There has been a media divide in the last decade over who is considered to be in the emerging market category. The BRICS(Brazil, Russia, India, China, South Africa) were all members of that global family, although I never saw Russia as an emerging market nation. They are leaders in many categories and not just oil, but they still get slighted due to the Cold War.
No, today it is comprised of third tier trading nations like Thailand, Viet Nam, Chile and so forth.
I guess from time-to-time nations like Libya were in this grouping as well as other examples, except social change has also caused economic woe. In fact, one could make an argument that the Arab Spring, now in the forefront of social change, will cause tumultuous economic change both in the nation of origin and the European nations where the refugees finally settle. Nevertheless, this piece is directed toward the present make-up of the third tier group as well as the BRIC nation's since the global market is interconnected. A ripple off one coast could become a tsunami when it crosses the ocean to another shore.
US Bond's
were issued in mass by the emerging market community. Governments and corporations took advantage of cheap money created by the US Fed. They knew the US market was safe and secure. This money funded government programs and allowed corporations to expand their capacity to grab market share. The timing was excellent from 2010 until 2015. Then, the slowdown in China and Europe ricocheted back to their border like a boomerang as Australia is a prime example. In addition, the period marked the introduction of QE in EU. Japan devalued along with China. The market devalued Brazil, India, South Africa, Russia along with almost every world nation. This is the central point of contention. The money raised by issuing bonds must be repaid and repaid in dollars. The problem for emerging nation's is that the devaluation of their currency makes this payment of the bonds more costly. The dollar rise also sent inflation around the world. Imports cause more and eventually people buy less to evade inflation. As a result governments cut back on programs and future plans as they struggle to meet the obligation of the bonds. Argentina is the poster child for failure to repay. The next step along those lines is Zimbabwe. Only a fool would follow that path.
Declining Oil
has not helped that much because again, oil is priced in dollars and since currencies are lower, this almost becomes a wash. There has been some help with lower prices, but then again, many of this group gets its revenues from oil. The International Energy Agency(IEA) says oil reserves are at 3 billion which is an all-time high. This is not good for the price of oil or nations who export oil for revenues. The OPEC leader, Saudi Arabia is pumping oil like crazy to discombobulate the US shale industry. This action is not going over so well with the other members of OPEC. Some world exporters like Libya has seen their production decline, but soon, sanctions to Iran will end and even more oil will be available. Speaking of sanctions, the one placed on Russia not only hurt Russia, but world trade which declined in 2015.
The iShares MSCI Emerging Market Index(EEM) plunged another 1.9% and is down 4.4% for the first week of 2016. It has returned to the 2009 level which is a valuation below the level at which these nation's first issued the bond's back in 2010. This could also cause another crisis because insurance on these bonds or derivatives will alarm the world markets because written contracts call for certain evaluation levels to be current. I have no idea how bad that can be or the bond's issued could be called and rolled over, but whatever happens, it can't be good.
Wednesday, January 13, 2016
Wednesday, January 6, 2016
Forecast 2016
- Today comes from yesterday and together forms a path toward tomorrow.
- JFL
Before I can go forward, I'd like to reflect on my 2015 calls.
Perfect Call
I said that Yellen would not raise rates and if she did, it would only be a quarter point and late in the year. And yet, not one pundit ever mentioned my blog. Go figure!
King Dollar
I said it would sink Dow profits. I'm a sage!
Market Correction
Wrong! I called for a 10% correction by the end of the first quarter and although January was down, the market rebounded to new highs. My only mistake was in timing because the market did fall 10% in August. However, truth be told, I was looking for a deeper correction. The composite was down 5% for the year, while NASDAQ was up 5%, however a few tech stocks like Netflix skew the index. Verification comes through the small caps which were down for the year. The uptrend has been broken both yearly and multi-yearly.
Currencies
I said that all fiat money would continue their race to the bottom. Bingo! My exact words.
"governments wanted a lower currency value to spur exports. Now, they will get it except the demand will also shrink(because their citizens pay higher costs) and new problems will surface like reserves to buy dollars and support their currency(bonds were issued in dollars and have to be repaid in dollars which cost them more.) Deficits will destroy budgets and plans for the future."
Gold
Wrong. Called for a $1350. price
Commodities in General
Wrong with warning of defaults, however this could be a timing issue again as hedging saved many oil companies. Nevertheless, in 2016 those contracts will expire and there will be defaults in oil. Any oil price below $32. will cause serious repercussions in the market.
Hacking
Correct and it will continue and get worse.
Taxes on Gas
Wrong, but again a timing issue. This will happen after the 2016 election.
TPP
Obama will keep backing it. My only hope is Sanders and Trump oppose it and win the public.
EU
Mixed. I called for a recession, however my prediction for QE was correct.
SA
Mixed bag. The dangers still exist especially for Argentina, Brazil and Venezuela.
Asia
Wrong as Thailand didn't suffer unrest. Japan weathered through another year with the Yen lower which helped their big exporting companies. Bank of Japan bought stocks to help their market and I missed that one.
Middle East
Wrong about another coup, but correct with displaced citizens. Findings on Ebola cure are still a work in progress, but the crisis has passed.
What do you think, dear reader? I think that I did B plus work and now, this is how I see it.
2016
The Fed will only add another quarter point, but really desire to get to 1%. At 1% the Fed can talk up ammunition if another crisis appears. Basically, another wait and see approach with a whole lot of BS!
The dollar will be range bound from 100 down to 93. Many other factors will determine its ultimate direction, especially with defaults in oil bonds and how the Fed responds to its reckless zero interest rates. If the dollar breaks above its high at 101, then new highs will come. Conversely, if it breaks below 93, then 85 is the next support level. Derivative triggers could cause a global recession, however that terrible danger could be put off until 2017. It is the ultimate weapon of financial destruction. Nevertheless, the debt market is, as it always was, a ticking time bomb caused by the Fed with low rates that provide cheap money, and the prospect of negative rates will only make everything that much more dangerous.
Currencies will continue to devalue which is a way to dump their exports on the US economy... I see the "hover-board" as a big fad, but since it is made by outsourced companies, little help for US manufacturing. It will continue to shrink, but toy companies will benefit with the fad. On the other Virtual Reality is expected to grow and surpass $150B in just four years. I'm not a gamer, but that is serious toy money.
Gold will also be range bound, but will respond to silver's action. I hope silver rises due to mining cutbacks in production and the demand by the solar industry. The price should be around $30. per ounce, so there is plenty of upside, although I don't see it rising that high. "Paper" gold trading could become a scandal. Paper trades exceed world supply many times over which is the manipulation of gold and silver. If there was actual delivery of these contacts - trouble in paradise with gold off the charts.
The market should drop 10% in the first quarter and I feel that it will eventually test the 2011 August lows. The real test will be in the action of the bond market. If defaults trigger problems, then derivatives could crumble everything with liquidity being a central point...I see S & P earnings falling into negative territory in the fourth quarter. This will be consecutive down earnings reports which in itself is a sign of a recession... Global markets, especially in Shanghai will pressure markets with declines. The Chinese ban on selling ends on 6 January. However, the ban has been extended for owners of 5%, which is hedge funds and institutions. Bottom line: you can buy, but you can't sell even if you want too. Yeah, that will spark new buyers into their market which happens to be dominated by individuals. The Chinese could do like Japan and buy their markets. This should be outlawed by law. Does the myth of the US Plunge Protection Team come into mind?
Mutual funds in the US had serious withdrawals in 2015 and this will increase in 2016 to which will add to the market drop. Just wait and find out that you cannot redeem your money. A serious, serious crisis is brewing.
Since 2016 is an election year and with the market catering, candidates will throw out all kinds of crap. I think that the idea of Mark Skousen's, Gross Output(GO) will catch hold by the media as it makes the US economy look better than it is in reality. Michael Burry, the man behind the movie, The Big Short, says he worries because big banks got bigger and the Fed is leveraged at 77 to 1 which makes it insolvent. Got gold anyone?
Like I stated above, I see hacking becoming worse and all the ways that physical money is being by-passed will only make things get worse if a crisis develops due to liquidity. I have warned you in the past, dear reader that there isn't enough money in circulation to cover the amount of debt in society. You should start paying bills with cash to understand its value. Money is not cheap!
Affordable Care Act will show its weakness and badly constructed as more and more health companies drop out of the exchanges. In addition, health prices are still rising. ACA is a terrible idea! There will also be a new buzz word in health care: Synthetic biology.
The EU will go deeper into debt due to the burden of the refugees. There will be backlashes, but I wonder do the refugees really appreciate the good will of so many or just how it effects me? It is no longer what my country can do for me, but what the global community can do for me. This will be a continuing saga, but no nation in SA offers a home to these people. I wonder about that too?
As for SA, Brazil will get the Olympics and social unrest about wages and living conditions as well as Argentina and Venezuela. The big Brazilian oil company should go bankrupt, but it will probably get a bailout. I see mucho unrest in SA.
The leap year won't have an answer for Chinese imperialism in the South Seas as military spending like in the US will be the Communist Party answer to help their economy. Not the answer!
Climate change will receive lip service of reforms. Promises will never be kept. Laws should be passed to demand solar energy on any new structure four floors or higher. Car companies should be pushed into NGC or electric models. The idea of tax credits will only burden society with another taxing bureaucracy. Instead, the government should impose tariffs on solar imports and provide tax credits to help US industries get their footing. Money should be given to states that pass solar building requirements. This is how I would answer the question. Denmark should be praised and copied as a great model of alternative energy.
The Middle East has been a sore spot in the world since the beginning of time. Palestine should be recognized and helped along with Israel. The deal with Iran holds some hope, but these people have a different culture than the West. Their religion, Islam has a serious flaw. Take 10 Muslims. You will get 5 Sunni and 5 Shite, however you will get 10 different interpretations of their teaching and beliefs. The Jewish religion has the same situation, except if you differ with a Jew, at most, he will shun you. These Muslims will kill you and destroy your church if you aren't one of their followers. These people are like the Catholic Church back in the Middle Ages when money and power blinded leaders. These people are worse. They're fanatics and I personally don't want anything to do with them until they can understand this principle: live and let live. Nothing there lasts, especially peace. This is a sore spot in the world and nothing has changed through time. No one can change culture only peace and love can show the way, but all we'll get is guns and war. Sorry, I cannot offer a better view, but keep on with self-improving and believing in peace and love. Amen.
- JFL
Before I can go forward, I'd like to reflect on my 2015 calls.
Perfect Call
I said that Yellen would not raise rates and if she did, it would only be a quarter point and late in the year. And yet, not one pundit ever mentioned my blog. Go figure!
King Dollar
I said it would sink Dow profits. I'm a sage!
Market Correction
Wrong! I called for a 10% correction by the end of the first quarter and although January was down, the market rebounded to new highs. My only mistake was in timing because the market did fall 10% in August. However, truth be told, I was looking for a deeper correction. The composite was down 5% for the year, while NASDAQ was up 5%, however a few tech stocks like Netflix skew the index. Verification comes through the small caps which were down for the year. The uptrend has been broken both yearly and multi-yearly.
Currencies
I said that all fiat money would continue their race to the bottom. Bingo! My exact words.
"governments wanted a lower currency value to spur exports. Now, they will get it except the demand will also shrink(because their citizens pay higher costs) and new problems will surface like reserves to buy dollars and support their currency(bonds were issued in dollars and have to be repaid in dollars which cost them more.) Deficits will destroy budgets and plans for the future."
Gold
Wrong. Called for a $1350. price
Commodities in General
Wrong with warning of defaults, however this could be a timing issue again as hedging saved many oil companies. Nevertheless, in 2016 those contracts will expire and there will be defaults in oil. Any oil price below $32. will cause serious repercussions in the market.
Hacking
Correct and it will continue and get worse.
Taxes on Gas
Wrong, but again a timing issue. This will happen after the 2016 election.
TPP
Obama will keep backing it. My only hope is Sanders and Trump oppose it and win the public.
EU
Mixed. I called for a recession, however my prediction for QE was correct.
SA
Mixed bag. The dangers still exist especially for Argentina, Brazil and Venezuela.
Asia
Wrong as Thailand didn't suffer unrest. Japan weathered through another year with the Yen lower which helped their big exporting companies. Bank of Japan bought stocks to help their market and I missed that one.
Middle East
Wrong about another coup, but correct with displaced citizens. Findings on Ebola cure are still a work in progress, but the crisis has passed.
What do you think, dear reader? I think that I did B plus work and now, this is how I see it.
2016
The Fed will only add another quarter point, but really desire to get to 1%. At 1% the Fed can talk up ammunition if another crisis appears. Basically, another wait and see approach with a whole lot of BS!
The dollar will be range bound from 100 down to 93. Many other factors will determine its ultimate direction, especially with defaults in oil bonds and how the Fed responds to its reckless zero interest rates. If the dollar breaks above its high at 101, then new highs will come. Conversely, if it breaks below 93, then 85 is the next support level. Derivative triggers could cause a global recession, however that terrible danger could be put off until 2017. It is the ultimate weapon of financial destruction. Nevertheless, the debt market is, as it always was, a ticking time bomb caused by the Fed with low rates that provide cheap money, and the prospect of negative rates will only make everything that much more dangerous.
Currencies will continue to devalue which is a way to dump their exports on the US economy... I see the "hover-board" as a big fad, but since it is made by outsourced companies, little help for US manufacturing. It will continue to shrink, but toy companies will benefit with the fad. On the other Virtual Reality is expected to grow and surpass $150B in just four years. I'm not a gamer, but that is serious toy money.
Gold will also be range bound, but will respond to silver's action. I hope silver rises due to mining cutbacks in production and the demand by the solar industry. The price should be around $30. per ounce, so there is plenty of upside, although I don't see it rising that high. "Paper" gold trading could become a scandal. Paper trades exceed world supply many times over which is the manipulation of gold and silver. If there was actual delivery of these contacts - trouble in paradise with gold off the charts.
The market should drop 10% in the first quarter and I feel that it will eventually test the 2011 August lows. The real test will be in the action of the bond market. If defaults trigger problems, then derivatives could crumble everything with liquidity being a central point...I see S & P earnings falling into negative territory in the fourth quarter. This will be consecutive down earnings reports which in itself is a sign of a recession... Global markets, especially in Shanghai will pressure markets with declines. The Chinese ban on selling ends on 6 January. However, the ban has been extended for owners of 5%, which is hedge funds and institutions. Bottom line: you can buy, but you can't sell even if you want too. Yeah, that will spark new buyers into their market which happens to be dominated by individuals. The Chinese could do like Japan and buy their markets. This should be outlawed by law. Does the myth of the US Plunge Protection Team come into mind?
Mutual funds in the US had serious withdrawals in 2015 and this will increase in 2016 to which will add to the market drop. Just wait and find out that you cannot redeem your money. A serious, serious crisis is brewing.
Since 2016 is an election year and with the market catering, candidates will throw out all kinds of crap. I think that the idea of Mark Skousen's, Gross Output(GO) will catch hold by the media as it makes the US economy look better than it is in reality. Michael Burry, the man behind the movie, The Big Short, says he worries because big banks got bigger and the Fed is leveraged at 77 to 1 which makes it insolvent. Got gold anyone?
Like I stated above, I see hacking becoming worse and all the ways that physical money is being by-passed will only make things get worse if a crisis develops due to liquidity. I have warned you in the past, dear reader that there isn't enough money in circulation to cover the amount of debt in society. You should start paying bills with cash to understand its value. Money is not cheap!
Affordable Care Act will show its weakness and badly constructed as more and more health companies drop out of the exchanges. In addition, health prices are still rising. ACA is a terrible idea! There will also be a new buzz word in health care: Synthetic biology.
The EU will go deeper into debt due to the burden of the refugees. There will be backlashes, but I wonder do the refugees really appreciate the good will of so many or just how it effects me? It is no longer what my country can do for me, but what the global community can do for me. This will be a continuing saga, but no nation in SA offers a home to these people. I wonder about that too?
As for SA, Brazil will get the Olympics and social unrest about wages and living conditions as well as Argentina and Venezuela. The big Brazilian oil company should go bankrupt, but it will probably get a bailout. I see mucho unrest in SA.
The leap year won't have an answer for Chinese imperialism in the South Seas as military spending like in the US will be the Communist Party answer to help their economy. Not the answer!
Climate change will receive lip service of reforms. Promises will never be kept. Laws should be passed to demand solar energy on any new structure four floors or higher. Car companies should be pushed into NGC or electric models. The idea of tax credits will only burden society with another taxing bureaucracy. Instead, the government should impose tariffs on solar imports and provide tax credits to help US industries get their footing. Money should be given to states that pass solar building requirements. This is how I would answer the question. Denmark should be praised and copied as a great model of alternative energy.
The Middle East has been a sore spot in the world since the beginning of time. Palestine should be recognized and helped along with Israel. The deal with Iran holds some hope, but these people have a different culture than the West. Their religion, Islam has a serious flaw. Take 10 Muslims. You will get 5 Sunni and 5 Shite, however you will get 10 different interpretations of their teaching and beliefs. The Jewish religion has the same situation, except if you differ with a Jew, at most, he will shun you. These Muslims will kill you and destroy your church if you aren't one of their followers. These people are like the Catholic Church back in the Middle Ages when money and power blinded leaders. These people are worse. They're fanatics and I personally don't want anything to do with them until they can understand this principle: live and let live. Nothing there lasts, especially peace. This is a sore spot in the world and nothing has changed through time. No one can change culture only peace and love can show the way, but all we'll get is guns and war. Sorry, I cannot offer a better view, but keep on with self-improving and believing in peace and love. Amen.
Wednesday, December 30, 2015
Why Are You Buying Stocks?
No, I'm not against the stock market, however the way to win is to buy low and sell high. This is my point of reference. The market is now priced high and to believe that new highs are on the horizon is ignoring danger signs between you and that far off distant level. At present, the percentages point down or to the correction ledger. Let me address my view on that this week and next week, I will post my much anticipated outlook: Forecast 2016.
Bull Market
We all realize that stocks have been in bull mode for seven years. The S & P 500 rose over 200% from March 2009 to December 2014. This year the market is flat!
It is not only flat but belies the truth of its value. The market corrected 10% in August, rebounded and now ranges between low and high resistance. The P/E ratio is over 21. Historically, it is moves between 12 and 15. Today's market is 35% to 40% over-priced by P/E ratios. Now, consider this aspect, earnings.
Earnings
was up less than 2% in 2014 and yet, stock prices rose double digits. This year, earnings were down and prices are still rising. Wall Street expect earnings to fall another 4.5% in the fourth quarter. Bottom line: earnings are lower, but the price that you pay is higher. This is a serious red flag.
Index
is skewed to favor certain companies which give a false reading on the market and economy. Five tech stocks are holding the market up (Amazon, Google, Netflix, Facebook and Microsoft)the rest of the market is down 5% and oil is down over 50%. By the way, AMZN has a P/E of 963. Suckers, beware!
The shills will keep pushing the market. Just like all the Fed knows is to print money, the shills keep barking to "buy the dips." My response to that is this, ever fall in a sand hole? No matter how hard you shovel on one side, the other side keeps refilling the hole. This dear reader, leaves you one question. No, not what is in your wallet, but what new product or innovation will cause a rally in our economy and stock market? blank____? Silence is the answer.
At this time the cycle of life and business cycle will be more influential than rate hikes, driverless cars, etc. The market is past its due date while prices are still getting higher. Take out your money and watch, wait and listen. Better days and opportunities will come, but not in the near-term.
Bull Market
We all realize that stocks have been in bull mode for seven years. The S & P 500 rose over 200% from March 2009 to December 2014. This year the market is flat!
It is not only flat but belies the truth of its value. The market corrected 10% in August, rebounded and now ranges between low and high resistance. The P/E ratio is over 21. Historically, it is moves between 12 and 15. Today's market is 35% to 40% over-priced by P/E ratios. Now, consider this aspect, earnings.
Earnings
was up less than 2% in 2014 and yet, stock prices rose double digits. This year, earnings were down and prices are still rising. Wall Street expect earnings to fall another 4.5% in the fourth quarter. Bottom line: earnings are lower, but the price that you pay is higher. This is a serious red flag.
Index
is skewed to favor certain companies which give a false reading on the market and economy. Five tech stocks are holding the market up (Amazon, Google, Netflix, Facebook and Microsoft)the rest of the market is down 5% and oil is down over 50%. By the way, AMZN has a P/E of 963. Suckers, beware!
The shills will keep pushing the market. Just like all the Fed knows is to print money, the shills keep barking to "buy the dips." My response to that is this, ever fall in a sand hole? No matter how hard you shovel on one side, the other side keeps refilling the hole. This dear reader, leaves you one question. No, not what is in your wallet, but what new product or innovation will cause a rally in our economy and stock market? blank____? Silence is the answer.
At this time the cycle of life and business cycle will be more influential than rate hikes, driverless cars, etc. The market is past its due date while prices are still getting higher. Take out your money and watch, wait and listen. Better days and opportunities will come, but not in the near-term.
Wednesday, December 23, 2015
Buget 2016: Banks Up, Citizens down
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.
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 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!
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