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Quite often you can see things otherwise invisible when you look at a big picture.. For example if you were flying from San Fran to Bangor, ME, no one in your interactions along the way would be able to tell you what was happening across the entire route in real time.  You simply trust that and hope all will end well.

But if you are at a console watching air traffic control across the entire United States, and noticing how suddenly those little plane shapes disappear whenever they cross the Mississippi anywhere between Memphis and Cedar Rapids, you know from that anomaly that something must be wrong… You don’t know what, but only you see it from looking at the macro picture, a hole developing into which those entering, never return.

Which is why some of us like to look at macro math.  Basically it is stuff that no one else thinks is important and for most of daily living, they are correct.  But if you are used to looking at the same picture every day and one day it is different, a person familiar would notice that.  No one else would.  Imagine waking up one morning and walking through your house and quickly looking up from your footsteps, seeing that portrait you have hanging on the wall has its subject facing left, instead of right… You would be unnerved, right?  Yet a visitor to your place, would not notice.

Here is where we are. We are already in a free-fall towards another financial crises which if not addressed quickly, will repeat 2008-9 and possibly be bigger. It is strongly possible that this summer quarter’s financial reports leaking out in October, will cause a crash similar to what happened 8 years ago….

I’m sure this is a surprise to you as it was me. I sure you are as skeptical of my telling of it, as you would be my insisting I saw my portrait whose image had been flipped during the night..  Main stream’s financial media and both political parties are still asleep and dreaming of the promise that the economy is buoyed and is roaring back.  Just like how we all get surprised when acquaintances of ours, actively healthy people, suddenly confide they’ve been diagnosed with terminal cancer.  That is the cruel side of life. Sometimes the outside does not properly show the hidden condition on the inside.

What has not been shown in all our financial reports, is the massive amount of quantitative easing buoying these glowing results.  QE for short, is where government prints money costing nothing, and then spends it on something. They could loan it.  They could donate it.  They can buy stock with it. They can do anything with printed money that can be done with circulated money… And in a recession, this policy works… (which is why we do it)… Businesses get loans and stay afloat; banks get loans and keep their doors open. But the last recession was 8 years ago, and across the world’s financial markets, certain actors still are doing it…

So in our newscasts we appear to have a great recovery just before the elections. Our stock market is high, our unemployment is quite low, and our corporate profits continue to rise.  Is their any other way to measure it?

But does it make a difference to you if the reason the stock market is high because many of the stocks are now owned by government entities involved in quantitative easing, bought at low times to boost prices keeping plummeting crashes from continuing?  Does it make a difference that corporate profits are continuing because of massive increases in corporate debt primarily taken on to avoid showing a negatively balanced profit sheet, debt often owed to government entities which bought them up when no one else would to help keep their prices high… Does it make a difference if I told you that despite all the newly minted private sector jobs now being generated at reduced wage levels from skeletons of the older jobs now gone, the entire total income now being generated by all those working, is less per person than was before the great recession of 2008-9?  But you knew all this, right?

When put all together, the bottom line is that our economy is actually in a recession if measured by “real” corporate profits being down,  by “total amount of generated wages” impacting the economy being down,  by corporate “revenue streams” across our business world, being down,  by our “stock market minus QE infused purchases” being down,… but the supports provided by QE hide these facts from us all.  And it is not just here in the US. It is even a bigger global problem. There is the EU who prints money for every Southern European economic crises.  There is Japan who prints money to prop up everything. There is the ongoing problem in China. There is Britain who is now pumping to keep Brexit from collapsing its economy. Globally in just one quarter, we witnessed QE soar to never-before-seen levels. and it hasn’t stopped climbing.

Have you noticed how even with bad economic news, stocks go up?  That should not be — a reality which is obvious to grasp when parsed this way….

“Uh-oh, looks like you are going to lose a lot of money/  Oh! No problem, I’ll just buy more stocks at a higher price then..”  Time in and time out, this is exactly what happens.

QE is buying those stocks… and we’ve reached the level where there are so many, there is no one there to sell them too… Bond yields are negative and yet they keep buying.

“We are therefore in uncharted waters and it is impossible to predict the unintended consequences of very low interest rates, with some 30% of global government debt at negative yields, combined with quantitative easing on a massive scale” —Chairman Lord Jacob Rothschild of Rothschild Investment Trust

Asset Purchases Global
Notice how across the globe, governments are now buying up $180 billion a month or $30 billion per month higher than all the QE in the world at the peak of the Recession (2009).

Now jump to the crux of the problem.

Negative Interest

Did you notice the climb of negative yield debt just in the past 8 months. Aren’t negative yields dangerous?

Can be. Already one third of all sovereign debt yields negative interest rates. That means that investors are effectively paying borrowers to lend to them. The Bank of Ireland and Royal Bank of Scotland already charge depositors interest, as opposed to paying depositors interest.   That’s bizarre. Not to mention unsustainable.

At the current rate of decline, the entire global market will be in subzero land by the end of the year.

 

Around 45% of the global “fixed income” market is now “compromised” by central bank buying.” 

This is compounded by the new fact that nearly half of the bond buyers in the world don’t care about price because they print money out of nothing.   So what does this look like? Take Japan, for example.

Japan’s biggest banks are running out of room to sell their government bond holdings, pushing the central bank closer to the limits of its record monetary easing.   Finding willing sellers is a headache for Governor Haruhiko Kuroda as the central bank prepares to review policy at next month’s board meeting, amid growing concern among economists that he has few tools left to revive the economy. Record bond buying has already saddled the Bank of Japan with more than a third of outstanding sovereign notes, draining liquidity from the market and making it more volatile.

As proof of this trend, on August 9th, the Bank of England couldn’t find enough bonds to buy.

In plain terms it is as if you were now living solely off borrowed money and constantly getting new loans just to make the payments on your past due old loans and then suddenly, not being able to get any new loans anymore……

As we can see from the first chart above, Japan’s “need” is near $90 billion a month, which means once the loans potential dries up… there is an $90 billion dollar hole into which everything collapses…

Don’t underestimate what is happening here, the BoJ is buying a lot more than just sovereign bonds.

The Bank of Japan’s controversial march to the top of shareholder rankings in the world’s third-largest equity market is picking up pace.  Already a top-five owner of 81 companies in Japan’s Nikkei 225 Stock Average, the BOJ is on course to become the No. 1 shareholder in 55 of those firms by the end of next year, according to estimates compiled by Bloomberg from the central bank’s exchange-traded fund holdings.

 

Japan may be the extreme example, but they are hardly alone.  

The balance sheet assets of the world’s six major central banks hit a new all-time record, increasing to $16.9 trillion from $4.9 trillion 10 years ago, a 239 percent increase.  All the major global central banks are buying up financial assets to the point that global liquidity is drying up. In other words, the central banks are becoming the markets.  Markets have become so distorted by central bank activity that they are no longer transmitting very useful information about the economy at all.”

Bad as this may sound, this is still not the real problem  Here is the REAL scary problem. These low negative rates in safe bonds are sending buyers out in droves to the unsafe markets to find any yield, even small ones of 5%.  In these markets the risk looms so large for so small a payoff, that one day’s trade can wipe a years of yield right off the books.

Volume in emerging markets have soared double their previous record in volume sold since March.

emerging markets 2016

But that is just one example

Junk Spike

Junk bonds, rallied 48% this year, even while junk bond defaults have hit five year highs.

Corporate debt.
Debt Corporate

Corporations are issuing record amounts of debt, and investors and QE are gobbling it up.

Companies worldwide are poised to raise more than $100 billion so far this month, the most for the period in Bloomberg data going back to 1999…. The average yield on sterling-denominated corporate bonds has fallen to a record-low 2.19 percent, according to Bank of America Merrill Lynch index data. Globally, the average is near the lowest ever at 2.3 percent, the data show.

More than $2.3tn of dollar-denominated debt has already been issued by companies and banks since the year began, including three of the ten largest corporate bond sales on record, Dealogic data show.   Which makes perfect sense…until you factor in that corporations are defaulting on debts at a near crisis level.

corporate defaults

The year is half over and we are already at the 60% level of 2009……….

According to a new report from Standard & Poor’s Global Ratings, corporate debt around the world is massively on the rise and could skyrocket to $75 trillion from the $51 trillion it’s at now…. What’s more – S&P estimates that two out of five corporations are highly leveraged (meaning they’ve taken on too much debt). About 43% to 47% of corporations globally are at a financial risk level.

Debt to EBITDA

EBITDA = (Earnings Before Interest,Taxes, Depreciation, Amortization)
Far, far above the 2009 recession levels…

But why are corporations the world over, all taking on debt at the same time (we are just finding out now because reports are filtering out from June 2016)?….

Because operating cash flow doesn’t cover it.

 

In Q2, companies generated $425 billion in operating cash flows. Only $151 billion was invested in fixed assets. The lack of investment is the bane of the US economy. And:

 $110 billion went into dividend payments.    

$61 billion was used for takeovers (OK, that’s down from last year)    

$137 billion was blown on financially engineering their earnings via share buybacks.

So operating cash flows were $35 billion short. That happened quarter after quarter. Hence debt ballooned to 32% of total assets at non-financial firms, the highest since 2008, another propitious year.

As you can see in order not to disappoint shareholders, corporate entities are taking on low interest debt simply to keep their profits looking pretty for the short term.  As seen above one could easily avoid debt by

  • a) cutting dividend payments,
  • b) stop taking over other businesses, or
  • c) stop buying back your stock to increase earnings/share…..

No, but none of these superfluous options got cut back, debt was taken on to cover them…

(As an aside, if anyone is wondering what is still wrong with the American economy, the number of whopping total of $61 billion applied to takeovers compared to an anemic $151 billion into capital investment, says it all… )

You must be wondering!  With all this bad news, why is the stock market climbing so precipitously?  Who would put money into a struggling company laden with debt (32% of assets) which cannot meet profit targets without taking on even more debt?  Let me guess. You? You are going to go out and buy some debt laden stock right now, correct?  Of course, you’ll put your whole retirement plan on it, correct?

Well, yes. If you have anyone minding your money, a mutual fund perhaps, I’m sorry, but this has already happened to you.  For in the short term, it has become the only way to get any yield at all.

Yield Comparison

Today’s precarious stock market scenario only makes sense when compared to negative bond yields… From the comparison chart above, you can see that this is a new phenomenon.  Accounting for the negative bond yields, today, you make 70% more in stocks than you do in bonds…

With a bubble stretched this thin, and with ample covering up so much bad financial news, the danger becomes very real that a tiny pinprick from somewhere, whether coming from student loans, junk bonds, emerging market bonds, corporate bonds, equities, or sub-prime car loan bonds, causes negative losses more than the ability of one to pay……

When disaster finally happens there will be another rush for the exits everywhere, and that is where the fatal flaw in the system will be exposed: there is no liquidity in the markets….

The World Bank estimates the ratio of non-performing loans to total gross loans in 2015 reached 4.3 percent. Before the 2009 global financial crisis, they stood at 4.2 percent.     If anything, the problem is starker now than then: There are more than $3 trillion in stressed loan assets worldwide, compared to the roughly $1 trillion of U.S. subprime loans that triggered the 2009 crisis….

Mr. Businessman calls up his bank… I need a loan right now, quick!   ….. Sorry says the bank. We’re out of money…..

The one solution?  Pretty painful.. Raise interest rates,.  which will result in downward pressure globally on all portfolios, dropping overinflated stock like its hot, but… will dothe necessary job of stopping corporate debt-load from continuing to grow and return us to more accurate reporting. Raising the interest rates act like chemo therapy to the economy, providing long-term healing by actually killing off parts of the living body to keep a malignancy from spreading to healthy tissues… When given the choice, very few of us choose to die forthright, instead resign to taking the chemo.  As we struggle with the decision, at the end of our thought process we all succumb to choosing that option at the end, coming to the realization that either way, we die, and at least therapy provides us the option of more time….

These implications hitting in October are anyone’s guess to their impact on this election year.

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August 24th After Lunch

This trend has been consistent. A surprise bump in August puts fear in investors. Then when the third quarter’s financial reports come out after September 30th, with roughly 2/3’rds not meeting projections, on one day in October, every one at once decides to pull out…

That is the problem.

Currently there is no better market across the globe, which is why our stock market has had its good run… But when Treasuries at low percentages look better than stock market negatives, it does make good sense to switch…

Which is nothing new… The only problem is when everyone does it at the same time… It creates an hubris where stocks have no value and their plunge becomes intense…

You may have heard… today opening plunged 1100 points… Today, August 24th, 2015, marked the end of the largest running bull market on record… Good news is that it’s up 950 points… So if you’d already been sitting outside the market and jumped in this morning… this was a good day.. so far..

But that can’t happen forever and if the market had dropped 3300 instead of 1100 that 950 of available reserves would do nothing…

For six weeks we will stumble around and the stocks will slowly rise and bounce back, but the “skittish index” has just now shot through the roof…

When the 3rd Quarter reports emerge, and if they are over 50% below expectations… Get ready…

There is far less resiliency in the middle class now than there was in 2008-2009 “Republican Caused” Depression. And today there are far less Democrats in the House and Senate to approve any bailout which means the majority now think like Romney: let markets correct themselves,keep government out. Herbert Hoover said the same thing in 1929.

The good news is that by wiping out a good portion of the stock market’s profits which 99% now goes to the 1%, is that the middle class now achieves more equity than anytime since before Ronald Reagan. … when it does become more equitable, we need to instill policies that keep it equal like we did in 1932-1933…. Change the rules so that as wealth is re-created, 50% is given to the labor side of the equation, and 50% goes to the capitalist side of the equation…

Taxing more is the simplest and most effective way to achieve that. It worked very well once before.

Last December I’d stumbled across this interactive map put up by the PEW foundation,  which had accumulated each state’s research of how many people were unemployed long termed back then, and how many were slipping off the roles this upcoming year… What I want to show, is the economic consequences of not continuing unemployment benefits, and to show it on a state by state basis.   The economic cost is nothing to ignore….As you may remember, Walmart is reeling from the food stamps (SNAP) cutbacks last November.  Their figures for this quarter come out early April.  But having some of their biggest clients drop out of society’s economics, jolted them last quarter..

The numbers for my state were estimated lower than reality.. PEW underestimated in December what Delaware actually reported in January by about 10%… Therefore these numbers should be considered baseline conservative estimates only, and very believable..  If they shock you, the reality is probably much worse….

As you know, all those already  on long termed unemployment  stopped receiving benefits on December 28th of last year.  Subsequently each week, every state has some members on its state’s unemployment roles who expire, and normally would get dumped into the federal program and continue being able to contribute to our economy while they look for work…That number gets bigger each week…

The idea occurred to me (and I did a piece on my own state),  that we could figure the economic damage relatively easily by finding the number of unemployed, calculating their economic worth by extending the average check amount, and applying a multiplier to account for the increase economic activity that unemployment creates. These multipliers are all over the map. The Dept of Labor predicts a 2.0 multiplier. and Moody’s predicts a 1.55 multiplier… Every dollar given through unemployment, creates $2.00 (1.55) in overall economic benefit as it continues to filter up the economic ladder to the top….

So I took it upon myself to show  how many people were initially cut, how many more increased the totals weekly, how much economic loss this costs each state,  and where the states will be at the end of this week, the beginning of March… The next step, since I won’t have the time, would be for someone to compare these estimates of people getting booted off an income, with each individual’ states data on weekly new hires. simply to prove whether or not unemployment was due to laziness and not the lack of good full-time paying jobs…  It would be easy to determine,.  If one would find that 10,000 are getting the boot, and if the state is showing no new hires, that we are creating a large class of people who will soon be creating large problems, stemming from simply the necessity of survival…. Call it our Third World Quotient. (I used this source for each states unemployment benefit)

===

Alabama   12.100 lost benefits on Dec. 28th.  925 added each week. Total off roles as of March 1st =20,425 @ $265 Alabama benefit = now hitting with impact of $5.4 million per week.  March 1st -Dec.28th Cumulative Lost Income Damage.= $43.9 million. Times 1.55 Multiplier effect, $68,045,000 dollars

Alaska    23,300 lost benefits on Dec. 28th.  448 added each week.  Total off roles as of March 1st =27,332 @ $442 Alaska benefit = now hitting with impact of $24.1 million per week.  March 1st -Dec.28th cumulative Lost Income Damage = $111.9 million  Times 1.55 Multiplier effect, $ 173,439,916 dollars

Arizona   17,100 lost benefits on Dec. 28th.  1288 added each week.  Total off roles as of March 1st = 28,962 @ $240 Arizona benefit = now hitting with impact of $6.9 million per week.  March 1st -Dec.28th cumulative Lost Income Damage = $55 million  Times 1.55 Multiplier effect. $ 85,173,120 dollars

Arkansas  9,300 lost benefits on Dec 28th.  775 added each week.  Total off roles as of March 1st = 16,275 @ $ 451 Arkansas benefit = now hitting with an impact of $ 7.3 million per week.. March 1st -Dec.28th cumulative Lost Income Damage = $57.6 million times 1.55 Multiplier effect $89,39,018 dollars.

California   214,800  lost benefits on Dec 28th.    16,078 added each week.  Total off roles as of March 1st = 359,502  @ $ 450   California benefit = now hitting with an impact of $161  million per week.. March 1st -Dec.28th cumulative Lost Income Damage =  $1.29 billion times 1.55 Multiplier effect $ 2,002,878,225 dollars.

Colorado   17,900 lost benefits on Dec 28th.  1400  added each week.  Total off roles as of March 1st =  30,500 @ $ 466  Colorado benefit = now hitting with an impact of $14.2   million per week.. March 1st -Dec.28th cumulative Lost Income Damage =  $37.7 million times 1.55 Multiplier effect $ 58,434,070  dollars.

Connecticut  26,000 lost benefits on Dec 28th.   1636  added each week.  Total off roles as of March 1st =   35816 @ $ 665 Connecticut benefit = now hitting with an impact of $23.8  million per week.. March 1st -Dec.28th cumulative Lost Income Damage = $221.8 million times 1.55 Multiplier effect $ 343,878,815  dollars.
Read the rest of this entry »

Now, to answer why….

“‘Five years after excessive debt propelled a housing-market collapse into a financial crisis and recession, similar bets are being placed across the U.S”.

“Total corporate-bond debt has grown to nearly $6 trillion, up 59% since 2007, the year before the financial crisis. … Leverage by companies rated investment grade has risen 20% since 2010 … about 6% higher than in 2008…

In 2008, mutual funds held, on average, 17% of the bonds and 3% of the loans made to junk-grade companies, according to Bank of America. Today, they own about 26% of the bonds and 19% of the loans.

“Assets in mutual funds and exchange-traded funds that invest in junk bonds have grown to $285 billion in July from $92 billion at the end of 2008,”

“‘Many companies are repeating some of the mistakes of the past,’ by taking on too much debt,…”

“Overall corporate health was ‘no better than it was in 2007 and by some measures worse.”

(All quotes culled from Wall Street Journal)

For those that don’t do this all the time, here is how it works….

You buy $100 million dollars of stock X on margin…  You pay 50% of the cost or  $50 million, owing the remainder $50 million to your broker.  The stock value rises to $150 million and you sell it….   You get the $150 million minus the $50 million owed back to your broker… You pocket an extra $50 million on the $50 million you invested…   Your $50 million returned a 100% on your investment, congratulations….

If done in cash, you should have paid $100 million, and gained $50 million when sold at $150 million…  Wait … is that the same exact total?…  Yes, you are right, but your investment only gained 50%… not 100%

This is why borrowing for stocks is up…  Worse than it was in 2007-2008?…. Yes. Correct.  Despite the Dodd-Frank bill, it is worse now, than in 2007-2008…..

So then what happens if the price of stocks fall…..   ???

You bought $100 million of stocks putting $50 million down and borrowing $50 million from your broker… Rule number one:  you broker does not lose:  you do….

Stocks fall 2%….   Your value is dropped to $98 million.  You now owe the broker $2 million on top of the $50 you put down. Stocks fall again, 2%….  You value drops to $96 million.  You know owe your broker an additional $2 million you put down…  Getting scared?  Sell at $96 million and by the time it goes through, you only get $95 million.  Since you owed your broker $50 million and only get $45 million, you immediately cut him a check for $5 million dollars…. You originally put up $50 million so your investment cost you…. 10%….

If you paid cash and put  the full $100 million up front, your loss to your company would have only been 5%….

So let us imagine this on the volume of the New York Stock Exchange…  Where  last Friday on the NYSE, $30 billion traded hands (positively for most, fortunately)    … Assuming it was a bad day, and everyone was leveraged, on the minimal 5% drop outlined above, America would have to pay an minimal $1.5 billion to their brokers…  In other words… Americans who leveraged, would be $1.5 billion poorer just from the NYSE one day drop alone….

At the 16,000 mark, a 5% drop means the DJIA would rest at 15,200….  or where it was back in the middle of this past October…. just 23 trading days ago…..  Because of leveraging,  that 5% drop means corporate America takes a 10% clip….

I don’t know if you’ve ever taken a loss of 10%, but if you haven’t… let me tell you… one does cut back on spending….

And that, is what makes this chart so scary……….

QE versus Stock Prices

(Click image to enlarge)

Makes one understand now exactly why the market-rise continues despite the reality of our current economic situation, doesn’t it? Now…..remember what happened when Bernacke said… “Well, eventually this easing will someday have to end.”?

So….. what to do?

Quietly exit…  slowly get off the ice so no one notices….  Just be totally off before all the cracking starts….  and the scrambling begins.

Just heard that discussion was flying around Moody’s after the Fitch announcement today, over whether their rating should be in the “B” range or “C” range if the default occurs.

One train of thought was that with the alternative universe Republicans currently live in, where thinking that  we can weather the default of the debt ceiling as well as the government shutdown indefinitely or until at least Obama puts in his resignation papers,  dropping  the USA’s rating only a point or two, would not be an accurate portrayal of the risk.

These rating organizations have a reputation to keep.  Were they to make the bonds drop only from A+++ to an A++, or down to an A+, it would give credence to the viewpoints of the alternative universe’s thinking that “gee, that wasn’t so bad” and prolong the crises.

If the US Government can’t decide to open itself up, and can’t decide to pay the obligations to which it has already committed, then it is no better than Somalia, or Chad, or the Central African Republic They can’t open due to war and insurrection; we can’t open because of immature legislators.  The result is the same;  they aren’t governing, and that is a bad risk. Except we have a lot more money than Somalia, Chad, and the Central African Republic, which will depreciate faster than the Titanic hit bottom once it finally slipped under.

And that is the other side of the argument.  That considering the outcome of default, and effect of the lowering of the rating, that perhaps modifying the amount of the drop might be prudent.  Drop the bond ratings to the level of Portugal or Bulgaria, keep it in the “B” range, instead of the Somalian range where it belongs.

Then the other side counters back… But if we do that, the Tea Party will say, “see, they were lying, default is not as bad as they said…” 

Most likely they will err on the side of caution.  Drop it into the “B” range….  Save the “C” range for another day…. 

That at least, was the rumor told to me as being the current mood at Moody’s…  As everyone knows, the “official” word could be a whole different level entirely.

 

Image

Always knew they were on some serious drugs.

The last crises explained in hour by hour replay.

There is only one reason to remain in today’s stock market. That is if you “short” sold everything  to begin next week.  If you haven’t, it might be too late…  if I were the Chinese or other foreign investors, I’d bet short, and start pulling out right now. 

You know that is a safe bet.

I sometimes forget that people really don’t understand the financial markets as well as they should.  That’s very understandable.  I don’t understand everything it takes to build a road, as much as I should. 

There are so many things to know; we can’t know everything.  When I posted a message about getting out of the markets, I received a comment that reminded me that not everyone was up to par on what is about to happen and how that will affect them.  

Here is why getting out now is a good thing, and why staying in “for the long haul” is a bad thing.

Assume you have $10,000 in stocks.   If the stock market drops 40% as it is prone to do, it will be years before it gets back up to its level.  On the Dow Jones a 40% drop would be like going down to 9000 to give you an idea.  That can happen in a day, and with most IRA’s, you have to put your bid in one day and it comes out the next.  You could do it now, and if it crashes tomorrow still lose it all.

Which is why you should act today, Friday, and take a chance on Monday.

If you don’t.  here is what will happen.   That $10,000 could become $6,000 by next Monday afternoon.  But you are in it for the long haul, right?.  Again after 2 years of  awesome 30% growth,, that money-total of yours has again climbed up to $10,000.  No big deal you shrug. You were in it for the long haul. You lost nothing.

Now, the other side of the story.

You switch the $10,000 right now over to a Treasury bond fund.  There is not much growth, so it stays at $10000 for a while.  Of course, everyone else has lost 40% but you are steady.  

So when the market stops losing and starts bouncing back, you go in at the bottom. with your full $10,000.   After 2 years of 30% growth, you have $16,000.  Had you stayed, you only had $10,000.

That is why, both those who are smart and unsmart should get out of  the stock market now.

In layman’s terms its the equivalent of protecting your property upon notice that Superstorm Sandy is headed for Delaware’s shores.  You can take your chances that it will blow over and do nothing….. you could be right if you are very lucky.  or you could hedge your bets and with little or no expense, and just a tiny bit if effort, protect your assets from any damage that could occur…. 

Just saying that an economic superstorm of gigantic proportions is headed your way.

 

 

Here is what happened the last debt crises… published from the Treasury’s blog

“The financial market stress that developed in
August of 2011 persisted into 2012 even
though Congress raised the debt ceiling prior
to the exhaustion of extraordinary measures.”

“From June to August 2011, consumer
confidence fell 22 percent and business
confidence fell 3 percent.”

“Financial market conditions have a direct
effect on economic activity. A good deal of
household wealth is held in financial assets,
and much of household and business
spending is funded by borrowing. Thus,
lower asset prices and higher borrowing costs
tend to weigh on private spending ”

Now the clicker….

“So far this year, Treasury yields have
been rising on balance, which means that any
adverse effects from financial market
disruptions caused by a debt ceiling debate
may not be offset as it was in 2011.

That is why it is unlikely that Boehner will send us over the edge. In fact, the sooner he sells out the Tea Party, the better…

The last 5 days of stocks…
-70 -128 +68 -58 -120

Do you feel poorer already? Better cut back on that spending…..