- "People talkin' about us
They got nothin' else to do
When it all comes down
We will still come through..."
- Eagles
You know it takes real courage to follow your convictions
Get out of your comfort zone and
face an uncertain future.
Tipping my hat to the brave souls that wanted sovereignty of their nation
That overcame eons of conflict between Catholics and Protestants to realize
that both are Christians, that both are part of the culture and at the same time,
wanted to protect that legacy.
They risked the threats of the entire world.
Going to the rear of the line, unemployed and staring into a dark tunnel.
The powers-to-be hit their currency, banks and more.
That the losers wouldn't respect the vote, calling for another test.
Looking for loopholes and world leaders saying,
"That the English are deluding themselves."
That is their story - what will be ours?
- Who's gonna make it, we'll find out in the long run..."
We are dominated by two political parties that do nothing for its citizens. On rare occasions we get an insight to elite thinking like on Brexit. Here is one, "It's always a dangerous thing when you leave democracy to the people." How about this one, "If voting mattered, we wouldn't let them do it."
Now, in our coming election we get to choose the lesser of two evils.
Hillary is despised by half of her parties constituents. Trump is hated by all of his party leaders.
Hillary says, "She's fighting for us." Here is her bio: In her 30 years, we know the Clinton's are approachable by anyone with MONEY! Her husband gave us Nafta and Cafta. We got the Shafta! Ross Perot was right. That shushing sound is, "lost jobs going over the border." She will push for the Trans-Pacific Partnership (TPP) even though at the moment she says she's against it. She will kill the last of our manufacturing. She cannot claim one thing that she accomplished for our nation except be in a coalition that placed handicap children in our public schools even though the schools were not equipped to teach and service them. The idea was correct, but the resolution wasn't. She will be just like Obama who said, "I'm for First Payer!" and we got Big Pharma - sell out! He promised to end the Middle East wars. We got eight more years of it. She will let the military complex run hog wild and our deficits will be worse than ever. If she wins, I predict more wars, higher deficits and a recession.
The only thing that Trump says that has any merit is the ending of the rip-off of globalization. He implies that he will protect American production and jobs. However, I cannot fully trust any Republican because the GOP really means, "Guardian of Privilege." I want to believe. I think that he is the lesser of the two evils, but I can't.
Together, this means that as citizens we need to find a way to form a new political party that will represent what the people really want - peace and prosperity. It can be done as we can take strength from the British vote.
It means the foremost point of this party should be to get back the sovereignty of our nation. To drop the WTO which mandates to us what we can produce, how much we can produce and at what price. The party should return to our Founding Fathers advice: no foreign entanglements like NATO and SEATO. We determine the number of immigrants according to our economic needs and abilities. We are for trade, but no blank agreements. Each trade is on its own merit. Speaking of our trading partners, Dangerfield had the answer, "No respect!" Globalization gives us: Invading species that destroy our environment, VW that poisons our air, China that poisons our pet food and all manipulate their currency to steal our jobs and lower our standard of living.
Give Peace A Chance
We want peace. All we get is endless wars that steals half of our budget, puts all of us in deep debt, while killing our youth. The military complex, this "deep state" has been wrong about every endeavor from Korea to today. Our standard of living has gone from first and now, we are not even in the top 20. Instead of war that money could have rebuilt our infrastructure, create jobs, improve education and lower our debt. This is how we obtain prosperity. It begins with peace.
We need to end the FED! Again, a return to the thinking of our founding fathers. We may not have the ability to return to a gold standard, but the Greeks taught us that all things go in transition. We need to start the change and leading the way will be a balanced budget by law. In addition, we need the courage to admit that we have many needs, but the above is the cornerstone to this new party.
By the way there are other, smaller political parties in America. The largest is the Libertarians. They want less government and less regulation. Do you know what that means? Every tree will be cut down, leaving a forest of stumps. Every waterway will be on fire due to pollution. No national parks. They are even against social security, but so were the Republicans at one time.They forget that if one man can kill another, what chance does nature have? Man will succumb to the siren call for riches like many of our doctors who dropped the Hippocratic oath for a new code: the greenback. They commit fraud on programs intended to do good as they line their pockets, stealing from us all because their resolve is weak.
Sadly, we had an example in England. Just prior to the vote. a man killed an outspoken opponent to Brexit. That poor soul could have just spoken his ideas like she did with the bottom line being a neutral vote and the citizens choosing between the two ideas. It is called, "Free speech." This blog is a good example of our founding fathers thinking. However, he ends up being like a terrorist who he believed could be hiding among the immigrants when in reality the terrorist was in his soul.
Let the Eagles take us out:
- Well, we're scared
But we ain't shakin'
We're kind of bent
But we ain't breakin'
Wednesday, June 29, 2016
Wednesday, June 22, 2016
Helicopter Money Is Here!
-" There is no other agency of government which can overrule actions that we take."
- Alan Greenspan
When Milton Friedman tagged the line, he was being flippant. Things have gotten so bad about "manna" from helicopters that maybe, you thought for a second that I was going to reveal a website giving away cash?
The Fed had its June meeting, but the bond market called the minutes even before they were written. Dear reader, two markets are moving at light speed, and usually, they move at a snail's pace. This insight will give you a feel at what I'm seeing.
Currency Market
is 44 times larger than the stock market. In fact, it is the world's largest exchange. One nation and one confederation are disrupting the basket of currencies that world trade responds and trades off.
Disrupters!
The yen has gyrated 20% in range since 2014. The euro is in a state of flux. Its range has seen moves of 25%. This is a direct result of "free" money from central banks associated with each entity. Japan's central bank is doing monetary finance. No one will buy their bonds except the BOJ and to the tune of $80 trillion yen per year. The Japanese government uses deficit spending at $35 trillion yen a year. The plan is to eliminate debt by buying all the debt. Then, they will tell the world that they are debt free. Yay, helicopter money!
The European Central Bank is enacting the same plan, but closer to QE. They will buy corporate debt and this action is driving rates down for member nations. For example, take Germany. In 2014, the ten year rate was 1.44% and today, 0.01%. This is a 98% drop in two years! In fact, in daily action the German note actually went negative.
Taxing Money
Switzerland leads the charge against cash. For example, you put $100K in a Swiss ten year note and they bill you $4500 upon the due date. By the way, if rates were to rise during the period that note would also crash in total value. Who you gonna call? Ghostbusters? Idiots!
Paradox
Even though currencies have declined with mass printing, banks have tighten their lending standards because of their exposure to the falling price of oil. A recent study found that 80.2% of banks are cutting their lending to the oil and gas industry. Before they close the vault, they have added more capital to cover the wave of defaults and bankruptcies. Bank of America has added another 15% for the rainy day. By the way, the latest bankruptcy count(83) is higher than the combined points scored by James and Irving(82) in game five of the NBA championship.
Need A Fifth
The coach, the ECB, has four players in Japan, Denmark, Sweden and Switzerland. They need one more to get a starting five. At present, the team has assembled $13 plus trillion in government bonds that are negative. In fact, in the last four months negative issues have jumped 67%. In addition, as stated, bonds in Germany and the UK are so low that at various times the issues have turned negative.
Why the Bond Market Knew...
The week before the Fed meeting, the 10-Year T-Bill was 1.70% and last week, just 1.39%.Dear reader, that yield won't even match inflation for 2016 and this goes to 2026? Get real! We have been living with negative yields since 2008, but no one speaks for the citizens when talking about inflation. Food and shelter are off the charts and don't mention car insurance or the other lie, Obama Care.
Three US powerhouses are grabbing the dollars as they fall from the sky. Johnson and Johnson(JNJ), General Electric(GE) and Philip Morris(PM) all have bonds trading in negative territory. Companies will be grabbing with both hands except a few sane souls like myself. I'm not alone.
Not So Fast, Kimosabe!
In Japan, citizens are pulling their money out of banks. I predict this action will grow all over the world, maybe even develop a run on banks. Anyway, they are buying safes to store their yen. I think mattresses got a bad rap from all the mafia movies.
In Germany, the insurer giant, Munich Re recently pulled their millions from the ECB. This company insures insurance companies and I guess they are looking for insurance? Commerzbank, a German banking giant, also pulled their millions from the ECB.
World's Collide
A split will emerge within the world. On one side will be the fiat people and on the other, the awakening to real value like in precious metals. I will stop to pick up a dollar lying on the street, but I ain't looking up to the skies for some more. Real wealth takes work. You have to invest your time and energy to create value. You can't create it out of thin air. When something has real value, it will retain that value and not be subject to the wind blowing paper in the air at the caprice of some bureaucrat, a desk jockey, thinking he is a financial engineer. End the Fed!
- Alan Greenspan
When Milton Friedman tagged the line, he was being flippant. Things have gotten so bad about "manna" from helicopters that maybe, you thought for a second that I was going to reveal a website giving away cash?
The Fed had its June meeting, but the bond market called the minutes even before they were written. Dear reader, two markets are moving at light speed, and usually, they move at a snail's pace. This insight will give you a feel at what I'm seeing.
Currency Market
is 44 times larger than the stock market. In fact, it is the world's largest exchange. One nation and one confederation are disrupting the basket of currencies that world trade responds and trades off.
Disrupters!
The yen has gyrated 20% in range since 2014. The euro is in a state of flux. Its range has seen moves of 25%. This is a direct result of "free" money from central banks associated with each entity. Japan's central bank is doing monetary finance. No one will buy their bonds except the BOJ and to the tune of $80 trillion yen per year. The Japanese government uses deficit spending at $35 trillion yen a year. The plan is to eliminate debt by buying all the debt. Then, they will tell the world that they are debt free. Yay, helicopter money!
The European Central Bank is enacting the same plan, but closer to QE. They will buy corporate debt and this action is driving rates down for member nations. For example, take Germany. In 2014, the ten year rate was 1.44% and today, 0.01%. This is a 98% drop in two years! In fact, in daily action the German note actually went negative.
Taxing Money
Switzerland leads the charge against cash. For example, you put $100K in a Swiss ten year note and they bill you $4500 upon the due date. By the way, if rates were to rise during the period that note would also crash in total value. Who you gonna call? Ghostbusters? Idiots!
Paradox
Even though currencies have declined with mass printing, banks have tighten their lending standards because of their exposure to the falling price of oil. A recent study found that 80.2% of banks are cutting their lending to the oil and gas industry. Before they close the vault, they have added more capital to cover the wave of defaults and bankruptcies. Bank of America has added another 15% for the rainy day. By the way, the latest bankruptcy count(83) is higher than the combined points scored by James and Irving(82) in game five of the NBA championship.
Need A Fifth
The coach, the ECB, has four players in Japan, Denmark, Sweden and Switzerland. They need one more to get a starting five. At present, the team has assembled $13 plus trillion in government bonds that are negative. In fact, in the last four months negative issues have jumped 67%. In addition, as stated, bonds in Germany and the UK are so low that at various times the issues have turned negative.
Why the Bond Market Knew...
The week before the Fed meeting, the 10-Year T-Bill was 1.70% and last week, just 1.39%.Dear reader, that yield won't even match inflation for 2016 and this goes to 2026? Get real! We have been living with negative yields since 2008, but no one speaks for the citizens when talking about inflation. Food and shelter are off the charts and don't mention car insurance or the other lie, Obama Care.
Three US powerhouses are grabbing the dollars as they fall from the sky. Johnson and Johnson(JNJ), General Electric(GE) and Philip Morris(PM) all have bonds trading in negative territory. Companies will be grabbing with both hands except a few sane souls like myself. I'm not alone.
Not So Fast, Kimosabe!
In Japan, citizens are pulling their money out of banks. I predict this action will grow all over the world, maybe even develop a run on banks. Anyway, they are buying safes to store their yen. I think mattresses got a bad rap from all the mafia movies.
In Germany, the insurer giant, Munich Re recently pulled their millions from the ECB. This company insures insurance companies and I guess they are looking for insurance? Commerzbank, a German banking giant, also pulled their millions from the ECB.
World's Collide
A split will emerge within the world. On one side will be the fiat people and on the other, the awakening to real value like in precious metals. I will stop to pick up a dollar lying on the street, but I ain't looking up to the skies for some more. Real wealth takes work. You have to invest your time and energy to create value. You can't create it out of thin air. When something has real value, it will retain that value and not be subject to the wind blowing paper in the air at the caprice of some bureaucrat, a desk jockey, thinking he is a financial engineer. End the Fed!
Wednesday, June 15, 2016
In Defense of Donald Trump
The real big problem with Donald Trump is that he talks in sound bytes. For that matter this is the same problem with the news media.
Trump lashed out against the US District Judge, Gonzalo Curiel concerning the lawsuit against Trump University. Trump said, "The judge is probably biased against me because of my previous comments about Mexican immigration."
Then what?
The media jumps on the quote to imply that Trump is racist. This action revealed their inherent dislike for Trump and by de-facto, pro-Clinton leanings. In reality, if Donald just took the time to explain his thinking, there would be a different conversation today.
Federalist Papers
Alexander Hamilton took up the cause for the original colonies to ratify the constitution. He, along with John Jay and I can't at this moment recall a third member of the revolution group, wrote a series of articles to promote the citizens to push their local government to back the new Republic.
Hamilton advocated the three equal branches of government. He goes on to say that judges in the Judiciary Branch, can be subjective and do what is best for the nation rather than serve self-interest. This sounds all well in theory, but humans are flawed. They cannot always be subjective in nature. I can recite numerous examples, and in my unpublished work, I do. Here I will use the two most important.
Dred Scott v. Sandford
Supreme Court Judge, Taney declared in 1857 that African-Americans are inferior. The man was pro-slavery among other things. He said, "Slaves are chattel."
Plessy v. Ferguson
The Supreme Court ruled that separate but equal is constitutional in 1896.
When the court overturned the above verdict in Brown v. Board of Education in 1954, the South almost revolted again. Southern senators outlined a plan to "pack" the court with right minded people. In detail, the book called, Southern Manifesto, devised a way to boycott schools rather than integrate.
Right there points to the problem. People have their own baggage. You can get any decision in the courts as long as you get to pick the judge. This is why the Republicans are holding up the nomination process at the moment.
Getting deeper, this is the real reason why there was a quick response to Trump's latest outburst. The powers-to-be do not want this aspect to get play, to become part of the conversation because the bedrock of the elites is really at stake.
Now, if Donald Trump just explained that this Hispanic-American judge has a very close affiliation to the San Diego based La Raza, which is pro-Mexican-American and pro-immigration of Mexicans, then, maybe there is some doubt about this judge's ability to be subjective. Clinton won't reveal this truth either.
If our nation is ever going to evolve our democracy, the third branch of our system needs to be overhauled(I have an answer in my work, but I can't reveal it here). As it stands now, the Judiciary Branch is a dictatorship within our democracy. Yes, I know that decisions could be amended, but the process is too difficult and lengthy, especially with so many day-to-day verdicts. The court creates law without legislation which violates the constitution. By the way, Jefferson and Madison are on my side if you care to look it up.
Trump lashed out against the US District Judge, Gonzalo Curiel concerning the lawsuit against Trump University. Trump said, "The judge is probably biased against me because of my previous comments about Mexican immigration."
Then what?
The media jumps on the quote to imply that Trump is racist. This action revealed their inherent dislike for Trump and by de-facto, pro-Clinton leanings. In reality, if Donald just took the time to explain his thinking, there would be a different conversation today.
Federalist Papers
Alexander Hamilton took up the cause for the original colonies to ratify the constitution. He, along with John Jay and I can't at this moment recall a third member of the revolution group, wrote a series of articles to promote the citizens to push their local government to back the new Republic.
Hamilton advocated the three equal branches of government. He goes on to say that judges in the Judiciary Branch, can be subjective and do what is best for the nation rather than serve self-interest. This sounds all well in theory, but humans are flawed. They cannot always be subjective in nature. I can recite numerous examples, and in my unpublished work, I do. Here I will use the two most important.
Dred Scott v. Sandford
Supreme Court Judge, Taney declared in 1857 that African-Americans are inferior. The man was pro-slavery among other things. He said, "Slaves are chattel."
Plessy v. Ferguson
The Supreme Court ruled that separate but equal is constitutional in 1896.
When the court overturned the above verdict in Brown v. Board of Education in 1954, the South almost revolted again. Southern senators outlined a plan to "pack" the court with right minded people. In detail, the book called, Southern Manifesto, devised a way to boycott schools rather than integrate.
Right there points to the problem. People have their own baggage. You can get any decision in the courts as long as you get to pick the judge. This is why the Republicans are holding up the nomination process at the moment.
Getting deeper, this is the real reason why there was a quick response to Trump's latest outburst. The powers-to-be do not want this aspect to get play, to become part of the conversation because the bedrock of the elites is really at stake.
Now, if Donald Trump just explained that this Hispanic-American judge has a very close affiliation to the San Diego based La Raza, which is pro-Mexican-American and pro-immigration of Mexicans, then, maybe there is some doubt about this judge's ability to be subjective. Clinton won't reveal this truth either.
If our nation is ever going to evolve our democracy, the third branch of our system needs to be overhauled(I have an answer in my work, but I can't reveal it here). As it stands now, the Judiciary Branch is a dictatorship within our democracy. Yes, I know that decisions could be amended, but the process is too difficult and lengthy, especially with so many day-to-day verdicts. The court creates law without legislation which violates the constitution. By the way, Jefferson and Madison are on my side if you care to look it up.
Wednesday, June 8, 2016
All Things Are Connected
I wrote a book and the meme within it is, "All things are connected." Because I don't have a name like Paris Hilton, Kim K. among others, agents have declined my work. This is why I write a blog - to get a name or possibly some recognition. It might lead to representation and then, publication.
Among the important indicators that I watch is the bond market because it will not only reflect the strength and direction of the US economy, but also the cost of financing - interest rates.
Prior to last Friday's job report, the media talk and general consensus is that the Federal Reserve will raise rates by a quarter point in June or July. The bond market says...
No!
This caught my attention. Have you checked the global market? The bond market is echoing the global trend which is down and negative in many nations.
10-Year T-Bill
rate is low at 1.70%, but that ridiculous low return is high compared to central banks elsewhere. In Germany, you only get 0.12% and a growing number of central banks are turning to negative rates. These idiots say they seek inflation for growth, but they enact a deflationary concept to achieve it.
Real Life
You have a business. To preserve cash for a rainy day, you borrow for a short term need. Now, your central bank lowers the cost of loans. You save on this cost. However, this does not mean that consumers will buy your product or if competition from State funded businesses can out-price your product through currency manipulation to win market niche. The Fed's actions have only reduced costs for businesses which gave a spark to stock prices. They have hurt all citizens through devaluation of currency and, especially savers, pension plans and mutual funds.
Accept Responsibility
Will they ever admit that their policy is wrong? For example, the Organization for Economic Cooperation and Development(OECD)just changed their projection for US growth in 2016. At least, they made an announcement. Anyway, originally, they said US growth would be 2.4%. Then, they lowered it to 2%, and now, 1.8%. Hey, they are not alone. You can add President Obama, the IMF and the Fed among others. By the way, I predicted GDP would be 0.5% in the first quarter and I was spot on until the latest government revision. Don't they always make things look better?
Mathew Mish, credit strategist at UBS is also looking at bonds, especially high risk issues. His analysts projects a rise in default rates from 2.6% last year, to 4.3% in 2016. I like to add that the market has resulted in four straight quarters of profit declines. We both realize that companies will have a harder time to cover costs and debt. For those who will seek further funding to make ends meet, they will face tougher lending standards as debt is getting more expensive, regardless of what central banks do with rates.
In addition, I see the low price for oil negatively effecting one of the strongest sectors in the US economy. I see retail continue to suffer. Together, they will effect the bond market. Mish estimates default rates for non-energy firms will rise to 3.5% in 2016 from 1.5% in 2015. We both see the default rates adding stress to the market.
Higher Rates?
If rates are raised, many pension and mutual funds will drop "old" bonds for higher returns. This action could cause a liquidity crunch and another reason why the drastic actions of the Fed is so dangerous. In any event, lending standards will strengthen along with the rate of return.
Housing
Not only does the cost of doing business climb, but higher interest rates will disqualify tens of thousands of home buyers.
The staircase, ladder climb model
We already have a serious flaw in housing - builders have by-passed affordable housing for the upscale market. The staircase model and the American dream in housing has crumbled in many regions of the country. And now, the return of Flippers! In the first quarter of 2016, flippers accounted for 20% of all home sales. They are everywhere! From cable TV in Nashville to LA. If they can't sell, then we all know what happens.
As I wrote in my unpublished work, The Evolution of Democracy: The Book of Multiple Ideas and Predictions, all things are connected.
Among the important indicators that I watch is the bond market because it will not only reflect the strength and direction of the US economy, but also the cost of financing - interest rates.
Prior to last Friday's job report, the media talk and general consensus is that the Federal Reserve will raise rates by a quarter point in June or July. The bond market says...
No!
This caught my attention. Have you checked the global market? The bond market is echoing the global trend which is down and negative in many nations.
10-Year T-Bill
rate is low at 1.70%, but that ridiculous low return is high compared to central banks elsewhere. In Germany, you only get 0.12% and a growing number of central banks are turning to negative rates. These idiots say they seek inflation for growth, but they enact a deflationary concept to achieve it.
Real Life
You have a business. To preserve cash for a rainy day, you borrow for a short term need. Now, your central bank lowers the cost of loans. You save on this cost. However, this does not mean that consumers will buy your product or if competition from State funded businesses can out-price your product through currency manipulation to win market niche. The Fed's actions have only reduced costs for businesses which gave a spark to stock prices. They have hurt all citizens through devaluation of currency and, especially savers, pension plans and mutual funds.
Accept Responsibility
Will they ever admit that their policy is wrong? For example, the Organization for Economic Cooperation and Development(OECD)just changed their projection for US growth in 2016. At least, they made an announcement. Anyway, originally, they said US growth would be 2.4%. Then, they lowered it to 2%, and now, 1.8%. Hey, they are not alone. You can add President Obama, the IMF and the Fed among others. By the way, I predicted GDP would be 0.5% in the first quarter and I was spot on until the latest government revision. Don't they always make things look better?
Mathew Mish, credit strategist at UBS is also looking at bonds, especially high risk issues. His analysts projects a rise in default rates from 2.6% last year, to 4.3% in 2016. I like to add that the market has resulted in four straight quarters of profit declines. We both realize that companies will have a harder time to cover costs and debt. For those who will seek further funding to make ends meet, they will face tougher lending standards as debt is getting more expensive, regardless of what central banks do with rates.
In addition, I see the low price for oil negatively effecting one of the strongest sectors in the US economy. I see retail continue to suffer. Together, they will effect the bond market. Mish estimates default rates for non-energy firms will rise to 3.5% in 2016 from 1.5% in 2015. We both see the default rates adding stress to the market.
Higher Rates?
If rates are raised, many pension and mutual funds will drop "old" bonds for higher returns. This action could cause a liquidity crunch and another reason why the drastic actions of the Fed is so dangerous. In any event, lending standards will strengthen along with the rate of return.
Housing
Not only does the cost of doing business climb, but higher interest rates will disqualify tens of thousands of home buyers.
The staircase, ladder climb model
We already have a serious flaw in housing - builders have by-passed affordable housing for the upscale market. The staircase model and the American dream in housing has crumbled in many regions of the country. And now, the return of Flippers! In the first quarter of 2016, flippers accounted for 20% of all home sales. They are everywhere! From cable TV in Nashville to LA. If they can't sell, then we all know what happens.
As I wrote in my unpublished work, The Evolution of Democracy: The Book of Multiple Ideas and Predictions, all things are connected.
Wednesday, June 1, 2016
Chief Little Cash - Big Debt
Everyone knows Apple, Microsoft, and Google has tons of cash somewhere overseas, however there are over 2,000 nonfinancial companies that added a combined figure of $6.6 trillion in debt in 2015, including the above cash rich, tech giants. This debt casts a long shadow over the same total of cash in-hand. The present balance sheet only shows $1.84 trillion for the same companies. According to S&P Global Ratings, this ratio of cash-to-debt is the lowest it has been in 10 years.
Recovery in 2009
has seen company debt grow 50 times that of its cash growth. In numbers, debt grew to $850 billion and cash grew one percent. This equation equates to bad math. Maybe those stats that say the US is falling behind the world in math and science is taking effect?
Looking deeper into the numbers, the stats distort an intrinsic aspect among the companies. The elites like in the first sentence, have the majority of cash and can withstand a difficult period, while the remaining entities(99%) have the majority of debt. They have to budget $6 trillion and their cash reserves will evaporate quickly in any downturn. Just ask the neighboring oil and gas tribe. At present, the cash-to-debt ratio fell to 12 percent among speculative-grade issuers. This aspect puts many banks in a tough situation as they have to set aside more capital to cover Chief Rainy Day who may default.
What do these four have in common?
Aeropostale, Quiksilver, Pacific Sunwear and Sports Authority????
all retailers who filed bankruptcy in 2016. They are not alone as they stand in the court line behind the 67 oil and gas tribe. Last year at this time there were only 39 standing in line. The S&P expects the default rate to continue to rise from the 3.9 percent in 2015 to 5.2 percent this year.
Analysts explain this year's January drop in stock prices to credit conditions tightening at that time. Now, they say credit is available even for Greece. They say the market has passed the danger zone.
I say, "Oh really!"
Those same analysts should have been at the victory pow-woo after Little Big Horn. The victory of bows and arrows(debt) over guns(cash) would be short lived as debt grows with interest while cash is needed in day-to-day transactions. It was a sad victory party because the future had a dark shadow hanging over it just like our economy.
Recovery in 2009
has seen company debt grow 50 times that of its cash growth. In numbers, debt grew to $850 billion and cash grew one percent. This equation equates to bad math. Maybe those stats that say the US is falling behind the world in math and science is taking effect?
Looking deeper into the numbers, the stats distort an intrinsic aspect among the companies. The elites like in the first sentence, have the majority of cash and can withstand a difficult period, while the remaining entities(99%) have the majority of debt. They have to budget $6 trillion and their cash reserves will evaporate quickly in any downturn. Just ask the neighboring oil and gas tribe. At present, the cash-to-debt ratio fell to 12 percent among speculative-grade issuers. This aspect puts many banks in a tough situation as they have to set aside more capital to cover Chief Rainy Day who may default.
What do these four have in common?
Aeropostale, Quiksilver, Pacific Sunwear and Sports Authority????
all retailers who filed bankruptcy in 2016. They are not alone as they stand in the court line behind the 67 oil and gas tribe. Last year at this time there were only 39 standing in line. The S&P expects the default rate to continue to rise from the 3.9 percent in 2015 to 5.2 percent this year.
Analysts explain this year's January drop in stock prices to credit conditions tightening at that time. Now, they say credit is available even for Greece. They say the market has passed the danger zone.
I say, "Oh really!"
Those same analysts should have been at the victory pow-woo after Little Big Horn. The victory of bows and arrows(debt) over guns(cash) would be short lived as debt grows with interest while cash is needed in day-to-day transactions. It was a sad victory party because the future had a dark shadow hanging over it just like our economy.
Wednesday, May 25, 2016
Crucial Point
With the loss of quality manufacturing jobs each month and year, car sales become a point of concern. The revived auto-manufacturing industry and the ability to sell those vehicles has been the one true bright spot in our economy.
Sales
rose pass 17.4m in 2015 after a strong 16.4m in 2014. The new kid on the block, Tesla had a breakout response for deposits on its Model 3. However, it faces many problems among which is the ability to get the product to the customer. It lacks dealerships. The nation lacks refuel infrastructure for electric cars. In addition, the new ramp-up will be a logistical nightmare. I do wish Musk well. He'll need it. By the way, Tesla diluted the value of its shares by issuing more to raise money to increase production.
This year appears to be a solid year, but projections of 18m units sold will fall far short of expectations. I believe another 16m vehicles will be achievable. One thing the auto industry has going for it is the fact that the average age of cars on US roads is 11.4 years old.
Having said that, there are quite a few other problems.
Inventories
at dealerships are building above normal and wrinkles are forming on far heads. This is nothing new for dealerships. Car sales are a lot like the oil business - boom and bust. The present solution has Mike Jackson, CEO of AutoNation, in fits. He has spoken out against auto leasing to reduce inventory and create sales. He knows those same vehicles will return in one to three years to form a glut and competition for new car sales. According to Edmunds.com, leasing accounts for 31.3% of all new car sales in March 2016 and 31% of all auto borrowers have negative equity in their vehicle. This is similar to the financial housing crisis when homeowners owed more than their home was worth.
Time Payments
the value of outstanding auto loans rose pass $1T in the first quarter. If those same customers get a flat, the repercussions of loan defaults could effect not only the dealership, but banking and the nation. This is very troubling because consumers have over $952B in credit card debt. The only time credit card debt passed $1T, we had a recession in 2008. Together, this points to a tapped out consumer.
Conundrum
Leasing sales is a tough problem. It is good because it keeps the manufacturing side busy by providing work. However, it clouds the horizon for the industry and nation. Dealers have 3.8m in inventory. This is the most in 10 years according to Wards Auto. Experian reports 1.8m leased cars will be returned this year. That means car deals will soon be forth-coming. Dealers need to make space for the 2017s.
Another problem is the duration of time payments with sales. Too many deals call for 84 monthly installments. When fully paid, the vehicle will be old with too many miles under the hood. Like I said, this bright spot in our economy is reaching an inflection point. If the wrong consequences come about from this leasing policy and lengthy payment plan, the industry could suffer as well as the economy.
Sales
rose pass 17.4m in 2015 after a strong 16.4m in 2014. The new kid on the block, Tesla had a breakout response for deposits on its Model 3. However, it faces many problems among which is the ability to get the product to the customer. It lacks dealerships. The nation lacks refuel infrastructure for electric cars. In addition, the new ramp-up will be a logistical nightmare. I do wish Musk well. He'll need it. By the way, Tesla diluted the value of its shares by issuing more to raise money to increase production.
This year appears to be a solid year, but projections of 18m units sold will fall far short of expectations. I believe another 16m vehicles will be achievable. One thing the auto industry has going for it is the fact that the average age of cars on US roads is 11.4 years old.
Having said that, there are quite a few other problems.
Inventories
at dealerships are building above normal and wrinkles are forming on far heads. This is nothing new for dealerships. Car sales are a lot like the oil business - boom and bust. The present solution has Mike Jackson, CEO of AutoNation, in fits. He has spoken out against auto leasing to reduce inventory and create sales. He knows those same vehicles will return in one to three years to form a glut and competition for new car sales. According to Edmunds.com, leasing accounts for 31.3% of all new car sales in March 2016 and 31% of all auto borrowers have negative equity in their vehicle. This is similar to the financial housing crisis when homeowners owed more than their home was worth.
Time Payments
the value of outstanding auto loans rose pass $1T in the first quarter. If those same customers get a flat, the repercussions of loan defaults could effect not only the dealership, but banking and the nation. This is very troubling because consumers have over $952B in credit card debt. The only time credit card debt passed $1T, we had a recession in 2008. Together, this points to a tapped out consumer.
Conundrum
Leasing sales is a tough problem. It is good because it keeps the manufacturing side busy by providing work. However, it clouds the horizon for the industry and nation. Dealers have 3.8m in inventory. This is the most in 10 years according to Wards Auto. Experian reports 1.8m leased cars will be returned this year. That means car deals will soon be forth-coming. Dealers need to make space for the 2017s.
Another problem is the duration of time payments with sales. Too many deals call for 84 monthly installments. When fully paid, the vehicle will be old with too many miles under the hood. Like I said, this bright spot in our economy is reaching an inflection point. If the wrong consequences come about from this leasing policy and lengthy payment plan, the industry could suffer as well as the economy.
Wednesday, May 18, 2016
Your Stream Could Turn Dry
- "You will end up in poverty if you lend money, and receive less than your principle in return."
- Sebastian
If you subtract the real inflation rate from the yield of the ten year treasury bill, we are already under negative rates. It could get worse. The trend is down because the Fed is creating deflation by shrinking interest rates. They claim a 2% target for inflation, but everything that they do obstructs the possibility. Personally, I would rather see stable prices and no inflation with social mobility alive and kicking. However, that is another story for another time.
10-Year Note
I will use the classic 10-year denomination because it is generally viewed as the benchmark both for shorter and longer issues. When you scan down the list, you will notice the hypocrisy in all the issues. Some issues offer a vastly higher rate, but you have to consider both the risk, currency exchange and historical inflation within that nation. In any event, in the US, the return of 1.75% for a ten year period is a basic lie. There has never been a period in our history of a ten year duration that prices in the first year was less than 1.75% after ten years! Dear reader, keep in mind that an investor is suppose to make a profit for the time use of his money. Our Treasury is saying, if you buy a ten year note at 1.75%, then in ten years you should see a profit. Get out of town! Anyway, the story is worse in Europe and Asia.
Country Rate Trend
US 1.75% This is down 50 basis points for year-over-year(YOY)
Canada 1.31% This is down 48 basis points/YOY
Germany 0.12% This is down 55 basis points/ YOY
UK 1.40% This is down 56 basis points/ YOY
Switzerland -0.35% This is down 42 basis points/ YOY
Japan -0.13% This is down 57 basis points/YOY
If you believe the narrative, India offers the best return
India 7.42% This is down 52 basis points/ YOY
Did you notice the insipid intrusion of negative rates? This is a scary trend that all nations are embracing. People, central banks are causing deflation by lowering the value of money. This is a destructive principle. This disease has spilled over into the private sector.
Dividends and Investors
Americans, usually like stable, large companies that pay a good dividend. Companies like J&J and oil giants, Exxon and Chevron. In Europe, investors like their large blue chips like Royal Dutch Shell PLC or Siemens AG. Dear reader, those last two had their bonds fall negative in April. Their principle is decreasing! According to Bloomberg, another $16B of euro-corporate bonds are trading with yields below zero...Idiots!
Back in the US, the current yield for dividend paying companies in the S&P 500 is 2.1%. This is less than the historic average, but it is 1.8% more than the 10-Year Treasury. Of course, the Fed's cheap money allows companies to buyback their stock. Not that this will capture a future sales explosion by the company, but it makes the quarterly report look better and the CEO makes more with his stock options...Crooks!
Last year, companies in the S&P 500 spent almost $1 trillion on buybacks and dividends. However, it is the dividend aspect that worries me. By the way, that total spent is greater than the total profits of the same S&P 500 companies. People, simple math tells you as you well know, you cannot keep spending more than you make. Something has to give. It points to the dividends. A trend is already in motion.
Last year, nearly 400 companies cut their dividend. By the end of April of this year, there are 213 cuts. At this rate, 2016 should see 639 - maybe one of yours? Keep in mind, that estimate if reached, will crush the previous record of 527 back in the financial crisis of 2009. My suggestion is never take a dividend, but reinvest it in the same company. Eventually, you will have enough free shares so that you can sell your original purchase shares and let your "free" shares grow even if they cut their dividend.
In discloser, I use that same investment plan with Silver Wheaton. Peace, out!
- Sebastian
If you subtract the real inflation rate from the yield of the ten year treasury bill, we are already under negative rates. It could get worse. The trend is down because the Fed is creating deflation by shrinking interest rates. They claim a 2% target for inflation, but everything that they do obstructs the possibility. Personally, I would rather see stable prices and no inflation with social mobility alive and kicking. However, that is another story for another time.
10-Year Note
I will use the classic 10-year denomination because it is generally viewed as the benchmark both for shorter and longer issues. When you scan down the list, you will notice the hypocrisy in all the issues. Some issues offer a vastly higher rate, but you have to consider both the risk, currency exchange and historical inflation within that nation. In any event, in the US, the return of 1.75% for a ten year period is a basic lie. There has never been a period in our history of a ten year duration that prices in the first year was less than 1.75% after ten years! Dear reader, keep in mind that an investor is suppose to make a profit for the time use of his money. Our Treasury is saying, if you buy a ten year note at 1.75%, then in ten years you should see a profit. Get out of town! Anyway, the story is worse in Europe and Asia.
Country Rate Trend
US 1.75% This is down 50 basis points for year-over-year(YOY)
Canada 1.31% This is down 48 basis points/YOY
Germany 0.12% This is down 55 basis points/ YOY
UK 1.40% This is down 56 basis points/ YOY
Switzerland -0.35% This is down 42 basis points/ YOY
Japan -0.13% This is down 57 basis points/YOY
If you believe the narrative, India offers the best return
India 7.42% This is down 52 basis points/ YOY
Did you notice the insipid intrusion of negative rates? This is a scary trend that all nations are embracing. People, central banks are causing deflation by lowering the value of money. This is a destructive principle. This disease has spilled over into the private sector.
Dividends and Investors
Americans, usually like stable, large companies that pay a good dividend. Companies like J&J and oil giants, Exxon and Chevron. In Europe, investors like their large blue chips like Royal Dutch Shell PLC or Siemens AG. Dear reader, those last two had their bonds fall negative in April. Their principle is decreasing! According to Bloomberg, another $16B of euro-corporate bonds are trading with yields below zero...Idiots!
Back in the US, the current yield for dividend paying companies in the S&P 500 is 2.1%. This is less than the historic average, but it is 1.8% more than the 10-Year Treasury. Of course, the Fed's cheap money allows companies to buyback their stock. Not that this will capture a future sales explosion by the company, but it makes the quarterly report look better and the CEO makes more with his stock options...Crooks!
Last year, companies in the S&P 500 spent almost $1 trillion on buybacks and dividends. However, it is the dividend aspect that worries me. By the way, that total spent is greater than the total profits of the same S&P 500 companies. People, simple math tells you as you well know, you cannot keep spending more than you make. Something has to give. It points to the dividends. A trend is already in motion.
Last year, nearly 400 companies cut their dividend. By the end of April of this year, there are 213 cuts. At this rate, 2016 should see 639 - maybe one of yours? Keep in mind, that estimate if reached, will crush the previous record of 527 back in the financial crisis of 2009. My suggestion is never take a dividend, but reinvest it in the same company. Eventually, you will have enough free shares so that you can sell your original purchase shares and let your "free" shares grow even if they cut their dividend.
In discloser, I use that same investment plan with Silver Wheaton. Peace, out!
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