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Dow Jones August 27

A perfect storm is brewing, and as with any hurricane warning, it can blow right past.  However not being aware and getting hit, can be devastating.   Here is what is happening.

  • Corporate profits will be under projections because purchases are under projections. After all, at this time last year we didn’t have the 2.5% Social Security Tax.
  • Attacks on Syria could cause an oil spike on the global market,
  • The Sequester continues tightening its belt even more beginning in September as all departments try to hit their low budgets…
  • Another debt ceiling crises, this time over Obamacare.  Government shut down.
  • Stocks have fallen off their highs, and only good news can bring them back.
  • The Fed is looking to raise interest rates.
  • New outbreak of Bubonic plague.
  • Possible collapse of student loan debt.
  • Banks too big to fail in 2008, are even bigger now.
  • % of Wealth in the top 1% equals that of 1929

Safe is better than sorry.  I’ll put more on this later, but, really, things are looking worse than just before 2008. Those are the big ones.

To have political crises and economic backtracking hitting at the same time, could create a rogue wave and cause one of those major drops. When the stock market dropped in 1929, know one really knew why.  It fell in September, then went back up. Then fell again in October, several days in a row, and went back up, then fell gradually until 8 months later when it finally hit its low.

Here is what you need to do with your IRA or 401K if you have never made an adjustment before. …

Call up your plan administrator at your workplace.  Their name will be on the literature you get quarterly.   They are your employer’s liaison with the investment company. Ask them if you can switch your accounts back and forth.  Almost all plans today allow it.  Your administrator herself has done it many times so ask them if it is easy. Ask them if you can move your volatile accounts over to safe ones.  Ask them how it is done. Here is how doing so saves you money.

Stocks are volatile. Treasury Bonds are solid.  Good stocks can give you a good return on your investment,  Treasury bonds have flat growth and should only be used to protect your money during a collapse.   Stocks are only as good as what people will pay for them.  Treasury bonds have a regular rate they pay out over time….  Stocks can become worthless.  Treasury bonds are the safest investment ever.

So if the stock market loses  30 percent and you have a value of $100,000 saved up for retirement, that is now $70,000 dollars.    You lost $30,000 in your portfolio’s worth! Now if you move your money over to Treasury bonds now while stocks are high, that $100,000 stays at $100,000 while later, everyone else drops down to  $70,000.  As the stock market plummets, drops, and drops some more, you have “no worries mate”, your money  stays right where it is in value….

Then, when the market reaches it’s lowest point and turns back around, you get out of your Treasury Bonds and again invest in all stocks.  As each of those stocks rise, so does the value of your investments.  So you go in at $100,000 and as the market rises its 30% back to where it was, you net a value of $30,000, and your total worth is now $130,000.

Those suckers who didn’t switch, saw their value drop to $70,000 in the crash.  After several years in recovery, they will finally return to the value they once had prior to the big drop, whereas you, by not losing your money in the first place, have actually grown your money….

But what if you pull out and the market keeps climbing instead, and doesn’t fall? Should the market defy all the negatives I mentioned above (it won’t),  your value will not drop, it will however stay at $100,000 while others in the market climb with the value of their stock. You may lose $1 ,$2, or maybe $3 thousand of what you could have potentially earned,  but that is a long shot and long shots never happen.  Even if it were, still that is a small price to pay to insure you won’t lose $30,000 in the next two months.

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Although the year is barely out, we do have our first nomination for the spot to be announced in December 2013.  With the Kinder Morgan Deal now on hold semi-permanently, even they are pointing to our hero of the year as the man most responsible for allowing the port to remain state owned….

I can say it was Julius Cephas who was behind almost every move to combat the loss of good jobs at our port.  He is being pointed out as the villain by the capitalists at Kinder Morgan.  In Delaware’s eyes, that elevates his hero’s stature even more…

In truth, he is no villain and knowing him, he will probably shun the acclimations being made by us common folk as being our hero.  In his eyes, he was just doing what needed to be done because no one else was there at that very moment to do it, and as that task swelled, it took a lot out of him….

Capitalists always need a villian.  But it was the “truth” which actually is what killed this deal.  Kinder Morgan WAS going to cut back on jobs, and their change of heart and blaming Julius instead of others, points exactly to the core of their problem with our port… …

People in Texas, do not understand unions.  They simply can’t fathom or understand how there can be an actual law that lets people strike and shut you down, whenever you try to pay them less..  In their eyes, you work for what they want to give you and if it is too little, ..humph.  go elsewhere….

The second culprit (after the “truth”),  was our office of economic development.  We gave Kinder Morgan too many “eager” signals that set us up as being seen as an easy pick.  They truly thought they could waltz in, pick up a top notch East Coast Port for a song, and we would eagerly give it up…  Again, that was because everything was done in secret.  Had a meeting been forthcoming in the very beginning,  Kinder Morgan might have moved on earlier when it became readily apparent, that southern Texas practices do not bode well in the Northeast…

Of course, being a corporation, they will blame the whistle blower.  (Ironic since the whistle blower of Enron works for them)..   Of course.  It is not like they find anything immoral in taking a state asset for a song, in firing those skilled dock workers, and replace them with some Spanish speaking Texans who never even heard of a union….

And Julius did blow that whistle. .  Like Rose on the Titanic, he took the whistle off of Jack (pun intended), and blew softly at first, then harder, and harder.   Gradually the sound registered on others ears….

Without Julius, Bob Marshall would not have pushed through Senate Bill 3.  Without Julius, most of the links showing up in everyone’s blog, would have not been found.  Without Julius, the case for protecting workers would not have even made the rounds of the Norman Oliver show….

There were many helpers. Bob Marshall, Nancy Willing, Norman Oliver, Norinda, Helene Keeley, Al Mascitti, Liz Allen, John Kowalko, and (an other blogger too shy to be mentioned here). When one looks back through all of them one sees from everywhere, there in the center of the universe,  stands a normal human being just like us, known to most … as Julius.

There will come a time when a better deal will arrive.  Could even be this year. There will come a time when a suitor who does care about Delaware, who does care about unions, about human beings, about those businesses on the outside, and who will want to upgrade the port for everyone’s interest, not just their own… And that suitor in this day and age, could even come from abroad.  Germany is very committed to union labor, to the environment, to being a good neighbor…. There are a great many possibilities out there that are immeasurable…. We definitely dodged a Texas bullet with this one….

When that suitor arrives… Julius’s stature will be set in cement….  For he did nothing really Herculean, except argue the truth…  He didn’t lie.  He didn’t connive,  He didn’t threaten….

That was done by our office of economic development.  Instead and unlike them, Julius told the truth.  He told the truth to anyone who would listen.  He told the truth enough, so many “did” listen….

And that is why, he  deserves this nomination as Delaware’s Man of the Year.  I know it is early into 2013, but great things just do not wait!!….

You will hear smears that Julius tubed the deal… I saw the letter and it is already out on WDEL and the Delawareonline’s News Journal… But as an impartial blogger, I can tell you exactly what killed this deal.

It was “the truth”.  The truth of what this deal would cost us Delawareans….. is what turned the tide and caused the outcry that rose up against it….

If Kinder Morgan really wanted this deal, they could have easily said… “we are expanding and putting 5 new berths out into the river.  We are buying the port for the bargain price of $5 billion.   We need those businesses outside the fence because the jobs we get, will soon be too big, we can’t do it ourselves.  We will keep the union just as it is;  Wilmington needs good jobs and we are going to do our part….  We are also going to contribute into an emergency fund to be used for any spill or environmental accident that takes place under our tenure….

Kinder Morgan could have done any of those things, … and didn’t…. The blame doesn’t lie with Julius after all…. Especially when you consider the following…

This Economic Council erred on Fisker Automotive.  Then it erred on Bloom Energy.  Then it tried to Kinder Morgan us out of our port…..   Someone rushed in  with a save to make sure that last one didn’t happen.

That person is now hereby nominated for Delaware’s Person of the Year…….

Everyone who has followed me knows  I’m always right on the market.   I’m not putting up links but you can go back through the archives and verify all you want.

If you have a mutual fund that allows you to switch from stocks to secured investments like Treasury’s, put the order in now. The smart money is starting to pull out now and the stocks will start dropping and keep falling as long as the switching continues….

Here is the reason….

Mitch McConnell…. “It’s pretty clear to me that the sequester is going to go into effect…Read my lips: I’m not interested in an 11th-hour negotiation.”

The most liberal estimate shows that when the sequester goes into effect the GDP will lose  .5% over the course of the year.  This first Quarter will be positive which means the next three quarters will be in negative territory.

The exact same thing occurred in 1937.   It is usually lumped in by history as a continuation of the Great Depression but two quarters of 1936 looked like our two quarters just after the election this time…  As 1937 opened, just as 2013 opened, prospects were rosy that the worst was behind us. Unemployment had dropped from 25% to 14% with manufacturing  output rising to its 1929 levels, and then, …. with budget cutbacks  to reign in spending, very similar to sequestration today, unemployment shot back up to 19%…. If the same trend holds, our unemployment should rise to 9% again before it stabilizes and then fall slowly, ever so slowly, back to 7% it is today, quite possibly as late as 2016.

Manufacturing then cut back 37% returning work output to 1934 levels.

Finally on April 2,  1938  Roosevelt sent a new large-scale spending program to Congress, and received $3.75 billion which was split among PWA, WPA, and various relief agencies.   Other appropriations raised the total to $5 billion in the spring of 1938, after which the economy recovered.

Unemployment never recovered its 1936 level until the US went into WWII….

The Stock Market which had climbed back to its 1929 high as of  February of 1937,  lost 50% of its value by February 1938…..

Put bluntly, with sequestration, there is zero chance stocks will rise, and a 99% chance they will fall.  Doesn’t it make sense to sell out now, and put that money into the safe keeping of Treasury Bonds?

The Republicans seem jubilent they are causing it this collapse.  I guess afterwards there will be no question in any reporters or any American’s mind, that Democrats and  Keynes were always right, and Republicans and Milton Friedman were always dead wrong.

If you don’t do what I said,  and get out now,  don’t come crying to me… You were warned!