September 1st, 2014
Published Daily

With Gold Prices Falling, We’ll Take the Odds

by Rick Ackerman on April 5, 2012 4:19 am GMT · 59 comments

Gold came down hard for a second straight day yesterday, but for all the wrong reasons. That’s why Rick’s Picks subscribers were ready to seize the opportunity with distress bids in two popular gold mining vehicles. One of them, GDX, the Gold Miners ETF, fell to within 14 cents of a 46.15 target that had been disseminated to subscribers a month ago when the price was in the high $50s.  So far, the recommendation is looking like a winner: by day’s end, with GDX settled at 46.71, the paper position was 68 cents in-the-black. The other recommendation involved GDXJ, an ETF comprised of smaller mining companies. This vehicle plummeted yesterday to a 22.74 target that had been promoted to our subscribers as a “back-up-the-truck” number when the stock was trading closer to $25. And although GDXJ fell yesterday a bit lower than we’d forecast, hitting 22.39 intraday, the bounce into day’s end brought it back to a high of 22.85 and a settlement just two cents below that.  Give it a little rest overnight, and we expect GDXJ to bolt from the gate on Thursday, the last trading day of this holiday-shortened week. Even so, we’ve instructed traders to place protective stops not far below where they got long in order to minimize exposure if GDX and GDXJ relapse to new lows. [Want to get in on our next trade via a real-time e-mail alert? Click here for a free trial subscription to Rick’s Picks that will give you that and much more, including access to our 24/7 chat rooms.]

So what about our assertion that bullion and mining shares fell for all of the wrong reasons? The selloff began on Tuesday when minutes from the last Fed meeting were released. Apparently, the minutes contained no explicit word that the Fed would countenance more easing. This supposedly disappointed traders, who reacted by selling stocks, particularly shares tied to precious metals and energy. However, traders needn’t have feared that the Fed has become less accommodating, That is simply the story that the clueless idiots who bring us the news each day have put out because even the very brightest of them is apparently incapable of deviating from the conventional narrative. In fact, far from backing off the throttle, the Fed has been pedal-to-the-metal for most of the last decade, pushing credit growth into a parabola that only Wall Street’s best and brightest and the nincompoops in the newsrooms could have missed. They also seem to have missed the datum, widely circulated last week, that the Fed turns out to have bought 61 percent of all Treasury paper sold at auction in 2011. If that’s not QE3 enough to satisfy Wall Street, then perhaps it’s time for Helicopter Ben to live up to his nickname.

In the meantime, we’ll continue to take the odds as bullion prices fall. And why not, assuming we can continue to buy at Hidden Pivot targets, and to exit trades gone awry quickly, the better to try again later at a better price?  The forces that have been driving gold and silver higher for more than a decade remain firmly in place, as far as we can tell. Under the circumstances, we prefer to treat the nasty price breaks that have occurred in bullion from time to time as buying opportunities – shakedowns engineered to benefit deep-pocketed buyers at the expense of panicky sellers who evidently believe what they hear on the evening news.

(If you’d like to have these commentaries delivered free each day to your e-mail box, click here.)

Take the Hidden Pivot course at your leisure, in recorded one-hour segments. The real-time Wednesday Tutorial sessions, the HP Tutorial video library and a confirmed seat at the next live Hidden Pivot webinar on October 16, 2014 come as part of the package.



{ 59 comments }

RidetheWave April 5, 2012 at 4:39 am

Rick,

I couldn’t have said it any better myself. Just got off the phone with a friend of mine and he and I both are assured that our heavy investment in PM positions are a bottle rocket waiting to happen.

Nothing has changed. And here is the key as to why QE 3, 4, 5 et all is assured.

4 letters….D-E-B-T.

Not personal debt. Not mortgage debt. PUBLIC DEBT!!!!

The Fed, and our country for that matter, are in a box.

The interest on our Debt via the longer end of the treasury curve must tie to low (LOW) long term rates.

Yes mortgage rates are the beneficiary. And if you believe that house prices will rise when currently Bank’s list 1/7th of what they take back in auction, then you are a fool. But that is a side note. House prices will be flat for years. See Japan. But they will be down in real terms. Also see Japan.

Yes, also, personal debts like credit cards are a beneficiary for those that need the debt to live like, middle class at best given astronomical (real) inflation, and real income deflation.

But the best beneficiary of this the Gov’t. The gov’t debt that grows and has interest that blows the mind in size, must be inflated away at low rates.

High rates thus are not doable. Bottom line.

QE3 is 100% assured. Not if. Just when.

And when it happens, gold and silver will go nuclear.

And the shares tied to them go even higher.

It’s so obvious it almost couldn’t be more so if it wasn’t a 100 pound anvil that landed on your head.

Case closed.

-RidetheWave

RidetheWave April 5, 2012 at 5:40 am

Thanks for the touts tonight Rick. Even with possible lower D’s on GDX, GDXJ, and HUI I decided this morning to dust off an old hat I have not used since 2008, early 2010, summer of 2010, and early 2011.

I am in miner mode.

All the non PM’s have been liquidated.

Cash and margin ready to pounce. IT’S GO TIME!

Another 10% down from here on the shares will be met with my bids.

It’s a great bet knowing he precedent for such absurdly oversold conditions to nearly always see a doubling, tripling, or in some cases quadrupling on the other side…….often in 5 to 8 months from now.

It won’t be any different this time, short of Lehman Part II which at least in 2012 I find preposterous to assume in an election year.

Yes 2008 was too but everything was an experiment. The power-z know better by now.

Thanks for all that you do!!!!

fallingman April 5, 2012 at 3:47 pm

Really well written and to the point.

Soros’s admonition to “Find the trend whose premise is false and bet against it” applies here.

The false premises are that there is a real recovery and that the Fed will back off from monetization. Yeah, right. Fat chance. They CAN’T stop, even if they wanted to. And as Rick points out, they HAVEN’T stopped. Those freshly conjured billions are the only thing stabilizing the house of cards. Stop the pumping for even a little while…”aaaand it’s all gone.”

Absurd, and yet that’s what passes for conventional “wisdom.”

redwilldanaher April 5, 2012 at 5:18 pm

http://www.cnbc.com/id/46952253

For any Stock Market Indices PSYOPS doubters…

redwilldanaher April 5, 2012 at 5:48 pm

Snippet:

“Equity markets around the world didn’t take too well to the prospect that the Fed is set to remove the punchbowl — and with good reason. The recent bout of risk-on investing, as we had predicted, is predicated purely and simply on the success of quantitative easing and the prospect of more in the coming months,” Andrew Wilkinson, chief economic strategist at Miller Tabak in New York, said in a note to clients.

Wilkinson sees possible intervention coming, but believes it could be a painful period for investors with a likely “slide in equities to help recalibrate the reality of where the global economy really stands.”

fallingman April 5, 2012 at 5:52 pm

It’s all about the Fed and the rest of the criminal central bankers. Nauseating.

END THE FED! END THE FED! END THE FED!

&&&&&

Ron Paul was the last, best hope to end the Fed, but the oppportunity is about to die with the 2012 election. Hard to believe that a candidate who speaks the truth is unelectable, especially when every voter in America knows he is being lied to — badly — by the president and all the others.

Less hard to believe is that the media’s mechanical choice for the GOP — a pandering, careerist, status-quo mediocrity — has the nomination clinched, notwithstanding the fact that he evinces no enthusiasm whatsoever among voters, even those who would sooner drink hemlock than cast a ballot for Obama. RA

redwilldanaher April 5, 2012 at 6:10 pm

It seems pretty clear doesn’t it fm? But yet there has been a lot of talk hereabouts with respect to P/E ratios and other references that stop just short of labeling many of us with the dreaded “conspiracy theorist” tag…

Benjamin April 5, 2012 at 6:12 pm

I’m guessing The Fed would let it fall however far it needed, in order to let their closest allies (and/or themselves; who knows?) buy up on the panic/cheap.

fallingman April 5, 2012 at 6:25 pm

I absolutely believe there’s a conspiracy to manipulate markets at the very least, so the label would fit.

But I don’t consider myself a theorist. More like a conspiracy realist. I just can’t help but believe my “lyin’ eyes.”

I don’t buy the PSYOPS. It’s Orwell meets Bernays 24/7 and it’s all BS.

Did I mention that the remnant of a once free and proud people should take control and END THE FED!? Yeah, I guess I did.

Have s good weekend Red. You da man.

redwilldanaher April 5, 2012 at 6:25 pm

Few ZH Headlines etc. from today. They seem rather timely given what’s been in heavy discussion here at Rick’s:

meet-people-bringing-you-currency-manipulation-daily-basis

The New York Fed’s Brian Sack, better known by everyone as the head of the Plunge Protection Team, is gone.

For everyone who wants to see a simple yet explicit example of how the BLS’ relentless propaganda courtesy of perpetual prior “adjustments” trickles down in terms of media propaganda, here it is.

3 Charts On The ‘Real’ Deteriorating State Of Corporate Balance Sheets

Art Cashin On Bernanke’s Secret Banker Meeting To Keep Europe Afloat

Bradley April 5, 2012 at 6:44 pm

Well, the GDXJ did a nice headfake this morning, breaking higher, and then easily breaking the opening print.
I picked up 100 shares at 22.60
My stop will be below yesterday’s low of 22.39
Haven’t seen any mushroom clouds yet, so I’m still betting…

Rick Ackerman April 5, 2012 at 10:27 pm

FYI, Bradley, we stopped ourselves out of GDXJ shares this morning at 22.67, since I am unwilling any longer to suffer even modest discomfort, let alone pain, owning any vehicle tied to mining stocks.

We continue to hold August 23.63 calls in GDXJ for 1.85 but with a 1.65 stop-loss. Also, the GDX position was exited at 46.18. We are buyers once more, but at lower levels.

Bradley April 6, 2012 at 4:50 pm

Many thanks for the update Rick.
Perhaps we’ll see some USD weakness Monday on the weak jobs report. We’ll see.
I can completely understand being frustrated with miner shares even in the face of strong metal prices these past years (!).
Tough to figure…

Robert April 5, 2012 at 7:05 pm

It feels like I’m at KMart…

I see Blue Lights flashing everywhere.

Interesting stats:

Feb29: Bernanke opens his yapper in Congress, and 225 Million ounces of Silver futures (25% of one year’s total GLOBAL mining output) get dumped on the market – price drops 2 bucks.

Apr3: FOMC minutes released, and 660 Million ounces of silver futures (80% of total global annual mining output)dumped on the market – price drops 60 cents.

It is requiring more and more presure to keep the submerged beachball below the surface…

I’m working on an essay that explains how falling prices in the PM’s are NOT indicators of general money supply contraction and deflation. They are merely forward looking indicators that foretell of even more severe FUTURE money supply increases and inflation… The thesis is that the process of driving the metals lower is the stealithiest form of open market QE there is.

It will not be light reading unless you understand how the futures exchanges operate, but I hope it will be informative…

I’ll get the draft to Rick as soon as it is ready.

Benjamin April 5, 2012 at 8:53 pm

Hey, Robert. I haven’t anything planned for the weekend, so I figure I might be able to help you out in making that essay more layman-esque. If you’re interested, gimme a shout here and we’ll figure out a means of contacting one another.

Rick Ackerman April 5, 2012 at 10:30 pm

Thanks, Robert. I’ll be eager to disseminate this essay to my readers.

gary leibowitz April 5, 2012 at 7:48 pm

Consumer in dire staits all these years yet consumer comform at a 4 year high, truck/car sales last month largest in over 4 years, 700,000 employed in last 3 month, highest in over 4 years. I see a theme here. As for the debt perhaps you will ignore these facts. Bush tax cut about to expire, personal payroll tax also about to expire and congress placed in law a mandated spending cut no matter if there remains a deadlock or not. That comes to over 9 trillion in cuting the deficit over 10 years.

I still can’t understand how 4 years have gone by and no one believes any of these figures. No one believes the market. Only when the market has a crash does everyone think there is a temporary hold on manipulation. Strange ideas on consiracies that only work when it is not in their favor, down.

I guess I have to wait for another protracted bear run to hear the “I told you so” chorus of admonishment. There is no black and white when it comes to the stock market. I still can’t get over the notion that a flash crash could wipe you out in a blink of an eye. Every single flash crash resulted in huge gains had you waited it out less than 1 year. The real crashes are lumbering behemoths that stumbles and tries to catch itself only to falls flat on its back. Recognizing that stumble is important. More important is to take emotions out of the equation.

We are at another critical point in my opinion. The technicals point to a junction where any further drop could cascade down, but just as likely, a push up could catapult us much higher. Tomorrow the market is closed but not the futures. The employment report, and therefore the futures market, should be very telling on where we are headed.

Robert April 5, 2012 at 8:24 pm

Gary-

My reply is as simple to express as it should be to comprehend:

EVERY SINGLE CRASH OCCURS AT THE EXACT MOMENT THE FUTURES MARKETS COME TO THE REALIZATION THAT THEY ARE WRONG IN THEIR FORECASTS.

It is sooooo simple- the present is LEVERAGED to the future. The Futures markets do NOT tell us what it going to happen – the futures markets only tell us what the future risk/reward ratio is for the bets we place TODAY…

When the futures markets are telegraphing a brighter future – you should only believe it if you see causality in the underlying trend (ie- some fancy new technology that allows you to send messages from your computer to your friend’s computer”

There is no causal agent in place today. Facebook? give me a break. AAPL? c’mon- what’s next, the iToaster?

You are absolutely, 100% right- the futures are painting rosy skies, happy days are hear again pictures for us.

Meanwhile- have you spent any time chatting with the unemployed guy down the street ? You know, the onethat worked for Yahoo up until last week.

How about the other neighbor whose wife is a hair stylisy whose appointments are still trending down from their highs of 40 per week in 2007, to 5 or 6 per week today?

Have you walked across any college campuses and gathered any informal info about how many students are working even a part time job? I have, and the trends are running 100% contrary to the Futures markets.

Joblessness is not abating. Indeed- the rate of unemplyment is falling because banks are hiring hundreds of thousands of $8 per hour temporary phone center clerks and foreclosure processers as they get ready for the next wave of mortgage defaults.

The wealth transfer from bottom to top is still running full steam – I hope you’ll pardon me while I sit out your little “bull for now, bear for later” party.

Good luck on your bullish sentiment – I will be the first to congratulate you if you become richer over the next 6 months…

&&&&&&

Couldn’t have said it better, Robert. I’ve absolutely, completely and totally run out of patience for arguing with Gary, but it’s nice to see that someone else is still willing to get in his face with the obvious. If he explicitly addresses even a single one of the points you’ve made, I’ll be very surprised. RA

gary leibowitz April 5, 2012 at 10:08 pm

Robert, aren’t you personalizing the stock market? Since when does the market have anything to do with the common mans suffering? It’s like the money lender. If it gets paid its pound of flesh than it has no concern how hard or easy it was for the borrower to come up with the money.

As for unemployment it only affects the market if enough people are suffering to cause a drop in spending overall. So far that is far from the case.

My comment on the futures market was only in reference to the current situation, not extrapolating out. Since the big employment numbers can move the markets and it is a holiday, except for futures, it seems reasonable to expect tomorrow’s futures response to greatly affect Mondays open.

Robert April 5, 2012 at 10:27 pm

Gary-

personalizing the market? I don’t think so. I think you and I simply differ in our perception regarding the fallacy of infinite growth.

I don’t beleive your figures because they are LIES. Or, to use a less inflammatory term, they are “rationally normalized” to the circumstances of human society’s current mass preoccupation with the concept that uniformity in thought and action is the path to growth and prosperity.

You are right, spending is spending in the immediate sense. The countervaling factor to this is that all spending can only come from the reduction of savings, or via new credit expansion… and where does credit come from?

Credit is generated on the margin.

Read:

http://www.zerohedge.com/news/nyse-margin-debt-highest-july-means-threat-margin-calls-high

You are right- things are being set up to either break way up, or break way down…

All debts must be paid- the only way this time would be truly different is if we (the human race) all decided in unison that from this day forward everyone is entitled to everything they want without having to work for it.

gary leibowitz April 6, 2012 at 8:00 pm

Robert, that wealth affect you talk about affects almost every single investment theme mom and pop has. Do you really believe the last 4 years only helped the top? How many people have IRA’s and 401/403’s, and retirement money? How many took their money out? Most shut their eyes and hoped for the best. The best has helped them these 4 years.

Not one sided my friend. If all was doom and gloom and all lost their jobs who is buying their products? Do you go to resaurants? Expensive ones? Are they closing? Restaurant clients have mushroomed over the last 10 years. No one wants to cook anymore. That is a bubble waiting to burst.

gary leibowitz April 5, 2012 at 11:27 pm

Rick, I have answered every point that was presented. Please expand on your concerns. It is impossible for me to discuss any facts since you dismiss them as some smoke and mirror parlor trick. You somehow dismiss the last 4 years also.

Everyone tries to counter my facts with generalities that the whole system is a sham and will eventually crumble. If you stick to the here and now which investors use to extrapolate the growth or contraction of the economy it is hard to deny we are better off than last year and the year before.

Please present data points that show why right now we are in much worse shape than the past 4 years. If you use generalities like national debt you have to relate it to specific cause and affect. If you dismiss the political will to reduce the debt you also dismiss the congress that stipulates there has to be spending cuts. Corporate america has certainly learnt very quickly how to get it act together. Their balance sheet has never been better. That is the reason for this stock market surge. Lean and mean. They cut the work force very early in this debt implosion crisis. If you look at the stock market thru corporate america’s books it is not hard to see why the market is so high. Yes profits on the backs of the sacrificed. Might not be fair but it is business as usual.

It seem that you wave your hand and dismiss the last 4 years as some sore of freak anomoly instead of understanding the cause of this move. Even if the underlying strength came from the fed and government policies you must relate that argument to why it will suddenly change today. You can’t argue that we are where we are becuase of magic but not explain why that same magic will disappear tomorrow.

If the rules have changed, live with it. If you think they are temporary explain why they will not last this year. In my mind every article and data point shows a stronger economy domestically than last year. It also shows consumers are spending more and borrowing.

As an investor in the market what criteria should one use to determine the path the market will take? Just as you use specific technical data points in your betting, why can’t people use similar technical or fundamental data to determine their course of action. You dismiss all other rules but yout own? People like Soros and Buffett would be spitting in the wind all those years if they never worked.

Robert April 5, 2012 at 11:56 pm

Gary,

You asked for one data point that counters your viewpoints. Here is a simple one that every homeowner (or potential buyer) should understand:

Debt to income ratio.

New US debt incurred divided by new tax revenue reciepts is a slow motion trainwreck in progress. There are plenty of sources out there that will show you that the expiration of the tax cuts you highlight mean NOTHING when offset by the growing rate of new debt being issued in Bonds. The tax cut expirations will be like eye-droppers full of water being squirted at a 5-alarm industrial plant fire.

Here are just a couple other articles that challenge some of your commonly expressed viewpoints:

1) Regarding your view that new car sales are booming:

http://www.zerohedge.com/news/latest-parabolic-chart-gm-channel-stuffing

2) Regarding your oft-repeated point that the rallies will go into overdrive when the retail “dumb money” starts pouring in:

http://www.zerohedge.com/news/when-will-retail-start-buying-stocks

I’m sure there is more, but for now, I think you and I will not meet to a consensual viewpoint; for you think I am somehow married to my bearishness and it has closed my mind to objectivity, while I think you are afflicted with terminal normalcy bias.

To be sure- I absolutely WANT to be wrong about what I think is coming… but I fear that I (and MIT) are both correct:

http://news.yahoo.com/blogs/sideshow/next-great-depression-mit-researchers-predict-global-economic-190352944.html

Steve April 6, 2012 at 12:12 am

Gary, are you having fun politically here on this forum? If you are not stoking everyone, then just take your theory and quit trying to tell everyone else they are wrong and you are correct. The facts and data spoken herein are not the same data accounting from 20 years ago. It is all new easy speak from practioners of mispresentation. VW is going to hire 900 new workers @ 10.00 an hour. So much for workers making a living. There are a ton of jobs where I live @ 8.00. Unemployment figures are pure B.S. Bank accounting B.S. Inflation B.S. I can’t argue making money like Rick, Robert, Red and a few more. But, I can argue politically vacant abuses causing the moral degradation that is represented by one individual demanding everyone be just like him. Rick may think I’m crazy as a Jay, but; at least he will allow me that as a choice for myself. You have a theory, Just Live It. My theory – evil will fail – fiat is evil – democracy is evil – people telling other people how they must think and live – evil. I enjoy most of the writers herein because they are independent thinkers who present facts and allow others to be who they are.

gary leibowitz April 6, 2012 at 7:19 pm

Robert, thanks for the articles to back up your claims. Most however are assumptions, not hard data. The GM sales figure was interesting how they can “pad” their numbers.

So let me ask you this. If all that you say is true shouldn’t the bottom line profits reflect that? Can you also show how companies are “padding” thier profits these last 4 years. If they are “padding” those numbers did they always do so? In other words, is it business as usual or are they allowed these last 4 years to show a favorable profit report. I know that bank rules have changed to allow them to “hide” the bad housing inventory. Are there other examples?

All analysts betting in the market know the rule changes and price that company accordingly. Banks are not exacly priced in the double digit earnings growth expectation because of it. There is transperency and the bets are reflective of that.

Steve April 7, 2012 at 12:44 am

Revised accounting standards. Unrealized profits. GM was a master at claiming 10% profit for their books on retirement trusts, (all by rule), when in fact the retirement accounts were are negative.

SD1 April 6, 2012 at 12:05 am

People are most bearish at the lowest points. Maybe we haven’t reached that stage yet, but given the number of “the US is screwed” sites bullying their way onto the internet, I’d say we have to be getting close.

Steve April 6, 2012 at 12:18 am

Missed what you are saying SD1. All the information I read is up up up and away – glory days are here again. Perma-bears have given up and gone away.

SD1 April 6, 2012 at 12:42 am

Depends where you spend your time Steve … I would say bearish sites are multiplying over bullish sites by a factor of ten.

John Jay April 6, 2012 at 4:54 am

Rick,
Re: Ron Paul not gaining traction.
That’s right, Perot, Buchanan, Ron Paul.
That’s strike three for Joe and Jane Six Pack.
None of those three guys were perfect, but if JSP was ever going to wake up, Ron Paul would have been the man to do it.
Let’s face it, there are just too many people on the dole, and they are going to vote for Obama in November.
Everyone wants 3% down FHA loans, or Section 8 housing, EIC, welfare, free cell phones. Or F-35 MIC contracts for aircraft that are already Edsels. Eleven million manufacturing workers, twenty two million government workers. That says it all.
It is everyman for himself now.
As George Carlin said, “Think of how stupid the average person is. Then realize that half of them are even more stupid than that.”

BDTR April 6, 2012 at 11:52 am

JJ,

If we emerge, and that’s a big if, from descent into the dystopian chasm looming before us, George Carlin may eventually be recognized for the prophet that he was.

But before self-congratulating on a presumed intelligence of participating in markets, successfully or not, so apparently under the thumb of institutional criminal enterprise in league with authoritarian government able to distort economic data at will, algo incite micro market moving events, surreptitiously by proxy employ price manipulation on a vast scale, and exact a supporting taxation to further the glee of fleecing vulnerable equity investment, where’s wisdom or justifiable moral basis for participation?

It isn’t as if one couldn’t defensively exit what’s arguably evolved as a criminal farce preying on the weak and unsuspecting in stark Darwinian fashion. So, naive as it may be to ask, isn’t algo gaming abetting the slaughter, like so many Pilot fish in a shark infested feeding frenzy?

Loss of confidence in markets is one thing to sideline allure. But, are there no moral consequences to market ‘trading’ participation under these appallingly subversive conditions in ethical vacuum?

That is, …short of being caught long when company kept makes a meal out of you? Just wondering.

&&&&&&

Welcome back, BTDR! RA

BDTR April 7, 2012 at 12:16 pm

Thanks Rick, critical place to read critique & opinion, along with ZH and a few others…it’s just that the more read the more often I’m left speechless these days.

Grateful that’s not the case for you.

Rich April 6, 2012 at 5:43 am

The reason for the Ron Paul disconnect is corporate media reporting, plain, pure and simple.

They have so far ignored disclosing their takeover of American institutions.

The have refused to report the staggering popularity of the natural antidote, the man who defends, protects and supports our Declaration of Independence, Constitution and Bill of Rights, and the vote rigging.

Ron Paul events draw more people than all the other candidates combined. We do our best to report the truth on this and other vital issues like the Senate Bill to allow the IRS to take away passports just by claiming money is owed, here:

http://silversenator2012.blogspot.com/2012/04/media-wake-up-call-ron-paul-continues.html

Rick Ackerman April 6, 2012 at 7:39 am

You could be right, Rich. In any case, my wife Marilyn, a Ron Paul delegate whose vote mysteriously mutated into a vote for Santorum, has promised to investigate the reasons why Romney continues to roll up inscrutable wins while Ron Paul draws huge crowds everywhere and polls well at the caucus level. You can read about it at Drudge if she comes up with something solid. RA

redwilldanaher April 6, 2012 at 4:35 pm

“Most people prefer to believe that their leaders are just and fair, even in the face of evidence to the contrary, because once a citizen acknowledges that the government under which he lives is lying and corrupt, the citizen has to choose what he or she will do about it. To take action in the face of corrupt government entails risks of harm to life and loved ones. To choose to do nothing is to surrender one’s self-image of standing for principles. Most people do not have the courage to face that choice. Hence, most propaganda is not designed to fool the critical thinker but only to give moral cowards an excuse not to think at all.” – Michael Rivero

Rich April 6, 2012 at 5:48 am

Happy Holidays All.
There’s something better ahead to be sure…

Buster April 6, 2012 at 2:07 pm

Lovin’ all the discussions lately. As always, it’s interesting to hear the varying opinions & perspectives. We each see the mountain from different angles, I’m sure, & it’s all relevant.
So I’ll say it how I see it from what I’ve seen. I may be wrong but it’s not without some foundation.
As far as the retail investor returning to stocks; I calculate a diminishing number going forward. I expect that we’ll end up seeing just computers trading between themselves with fake money keeping up the appearance or profitability as, despite the insurmountable corruption from the top of the pyramid & the stubborn ignorance of the sheeple at the bottom, the masses are still voting with their feet.
We are taught from a young age to value money or rather, as many now understand, debt currency, due to that being just about the only ‘product’ that TPTB actually manufacture by their own hands. (Easy work if you can get it, hey!) Yet, since the ongoing financial calamity of the past few years & the curtain being pulled back to reveal the corruption & lies, the masses are not so eager to sacrifice their labours for the promises of a better tomorrow, seeing clearly that it is actually being spent on crooks having a better today. Gradually but surely Babylon’s rivers are drying up, & from what I can decipher, will never return. The sheeple do yet have some sense of justice, & it has been decidedly niggled by world events & left coiled like a spring, looking to vent. Babylon will be the main target. Coupled with this we are witnessing a souring of relations between this secret empire of the Elites & the political/governmental structures around the world. This is inevitable, as since the ‘whore’ Babylon has historically been allowed her power over the sheeple in return for the immoral ‘favours’, ie. for the ‘Kings of the Earth’ getting their cut of the takings, once the sheeple stop giving unwitting support to this empire of fraudulent finance, the military industrial complex & mind control through false religion & the mainstream media, the whole shallow relationship will end.
I expect a declining trend in the numbers of sheeple willing to invest in the fraud that seems to be very deliberately revealing to us all, whether we want to believe it or not, & expect more attacks on the global operation of the Elites from governments, eventually leading to the historic demise of this centuries old organisation. Though it may seemingly survive as a ‘zombie shell’, -using a term used by Max Kaiser, but I don’t know??
In the meantime, don’t be fooled into thinking it’s all going to be business as usual. We really do live in interesting times. I’d suggest investing in the real world for some positive good. Maybe invest in your own lives or in the community around you, not in false promises made by murdering crooks.
Be patient & keep your chin’s up, whatever you believe, ‘cos a little justice looks like it’s surely coming from TRPTB! (Real):
‘Babylon the Great has fallen. And I heard another voice out of heaven say: “Get out of her, my people, if YOU do not want to share with her in her sins, and if YOU do not want to receive part of her plagues. 5 For her sins have massed together clear up to heaven, and God has called her acts of injustice to mind” ‘
Revelation 18:1

Get your ass & your assets out of Babylon if & while you can, ‘cos she’s going down!

BDTR April 6, 2012 at 2:32 pm

Since we’re going Biblical now, it always brings a smile to reference Jules memorable preamble to compensatory action;

“The path of the righteous man is beset on all sides by the inequities of the selfish and the tyranny of evil men. Blessed is he who, in the name of charity and good will, shepherds the weak through the valley of the darkness. For he is truly his brother’s keeper and the finder of lost children. And I will strike down upon thee with great vengeance and furious anger those who attempt to poison and destroy my brothers. And you will know I am the Lord when I lay my vengeance upon you.”

This, Jamie Dimon & Lloyd Blankfein, is truly Gods work.

John Jay April 6, 2012 at 2:44 pm

My, my, my!
Payrolls just posted under and bonds took off!
Too much talk of recovery lately, too much talk of early rate hikes!
If I was a suspicious man, I would suspect that the word went out to the BLS to “paint the tape” as it were.
I read somewhere that they will sacrifice the stock market to keep the bond market stratospheric.
What choice do they have running 1.5 trillion annual deficits?
Crazy.

gary leibowitz April 6, 2012 at 6:58 pm

I find it interesting how most of the backlash on my comments doesn’t answer the basic question. If all YOUR theories as to why the government data points are lies, or are slanted truths, how is it possible for the thousands of public traded companies to show such a huge profit over the 4 years. Do you now believe the indepenent auditors are also part of the government conpiracy?

You either believe the profits from these thousands of companies are a lie or you believe, for some unknown reason, that it will reverse immediately.

I hear about the “true” figures on the state of the economy but no one can explain, if true, how in the world are companies profiting by it? Now thats a puzzlement.

The profits are over a 4 year span. Manipulation of profits for 4 years? Profits despite the dismal state of the union today? I guess the massive buildup of leisure companies like restaurants is not happening? No one is spending huge discretionary money on eating out? No illusion there. I see it for my onw eyes. In fact the next bubble to burst will be restaurants. The buildup has been spectacular.

To conclude. You all are giving me reasons why the end result has to be bad. I don’t disagree. Most here not only expect it to happen but conclude the last 4 years was a lie and it is already happening. If kids can buy Apple products and spend on restaurants I guess that means they gave up living in an apartment.

As for the current “correction”. I stated that the jobs report will be a market mover and could direct the market for some time to come. Looks like the 120,000 job number was way off. My betting style makes it simple for me. If the SP500 falls on any given day at least 1.5 percent I pull out. In fact I will do so despite my assumptions that this whole year will be a winner. No huge lose if it was to occur. I set up a tight criteria because I could be wrong in my assumptions. Monday will test the markets strength, at least on the short term.

I just can’t get over the fact that we have had 4 years of lies with smoke and mirror profits. A government that has such control on all aspects of our life might happen in the future where a chip is implanted in your brain at birth. Until that time I’ll stick with the basics on determining when to place market bets.

One final point. I never stated things are all good. I stated that based on the last 4 year recovery, assuming the stock prices weren’t manipulated all that time, we have a situation where the economy is mending. I also never stated I thought it would last forever. To ignore either technical or fundamental techniques simply because you believe it is all a lie isn’t a betting style I can adapt to.

Mark Uzick April 7, 2012 at 4:50 am

Gary, the economy isn’t “mending”, it’s just being fed another dose of crystal meth by the serial bubble blowers; the only question is “During which of these serial bubbles will the economy have a heart attack?”

Until that fateful day arrives, people and companies flush with cash from ever increasing “government” spending will borrow and spend and those who save will see their savings rendered worthless; nominal corporate profits will rise and desperate savers will jump into stocks, real estate and, if they’re wise, into precious metals to try to preserve the value of their savings.

For now the rule is “Don’t fight the Fed.”, but don’t forget an even older rule: “Don’t put all your eggs in one basket.”

mario cavolo April 7, 2012 at 3:14 pm

Mark, I just want to chime in that with the global complexity and interconnectedness of the entire system, that “heart attack” day may not come for decades. Asia/China and Latin America is truly rising while the West indeed has its debt troubles. Overall, this wild system that is holding together has so many internal economic counterbalances that it may never collapse, just keep expanding and inflating as it has been for hundreds of years in fact!!

Cheers, Mario

Cam Fitzgerald April 8, 2012 at 7:19 am

Hang in there Gary. You are not all wrong (nor all right) but I often appreciate your outlook and your comments. There are so many discordant forces at work in the global and domestic economy now that the picture is a virtual ever-changing Rubiks cube nobody can agree on. Few even understand where it might all lead in the end but it is reasonable to respect the worst fears and outcomes suggested by both the inflation and deflation camps. In fact, we may just get the worst outcomes of both. For now; have faith. The S&P wants to return to it’s historical highs and that is clearly within sight. There are constant suggestions of an imminent market failure and collapse but we are not there. My own belief is that markets will continue to climb as the election nears despite a few minor setbacks along the way. Obama will be re-elected of course. I wrote about this in an article here a long time back and to date very little has changed my outlook. So you are right to respond to the strength of rising stocks as the season progresses. Where I feel much less certain is in the real reasons for the strength. There is a fiction here that is now obvious to everyone. Retail investors like yourself are mostly in hibernation. Computers run the show now and too few know the value of the data inputs that can change the variables for or against. It might seem like nothing more than a crapshoot to an outside spectator. In many ways it is. This is theater of course but it is the real kind now because it is getting to be fully interactive. It is actually possible to get wiped out to zero in the coming blizzard of macro events. No joke either. That is on the horizon if the EU implodes, China slows too fast, the Yen goes nuts and the US sinks under impossible debt burdens during a coming second round of devastating house price declines. Like a band-aid, it will be ripped off on a moments notice. Fast. That’s when the real correction begins. Hopefully we will all be ready to barter and trade on that bad day.

Jill April 6, 2012 at 8:03 pm

Gary, recent psychological research clearly shows that most people make their decisions on the basis of emotion and then later think up the logical reasons to justify those decisions. Whether bull or bear, almost everyone does this with the stock market too.

It’s a lonely thing to be right. As usual, whoever is right this year, whether bull or bear, will feel lonely and misunderstood. Too bad that, as humans, we all have social needs to be heard and accepted– and such needs are far stronger than the need for profit. This is a bear site here. So playing a bull horn won’t get you heard– even if you turn out to be correct for the next 10 years.

Well, looking at the data, I wouldn’t be surprised to see you get the 1.5% decline on the S&P Monday that is your criterion for selling– although one never knows for sure what the market will do.

If such a decline happens by the close, will you plan to re-enter later, if the pullback seems temporary? And if so, what would be your criteria by which you would tell that the market is bullish enough for re-entry?

I enjoy reading about people’s simple methods for long term trading, much more than I enjoy reading about their justifications for being bearish or bullish. Rick’s methods seem excellent to me, but they are shorter term than my own time frame. And I am not around to watch the market intra-day most days.

fallingman April 9, 2012 at 5:57 pm

“Recent research”… Really? Ha.

Funny, I was teaching that 25 years ago. Just about the time Folgers went from… “We’ve switched the coffee they normally serve in this fine restaurant with Folgers crystals…”Ooooh, look at how dark and rich. I never would have believed it was instant coffee”…to… “The best part of wakin’ up in Folgers in your cup,” including images of household bliss and no talk about the crappy coffee itself.

Where’ve you been?

Honestly, is this actually a fresh insight for you?

Buster April 7, 2012 at 10:05 am

Regarding China & US economic reality & future direction, I found this video by Larry Edelson (sorry Rick, it’s not meant as a plug for him, just as a point in the debate) …interesting. It would be good to hear Mario’s views & others here including bulls & bears alike.
Main points are that China is already no. 1 economy in the world on just about every level & getting stronger, whilst US is on a downward spiral, with diluted money appearing to keep the ship afloat as it is in fact sinking.
It makes some sense, considering that the West has no true free market capitalism, only control for the interests of the few, yet ironically, China appears to have some.

Buster April 7, 2012 at 10:05 am
mario cavolo April 7, 2012 at 3:28 pm

Hi Buster, without having watched the video yet, I immediately want to point out that it sounds like it is going to have all sorts of holes I am going to poke in it.

As I mean to point out, while “generally” true to say China rising, U.S. declining…this is way too much of a generalization. Let’s look for example; U.S. is a HUGE importer of Chinese goods, plus U.S. GDP is FAR higher than anyone elses So how can we say there is not a significant interdependence? You think China will continue doing great and kicking ass if the U.S. slumps too much?…of course not.

Also, China has plenty of tricks left up their sleeves in terms of decisions and policy shifts on all levels, international, national, and municipal, which is a bullish point that many China bears who don’t live here in China don’t allow themselves to see.

For example, here’s just one datapoint; China recently deciding to start lowering import taxes. Wow!…the implication of that policy shift to benefit exporters and to increasing China domestic consumption of imports is massive.

In fact, those two issues are amongst the top issues in the global economic system.

1. U.S. is finally starting to see large increases in its exports to China (they are behind the ball on this, with Germany, Japan, Korea already far ahead in this game, but finally U.S. realized this stupidity and through the NEI program, they are big time stepping up imports to China….Duh! ..better late than never, is all I have to say about that. )

2. Increasing Chinese domestic spending, now that that real estate and infrastructure development has mostly run its course, promoting other domestic consumption is greatly needed. And hence, there is the policy shift to start lowering import taxes, which also increase foreign country exports, which will of course include benefit to U.S. exports.

This ain’t rocket science…:)

Cheers, Mario

Cam Fitzgerald April 8, 2012 at 7:43 am

Oh Pleeeeeeeeeease! Buster, that video is all about Larry and Weiss just doing what they do best which is pump their own political agenda under the guise of “investment advice”.

Hey man, if you are patient for the whole video you can get “Your reward for watching: 6 Emergency survival guides valued at $474, yours FREE!”……..(yes I am a cynic of crass ad ploys and obvious manipulation….but hey!….Larry is at risk of getting thrown in jail at any moment by making the secret video….Wheeeee….lets give him our money for the effort!).

So who gives anything for free, Buster? Nobody, right?

Is your credit card ready to be tapped? Are you a Disciple….a believer in the Weiss way of thinking? Will it make you rich?…….Have at it man. Go ahead and give them your money. Just because Larry and company have glossed up the usual advert with a personal video appearance means absolutely nuthin extra for you.

What you want in investment advice is personal attention and the words of a person who is independent and wholly free of any agenda (or propaganda).

Just because Weiss has modeled itself as the Saviour of America and the voice of reason in the world of distress does not mean you should be trusting of the message. They are still selling subscriptions. That outfit runs its own political agenda in my opinion.

Buster April 8, 2012 at 12:09 pm

Yes Cam, I agree wholeheartedly. It was just the general storyline which I thought would make some good discussion points. Maybe I should have made that clear in case anyone thought I was endorsing it in any way.

mario cavolo April 7, 2012 at 2:39 pm

I’ll follow and join this excellent argument thread, with reference to JJ’s comment about bonds staying high and interest rates staying low.

All who suggest bonds CAN’T crash including my own “Say Goodbye to Yields” article has to be, HAS TO BE correct. The system can not possible handle or maintain its current status with increasing trillions of debt at anything other than close to zero interest rates in perpetuity.

I noted in a previous post that I suddenly had a bit of an epiphany, that the USD at zero interest rate is going to REIGN SUPREME as in fact the USD will continue rescuing / backstopping every other failed currency as needed across the world starting with the Euro. (and in fact as the USD does that, the Chinese will also, in their own convoluted, self-serving way, continue to backstop the USD. These are the fundamental undeniable intertwined relationships. )

The entire game, the entire system, no matter how you analyze, which angle from which you wish to deconstruct it or even righteously criticize and villify it, is BUILT on the foundation of the USD, the world’s reserve currency, a status unlike any other, with a liquidity and depth of presence far beyond any other currency, even as that is a debt issuanc based banking system. When I say this, I am only noting the reality, the fact, the status, not judging it either way.

And so, I suggest that U.S. hegemony exists in the USD currency status across the entire globe, no matter the debt level and related hypocrisy and instability so often analyzed.

I’ll take it a step further. The debt “problem” is a relative illusion and paradigm, not a stand alone fact; for example, llet’s look at how deeply and complexly the Asia/Chinese economy and currency is tied and connected to, no, actually FUSED is a stronger more accurate word, to the U.S. economy and its currency. One of those economies , China, has huge cash reserves, both at the govt and consumer level, enormous amounts of cash, while the other economy, the U.S. is based on debt, with far less cash. They are in fact, two diametrically opposed, yet married systems! (Please though note that the Chinese system is also overloaded with debt. )

Yet…are they not so intertwined as to be inseparable? Someone please state that is not the case and then make your case as to why because I don’t see it. Its like being in a “truce” or a “stalemate” The whole fiat currency system is currently maintaining itself in a “state” .

Now Rick and many of his more scrutinizing follower call that state an “illusion” because it is being built on a house of insanity, a house of debt and endless corruption; for example, the realization that the FED itself bought 60% of U.S. treasury debt. This is not a point to ignore or do we ask to recognize that it is simply the new normal for the next 20 years? While along the way, just benefitting the rich people.

This is indeed a valid point of view for many reasons. The rich are self-servingly bilking and gaming the system to their advantage as is too sickeningly obvious; all one has to do is read a book or two about the shenanigans leading to the ‘08 crisis and continuing shenanigans since then.

While also Gary is making a valid point which I have alos stated in my own way, there IS wealth, there IS spending, there IS 50% of the U.S. population richer and better than ever, though I must suggest Gary is missing the point that the “pieces of the puzzle” which create the supposed “stability” he harps on about have morphed. I will still put my “thesis” on the table that looking at the U.S. as having experienced a societal and economic schism adds much clarity to understanding what has and is happening.

Comparing and relating to stats and circumstances in the past is revealing less and less correlation to today’s circumstances. Yes it IS different, because it really is. Yes again, the situation in China IS different, because it really is. Nothing like what is happening now has been seen EVER in history. The things that are happening, ( make a list of so many items ) are truly OFF THE CHARTS relative to historical comparison and argument.

Let’s suggest there are only two possible financial system outcomes:

Scenario 1. The current global GDP and banking system will continue to expand by the trillions over the next 40 years from 705T to the Pep si CEO’s 200T.

I suggest that in this scenario along the way, the USD will continue to reign supreme/backstop every world crisis, takeover and replace smaller currencies, and become more and more, not less and less, the world’s true and only reserve currency. Secondly, the RMB will be the opposite love/hate sister currency in that relationship, completely interdependent,with the U.S. and Asia/China economies intricately weaved together forever.

Scenario 2. The system in fact will one day have another “flash crash” type crisis, leading to a ruinous circumstance where a large part of the banking system will be replaced or dissolved. a global sized currency crisis will hit, the market’s will go haywire, yes Rick is right that it will happen so fast that we will not be able to be on the right side of those moves to profit .

World govt’s and/or the major banks will have a crisis meeting to issue a new currency or announce some kind of major shift in the current fiat currency and banking system due to some unforeseen disastrous whatever (orchestrated and planned behind the scenes or a true unforeseen event, it doesn’t really matter, as the collapse outcome will be similar.)

As if any of you know my previous writing, I’ll go with scenario 1 above, and in that sense, I understand the significance of Gary’s positive side arguments.

Yes, welcome to our global-sized zero interest rate recessionary Japan, but also with a rising Asia/China/Latin America block. We will have continued inflationary expansion across the globe. The morphing declining U.S. and European middle class with too much debt and little in the bank are in the absolute worst position of any population sector on the planet for the next 20 years or so.

Better to be poor in Asia/China/India than America/Europe because you can much more easily afford to be! Those are the facts.

So then except for that declining population sector, from a global macro point of view, that scenario doesn’t sound so bad in fact. Then let me say to Gary though, I have been reading all the arguments and you do seem to be blocking out some unprecedented extreme negatives in the system, artificially holding up the system. And so in that sense I recognize the significance of Rick’s admonishments and deep analysis.

I’ll end here as my bambino is wailing up a storm….

Cheers, Mario

Rick Ackerman April 7, 2012 at 8:05 pm

Anyone who argues that the central banks can paper over debt more or less indefinitely is not reckoning with the fact that it is requiring more and more borrowing to generate $1 worth of GDP growth at the margin. When I wrote about this for Barron’s in the late 1990s, it took about $2.80 of new borrowing to generate $1 worth of GDP. This compares with a postwar low of less than 80 cents.

I believed at the time that $2.80 was about as high as the ratio could go before interest charges smothered the economy. How wrong I was — a failure of the imagination, I guess. The figure has since ratcheted from around $3.70 in 2008 to who-knows-how-high. My guess is that it currently takes more than $10 to create $1 worth of GDP growth, but even if it were “only” $5, how long can that go on?

mario cavolo April 8, 2012 at 8:25 am

Right of course Rick, you bring up another one of those key data points that mean something.

Related, I think of the new custome acquisition cost, and the cost to get “butts in seats” in the seminar/workshop world….

All these costs to generate a given amount of revenue keep going up, and in that respect, it just shows us that slow insidious constant inflation all around us….

Cheers, Mario

mario cavolo April 7, 2012 at 3:11 pm

Hi Gary….as I’m reading through I want to share some of my reactions to parts of your comments. I am one of the few people who is willing to side with you on a decent sized portion of your rosy view, but coming from a different angle as to why.

1. “…why the government data points are lies.”

This is a key point and I am thinking, the data points aren’t lies. They just need to be scrutinized by unsuspecting people. For example, inflation is low, but inflation doesn’t include food and gas costs, well, that’s ridiculous! Yet, it is the official stat.

2. “….Profits despite the dismal state of the union today?”

Well, see here is where I want to raise up my “societal schism” theory again. Corporate profits, yes, obviously true, and in fact, we can NOT say the stock market is grossly overvalued in terms of P/E ratios, etc. BUT that’s CORPORATE profits while the lower middle class population sector is being systematically decimated. I think this isthe point you are not seeing. The bottom 50 million have always been in a bad place. But now the next 50 million are also rapidly heading down into that hell. And even the next 50 million are struggling.

I will put forth the analogy of sadly famous China’s “lost generation” , of which my mother in law is one. Now we similarly have America’s “lost generation”

So this point 2 speaks to the group in America who is struggling, really truly screwed over more and more as each and every day passes.

3. “…Consumer in dire staits all these years yet consumer comform at a 4 year high, truck/car sales last month largest in over 4 years, 700,000 employed in last 3 month, highest in over 4 years.”

Ahh! This is where we agree and see the same positive spending. I simply wish to differentiate where that spending is coming from, which is one of your arguments. Gary, I suggest that the lower 150 million U.S. citizens are screwed more than ever. And that the system is hideousl corrupted. And so in that sense I can easily see the side of Rick and other’s arguments here. The situation for this group of people, the decline in their societal system is an unmitigaged disaster!

While!!…at the very same time,…the top 100 million are doing better than ever!!!…and THAT is where the good stats are coming from. They are the ones still out there buying the cars, with their kiddies in expensive schools, with their debt loads at reasonable levels, with great incomes.

The super wealthy and upper middle income wealthy in America, are BY FAR, wealthier and better off than ever in terms of sheer dollars. And I believe that goes far to explaining the good stats, they ARE the ones out spending and in fact, for every ONE dollar that a struggling American stops spending, I bet this group of folks is spending TWO more dollars, and so we find the positives in the stats, even though 40% of U.S. society population is ruined. Proof of this point might come for example, in the known rise of food stamps subscribers now at 50 million and continuing to rise. And also, that while there is job creation, those wages are relatively dismal, it is not positive, vibrant, exciting high wage growth. It is survival wage growth.

So then, lots of positives and lots of negatives. While your positives, which do in fact exist, they do NOT negate or nullify the extreme negatives, which also do, in fact, exist.

Enjoying the points and arguments, while let’s not forget, this is about our lives and our futures, very serious stuff.

John Jay April 8, 2012 at 6:35 am

Mario,
As far as Treasury auctions go, you will know the jig is up when the government declares interest on Treasury paper to be “Tax Free”. That will buy them some time if the Feds ever expanding purchase of Treasury debt blows up. I believe it is already tax free to foreign purchasers. Regarding the wealth held by Americans not including owner occupied RE:
30% have $1000 or less, the next 18% have between $1000 and $10,000. Only the top 10% have more than $250,000 in total savings and investments.
And that 30% holding $1000 or less was only 20% back in 2009. It looks like people are draining their savings just to survive.

Mark Uzick April 8, 2012 at 6:52 am

mario cavolo Mark, I just want to chime in that with the global complexity and interconnectedness of the entire system, that “heart attack” day may not come for decades. Asia/China and Latin America is truly rising while the West indeed has its debt troubles. Overall, this wild system that is holding together has so many internal economic counterbalances that it may never collapse, just keep expanding and inflating as it has been for hundreds of years in fact!!

Unless we allow the sovereign and personal debts to default, thereby clearing the path to real growth on a sound basis, the economy will either suffer a sudden violent heart attack or a long wasting illness, followed by a welcomed final heart attack, relieving it of its misery.

This idea that other nations will continue to work and produce while Americans consume their products and pay for it by printing money is a fantasy. The PRC has stopped printing renminbi to purchase dollars from the exporters; it’s no wonder they’ve lifted restrictions on American imports; now that they’ve seen that we must default on our debt, either outright or through dollar devaluation, they want to get something real in return for their products without having to give up the American market. Now, in order for this to work, they need Washington to do its part by legalizing private industry so that we’ll have something competitive to send back in trade; but this will not happen until we starve the ravenous beast that is the state by cutting off its accelerating infusion of fiat money that’s bleeding Americans’ savings dry, so that we can invest in industry again if the regulators should allow it to happen or, better yet, if the state regulators are sunset-ed out of existence and replaced with the only legitimate regulators of business: competition and enforcement of property rights.

Buster April 8, 2012 at 12:19 pm

All well balanced & coherent views as ever from everyone.
I well remember discussions back in the early noughties regarding the extreme debt levels. People thought that this time the Banksters had overstretched the debt game so far that it would be them who would go to the wall, not the sheeple as per the usual script. I argued that, just like with the Hunt brothers fiasco, the Banksters would simply get the rules changed in their favour and all would occur as in previous wealth transfer cycles. I think we can now see that there really are no rules to this game other than those which screw everybody outside ‘the club’. Human psychology being what it is, I wouldn’t doubt the game being jigged & re-jigged all the way down into total disintegration. There are plenty of examples of where this has happened & is still happening around the world today. Any dictatorship, whether outright or more subtle as we see in the West, only has to pander to a small number whilst keeping the rest in fear, to stay in power. Hence the growing big brother state in preparedness of this outcome.
Fear is surely the hallmark of the self-serving.
So, I conclude that the game can in fact continue seemingly indefinitely, or ‘muddle along’, -though the very real & stark consequences for society & individual’s lives make me uncomfortable using such a trivialising phrase as this. ……as an acquaintance, a lifelong hard working skilled guy who has been struggling to survive over the past few years, finally gave up that struggle a few days ago & took his own life.
The reality of financial injustice is hardship for those outside ‘the club’ & I think we’re destined to get a deeper understanding of this consequence over the coming years. No amount of ‘papering’ over the problem will stop this real disintegration as, in fact, it is the very cause of it. The ‘papering’ is simply theft of productive society’s efforts, which is given to the unproductive at best, or the downright destructive at worse. The economic outcome of this is the result of one basic economic truth…..Whatever government subsidises becomes more prevalent & whatever it penalises becomes diminished. We have a system that has stifled productive labour of the common man for the purpose of empowering the unproductive or destructive few, both government & the vested interests there of. It is an efficient regimen of turning the most creative creature on Earth into a helpless, useless beast of burden.

Still, we mustn’t grumble, must we. Let’s be pragmatic about things. If there’s a way around this problem at an individual level then we can try to find it. The world may well be going to hell in a hand-basket, but we can at least throw in some buns for toasting. Emigrating to somewhere away from the Banksters debt burden illusion trick seems like a tempting course of action.

Mario, are there any opportunities you can see for Westerners in China? Also, is there acceptance of foreigners working & living there, or any animosity towards them? Is it safe? I ask seriously because I think it may well be a growing focus for impoverished Westerners.

mario cavolo April 8, 2012 at 4:44 pm

…the short, dirty answer to your question is clear and is: ….less and less opportunity, less and less advantages, less and less favoritism, more and more resentment and control, and even yes, amongst the working class chinese, building resentment. It is, relatively speaking, a much safer, low violent crime, gun-free society. Also, not liberal towards giving foreigner’s residency or visas, a royal pain in the ass. More later…

Robert April 9, 2012 at 6:44 pm

I would like to focus everyone’s attention to a simple fact:

Corporate earnings and profits can not remain elevated in a 0% interest environment forever.

Corporate profits have to GO somewhere. They have to be channelled into business development, or they have to be dividended to shareholders, or they have to go to increased wages/salaries for employees, or they have to go towards share buybacks.

The only other option for all these fantastic “profits” is to sit in a 0% interest checking account where their purchasing power will steadily erode into nothingness. (Think AAPL and their $90Billion bank account balance that serves absolutely no purpose whatsoever.)

You see, when interest rates are 0%, the “cost” of debasing a currency is also zero.

Therefore, the “value” of the profits being reported by companies is 100% equivalent to the “value” of the money being created in order to generate those profits…

Do a little research on the kinds of profits being generated by German corporations ca. 1921 and 1922.

Smoke in mirrors – Nominal money supply growth leading to nominal liquidity increases, leading to nominal profits and earnings, leading to very REAL inflation…

All of this in the face of struggling employment levels, and the niggling little fact that NO ONE is paying attention to:

Healthy economic productivity (ie: the kind of work necessary to compensate hungry people so they can feed their families) is non-existent, while unhealthy economic productivity (ie: a new Camaro being cranked out for every person too poor to afford it) is rampant…

Seems Friedman was right, but then again, Freidman did not “discover” anything magical- All Friedman did was look at the Rentenmark and connect the dots between currency creation (ie debasement) and general price levels…

These trends are born in animal psychology (Google “mirror neurons” to understand why history never repeats, but the psychological trends often follow sine waves of similar frequency and amplitude)

The dollar today is the Rentenmark allegory… only this time it’s global.

Of course, since it’s global, I’m quite certain that this time it’s all going to end REALLY WELL.

Comments on this entry are closed.