I live in the USA and I am concerned about the future. I created this blog to share my thoughts on the economy and anything else that might catch my attention.
This is the End and a New Beginning
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I've been thinking about this for some time.
After 21 years of writing this blog almost daily, I've decided to stop
writing the daily updates on the blog.
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Silver Deep Dive
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Silver had a memorable year (+148%). Some of this can be explained by a
decline in the dollar. I decided to do some ML analysis to look for other
insights....
“There’s always a feature in the economy that lives off its credit,” he said, citing the technology and housing sectors. “The next phase of it is government. They’re operating under the same kind of illusion of infallibility and unlimited access to credit.”
The average home in London, including all those dreary outskirts that go on and on and on, is $436,000. That's even higher than it was as recently as 2006, when the bubble was in its late stages.
"Because prices are so heavily managed, China could easily flood the U.S. and the world with extremely cheap stuff," says Morici. If nearly everything America buys is made in China now, just wait. The trade imbalance would spiral further out of control; and manufacturers in other nations fighting China for market share would be at a greater disadvantage.
"Remember, when we talk about bubbles, the stakes are the future of the Communist Party," says Morici. "They'll try to survive no matter what; and it could mean destroying other economies to do it."
Disappointed by losses in stock markets and bonds during the recession, investors had turned to commodities in the hope of better returns, many borrowing at very low interest rates.
There's something really satisfying about a perfect bubble gum bubble. It's also fun to see just how big you can make it. Of course, when it eventually pops, trying to peel the pieces off your face and pluck them from your hair puts a damper on things.
We'll clearly need something epic to do this musical tribute justice.
Feb. 4 (Bloomberg) -- The California State Teachers’ Retirement System, the second-biggest U.S. public pension, is considering investments in commodities to boost returns and provide a hedge against inflation and slumping equities.
Did they like commodities at lower prices? No.
Commodity prices have surged since 2001 as global economic growth led by China, the fastest-growing consumer of raw materials, spurred demand for metals, energy and grains. Copper prices have quadrupled in the past eight years, and crude oil has more than doubled. Higher prices have attracted increased interest from hedge-fund managers and pension funds.
Global investors’ fears about a potential full-blown government debt crisis in Europe fueled a massive rush for safety on Thursday, driving stocks, commodities and other assets sharply lower.
Feb. 4 (Bloomberg) -- Crude oil tumbled the most in six months as the dollar gained and a drop in stocks bolstered skepticism that the economic recovery will be sustained.
NEW YORK (Dow Jones)--Gold futures fell more than $50 Thursday to their lowest level in three months as investors moved out of perceived riskier assets on concerns about euro-zone debt and weaker-than-expected U.S. weekly jobless figures.
WASHINGTON, Feb 4 (Reuters) - The number of U.S. workers filing for jobless benefits unexpectedly rose last week, but another big gain in productivity in the fourth quarter offered hope companies were getting close to adding to payrolls.
Worries about China's moves to rein in economic growth have sent copper futures reeling this year after prices more than doubled in 2009.
However, even as Chinese authorities take steps to tighten credit availability, demand from the world's largest consumer of the metal is forecast to remain strong and global copper supplies are likely to show only a small surplus. That means a dramatic selloff is unlikely for the metal, say market participants, some of whom see the current weakness as a buying opportunity.
We all know how unbiased "market participants" can be.
Here's my take.
If I am told a particular bridge is unlikely to collapse, then I tend to look for alternate routes to bypass it. Maybe that's just me. I'm just not much of a risk taker.
The reserve bubble is actually an Asia-wide phenomenon. And we should stop viewing this monetary arms race as a source of strength. Here are three reasons why it’s fast becoming a bigger liability than policy makers say publicly.
One, it’s a massive and growing pyramid scheme. The issue has reached new levels of absurdity with traders buzzing about crisis-plagued Greece seeking a Chinese bailout. After all, if economies were for sale, China could use the $453 billion of reserves it amassed last year to buy Greece and Vietnam and have enough left over for Mongolia.
Oh crap. That's only one of the three reasons. I now remember why I only lean towards deflation short-term while simultaneously hoarding toilet paper.
Think about how Dubai shook the global economy, or how the mere hint that Chinese growth may dip below 8 percent inspires panic. These disappointments pale in comparison with the turbulence that may come from Asia’s biggest bubble popping.
As usual, he makes a good point. This global economy is seriously messed up and grows more unstable by the year.
On a lighter note, I feel better about my stagflationary name long-term. Sigh.
Just presume it will go down. Presume that the companies that report good numbers will get hurt and the companies that report bad numbers will get destroyed -- just like last week. Presume that we are going into a slowdown and that last year's market is over.
One of the most annoying things about those who are negative about the market is that after you have a 3% to 5% correction, they are right into your mailbox with charts and graphs and times and dates for when they told you we were going to be at a high and that we would go much lower. "There, there, I told you so," they say. As if they don't sound like children, frankly.
In my opinion, he's a preachy holier-than-thou short-term rear-view-mirror looking hypocrite.
A-ha, that just leaves us with tech. That's why we keep coming back to it. That's why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now. It is by that process of elimination that I have picked my top 10. And my next 10 and my next 10 after. Only those companies are worth owning. The rest?
Great 5-year fixed rate loan (3.88% rate, 3.890% APR)
Get a low rate with payments that are based on repaying over 30 years.
The payments are based on 30 years. The loan is based on 5 years.
I'm a saver. I owe nothing on my house. Let's see how I could abuse this.
I could take out a mortgage and invest the difference somewhere. Let's assume the tax break on the mortgage offsets the taxes on the alternative investment. I'd therefore only need to make 3.89% on the money to break even. Any more than that is just pure gravy. At the end of the 5 years I could pay off the loan and pocket the difference.
Now all I need to do is figure out where to safely park the money to earn more than 3.89% over the next 5 years. How hard could it be? The bar is so low.
How about 5-Year Treasuries? I can earn 2.37%. That's not good enough.
How about 5-Year TIPS. They yield 0.35%. If inflation averages over 3.54% then I'd be doing fairly well. Call me skeptical though. What if the inflation never arrives?
How about the stock market? No matter how high it goes, the experts assure me that it's always good for another 10%. I think I shall pass on that. Further, this is supposed to be a mortgage for "savers", not for "investors".
Gold? Can't do it. Some might argue it is a form of savings, but let's get real here. It's a speculation. It might pay off big. It might lose big. It's just too volatile to bet the house on.
Oil? Yeah, I'm going to bet my house on that roller coaster ride. $11 to $140+ to $30+ to $80. While I am at it, I'll put a third of it on the number 22 in Las Vegas. I'm feeling really lucky!
How about ING Direct? I consider it to be a pretty good place for savers. I've got money parked there. I just recommended it today. Unfortunately, they only pay 1.25% on savings. That's clearly not going to work.
I'm stumped. I can't seem to find a "sure thing" that will appreciate by at least 3.89% per year over the next 5 years. I guess I shall pass. I don't want to risk my house if some sure thing turns into a sure flop.
There is some good news though. I sure don't feel the need to brace for hyperinflation right now. Maybe others shouldn't either?
WASHINGTON, Feb 1 (Reuters) - The White House budget proposal released on Monday assumes the U.S. economy is heading for a six-year run of above-average economic growth with no sign of a worrisome spike in inflation or interest rates.
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