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Check that out and then come back and tell us why everything is going to be just okay. Especially when the actual debt is much larger than what's shown there -- as this site continually points out.

Archive for the ‘The Economy’ Category

Don’t Let the Financial Media Fool You

Mr. Williams of ShadowStats.com has been busy lately. A summary of his latest report follows. Please don’t let ill-informed media outlets mislead you with inaccurate economic reports. Don’t expect highly politicized government sources to lead you astray either. Insist on accurate statistics on which to base your investment decisions.

  • Downside Restatement of Recent Economic Activity Continues
  • January Production Drop Was More than Bad-Weather Effects
  • First-Quarter 2014 GDP Contraction and Downside Revision to Third-Quarter GDP Growth Increasingly Are Likely

Economic News from John Williams at ShadowStats

Trying to figure out where the economy is going without reliable research and statistics is impossible. Here’s some help courtesy of John Williams. Of course you can always subscribe if you want all the details. And no, I receive no compensation if you do subscribe.

  • As With December, January’s Small Headline Jobs Gain Was Statistically Insignificant
  • Annual Upside Bias in the Birth-Death Model Increased by 140,000, Despite Last Year’s 119,000 Overstatement of Jobs Growth
  • Spurious Revisions Used to Spike Payroll Employment Levels Renewed Concurrent Seasonal Adjustments and New Population Controls Make Comparisons of Monthly Unemployment Detail Meaningless
  • January Unemployment: 6.6% (U.3), 12.7% (U.6), 23.2% (ShadowStats)

Year-to-Year M3 Growth Slowed to 3.0% in January

Tapering? That Will Last as Long as a Snowball in…

So Mr. Bernanke announced the beginning of a reduction of the amount of treasury bonds the Fed would buy. Then he conveniently handed off the ball to his successor, Mrs. Yellen. So far, the emerging markets are taking it on the chin as funds that stormed into those markets are withdrawn. I do assume the Mr. Bernanke and Mrs. Yellen are aware of the degree to which economies are linked together. I also assume they have an idea of who will be buying those bonds that the Fed will not — or do they?

It shouldn’t need to be pointed out that the reason for all this money creation and the sale of government bonds is because we do not have anything even remotely approaching the “wise and frugal” government that Thomas Jefferson envisioned. Mr. Obama has already racked up more debt than all the presidents before him combined. Not that they, nor the Congresses with which they served, were fiscally responsible. A nation cannot run an aggressive world-wide military empire without ruining itself financially. If you disagree, take a look at the countries that tried it and see if they’re still on top of the world today. For example, a bit over a century ago Britain was at war in Afghanistan.

Have we seen the end of quantitative easy or legalized government counterfeiting as perhaps it should be called? Does that question even need to be asked?

Was January a Top for the Broad Equity Markets?

I’m in a bit of a doom-and-gloom mood at the moment. I think of the prosperity that could have been, the dreams that could have come true, the suffering that could have been ameliorated, and I’m sad. A once great industrial nation is in the hands of incompetents, opportunists, misanthropes, and as our British friends would say, “blackguards.” So let’s see what’s going on in the investment world…

Was January a Top for the Broad Equity Markets? Probably not. Just because January was a dud as far as the broader equity markets were concerned, this doesn’t imply an imminent bear market in stocks. After all, that would be no way to welcome in a new Fed chairman, now would it?

You might even think I’m implying there’s some funny business going on in the form of manipulation. So what else is new? I’m way past that whole issue. Timing is what I’m interested in. That things are out of whack economically in the U.S. (and most of the rest of the world) doesn’t mean they can’t stay out of whack longer — or even get more out of whack. In fact, given the leadership we have, it would be shock if things didn’t get more distorted. However, I also believe there is a limit to the extent that markets can be pushed around — and we might find out what that limit is this year.

What I’m interested in is the timing of when things will start to move to get back into “whack” — and what that will look like. This is, of course, a crude exposition of an important component of Austrian economics, that the magnitude of the correction of distorted markets will be equal to the magnitude of the distortion. If that’s true, and I believe it is, then the inevitable correction ought to be one for the record books.

Welcome to the Second Great Depression – whenever it arrives.

Not Much Here to Explain Rally in Stocks

Our source for unbiased economic reporting, ShadowStats, released these bullet points. Of course, subscribers get a fuller picture. Nevertheless, what we see below are not the sort of things that drive bull markets in equities higher. So there must be another reason…..

  • October PPI Was Hit by Lower Energy Costs
  • Imminent Official Recession Signaled by New Leading Indicator
  • Broad Economy Never Recovered from Prior Downturn

We Watch and Wait

Watching the precious metals markets recently has been about as exciting as watching paint dry. That does not mean that thing are not happening.

Word has it that George Soros has put $18 million into miners. While that’s a paltry sum for him, he did not build his wealth by making poor investments. So it can be that there’s action under the surface.

No doubt there is a lot going on with physical gold regarding its move from West to East. Let’s face it, if I were sitting on billions worth of dollars and U.S. treasury instruments, I’d be scrambling to hedge my dollar risk the best way I could. If I can figure that out, so can lots of others.

While we wait, we can take a peek at what John Williams of ShadowStats has to say:

  • Watch Out for the Dollar
  • October Annual Inflation: 1.0% (CPI-U), 0.8% (CPI-W), 8.5% (ShadowStats)
  • Retail Sales Gain Was Statistically Insignificant; Recession Signal Remained Intact
  • Official Real Earnings Declined in October
  • Existing Home Sales Declined for the Month; Annual Growth Slowed Markedly

Nothing there to support the idea that we’re in a robust recovery. Maybe the current highs in the stock indices is just so much money sloshing around — before it finds somewhere else to go?

I’m Still Suggesting a Small, Home-Based Business

That you should consider starting a small business remains one of my top recommendations. Maybe it’s from stories from my grandparents who lived through the Great Depression. Like when my grandfather was laid off he made money to keep the family housed and fed by wiring farmhouses — even though they lived in the city. Apparently he had the foresight to take classes in electricity before the economic crisis struck.

There are a lot of options — and a lot of scams, unfortunately. You really need to take out a pencil and paper and start making a list of the things you could do. I know someone who goes to estate sales and buys sets of plates, then sells them one at a time on eBay. Personally, I’ve gone back into photography, a hobby-turned-business that worked very well for me when in college. Don’t expect overnight riches, just build an extra income stream. Ideally it will be very low in overhead and have flexible hours.

There are a ton of very inexpensive Kindle e-books that describe various money-making methods. Just keep in mind that there are a lot of unworkable plans. Happily, you can read reviews of the e-books or other books you might want to check out on Amazon to help determine of the book you looking at is helpful or a dud.

Don’t wait until the bottom falls out of this economy. We don’t know for sure when it will happen, how deep the decline will be, nor the duration. But I’ll be very surprised if we aren’t talking recession in 2014 like we were in 2008 — only worse.

Americans Don’t Get It. But Will They Get It in the End?

Blame it on the educational institutions. Or the media. Or indifference. Or political disinformation campaigns. No matter. The simple fact is Americans, as a whole, don’t get it when it comes to what’s dead ahead economically for our once prosperous nation. But will they ever get it? The answer is supposed to be, “They’ll get it in the end.” I’m not so sure.

In once sense, the effects of decades of increasingly irresponsible fiscal management at the national, state, and local levels will be felt by most all Americans at some point. In other words, they will get “it” in the end. The question is what is the “it” that they’ll get. What meaning will they assign to national economic hardship? Will they understand that reckless printing of fiat dollars to cover wild spending always ends in disaster? Will they learn that a nation cannot spend itself into prosperity? Or will they just find or be provided with some convenient scapegoats to blame? That last conclusion while being wrong is also dangerous. See Weimar Republic and subsequent political events.

Poor education or lack of quality information just results in people making block-headed decisions. We do it all the time. But when a tradition of ignorance of the factors that lead to a prosperous society become ingrained in a population over many years, the result is disaster via jumbo-sized block-headed decisions by investors and self-serving decisions by politicians to mention only two groups. The economy gets distorted. People have unrealistic expectations. Politicians make promises that only their successors will eventually have to break.

Are we at one of those points when Americans will be confronted with some very unpleasant economic truths? If not, we’re getting very close. And the truth will be out there. But, sadly, I doubt many will “get it.” I hope I’m wrong.

Calm Seas? Probably Not for Long

It’s interesting how the markets can give the appearance of being calm when there are profound forces building. You just have to look a little deeper.

Like China buying up 25% of world gold production. Like nations looking for ways to diminish the use of the dollar in international trade such as what appears to be going on in Saudi Arabia. Like the US running astronomical deficits with fewer folks willing to scoop up any more US treasury instruments.

Any one of these potential triggers — and many we’re not even aware of — could go off at any time setting up a cascading series of financial calamities that might just be beyond the ability of the central banks to control. To continue the seafaring metaphor, suggest you rig for rough seas in the near future.

Here’s gold just piddling around like it’s waiting for some thing big to happen.

gold chart

Somebody Is Buying Gold Down There

I’m not suggesting you go bottom fishing, but it is interesting to me that gold doesn’t like it below $1,300 very well — at least not since early August. And even during that primarily July down turn, it didn’t stay below $1,300 for more than four weeks. Somebody is buying below $1,300. Presumably because they don’t think is going to be hanging around at this level for very long before it heads north again.

Perhaps equal to my dislike of bottom fishing is my dislike of conspiracy theories. But in matters financial where you have some huge players with superb connections to those at high levels of government, it’s inevitable that there will be some conspiracy theories tossed around. And some might even be right.

As I’ve said before, gold does not trade like a normal market. Relatively enormous quantities are offered at particular times on the futures exchanges — apparently with the intent of driving the price down. Which if viewed strictly from the point of the seller is madness. Why not unload your position gradually to get the most for your gold rather than blasting away with the whole lot at once, almost guaranteeing that you’ll drive the prices down thereby getting less for your gold? That kind of behavior almost screams manipulation. I’ll leave it to you to decide if you want to pursue that activity any further.

Meanwhile, here’s the backdrop for this week’s trading:

gold chart

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