johngonole

How Much Sidelined Money Remains?

I'm not sure I buy the cash on the sidelines bit either. It may be there but those who have cash probably want at least $25,000 just for a cushion. Beyond that if they haven't invested yet they are probably likely to wait for a 20% pullback or so. I have missed out on most of the run as I sold off way to early on the rise. I just don't see how we can justify current prices when on looks at company outlooks. The consumer isn't coming back while unemployment is rising. I think unemployment is actually a leading indicator this time. Markets have just ingnored it. I also have a theory that the Federal Reserve is behind much of the stock market rise. Much of the new liquidity (printed cash) has come in the form of the Fed buying worthless securities that they can't get rid of anytime soon. With a larger money base they know eventually that inflation will come. At that time they will try to raise interest rates by selling their assets to take cash back out of the system. They may not be able to do this with the phoney securities they bought. Now that they have stabelized markets they are keeping interest rates low. I think they are doing this by buying stocks. The stock markets is one of the only truly liquid markets left. Therefore, from the Fed's point of view, they will be able to raise interest rates most easily by SELLING the stock they are currrently buying. I'm sure, as always, that those in the know knew this and have profited handsomely from the stock market rise. This is my conspiracy theory but it could actually be true. Too bad, the audit the fed bill hasn't passed then we could know for sure.

The Recession Is Far from Over

I second that. Peter Shiff for Senator!

Flow of Funds Report: Credit Market Shrinks for Every Sector Except Government

Great article. Basically the consumer has reached the point where those who can't help them selves can no longer borrow. The rest of us who are responsible either don't want to borrow OR are waiting for a more clear picture.

Government spending is our leaders ways of saying, "We know better than you, therefore we are going to FORCE you to borrow". The author is correct when he says they can't do it forever. The bigger problem is that while our economy is trying to resize for REAL sustainable demand our government is messing the process up by forcefully spending. In the end we will arrive at the same place before the economy in REAL terms will begin to grow. All this is doing is weaking our country.

Bullish Stance Is Wearing Thin

I have to agree. In Florida the construction industry is still worsening. This is only one sector but it will be hard for employment to pick up when important sectors are still slowing down.

I can only conclude that we must allow prices to fall. Expanding government debt only delays the process. We can't compete at current wages with other countries. Asset prices must likewise fall to stimulate demand. Stagflation will be the result of current policies. Deflation can be terrible. However if the deflation is caused by lower consumer debt (more savings), higher empolyment at lower wages, and balanced government budgets we should see more actual consumption due to lower prices, and thus higher employment and increased business spending. Companies are not going to spend money building their businesses without REAL demand. Demand from borrowed money is temporary and peoples memories are too fresh for those lessons to be forgotten so soon. Lower prices are necessary. We are doing exactly the opposite of what we should be doing. Prices would be must lower if not for the government interference.

Banks could suffer from the falling prices I realize this but perhaps they should. Let people who have saved their money actually benefit for a change from the saved money. This will encourage REAL demand.

How to Prepare for the Inevitable Correction

Nuts to the guy who thinks the increase is a correction. The first 2/3 of the upswing maybe. But we are closing in on DOW 10000. I remember when the DOW first crossed that number and the economy and its future outlook was much better than now.

Why Do Equity Markets Disagree with the Data?

About a month ago I read the trim tabs was betting on a market drop. Long term their liquidity theory has been pretty right on over the medium term.

Could it be the plunge protection team in action taking advantage of low liquidity. The Fed can buy whatever they want these days....why not some stock? Heck the Fed could buy the whole S&P 500 with paper money and it would be legal. The market cap of MSFT and GE are around 350B combined. Seems like chump change these days.

Recession Is Over: Long Live Depression

Go Ron Paul and Peter Schiff

The Coming Economic Collapse, Part 2

How can businesses plan long term with interest rates being manipulated up and down all the time.

Business that guess better than other on interest rates gain a competitive advantage over their competitors.

Banks have to hedge against constantly moving interest rates by either offering ARMs, derivatives, or loaning to riskier people.

Free markets can't function well when interest rates manipulation and mass speculation dominate certain industries.

Government intervention, thousands upon thousands of law changes, etc...

Free markets are the solution for certain but our government and the Fed for self serving purposes never let them operate properly. As for the crooks you don't burn down the crop field to get rid of the bugs.

Debt is the new form of slaverly. Our governments on all levels are forcing all of us deeper and deeper into debt. At what point to people start fleeing from their slavery into other countries. At what point does America build a wall to keep us in? Inflation or slavery seem to be the only good options left. The odds of building up our economy fast enough to pay for all this debt seems remote with downward wage pressures from china. So we arrive at the massive confiscation of wealth via inflation, estate taxes, etc... OR slavery of the middle class and upper class via massively high tax rates.

Until the government chooses to let the business cycle FREELY operate we will continue to push it off by higher and higher debt levels. The pain will be terribly bad but putting it off onto our children will be even worse. Its time we pay the piper. No more deficits please. No more large banks.

Nominal GDP Growth: Negative After 50 Years

etbtn........good one

The Battle of the Forces: Reflation vs. Deflation

I'm just going to throw out an idea here. I haven't looked vetted this idea yet. Perhaps the solution would be to divert what capital we have left into improving our productive efficiency versus allowing the government to increase spending.

Lets face facts. Personal spending and business spending is slowing due to what is disposable versus the debt burden. The current solution is for govt. spending to increase to attempt to offset the resizing/right-sizing of the economy. The competitive pressure on wages from low wage overseas will continue.

Debt is too high and wages aren't going to explode anytime soon. In order to support wages and lower debt we need employment to improve and wages to at a minimum hold up. Govt deficit spending is risky because the spending must be invested in a way that will improve productivity and efficiency. The question can govt really do that very well.

Ron Paul was correct when he stated we must pull back our defense spending due to all the overseas operations. I would go one step further. We need to pull back on not only in spending on defense but many many other programs that produce nothing of value to the common man. We have universities full of professors who spend money in order to publish papers on research that in most cases in completely useless. Case in point is a study of the use of drugs in the rave scene in BRAZIL. If government spending doesn't produce something it needs to be seriously considered for a cut.

I propose huge government spending cuts. Hopefully so much that we could also get huge tax cuts while still balancing the budget. Or at least lower the deficit to realistic terms. The left over tax money would then be in the hands of people who know what to do with it. They can pay down their personal debts more quickly or invest it into improving productivity of their businesses. Both will help make us more competive.

I realize that at first glance the idea of the govt reducing spending is scary from a deflationary spiral standpoint. But the government is just as capable as the banks at pissing our money away into a black hole. That is really the problem. Capital has been misallocated for far to long in this country.

I would support realistic government research on real energy production. Ethanol is obviously not it. I think Geothermal, Nuclear are probably our best bet.

Whatever decisions are made. The only one that will work is the idea that improves our productivity. Afterall productivity is where real wealth comes from. There could be zero currency in exisitance and if we were all productive we would be wealthy.

Obama Summarizes Economic Policies, Misses Several Key Points

Carey-Jim,

You make some excellent points. Schiffs arguments are basically concerning the impact of Federal Reserve and Government Spending policies and how they effect the overall economy. Your points about us being a mixed economy are well taken because they are true. I would suggest that productivity increases over the last years have been the slowest gains ever yet we've just gone through something akin to the industrial revolution when we talk about the technological revolution and the internet. With all these tremendous advances productivity in the US hardly budges.

I believe this is because more and more people work for governments (Federal, State, County, City) then ever before and work in a very very relaxed environment (hardly working or producing anything). Increases in employment at the oligopolies and monopolies also has not helped for the same reason. Fascism has created whole industries and companies that are immune from competition.

In essence while we've made huge productivity via technology they are being waisted or lost because of socilism and fascism in our country. Comfortable yes but look at the products that are actually having their prices lowered. Most of them are being imported from places where producitivity is increasing.

The real doom and gloom is that if we continue on the present course our dollar will collaspe and we will waken to the reality that the world will no longer serve our wants and needs and that most of us are working at pretend jobs that do nothing but push paper. Production is moving off shore. Obama wants to tax American profits when earned overseas. The effect won't be a reimportation of jobs to America. Rather foreign companies will simply capture profits than our companies. Our companies will be forced to abandon overseas operations. Reimporting them won't work because our work force simply can't compete.

On the positive if we could just convince enough Americans to demand a governemnt that in every law it passes seeked to protect the free market we would see government spending drop, monopolies and oligopolies shrink while small buisinesses could begin to produce and innovate again. Our current path will be akin to a snake feeding upon inself until there is nothing left to cannibalize.

In a side note the road is up hill. For example when Huckabee suggested on John Stewart's show that we could have smaller government if people would simply take responsibility and do the right thing he disagreed by stating that he thought we were doing pretty good because people can change lanes on the highway and obey traffic signals. The left will deny all logic and true progress so they can live in the world where they have all forms of control.
Why deny simple truth, such as if less people commit crimes less productivity will be waisted on jails, guards, courthouses, lawyers, etc...? John Stewarts response and the typical leftest is that if no one commits crimes then guards would be out of work.

So the truth is that are enemy is ignorance and those who feed upon it for their own gain. I'm not sure we can defeat it. Perhaps Texas will leave the Union. I'd move there just for a chance to hit the reset button.

Regardless somehow we must find our way back to a responsible, self reliant, self governing citizenry. Put back in place a libertarian dominated republic similar to our countries foundation. This will be the only way we get back to a productive society where one person can work and provide for his family while another parent can raise their children to be intelligent, thoughtful, and self confident.

Corrugated Box Shipments (A Leading Economic Indicator) Up in April

I main thing I agree with is that markets are unpredictable. When everyone is thinking the same thing will happen it probably will. I just don't know if I agree that people are leaning so heavy against a rally. I think generally people feel that the economy is bad and most think it might get worse. Still stocks are cheap. How the whole heard makes sense from that I don't know. If we hit 8600 I'll sell some stocks. Otherwise I'll hold and wait to buy more around sub 7500.

I've been investing in stock since 1998. All my money has been made buying low and selling high. GD has really been my only long term successfull hold. It seems the longer I hold the more likely I am to lose money. I know this is contrary to popular thought but I think when people are talking about single stocks the long term risk is higher than the short term risk. Its easier to predict 6 months out then 5 years out. On the otherhand when talking about indexes I still think long term risk is lower than short term risk.

Thus I recommend buying stocks during this period that look dirt cheap. Take your profit and find another one. Forget trying to trade the whole market. Its just too crazy.

Cramer's Call: Another Rally Top Indicator?

Jim Cramer aside. I think the market rally has some momentum. It might stall and fall again but I give it a 60% chance that we run up to 9000 like we did in December. It may even go to 9500 just based on momentum. IF IF IF it does go to 9000 I'd take some profits because the summer session and into the fall is alway bloody it seems. If the market only goes up or down a little from today over the next few days or weeks I have no idea what advice to give. I'm only saying that a quick run up to 9000-9500 area profits should be taken based on unemployment and seasonality of the stock market. Ignore my sell advice if the press starts giving credit to Obama and gushing everynight about superman. Kind of like how they said he did a weeks worth of diplomacy in one day last week when all he really did was take a bunch of pictures and sit in a 3 hour meeting. We have to be realistic. Take advantage of the moments when things appear to be unreal.

Cramer's Call: Another Rally Top Indicator?

I remember cramer talking about a land shortage over and over again when real estate was hot. He jumped on that band wagon just as it was ending. Of course he changes his mind so often he calls everything both ways anyway. I do like listening to him though cause I learn things about companies I'm not familar. Also even with firms I do something about he will have insights I just didn't know. Don't ever follow his advice though because they amount to gut calls about where he thinks the stock will go over like the next 5 days. The lighting round is not long term picks.

Let's Just Say It: Print More Money

I didn't have time to read all the comments so I hope I'm not repeating anyone here. First I'm pretty much in agreement with the Austrian school of economics when in comes to monetary policy. That said I think we are now teetering on a deflationary spiral. I have noticed that since Christmas the roads and malls seem to have lots more room to move around in. Once the hoarding of dollars begins we have an ever decreasing velocity of money that will create more and more deflation. Rising unemployment will continue to fuel the fire. The problem is that we are going from artificial demand to unreasonable hoarding.

At the same time the authors idea of flooding the market with dollars is just downright scary. This contraction is happening essentially because we over built in all kinds of ways to meet a temporary demand fueled by expanding debt. Yes we can expand government debt but isn't that really just more fuel on the fire. What happens when the taxpayers can no longer support the burden of the debt. This can't go on forever so this line of reasoning is false.

Now Austrians hear me out. I propose that instead of a Keynesian solution where government exchanges treasuries for dollars we just allow the Fed to exchange dollars for oil. The Fed could park the physical oil in those new caves they are creating for the Strategic Petroleum reserve. Thus the newly printed dollars are backed by oil. The strategic reserve is filled. The Austrians are correct that the new dollars placed into circulations WILL spark massive inflation once the velocity of money reverts back to the norm or mean. When this happens the Fed only needs to dump that stored oil back on to the market to destroy the dollars it just put into circulation. Thus the net result could be neutral increase in the supply of dollars but a short term solution to get us through the hoarding period. Also keep in mind that the new dollars while in circulation will help banks with their capital reserve crisis.

The problem with the Keynesians is that they use the newly printed dollars to create their empire of Fascism. Plus the tax payers are ever paying interest on the governments forever debt. Thus the Keynesians enslave us and the politicians and bankers become our rulers. The Keynesians NEVER remove the dollars from circulation and NEVER reduce government debt loads.

The problem with the Austrians is that their solution is to prevent these problems in the first place. That is if the Fed would stop manipulating the money supply and the banks would stop overleveraging then the economic cycles would shorten and be less volatile. In other words the ups and downs would be frequent and manageable through the natural mechanisms of capitalism. Free market capitalism like nature would direct economic activity for the benefit off all mankind.

I only propose the above solution as one to be implemented only when a deflationary spiral in imminent. Once the death spiral is terminated they must start listening to the Austrians. If they don’t then commodity markets as well as currencies could become even more volatile upsetting prices to the standpoint that capitol can no longer efficiently be deployed. I realize that the Fed is doing this somewhat when they buy securities off all kinds. Problem is that these securities could be worthless. Oil/Gold has value. The Fed should probably buy a basket of commodities (Not futures....real physical assets). We could even start a Moses project where we create stores of food in case of a national agricultural catastrophe.

Ultimately less face it the Fed is going to print money. Lets just hope they back it with something of value. NOT GOVT TREASURIES