You're Kidding

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.

Cramer's Mad Money - Hitting Bottom (4/16/09)

There isn't one thing Cramer said here, that is useful, because you would need inside information to be ahead of everyone else. Research has shown that doing exactly the opposite to what he says, works best.

Cramer is snake oil salesman, a pitchman, who only looks meaningful to naive suckers and entertainment freaks. The scumbag should be tarred and feathered and run out of town on a rail.

He is a sickening con man. I could go on, but you get the point.

Stop listening to him!!!!!!!!!!!!!!!!

Backwards Looking Leads to Bottom Blindness

The best thing any investor can do for the long term right now, is investigate the idea of "dividends," AND the idea of "compound interest," AND how reinvested dividends and compounding work together, AND what MLPs are, AND how the tortoise beat the hair to the finish line in their big race.

Real time, color, graphical, compound calculator, with slider inputs for immediate, scenario exploration:

personal.fidelity.com/...

This post is the most important investment advice you have ever read, or will ever read, and if you pay attention to the lesson, you will get down on your hands and knees, with tears in your eyes, and thank your lucky stars for being fortunate enough to have had the spark of intuition and desire to have investigated it.

When America Ruled the World (Part 2)

There is something underneath all the above talk about what we and others have "done" or "not done" to cause this meltdown, that hardly any of us are aware of. It goes to the heart of the problem, and in the end, frees all of us from any guilt or blame.

The forces that control our actions (or inactions,) are our DESIRES. The strongest desires we have, always win out over the weaker ones.

These desires manifest in us through our thoughts and our feelings, which themselves arise in our consciousness completely unpredictably and uncontrollably.

We never know what our next thought is going to be before it appears in our mind, nor do we know what our next feeling is going to be before it rises up and we feel it. We do not create thoughts or feelings ourselves, and have no idea how strongly they will affect us or the direction in which they will motivate us, until we suddenly feel ourselves moving with the desire to do something, in whatever particular direction we find ourselves moving in.

I know this because I have observed it directly for the past 2 1/2 yrs as it works within me. Anyone can see this within themselves, but only if they feel a strong enough desire to do so.

Once you see it, everything changes.

There is a saying from the East you may have heard of that goes something like this:

There is nowhere to go, and there is nothing to do.

This is literally true. The essence of us is simply awareness, or consciousness. We do not possess decision making power, make choices, or have "free will." These are illusions propagated by consciousness thinking that it is a "doer." We see ourselves as "doers." This is a mistake and is simply a reflection of the current state of the evolution of your consciousness as it wakes up and becomes aware of its own existence.

This journey has taken me to this point:

We are that part of existence which functions as a vehicle through which existence becomes aware of itself.

This meltdown is just a drama along the way, and is as overwhelming as the degree to which we are asleep and unaware of what we really are.

I seem to be awake right now, but I'll fall back asleep soon, I always do.

Awareness of the truth comes and goes.

Everything Is Backwards, But We Can Endure

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 !!!!!!

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...

Remember, Investors: This Too Shall Pass

Excellent article. Nice perspective.

Any links to other articles on ways to look at easing in to end up in the middle?

Also, you will do better in the long run by putting whatever capital you have in SNY, in PFE instead. SNY pays no dividends while PFE pays 8.6%. Reinvesting the divs will make PFE take off like a rocket compared to SNY. For example, an investment in PFE will be worth twice SNY in a little over 8 yrs on compounding divs alone. And if PFEs divs keep increasing as they have been in the last few years, then they will more than double in those 8 yrs, which will automatically more than double the stock price. All other things being equal, the total returns in a pure PFE vs a pure SNY investment will be about 4x in a little over 8 yrs.

Go to: personal.fidelity.com/...

to see the greatest real time, graphical, compound interest calculator you have ever seen. Your tongue will be on the floor in 10 or 15 min after playing with it!

I give you my personal guarantee.

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!

Is It Time to Buy? What History Shows

It never ceases to amaze me when I see the words of people who basically think that they can "read" charts and "see" technicals in the lines and points and curves, that enables them to decipher the "code" of PAST EVENTS, and then conclude that they can see "trends" that FUTURE EVENTS will follow, to a greater degree of certainty than what flipping a coin would tell them.

Pardon me for being a skeptic, but I took a lot of math in school and have lived through a number of decades in my life where I learned that the future either, 1) has little or nothing to do with the past, or, 2) it has a lot to do with it. Unfortunately, you never know before the future arrives in the present, and then slips into the past, whether your predictive model was correct or not. If you are dealing with "will the market go up for awhile" or "will it go down for awhile," then your predictive model has about a 50-50 chance of succeeding. This is the same chance you get from flipping coins. And don't forget, flipping coins can produce some stretches of 3,4,5,or 6 or even more, heads or tails in a row. This is, of course, a "trend" which tells us exactly what? The future? I'm afraid not.

Mathematicians either laugh or express sadness when they hear about the gullibility of people who think like this. But in the long run its probably no worse than any other method of trying to make money in the market. In the end, the direction we head, is based on an emotional reaction to what we think will happen in the future, and for those of us human beings who don't have crystal balls, this is what we are stuck with.

But please, try and understand this: there is nothing whatsoever scientific or mathematical about "charting." If you think there is, then you don't understand what science is all about. You can prove this to yourself by trying to read charts from the past, where you can see what the "future" holds immediately by turning to the next page of the book, or the web site. You will quickly learn that it is impossible to predict the future in any way, manner, or form, better than mere chance.

My suggestion, for what its worth, is to concentrate on the macro view. For example, unemployment figures, bankruptcies, consumer sentiment, wholesale purchasing, ocean shipping in dry dock, asset values, bank failures, downsizings, etc., taken as a whole, world wide, and trending the same way together, in a way not seen since the Great Depression, says that we just might be in deep, deep, trouble. Unless of course, you think these things can all turn around faster than they started dropping. The likely hood of that? My experience tells me less than a 50% chance. But I guess that judgment is about the past, too, isn't it?

See what I mean?

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.

Four Commonsense Clues to a Genuine Market Bottom

I once heard Mick Jagger of the Rolling Stones make a very profound comment.

An interviewer back in the '60's once asked Mick if he thought the Stones had "progressed," (as in progressed forward as a band.) Without missing a beat, he answered, "I don't think a "progression" really exists, because at any given time, you never know whether you are going forwards, backwards, or sideways."

Think about it. Isn't that true?

Today, we could ask ourselves if the market is going up, down, or sideways. The truth is no one knows where the market will be tomorrow, or the next day, or next week, or next month, etc. If we really thought we knew, we would bet everything we had on it. But, we don't make that bet because we aren't sure.

So, has the market bottomed yet? We don't know. How can we tell? Well, the only way to really know is to look back in time and see. We can see a bottom in 1932 for the 1929 crash, and we can see bottoms in the '87 and dot com busts clear enough because we are far enough in time away from them. Those are obvious. But for this meltdown, we won't be able to see the bottom, and know it is truly the real bottom, until long after it is past. And for this mess, it will take a very long time after its past to really know.

Don't forget, there were many "bottoms" between '29 and '32 that actually looked like the "real bottom," where the market went up 20 to 50% each time, but it wasn't until the market was down 89% from the peak, did we hit the "real bottom." We have yet to recover even once since the top last year, anywhere near 50%, yet people are wondering if we have bottomed yet. Its probably much too early, folks.

I think its good to look at the macro view and see how everything is looking economically all over the world. The way I see it right now, it looks HORRIBLE everywhere. It also looks like things are just getting started in their melting process. Don't forget, some of the underlying causes of our problems now, have been decades in the making.

I am all in cash except for 7% in double inverse index ETFs. My entire perception says we are going down big time from here over the next 3 to 6 mo short term, to about 2 yr long term. A lot of leverage has to unwind, and it may take awhile as governments try to create a smooth drop into a soft bottom.

So, because we can't find the bottom until long after its taken place, mathematically speaking, the optimum way to get back into the market is to begin to buy in spurts before the bottom gets here. Probably about the time you don't think things could go any lower would be a good time to edge in maybe 10%. Then wait for that feeling again and go in another 10%, all the while keeping on top of the world wide macro conditions. Of course, there is no set way to do this, because its your EMOTIONS that will dictate how you proceed, and we all know what wonderful leading indicators they are.

And that's the real problem, because logic, technical indicators, etc., etc., don't work in predicating the future. It may look like they worked yesterday, but that was a coincidence. Nobody can drive a car by looking in the rear view mirror. So all we have are our emotions. But that's as good as it gets, so best of luck and try to have some fun in the process.

Sentiment Overview: Bullishness Is on the Rise, Insiders Are Buying

There may be a wind at our backs, but there is a hurricane at our front.

Stop Calling This a Depression

Without question, the part of this article fixing blame for the mortgage crises is as misleadingly selective as any I have yet read.

You mention the government forcing lenders to loan money to people who couldn't really afford to buy homes, yet you provide no statistical evidence to back this up.

The particular act you refer to was called the "Community Reinvestment Act." And the truth is, only 17% of lenders fell under its obligations. Also of note, is the fact that of the top 25 lenders, only one fell under it. Obviously, this act could hardly be the culprit you would like to make it out to be.

You also mention that the other guilty party was the "consumer," who took out "irresponsible" loans.

Excuse me, but if I go to a lender and ask for a loan, and then get the money, you can bet that I qualified for that loan, or, nobody bothered checking my application.

Wait a minute. Since when don't lenders check applications? Aren't they responsible for them? Well, starting a few years ago, some mortgages were wrapped up as "investment securities" and passed up the food chain to someone else, each party along the way taking their "commission" and then passing it on. So essentially, nobody really cared about the loan being good or not, because there was lots of money to be made.

In order to make as many loans as possible, the lenders offered homes with incentives like "no money down," and sometimes even with non-recourse loans, which meant that the borrower wouldn't have anyone coming after them if for some reason they couldn't make the payments. Add to that the fact that there was high demand all over the world for these mortgage backed securities because US mortgages were perceived as being safe, thanks in large part to Moody's and other rating agencies giving them bogus AAA ratings.

So money was literally being thrown at anyone walking through the lender's front door. (One of the ex loan officers from WAMU recently reported in the news of intense pressure by upper management to "close more loans," during this period.)

When the upward trend of housing prices collapsed as all upward trends eventually do, housing values fell. Coupled with that, were increases in loan rates when variable mortgages spiked upward. Expected monthly payments then rose. The economy also soured. So today we have a 6% default rate and rising, although 94% of homeowners are still making payments. Nevertheless, some people cannot afford to make payments, while others are walking away who could pay, but their houses have dropped in value under what they owe on the loan. Anyone who thinks that people are going to continue making payments under these circumstances is naive to say the least. Why would these people be expected to act any differently than the unscrupulous lenders?

Fair is fair, and singling out Democrats and consumers, heavily biases your argument, and presents an unrealistic view of the real picture.

The Shallowest Generation

I have been thinking about the meltdown and the problems our economy faces, and I think I have come up with the perfect solution.

First, we freeze all prices and wages, except for people making less than 30K. For them we double their wages or more. For people making more than 500K, we cut their wages in half. No one is allowed to make more than 2 Million/yr, regardless of what they do. This solves the wage problem and ends inflation.

Secondly, we take over the Fed, and then lower interest rates to a negative 3.67%. In other words, people are paid 3.67%/yr to borrow money. They qualify for the loan by finding a lender who is willing to lend them the money because they have a good idea for its use. The lenders are required to monitor the loan, and if it loses money, they eat the loss. The banks are required to loan out so much money per month, based on how the economy is doing. The days of tight money will be over.

People in default on home loans get to stay in their homes with reduced interest and/or price - whatever it takes. This solves the housing problem.

Everything, and I mean everything, is totally transparent, and by law, is put on the Web. New jobs will sprout up as entrepreneurs find ways to make fees by connecting have-nots with haves. This ends the transparency problem.

Anyone found cheating the system in any way, automatically goes to prison for 5yr. Get caught twice, and you are sent to China. This will get the beached, Dry Bulk fleets back in action, and create new prison building jobs.

All those found to have contributed to the current meltdown due to greed, will have all monies gotten from that endeavor, taken away. Their names, addresses, and faces will be published in all print media now going under. This will save the print media.

I could go on and on here, but you get my point. All problems can be solved in a similar fashion. Once this new system is in place, everyone will eventually realize how absurd we all use to think about money, jobs, economics, etc. People will realize that no one is any better, or deserves anymore than anyone else, simply because they had the desire for something big, and the luck to be at right place, at right time, and got to take advantage of the cards they were dealt. Not everyone wants to, or can be, a lawyer, doctor, financial adviser, banker, politician, scientist/engineer, hacker, etc. Some people just want to have an adequate, peaceful life, without the hassle of working their assses off into oblivion, doing something they don't like. Why should anyone make a ton of money for what they do, while someone else, who may work much harder, makes just enough to get by? It isn't fair folks.

Case closed; problems solved.

Our Coming Depression

You have presented a quite distressing scenario. I can feel myself shaking inside.

Unfortunately, although no economic expert, I did follow your logic and it all kept clicking together, step by step, like the sound of a well made watch, with all its precise parts meshing perfectly together. I say "unfortunately" because I kept getting more and more depressed with each paragraph. I have no argument with you on your facts or their relationships. You may be absolutely correct. What is to come in the next few years may unfold exactly as you say, to all our horror.

Right now I feel like selling the remaining 10% of my portfolio that's in the market as quickly as possible, just to get the hell out. I'm really scared...

On the other hand, if you are right, then what's coming will be the time of our lives. Our emotions will run the gamut, we will have to meet difficult challenges and find our true metal, which only comes on those rare occasions in life which boil the blood and lead to high mountain tops of a very special kind of fulfillment. Perhaps its time for this generation to come together in something other than fear and greed, and discover a deeper, more meaningful connection that we all share.

Could be a good thing.