
The original push to create a central bank at the turn of the 19th century centered upon the fact that liquidity was a major recurring problem in the economy. The backer's, big money banks, stated that a central bank could keep credit and currency steady in the economy. There was no talk of an inflation mandate or an unemployment watchdog.
Then and Now
We now know their system is based on new money covering old debt through the destructive practice of stealth inflation. They slowly devalue our currency by printing new money to buy old bonds that provide liquidity for government to spend what they don't have in revenues. This is the argument that Republicans claim that Democrats are the "spend and tax" party. The only problem is that they do the same thing by taxing the nation as they generate returns with loopholes and subsidies for their backers who were the same people who pushed for the Fed in the first place back in 1913.
Since the Fed began, the value of our dollar has declined by 95%. They failed at their original concept and worse, they have insidiously affected both our corporate thinking as well as our individual approach to debt and credit.
Back in the "old" days before credit and debt were plentiful, people saved to make a purchase and paid in cash. After WW 11, with checking and the advent of credit cards, people slowly changed their approach to want and needs. With LBJs "Good Society" why not buy today and enjoy life. I can pay at the end of the month and balance my account. Their children learned this approach. It worked well until daddy got laid off or lost his job. Then, credit becomes a burden that must be repaid, but individuals cannot print money to over their expenses. We had a recession in the 1970s and a study shows that social mobility peaked in 1971, the same year President Nixon ended our currency tied to the gold standard.
Cheap Money
The advent of cheap money began with Greenspan and a study shows this is the beginning of the wealth gap in the US economy which grows each year due the continuation of cheap money. A study by Bank Rate finds that 25% of Americans have more debt than savings. In addition, another 13% have no debt and no savings. Together (37%) are living from paycheck-to-paycheck.
Then, there is the continual, make it up as we go along approach by the Fed. HARP loans is a program designed for people under water with their mortgages due to the last boom and bust mentality of the Fed. It has helped, but check this out. Now, you can refinance without an appraisal. Before the recession you could buy with a Ninja loan(No income, no job, no assets)and now, money no matter what the value.
Dear reader, it gets worse because the Fed was determined to get rid of the gold standard and now, it wants to eliminate currency from our society. They put out the virus and the creative, destructive nature of capitalism takes over. Everyone knows that credit cards make big bucks and therefore, an opportunity to take market share from them.
Pay Pal, Apple Pay, Square - Bitcoin
Technology helps the credit mentality by using your smart phone to spend what you don't have. You believe that you can settle up at the end of the month or put the bill on another credit card by playing rotation cards of credit. This works until your hours are cut or get laid off or fired(See Daddy above in 1970s). The serious problem that I see is this: Our economy has $11.7 trillion in M 2, which is currency in circulation, deposits, money market accounts and notes, but the currency segment is only $1.3 trillion. Any liquidity problem will cause cash to disappear from circulation due to fear that bank accounts, credit cards and checking will be frozen like in Cypress. The very first mandate will be violated again because cash will trump credit and of course, gold will trump cash. Funny, how that works.
Corporate World
This same approach to cheap money effects corporations. People, G.E. has more debt than Greece! Corporations issue bonds and only use the money to cover dividends and buy back stock. There is little or no research for new or better products. IBM has seen its revenues decline quarter after quarter, but it makes its estimated income. Why? Because the buybacks shrink the shares in the market and covering their guidance is easy. They are not alone as this is the standard practice of S & P 500 companies. Earnings and revenues are down, but the market is at all-time highs. Everyday people take for granted that these people know what they are doing. Ha! See or find Lehman. AIG went from $1451 a share to $7 bucks. Countless others would be long gone, shares worthless, if it weren't for the Fed intervening.
It is not only the corporate world. Government agencies know that the Fed will print and cover their asses. The FHFA, Federal Housing Finance Agency recently increased obligations of our government and us, taxpayers by lowering restrictions to Fannie Mae who went from $60 a share to .30 cents. Its sibling Freddie Mac did likewise. So now, they can buy and sell bonds to generate income to pay the government even if they are losing money. They are true wards of the state(so much for capitalism). At present, they have increased their ledger to the tune of $408 billion. If they fail again, and they will, who gets the bill? We do. The Fed will bail out the government, but no one will bail out you. The backers knew that back in 1913. This is the real reason why they wanted a central bank. It was the same reason why President Jackson ended the(central) Second Bank of the US. The central bank is socialism for the banking industry in case they screw up which they have, multiple times. This is another reason why I say, End the Fed!
Wednesday, February 25, 2015
Thursday, February 19, 2015
Reason #3: Why End The Federal Reserve
Do you remember the broad game, Monopoly? There is a great correlation with it and the Federal Reserve. Let's go back to yesteryear and you are having a family game night. Dad introduces everyone to the game of Monopoly. He explains the rules which basically is to eliminate your competition by winning all the money and property until you are king of the hill, top dog, number one!
The game moves along with your favorite piece. I like the car. You land on the Baltic States and you buy. Later, Dad lands on your property. You charge him a toll. You collect rent. Still later, dad lands on your sister's property. She collects rent too. Finally, dad lands on Mom's property and she extends her hand for rent due. Dad isn't doing well. The odds say that he will be the first one eliminated.
Now, compare the US government to Dad. The US spends more than it collects every year and at the same time, the US dollar is the world's reserve currency. This means it has universal usage. This is why all commodities get transacted in dollars. This makes dollars special, but the distributor of those dollars, spends recklessly.
It has its citizens so fooled that when the monthly balance it released, our stock market rises because the deficit was only $44 billion for the MONTH! Now, one would think in the game of life(not the other board game)that the US will eventually lose its status as the world's reserve currency if it keeps spending more than it collects. No, dear reader and this is the conundrum of life and money. Before I continue with reality, let us return to the board game.
When last visited, dad was losing his shirt. Then, he lands on a solid piece of property, Park Place. He wants to buy it, but you laugh because he can't afford it. No, children and family of Dad. He throws out cash and the wad that he counts the correct amount, appears larger than the three people that he is competing against. How can this be? Dad is cheating. He prints money out of thin air for whatever he needs and any amount. Bottom line: you don't want to play with a rig game and family game night ends along with other doubts about dad and his beliefs.
This is how many countries in the world see the US. We print in excess. The value of the dollar has fallen over 95% since the Federal Reserve came into power. When we devalue, we export inflation because everyone else has to buy dollars to trade. They are hoping for another system, but since none is on the horizon, they don't rock the boat. However, there is deep resentment and if another currency should seek to be number one, they may join. Then, our dollar will fall even further and our economy will be hit hard with inflation A gallon of gas could rise to five dollars. Just double and triple the price you pay for food, utilities and clothes. If this ever happens, you can thank the Fed, which is why I say, End the Fed!
The game moves along with your favorite piece. I like the car. You land on the Baltic States and you buy. Later, Dad lands on your property. You charge him a toll. You collect rent. Still later, dad lands on your sister's property. She collects rent too. Finally, dad lands on Mom's property and she extends her hand for rent due. Dad isn't doing well. The odds say that he will be the first one eliminated.
Now, compare the US government to Dad. The US spends more than it collects every year and at the same time, the US dollar is the world's reserve currency. This means it has universal usage. This is why all commodities get transacted in dollars. This makes dollars special, but the distributor of those dollars, spends recklessly.
It has its citizens so fooled that when the monthly balance it released, our stock market rises because the deficit was only $44 billion for the MONTH! Now, one would think in the game of life(not the other board game)that the US will eventually lose its status as the world's reserve currency if it keeps spending more than it collects. No, dear reader and this is the conundrum of life and money. Before I continue with reality, let us return to the board game.
When last visited, dad was losing his shirt. Then, he lands on a solid piece of property, Park Place. He wants to buy it, but you laugh because he can't afford it. No, children and family of Dad. He throws out cash and the wad that he counts the correct amount, appears larger than the three people that he is competing against. How can this be? Dad is cheating. He prints money out of thin air for whatever he needs and any amount. Bottom line: you don't want to play with a rig game and family game night ends along with other doubts about dad and his beliefs.
This is how many countries in the world see the US. We print in excess. The value of the dollar has fallen over 95% since the Federal Reserve came into power. When we devalue, we export inflation because everyone else has to buy dollars to trade. They are hoping for another system, but since none is on the horizon, they don't rock the boat. However, there is deep resentment and if another currency should seek to be number one, they may join. Then, our dollar will fall even further and our economy will be hit hard with inflation A gallon of gas could rise to five dollars. Just double and triple the price you pay for food, utilities and clothes. If this ever happens, you can thank the Fed, which is why I say, End the Fed!
Wednesday, February 11, 2015
Truth In Data: Who You Gonna Call?
With more questions than answers today, you may wonder, "Who You Gonna Call?" You can't call Harold Ramis, the creator of Ghost Busters. Sadly, he passed away.
The biggest problem with government today is not ideas to promote the general welfare, but the antagonists to those ideas. Not to delve into one particular issue because time and space in a blog cannot do it justice. However, I will scratch the surface with an example. Someone notices that their water looks cloudy. They sound the alarm. People take notice and they agree that something should be done. Rules and regulations are drafted that protect the public from unscrupulous and shady operations that spew dangerous chemicals into our water supply. Those operators complain. They provide jobs, but the dangers outweigh the benefits. The same, greedy owners resist spending their profits on filters and or other improvements. They find it cheaper to hire a lobbyists to fight the proposed rules and regulations, especially when they can get other polluters to contribute to the cost.
This is the real problem with government. It is no longer of the people and by the people because no one is for the people.
Do you recall the "cold war" lessons from your history class? The bureaucrats of the U.S.S.R. gave positive economic reports right up until the Soviet state collapsed. Lehman Brothers got the same positive ratings even up to the day it died. Going back to the U.S.S.R., the Russian people realized long before the finish line that their government reports were only propaganda tools. Is the US today any different?
Is it not true that in every six months or so, some company is caught violating Libor Rates, fixing prices like the aluminum scandal or mortgage fraud? My problem and question is who brings agencies like Bureau of Labor Statistics(BLS)to court? We can't even audit the Federal Reserve for peace of mind with our banking institutions.
Old Days
before computers, we had visible proof of the economy. There were long lines at the unemployment office, food stamp outlet and the welfare line. Today, we are fed facts that no one can validate. The media is guilty of conspiring with the same reports. No one offers an opposing view or at least, no one is given equal time to offer a different set of facts. We know that there are 48 million people collecting food stamps and other supplemental benefits, but we never see them in mass. We can't even distinguish them at the grocery store. They have debit cards.
Yes, things are better than 2008, but outsourcing hasn't been addressed. Yes, unemployment is down, but part-time jobs with low pay doesn't make one feel better about life or their future. The number of Americans with full-time jobs as a percentage of the population is at the lowest level in 40 years. The BLS should be reclassified to the BS office. The story that they tell is manipulated. Is their illusionary tale of our economy any different than the bureaucrats of the U.S.S.R.?
Who You Gonna Call?
The biggest problem with government today is not ideas to promote the general welfare, but the antagonists to those ideas. Not to delve into one particular issue because time and space in a blog cannot do it justice. However, I will scratch the surface with an example. Someone notices that their water looks cloudy. They sound the alarm. People take notice and they agree that something should be done. Rules and regulations are drafted that protect the public from unscrupulous and shady operations that spew dangerous chemicals into our water supply. Those operators complain. They provide jobs, but the dangers outweigh the benefits. The same, greedy owners resist spending their profits on filters and or other improvements. They find it cheaper to hire a lobbyists to fight the proposed rules and regulations, especially when they can get other polluters to contribute to the cost.
This is the real problem with government. It is no longer of the people and by the people because no one is for the people.
Do you recall the "cold war" lessons from your history class? The bureaucrats of the U.S.S.R. gave positive economic reports right up until the Soviet state collapsed. Lehman Brothers got the same positive ratings even up to the day it died. Going back to the U.S.S.R., the Russian people realized long before the finish line that their government reports were only propaganda tools. Is the US today any different?
Is it not true that in every six months or so, some company is caught violating Libor Rates, fixing prices like the aluminum scandal or mortgage fraud? My problem and question is who brings agencies like Bureau of Labor Statistics(BLS)to court? We can't even audit the Federal Reserve for peace of mind with our banking institutions.
Old Days
before computers, we had visible proof of the economy. There were long lines at the unemployment office, food stamp outlet and the welfare line. Today, we are fed facts that no one can validate. The media is guilty of conspiring with the same reports. No one offers an opposing view or at least, no one is given equal time to offer a different set of facts. We know that there are 48 million people collecting food stamps and other supplemental benefits, but we never see them in mass. We can't even distinguish them at the grocery store. They have debit cards.
Yes, things are better than 2008, but outsourcing hasn't been addressed. Yes, unemployment is down, but part-time jobs with low pay doesn't make one feel better about life or their future. The number of Americans with full-time jobs as a percentage of the population is at the lowest level in 40 years. The BLS should be reclassified to the BS office. The story that they tell is manipulated. Is their illusionary tale of our economy any different than the bureaucrats of the U.S.S.R.?
Who You Gonna Call?
Thursday, February 5, 2015
Super Bowl, Chicken Wings and Inflation
Some people say that the economy will soften because the Patriots won the Super Bowl. They claim the big game has developed an indicator with 81% accuracy. They claim that if an original NFC team wins the game, the economy expands. However, if an AFC team wins the game, the economy weakens. I use to follow this crazy line until I realized that like everything else, it is massaged and manipulated. Just look at the two teams who played. Seattle was a expansion AFC team that was moved to the NFC. The city of Boston has teams come and go over the years. Some in the original NFL and some in the original AFL. Pittsburgh is another example. It is an original NFL team, but they were moved to the AFC. There are other cases with the Cardinals, Rams and Colts. In reality, the NFL is a reflection of our society. You got good guys like Thomas Davis and bad guys with long sheets at the police station. Then, you got the manipulators. These are the guys who buffed up the stat lines by curtailing defenses. How does this relate to the cost of wings and the concept of inflation? Glad, you asked.
BLS
Bureau of Labor Statistics released their "official" inflation figures. They fell in November to .03%, and again, in December to .04%. "No inflation!" they say. Well, how come the cost of chicken is up 8.3% just this MONTH? And dear reader, wings are up even higher.
People, it is not only wings. I saw an ad from Publix Supermarket. It had rib-eye steak on sale at $11.99 per pound. Are you kidding me? No wonder I can't remember the last time that I had a steak. Keep this in mind, this was the sale price. It actually costs more! It's like going to a Cadillac showroom. Why waste your time when you know you can't afford one. Prices at the supermarket give you the idea to lose weight by not eating...at all.
*eggs up 23%
*dairy up 17%
*meat up 22%
*bread up 16%
* my favorite, the elixir of life, coffee up 14%
Now, you may argue that coffee is not essential, but it is the little pleasure that I crave in the morning and it is the second largest import after oil into the US. And don't forget sugar, not that fake stuff. It is up in price, too. Then, of course, the coffee makers kept the price similar with their "old" standby trick. It is their Houdini act. Same container that use to have a pound, and then, 12 ounces and now, 9.3 ounces. Get out of town!
Big Mac
index is used by many analysts'. The only problem that I have with it is the conclusion. They study the price of the burger throughout the world and use the information to say whether a currency is over or underpriced. I remember when it cost just one dollar and now, it is four times that amount. That, folks, is inflation. I guess those same analysts don't want a mark on their resume, because they want a government agency job and saying there is inflation is a no-no.
Jim Clifton
is the CEO of the polling company, Gallup. He called out the government, Wall St. and the media for lying about unemployment. I like this guy, but I think he chose the wrong word. He should've said, deceived. He should post the old Abbot and Costello routine on unemployment. They said it best. I even read a piece by the next agency hopeful who stated that the low ratio of people to the workforce at 62.3% does not have any value to the economy as a whole. Maybe I'm wrong. This guy could run for president in the Republican Party. Then again, I'm sure there is a Democrat out there with ways to show lower inflation because whatever the figure, it is tied to social security benefits under COLA(cost of living). If inflation was calculated correctly, social security checks would rise. Can't let that happen and of course, the US federal deficit would fall off the charts. The low inflation numbers allows the Fed to use the same deception to keep rates low. This is the central theme in my unpublished book, all things are related. So, let's get real and show the real world.
Big Day
you go to a family or friends gathering. You're happy because at the gas station prices are down a lot. You remember one dollar a gallon gas. You remember four dollars a gallon gas. Now, you are saving $700 a year on gas, if it lasts. You don't want to think about the rumor for tax increases to cover roads, bridges and budgets. You grab some chips, beer and soda to bring to the party. They all cost more, but hey, I saved on gas. People at the party mention the bowl indicator. You think about it on the drive home. If things go south, will my job also fly south as in offshore? Hey, the Pats won and I saved on gas. You put on a radio station to hear the post game hype.
P.S.
Everyone from the government, the IMF, World Bank, Wall St. to the media state that our economy will grow by 3 to 4% every year, but in reality, this is the 9th straight year will less than 3% growth. Deceive, not lying is the correct word.
P.S.S.
Who is the biggest deceiver of all? Got to give it to the BLS. Why? Because they have the audacity not to include food and energy in their inflation report. Those are the two things that you need and use everyday.
BLS
Bureau of Labor Statistics released their "official" inflation figures. They fell in November to .03%, and again, in December to .04%. "No inflation!" they say. Well, how come the cost of chicken is up 8.3% just this MONTH? And dear reader, wings are up even higher.
People, it is not only wings. I saw an ad from Publix Supermarket. It had rib-eye steak on sale at $11.99 per pound. Are you kidding me? No wonder I can't remember the last time that I had a steak. Keep this in mind, this was the sale price. It actually costs more! It's like going to a Cadillac showroom. Why waste your time when you know you can't afford one. Prices at the supermarket give you the idea to lose weight by not eating...at all.
*eggs up 23%
*dairy up 17%
*meat up 22%
*bread up 16%
* my favorite, the elixir of life, coffee up 14%
Now, you may argue that coffee is not essential, but it is the little pleasure that I crave in the morning and it is the second largest import after oil into the US. And don't forget sugar, not that fake stuff. It is up in price, too. Then, of course, the coffee makers kept the price similar with their "old" standby trick. It is their Houdini act. Same container that use to have a pound, and then, 12 ounces and now, 9.3 ounces. Get out of town!
Big Mac
index is used by many analysts'. The only problem that I have with it is the conclusion. They study the price of the burger throughout the world and use the information to say whether a currency is over or underpriced. I remember when it cost just one dollar and now, it is four times that amount. That, folks, is inflation. I guess those same analysts don't want a mark on their resume, because they want a government agency job and saying there is inflation is a no-no.
Jim Clifton
is the CEO of the polling company, Gallup. He called out the government, Wall St. and the media for lying about unemployment. I like this guy, but I think he chose the wrong word. He should've said, deceived. He should post the old Abbot and Costello routine on unemployment. They said it best. I even read a piece by the next agency hopeful who stated that the low ratio of people to the workforce at 62.3% does not have any value to the economy as a whole. Maybe I'm wrong. This guy could run for president in the Republican Party. Then again, I'm sure there is a Democrat out there with ways to show lower inflation because whatever the figure, it is tied to social security benefits under COLA(cost of living). If inflation was calculated correctly, social security checks would rise. Can't let that happen and of course, the US federal deficit would fall off the charts. The low inflation numbers allows the Fed to use the same deception to keep rates low. This is the central theme in my unpublished book, all things are related. So, let's get real and show the real world.
Big Day
you go to a family or friends gathering. You're happy because at the gas station prices are down a lot. You remember one dollar a gallon gas. You remember four dollars a gallon gas. Now, you are saving $700 a year on gas, if it lasts. You don't want to think about the rumor for tax increases to cover roads, bridges and budgets. You grab some chips, beer and soda to bring to the party. They all cost more, but hey, I saved on gas. People at the party mention the bowl indicator. You think about it on the drive home. If things go south, will my job also fly south as in offshore? Hey, the Pats won and I saved on gas. You put on a radio station to hear the post game hype.
P.S.
Everyone from the government, the IMF, World Bank, Wall St. to the media state that our economy will grow by 3 to 4% every year, but in reality, this is the 9th straight year will less than 3% growth. Deceive, not lying is the correct word.
P.S.S.
Who is the biggest deceiver of all? Got to give it to the BLS. Why? Because they have the audacity not to include food and energy in their inflation report. Those are the two things that you need and use everyday.
Saturday, January 31, 2015
What If I Told You This?
That Apple would have a record quarter earning over $18 billion? That another hamburger place would offer an IPO? It was priced at $24. per share. Shake Shack would rise to $45. per share on the first trading day. That Amazon would finally have a quarter where they made money after five straight losing periods? In fact, it was a blowout and the stock rocketed upward by $42. per share. That Google, home of my blog, would also earn big profits? Its stock surged by $23. per share. Finally, to round out the format, a health company, ICPT, would also rise beyond belief, up by $32. per share. Putting the above together, I bet that you would have mortgaged the house, put your margin limit to the limit, placing your hard earned money that the stock market would rise?
And you know what?
You Would Be Wrong.
Why? Because you forgot or worse, didn't read my 2015 Forecast. In it, I said the first quarter was a sure bet to correct by 10% due to the rising dollar which is even higher at the moment. I don't want to brag, but I also stated that silver would rise in 2015 and it is up by 7%.
What The Market Is Saying
While bellwethers are riding high the internals of the market are decaying. Remember, I gave you, dear readers an important indicator, the Baltic Shipping Index. People, it is lower now than in the mist of the financial crisis of 2008. This affects everything! Products aren't moving because no one is buying. The talking heads in the media didn't inform you ahead of time about the oil glut and all they are saying today is buy the dips. Now, they say lower gasoline prices will put over $700. for every household which will spur the economy even higher. Not so fast, Kimosabe! Fact is gasoline consumption has declined every year since the recession of 2008. Those shills forget two facts. One, people will seek ways to avoid inflation(higher oil prices) and two, demographics, especially, older workers dropping out of the workforce or participation rate. It is lower now at 62.5% than 45 years ago and declining. Distribution is taking place. Do not get caught in a downdraft thinking that the market cannot go lower. It needs the Dow to fall to 12,000 to be fairly valued.
Bonds
are screaming the truth! The ten year US Treasury is down to 1.63% and France or Germany only pays .5%. Bonds are rising in price which means rates will go lower, not higher. Dear reader, this is the smart money, however, I don't feel that they are too bright by getting a negative return in buying bonds. Central banks have issued so much debt that it is crushing their currency and government budgets. The US Fed can't raise rates because the dollar will go higher, the euro and yen lower and our exports will die on the vine. Not to mention that since our companies have outsourced all our industry, their profits will sink due to currency exchange.
Hey, I Told You So
and keep in mind that all the agencies from the IMF to the World Bank to the Federal Reserve to the ECU have all stated growth as they always do because they all print which masks the rising prices as progress by them, but it is not. Price stability is progress and only a strong currency can give you that, not fiat paper. It has no internal strength. Only gold offers this strength which is why I say, End the Fed!
And you know what?
You Would Be Wrong.
Why? Because you forgot or worse, didn't read my 2015 Forecast. In it, I said the first quarter was a sure bet to correct by 10% due to the rising dollar which is even higher at the moment. I don't want to brag, but I also stated that silver would rise in 2015 and it is up by 7%.
What The Market Is Saying
While bellwethers are riding high the internals of the market are decaying. Remember, I gave you, dear readers an important indicator, the Baltic Shipping Index. People, it is lower now than in the mist of the financial crisis of 2008. This affects everything! Products aren't moving because no one is buying. The talking heads in the media didn't inform you ahead of time about the oil glut and all they are saying today is buy the dips. Now, they say lower gasoline prices will put over $700. for every household which will spur the economy even higher. Not so fast, Kimosabe! Fact is gasoline consumption has declined every year since the recession of 2008. Those shills forget two facts. One, people will seek ways to avoid inflation(higher oil prices) and two, demographics, especially, older workers dropping out of the workforce or participation rate. It is lower now at 62.5% than 45 years ago and declining. Distribution is taking place. Do not get caught in a downdraft thinking that the market cannot go lower. It needs the Dow to fall to 12,000 to be fairly valued.
Bonds
are screaming the truth! The ten year US Treasury is down to 1.63% and France or Germany only pays .5%. Bonds are rising in price which means rates will go lower, not higher. Dear reader, this is the smart money, however, I don't feel that they are too bright by getting a negative return in buying bonds. Central banks have issued so much debt that it is crushing their currency and government budgets. The US Fed can't raise rates because the dollar will go higher, the euro and yen lower and our exports will die on the vine. Not to mention that since our companies have outsourced all our industry, their profits will sink due to currency exchange.
Hey, I Told You So
and keep in mind that all the agencies from the IMF to the World Bank to the Federal Reserve to the ECU have all stated growth as they always do because they all print which masks the rising prices as progress by them, but it is not. Price stability is progress and only a strong currency can give you that, not fiat paper. It has no internal strength. Only gold offers this strength which is why I say, End the Fed!
Wednesday, January 21, 2015
The First Domino Falls
There is an old expression on Wall St. that says, "the market can act irrational longer than you can stay solvent." From where I sit, the market is definitely in the irrational stage. I see a big correction coming, but the powers-to-be will do everything to prove me and others wrong.
First Piece
fell last week in China. For years China has instituted "make work" projects that has a labor force of 136 million people employed. Real estate projects like a complete city, capable of holding one million people, now built and sit completely empty. Tall, new skyscrapers that house only a passing bird nest. In busy locations prices have risen ten-fold and amazingly, no end in sight until now.
Kaisa Group Holdings Ltd.(1638)
is a Chinese real estate developer that missed a loan payment of $23 million on its dollar-denominated bond. Kaisa borrowed $500 million of a 2020 bond. There are many repercussions as the ripple in the water travels far.
Consider that the World Bank estimates that China influences 16% of world economic growth. Not only that, Chinese companies made up 62% of all US dollar bond sales in the Asia-Pacific region. Black Rock Inc. holds 8.875% of the Kaisa debt and JPMorgan Chase, Fidelity and ING also hold some Kaisa debt.
"Debt Must Be Repaid"
stated the IMF chief last week, however she was referring to Greece. Nevertheless, the truth is true for everyone, but that is not the only problem. Building empty cities makes one wonder when the punch bowl will go empty. I guess the local government in Shenzhen feels the same way. They blocked all sales of Kaisa, amounting to $300 million and stopped all their projects for now. This is only 15 miles from Hong Kong, but goes all the way to the capital. President Xi Jinping of China has stated he wants to crack down on rampant corruption and in Shenzhen that means Jiang Zunyu. He was the security chief until he got arrested for corruption and this guy is connected to Kaisa. In addition, China's real estate market showed declining prices in 65 of 70 cities. Not a good trend. The main problem is fixed books where down payments and margins are adjusted to meet requirements. This sounds like our past problem with "ninja" loans(no income, no job or assets).
Creditors are lining up and you know what that means...
Enter Lawyers
Everbright Bank Ltd. and Industrial & Commercial Bank of China have asked courts to freeze assets of Kaisa. Maybe this is just a small rock and the ripple will disappear, but then again, do you remember Ben Bernanke saying the housing crisis is contained in 2007?
Diastrophism
is happening. Here in the US, one small oil company whose name escapes me, filed for bankruptcy. Of course you heard of Baker Hughes and Halliburton. They both announced massive layoffs due to the falling price of oil. And then, there was a little announcement by the Swiss National Bank about breaking its peg to the euro. Can you feel the earth moving? All that shaking is disturbing the domino pieces. I'll call it, economic diastrophism and you can blame this too on the Fed which is why I say, End the Fed!
First Piece
fell last week in China. For years China has instituted "make work" projects that has a labor force of 136 million people employed. Real estate projects like a complete city, capable of holding one million people, now built and sit completely empty. Tall, new skyscrapers that house only a passing bird nest. In busy locations prices have risen ten-fold and amazingly, no end in sight until now.
Kaisa Group Holdings Ltd.(1638)
is a Chinese real estate developer that missed a loan payment of $23 million on its dollar-denominated bond. Kaisa borrowed $500 million of a 2020 bond. There are many repercussions as the ripple in the water travels far.
Consider that the World Bank estimates that China influences 16% of world economic growth. Not only that, Chinese companies made up 62% of all US dollar bond sales in the Asia-Pacific region. Black Rock Inc. holds 8.875% of the Kaisa debt and JPMorgan Chase, Fidelity and ING also hold some Kaisa debt.
"Debt Must Be Repaid"
stated the IMF chief last week, however she was referring to Greece. Nevertheless, the truth is true for everyone, but that is not the only problem. Building empty cities makes one wonder when the punch bowl will go empty. I guess the local government in Shenzhen feels the same way. They blocked all sales of Kaisa, amounting to $300 million and stopped all their projects for now. This is only 15 miles from Hong Kong, but goes all the way to the capital. President Xi Jinping of China has stated he wants to crack down on rampant corruption and in Shenzhen that means Jiang Zunyu. He was the security chief until he got arrested for corruption and this guy is connected to Kaisa. In addition, China's real estate market showed declining prices in 65 of 70 cities. Not a good trend. The main problem is fixed books where down payments and margins are adjusted to meet requirements. This sounds like our past problem with "ninja" loans(no income, no job or assets).
Creditors are lining up and you know what that means...
Enter Lawyers
Everbright Bank Ltd. and Industrial & Commercial Bank of China have asked courts to freeze assets of Kaisa. Maybe this is just a small rock and the ripple will disappear, but then again, do you remember Ben Bernanke saying the housing crisis is contained in 2007?
Diastrophism
is happening. Here in the US, one small oil company whose name escapes me, filed for bankruptcy. Of course you heard of Baker Hughes and Halliburton. They both announced massive layoffs due to the falling price of oil. And then, there was a little announcement by the Swiss National Bank about breaking its peg to the euro. Can you feel the earth moving? All that shaking is disturbing the domino pieces. I'll call it, economic diastrophism and you can blame this too on the Fed which is why I say, End the Fed!
Thursday, January 15, 2015
Doctor Copper Caught The Flu
He caught it on the high seas. No, not from one of the cruise lines. He picked it up from global trade. You see, dear reader, the Baltic Dry Shipping Index reflects world trade. If you need coal in China, it arrives on a boat. When Japan imports natural gas to make up for the closing down of its nuclear reactors after the disaster of March 2011 at Fukushima, it has to import. It does not have natural resources. They are not alone. Global trade is done from port to port. When things are looking good and everyone is working like busy bees, the shipping index is at highs and conversely, when the hive has little honey, the index sinks like skipping a rock on water.
Yesterday
...all my troubles seemed so far away... Dr. Copper was giving interviews back in July 2012. He talked on-and-on about the housing recovery, consumer spending and how miners were ramping up supply to meet the needs of the industry. Copper was hitting highs at $4.25 a pound.
Today
...don't give me no dirty looks...takeout the trash...yakety yak, don't talk back...the doctor is confined to his bed. No house calls and please, don't phone. Copper just hit $2.42 a pound this week. The doctor called in a specialist, my good friend Sebastian. My buddy says the doctor actually caught the flu back in winter of 2013 when he was doing all those talk shows. The decline was sharp and the doctor inscribed to himself a flu shot after falling to $3.29 a pound. He recovered to $3.95 a pound, but the medicine of low interest rates wore off. He has been getting sicker and weaker ever since.
Sebastian tried to explain to him that the shipping index is also sick and the idea to take a cruise, to breathe in the salt air for a cure could cause more complications. My friend demonstrated the strain of flu is highly contagious and spreads from port-to-port. Back in the good old days, the Baltic index sailed at $2337 for day rates, and today, it is under water at $709 per day. Shippers are trying to make money by storing oil, but that is another story. The doctor fired my friend. He called for a second opinion. Mr. Lumber gave him a similar prognosis.
Sometimes you win, sometimes you lose
but lumber is quite stable and it usually has the right medicine to cure a flu, but his anti-biotic is not working this time. The virus of low wages and demographics are too resistant to the old medicine. Back in March 2013, the price of lumber was $3.56 and now, it is $3.10 which is a decline of 16% and falling. Mr. Lumber also mentioned the shipping index and to the dismay of Dr. Copper, the medicine that he administered last August sparked a recovery from $723. to $1484. However, resistance overtook the biotic and as stated by Sebastian, it is down to $709 per day and falling into deep do-do.
Yes, Mama and Papa, ...all the leaves are brown and the skies are gray...Good time Charlie has got the blues...
Yesterday
...all my troubles seemed so far away... Dr. Copper was giving interviews back in July 2012. He talked on-and-on about the housing recovery, consumer spending and how miners were ramping up supply to meet the needs of the industry. Copper was hitting highs at $4.25 a pound.
Today
...don't give me no dirty looks...takeout the trash...yakety yak, don't talk back...the doctor is confined to his bed. No house calls and please, don't phone. Copper just hit $2.42 a pound this week. The doctor called in a specialist, my good friend Sebastian. My buddy says the doctor actually caught the flu back in winter of 2013 when he was doing all those talk shows. The decline was sharp and the doctor inscribed to himself a flu shot after falling to $3.29 a pound. He recovered to $3.95 a pound, but the medicine of low interest rates wore off. He has been getting sicker and weaker ever since.
Sebastian tried to explain to him that the shipping index is also sick and the idea to take a cruise, to breathe in the salt air for a cure could cause more complications. My friend demonstrated the strain of flu is highly contagious and spreads from port-to-port. Back in the good old days, the Baltic index sailed at $2337 for day rates, and today, it is under water at $709 per day. Shippers are trying to make money by storing oil, but that is another story. The doctor fired my friend. He called for a second opinion. Mr. Lumber gave him a similar prognosis.
Sometimes you win, sometimes you lose
but lumber is quite stable and it usually has the right medicine to cure a flu, but his anti-biotic is not working this time. The virus of low wages and demographics are too resistant to the old medicine. Back in March 2013, the price of lumber was $3.56 and now, it is $3.10 which is a decline of 16% and falling. Mr. Lumber also mentioned the shipping index and to the dismay of Dr. Copper, the medicine that he administered last August sparked a recovery from $723. to $1484. However, resistance overtook the biotic and as stated by Sebastian, it is down to $709 per day and falling into deep do-do.
Yes, Mama and Papa, ...all the leaves are brown and the skies are gray...Good time Charlie has got the blues...
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