Enjoy Dow 10,000 now

[Xpectations]

I'm just not convinced that the Dow (currently 10,112) and the S&P 500 (currently 1,100) are going to maintain these levels all that much longer.

They could easily be but a fond memory as we move through 2010.


Valuations are getting historically lofty again.
The market is highly overbought.
Next year we are probably going to annihilate the total number of foreclosures we saw this past year.
The current and previous administrations have been completely irresponsible and reckless with the stimulus and bailout strategies.
We will likely see massive bank failings due to lax reporting and loss regulations under Obama/Geithner.
The FDIC is underfunded.


I seriously question whether this country has ever had back-to-back administrations who have handled our economic welfare more poorly.

Maybe I'm wrong on all of this. I certainly hope that I am. If I had discretionary dollars in the market, I would be really worried. But maybe that's just me.

Time will tell.

[drudy23]

We're far from "out of the woods"...so I would likely agree with you here.

If we're all waiting for "back to normal", then we all will have the same issues. If this country doesn't realize that a new, more financially conservative "norm" needs to happen, then we're destined to repeat this fiasco in the next 5-10 years.

[Juice]

Commercial real estate is about to implode which will be pretty damn close if not worse to what happened with the home mortgages. Plus this administration is blowing smoke up everyone's asses with stats like "jobs saved."

[X-band '01]

I'm just not convinced that the Dow (currently 10,112) and the S&P 500 (currently 1,100) are going to maintain these levels all that much longer.

They could easily be but a fond memory as we move through 2010.


Valuations are getting historically lofty again.
The market is highly overbought.
Next year we are probably going to annihilate the total number of foreclosures we saw this past year.
The current and previous administrations have been completely irresponsible and reckless with the stimulus and bailout strategies.
We will likely see massive bank failings due to lax reporting and loss regulations under Obama/Geithner.
The FDIC is underfunded.


I seriously question whether this country has ever had back-to-back administrations who have handled our economic welfare more poorly.

Maybe I'm wrong on all of this. I certainly hope that I am. If I had discretionary dollars in the market, I would be really worried. But maybe that's just me.

Time will tell.

Oil is also approaching $80 per barrel again - where have we heard this before?

[waggy]

I read recently there are something like 7 million residential properties that are "in the process" (there was a specific term for it I can't recall) of foreclosure. These are houses not even for sale on the market yet. This number represents about 135% of home sales for a given year. Add in the unemployment numbers and difficult credit, and this country is going to be adjusting for many years.

[bobbiemcgee]

I think it's a sucker's rally. Until someone can tell me what happened to the Trillions and Trillions of "off the books" derivatives out there, I'm not optimistic. The "real unemployment #" is closer to 17-18%

[Fred Garvin]

I hope everyone loses all their money. I hate all of you that benefit from this "ownership society."

[boozehound]

I strongly agree. I am not sure what concrete basis anyone has for thinking that the we are any better off now then we were a year ago. We still have way too much debt, and we produce very little that adds value to the global economy. All the economic 'expansion' in the 2000's has been financed on borrowed money. I am very afraid that things are going to get much worse.

[vee4xu]

I sold a bunch of stuff last Thursday. It was good timing for all of the issues. I think there is still going to be a downdraft. My feeling is that it could test somewhere between 8,000 and 8,500. I will have quite a bit of powder dry to swoop in and buy at that point. If not, then I will look at opportunities in whatever market exists. Though unemployment seems to have leveled off it is likely to be sustained at higher than normal levels. Also, the consumer is not back and will not be for some time. In the meantime savings rates are up which is good for the long term health of the economy, but not good for consumer products purchases.

[boozehound]

'The consumer' was purchasing based on real estate inflation and borrowed money, none of which truly added any value to the global economy. I am afraid that the consumer won't be back until we start to truly produce a value-added product or service for the benefit of the global economy. Too much of our economy lately has been based on Americans spending money, and not enough on other countries spending money to purchase a product or service from the US.

[vee4xu]

'The consumer' was purchasing based on real estate inflation and borrowed money, none of which truly added any value to the global economy. I am afraid that the consumer won't be back until we start to truly produce a value-added product or service for the benefit of the global economy. Too much of our economy lately has been based on Americans spending money, and not enough on other countries spending money to purchase a product or service from the US.

Agree. Also, the consumer won't be back until they job market gets better and the capital markets get better. The reason being that many consumer products require loans. Underwriting will be much more stringent so hopefully when consumers buy products they will be able to afford them and pay the loans they take out. I talk to many economist types and their mantra is jobs, jobs, jobs. The longer it takes the job market to recover, the longer we will bounce along the bottom of this recession.

[xudash]

Agree. Also, the consumer won't be back until they job market gets better and the capital markets get better. The reason being that many consumer products require loans. Underwriting will be much more stringent so hopefully when consumers buy products they will be able to afford them and pay the loans they take out. I talk to many economist types and their mantra is jobs, jobs, jobs. The longer it takes the job market to recover, the longer we will bounce along the bottom of this recession.

A lot of this market value is based on what market value is always based on: discounted cash flow/earnings. Companies have been cutting expenses and they have been generating better than expected earnings reports.

That's wonderful, except that the expense reductions are mostly related to personnel cuts. Will cuts finally stop and reverse into hiring? Not at the pace that would make most people comfortable. I see a flat and long recovery. This puppy is not going to bounce back.

And the banks haven't exactly been crazy about turning the credit spicket back on yet.

I see a market reversal as well. Like him or hate him, this president governs too far to the left to know how to bring an economy back up from what now is perceived to be its technical low point. He needs to keep Bush's income tax cuts in effect and not screw around with capital gains taxes as well. Yet I don't think he can with the deficits he already has racked up and is projected to rack up. It's not a Democrat v. Republican thing; Kennedy understood what was required in his day.

With LBJ it was guns and butter.

With BHO it's guns, entitlements and health care.

I hope he flat out proves me wrong - I doubt that will happen - but, for now, except for the GM wallpaper I'm still expecting from bankruptcy court (i.e. a conversion of what had been totally ignored senior secured notes to common stock at a conversion ratio that would have made Stalin proud) we are flushing to cash.

Beyond the technical concerns in the capital markets lies the concern over Iran and something really going stupid in the Middle East. All hell will break lose economically if that busts open. The good news is that there is so much more to worry about than that at the present time.

[XU 87]

I have stock brokers in my building who I ride the elevator with. I have money managers on my floor. I've read several articles about the market. And they all say the same thing-There's no way the market can keep going up. And like Vee, I sold some stock (not much in the scheme of things).

The only problem is despite everything I've read and heard, the market just keeps going up.

[taxpayer]

I'd say you're all being overly negative but to be honest, I have zero confidence in the so called leadership in DC; be it elephants or donkeys. I believe we are watching the dismantling of a great nation right before our eyes. The activities of the last number of years defy logic. Open borders, printing of billions of dollars, spend, spend, spend, the bailing out of private firms, having the Fed pretty much call the financial shots even though they aren't part of our government. We are a house of cards financially.

[vee4xu]

I think a lot of what is going on is as dash said because the reporting companies cut expenses back drastically last year at this time. As a result, earnings will look good this quarter because of that. However, future quarters will depend on increased sales and because there are no jobs, jobs, jobs and no real prospect for a large increase in them those sales will not materialize. As a result the 1Q 10 reporting season could result in a much lower market. The idea is that the market is pricing for the future. And this market is pricing the big cutbacks. We'll see what happens in December and January.

[vee4xu]

I'd say you're all being overly negative but to be honest, I have zero confidence in the so called leadership in DC; be it elephants or donkeys. I believe we are watching the dismantling of a great nation right before our eyes. The activities of the last number of years defy logic. Open borders, printing of billions of dollars, spend, spend, spend, the bailing out of private firms, having the Fed pretty much call the financial shots even though they aren't part of our government. We are a house of cards financially.

I am concerned TP, but not quite as draconian as you are feeling. That said, your sentiments certainly represent some percentage of the possibility that can result from the mess we're in. Where I hang my hat is that markets react in mirror images. Large ups are followed by large downs. We are currently in a large down. Things were nowhere near as good as they seemed at the top and IMHO are not as bad as they seem as we seek a bottom. It will take time to de-lever the debt that has been amassed in ours and the global economies as a whole. It won't be easy, but I have belief in the entreprenueral spirit of our country. The key is to give these folks the economic tools necessary to widen the scope of all the good ideas. This is the part of the equation that could prove problematic. The reason is that there will be a tug of war between the de-levering groups trying to refinance exisitng debt and the new companies trying to get off the ground. The result will be a high demand for money and dare I say high interest rates. That would be tough. I am somehow optimisitc that it won't get to that point.

[Snipe]

I'm just not convinced that the Dow (currently 10,112) and the S&P 500 (currently 1,100) are going to maintain these levels all that much longer.

They could easily be but a fond memory as we move through 2010.

Once inflation hits this country the Dow will blow past 10,000. But by then it won't matter.

THE INFLATION ADJUSTED DOW

http://www.dogsofthedow.com/dow-1925cpi-log.gif


Looks like the massive expansion of government spending and going off the gold standard helped a lot!

Your worst fear isn't if the Dow can hold at 10,000. Your worst fear should be that the Dow will be at 20,000 within the next decade.

All those dollars we just pumped into the system are going to come around. Inflation is coming on a massive scale. The dollar in your pocket will be worth less, or in short form worthless.

[Snipe]

Oil is also approaching $80 per barrel again - where have we heard this before?

Oil is a commodity that is a good marker for inflation in my opinion. The price of oil hasn't risen much over the past hundred years compared to the price of gold or other commodites. Oil is rising because the dollar is worth less. Oil will continue to rise in the long run, and the dollar will continue to be worth less.

[Snipe]

I read recently there are something like 7 million residential properties that are "in the process" (there was a specific term for it I can't recall) of foreclosure. These are houses not even for sale on the market yet. This number represents about 135% of home sales for a given year. Add in the unemployment numbers and difficult credit, and this country is going to be adjusting for many years.

I think that is CHANGE that we can believe in.

[Snipe]

I think it's a sucker's rally. Until someone can tell me what happened to the Trillions and Trillions of "off the books" derivatives out there, I'm not optimistic. The "real unemployment #" is closer to 17-18%

During the Great Depression unemployment hit 25%. Could the real numbers drift that far. It would be a nightmare beyond words.

Tough history is coming.

[PM Thor]

Once inflation hits this country the Dow will blow past 10,000. But by then it won't matter.

THE INFLATION ADJUSTED DOW

http://www.dogsofthedow.com/dow-1925cpi-log.gif


Looks like the massive expansion of government spending and going off the gold standard helped a lot!

Your worst fear isn't if the Dow can hold at 10,000. Your worst fear should be that the Dow will be at 20,000 within the next decade.

All those dollars we just pumped into the system are going to come around. Inflation is coming on a massive scale. The dollar in your pocket will be worth less, or in short form worthless.

So what? Let me get mine in the stocks right now! I'm not cashing out anytime soon, so I (and everyone else) needs to watch the market closely. When there are indications that it's going to plummet, get out. Or, get ready ready to buy big.

Who cares what happens to the others? If you gots the cash in your pocket, screw everyone else! Capitalism rules!

I HATE dayton.

[Snipe]

I strongly agree. I am not sure what concrete basis anyone has for thinking that the we are any better off now then we were a year ago. We still have way too much debt, and we produce very little that adds value to the global economy. All the economic 'expansion' in the 2000's has been financed on borrowed money. I am very afraid that things are going to get much worse.

You betcha!

The Collapse will be spectacular. We have done nothing to fix fundamental problems in the economy and we have spent all the dry powder in the keg. It is the worst of all possible worlds.


'The consumer' was purchasing based on real estate inflation and borrowed money, none of which truly added any value to the global economy. I am afraid that the consumer won't be back until we start to truly produce a value-added product or service for the benefit of the global economy. Too much of our economy lately has been based on Americans spending money, and not enough on other countries spending money to purchase a product or service from the US.

This last market rally was different than most and much of the gain came from real estate and was inflated by our expanding debt. In earlier booms we expanded American productive capacity. As economic booms expanded productive capacity and infrasturcture expanded. Then when the economy retracts it sets up a position for some firms to expand productive capacity on the cheap because the infrastructure was already built. The railroad ties had been laid before the crash. This latest boom was different. We expanded on debt and the housing market. We may not find an expansion of productive capacity on the cheap in this market. And the government has been stimulusing us into using all the weapons in our arsenal for little result.

The biggest problem I have with government spending is opportunity cost. We spent a trillion in the stimulus. You could build a nuclear power plant for anywhere from 3-7 billion. We could have built a couple of hundred nuclear power plants that would have probably been in use 80 years from now. We could have opened up drilling for oil in Alaska, California, Florida and in selective spots in the mainland. We could have made a measure in real energy independence and created jobs and infrastructure. By the time we get around to those ideas, I doubt the Chinese will be willing to finance the bonds.

Maggie Thatcher took over when the United Kingdom was a debtor nation. They had to agree to terms and conditions from the World Bank. When that happens, you have lost soverignty. Some Central Banker is making your decisions in a faraway land. How long before Chinese Central Bankers start dictating terms to us?

Is that a crazy idea? Maybe, but we are closer to it than you think.

If the dollar were to fail, all hell will break loose. You would have uprest and no social control. And it wouldn't be gold that you would want unless you are wealthy. Gold isn't going to by you eggs and milk. The first thing you would want when the shit hits the fan is a gun and some ammo.

Edit: I just invented the turn uprest. I was going for unrest and uprising all in the same word. Let future generations of the Webster dictionary credit me for this ginormous new advance in diction.

[Snipe]

I have stock brokers in my building who I ride the elevator with. I have money managers on my floor. I've read several articles about the market. And they all say the same thing-There's no way the market can keep going up. And like Vee, I sold some stock (not much in the scheme of things).

The only problem is despite everything I've read and heard, the market just keeps going up.


I have sold as well. I think right now is the best time to sell. To mix metaphors we are in the eye of the hurricane and the calm before the storm. The shit is about to hit the fan.

The only problem is, if you sell, where do you put the money into. Just having dollars doesn't make sense if inflation is coming.

I need to read Peter Schiff's book and stock up on some supplies.

[Snipe]

I'd say you're all being overly negative but to be honest, I have zero confidence in the so called leadership in DC; be it elephants or donkeys. I believe we are watching the dismantling of a great nation right before our eyes. The activities of the last number of years defy logic. Open borders, printing of billions of dollars, spend, spend, spend, the bailing out of private firms, having the Fed pretty much call the financial shots even though they aren't part of our government. We are a house of cards financially.

Amen brother. House of F'ing Cards.

"Things that can't go on forever, don't."

Hope everyone enjoyed it while it lasted, because tough history is coming.

[waggy]

The first thing you would want when the shit hits the fan is a gun and some ammo.

Yup, because the police will be busy with white collar DUI'ers. They need the cash.

[Snipe]

So what? Let me get mine in the stocks right now! I'm not cashing out anytime soon, so I (and everyone else) needs to watch the market closely. When there are indications that it's going to plummet, get out. Or, get ready ready to buy big.

Who cares what happens to the others? If you gots the cash in your pocket, screw everyone else! Capitalism rules!

I HATE dayton.


Thor, it wasn't capitalism that devalued the dollar, and it isn't capitalism that will cause the collapse. Maybe it is just me, but I don't think you get it.

[waggy]

Maybe it is just me, but I don't think you get it.

Public employee...

[Snipe]

Yup, because the police will be busy with white collar DUI'ers. They need the cash.

If the dollar crashes police won't want to put their lives on the line for worth-less dollars. They will probably still protect their own though, and the nice neighborhoods while they can.

[waggy]

If the dollar crashes police won't want to put their lives on the line for worth-less dollars. They will probably still protect their own though, and the nice neighborhoods while they can.

Exactly. What acronym will MADD mothers come up with for home invasion?

[Snipe]

Public employee...

Government dole indeed. It goes without saying....

[Snipe]

Exactly. What acronym will MADD mothers come up with for home invasion?

I think it will be WTSHTF. When The Shit Hits The Fan, nobody will care much about drunk diving anymore.

Rome before the fall.

[PM Thor]

Oh I get it, jackasses. You can't get more condascending.

But your chicken little attitudes can be flipped if you are bright enough to do it. Like I am doing. Guess you aren't smart enough to take advantage. You can make money in any type of market if you simply pay attention. It's not rocket science, this public service worker knows how to do it, don't you? I could care less where the government ends up in 30 years, I will be long gone by then, spending my cash in a warmer climate with hot latinas dancing around me.

Land might devalue, but it never goes away.

I HATE dayton.

[Xpectations]

Once inflation hits this country the Dow will blow past 10,000. But by then it won't matter.

THE INFLATION ADJUSTED DOW

http://www.dogsofthedow.com/dow-1925cpi-log.gif




Except that inflation has typically been a very bad thing for the stock market -- even in real terms, let alone inflation adjusted terms.

Note the market dips on your chart above that began just before 1920, just after the mid 1940s and starting in the late 1960s through early 1980s.

Those particular stock market drops corresponded to our highest inflation rates over the past century (see below).

http://upload.wikimedia.org/wikipedia/en/a/a0/US-Inflation-by-year.png

Inflation doesn't tend to inflate the stock market.

Besides, we're still a few years from a meaningful rise in inflation. Despite the rabsurd and reckless doubling of the amount of U.S. currency in less than a year, M2 has been falling due to banks hoarding TARP dollars and keeping it in reserves.

What happened to the oversight we were promised? What happened to the transparency we were promised? Instead, the oversight is the removal of oversight (e.g., removing mark-to-market for the most toxic of assets).

We won't possibly know how deeply these banks are in trouble until it is far too late.

It's ironic that one of the most significant and dangerous financail deregulation policies in our nation's history came under the administration that was supposed to clamp down on those same firms.

That move by the Obama Administration is at least on par with the stupidity of the SEC under the Bush Administration deregulating the major investment banks such that they could take on 40:1 leverage multiples versus the typical 12:1 multiples.

That move, combined with the Barney Frank led move to allow Fannie Mae to also lend at a 40:1 multiple (you may recall that Franklin Raines said 50:1 was safe) are the two biggest reasons that locked in our demise.

Obama's moves are ensuring we simply dig our current hole MUCH, MUCH deeper. Again, the first step in getting yourself out of a hole is to stop digging. Instead, our politicians respond by buying more shovels and digging faster.

If it weren't so sad it would be laughable.

[X-band '01]

We could have opened up drilling for oil in Alaska, California, Florida and in selective spots in the mainland.

It seemed like that was only a priority when the demand for oil was peaking last year. But as you noted, oil is rising because the value of the dollar is falling. Demand isn't rising, supplies are steadily declining by the day, but it seems that more and more investors are trying to buy into oil instead of traditional stocks.

I'm not saying this was the main reason that the Great Recession started, but it doesn't help when people were spending as much as $60-$70 more a month on gas during the summer of 2008. Last year, when gas was about $4 at the pump during the summer, that was at least 25% higher than the price at the pump during 2007's peak driving season, which was well ahead of the general inflation rate.

[xudash]

I'm going to step back in to try to make us feel better.

Re the topic of inflation, it could be worse, because it has been frightening in the past. Let's go back and visit our friends in the Weimar Republic:

http://en.wikipedia.org/wiki/File:GermanyHyperChart.jpg

Imagine needing a wheelbarrow to take a pile of paper money to buy a loaf of bread at a store. At least we have debit cards now.

[boozehound]

I'm going to step back in to try to make us feel better.

Re the topic of inflation, it could be worse, because it has been frightening in the past. Let's go back and visit our friends in the Weimar Republic:

http://en.wikipedia.org/wiki/File:GermanyHyperChart.jpg

Imagine needing a wheelbarrow to take a pile of paper money to buy a loaf of bread at a store. At least we have debit cards now.

So you are saying that we need an Adolph Hitler like figure to initiate a massive military buildup to get us out of this... ;)

[xudash]

So you are saying that we need an Adolph Hitler like figure to initiate a massive military buildup to get us out of this... ;)

Thanks for putting the smiley face on the end of that.

In related news, this is staggering: 1 Euro = 1.4957 U.S. dollars

[Snipe]

So you are saying that we need an Adolph Hitler like figure to initiate a massive military buildup to get us out of this... ;)

That didn't end well...

From the wiki on hyperinflation (http://en.wikipedia.org/wiki/Hyperinflation):


By late 1923, the Weimar Republic of Germany was issuing two-trillion Mark banknotes and postage stamps with a face value of fifty billion Mark. The highest value banknote issued by the Weimar government's Reichsbank had a face value of 100 trillion Mark (100,000,000,000,000; 100 billion on the long scale).[8] [9]. One of the firms printing these notes submitted an invoice for the work to the Reichsbank for 32,776,899,763,734,490,417.05 (3.28×1019, or 33 quintillion) Marks.[10]

The largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for the amount of 100 quintillion pengő (100,000,000,000,000,000,000, or 1020; 100 trillion on the long scale). image (There was even a banknote worth 10 times more, i.e. 1021 pengő, printed, but not issued image.) The banknotes however didn't depict the numbers, "hundred million p.-pengő" ("hundred million billion pengő") and "one milliard p.-pengő" were spelled out instead. This makes the 100,000,000,000,000 Zimbabwean dollar banknotes the notes with the greatest number of zeros shown.

The Post-WWII hyperinflation of Hungary held the record for the most extreme monthly inflation rate ever — 41,900,000,000,000,000% (4.19 × 1016%) for July, 1946, amounting to prices doubling every thirteen and half hours. By comparison, recent figures (as of 14 November 2008) estimate Zimbabwe's annual inflation rate at 89.7 sextillion (1021) percent. [11], which corresponds to a monthly rate of 5473%, and a half-life of about five days.


http://upload.wikimedia.org/wikipedia/en/thumb/3/3e/Zimbabwe_%24100_trillion_2009_Obverse.jpg/250px-Zimbabwe_%24100_trillion_2009_Obverse.jpg

One Hundred Trillion Dollars! Where is Mike Myers when you need him?

http://upload.wikimedia.org/wikipedia/commons/thumb/3/33/HUP_100MB_1946_obverse.jpg/250px-HUP_100MB_1946_obverse.jpg

One Hundred Million Billion Pengo!


Hungary went through the worst inflation ever between the end of 1945 and July 1946. In 1944, the highest denomination was 1,000 pengő. By the end of 1945, it was 10,000,000 pengő. The highest denomination in mid-1946 was 100,000,000,000,000,000,000 pengő. A special currency the adópengő - or tax pengő - was created for tax and postal payments [1]. The value of the adópengő was adjusted each day, by radio announcement. On 1 January 1946 one adópengő equaled one pengő. By late July, one adópengő equaled 2,000,000,000,000,000,000,000 or 2×1021 pengő. When the pengő was replaced in August 1946 by the forint, the total value of all Hungarian banknotes in circulation amounted to one-thousandth of one US dollar.

http://upload.wikimedia.org/wikipedia/commons/thumb/0/0e/Inflaci%C3%B3_utan_1946.jpg/180px-Inflaci%C3%B3_utan_1946.jpg

The great thing about hyper inflation is that we can pay off the national debt quite easily. Just print a couple dozen trillion dollar bills and tell the Chinese to keep the change. The only way we pay off this debt is to monatize it and print money.

I think the baby boom generation is going to have quite a legacy.

[Snipe]

http://www.marshu.com/articles/images-website/articles/presidents-on-us-paper-money/five-thousand-5000-dollar-bill-thumb.jpg

James Madison is on the $5,000 bill.

http://www.marshu.com/articles/images-website/articles/presidents-on-us-paper-money/ten-thousand-10000-dollar-bill-thumb.jpg

Our own Salmon P. Chase adorns the $10,000 bill.

http://www.marshu.com/articles/images-website/articles/presidents-on-us-paper-money/one-hundred-thousand-100000-dollar-bill-thumb.jpg

Facist Warmonger Woodrow Wilson blesses the $100,000 bill.

These bills are no longer in circulation. Our Government has yet to create the One Million Dollar bill.

If it does I would nominate Nobel Laureate Barack Hussien Obama, winner of the Nobel Prize for Peace. We might have to change the "In God We Trust" to something more suitable to the spirit of an Obama dollar. If and when the funny money starts printing we also need honor, George W. Bush, Nancy Pelosi and Harry Reid.

[bobbiemcgee]

"Coach I need one more" said the ref. "My team is on the floor".
...Hoosiers

[boozehound]

Yeah. This has the potential to end very badly for the country. We have borrowed too much for too long to finance our false prosperity. When it is truly time to pay the piper there is going to be a lot more pain. I don't know how long that is going to take though. As long as countries keep loaning us money we could continue to prop ourselves up for decades.

My fear is that the longer you wait to deal with the true issue the worse it gets. The larger concern that I have is the fact that on a global scale it is very difficult for us to compete with the Chinese in producing physical goods. Until the average wage rate rises in China to a level closer to that of the U.S. it is going to stay that way. They most we can hope for right now is rapid inflation in China driving the average wage up to a level that other developed countries (like the U.S.) can compete with.

Even with the cost of shipping goods overseas built in it is very hard to compete with a country that has China's production capacity and such low average wages for workers. It won't stay that way forever though.

[waggy]

You can't get more condascending.

I can understand it's difficult when someone appears to be attacking your livelyhood, but it wasn't meant to be personal.. It was just an observation that public employees seem to be the most insulated from inflation, and it's generally reflected in their attitudes, even if subconciously.

[boozehound]

Niall Ferguson opines:

"People have predicted the end of America in the past and been wrong," Ferguson concedes. "But let's face it: If you're trying to borrow $9 trillion to save your financial system...and already half your public debt held by foreigners, it's not really the conduct of rising empires, is it?"

Watch the whole video in the left hand corner. There are some very interesting statements made.

http://finance.yahoo.com/tech-ticker/article/357319/Niall-Ferguson-U.S.-Empire-in-Decline-on-Collision-Course-with-China?tickers=FXI,PGJ,%5EGSPC,%5Edji,SPY,LMT,RTN&sec=topStories&pos=9&asset=&ccode=

[waggy]

Niall Ferguson opines:

"People have predicted the end of America in the past and been wrong," Ferguson concedes. "But let's face it: If you're trying to borrow $9 trillion to save your financial system...and already half your public debt held by foreigners, it's not really the conduct of rising empires, is it?"

Watch the whole video in the left hand corner. There are some very interesting statements made.

http://finance.yahoo.com/tech-ticker/article/357319/Niall-Ferguson-U.S.-Empire-in-Decline-on-Collision-Course-with-China?tickers=FXI,PGJ,%5EGSPC,%5Edji,SPY,LMT,RTN&sec=topStories&pos=9&asset=&ccode=

Thanks.

...

[xudash]

Niall Ferguson opines:

"People have predicted the end of America in the past and been wrong," Ferguson concedes. "But let's face it: If you're trying to borrow $9 trillion to save your financial system...and already half your public debt held by foreigners, it's not really the conduct of rising empires, is it?"

Watch the whole video in the left hand corner. There are some very interesting statements made.

http://finance.yahoo.com/tech-ticker/article/357319/Niall-Ferguson-U.S.-Empire-in-Decline-on-Collision-Course-with-China?tickers=FXI,PGJ,%5EGSPC,%5Edji,SPY,LMT,RTN&sec=topStories&pos=9&asset=&ccode=

Thank you for posting that. Very interesting.

Gentlemen, we're way past elephants versus donkeys at this point. We need true and sound leadership. We need fair debate and logical compromise. We need a reasoned, strategic path out of the mess we're in that will keep this American gig going for decades longer.

Yet all we have is the equivalent of the Roman senate complete with daggers, except that they show up in Brooks Brothers suits instead of togas. At least the Romans went down in style: heavy drinking, orgies, etc.

Who would do Pelosi at this point?

I'll stop typing now as this is not going in the right direction.

[xu95]

Who would do Pelosi at this point?



She is too busy trying to hide all of her illegal workers.

xu95

[taxpayer]

Let's see. Now they are going to add another czar to oversee what is an appropriate salary in various businesses. Where is that in the Constitution? Must be just after dumping a currency based upon gold & silver and replacing it with a fiat currency system. Better yet, let's allow a private group to control our currency. Better yet, when they supply us for said currency, they charge us (the U.S. Governement = taxpayers) interest. The pot is on the stove and the water is getting very warm.

[BENWAR]

I'm just not convinced that the Dow (currently 10,112) and the S&P 500 (currently 1,100) are going to maintain these levels all that much longer.

They could easily be but a fond memory as we move through 2010.


Valuations are getting historically lofty again.
The market is highly overbought.
Next year we are probably going to annihilate the total number of foreclosures we saw this past year.
The current and previous administrations have been completely irresponsible and reckless with the stimulus and bailout strategies.
We will likely see massive bank failings due to lax reporting and loss regulations under Obama/Geithner.
The FDIC is underfunded.


I seriously question whether this country has ever had back-to-back administrations who have handled our economic welfare more poorly.

Maybe I'm wrong on all of this. I certainly hope that I am. If I had discretionary dollars in the market, I would be really worried. But maybe that's just me.

Time will tell.

Good call so far. The Dow is down 400 since your prediction.

[pizza delivery]

Need some advice from the financial guru's here:

I've got a nice little stash of cash in mutual funds, is it safer to go with CD's at this point? If a bank dies and I have CD's do I lose my money?

[bobbiemcgee]

Cd's are currently insured by the FDIC in federally chartered banks up to $250,000. The FDIC has the full faith and credit of the US Treasury behind it. After they both go, learn Chinese.

[vee4xu]

Cd's are currently insured by the FDIC in federally chartered banks up to $250,000. The FDIC has the full faith and credit of the US Treasury behind it. After they both go, learn Chinese.

And brush up on eating wtih chopsticks.

[Xpectations]

Need some advice from the financial guru's here:

I've got a nice little stash of cash in mutual funds, is it safer to go with CD's at this point? If a bank dies and I have CD's do I lose my money?

A lot depends on your age, time horizon for when you might need or want the money (e.g., house downpayment, college, retirement, other), risk tolerance, and percentage of your overall net worth represented by these investment dollars.

There are mutual funds that will likely hold up fine if there is a market plummet -- and not just bear (i.e., net short) funds, which carry plenty of risk themselves . Unfortunately, there are very, very few funds that fit that description.

[Snipe]

What is the best way other than gold to protect against inflation? I think inflation is coming down the road. Is there any way to profit off of it?

If you owe a lot of money on a house at a low interest rate, it seems like inflation would be your friend. At least it would hurt the bank more than it hurt you. What is the best way to profit off of the disaster?

And has anyone read Peter Schiff's stuff? I keep putting it off. I may regret that.

[bobbiemcgee]

What is the best way other than gold to protect against inflation? I think inflation is coming down the road. Is there any way to profit off of it?

If you owe a lot of money on a house at a low interest rate, it seems like inflation would be your friend. At least it would hurt the bank more than it hurt you. What is the best way to profit off of the disaster?

And has anyone read Peter Schiff's stuff? I keep putting it off. I may regret that.

Try taking a gold bar down to the 7-11.

[Snipe]

Try taking a gold bar down to the 7-11.

That is why I asked for "other than gold". I know gold is a good hedge, but I don't have the resources to sit on a boatload of the stuff. Gold is good for people with lots of money. For people like me, it would be better to have a gun and plenty of ammo.

Like you said, gold ain't going to get you a loaf of bread and some milk. Better to have something practical that has a high practical value.

[bobbiemcgee]

I think we're in for a "lost decade" like what happened in Japan but I hope not. There will be nowhere to earn a decent return without huge risk and since the fed is loaning money to banks @ 0%, Inflation will be a given @ some point.

[boozehound]

What is the best way other than gold to protect against inflation? I think inflation is coming down the road. Is there any way to profit off of it?

If you owe a lot of money on a house at a low interest rate, it seems like inflation would be your friend. At least it would hurt the bank more than it hurt you. What is the best way to profit off of the disaster?

And has anyone read Peter Schiff's stuff? I keep putting it off. I may regret that.

Peter Schiff is a good read. Very interesting, and not too dry. If you are pressed for time you can find a lot of youtube clips of him on various shows that are quite interesting as well.

You are 100% correct about the mortgage. Inflation essentially benefits people who are holding debt, particularly if the wage rate rises to keep the pace with inflation. Inflation also shrinks the national deficit, kind of, because our dollers are worth less so in a way the total value of our outstanding debt is 'worth' less.

Real estate can be a way to profit from inflation, but that takes a fair amount of money as well. You could invest in foreign currency as a hedge, but that is not a guarantee either.

Since our money isn't pegged to anything, we could, if I am not mistaken, print money to pay off the defecit, which is basically what Obama's plan seems to be. The side effect would be rapid inflation.

[XU 87]

Citigroup just declared bankruptcy. Good thing the government loaned them a few billion to keep them afloat for a few more months.

[xudash]

Citigroup just declared bankruptcy. Good thing the government loaned them a few billion to keep them afloat for a few more months.

Careful there hotrod. CIT Group filed C11, not Citicorp.

[XU 87]

You are correct. But CIT Group received $2.3 billion in government funds last year, which they used to stay out of bankruptcy for a few months.

[Snipe]

I heard the auto industry is looking for another round at that taxpayers expense. Who couldn't tell that wouldn't end well?

I wish we could have seen what would happen if the government didn't bail everyone out.

[XU 87]

I think GMAC is getting another $2.8 billion.

[waggy]

I need a bailout. Where do I go to get Obama Money!?

[XU 87]

Just open a company, run it poorly and produce products that the consumer doesn't want. After you're on the verge of bankruptcy, the govt. will send a few billion your way.

[bobbiemcgee]

Careful there hotrod. CIT Group filed C11, not Citicorp.

Discover Bank has the right idea - take a gov't bailout, triple everyone's interest rate to 29.99% while borrowing @ 0 and then report 3x the usual profits. Banks are a license to steal nowadays. Probably an excellent time to open a state chartered bank. No bad loans and borrow all you want @ 0. Now there's a place to put $$$$. Plus you can buy up bad loans @ 20 - 30 cents on the dollar secured by real estate. Don't worry if you make a mistake, Fed is behind you.

[Xpectations]

What is the best way other than gold to protect against inflation? I think inflation is coming down the road. Is there any way to profit off of it?

If you owe a lot of money on a house at a low interest rate, it seems like inflation would be your friend. At least it would hurt the bank more than it hurt you. What is the best way to profit off of the disaster?

And has anyone read Peter Schiff's stuff? I keep putting it off. I may regret that.

Commodities -- the most popular of which is gold -- is the typical investment as a hedge against inflation. That's what Schiff does.

There are two primary reasons though that Schiff has been frequently wrong (I would simply say "too early") on the investment front despite Bush and Obama literally okaying a literal doubling of the amount of U.S. currency (that is staggering when you think about it).

The first is that the government has been insistent on buying debt (i.e., bonds), and the worst of the debt. So the government has given banks money and the enormous demand they've created for buying crappy debt has kept bond prices higher than they would normally be in and yield spreads lower than they would normally be in times such as this. Thus yields (i.e., interest rates) are being kept low, though not in a sustainable way (i.e., the fundamentals of this debt are still shit, but we're buying it at crappy interest rates anyway).

The second reason is that banks are hoarding the money they receive from the government and placing it in reserves. Going into this month, M2 has actually dropped versus last spring despite us printing money at a record pace. Banks aren't lending despite that being what the government said all of this was for.

The Bush Administration did a shit job of overseeing the money directed to banks. The Obama Administration -- despite all the tough talk of oversight and transparency -- has done NOTHING about it. NOTHING.

The money they've been provided -- OUR MONEY -- is sitting there in reserves helping make the banks' balance sheets look better than they really are.

So, Snipe, I think you are spot on that inflation is the enemy looking into the future because our current tactics cannot be sustained and eventually we're going to have twice as many U.S. dollars in circulation, driving down the value of each one.

It is difficult to model a scenario where asset prices haven't doubled 10 years from now solely based on what the government has already done -- let alone what it might do in the future.

However, there won't be a normalized 7.2% (the implied average compound annual growth rate for a 10-year doubling) growth rate each year. It will be very heavily backloaded.

That said, I still believe Schiff is early by at least two more years, and more likely three years. That is when the effects described above will wear off and the unsustainability of these stupid attempts by Bush and Obama will come crashing down under its own weight.

And we should see double-digit annual inflation rates in the back half or back two-thirds of the decade ahead.

[boozehound]

Very well put Xpectations. The thing that really gets me is that nobody is being forced to answer for the spending of the bailout money. We (well, not us, congress) OK'd the bailout and they made almost no real effort to find out where, when, why, and how the money is being spent.

Get your financial house in order now because we are in for a rough road in a few years.

[boozehound]

I heard the auto industry is looking for another round at that taxpayers expense. Who couldn't tell that wouldn't end well?

I wish we could have seen what would happen if the government didn't bail everyone out.

Snipe, I have often wondered the same thing. Despite what the pundits say I really don't think that it would be that much different. I think that we have spent the money and now we are working very hard to convince ourselves that it made everything better. I think that it was a short term fix at best that will result in a lot of deflation in the long term.

We as a country don't want to deal with economic hardship so we push it off, like Greenspan did with the dot com burst. The problem is that when we do finally pay the piper it is going to be 10x worse than if we had just weathered the little storms earlier.

I am very concerned for the future of our economy.