An agreement was reached last week and signed into law. The president claims it will provide the middle class a boost while securing our nation. It took me a week to read and I don't understand many aspects of it. Yet lawmakers, supposedly read it and vote on it in less than 24 hours. This is why I concluded my opinion on the parts that I could understand: Misleading info, favoritism and outright lies. It is why I advocate in my unpublished work that bills only contain and pertain to one point with no riders, which is exactly how Congress operates. These lawmakers will only vote for a bill if they can add one of their pet projects. BS!
The president got pre-school for four year olds and a continuation of a plan between business and schools to fill needs. The president goes on to say that this builds on the 750,000 new jobs his administration has fostered in manufacturing. He doesn't mention the continuing shrinking of our manufacturing sector by another million jobs. Politicians spin the truth and mislead the public.
Infrastructure
got funded and the president praises this budget. He fails to mention the money is a band-aid to repair roads and bridges, let alone developing a better transportation system in the air or at our ports. The Chinese lead with their pocket book. They are ready to open the new expanded Panama Canal. The president goes on saying that he closed loopholes to help pay for this aspect of the bill. He failed to mention any nor could I find exactly what loopholes were closed. By the way 65% of our roads are rated less than good condition.
Military
spending is up at $612 billion and yet, lawmakers grumble about social security which is paid for by funds from workers(our own money) that they used for past budgets and squandered many moons ago. Funny aspect pertaining to this budget. The military also collects revenues from other agencies within the budget. So, when the president mentions cyber-security, he really is requesting more money from Congress in another bill to pay for it. One would think that this falls under defense as a internet threat, but we would be wrong. Space and NASA is another example.
Immigration
remains the same, so illegals keep on coming. The president says that these people help American wages. Yeah, they lower them!
Sequestration!
The president wants to end it. Of course he does, it limits his spending. Speaking on one side of his mouth, he claims that he is responsible for lowering our deficit to less than 3% of GDP. However, his left-side brain does not speak that the sequestration was the means to lower spending to reach under 3% of GDP.
Big Business
got early Christmas presents. Producers no longer have to label meats from country of origin.
Banks got the CFTC to allow transactions on derivatives by only forcing one-side of the party to post collateral on deposits pertaining to the deal. This gives banks more leverage which is the cause of their weakness. Now, the banks will play "piggy-back" on derivative deals. You post a deposit this time and I'll post the deposit the next time, but if we connect the deals, it will be the same money used over-an-over again. My fellow Americans and dear readers, ain't that great! This will make the unwinding of institutions so much more difficult if another crisis comes and it will. In addition, Goldman Sacks paid another fine last week as well as many of the other big banks in the past year for various crimes like rigging the Libor Rate , but they never have to admit guilt. Dear reader, these are felonies and if you or I committed one, they throw away the key. I believe that after three strikes, a company should cease to exist and be liquidated if convicted of these type of crimes, but shills are appointed to agencies to monitor them. Sell-out!
Energy
big oil got the right to sell our oil abroad. Expect shortages in the future and of course, higher prices.
Money is allocated to States for Clean Power, but no one forces these same States to use it for that purpose. More money for nuclear with crumbs for alternative energy. Sell-out!
There are many categories like Flood Insurance which is money to people who live in nice homes along the water, but are too cheap to pay for their own insurance. Sell-out!
There is money for this lobbyists and that lobbyists like the $60 million for the "continuation" of the USDA headquarters or the $206 million for the Agriculture Research Service building renovations.
Finally, I would like to remind you what President Obama said in his second-term speech:
- "We cannot win the future with government of the past."
Yeah, who needs to listen to the constitution. It was written ages ago with old ideas. I guess that is why he circumvents Congress and passes his own laws with Executive Action.
There is appropriations for Wildfire, Climate Resilient Toolkit, Drought Resilience, Crop Insurance and other emergencies, but most of the money is wasted on bureaucratic agencies, although some good is achieved through these services.
Bottom Line:
Our fellow citizens got pre-school money and a few lucky citizens will be in the right state that partners with business for future jobs. As for the rest of us, consider this: this bill only covers nine months and it calls for spending of another $1.8 trillion. Yeah, we are now talking budgets of over a trillion per year with the military expanding while our manufacturing is declining. We continue to be policemen of the world, while at home our standard of living keeps falling. We are not even in the top ten of living environments. As for our leadership and future we ask this question, is there any difference between the Democrats and Republicans? None, at least that is how I see it. Bush was the worse spending president until Obama. Both claimed spending reductions as in ratio to GDP, but both misled the fact that the deficit only expanded during their administration. Our democracy is only a vote between the rich which is ironic. Ben Franklin feared the masses would vote themselves wealth which would destroy the ability for democracy to operate.
Wednesday, December 23, 2015
Wednesday, December 16, 2015
Rental Nation
We introduced the concept of disposal to the world, but convenience can't hide serious problems. Our poor paying economy has forced us into renting instead of owning. We no longer move for better opportunities, but dispose of apartments like fast food throw-a-ways. This ugly recognition gathered steam after the 2008 crisis sent waves of "keys-in-the-mail" foreclosure's that added millions to the renting folds. There are now 9 million more renters than there were just ten years ago. Granted, our population is over 300 million and that helps the stats, but the addition of 350,000 every month never is mentioned in the unemployment figures. However, one thing at a time.
Study
a recent report by the Harvard Joint Center for Housing Studies says 43 million families which is 1 in 5, are suffering from rising rental costs. Today, rent consumes 30% of monthly income. In some locations like New York, San Fran, it is worse. The study finds that renters there use 50% of income for rent. Ouch! You can add my landlord to the greedy Scrooges. He raised my lease by 16.5%. SOB! These "severely" effected renters went from 7.5 million to 11.4million in the last 10 years and when you consider wages are stagnant to down by 9% since 2001, this is another fork in the misery index. Funny, none of the candidates from either party touches this topic.
Bottom Line: 49% are suffering and another 26% are close to homelessness.
To make matters worse, rental occupancy is at its highest, so the Scrooges out there can continue to put it to you. This leads to another problem: home ownership. When Scrooges raise their rent, we cannot save for future plans like our own home because there is no "disposal" money leftover. Then again, I can understand the thinking in "tiny" home new construction. Maybe VW will bring back the bus / van and with some flowers on its side? I can visualize my new home because wages are too low to save foe anything better.
Related Study
by the Pew Study found that the middle class is shrinking. I have been saying this for the last ten years. It said in 1971 the middle class composed 61% of our society. Today, it is falling at 50% and the poor / lower class was 16% and now, 20% and rising. This is based on income of $41k plus for a family of three. In fact, if you combine the upper with the lower, they outnumber the middle class. Personally, I see these figures very conservative.
Retirees
You better get your money NOW! I have warned you repeatedly, dear reader about the aspect that leverage and debt mask the fact that there is NOT enough money in circulation to cover our claims. Last week 3rd Ave Management blocked redemptions. They won't return your money. How are you going to pay your rent or mortgage? They are not alone. Stone Lion is also blocking redemptions. The Wall Street Journal reported that this year, junk bonds will lose money. They added that the 30 year average of defaults is 3.8% and they see 4.6% in 2016. Get your money, now before the lawyers get it.
Study
a recent report by the Harvard Joint Center for Housing Studies says 43 million families which is 1 in 5, are suffering from rising rental costs. Today, rent consumes 30% of monthly income. In some locations like New York, San Fran, it is worse. The study finds that renters there use 50% of income for rent. Ouch! You can add my landlord to the greedy Scrooges. He raised my lease by 16.5%. SOB! These "severely" effected renters went from 7.5 million to 11.4million in the last 10 years and when you consider wages are stagnant to down by 9% since 2001, this is another fork in the misery index. Funny, none of the candidates from either party touches this topic.
Bottom Line: 49% are suffering and another 26% are close to homelessness.
To make matters worse, rental occupancy is at its highest, so the Scrooges out there can continue to put it to you. This leads to another problem: home ownership. When Scrooges raise their rent, we cannot save for future plans like our own home because there is no "disposal" money leftover. Then again, I can understand the thinking in "tiny" home new construction. Maybe VW will bring back the bus / van and with some flowers on its side? I can visualize my new home because wages are too low to save foe anything better.
Related Study
by the Pew Study found that the middle class is shrinking. I have been saying this for the last ten years. It said in 1971 the middle class composed 61% of our society. Today, it is falling at 50% and the poor / lower class was 16% and now, 20% and rising. This is based on income of $41k plus for a family of three. In fact, if you combine the upper with the lower, they outnumber the middle class. Personally, I see these figures very conservative.
Retirees
You better get your money NOW! I have warned you repeatedly, dear reader about the aspect that leverage and debt mask the fact that there is NOT enough money in circulation to cover our claims. Last week 3rd Ave Management blocked redemptions. They won't return your money. How are you going to pay your rent or mortgage? They are not alone. Stone Lion is also blocking redemptions. The Wall Street Journal reported that this year, junk bonds will lose money. They added that the 30 year average of defaults is 3.8% and they see 4.6% in 2016. Get your money, now before the lawyers get it.
Wednesday, December 9, 2015
New Crisis Indicator: 1.31
- Never spend your money before you earned it. -
Thomas Jefferson
We violate the words of wisdom from our great founding father every day and a new indicator tells us another haircut is coming. There is a correlation in business that relates a ratio between a sale and length of time on a shelf prior to that sale. It is called the inventory to sales ratio. The US Census Bureau reported the latest figures with the index reaching 1.31.
Producers extend their product for retail or supply lines that eventually become retail based on the believe that there is demand for the product. However, if demand falls, problems ensue. Producers won't extend their product which places more demand for credit, but what happens when there is no sales? Discounters buy to sell, but mainline retail and producers suffer losses. Credit dries up because loan rates rise and fall into junk level status. Liquidity shows itself like with Lehman back in 2008 which is the last time that the sales to inventory ratio hit 1.31. Not good.
Fear Factor
enters the equation. When retailers place new orders, but had problems selling the previous supply, a common term arises, the business cycle. We are 80 months into this cycle which historically is the time-length duration. A producer will limit supply because he has not received payment with all parties aware that after every downturn not all retailers are able to open there doors. Where is Radio Shack? How about Pets.com? I could offer a litany of businesses that are no longer around and with debt at an all-time high, the "fear factor" grows with each monthly report.
The National Inflation Association(NIA) reported that credit card debt in US households grew another 4.91% YOY, while at the same time retail sales were flat. This implies that credit is being used to pay previous debt and that is the road to financial problems. It is never good to live by robbing Peter to pay Paul. NIA makes this other correlation: Whenever US wholesale inventories surpass 1.31 the S & P 500 has crashed. In the dot.com crash of 2001, the ratio peaked at 1.34 and it reached its record in 2008/2009 at 1.41, the Great Recession.
Cass Freight Index
which reflects North American freight volumes and costs just reported. Keep in mind that the global trading index or Baltic Dry Shipping is at its all-time low reflecting world trade is declining sharply. Anyway, shipments never exceeded 1.2 on its scale. In fact, the range level is between 1. and 1.2 for four years, while expenditures has slowly crept higher from 1.8 to as high as 2.8. It now sits at 2.4. Bottom line: shipping has declined MOM and YOY and costs are rising. Not good.
Finally,
International Trade
figures were released on Friday and US exports declined another 1.4%, but imports rang up another $43.9 billon which is our money spent before we earned it and since this is the case every month, every year, decade after decade, when will we realize that we are being exploited by the global community and that there is no such thing as free trade. Not good for near term as well as the long term.
Thomas Jefferson
We violate the words of wisdom from our great founding father every day and a new indicator tells us another haircut is coming. There is a correlation in business that relates a ratio between a sale and length of time on a shelf prior to that sale. It is called the inventory to sales ratio. The US Census Bureau reported the latest figures with the index reaching 1.31.
Producers extend their product for retail or supply lines that eventually become retail based on the believe that there is demand for the product. However, if demand falls, problems ensue. Producers won't extend their product which places more demand for credit, but what happens when there is no sales? Discounters buy to sell, but mainline retail and producers suffer losses. Credit dries up because loan rates rise and fall into junk level status. Liquidity shows itself like with Lehman back in 2008 which is the last time that the sales to inventory ratio hit 1.31. Not good.
Fear Factor
enters the equation. When retailers place new orders, but had problems selling the previous supply, a common term arises, the business cycle. We are 80 months into this cycle which historically is the time-length duration. A producer will limit supply because he has not received payment with all parties aware that after every downturn not all retailers are able to open there doors. Where is Radio Shack? How about Pets.com? I could offer a litany of businesses that are no longer around and with debt at an all-time high, the "fear factor" grows with each monthly report.
The National Inflation Association(NIA) reported that credit card debt in US households grew another 4.91% YOY, while at the same time retail sales were flat. This implies that credit is being used to pay previous debt and that is the road to financial problems. It is never good to live by robbing Peter to pay Paul. NIA makes this other correlation: Whenever US wholesale inventories surpass 1.31 the S & P 500 has crashed. In the dot.com crash of 2001, the ratio peaked at 1.34 and it reached its record in 2008/2009 at 1.41, the Great Recession.
Cass Freight Index
which reflects North American freight volumes and costs just reported. Keep in mind that the global trading index or Baltic Dry Shipping is at its all-time low reflecting world trade is declining sharply. Anyway, shipments never exceeded 1.2 on its scale. In fact, the range level is between 1. and 1.2 for four years, while expenditures has slowly crept higher from 1.8 to as high as 2.8. It now sits at 2.4. Bottom line: shipping has declined MOM and YOY and costs are rising. Not good.
Finally,
International Trade
figures were released on Friday and US exports declined another 1.4%, but imports rang up another $43.9 billon which is our money spent before we earned it and since this is the case every month, every year, decade after decade, when will we realize that we are being exploited by the global community and that there is no such thing as free trade. Not good for near term as well as the long term.
Wednesday, December 2, 2015
Next Financial Crisis: Bullets in Gun
- "Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves."
- Norm Franz from his work, Money & Wealth in the New Millennium.
No one gets a prediction totally correct, although their overall view contains true elements of an event. With that understanding, I feel the bullets are being loaded into the gun as you read and I write.
War on Cash
is part of it. If everyone demanded their cash from banks, defaults would happen overnight. Even with all the debt and credit out there, believe it or not, there is not enough cash in circulation to answer our claims on it. Then, again, there is a certain safety in not having to exchange large amounts of money for things like rent, homes, cars and other high priced items. However, Gresham's Law is taking effect: bad money drives out good money. We no longer have the value of gold and silver behind our currency. You can't find a silver quarter, anywhere. Silver has been driven out by what we now have in circulation. Now, Pay Pal and Square and whatever else will drive cash from our society. This is a totalitarian's dream. We are losing our financial independence. Laws are being passed that no sane citizen would approve and they all limit cash.
*Italy made cash transactions over $1,000 Euros illegal.
*France lowered its law on cash transaction from $3,000 Euros to $1,000 Euros.
*Spain banned cash transactions over $2,000 Euros.
*Russia banned cash transactions over $10,000 Rubies.
Sweden could be the first nation to eliminate cash. Ironically, they first introduced paper money to Europe in 1661.
Do you remember what happened in Cypress? Mexico joined the circus and now, no cash payments of more than $200,000 pesos. Uruguay banned transactions over $5,000 in whatever money they use. In the US, if you withdraw $10,000 or more, you will be treated like a criminal and the government will be notified of your transaction. Individual financial freedom is vanishing along with cash.
Negative Rates
is another bullet in the gun. Banks will charge you to hold your money. They will still use it as they desire, but the liability will be passed to government under FDIC. They will use the fees that they charge you to pay into the FDIC system. So, in effect, you are paying twice. This is happening now.
Funny, in our so-called free capitalist society which is based on saving and building capital to foster a better standard of living to use as we like for a car, home, farm, business, education, etc. is no longer in vogue. Negative interest rates opposes the concept of a free market. This will punish savers as this policy endorses the idea to spend NOW!
Currency Devaluation
is what the global community is doing. Nations are devaluing their currency to gain market niche in exports. A race to the bottom. If US rates rise, China will stop its peg to the dollar and devalue its currency, AGAIN! Target practice is happening everywhere with more ammo on the way. By the way, the IMF has already instituted a plan for a new world reserve currency which will put inflation in the US off the charts. Special Drawing Rights(SDR) money now includes China and thus, everything is in place when and if the US currency collapses. Not only will US citizens suffer financially, but our nation will lose sovereignty to a bureaucratic bank that we started under Bretton Woods Agreement.
Junk Bonds
is going to be the first misfire by the gun. I believe the trigger is already being squeezed. When the Fed raises rates that it foolishly lowered to nothing, the misfire will happen. To recap, junk bonds are issued by shaky companies or whose industry is under duress like oil. Last Monday, one of the biggest junk bonds ETFs(JNK) hit its lowest level in over six years. The Financial Times reported half of all corporate bonds have a junk rating. Companies are defaulting at the highest rate since the financial crisis. At present, 99 global companies have defaulted this year. This is the second highest only to the 222 defaults of 2009. US companies make up 62 of the 99 with more on the way. The Wall Street Journal reported corporate downgrades are at their highest level since 2008. Standard and Poor's downgraded 297 US companies in the first nine months of this year. A downgrade is a lowering of the credit risk of an entity. The Fed is responsible by offering cheap money and of course, greed which is demonstrated by buybacks. When the gun fires, these same companies will expand stock to raise money and this will crater the market. US companies owe $7.7 trillion in debt. That is 50% more than a decade ago. US corporate bonds rated CCC or below have exploded up 15.74%. Risk is in the air. When society reads that they are slaves to debt, a rock will fly. After the first rock is thrown, others will follow. A gun firing leaves smoke and where there is smoke, there is fire. This is not good and another reason to End the Fed!
- Norm Franz from his work, Money & Wealth in the New Millennium.
No one gets a prediction totally correct, although their overall view contains true elements of an event. With that understanding, I feel the bullets are being loaded into the gun as you read and I write.
War on Cash
is part of it. If everyone demanded their cash from banks, defaults would happen overnight. Even with all the debt and credit out there, believe it or not, there is not enough cash in circulation to answer our claims on it. Then, again, there is a certain safety in not having to exchange large amounts of money for things like rent, homes, cars and other high priced items. However, Gresham's Law is taking effect: bad money drives out good money. We no longer have the value of gold and silver behind our currency. You can't find a silver quarter, anywhere. Silver has been driven out by what we now have in circulation. Now, Pay Pal and Square and whatever else will drive cash from our society. This is a totalitarian's dream. We are losing our financial independence. Laws are being passed that no sane citizen would approve and they all limit cash.
*Italy made cash transactions over $1,000 Euros illegal.
*France lowered its law on cash transaction from $3,000 Euros to $1,000 Euros.
*Spain banned cash transactions over $2,000 Euros.
*Russia banned cash transactions over $10,000 Rubies.
Sweden could be the first nation to eliminate cash. Ironically, they first introduced paper money to Europe in 1661.
Do you remember what happened in Cypress? Mexico joined the circus and now, no cash payments of more than $200,000 pesos. Uruguay banned transactions over $5,000 in whatever money they use. In the US, if you withdraw $10,000 or more, you will be treated like a criminal and the government will be notified of your transaction. Individual financial freedom is vanishing along with cash.
Negative Rates
is another bullet in the gun. Banks will charge you to hold your money. They will still use it as they desire, but the liability will be passed to government under FDIC. They will use the fees that they charge you to pay into the FDIC system. So, in effect, you are paying twice. This is happening now.
Funny, in our so-called free capitalist society which is based on saving and building capital to foster a better standard of living to use as we like for a car, home, farm, business, education, etc. is no longer in vogue. Negative interest rates opposes the concept of a free market. This will punish savers as this policy endorses the idea to spend NOW!
Currency Devaluation
is what the global community is doing. Nations are devaluing their currency to gain market niche in exports. A race to the bottom. If US rates rise, China will stop its peg to the dollar and devalue its currency, AGAIN! Target practice is happening everywhere with more ammo on the way. By the way, the IMF has already instituted a plan for a new world reserve currency which will put inflation in the US off the charts. Special Drawing Rights(SDR) money now includes China and thus, everything is in place when and if the US currency collapses. Not only will US citizens suffer financially, but our nation will lose sovereignty to a bureaucratic bank that we started under Bretton Woods Agreement.
Junk Bonds
is going to be the first misfire by the gun. I believe the trigger is already being squeezed. When the Fed raises rates that it foolishly lowered to nothing, the misfire will happen. To recap, junk bonds are issued by shaky companies or whose industry is under duress like oil. Last Monday, one of the biggest junk bonds ETFs(JNK) hit its lowest level in over six years. The Financial Times reported half of all corporate bonds have a junk rating. Companies are defaulting at the highest rate since the financial crisis. At present, 99 global companies have defaulted this year. This is the second highest only to the 222 defaults of 2009. US companies make up 62 of the 99 with more on the way. The Wall Street Journal reported corporate downgrades are at their highest level since 2008. Standard and Poor's downgraded 297 US companies in the first nine months of this year. A downgrade is a lowering of the credit risk of an entity. The Fed is responsible by offering cheap money and of course, greed which is demonstrated by buybacks. When the gun fires, these same companies will expand stock to raise money and this will crater the market. US companies owe $7.7 trillion in debt. That is 50% more than a decade ago. US corporate bonds rated CCC or below have exploded up 15.74%. Risk is in the air. When society reads that they are slaves to debt, a rock will fly. After the first rock is thrown, others will follow. A gun firing leaves smoke and where there is smoke, there is fire. This is not good and another reason to End the Fed!
Wednesday, November 25, 2015
Precious Metals: Is The Price Right?
In this piece I won't be referring to a particular mining company, although I like Silver Wheaton. No, I will be looking at the end product, physical bullion and its price.
Let's do a story about a product that you can buy. This product happens to be a commodity and unlike regular retail items, it is subject to many rules and regulations. One of the many negatives of rules and regulations is that it makes the product more expensive and it allows for manipulation because those who enforce the rules and regulations are appointed. Nevertheless, we do need rules and regulations because we know man is greedy and not past corruption to obtain his desired objective. It is a shame that Libertarians don't recognize this aspect to life. It is also a shame that the appointed regulator can be a pawn used by man for a desired goal. This is the heart of the problem with the price of precious metals.
Enter a store
You look at the product for sale. You are already armed with the knowledge that both items have declined in value this year with gold at $1077.20 an ounce and silver at $14.15 an ounce. You pick up a gold American Eagle coin and debate with yourself over the premium to the price. If you are China, the largest producer and consumer of the product, you buy. You are not alone. Sales of US American Eagles by the US Mint are at a five-year high at 12 tonnes and up 251% YOY in the third quarter. In fact, the US Mint halted sales due to lack of supply. You didn't need me, dear reader to tell you that as you see many buyers in this store. You pick up a US Silver Eagle coin and debate within yourself again over the price. The merchant takes the Eagle coin from you. He says that he needs it to cover other buyers that purchased 42.02 million ounces, another all-time high. He says come back next week and he might get a resupply. Later, he admits that the solar industry is a heavy buyer and the mining supply declined this year.
As you exit the store, you see a limo stop outside. From the limo central bankers exit. They move past you into the store. For the 19 consecutive quarter they are plus buyers over sellers of the metal. This year they will purchase 8% more than last year or 1,121 tonnes. Central bankers may deal with fiat money, but deep inside, they know it is built on sand and having gold is a backup plan that is never mentioned.
Outside
You stop to think. Doesn't basic economics dictate price through supply and demand? The price should be higher with all the demand that you noticed in the store. As you pause in the street, an Indian man walks past you and enters the store. You find out later that India consumed 268 tonnes of gold in the third quarter of 2015 which is 13% more than 2014. This adds more confusion to what you see in reality and what the retail value of a physical coin.
Whispers on the Street
Getting back to the appointed shills that govern exchanges, you hear whispers that allow over 300 contracts on gold in the COMEX. Another whisper is worse. On LBMA they allow 1000x the actual amount of gold in their vaults with paper contracts. If buyers demand delivery, there will be defaults and a scandal. Someone argues this point by saying that JP Morgan will back the exchange and it has long been whispered that the Fed itself interacts with the market against gold. I think if that is true, everyone who works or ever worked at those institutions should be put in jail for violating the integrity of the free market.
You think about all that you saw, heard and know. You make a decision. You reenter the store. You start a plan to buy a coin from time-to-time because you also know that the market is irrational and it can stay that way longer than you can stay solvent if you purchase stock shares that are declining. Back within your deepest understanding of life, the day will come when people realize that fiat money buys less and less while precious metals can purchase more and more. As always, End the Fed!
Let's do a story about a product that you can buy. This product happens to be a commodity and unlike regular retail items, it is subject to many rules and regulations. One of the many negatives of rules and regulations is that it makes the product more expensive and it allows for manipulation because those who enforce the rules and regulations are appointed. Nevertheless, we do need rules and regulations because we know man is greedy and not past corruption to obtain his desired objective. It is a shame that Libertarians don't recognize this aspect to life. It is also a shame that the appointed regulator can be a pawn used by man for a desired goal. This is the heart of the problem with the price of precious metals.
Enter a store
You look at the product for sale. You are already armed with the knowledge that both items have declined in value this year with gold at $1077.20 an ounce and silver at $14.15 an ounce. You pick up a gold American Eagle coin and debate with yourself over the premium to the price. If you are China, the largest producer and consumer of the product, you buy. You are not alone. Sales of US American Eagles by the US Mint are at a five-year high at 12 tonnes and up 251% YOY in the third quarter. In fact, the US Mint halted sales due to lack of supply. You didn't need me, dear reader to tell you that as you see many buyers in this store. You pick up a US Silver Eagle coin and debate within yourself again over the price. The merchant takes the Eagle coin from you. He says that he needs it to cover other buyers that purchased 42.02 million ounces, another all-time high. He says come back next week and he might get a resupply. Later, he admits that the solar industry is a heavy buyer and the mining supply declined this year.
As you exit the store, you see a limo stop outside. From the limo central bankers exit. They move past you into the store. For the 19 consecutive quarter they are plus buyers over sellers of the metal. This year they will purchase 8% more than last year or 1,121 tonnes. Central bankers may deal with fiat money, but deep inside, they know it is built on sand and having gold is a backup plan that is never mentioned.
Outside
You stop to think. Doesn't basic economics dictate price through supply and demand? The price should be higher with all the demand that you noticed in the store. As you pause in the street, an Indian man walks past you and enters the store. You find out later that India consumed 268 tonnes of gold in the third quarter of 2015 which is 13% more than 2014. This adds more confusion to what you see in reality and what the retail value of a physical coin.
Whispers on the Street
Getting back to the appointed shills that govern exchanges, you hear whispers that allow over 300 contracts on gold in the COMEX. Another whisper is worse. On LBMA they allow 1000x the actual amount of gold in their vaults with paper contracts. If buyers demand delivery, there will be defaults and a scandal. Someone argues this point by saying that JP Morgan will back the exchange and it has long been whispered that the Fed itself interacts with the market against gold. I think if that is true, everyone who works or ever worked at those institutions should be put in jail for violating the integrity of the free market.
You think about all that you saw, heard and know. You make a decision. You reenter the store. You start a plan to buy a coin from time-to-time because you also know that the market is irrational and it can stay that way longer than you can stay solvent if you purchase stock shares that are declining. Back within your deepest understanding of life, the day will come when people realize that fiat money buys less and less while precious metals can purchase more and more. As always, End the Fed!
Wednesday, November 18, 2015
Earnings Report & Trading Outlook
- "Failing to prepare is preparing to fail."
- Ben Franklin
Our great founding father would probably say get your money out of the market at this time because there are signs that indicate rough waters ahead.
The new calendar year began in October for the government and it ran a deficit of $136.5B. This is 12.2% higher YOY. They spent $136.5billion dollars that they don't have and they have been doing this year-after-year without consequences. This is our so-called leadership. But hey, they'll tell you that the dollar is strong and it will rise some more if the Fed raises rates in December.
The stock market is down for the year and yet, it is close to all-time highs. This would be a conundrum except we know that the Fed printing cheap money is the sole driver of the market. Many claim the recent decline on the aspect that the Fed might raise interest rates for the first time since June 2006. So, let us look closely at the third quarter earnings report to get some insight into the US economy.
With 88% of S & P companies reporting, earnings are down 3.7% and future guidance says that it will fall again for the fourth quarter at another 3%. If we dig deeper, we see commodity sectors down at recession levels. By the way, the world's third largest economy, Japan is in recession.
CEO
of a steel company stated that steel is not only in a recession, but a depression. When steel recovered after the crisis of 2008, it peaked at 2000. Today, it is at 608 and falling. Dr. Copper was healthy in 2011 at 4.25 a pound and now, half that level at 2.16 and falling. King Coal touched 35,000 in 2012 and today, 6,162 and falling. Rail car orders are down 83% and big trucking orders are down 45%. Finally, oil which we all need in one form or another every day. It is down 52% at a little over $40 per barrel and falling due to overcapacity. This tells you that there is no big demand in products that are needed if an economy is growing at home or abroad. Need a second opinion? The CEO of Maersk Group, the largest shipping transportation company in the world says, "He sees a difficult period ahead." This sad outlook is reflected in the Baltic Dry Shipping Index which is at its lowest level, EVER!
You will still hear the talking heads on television and the media calling, "to buy the dips, the market is just off the highs," however the market is manipulated by its indexes. Fact: there is only one company still in existence in the original Dow Jones, GE. The index like all the indexes gets reprogrammed all the time. At present, five companies are responsible for the markets surge.(Apple, Google, Netflix, Amazon and Facebook.) The market is getting less on sales and revenue(see above or below.)
IBM
is a perfect reflection of what is really happening. Market value has dropped every year from 2009 at $167B and now, $129B. The company like so many, have used stock buybacks to keep the share price up. Just think, in an age of personal PCs, IBM use to receive over 50% of revenue from hardware and today, just 6%, while at the same time it has gone into debt to fund share buybacks by spending $116B from 2004 to 2013. It now has a debt ratio of 295%. They are not alone as other big names like Walmart and GE and many others have done the same thing. They borrow cheap money from the Fed. In fact, the record of debt of $1.4trillion set in 2014 will soon be broken in 2015.
Take a look at some of the biggest names in retail: Macy's, Dillard's and Nordstrom - all reported lower earnings and a lower future guidance.
Housing is one of the biggest deceivers of all. It gets many government programs at taxpayer's expense to save those who made a serious mistake in the crisis of 2008. In addition, low rates by the Fed has stabilized the sector with prices that are even higher than the collapse of 2008. Yet, home ownership is at levels reached in 1978 - 1978! There is no entry level housing because wages cannot meet the cost of home ownership and we all are lambs to renting which is off the charts and rising. The government does not call this inflation, it is just appreciation. Manipulation!
Finally, Goldman Sacks reports that US companies will spend a record $608b on buybacks this year which is 10% more than last year, but research and capital expenditures are down, so where is the future growth going to come from? If you listen to the media, you are preparing to fail.
- Ben Franklin
Our great founding father would probably say get your money out of the market at this time because there are signs that indicate rough waters ahead.
The new calendar year began in October for the government and it ran a deficit of $136.5B. This is 12.2% higher YOY. They spent $136.5billion dollars that they don't have and they have been doing this year-after-year without consequences. This is our so-called leadership. But hey, they'll tell you that the dollar is strong and it will rise some more if the Fed raises rates in December.
The stock market is down for the year and yet, it is close to all-time highs. This would be a conundrum except we know that the Fed printing cheap money is the sole driver of the market. Many claim the recent decline on the aspect that the Fed might raise interest rates for the first time since June 2006. So, let us look closely at the third quarter earnings report to get some insight into the US economy.
With 88% of S & P companies reporting, earnings are down 3.7% and future guidance says that it will fall again for the fourth quarter at another 3%. If we dig deeper, we see commodity sectors down at recession levels. By the way, the world's third largest economy, Japan is in recession.
CEO
of a steel company stated that steel is not only in a recession, but a depression. When steel recovered after the crisis of 2008, it peaked at 2000. Today, it is at 608 and falling. Dr. Copper was healthy in 2011 at 4.25 a pound and now, half that level at 2.16 and falling. King Coal touched 35,000 in 2012 and today, 6,162 and falling. Rail car orders are down 83% and big trucking orders are down 45%. Finally, oil which we all need in one form or another every day. It is down 52% at a little over $40 per barrel and falling due to overcapacity. This tells you that there is no big demand in products that are needed if an economy is growing at home or abroad. Need a second opinion? The CEO of Maersk Group, the largest shipping transportation company in the world says, "He sees a difficult period ahead." This sad outlook is reflected in the Baltic Dry Shipping Index which is at its lowest level, EVER!
You will still hear the talking heads on television and the media calling, "to buy the dips, the market is just off the highs," however the market is manipulated by its indexes. Fact: there is only one company still in existence in the original Dow Jones, GE. The index like all the indexes gets reprogrammed all the time. At present, five companies are responsible for the markets surge.(Apple, Google, Netflix, Amazon and Facebook.) The market is getting less on sales and revenue(see above or below.)
IBM
is a perfect reflection of what is really happening. Market value has dropped every year from 2009 at $167B and now, $129B. The company like so many, have used stock buybacks to keep the share price up. Just think, in an age of personal PCs, IBM use to receive over 50% of revenue from hardware and today, just 6%, while at the same time it has gone into debt to fund share buybacks by spending $116B from 2004 to 2013. It now has a debt ratio of 295%. They are not alone as other big names like Walmart and GE and many others have done the same thing. They borrow cheap money from the Fed. In fact, the record of debt of $1.4trillion set in 2014 will soon be broken in 2015.
Take a look at some of the biggest names in retail: Macy's, Dillard's and Nordstrom - all reported lower earnings and a lower future guidance.
Housing is one of the biggest deceivers of all. It gets many government programs at taxpayer's expense to save those who made a serious mistake in the crisis of 2008. In addition, low rates by the Fed has stabilized the sector with prices that are even higher than the collapse of 2008. Yet, home ownership is at levels reached in 1978 - 1978! There is no entry level housing because wages cannot meet the cost of home ownership and we all are lambs to renting which is off the charts and rising. The government does not call this inflation, it is just appreciation. Manipulation!
Finally, Goldman Sacks reports that US companies will spend a record $608b on buybacks this year which is 10% more than last year, but research and capital expenditures are down, so where is the future growth going to come from? If you listen to the media, you are preparing to fail.
Wednesday, November 11, 2015
Gresham's Law Hits Currencies
A recent episode in my life correlates to what is happening in international currencies. My lease is coming to an end. My greedy landlord offered me an extension with a rent increase of 16%. Isn't he sweet? I thought about that. I have to make due with the same income and yet, this one aspect to my life now costs me 16% more than yesterday. My protests fell on deaf ears. I reminded him that I always pay on time, get along with the complex neighbors, never cause a problem and take care of his property. He reminded me that my same apartment only generated $500 per month for him in the past. I thought about that. What do you do when your income is the same when rent was $500 per month and now, almost $700? You become homeless is my first thought. I wanted to tell him that his greed will drive out the good tenants and will be replaced by those who never pay on time, cause problems and don't take care of the premises. Gresham's Law: Bad money drives out good money. Fiat money killed our silver coins and devalued our currency. Good neighbors are replaced by poor neighbors and then, crime.
Take my above situation and now, apply it to what is happening with global currencies.
Governments
understand the benefits of fiat money. It costs them nothing to print and although this printing devalues your currency, the lower market value will cause a surge for your nation's exports. They never mention the flipside. A lower valued currency is a negative aspect to their citizens and in addition, this policy will also cause inflation to their imports and thus, a hardship to the citizens like my rent increase. These political tendencies are nothing new. We had a doozy back in 1921 - 36 period. There was one difference. It appears that "printing" policies by governments then, allowed more time to determine the effects of it, as compared to today. Let's revisit.
1921
Germany overprinted. They destroyed their currency which led to the collapse of the government. In 1925, France and Belgium devalued. This made England and the US with the stronger currency. They got the exports and we got the deficits. In 1931, England struck back by going off the gold standard and devalued. Then, in 1933, the US devalued and closed gold to its citizens. Then, in 1936, England, France and Belgium devalued again to gain market share in exports. It is the same today except the time duration seems to be 24-months at the most as opposed to three to five years back in the day.
Today
politician's understand the disposable society and instant gratification After the financial crisis of 2008, all governments printed, but the US kept at it with another devaluation in 2011. Then, the Japanese under Abenomics made a bigger push downward in 2012. They not only printed and bought government bonds, but also stock shares. The EU answered with stimulus. Now, they've added QE and negative interest rates. A government does something and the competing government follows with something, but all forget that its citizens still have the same income with food rising with taxes rising with insurance rising and eventually, gasoline will catch up. What do they do become homeless? The Syrian refugees are walking to Germany and Europe, but where will the homeless citizens of these nation's walk too?
The pie is shrinking and there is not enough to go around and to answer Liz Saunders: Yes, there is over capacity and it is in currencies. There is not enough pie which means almost all get less and this is demonstrated by China.
China
is 10% of the global GDP and if China gets less than this effects everyone else. A quarter less for China equates to 2.5% less for world GDP which according to the IMF will be 3.6% in 2016. By my math I see global GDP will be 1.1%. I guess they use modern math. Now, I see another problem. Say, I'm right at 1.1%. However, if China shrinks, then its trading partners who are also part of the equation will also shrink to which, makes the 1.1% figure too high because they will have less. Bad money is being driven out by worst money which whether you realize it or not, is the cashless society. Jobs are outsourced leaving only transfer "money" as income. The velocity of money is disappearing to a digital account ledger which is another reason to End the Fed!
Take my above situation and now, apply it to what is happening with global currencies.
Governments
understand the benefits of fiat money. It costs them nothing to print and although this printing devalues your currency, the lower market value will cause a surge for your nation's exports. They never mention the flipside. A lower valued currency is a negative aspect to their citizens and in addition, this policy will also cause inflation to their imports and thus, a hardship to the citizens like my rent increase. These political tendencies are nothing new. We had a doozy back in 1921 - 36 period. There was one difference. It appears that "printing" policies by governments then, allowed more time to determine the effects of it, as compared to today. Let's revisit.
1921
Germany overprinted. They destroyed their currency which led to the collapse of the government. In 1925, France and Belgium devalued. This made England and the US with the stronger currency. They got the exports and we got the deficits. In 1931, England struck back by going off the gold standard and devalued. Then, in 1933, the US devalued and closed gold to its citizens. Then, in 1936, England, France and Belgium devalued again to gain market share in exports. It is the same today except the time duration seems to be 24-months at the most as opposed to three to five years back in the day.
Today
politician's understand the disposable society and instant gratification After the financial crisis of 2008, all governments printed, but the US kept at it with another devaluation in 2011. Then, the Japanese under Abenomics made a bigger push downward in 2012. They not only printed and bought government bonds, but also stock shares. The EU answered with stimulus. Now, they've added QE and negative interest rates. A government does something and the competing government follows with something, but all forget that its citizens still have the same income with food rising with taxes rising with insurance rising and eventually, gasoline will catch up. What do they do become homeless? The Syrian refugees are walking to Germany and Europe, but where will the homeless citizens of these nation's walk too?
The pie is shrinking and there is not enough to go around and to answer Liz Saunders: Yes, there is over capacity and it is in currencies. There is not enough pie which means almost all get less and this is demonstrated by China.
China
is 10% of the global GDP and if China gets less than this effects everyone else. A quarter less for China equates to 2.5% less for world GDP which according to the IMF will be 3.6% in 2016. By my math I see global GDP will be 1.1%. I guess they use modern math. Now, I see another problem. Say, I'm right at 1.1%. However, if China shrinks, then its trading partners who are also part of the equation will also shrink to which, makes the 1.1% figure too high because they will have less. Bad money is being driven out by worst money which whether you realize it or not, is the cashless society. Jobs are outsourced leaving only transfer "money" as income. The velocity of money is disappearing to a digital account ledger which is another reason to End the Fed!
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