You're Kidding

The Coming Depression: See It Clearly Through Historical Eyes

You say you see cycles in the above chart...

I see nothing in it that would tell me when to get fully invested in this market, nor do I see anything in your article that would indicate you are willing to make any such predictions.

That would be a smart move on your part and quite revealing as to how much practical, useful information you really think these "cycles" tell us.

Nothing like having your cake and eating it, too. That's a winner if I've ever heard of one.

But there's more! You conclude by saying:

"If I am correct in the assertions made in this article, it raises serious doubts about the effectiveness of the Obama plan to fix the economic problems of the country."

So let me get this straight. You are saying that these cycles you see, going back hundreds of years, portend the future success of what the government might do now? You realize, of course, that if the government was going to take say, a much different action, that your "model" would still raise the same doubts about its success, too? In other words, no matter what the government does, or doesn't do, it probably won't work, because of what your cycles tell us.

Now, I know you haven't thought this through, because any logical person would see the complete irrationality of such thinking. So please, tell us you were wrong, so we don't have to put your name on the "Never Read Another Article From These People" list.

How Much Downside Could Still Exist?

When you look at this planet and see the billions of people who are obsessed with just staying alive with some sense of comfort and dignity, and then see how few of this number actually are making the decisions which affect so many others' lives, and then become aware that nobody understands the complex interrelationships that exist between all the variables that determine the direction and consequences of how this whole mess moves...it is then you realize that this planet is most likely a DNA experiment of another, more advanced civilization, that has mistakenly over juiced the sexx and greed molecular aspects of the DNA, and is obviously busy somewhere else in the universe and isn't paying the proper attention to this experiment!

Its important that we set up large transmitters and try to contact our creators so they get off their coffee break and get back on the job, because we are going to helll in a hand basket and need their attention now! It is past the point of no return and we are sliding into a financial black hole, and my dividends, I just know, are going to be soon cut!

HHHHHHHEEEEEELLLLLLPPP...

Last Thursday Was the Bottom - It's Time to Get Back in

I think you are dreaming. The worldwide macro economic situation is absolutely horrible and getting worse all the time. Have housing prices stabilized? Hardly. Has the derivatives market leverage unwound yet? Its hardly gotten started. Are the unemployment, bankruptcy, and bank failure rates going down now? They've just started going up. Do the people in charge of fixing things know what they are doing? Ya think?

And you are saying that all these things are probably going to turn around in the next 6 mo?

Just because the world's governments are throwing money around and the market bounces up a little, doesn't mean anything except that there are a lot of impatient investors who really, really, really want to make some money right now. So what else is new?

This isn't a normal recession we're heading into, and it cannot be realistically compared to any of the recent recessions. This one is very different and the bottom is nowhere in sight.

Peter Schiff Answers His Critics

There is a guy named Joe Granville, who was a big investment Guru in the '70s. He did really, really well...for awhile, then started being wrong...and bingo, lost his Guru crown.

He was just one of many who have come, conquered, and then faded, and who will be followed by many more. They appear to be prescient and attract droves of followers, but alas, it turns out that they are soothsayers but for a limited time only, and not for always. Bummer.

Why is it that they always fade out? Well, obviously, because they weren't really Gurus at all. They were just lucky for awhile.

There are even some around today, and if you were to get into a time machine and jump into the future, you would find them there. They would have predicted, say, for example, the bottom of the Great Recession in late 2008 (or 2009, or 2010, or...whenever it was.) There they are...the Gurus..and they were right!

Except they weren't. They were lucky. How they saw the future happened to be somewhat correct. But do you think this correlation really means anything?

Well, lets say it does. The question now becomes how do I find a Guru before
we all discover he was right, which will then probably be too late to take advantage of his "predictions." There are lots of Gurus around making their prognostications; but which one is going to be right? If you think about this for very long, you'll discover that you can't ever know. How can you possibly know ahead of time which "Guru" will be right, and at what time in the future, unless...

You are a Guru, too!

In that case, you don't need one, do you? Just listen to yourself. But, alas... you know you're not a Guru. So, its impossible to pick one out and know ahead of time when they are going to be right, unless you just make a lucky guess.

So we only know who they are, and when they are right, after the fact, and not before. Again, big Bummer.

And to go one step further, if after all that we still decide to follow what someone says because it appears they were right once, or for awhile, how on earth do we know if they are going to be right again? Jo Grandville was "right" for awhile, and then he wasn't. Peter Schiff was right, it seems, for awhile, if you give him a lot of leeway time wise, (and now recently has been faltering, or just judged incorrectly, perhaps?) Nevertheless, he seems to have known what was going to happen in that future that now is happening...right???

Well, I've got great news for all. Here's a way to find a real Guru who can pick the direction of the DOW at least 10 times in a row! So he's got to be correct on the 11th, too, right?

Get a thousand people together on your web site to pick whether the Dow will go up or down tomorrow. The next day we'll find that about half of the group was right. Keep only those in the group who were correct. Then repeat for nine more days. In the end, one or two people will be left who will have been correct for ten days in a row! Will this be the Oracle we are looking for?

This is what PURE CHANCE gives us: people who stand out and appear to "know something" and have methods which appear to "predict" what is to come. But its all just a coincidence.

We all have to have a very strong desire for the truth in and of itself, in order to be objective enough to see past our own rose colored glasses. Whether we have this desire or not, says far more about us in this present moment - our desires, our agendas, our beliefs, etc., than we will ever be able to accurately predict about the future.

Kinder Morgan's Dividend Payout Rate Is Unsustainable

The Wachovia MLP Primer (Third edition, July 14, 2008) may be the best detailed discussion of MLPs around. I would recommend anyone seriously interested in investing in what is probably the best investment the market has to offer, to read and study it. (You especially need to do this if you want to write about the subject.)

After spending 9 months full time investigating the market and the related meltdown, I put 100% of a mid 6 figure inheritance into 7 MLPs: ETE, NRGP, EPE, NSH, BGH, LINE, and CPNO (that's right, 100%.) 60% of that went into the General Partners of investment grade, midstream pipeline and storage MLPs (including the one propane MLP,) which all increase their distributions much faster than their underlying MLPs.) I sleep easily at night knowing all my money is in extremely safe enterprises that are not going to go out of business in the foreseeable future, and will continue not only generating high distributions (10.4% on my initial portfolio purchase price) but will continue INCREASING those distributions over time as they have been doing for years, (especially once the recession is behind us.)

"Diversification" did how good of a job protecting equities in the last year? That's right, ABSOLUTELY NO GOOD. In fact, it guaranteed disaster.

Wall Street is full of wonderful suggestions that are meant to make Wall Street lots of money, not protect investors. You pay attention to the likes of Goldman Sachs' "recommendations" and "insights" at your own peril.

You must do your own due diligence and listen to nobody (including me) whose advice you cannot confirm for yourself. So, prove to yourself that the following investment advice is the best you will ever receive:

1) Think LONG TERM. How many more years will you be alive? I'm 63 and I could be alive another 25 or 30 years. Just about EVERYONE should think long term. Remember the race between the tortoise and the hare? Who won?

2) Think DIVIDENDS and DISTRIBUTIONS. Academic studies have shown div /dist stock investing has always beat non div/dist stock investing.

3) REINVEST (compound the interest) as much of the income stream as possible (ALL if you can) right back into your portfolio.

4) Think MLPs. The incredible tax advantages, the high dividends, the solid businesses, are irresistible and REAL.

5) Pay less attention to capital gains and more to divs/dist. This will set up a "cash flow engine" that will far outpace mere capital gains in the long run. Keep in mind that a portfolio which pays a 10% yearly div/dist, with div/dist and stock/units also rising 10% yearly, generates a cash flow engine that doubles the value of a portfolio about every 4 years! (not counting taxes or inflation - use this example for comparison purposes with other investments.)

These five points will make you rich if you do your DD and they will put a big smile on your face. Your future will be assured.

To get started learning about compound interest with a visceral feel, go here to see a color, graphical, real time (with sliders - no need to enter numbers) compound interest calculator, which will allow you to play with various scenarios like distribution rates, inflation, taxes etc.

personal.fidelity.com/...

Oh, and when everybody else believes in the same thing (ie "diversification," "property values always go up," "the US economy is the best and safest in the whole world," etc., etc.,) don't blindly accept it!

Good luck!

Bank Nationalization - The Max Holmes Proposal

brando - your right wing bias is disgustingly obvious.

The CRA act is not responsible for this meltdown we are in. Most of these loans are doing just fine (see Wikipedia and Business Week Mag:
www.businessweek.com/i...

Its not the "socialists" who don't understand economics, its your neo-con friends and their supporters who have forever fought for deregulation and who have been in charge of the executive dept. for the last 8 yrs (say "no oversight" a few times why don't you?)

Finally, we have an executive that cares more about the health and well being of all the people in this country rather than just the rich and powerfully placed.

Please say goodbye to unregulated, scumbag capitalism for hopefully forever. The rest of us have had enough of your lunatic, money grubbing, criminal excuse for government. I'm afraid its best this way for the vast majority of people in this country. Take off your rose colored glasses. You're blind as a bat.

Distressing Details of the UltraShorts

Last October I bought 3 double inverse, index ETFs (QID, SDS, SKK) with a small portion of my portfolio (the rest was in cash,) splitting my investment equally between them. I was convinced the market was going down big time. I bought without doing much of any due diligence and just assumed that I could hold them for the short to medium term and do really well if my instincts were correct.

I sold them in January, just under 3mo later, when they were way down and I couldn't stand it any longer, even though the plan was to keep them until the market really tanked later in the year.

Afterwords, I thought I would check out how well they had tracked their indexes. The Nasdaq 100 was down less than 1% so I should have been up about 2%. Instead I was down over 18%. The Russell 2000 was down 2.4% so I should have been up about 5%. Instead I was down 33%. And the S&P 500 was up 3.6%, so I should have been down about 7%. Instead I was down 33% again.

My total loss was about 28% of my investment: about $8600.

I have barely a decent size retirement, which I will be ok with, but only if I stop blowing money like this.

I suspect there are many others out there who have, are right now, or who will be, burned by these "investments." I speak from a prejudiced point of view, obviously, but I think it is unconscionable for these instruments to be sold without making it obvious to the buyers what they really are. Based on what I am reading, this is not what the companies that are pushing these products are doing.

But then again, maybe I shouldn't expect that at all. After the scummy revelations we have all seen of what the financial industry really seems to be, perhaps I am just naive and need to grow up.

Well, I just got a nice bee sting and I hope I have learned my lesson. But ya know, investing is risky, and its bad enough as it is without having to worry about getting ripped off by some scumbag's greedy financial engineering wet dream. But on the other hand, there are a lot of folks who have been stung far worse than I have, so I'll quit whining.

Tomorrow is another day.

Manufacturing Collapse Reminiscent of Great Depression's Beginning

curbs-in said:

To this day there is no agreement on the causes or what ended the Great Depression so long ago.
----------------------...

Maybe among those who don't understand the simple things in life.

The causes were when a critical mass of enough human beings became high on the fumes of an over supply of fuel: easy money which could be invested with high leverage and an attitude that investments and business could only get better - a devastating, time-illusory environment which ended only when the economy ran out of "fuel" and people came down from their high and got their normal wits back. World War II helped considerably, of course. (Go through a major war with pure evil and win it, and see how you feel! ) And its hard to say how long things would have taken without the war, but probably longer. Its likely the case that overcoming the orgasmic delight of the illusion required an equal amount of suffering through a recovery process for the illusion to disappear. And WWII created a lot of suffering.

This is exactly what must happen to us today (without a war, hopefully.) The times have changed and the methods of alleviating the pain will vary, but until we deleverage sufficiently to normal values and have endured our proportional suffering, we won't get out of this physical and mental mess.

The government will function to try and smooth out our withdrawal from the addiction, but the money is causing a new addiction: bailoutititis. This may smooth out the landing but will probably extend the time of recovery, just like the addiction to methadone which manifests in the heroin addict, as attempts are made to cushion his crash. However long it lasts, our recession/depression won't end until the great unwinding is finished and we are spent of our insanities.

In the meantime, we will probably see a number of bear rallies (like the one we are in right now) where people think we are past the bottom and will be on our way to recovery in just a number of months. (There were five or six of them over the three year period before the bottom in 1932. The first one went 48% up before turning around.) Does anyone who is objective really think in 6 months or so that housing prices will stabilize? That bankruptcies will cease? That unemployment will turn up? That banks are going to be lending at usual levels? That trillions in derivatives are going to unwind? That there isn't a threat of high inflation with all the money being pumped into the system?

We are just getting started in this. The rest is wishful, illusory thinking.

A Financial History of the World

The gods must be laughing their rear-ends off at the big deal "crisis" we are in.

There is no crisis. Its all just an illusion.

Think of it this way: Imagine a large family with four generations of kids, parents, grand parents and great grand parents. Now lets say one of the sub families gets into trouble and may lose their home or main employment unless they get their hands on some money. Because its a big family that cares about its whole self, one of the other sub families loans enough money to those in need to tide them over until better times come. Problem solved. Nobody loses their home and has to live in the street. Now, the family that loaned the money may have to hold back a bit because they now have less money, but they don't care, because they know there is something more important than money.

Perhaps you understand the principal here. All the people in the family actually CARE about what happens to each other, and so a way is found to solve the problem.

Regardless of the fact that the one big human family that lives here on Earth is composed of parents and kids who are a rainbow of different colors, have different belief systems, different religions, different languages, different class structures, and different judgmental egos, does not change the fact that there is only one human family on this planet.

If we had all evolved spiritually enough by now, so that more of us than just me and very few others apparently, realized this obvious, simple truth, then we wouldn't have a problem at all. We would simply sit down and figure out where all the money is sitting, and move it to where it is needed, and then think together how to change things so that this never happens again. But we can't do that because most people couldn't give a rats asss about their next door neighbor's problems, let alone anyone else's. And most everyone is so utterly self absorbed, that they can't see themselves in anyone else's eyes, except maybe the ones they are in love with, or maybe currently having sexx with.

The supposed "smartest" and most "advanced" species on this planet is totally blind, pathetically stupid, disgustingly heartless, and is being laughed at by every god the universe, because we brought this on ourselves, in endless pursuit of vacuous, spiritually worthless wealth, and junk.

Listen. You can here them laughing.

The Law of Unintended Consequences: 20th Century and Beyond

Thanks for a great, in depth article. There is much here to think over.

I don't agree with all of your conclusions, but most of your logic does make sense and much of what you say seems like it could very well happen. Hopefully, though, as time goes by, course corrections will be made that will lessen some of the dramatic downturns you suggest are inevitable.

Lets hope so.

Thanks again for the great read!

Why dividends matter: Historically, dividends are responsible for about half of the stock market's total return. Yet by 2000, their slice of the pie plunged to just 10%. Meager dividends could significantly delay any full recovery.

Cetin lives for feedback. If he doesn't get any, he'll stop posting. You guys keep him alive by giving him attention.

Outlook for MLPs Ahead of April Earnings

I think word will get out on MLPs, especially pipelines, and those holding these stocks, will do very well in the long run.

Lets not forget that dividend stocks (with dividends used to purchase more shares) are the best long term investments there are in the stock market, as academic studies have shown. Not to mention the pain that going after capital gains alone has recently caused.

Investors will learn to think "long term" I predict, and sooner, rather than later.

The Case for Natural Gas

When you make statements like this:

"This looks like an opportuntity that comes along just a few times in an investor's life."

You sound like a used car salesman.

Of course, natural gas will surely be higher in the future at some point than it is now.

But you could make that same case for a lot of other things, too, being what valuations are right now.

Sorry, but I come away with more hype from your post than inspiring content.

We Are Where We Are

gabe borenstein said:

...as we will learn by the second quarter of 2009, the Americans had implemented some very dynamic measures which will contribute to the first half of 2009 economic net expansion and a dynamic rebound by the second half of 2009 - I am sure of this.
----------------------...

Sorry, but you are dead wrong, and I am sure of this.

There are tens of trillions of dollars in derivatives (to name just one of many problems) that must unwind first. This might delay the recovery a bit.

Unemployment: It's Even Worse than You Think

Here's how this goes: Certain nations get together secretly and realize that the ones that are the worst off will have to default on a certain percentage of their debt. So each nation takes its turn and the others eat a portion of the bill they are owed. This is setup to happen over a long period of time so some sort of "soft landing" can take place for the world's economy as a whole. Nobody likes this, but everyone realizes we are all so interdependent, that there is no choice. This effectively pushes the life of the ponzi scheme out as far as possible before the whole thing collapses. Everybody hopes things will somehow fix themselves before the final collapse comes.

This is where we are headed.