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The Reagan Counterrevolution...by my man Peter schiff

im will to give Obama the benefit of the doubt, for a few months until i can truly see what he is thinking in terms of policies going forward.
There will be a very steep learning curve ahead, but Obama is a quick read.
His advisors he appoints, will determine my actions.
I would still urge everyone to stay in cash. I could see the dow hitting 5000, and wiping out the remaining 40-50% of whats left of most portfolios.
JMHO

and now Peter schiff


In 1980, when the U.S. economy was last in serious trouble, Ronald Reagan offered the correct diagnoses that government was the problem and not the solution. His message resonated with voters, propelling him into the White House to implement an agenda of lowering marginal tax rates, reducing government spending and business regulations, restoring sound money, abolishing entire government departments, and basically allowing free market vibrancy to unshackle an economy burdened by big government. Though in practice much of the Reagan revolution never materialized, at least in theory his basic premise was sound.

In contrast, the country has now hitched its wagon to the views of Barack Obama. We don’t know much about what he truly believes about economics, but the little that we do know is not encouraging. Obama has repeatedly heaped the blame for the current crisis on the excesses of unregulated capitalism and the greed of the wealthy. For him, the free market is the problem and government is the solution.

The President-elect has promised to cage the destructive forces of capitalism, impose more regulation, raise marginal tax rates, increase government spending, and restore prosperity by redistributing wealth from those who earned it to those considered to be more deserving. Like most of his generation, Obama believes that economic growth results from consumer spending, primarily from the middle class. Any policy that keeps the consumers headed to the mall will be promoted.

Unfortunately, while Reagan had a hard time getting his full agenda through Congress, Obama will likely be much more successful. The effort to concentrate more power in Washington will be far more appealing to Congress then Reagan’s idea of restoring it to the people.

This sharp contrast in philosophy should not be taken lightly. Reagan looked to unleash the pent-up free market forces that had been smothered by a generation of Great Society reforms and uninterrupted Democratic control of Congress. Today, the public is looking for the Obama Administration to create the growth that the free market has apparently destroyed. The hope that our economy will grow as a result of government spending and micro-management is the most seminal shift in political philosophy since the New Deal.

Despite the absence of Reagan’s promised spending cuts, the economy generally did well during his presidency (The growth would have been more genuine if the cuts had been delivered). However, Obama’s policies will immediately make the current situation worse and the nation will suffer severely as a result. Rather than a sharp recession at the beginning of his term followed by a significant expansion (as occurred under Reagan), the recession that Obama inherits will be far worse when his first term ends.

What nearly all politicians on both sides of the aisle fail to understand is that the current contraction and credit crunch is necessary to restore order to an economy that is horribly out of balance. Years of misguided fiscal and monetary policy and market-distorting regulations have resulted in reckless borrowing and spending on Main Street, pervasive gambling on Wall Street, and rampant fraud and corruption at every intersection. America’s borrow and spend economy, and the bloated service sector that evolved around it, must be allowed to topple, so that a more sustainable economy grounded in savings and production can rise in its place. Any government efforts to delay the adjustment and spare us the pain will backfire, turning this recession into an inflationary depression.

Of broader concern however is the sharp turn in ideology, and what it means for the future of our nation. If this is a permanent shift, then America will lose any resemblance to the economic titan it was in the 20th Century. Our standard of living will decline sharply, our economy will be ravaged by inflation, tens of millions will be unemployed, more individual liberties will be surrendered, and rugged individualism will be supplanted by the nanny state. In short, Latin America may extend north to the Canadian border.

However, if this shift proves temporary and Obama’s reign either ends in one term, or he summons the intelligence and courage to reverse course once the situation deteriorates, then perhaps one day there will be light at the end of a very long tunnel.

While all of us can certainly hope for the best, prudence suggests that we had better prepare for the worst. Not only does that mean divesting our portfolios of U.S. dollar denominated investments but preparing for the possibility of emigration. With economic conditions at home becoming increasingly intolerable, the call of freer economies and greater prosperity abroad may be too tempting to resist.

Ol
actually i havent read his book, but have listened to him for yrs,

i also subscribe to Bill Fleckenstiens daily rap and would highly recommend it and costs about 150 per yr.

Between the two of them , you will great a great feel about the dangers that lie ahead.

goodluck

Can Democrats handle the hot seat?
The Republicans weren't willing to pursue major reforms that could have put America on firmer financial ground. If their successors don't either, they will meet the same fate in 4 years.

That was certainly the case with Ronald Reagan, but I don't believe Barack Obama and the Democratic Party have been handed a mandate. Rather, I believe the electoral outcome is a function of economic pain (and overall disgust with George W. Bush and Republicans generically).

On the flip side, it was the economic "strength" created by the housing bubble -- which caused folks to feel good about their finances -- that enabled Bush to win in 2004 despite the unpopularity of his policies. As that mood started to fray, in concert with the bubble's last gasps, we saw the losses in the 2006 congressional contests. And then the dam broke Tuesday night.

As I was trying to gather my thoughts, I received an e-mail from a reader containing comments from a post-election column I'd written in 2004. I'd like to reprise them here as evidence that Tuesday's outcome was largely attributable to economic weakness and financial setbacks:

"I think the party that has won, in this case the Republicans, might want to be careful what they wish for, in that both the stock and real-estate bubbles will unwind on their watch, with them in full control of the House, the Senate, the presidency and the governorships.

"Perhaps we'll all get lucky and the Republican Party will decide to pursue a flat tax, tort reform, and term limits -- the three major areas of reform which I believe could help the country become more competitive and help extricate us from the horrible fix that I see us in. However, if they continue the pork-barrel politics of the last four years, I would think that next go-round, the Republicans will be bounced from office after people's hopes are dashed in the upcoming economic turmoil."

Legacy entwined with economy
For what it's worth, my feelings are somewhat similar now.

The Democrats might want to be careful now that they have the hot potato, as I believe the economic landscape is liable to be nothing short of disastrous. They may be able to blame a fair amount of it on Bush for a while. But that might be difficult to do four years from now. Thus it's entirely possible that the pendulum which has now swung in their direction could reverse course.
Unfortunately, but not surprisingly, the Republicans did not pursue any of the policies I felt would be beneficial. Nor do I expect the Democrats to. Nor will they force the Federal Reserve to return to the gold standard (or target money-supply growth, the next-best choice) -- which is another imperative that I would add to my prior three wishes.

The only policy option I expect they'll implement -- which could be quite important -- will be to allocate spending on infrastructure projects, though I fear mountains of money will be wasted. (We also ought to spend a serious amount of money on making our country a nuclear-power-based economy, like France.)
In my opinion, these policies would go a long way toward getting the country back on solid ground, so we could effectively deal with long-term issues such as debt levels, health care and Social Security.

Should job No. 1 for the president-elect be devising an economic stimulus plan? It depends on whom you ask.
Sacrifice is a hard sell
None of these ideas would be painless. Pain is unavoidable, thanks to the prior real-estate and credit bubble.
Sadly, I'm afraid, there is no chance we will pursue any of these options I have suggested, as they are not politically palatable. And, since the politicians have only one goal -- keeping themselves in power -- I don't have high hopes for positive developments emanating from Washington, D.C.
Of course, there are those who believe that government is the answer to our problems. Among them is Martin Wolf, who presented his case in a Financial Times article titled "Preventing a global slump must be the priority." The sentence that I think is the most telling: "Those who view liquidation of past excesses as the solution fail to understand the risks."

Meddling in haste, stagnating at leisure
First of all, Wolf has it backward: The folks opposed to liquidation, not those who favor it, are the ones who "fail to understand the risks."
The former cannot comprehend that in avoiding the risks of liquidation, they're asking for a version of what has transpired in Tokyo for the past two decades -- whereby the Japanese, in refusing to take the pain created by their real-estate and credit bubble, ensured the aftermath would be much worse and take much longer to recover from. (Not least of their mistakes: the unintended consequence of absurdly low interest rates in Japan, where chaos ensued as the domestic scramble for yield and the global spree of low-interest borrowing in yen went awry.)
Second, those of us who think liquidation needs to take place are not arguing that it's the solution. There is no solution (except to prevent bubbles from starting). Anyone who thinks otherwise does not understand the nature of the problem -- or capitalism, for that matter.
Only in a crisis can we have any hope of generating the political will to begin pursuing sensible policies. But thus far in our current financial crisis, there's been little indication of interest in pursuing sound long-term policies. It's been more about political expediency and ameliorating pain in the short run.
However, as the example of Japan demonstrates, the pain will be far worse and will last far longer if the government continues to try to force various markets (such as housing) to trade at prices it deems appropriate, rather than allowing markets to trade where they need to trade.
Our current economic and financial turmoil can't be "fixed" -- that is, we will not see a quick return to prosperity. But if we have the willpower, our problems can be dealt with -- in that it is possible to reshape our priorities to return us over time to a productive and financially prudent country.

more and more i am hearing of the dow hitting 5000, ive heard reports of the dow hitting 3000 and now this.

Obama To The Rescue?


Having received 62.5 million votes, Barack Obama has earned a spectacular personal victory and a clear mandate to bring some form of change to the United States. Obama’s decisive and masterly election campaign, where he first had to outmaneuver the formidable Clinton machine, may bode well for his ability to implement a government response of unprecedented magnitude. Time will tell if this is a blessing or a curse.

In the short term, markets may likely rally on the grounds that election uncertainty is over and that Obama and a Democratic Congress may institute massive infrastructure spending along the lines of Roosevelt’s New Deal. The larger question for investors will be whether Government spending will make any difference to long term performance, or whether the markets are already locked into a downward spiral that no amount of pump priming can counteract?

There is increasing evidence that the severe recession or depression that we have long forecast is now becoming reality. One has only to look inside local shopping malls to see the physical effect of a visible loss of consumer confidence. Once confidence is lost, it is exponentially more difficult to regain.

To avoid a deep recession, as the government now hopes to do, massive intervention would have been required – months ago. But, in the absence of extraordinary political cooperation with the sitting President, we can assume no significant changes in policy until Obama takes office in late January. When new programs do come, the big question will be size.

The outgoing Bush Administration, which is responsible for creating the vast asset booms, has thus far provided only $172 billion in a stimulus package and some $700 billion in authorized asset purchases, mainly to bailout Wall Street. Historically, these are large numbers, but today they are dwarfed by losses already suffered by real estate and stock investors.

Losses incurred on the $14 trillion U.S. mortgage market will be significant, and we can expect government initiatives to try to replace these vanished assets. Of course, not all of these mortgages will go bad. But with rising corporate and individual bankruptcies and increasing unemployment, an increasingly large number will default.

Almost $5 trillion of these mortgages were ‘sliced and diced’ into the now notorious mortgage-backed securities. Despite their ‘toxic waste’ content, these so-called ‘securities’ were sold to conservative investors, including U.S.-based pension funds, the solvency of which will be a major issue for the Obama Administration.

But the losses don’t end with the mortgage market. As we had forecast, state governments and corporate America, including insurance, credit cards and auto companies, have arrived in Washington, hat in hand, asking for taxpayer money. Looming rapidly into sight is the more than $20 trillion of private sector corporate and consumer debt. As is reflected in widening credit spreads and the threatened bankruptcy of national business icons such as GM and Ford, this debt is also being called increasingly into question.

How many trillions of dollars of Government spending will be necessary to make whole the institutions and individuals swamped by this tide of credit defaults? Is the government prepared to float multi-trillion dollar annual deficits? Apparently so. If such sums are palatable to our creditors, then perhaps the worst can be avoided.

Regardless of government action, we feel that the recession will be both severe and long lasting. The resulting fall in corporate earnings will be reflected in future stock prices. In light of this, we urge investors to be wary of claims that U.S. stocks are cheap.

It is worth remembering that prior to the stock market crash of October of 1929, the Dow had peaked 381 earlier that same year. It was not until some three years later, when severe recession and then depression took hold, that the Dow reached its low of just 42, a fall of some 90 percent from its 1929 highs.

In a historical context, the Dow’s recent fall from 14,164 to some 8,200 (a decline of just over 40%) does not necessarily indicate that stocks are cheap. Today, a 90% fall would bring the Dow down to a level of 1,416!

i hope everyone is very defensive. This market could take out the previous lows and it would be a disater in the making.

i could easily see the dow hitting 5000 , but please dont let the averages fools you, the damage behind the averages is great and not about to recover, what lies ahead is further erosion of capital, (your portfolios), of which another 50% hit could happen in no time.

CASH IS KING...and do not be a hero...we are going down hard...

ciao
the guru

im still wondering what happened to AL247...I REALLY DO MISS HIS WISDOM LOL

Notice how "Depression" is mentioned just a few times




China Gets It Right, But Hurts America


The announcement of a massive stimulus package of almost $600 billion shows that China means business not just in reviving, but also in rejuvenating its economy.

As both America and China confront the prospect of a global depression, both countries have chosen to fend off potential unrest with liberal government spending. But the Chinese move is bolder and more likely to succeed.

The most remarkable aspect of the Chinese stimulus plan is its enormous size. Despite the massive publicity surrounding its formidable growth rate, the Chinese economy is still ‘only’ one-fifth the size of America’s. Relative to its economy, China’s stimulus package would be the equivalent of a $3 trillion package in America.

The Bush-Greenspan asset booms were so extreme, and the resulting deleveraging so massive, that government actions in multiples of trillions of dollars are needed to make any meaningful impact in slowing the asset bust.

Based on this yardstick we can see that the differences in the Chinese and American approaches could not be more dramatic. The divergence bodes ill for the future.

The impact equivalent of China’s package of $3 trillion is 17.4 times that of America’s $172 billion. Of course, this does not include the $700 billion Bush TARP that was agreed to by Congress last month. But then, China did not have a financial system which needed a massive taxpayer bailout.

Although some Chinese investors may have been taken in by smart Wall Street salesmen peddling mortgage backed securities, the scale of these investments does not present systemic risk to China’s financial markets.

China has announced that the lion’s share of its stimulus spending will focus on modernizing the infrastructure of its country in preparation for challenging America as a super power in just a few more years.

In contrast, the focus of the Bush Administration plan is to boost consumer spending. America’s decaying infrastructure has been virtually ignored. This will render America’s economy ever less competitive in an increasingly competitive world.

Even the follow-up packages in America are likely to throw increasing amounts of taxpayer money at highly leveraged banks and failed corporations, like General Motors.

When the world recovers from the looming depression, China will emerge greatly strengthened and as a far more serious challenger for super power status.

Since the ancient times of Babylon, super power status also has been reflected in any ‘uber’ nation’s currency. While China’s economy is dominated by roaring manufacturing and infrastructure development, America’s economy is comprised of 72 percent by consumers. In reality, America is consuming more than it produces and is eroding its national wealth at an alarming rate.

In contrast, emerging nations like Brazil, Russia, India, and China (the so-called BRIC nations) are producing far more than they consume and are creating real wealth in the process. It follows that BRIC corporations and even their currencies should be attractive long-term investments, relative to those of the United States.

On November 15th, the G-20 leaders meet in Washington to discuss threats faced by the world economy. Today, there is decreasing faith in paper currency. The G-20 leaders must address this crucial problem. It may well be that they seize this opportunity to establish an international currency, under the auspices of the IMF, but linked to Gold.

Should they fail, a resurgent China can be expected to veto any subsequent attempts in an effort to replace the U.S. dollar with its own as the world’s key ‘anchor’ or reserve currency. Such a change in reserve status will confer on China a number of competitive advantages previously reserved for America.

Unlike America, China is unlikely to borrow to finance its stimulus package. Indeed, it is likely to spend its own national earnings rather than continue to invest in U.S. Treasuries.

Worse still, China might even begin to sell part of its massive holdings of some $1 Trillion of U.S. Treasuries. This will put upward pressure on U.S. interest rates, tending to drive a recession into a depression.

However it is financed, China’s stimulus package is decidedly bad news for America.

dont let the averages fool YOU

Here is what im talking about, the dow continues to have major up days and down days over the last few weeks but overall the averages have levelled off, but the stocks continue there downward spiral, perfect example is comparing GE to the dow

if the dow were to follow GE for example, which is one of the most diversified industrial stocks out there, i calculate the dow to be at a level of about 7000.....

cash is king

if you click on the link below, you can then compare the dow averages with GE



http://finance.yahoo.com/echarts?s=GE#c ... d;compare=^dji;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

The Humpty Dumpty Economy, by my man Peter Schiff

SO REFRESHING


Before the current economic crisis became apparent to all, the most popular fable used to describe America’s uncanny economic resiliency was the story of Goldilocks. It was argued that our economy was skipping down a sunny path of moderate growth, low inflation and rising asset prices. However, a much better parable for our economy over the last decade would have been the story of Humpty Dumpty: a bloated, fragile shell perched on the top of a dangerously high stone wall. This week, all the government’s horses and all of its men scrambled to put Humpty Dumpty back together again. Here is a look at some of this week’s highlights:

The Mother of all Moral Hazards

No doubt prodded by the administration, Fannie Mae and Freddie Mac announced a new attempt to stop the fall in home prices and foreclosures through a loan modification program that would cap mortgage payments so that a homeowner’s total housing expenses would not exceed 38% of household income for home owners who are 90 days delinquent.

In a classic case of unintended consequences, the plan will encourage a massive new round of delinquencies and household income reduction as homeowners will jump through hoops to qualify for the program and maximize their benefit. Those who could conceivably economize to meet their existing obligations will now have a strong reason to forego such sacrifices. Those who are not 90 days past due will intentionally become so. In many cases, dual income families may decide to eliminate one job altogether as reduced mortgage payments combined with lower child care and other work related expenses will likely exceed the after-tax value of the lost paycheck.

Unfortunately, the last thing our economy needs is falling household incomes and even more bad debt. But that is precisely what this plan will give us.

To Bail or Not to Bail

With the Big Three auto makers now in a plainly visible death spiral, the automotive bailout debate is kicking into overdrive. The disagreement hinges on whether a bailout is necessary to support an important industry or whether the unprofitable dinosaurs of the past should be allowed to fail as America focuses on an information-age, service sector, and alternative energy future.

As usual, both sides have it wrong. The government should let the Big Three fail not because we no longer need an auto industry, but because we desperately do. What we do not need is the bloated, inefficient auto industry that we have today. By allowing the Big Three to fail, their capacity will be turned over to new owners who will be able to acquire the means of production at fire sale prices and hire workers at globally competitive wages. The result will be a more efficient auto industry making cars that people around the world actually want to buy at prices they can afford. Such auto makers could conceivably be profitable and could become the cornerstone of a manufacturing renaissance in the United States. In contrast, Ford, Chrysler and GM are never ending money pits that threaten to swallow a good deal of our economy.

We Shopped and Dropped

This week, the bankruptcy filing by Circuit City and a profit warning from Best Buy, served as proof positive that America’s national shopping spree is over. As I have long said, the business model of importing cheap goods for Americans to buy with credit cards was unsustainable. We were told to “Shop till we dropped,” and we did.

Americans two primary sources of spending money, home equity extractions and unlimited credit card availability, have been shut down. With only dwindling paychecks to rely on, Americans are justifiably economizing. As a result, many more retailers will file for bankruptcy over the next few years, and those that remain solvent will only do so by drastically cutting their capacity.

In a desperate move to arrest this necessary process, Treasury Secretary Paulson announced his intention to use part of the $700 billion TARP (Troubled Asset Recovery Program) funds to re-liquefy consumer lending.

Paulson observed that “illiquidity is raising the cost and reducing the availability of car loans, student loans, and credit cards”, “creating a heavy burden on the American people” and reducing jobs. While all of this is true, this is precisely what needs to happen. Americans need to reduce their spending on all of these things, and market forces are in the process of bringing that change about. By encouraging even more borrowing, Paulson’s plan will aggravate the crisis.

Along those lines, our nation’s various bank regulators issued a joint press release this week that “encouraged” banks to make more loans and to reduce their lending standards if need be. Since lax lending standards are one of the primary reasons that those banks “needed” to be bailed out in the first place, it is lunacy to now encourage them throw good money after bad. More risky lending (and currently nearly all lending is risky) interferes with the market’s attempts to rebalance our economy along the lines that Paulson himself admits is necessary, and sows the seeds for even bigger bailouts in the future when this new crop of loans go bad.

Bait and switch

Reminiscent of his Bazooka maneuver, quick draw Paulson reversed course quickly with his decision to not use any TARP funds to buy the assets that the plan was specifically funded to procure. Instead, he will simply dole out the loot to his buddies on Wall Street and use it for whatever seemingly worthy initiative strikes his fancy.

Although Congress loves to grandstand about oversight, it has thus far shown no courage to interfere, or even question, the change in strategy. Paulson claims that he is simply rolling with the punches. The truth however, is that the original plan was flawed from inception, as I clearly pointed out in a string of commentaries following his proposal. How could the Treasury Department, with all its funding and PhD’s, not make similar predictions? Paulson is either a liar or completely incompetent. My guess is he is both.

By Bill fleckenstein

i suggest everyone with money in the market subscribe to his daily rap
it will be the best money ever spent
goodluck

Trillions down and still bailing
A hodgepodge collection of efforts has put us all on the hook for piles of money, and what do we have to show for it? A still-terrible market and a recession.

Unfortunately, despite some 12 financing facilities created by the Treasury and the Fed, massive interest rate cuts and various bailouts, the government has little to show for its attempts to dictate where markets should trade.

The Fed's own balance sheet has exploded from roughly $900 billion worth of debt in August to around $2 trillion as of last week. Knowledgeable sources expect that to reach $3 trillion by the end of the year.

That means that it will have grown from approximately 6% of gross domestic product to more than 20% in the space of four months. (For perspective, Japan's balance sheet grew from roughly 9% of GDP to 29% over the 10-year period from 1994 to 2004, as it pursued "quantitative easing," which basically involves the central bank making more cash available to banks to ease lending.)

These numbers and rates of growth are so enormous (and unprecedented) as to be utterly incomprehensible. Does anybody actually think the government has any idea what it's doing?

I think it's certainly dawning on folks that when the government "does something," it often creates more problems than it solves. In this case, as it props up poorly managed companies, it may only be allowing them to rain further havoc on the better ones in their industry. American International Group (AIG, news, msgs) is an example of this, and I'm sure many other financial entities will turn out to be as well. (As an aside, notice all the idiotic executives, across a wide range of industries, who have bought back hundreds of billions of dollars' worth of shares at stupid prices -- a classic example of blowing up their businesses in an attempt to manage the stock price.)

Parched for work in arid times
Though the government hasn't admitted it yet, we are in a recession, and in this particular instance, it seems to me that creating jobs will be an unusually severe problem. That's because the economic expansion we saw from 2002 to 2007 was essentially just a function of speculation (as I have stated often -- and I explain in my book "Greenspan's Bubbles"). I just cannot stop worrying about where the jobs are going to come from prospectively.

When I wrote that book, I pretty much exorcised my own demons regarding my revulsion and anger at the policies of former chief Alan Greenspan and his Federal Reserve. Recently, though, I couldn't help but think how much better off everyone would be had the United States used the time after the equity bubble and the 9/11 attacks to pursue sound policies, as well as encourage folks to save money and prepare themselves for the demographic challenge of Social Security and rising health care costs.


Instead, Greenspan created a multiple-GDP-sized housing bubble, during which folks took on huge amounts of debt instead of actually saving money. It was only ridiculous financing (which has since imploded the banking system) that allowed so many folks to pay absurd prices for houses -- and take money out of them at the same time via home-equity loans.

Of course, one of the most misguided government ideas was trying to prop up home prices. (Secretary Hank Paulson essentially conceded as much last Wednesday when he announced that the Treasury Department was abandoning its plan to purchase troubled mortgage assets.)

House prices need to come down to where folks can afford them. And prices may have to fall even further than we might have thought in the first place, because there's going to be high level unemployment and probably not a lot of wage growth.

Video on MSN Money
Jubak: Fire the whole Treasury team

Don't stop with just Henry Paulson, says Jim Jubak, fire the entire team at the Treasury. They’re incompetent, insensitive and arrogant, he says, and President-elect Barack Obama shouldn't hire any of their clones.
Cut the wires to his microphone
This is going to be a very unpleasant period, I'm sorry to say. The outcome we are witnessing is exactly why, during both the stock mania and the housing mania, I was so vociferous in my criticism of Greenspan. He is the one man who continually meddled with the market and continually advocated that folks behave in an irresponsible way.

I find it outrageous that this buffoon is still making speeches (and commanding huge fees) when the entire country, and perhaps the world, is paying for his crimes against finance.

sorry to repeat myself but yes the sky is falling, and it will get worse.

i cannot see the end of this meltdown and unfortunately, the light at the end of the tunnel is an oncomming train.
Citigroup... DOWN HUGE AND HEADED FOR CHAPTER 11

FORD WILL GO DOWN, GM WILL GO DOWN
CHYSLER WILL GO DOWN
STOCKS ARE BASICALLY WORTHLESS
Reality is starting to take hold and i think the market is finally understanding this point.
Government must not interfere with this mess, especially the U.S. government, and even if they wanted to, they are powerless simply because THEY ARE BROKE.
game over and let the chips fall where they may.

dats what i think

goodluck boys and stay liquid..CASH IS KING

THE GURU

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PORTFOLIO VALUE
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i must be sniffing some pretty good glue, as im in the top 1% of this competition from the financial post
the guru

China Plays a Better Long Term Hand...by john browne


As Peter Schiff and has long warned, America’s reliance on borrowing and consumption to fuel economic activity would result in the wholesale destruction of national wealth. Until recently, the dissipation was largely invisible to most consumers. However, the ongoing plunge in real estate and equity prices and newly released statistics concerning retail sales, consumer confidence and employment have now made it plain to most Americans that their own wealth has been seriously, and perhaps permanently, degraded. In response, they are now hoarding cash and reevaluating their spending habits.

The immediate result is that the large retailers, such as Circuit City, Best Buy and Mervyn’s, have gone under completely or have closed a significant percentage of their locations. Indeed, on November 17th, Moody’s warned of an epidemic of corporate bankruptcies. America is facing a severe recession that, if wrongly handled, will likely lead to a depression as bad, if not worse than those of the South Sea Bubble (1720) or the Great Depression of the early 1930’s.

Such a depression will affect most of the developed world. But countries will not suffer equally. In a depression, wealth vanishes. Therefore, wealth accumulation will be even more acutely divided between those nations that are, like America, net consumers and those who, like China, are producers. The contrast will become increasingly stark and will likely be reflected in the value of equities within the two economies.

For instance, contrast the recent economic stimulus packages of the two countries.

In America, President Bush’s first stimulus package amounted to some $172 billion. However, it was geared 87 percent to consumers and only some 13 percent to producers. This was in keeping with the fact that consumption accounts for 72 percent of the American economy, as measured by Gross Domestic Production. In contrast, China’s stimulus package is to be some $600 billion, roughly four times larger than the equivalent program in the United States. However, the American economy is five times the size of that of China, so in relative terms the Chinese package is the equivalent of some $3 trillion. In other words, to stimulate its economy China is spending some 17.4 times more than America, on a relative basis.

Furthermore the Chinese spending package is far more likely to have counter recessionary benefits than the American stimulus programs. Whereas the American package was geared to consumers, the Chinese package is geared to productive infrastructure projects that will add to the long term competitiveness of its economy. In China, real wages will filter down to consumers in the form of real wealth, as China’s economy gears itself up to become an increasingly effective challenger to American superpower status.

Whereas the Bush Administration has spent only some $22 billion on economic production, it spent some $150 billion on consumers and a staggering $2.8 trillion to bail out the financial industry. The strategic emphasis of the Administration’s spending of taxpayers’ funds is clear for all to see. If you lend money we will support you, if you make things, you are on your own.

In America, the government both encouraged and allowed the financial system to engage in highly leveraged lending. In addition, the financial industry was permitted to hide the risk by using ‘off-balance-sheet’ accounting and fictitious capital asset classification. A classic example of the latter was the classification of a tax credit as ‘capital’ by Fannie Mae. This allowed Fannie Mae to leverage its mortgage investments by some one hundred times its ‘true’ capital, while disclosing only some fifty times in its accounts.

China allowed no such deceptive ‘financial engineering’. It has therefore not had to spend on salvaging its banking system.

In the meantime, both the American and Chinese stock markets have suffered falls of some 50 percent. But given the far wiser policy initiatives of their government, Chinese equities appear to offer much better growth prospects than their American counterparts

Some good news for a change, i like the direction Obama is taking with all his appointies, clearly people with "brainpower"



President-elect Barack Obama will appoint former Federal Reserve Chairman Paul Volcker on Wednesday to be the chairman of a new White House advisory board tasked with helping to lift the nation from recession and stabilize financial markets, Democratic officials say.

The panel will be called the President’s Economic Recovery Advisory Board.

Volcker is one of the true heroes of Central Banking and American economics. He is the rare political player who is willing to make the difficult and unpopular decision, regardless of the polls and politics. Some people believe you just have to do what’s right, and not what’s expedient. If a President wanted to get the real story — stright up no chaser — than you cannot do any better than Volcker.

This is a savvy move by the President-elect, counter-balancing what many perceive as a Clinton-heavy economics team. The advisory panel will brief the president directly, and provide expert advice outside the usual channels.

one thing is for sure, it will be a great time to buy your dream flat screen in the new yr
goodluck

TOKYO–Panasonic Corp. has slashed its annual profit forecast by 90 per cent, blaming a strong yen, sluggish sales and heavy discounting as electronics makers fight for market share amid a global economic downturn.

Panasonic said Thursday it now expects 30 billion yen (US$316 million) in net profit for the financial year ending March 2009 – less than a tenth of its earlier forecast of 310 billion yen.

The Osaka-based company lowered its sales forecast for the year to 8.5 trillion yen ($89.5 billion) from 9.2 trillion yen.

Panasonic, which changed its name from Matsushita Electric Industrial Co. on Oct. 1, said business conditions are ``deteriorating sharply," battered by sluggish consumer spending and intense price competition.

Bailout-a-Go-Go by my man Peter Schiff


Keeping track of the ever mutating bailout debate is becoming increasingly difficult. With the Federal money spigots now thrown wide open, and with no one of influence advising restraint, the only debate is where to direct the torrent. During the past week, the talk began with Detroit and Citigroup, but by Friday had shifted to a massive “stimulus package” to bail out consumers. The early buzz includes some very large figures. But first, a bit of a recap:

On Monday, the $300 billion Citigroup bailout took center stage. Once again Henry Paulson decided to throw taxpayer funds into a bottomless Wall Street money pit. Shockingly the Citigroup plan did not seem to demand any serious curtailment of lavish salaries and bonuses. Paulson’s shameless largesse to his Wall Street friends has elevated financial industry bonuses to entitlement status.

“Remember Lehman” now seems to be the rallying cry to justify any and all financial bailouts. But Lehman’s demise is in no way responsible for our current problems, and the decision to let them fail is the only bright spot in otherwise consistent record of policy mistakes. We bailed out Bear Sterns and AIG, and what did that get us?

The Citi bailout greatly increases the chances for a similarly misguided auto industry bailout. After all, if taxpayers ensure multi-million dollar bonuses for Citi executives, how can they refuse similar help for eight-figure auto executives and $70 per hour unionized auto workers?

It was inevitable that the size of these bailouts would up the ante for an economic stimulus package aimed at consumers. Not missing a beat, Barack Obama announced a $700 billion dollar fast-tracked package that will likely exceed $1 trillion before passage. (Trillions are the new billions.) The plan must be sending shivers down the spines of our foreign creditors who are expected to foot the bill. Add this cost to the hundreds of billions of prior stimulus and bailout packages, and the cost to our creditors is quickly heading into the multi-trillion dollar range. It can’t be long before they cry uncle and repeat the words of prizefighter Roberto Doran “No Mas.”

With so many familiar faces on his new economic team, Obama signaled his intention to “hit the ground running.” With the possible exception of Paul Volcker, all of his top appointees share the view of the Bush administration that the root causes of our economic problems lie in the reluctance of banks and other financial institutions to lend. As a result, we can expect a virtual continuance of current policy.

It is no surprise therefore that both Democrats and Republicans offered healthy “huzzahs” to Henry Paulson’s latest bazooka: $200 billion to purchase securities backed by auto, student, and credit card loans. It is hoped that with this transference of risk to taxpayers, lending institutions won’t be so cautious, and the credit-fueled American economy can thrive anew. This is unalloyed insanity that can only lead to total ruin.

Paulson stated clearly that he would print as much money as it takes to revive the economy. Unfortunately the only industry likely to be revived by such policies is printing itself. But even this will not help the United States as the majority of our printing equipment is imported from Switzerland.

But what if the root of our financial problem is that American consumers have already taken on too much debt? By trying to force feed even more credit down the throats of already overly indebted Americans, Paulson’s plan will only weaken the economy further.

Building on the groundwork laid by Paulson, the massive stimuli that will likely be pushed through by Obama and an overly eager Democratic Congress will further impede any real recovery. By swallowing up all available capital, spending to create government jobs will destroy far more private sector jobs. Rather than expanding government and increasing the national debt, policy makers should be thinking about doing the opposite.

The brutal truth that no one in Washington dares acknowledge is that our systemic economic problems can only be solved by a reduction in consumer borrowing and an increase in savings. We must repair our national balance sheet and a painful recession is the only path to achieve this. By interfering with the market’s attempts to bring this necessary change about, all the proposals currently coming from Washington or bubbling up from think tanks and Nobel prize-winning economists, will only exacerbate the imbalances and lay the foundation for even greater losses and a larger crisis.