What do you get when you owe a lot of people money today, tomorrow, and forever into the future but cannot repay it with tax revenues from today, tomorrow, and forever into the future?
Answer: Greece, Portugal, Ireland, Italy, Spain, Japan, and the US.
Charles Biderman is the Chief Executive Officer of TrimTabs Investment Research and Portfolio Manager of the TrimTabs Float Shrink ETF (TTFS).
Source: http://trimtabs.com/blog/2012/02/21/bidermans-daily-edge-2122012-buyers-of-worthless-debt-keep-government-afloat/
Tuesday, February 28, 2012
Monday, February 27, 2012
Is There a Gold Bubble?
Only if you don't believe that governments can print money out of thin air.
Source: http://futuremoneytrends.com/index.php/trend-videos
Source: http://www.zerohedge.com/article/gold-rise-143-trillion-us-debt-limit-increase-%E2%80%93-bloomberg-chart-day
Source: http://futuremoneytrends.com/index.php/trend-videos
Source: http://www.zerohedge.com/article/gold-rise-143-trillion-us-debt-limit-increase-%E2%80%93-bloomberg-chart-day
Sunday, February 26, 2012
Domestic Argument: Dow Jones Transports vs. Industrials
According to the century-old “Dow Theory,” both the Dow Jones Industrial Average and Dow Jones Transportation Average need to move in tandem to confirm a market’s trend. It highlights how making goods is one leg of the industrial economy (Dow Jones Industrial Average) and moving those goods around (Dow Jones Transportation Average) is the second leg, so their trends should be in sync.
The transports are highly cyclical stocks that are sensitive to swings in the economy. The index, which includes bellwethers FedEx and UPS, is often seen as a leading indicator for stocks and the broader economy.
The transports are highly cyclical stocks that are sensitive to swings in the economy. The index, which includes bellwethers FedEx and UPS, is often seen as a leading indicator for stocks and the broader economy.
Source: http://blogs.wsj.com/marketbeat/2012/02/13/morning-marketbeat-dow-transports-wave-warning-flag/
Source: http://www.vulpesinvest.com/announce/index.html
Source: Things That Make You Go Hmmm. Grant Williams. Feb. 26, 2012.
$1 of Additional Debt Gets Us...
You know how that second ice cold beer is good, but not nearly as great as the first? And the third is good still, but not as good as the second? And the 24th is good, but not as good as whatever number beer you can remember?
Unfortunately, US Debt is the same way. Except now we're past 15 trillion dollars. That's a lot of beers.
For every $1 of debt we take on, we get $0.40 of GDP in return.
Source: http://www.hindecapital.com/docs/hil_reports/Hinde%20Capital%20Singularity.pdf
Unfortunately, US Debt is the same way. Except now we're past 15 trillion dollars. That's a lot of beers.
For every $1 of debt we take on, we get $0.40 of GDP in return.
Source: http://www.hindecapital.com/docs/hil_reports/Hinde%20Capital%20Singularity.pdf
Ben Davies: Greece is Just a Preview of What's Coming For the Rest of Us
Source: http://www.chrismartenson.com/blog/ben-davies-greece-just-preview-whats-coming-rest-us/71786
Source: http://www.hindecapital.com/docs/hil_reports/Hinde%20Capital%20Singularity.pdf
Source: http://www.hindecapital.com/docs/hil_reports/HindeSight%20June%202010%20Gold%20The%20Currency%20of%20First%20Resort-1.pdf
Cumulative Credit Card Balances of the Swiss, English, Japanese, American, Chinese, and European Central Banks
Over the last 4 years, $7 Trillion was pumped into stocks, bonds, etc. by central banks of Switzerland, England, Japan, America, Europe (ECB), and China.
The balance doubled over the past 4 years, after doubling 5 years before that.
Ever tried to get your credit card balance to grow like that? How about paying it off?
Don't worry, they're sovereign nations, which means nothing can bail them out (unlike AIG, Bank of America, General Motors, Dexia), so nothing can possibly go wrong...
The balance doubled over the past 4 years, after doubling 5 years before that.
Ever tried to get your credit card balance to grow like that? How about paying it off?
Don't worry, they're sovereign nations, which means nothing can bail them out (unlike AIG, Bank of America, General Motors, Dexia), so nothing can possibly go wrong...
Saturday, February 25, 2012
Grant Williams on Gold, Central Banks, Inflation/Deflation
Buy gold until central banks stop printing money.
Don't Worry, Our Friends Are Still Lending Us Money
The US recently broke the 100% Debt-to-GDP barrier last year and is now well on its way to 102% within a few months of that triple-digit accomplishment.
Who's lending the US Treasury money you ask? One, the US Federal Reserve. Two, Japan. Three, the UK.
Seems like China and Russia no longer feel like lending us money any longer. Maybe it's because losing 2% to 3% per year through US inflation isn't appealing. Maybe they're tired of the dollar standard. Maybe they prefer to buy hard assets in a money-printing world.
Uh oh... It seems we may have a problem. The UK is almost at 1,000% Debt-to-GDP when including its financial, non-financial, government, and household debt! Japan is past 600%. I'm no rocket scientist, but having a broke person borrow from "broker-er" friends is probably not a good idea.
Maybe we can get our Swedish, Norwegian, Swiss, Australian, and Canadian friends to start buying up some US Treasuries...
Who's lending the US Treasury money you ask? One, the US Federal Reserve. Two, Japan. Three, the UK.
Seems like China and Russia no longer feel like lending us money any longer. Maybe it's because losing 2% to 3% per year through US inflation isn't appealing. Maybe they're tired of the dollar standard. Maybe they prefer to buy hard assets in a money-printing world.
Uh oh... It seems we may have a problem. The UK is almost at 1,000% Debt-to-GDP when including its financial, non-financial, government, and household debt! Japan is past 600%. I'm no rocket scientist, but having a broke person borrow from "broker-er" friends is probably not a good idea.
Maybe we can get our Swedish, Norwegian, Swiss, Australian, and Canadian friends to start buying up some US Treasuries...
Source: http://www.zerohedge.com/news/us-debt-gdp-passes-101-global-debt-ponzi-enters-its-final-stages
Does History Repeat Itself?
So far, 2012 seems to be a bullish start for equities. Great news!!!
Except for the fact that volumes have been at historical lows and short position covering has been occurring (not good for sustained bullish markets).
Where does this leave us? A market levitating because of central bank money-printing (too much money chasing too few assets), very low volumes (strong volume confirms bull/bear markets), and short covering ("don't fight the fed").
How long can this go on? I'm betting not for much longer, but it is an election year.
If the Fed launches another round of quantitative easing, the markets should go higher. But like sleeping pills, with every additional pill, the added effects are less than the one before it (and too many will produce very bad results).
Don't Get Too Much Education
Dear Current and Future Student Loan Recipients,
Please be smart and don't go to a school that will put you in too much debt.
I would hate to have to bail you out along with your parents that bought houses they couldn't afford.
Regards,
Canned Goods Eater
Supposedly, Occupy Wall Street had some picture similar to the one below, which exaggerated the size of 2011.
This image below should display 2011 correctly. All is solved! There is no problem that I can see...
Student loan debt is a small percentage of total debt. Does this mean that student loan debt repayment to the govt. will crowd-out other types of repayment?
The Long Road Back to Square One (Peak Employment)
If this "recovery" doesn't feel like much of a recovery, I agree with you.
Unemployment has been worse than recent recessions and it's taking much longer to get back to peak employment.
People are staying unemployed much longer. Does 99 weeks of unemployment benefits lead to shorter or longer unemployment duration? From personal experience, I maxed out my benefits before being truly motivated to suck-it-up and find any job that would help pay the bills.
College degrees seem to be strong unemployment insurance.
North Dakota looks like it's in good shape.
Source: http://www.crgraphs.com/
More Good News: Nearly Half of All Americans Don't Pay Income Taxes
Because we all like charts going up and to the right.
Here's one of American taxpayers.
Nearly Half of All Americans Don't Pay Income Taxes.
Thursday, February 23, 2012
Get Rich Quick! Buy Stocks!
http://www.sprott.com/media/108878/0212%20Unintended%20Consequences.pdf
Want to get rich or simply avoid losing your shirt in 2012? Then figure out the answer to the following question:
When you combine Coordinated actions (the US Fed, the Band of England, the Bank of Japan, the European Central Bank, the Swiss National Bank, and the Bank of Canada), US Dollar Swaps (unlimited borrowing of US dollars for other central banks), Long-Term Refinancing Operations (unlimited money at 1% for 3 years for European banks), Back-Door Quantitative Easing, Zero-Percent Interest Rates (US extended it to 2014 by buying its own bonds), and Numerous Quantitative Easing from countries around the world, what comes next?
Part of the answer is the magnificent Jan/Feb 2012 US stock market performance!
Next up? Higher prices! Doubtful...
Source: http://www.sprott.com/media/108878/0212%20Unintended%20Consequences.pdf
Source: http://www.zerohedge.com/news/eric-sprott-unintended-consequences
Want to get rich or simply avoid losing your shirt in 2012? Then figure out the answer to the following question:
When you combine Coordinated actions (the US Fed, the Band of England, the Bank of Japan, the European Central Bank, the Swiss National Bank, and the Bank of Canada), US Dollar Swaps (unlimited borrowing of US dollars for other central banks), Long-Term Refinancing Operations (unlimited money at 1% for 3 years for European banks), Back-Door Quantitative Easing, Zero-Percent Interest Rates (US extended it to 2014 by buying its own bonds), and Numerous Quantitative Easing from countries around the world, what comes next?
Part of the answer is the magnificent Jan/Feb 2012 US stock market performance!
Next up? Higher prices! Doubtful...
Source: http://www.sprott.com/media/108878/0212%20Unintended%20Consequences.pdf
Source: http://www.zerohedge.com/news/eric-sprott-unintended-consequences
Wednesday, February 8, 2012
Don't be Like the Citizens of Greece, Pay Your Taxes
Here are some stats from the 2009 tax season:
- The Top 1% (>$500,000) paid 40.4% of total federal taxes.
- Of the 307.8 million Americans, 151.5 million were tax units (I guess eligible to pay taxes?).
- 47% of the 151.5 million, had ZERO tax liability.
- Of the 307.8 million Americans, 80.4 million paid taxes.
- The Top 25% (>$75,000) paid 86.6% of total federal taxes.
- The Top 50% (>$40,000) paid 97.1% of total federal taxes.
- The Bottom 50% paid 2.9% of total federal taxes.
Source: http://visualizingeconomics.com/2010/02/05/who-is-not-paying-taxes/
Source: http://visualizingeconomics.com/2007/11/03/nytimes-historical-tax-rates-by-income-group/
Source: http://en.wikipedia.org/wiki/Laffer_curve
Source: http://en.wikipedia.org/wiki/File:LafferCurve.svg
- The Top 1% (>$500,000) paid 40.4% of total federal taxes.
- Of the 307.8 million Americans, 151.5 million were tax units (I guess eligible to pay taxes?).
- 47% of the 151.5 million, had ZERO tax liability.
- Of the 307.8 million Americans, 80.4 million paid taxes.
- The Top 25% (>$75,000) paid 86.6% of total federal taxes.
- The Top 50% (>$40,000) paid 97.1% of total federal taxes.
- The Bottom 50% paid 2.9% of total federal taxes.
Here are some historical tax rates by earners:
From Wikipedia: In economics, the Laffer curve is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. It is used to illustrate the concept of taxable income elasticity – that taxable income will change in response to changes in the rate of taxation. The Laffer curve postulates that no tax revenue will be raised at the extreme tax rates of 0% and 100%.
One potential result of the Laffer curve is that increasing tax rates beyond a certain point will be counterproductive for raising further tax revenue. A hypothetical Laffer curve for any given economy can only be estimated and such estimates are controversial.
This graph is based on the results from "How Far Are We From The Slippery Slope? The Laffer Curve Revisited" by Mathias Trabandt and Harald Uhlig, NBER Working Paper No. 15343, September 2009. Their research estimated Laffer Curve maximum revenue points to be between 60% to 80% tax rates.
Source: http://visualizingeconomics.com/2010/02/05/who-is-not-paying-taxes/
Source: http://visualizingeconomics.com/2007/11/03/nytimes-historical-tax-rates-by-income-group/
Source: http://en.wikipedia.org/wiki/Laffer_curve
Source: http://en.wikipedia.org/wiki/File:LafferCurve.svg
The Great Race, to the Devalue Your Money
Remember when a penny could buy a pack of gum? Me neither. But it could, in the '40s.
Today, a pack of gum is over a dollar. Either the gum today is made of space-age material, or that penny somehow lost its value.
Gold's purchasing power has done quite well since 1971. Try not to think of it as though gold has increased in value. Instead, think of it as though the dollar has lost a lot of its value and now requires more dollars to buy the same amount of gold.
Source: http://www.financialsensearchive.com/fsu/editorials/dollardaze/2009/0223.html
Source: http://visualizingeconomics.com/2008/05/04/average-income-in-the-united-states-1913-2006/
Today, a pack of gum is over a dollar. Either the gum today is made of space-age material, or that penny somehow lost its value.
But "everyone makes more money today" than they did in the '40s, you say. True, but not after factoring in the devaluation of the dollar. From the '40s to mid-2000s, income doubled in real terms. But since 1971, the dollar lost over 80% of its purchasing power (worse when compared to the '40s).
Don't fret though, it's not just America. We're all in it together!
Gold's purchasing power has done quite well since 1971. Try not to think of it as though gold has increased in value. Instead, think of it as though the dollar has lost a lot of its value and now requires more dollars to buy the same amount of gold.
Source: http://www.financialsensearchive.com/fsu/editorials/dollardaze/2009/0223.html
Source: http://visualizingeconomics.com/2008/05/04/average-income-in-the-united-states-1913-2006/
Tuesday, February 7, 2012
Central Banks Around the World Saving the World One Country at a Time (Anytime Now)
I think this is how it works.
1. The economies of the world have problems (housing and financial crises).
2. Economies do better when people spend more (companies earn more and hire more).
3. People don't feel good right now so they don't spend. Things that make them feel good are rising housing values and stock prices.
4. Governments spend money they don't have to encourage people to spend.
5. They manipulate interest rates (through buying their own debt) so that people can borrow money and spend it on houses, stocks, businesses, and so on.
6. People spend more.
7. The economy grows.
8. Unfortunately, banks' lending standards have increased and the people who want to borrow money, can't.
9. What does that leave? Government banks with gigantic balance sheets, people not able to borrow, people worried about losing their jobs and not being able to retire, people saving more and not buying jet skis and 60" TVs...
10. So government banks spend more money they don't have to encourage people to spend...
Q: What happens when you have a mountain of debt and have reached your credit limit?
A: Ask your credit card company to increase the limit, of course.
What, you thought China's ghost towns, millions of miles of infrastructure, and subsidies to various industries (such as solar) enabling Chinese firms to undercut prices from cross-border competitors was by luck?
Source: http://www.ritholtz.com/blog/2012/01/living-in-a-qe-world/
1. The economies of the world have problems (housing and financial crises).
2. Economies do better when people spend more (companies earn more and hire more).
3. People don't feel good right now so they don't spend. Things that make them feel good are rising housing values and stock prices.
4. Governments spend money they don't have to encourage people to spend.
5. They manipulate interest rates (through buying their own debt) so that people can borrow money and spend it on houses, stocks, businesses, and so on.
6. People spend more.
7. The economy grows.
8. Unfortunately, banks' lending standards have increased and the people who want to borrow money, can't.
9. What does that leave? Government banks with gigantic balance sheets, people not able to borrow, people worried about losing their jobs and not being able to retire, people saving more and not buying jet skis and 60" TVs...
10. So government banks spend more money they don't have to encourage people to spend...
Q: What happens when you have a mountain of debt and have reached your credit limit?
A: Ask your credit card company to increase the limit, of course.
What, you thought China's ghost towns, millions of miles of infrastructure, and subsidies to various industries (such as solar) enabling Chinese firms to undercut prices from cross-border competitors was by luck?
Sunday, February 5, 2012
100 Years of Proof That Saving Your Money is a Losing Proposition
The US Federal Reserve targets a 2-3% inflation rate (or close to that) partly because they are scared out of their minds of deflation (ask Japan how over a decade of that has gone for them) and partly because it's easier to pay off $15 trillion of debt (if we can sell China, Japan, and the UK $100 in debt today, print $50 of money from thin air next year, the debt we issue is a bargain). Never mind the fact that your salary will increase 3% next year, if you're lucky, while your gasoline and food bills will go up by 20%.
You think it's coincidence that inflation is positive? US inflation rate 1914 to 2011:
Source: http://minefund.com/wordpress/2011/03/28/purchasing-power-of-the-dollar-vs-gold/
Source: http://budwood.hubpages.com/hub/US-Dollar-Purchasing-Power
Source: http://www.tradingeconomics.com
Source: http://www.bls.gov/cpi/cpifaq.htm#Question_7
Source: http://zerohedge.blogspot.com/2009/05/annihiliation-of-dollars-purchasing.html
Source: http://www.financialsensearchive.com/fsu/editorials/dollardaze/2009/0223.html
You think it's coincidence that inflation is positive? US inflation rate 1914 to 2011:
What's the big deal? Positive inflation means the value of the basket of goods in the consumer price index increase over time because of improvements in the products: better TVs, better medicine, brand new apartments for rent, entertainment costs more because of CGI, softer/quilted toilet paper, and on and on.
Japan inflation rate: 1998 to 2011:
Or maybe it's because of loose monetary policy. Maybe the govt is creating money from nothing by the strokes of the keyboard (some accounting wizardry of debits and credits in the assets of banks and the Treasury).
Money creation, money printing, and quantitative easing all lead to inflation/lower purchasing power. Your money in your savings account loses value every year. The policies of the US govt encourage spending and punish saving.
If you think keeping your money in a savings account in a local bank will protect you from the world's most powerful countries competing to devalue their currencies, think again.
Source: http://budwood.hubpages.com/hub/US-Dollar-Purchasing-Power
Source: http://www.tradingeconomics.com
Source: http://www.bls.gov/cpi/cpifaq.htm#Question_7
Source: http://zerohedge.blogspot.com/2009/05/annihiliation-of-dollars-purchasing.html
Source: http://www.financialsensearchive.com/fsu/editorials/dollardaze/2009/0223.html
Advice for the Day
Take one for the team and do exactly opposite of what this video tells you to do.
Debt got us into this mess, and it will get us out of it. And if it doesn't, at least we can see just how many Americans can start getting food stamps -- before that system breaks.
Debt got us into this mess, and it will get us out of it. And if it doesn't, at least we can see just how many Americans can start getting food stamps -- before that system breaks.
Saving is for Suckers
From Captain Obvious: for the past 30 years, Americans have been saving less while taking on more debt. What's to blame? Houses.
Before 2007, this didn't seem like a problem. Houses represented majority of a family's net worth and always increased. Taking on debt to buy a home(s), not to mention taking advantage of mortgage interest deductions and fancy financing (zero down with below-market rates for the first few years of the mortgage), enabled homeowners to gain the confidence to borrow even more money against their appreciating asset and buy more necessities (pools, boats, granite counter tops, big screen TVs, vacations ...).
The American dream equates to home ownership for many. The dream was working just fine for decades until the unthinkable happened, housing prices not only stopped increasing, but plummeted in many states.
Currently, the govt is doing its best to prop up the housing market (keeping long-term interest rates low, buying mortgage-backed securities, pushing banks for principal reductions and interest forbearance for homeowners, etc.).
But what happens if market forces prevail and the bottom falls out causing prices to plummet for areas with large amounts of homeowners with negative equity? What happens when homeowners run out of savings and stop paying their mortgages? Answer: they stop paying their mortgages and stay in their homes for over 600 days before the foreclosure process has them removed.
New York: 600 Days.
Florida: >500.
Hawaii: >500.
Maine: >500.
Illinois: >450.
California: >450.
Nevada: >400.
Have all the foreclosures been flushed through the system? If people know the answer (hint: the answer is NO), then will they buy houses or wait? Can you entice people to buy a house with historically low rates? Will they buy a house to save a few percentage points on a 30-year adjustable fixed-rate when they believe that they can buy the home for a 15% discount in 18 months?
Source: http://hosted.ap.org/specials/interactives/_business/debt_addiction/
Source: http://jimersoncobb.com/blawg/2012/01/03/a-speedy-foreclosure-in-florida-%E2%80%93-proper-utilization-of-statute-702-10/
Source: http://www.suntimes.com/business/3055979-420/average-foreclosure-delinquent-foreclosures-loans.html