Update on America's Second Great Depression (Part 1)
Mike Stathis
April 25, 2010
http://www.avaresearch.com/article_details-519.html
Washington, Wall Street and their partners in crime, the media, have continued to spread the myths of an economic recovery since late summer 2009.
In response to the propaganda, the stock market has continued to rally. But most individual investors have been left out of this tremendous rally.
Yet, the economic data paints a different picture than the media presents. Make no mistake, we are seeing the early stages of what will written in history books as America’s Second Great Depression, just as I predicted in America’s Financial Apocalypse (2006).
Who are you going to trust? The media and their government hacks who have been wrong over and over, or someone who has been right about virtually everything over the past five years?
Who are you going to trust, people with clear political and financial agendas, or someone with neither?
At best, the U.S. will continue to experience economic malaise for well over a decade. As the nation progresses through this treacherous period, any of the small improvements will be offset by longer-term issues that are virtually impossible to overcome.
(1) Most of the 80 million baby boomers will never be able to fully retire. They did not have adequate retirement savings even before the economic collapse. Now they are in much worse shape. As a result, they will not only pull out of the stock market much faster as a means to survive, but they will be dead consumers.
(2) Most states will continue to struggle with budget gaps for many years. This will lead to even more cuts to vital programs.
(3) The entitlement tsunami will engulf Washington’s budget, causing a sustained period of massive deficits. This will be addressed by further cuts to benefits and premium hikes to Medicare and Medicaid.
(4) The massive national debt will continue to threat the solvency of the U.S. This will lead to a long period of high interest rates even after the approaching interest rate surge, expected to mount within a couple of years.
For a variety of reasons, the climb back up to the previous highs reached in 2006 will take at least another ten years, as stated previously. Furthermore, as more foreclosures hit the market, prices will plunge, erasing any gains made.
Accordingly to government data, the number of unemployed Americans stands at around 16 million, with the U-6 population of unemployed and underemployed at nearly 26 million. My own estimates for U-3 and U-6 are 18 million and 32 million respectively.
The problem with being out of work for an extended period (besides the immediate financial problems it creates), is that the longer one remains out of work, the higher chance that they will have to change careers.
And it’s not likely that a career-change will lead to the same wages as the person earned in their previous career since they are starting fresh. That’s the big problem with the unemployment picture that no one seems to get. What does this mean? It simply adds more fuel to America’s long period of declining living standards.
Even assuming the more optimistic GDP estimate for a 5-year period, the U.S. economy would need to grow by about 5% annually for the remaining 5 years in order to bring unemployment down to around the “fully employed” level of around 5.0%.
GDP growth really doesn’t matter unless you adjust for debt-spending. The U.S. could grow by 5% for five years if Washington borrowed tens of trillions of dollars to pump into the economy. What is needed is real growth, not debt-fueled growth. Without real growth, you have an illusion, just like the growth after the dotcom bubble burst.
Previously, I discussed the fact that there would be no real recovery for most Americans.
The fact is, the results will be the same regardless who is in office because America no longer has a real democratic process. The key decisions are made by a group of individuals you rarely hear about. The president merely serves as the puppet. This has been going on for many years.
This dynamic isn’t going to change without a drastic movement from the masses. But this is unlikely to occur since most Americans have been brainwashed by a media industry controlled by corporations and political interests.
As you can imagine, the decline in sales, income, property and other tax revenues has also hit cities and states very hard. This has resulted in budget deficits for most cities and all but two states.
Has running the currency printing presses in overdrive and accumulating record levels of federal debt been worth the results?
Absolutely not.
Over 40 million Americans are on food stamps, or more than 13% of Americans. This is the highest rate on record, going back 50 years.
Why don't you start with the guys in the media club who have positioned as experts, like Faber, Schiff, Shiller, Prechter and so on. They don't come close.
Once you have convinced yourself of my track record, you need to ask why the media continues to ban me.
Allow me to cut to the chase. The financial media works for Wall Street. Wall Street buys the ads and commercial, so the last thing the media wants is to provide you with credible experts with good track records. Instead, they interview extremists with terrible track record, offering no specific guidance. This is the way it works. If you don't see this by now, you are forever doomed.
Showing posts with label Wall Street. Show all posts
Showing posts with label Wall Street. Show all posts
Friday, April 30, 2010
Saturday, November 15, 2008
A Visual Guide to the Financial Crisis
A Visual Guide to the Financial Crisis
WallStats.com
Nov 13, 2008
http://blog.mint.com/blog/finance-core/
a-visual-guide-to-the-financial-crisis/
Almost overnight, the talking heads went from perpetuating the euphoria of investors to rushing to pronounce the economy dead. Last year, when lenders started dropping like flies as foreclosures rose and margins were called, the problems of Wall Street became more and more apparent, and lending guidelines were tightened to the point that many individuals were stuck in their time-bomb loans, and thus began a vicious cycle. But what led to this? Here is a visual guide to help you understand the events leading up to the bailout.
Click here for the Source Article
WallStats.com
Nov 13, 2008
http://blog.mint.com/blog/finance-core/
a-visual-guide-to-the-financial-crisis/
Almost overnight, the talking heads went from perpetuating the euphoria of investors to rushing to pronounce the economy dead. Last year, when lenders started dropping like flies as foreclosures rose and margins were called, the problems of Wall Street became more and more apparent, and lending guidelines were tightened to the point that many individuals were stuck in their time-bomb loans, and thus began a vicious cycle. But what led to this? Here is a visual guide to help you understand the events leading up to the bailout.
Click here for the Source Article
Monday, November 3, 2008
Stocks likely to recover no matter who's president
Stocks likely to recover no matter who's president
Madlen Read, AP Business Writer
Nov 02, 2008
http://news.yahoo.com/s/ap/20081102/
ap_on_bi_ge/election_stock_market
Wall Street prefers Republicans, McCain supporters argue. But stocks have done better under Democratic presidents, Obama supporters fire back.
When it comes to the stock market — especially this turbulent market — does it really matter who is elected president?
Yes and no. Politicians do influence the economy — and they'll play a big role in how the country emerges from this current crisis. But analysts say neither presidential candidate can be a cure for what's ailing Wall Street.
Moreover, most analysts believe the battered stock market has nowhere to go but up next year, no matter who ends up in the White House — and history will probably give the victor credit even if he actually had little to do with the rally.
Still, the stock market is just one part of the economy, and under either Barack Obama or John McCain, the United States needs to recover from a downturn whose severity has not yet been determined. And either candidate will face a budget deficit of around $500 billion when he's sworn into office — a shortfall expected to climb to $1 trillion next year.
Because of the deficit, the financial climate might end up affecting the new president's policies more than his policies will affect the financial climate.
That's not to say, of course, there aren't differences in the impact McCain or Obama would have on U.S. businesses, and in turn, their stocks. Robert Froehlich, an investment strategist at Deutsche Bank, said it's likely that under Obama, the alternative energy sector would do well, and possibly the paper and steel industries if he enforces trade treaties. And under McCain, Froehlich said, it's likely that big energy companies would do better because he does not support a windfall profits tax, and that financial companies could benefit because of his stance on dividend taxes, long-term capital gains taxes, and estate taxes.
"Don't expect the next president to say, 'I'm strapped with this economic crisis, I'm going to throw all my plans away,'" Froehlich said.
There are historical trends one can draw between presidents and how the stock market performs. The question is how seriously to take them.
The Dow Jones industrial average and the broader Standard & Poor's 500 index have posted larger returns during the terms of Democratic presidents. But this statistic doesn't prove that Democratic policies boost the stock market — the major indexes have also done better under a Republican Congress than a Democratic Congress.
Another pattern to take note of is the stock market's apparent four-year cycle, described by market historian Yale Hirsch in his Presidential Election Cycle Theory. The theory says the stock market does well in a presidential election year, badly in the year after the election and then improves until the next presidential election. This pattern has held up for most of the century, although it's being tested by the two terms of President George W. Bush.
However, the monetary policy of the Federal Reserve, rather than the influence of the president, can explain this pattern better, according to a 2007 study by CFA Institute Education managing director Robert Johnson, University of Wisconsin professor Scott Beyer and Northern Illinois University professor Gerald Jensen. Their study found that the Fed has tended to lower interest rates during the latter half of presidential terms — and lower interest rates encourage borrowing and spending.
And investors shouldn't get too caught up in the market's short-term reaction after the election results. The Dow surged, for example, after President Hoover was elected in 1928 — and the next year the it crashed, ushering in the Great Depression.
Madlen Read, AP Business Writer
Nov 02, 2008
http://news.yahoo.com/s/ap/20081102/
ap_on_bi_ge/election_stock_market
Wall Street prefers Republicans, McCain supporters argue. But stocks have done better under Democratic presidents, Obama supporters fire back.
When it comes to the stock market — especially this turbulent market — does it really matter who is elected president?
Yes and no. Politicians do influence the economy — and they'll play a big role in how the country emerges from this current crisis. But analysts say neither presidential candidate can be a cure for what's ailing Wall Street.
Moreover, most analysts believe the battered stock market has nowhere to go but up next year, no matter who ends up in the White House — and history will probably give the victor credit even if he actually had little to do with the rally.
Still, the stock market is just one part of the economy, and under either Barack Obama or John McCain, the United States needs to recover from a downturn whose severity has not yet been determined. And either candidate will face a budget deficit of around $500 billion when he's sworn into office — a shortfall expected to climb to $1 trillion next year.
Because of the deficit, the financial climate might end up affecting the new president's policies more than his policies will affect the financial climate.
That's not to say, of course, there aren't differences in the impact McCain or Obama would have on U.S. businesses, and in turn, their stocks. Robert Froehlich, an investment strategist at Deutsche Bank, said it's likely that under Obama, the alternative energy sector would do well, and possibly the paper and steel industries if he enforces trade treaties. And under McCain, Froehlich said, it's likely that big energy companies would do better because he does not support a windfall profits tax, and that financial companies could benefit because of his stance on dividend taxes, long-term capital gains taxes, and estate taxes.
"Don't expect the next president to say, 'I'm strapped with this economic crisis, I'm going to throw all my plans away,'" Froehlich said.
There are historical trends one can draw between presidents and how the stock market performs. The question is how seriously to take them.
The Dow Jones industrial average and the broader Standard & Poor's 500 index have posted larger returns during the terms of Democratic presidents. But this statistic doesn't prove that Democratic policies boost the stock market — the major indexes have also done better under a Republican Congress than a Democratic Congress.
Another pattern to take note of is the stock market's apparent four-year cycle, described by market historian Yale Hirsch in his Presidential Election Cycle Theory. The theory says the stock market does well in a presidential election year, badly in the year after the election and then improves until the next presidential election. This pattern has held up for most of the century, although it's being tested by the two terms of President George W. Bush.
However, the monetary policy of the Federal Reserve, rather than the influence of the president, can explain this pattern better, according to a 2007 study by CFA Institute Education managing director Robert Johnson, University of Wisconsin professor Scott Beyer and Northern Illinois University professor Gerald Jensen. Their study found that the Fed has tended to lower interest rates during the latter half of presidential terms — and lower interest rates encourage borrowing and spending.
And investors shouldn't get too caught up in the market's short-term reaction after the election results. The Dow surged, for example, after President Hoover was elected in 1928 — and the next year the it crashed, ushering in the Great Depression.
Sunday, September 28, 2008
Mark Cuban on the Financial Crisis
Mark Cuban on the Financial Crisis
Greta Van Susteren
Sep 25, 2008
http://www.foxnews.com/story/0,2933,427644,00.html
Self-made billionaire and entrepreneur Mark Cuban went "On the Record" about the economic crisis facing the nation.
VAN SUSTEREN: All right, Mark, I want to start at the end and work backwards. What happens after the bail out?
MARK CUBAN, DALLAS MAVERICKS OWNER: Boy, that's a good question.
Let's just say we put $700 billion into the economy, we increase liquidity, and it all goes according to plan--except there's one problem. The people who will do the lending after the money is injected were the ones that were doing the lending before. These were guys who don't know how to bank the right way.
Related
So my guess is that they are going to be afraid to lend money. You're not going to see the effect of anybody being able to walk in, even with good credit, to borrow money for a house, to borrow money for a car.
VAN SUSTEREN: Does this financial crisis, for lack of a better word, that we're in--I know how it affects people who are lower income and middle income, but how about the rich guys? Does this have really any impact on you?
CUBAN: Oh, of course it has an impact, but we can rebound a lot more quickly. I had money in Lehman, and it's just gone.
VAN SUSTEREN: One of the things that sort of bothers people is it seems like the people that have a lot of responsibility in this are getting the bailout. Is there any other alternative that see instead of a bailout?
CUBAN: No. You're going to have to bailout, you're going to have to inject liquidity, you're going to have to take the bad loans and all the bad instruments off people's balance sheets.
All the social networking we talk about--we need to make sure that every transaction that takes place, wherever there is money injected, wherever there is a purchase made, all that is made available for all the citizens of the country to see.
Because it's not going to be an oversight board that catches problems. It's going to be the citizens of this country that go online and on a second by second basis that catch problems.
Because, I have to tell you, Wall Street is too smart. They can stay ahead of any board that any political entity appoints, but you are not going to be able to stay ahead of pure transparency, because the people of this country will get involved, pay attention, will realize $700 billion is at stake. And they'll also want to see if they're making money, because I think the second part of the fear is, yes, we may make money, but just like we don't know exactly where our tax money goes today, this money will go right in to the Treasury and somebody will earmark it, and it will be gone.
Greta Van Susteren
Sep 25, 2008
http://www.foxnews.com/story/0,2933,427644,00.html
Self-made billionaire and entrepreneur Mark Cuban went "On the Record" about the economic crisis facing the nation.
VAN SUSTEREN: All right, Mark, I want to start at the end and work backwards. What happens after the bail out?
MARK CUBAN, DALLAS MAVERICKS OWNER: Boy, that's a good question.
Let's just say we put $700 billion into the economy, we increase liquidity, and it all goes according to plan--except there's one problem. The people who will do the lending after the money is injected were the ones that were doing the lending before. These were guys who don't know how to bank the right way.
Related
So my guess is that they are going to be afraid to lend money. You're not going to see the effect of anybody being able to walk in, even with good credit, to borrow money for a house, to borrow money for a car.
VAN SUSTEREN: Does this financial crisis, for lack of a better word, that we're in--I know how it affects people who are lower income and middle income, but how about the rich guys? Does this have really any impact on you?
CUBAN: Oh, of course it has an impact, but we can rebound a lot more quickly. I had money in Lehman, and it's just gone.
VAN SUSTEREN: One of the things that sort of bothers people is it seems like the people that have a lot of responsibility in this are getting the bailout. Is there any other alternative that see instead of a bailout?
CUBAN: No. You're going to have to bailout, you're going to have to inject liquidity, you're going to have to take the bad loans and all the bad instruments off people's balance sheets.
All the social networking we talk about--we need to make sure that every transaction that takes place, wherever there is money injected, wherever there is a purchase made, all that is made available for all the citizens of the country to see.
Because it's not going to be an oversight board that catches problems. It's going to be the citizens of this country that go online and on a second by second basis that catch problems.
Because, I have to tell you, Wall Street is too smart. They can stay ahead of any board that any political entity appoints, but you are not going to be able to stay ahead of pure transparency, because the people of this country will get involved, pay attention, will realize $700 billion is at stake. And they'll also want to see if they're making money, because I think the second part of the fear is, yes, we may make money, but just like we don't know exactly where our tax money goes today, this money will go right in to the Treasury and somebody will earmark it, and it will be gone.
Saturday, September 20, 2008
Wall Street's Unraveling
Wall Street's Unraveling
Robert J. Samuelson
Sep 17, 2008
http://www.washingtonpost.com/wp-dyn/content/article/
2008/09/16/AR2008091602877.html
Wall Street as we know it is kaput. It is not just that Merrill Lynch agreed to be purchased by Bank of America or that the legendary investment bank Lehman Brothers filed for bankruptcy or that the insurance giant AIG is floundering. It is not even that these events followed the failure of the investment bank Bear Stearns or the government's takeover of Fannie Mae and Freddie Mac, the largest mortgage lenders. What's really happened is that Wall Street's business model has collapsed.
Greed and fear, which routinely govern financial markets, have seeded this global crisis. Just when it will end isn't clear. What is clear is that its origins lie in the ways that Wall Street -- the giant investment houses, brokerage firms, hedge funds and "private equity" firms -- has changed since 1980. Its present business model has three basic components.
First, financial firms have moved beyond their traditional roles as advisers and intermediaries. Now, most financial firms also invest for themselves. They use partners' or shareholders' money to place bets on stocks, bonds and other securities -- so-called "principal transactions."
Second, Wall Street's compensation is heavily skewed toward annual bonuses, reflecting the profits traders and managers earned in the year.
Finally, investment banks rely heavily on borrowed money, called "leverage" in financial lingo. Lehman was typical. In late 2007, it held almost $700 billion in stocks, bonds and other securities. Meanwhile, its shareholders' investment (equity) was about $23 billion. All the rest was supported by borrowings. The "leverage ratio" was 30 to 1.
Once assembled, these components created a manic machine for gambling.
Robert J. Samuelson
Sep 17, 2008
http://www.washingtonpost.com/wp-dyn/content/article/
2008/09/16/AR2008091602877.html
Wall Street as we know it is kaput. It is not just that Merrill Lynch agreed to be purchased by Bank of America or that the legendary investment bank Lehman Brothers filed for bankruptcy or that the insurance giant AIG is floundering. It is not even that these events followed the failure of the investment bank Bear Stearns or the government's takeover of Fannie Mae and Freddie Mac, the largest mortgage lenders. What's really happened is that Wall Street's business model has collapsed.
Greed and fear, which routinely govern financial markets, have seeded this global crisis. Just when it will end isn't clear. What is clear is that its origins lie in the ways that Wall Street -- the giant investment houses, brokerage firms, hedge funds and "private equity" firms -- has changed since 1980. Its present business model has three basic components.
First, financial firms have moved beyond their traditional roles as advisers and intermediaries. Now, most financial firms also invest for themselves. They use partners' or shareholders' money to place bets on stocks, bonds and other securities -- so-called "principal transactions."
Second, Wall Street's compensation is heavily skewed toward annual bonuses, reflecting the profits traders and managers earned in the year.
Finally, investment banks rely heavily on borrowed money, called "leverage" in financial lingo. Lehman was typical. In late 2007, it held almost $700 billion in stocks, bonds and other securities. Meanwhile, its shareholders' investment (equity) was about $23 billion. All the rest was supported by borrowings. The "leverage ratio" was 30 to 1.
Once assembled, these components created a manic machine for gambling.
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