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Euro Leaders Closing In On The Big Prize: Centralized Power

June 13th, 2010 at 01:50 pm

As laid out in the previous Euro Crisis post below, European leaders are now underway with the second and final step in their quest to centralize power over all of Europe.

Following are excerpts from Christopher Booker's article written for the Telegraph:

"Easily the most telling statement by any politician last week was that from an anguished Angela Merkel, in pronouncing that 'the current crisis facing the euro is the biggest test Europe has faced for decades, even since the Treaty of Rome was signed in 1957'. 'If the euro fails," she went on, 'Europe fails,' warning that the consequences for the whole of Europe would be 'incalculable'."

"What we are witnessing here is a judgment on the entire deceitful and self-deceiving way in which the 'European project' has been assembled over the past 53 years. One of the most important things to understand about that project is that it has only ever had one real agenda. Everything it has done has been directed to one ultimate goal, full political and economic integration. The headline labels put on the various stages of that process may have changed over the years, such as building first a 'common market', then a 'single market', finally a 'constitution'. But by far the most important project of all was locking the member states into a single currency."

"This was always above all a political not an economic project, to be driven through at any cost, which was why all those 'Maastricht criteria' laid down to bring it about were repeatedly breached. But as expert voices were warning as long ago as the 1970s, when it was first put on the agenda, there was no way economic and monetary union could work unless it was run by a single all-powerful economic government, with the power to raise taxes."

Read the full article: The Euro Crisis is a Judgement on the Great Lie of 'Europe'

Back To Basics Is The Way Forward

May 25th, 2010 at 07:52 pm


Where would we be if more of the high-impact economic and financial experts had utilized their massive exposure to consistently place more focus and push behind the long-standing alternatives that would have reliably prevented the kind of life-altering problems we are now seeing for so many people?

Instead we have watched and absorbed as many of these experts have kept the spotlights focused on jumping back and forth between different sectors and asset classes of the financial markets -- popularly known as the market timing game.

And if you don't have the time or inclination to play the game, those who pay the major bills to keep these spotlights on -- and thus direct their focus -- will gladly do it for you, generating enormous turnover fees in the process while the associated risks remain with you.

The S&P 500 is the widely followed index of large-cap American stocks that is considered a bellwether for the American economy.

The major sea change in the character of its progression over the past two decades presents a strikingly clear picture of how this institutional promotion of the market timing game has created a volatile and unstable economic environment.


Could it be that many of these experts who are supplying the breaking news from the economy and financial markets actually do not see and understand how this volatility --that the timing game depends on -- has crippled our system right before their eyes?

Doesn't seem likely.

If It Bleeds, It Leads

To survive let alone thrive in the breaking news area of the media world, long term safety and stability are not sexy subject matters to rattle on about. They simply will not meet the demands of the ratings-eating media machine that has an overwhelming appetite for strife. As a result, what we are witnessing is clearly a driving force behind the ongoing instability.

Henry Ford once said, "A business that makes nothing but money is a poor kind of business."

Waiting around for this cat to change its stripes is not realistic. So let's take a closer look at how this media phenomenon is used to work magic for those who support and manipulate it, its actual results for the average person who has invested their life savings in this system and some alternatives that will break this downward spiral and move us forward.

Playing with House Money

The big guys understand the basic rule -- the absolute necessity -- of playing it safe with their Core Financial Assets. In other words, play it safe with the house money by having in place at all times a firewall of safety around that which is necessary to maintain what you have achieved.

And even when they decided to do some risk taking with their own household accounts, they were sure to have the contingency plan in place whereby the U.S. taxpayer would be the go-to guy if things got out of hand.

Still, if the general rule is to play it safe with house money, how is it, why is it, that the average investor continues to be encouraged -- however subtly so -- to continue gambling with theirs?

The Flying V

For those not familiar with the terminology, a "V-shaped" recovery is a term used repeatedly by the experts to describe the notion that when the Financial Crisis hit and we saw a precipitous drop in the economy and financial markets, that this was somehow a temporary problem that would immediately correct itself once we threw a bunch of money at it and we'd shoot right back up and be on our merry way just like before.

This was a completely false and misleading premise from the start in that it obviously ignores the internal damage that had been deeply rooting itself for decades before reaching an inevitable point of implosion. And to even consider that damage of this magnitude could possibly be corrected or repaired in a short-term time frame -- one quick bounce off a bottom and away we go -- pushes all logic right out the window.

Once the house of cards collapsed, in pretty short order, we started getting this parade of happy talk experts streaming through the extended infomercials for Wall Street armed with the same basic call to action script designed to keep people and their assets in the game -- or get them back in.

With very serious, pedantic looks, they stare into the camera and start reciting this come-hither blabber about how we've got a V-shaped recovery going on. The markets react to this unfounded stimulation and the message is driven home: Act now, or let us act for you. The train is leaving the station and you don't want to miss out!!

Let's stop and think for a moment. Out in the real world of the real economy, where is this big V happening? Have you spotted a big V flying over the land? Maybe it's busy circling over Europe? Maybe we should get the UFO guys in on this?

Is this the appropriate and accurate message from people who have been given the spotlight and are supposed to know what they're talking about?

If you're really just a infomercialist hustling for private interests, just say so. When using the publicly-owned airwaves, wear a little ID badge or make the type of disclaimers that are now taking up more than half of all the pharma commercials. Be straight about it.

And what about the go-to guys who have to make their lives work in the real world? What's their backup plan?

The Lost Decade

So where has all this expert advice taken the average investor over the last ten years? According to the Dow Jones Industrial Average, S&P 500 and Nasdaq, not very far.



For all of this daily bombardment of "It's up, It's down", what we really get is quite meaningless, glaringly counterproductive and grossly misleading -- most importantly from the perspective of the one thing we cannot replace: TIME.

When you walk into the virtual reality of any casino you will never see a clock. In this carefully planned and psychologically controlled type of environment, the last thing they want you thinking about is your time.

On average, how many decades out of the normal life cycle are your most productive? Approximately 3. What's the financial wizards' recovery strategy for this 1/3rd loss of the time value of your most productive years? There is no recovery.

Now, even to the most casual observer, smoke-and-mirrors mumbo jumbo like "Don't worry, it'll come back..." just doesn't cut it anymore when it comes to the reality of your time on this planet.

"It is generally agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of Stock Exchanges." - John Maynard Keynes

Conservation - A Shift in Perspective

Like the natural resources we all depend on, our financial resources are of equal importance. Especially considering how one supports and impacts the other. The ongoing fallout from the Financial Crisis is not a regional event, but a global contagion reaching and affecting every corner of planet Earth.

Do a Google search on conservation of natural resources and see what comes up. Then try a search on conservation of financial resources and compare the results.

From the same level of concern and priority given to the preservation and sustainability of our natural resources, would it not make sense that the universally established principles and theme of Conservation be broadened to include what we have come to realize, unmistakably, are our limited financial resources?

The individual is the basic building block of any real change for the better. It's never too late. So with the fresh perspective of Conservation, we can each make the choice and commitment for ourselves and the generations to come to get some backbone and act responsibly.

How can it happen otherwise?

Why do we leave major parts of our life exposed in today's world?

We know and understand the necessity of insuring ourselves before the fact against forces absolutely beyond our control for such things as our health, homes and businesses, not to mention the potential liability every time we get behind the wheel of an automobile.

By the same simple logic, would it not make sense to insure, reliably, before the fact, our life-long savings for the major milestone events that are date certain such as the tuition for our children's education and our retirement? And we're not talking about those asset allocation models where risks are shuffled around like deck chairs on the Titantic.

These widely used models were one way to definitely generate all kinds of turnover fees, but, when put to the real test, they did not live up to their promise.

Again, not sexy subject matter like market timing and the my crystal ball is bigger and better than yours nonsense. But at the end of the day, in the real world where people are responsible for themselves and others, the only "timing" that matters is this: will what you worked for be there when you need it?

Independent Thinking for the Greater Goood

Predictions, as we are seeing, are nothing more than good guesses or bad guesses. The time has passed for relying on experts whose crystal balls have been shattering left and right. The chicanery and game playing of the prediction business that the media thrives on is out. Long-term planning and preparation for the inevitable and unpredictable twists and turns that lie ahead is back -- it really never left.

The choice of direction from here is simple and straightforward. That's right, simple and straightforward, not vacuously sophisticated and needlessly complicated in such a way as to separate us from the basic fundamentals that will never, ever be denied -- which is exactly how all houses of cards are designed and built.

Hold it! Back up the truck. Fundamentals?? You know, the simple, old-fashioned, corny stuff like you can't spend more than you make.

"If you know how to spend less than you get, you have the philosopher's stone." - Benjamin Franklin

We can continue to choose sexy and reckless with high ratings and questionable success for a very few. Or we change course over to a commitment to Conserve our Core Financial Resources, supported by long-term thinking whose first priority is a strong foundation that will provide a reasonable amount of stability in people's lives. Or, at the very least, keep the blowups manageable.

To be sure, this approach won't feed the media-cultivated need for the addictive type of hype, "chasing the dragon" thrills that are here and gone in a nano seconds. But it will produce a lot less angst and turmoil over the long term for a far greater number of people.

It's time to Draw The Line!

Like the big guys, you can start by first making a clear distinction between what you consider to be your Core and Non-Core Financial Assets. Then determine how these assets are positioned: either for growth with safety; or growth with risks and the inevitable setbacks that are a part of taking risks, especially in today's economic environment.

Below is a link to the Draw The Line Exercise Worksheet that has been provided for your secure and private use. Take a couple of minutes to type account names only in the column that matches their current status of safety or risk, identifying each account as either a Core or Non-Core Asset. Hit print and you'll get a quick picture of where you now stand.


With this as a baseline, you can make a clear decision to either stay the current course, or head in a different direction.

There are always alternatives.

The choice is yours.

To learn how to implement a crisis-tested strategy for the sustainable growth and preservation of Core Financial Assets, click on the following link:


Estate Conservation

May 25th, 2010 at 08:19 am

More and more we are hearing the term Estate Conservation instead of the traditional Estate Planning.

Think about it. In today's world, if you're not first doing Financial Conservation along the way, what "Estate" will there be to conserve?

The only "timing" that matters: Will it be there when you need it?

May 21st, 2010 at 12:00 pm

No coin has only one side. Like up cycles, down cycles are an inevitable part of the financial markets and the economies they are supposed to reflect. The Financial Crisis was in large part brought on by a head-rattling, mind-numbing lack of forward-thinking and priority given to providing reliable safeguards that would automatically kick in and protect Core Financial Assets when the market coin flipped heavily to the negative side.

When, not if. It has never been nor will it ever be a question of if the down cycles will arrive, only a question of when. And, as we have learned the hard way, the timing is unknown until it happens. Once a down cycle starts, and losses are being incurred, how do you put the toothpaste back in the tube? You can't, it's too late. Time to ride the waves.

Surf's Up! There are two main moving parts to the dynamic of recovering from any losses experienced in the financial markets. First, look at the chart of any index, stock, bond or commodity (examples below) and you will see how they all move in a fluctuating wave pattern. Bearing in mind that legs are strongest in the first phase of a foot race (to mix metaphors), if you have experienced any losses in a down cycle, the first and strongest phase of a subsequent market recovery or up cycle, by definition, is not devoted to real asset growth, but to the recovery or retracement of those previous losses.

The math of compound loss. The second moving part of recovering from market drops is how the math is not working in your favor. For example, to get back to breakeven from a loss of 50% would require a recovery gain of 100%.

Locked-in losses. Keep in mind that when financial or psychological pressure builds up during a down cycle -- which is particularly true when it comes to Core Financial Assets -- and the order to sell goes through, any losses incurred become permanent and the producing asset is gone forever.

Will what you worked for be there when you need it? Recovering from market losses that impact Core Financial Assets built over a long period is an uncertain process. Once caught in this position, you have absolutely no control over the timing of market recovery that will determine whether or not your asset value -- think life savings -- has been restored, if ever, by the time it is needed for date-certan milestone events such as college tuition and retirement.

To eventually recover in financial terms is one thing, but how do you ever recover the time it took to build these assets?

The lost decade. If we use Dow Jones Industrial Average as an indication of just how far the average investor has progressed over the last ten years, the simple answer is: not very far.


So, on average, how many decades out of the normal life cycle are your most productive? Approximately 3. What's the recovery strategy for this 1/3rd loss of the time value of your most productive years? There is no recovery.

Now, even to the most casual observer, smoke-and-mirrors mumbo jumbo like "Don't worry, it'll come back..." just doesn't cut it anymore when it comes to the reality of your time on this planet.

Solution. Start by first making a clear distinction between what you consider to be your Core and Non-Core Financial Assets. Then determine how these assets are positioned: either for growth with safety; or growth with risks and the inevitable setbacks that are a part of taking risks, especially in today's economic environment.

Below is a link to the Draw The Line Exercise Worksheet that has been provided for your convenience and private use. Take a couple of minutes to type account names only in the column that matches their current status of safety or risk, identifying each account as either a Core or Non-Core Financial Asset. Hit print and you'll get a quick picture of where you now stand.


With this as a baseline, you can make a clear decision to either stay the current course, or head in a different direction.

There are always alternatives.

To learn how to implement a crisis-tested strategy that utilizes the "Step Structure" to insure the sustainable growth and preservation of Core Financial Assets, click on the following link:


Economist, Nouriel Roubini - The Need for "Fiscal Conservation"

May 19th, 2010 at 08:21 am


The Euro Crisis: Did it just happen or was it planned?

May 15th, 2010 at 06:29 am


To illustrate a simple point, let's say that the Germans like to save their money for the cold, rainy days they know are coming, and that the Greeks like to spend too much time partying on their sunny, beautiful beaches. Why should the Germans and everyone else -- like the U.S. in particular who has enough problems of its own -- be dragged along in this co-dependent lunacy of having to bail them out when the inevitable happens?

Far more important for the long-term greater good, is it the right thing to do?

Isn't it obvious to anyone with adult experience in life that brick walls would eventually be hit, like the Germans telling the Greeks, "You Greeks have to live according to our German way of doing things as a condition for your drunk driving bailout."

With just a little foresight, who could have possibly, seriously thought this would ever fly?

The great minds of Europe set up a framework for cultural identity clashes, never-ending cycles of enabling and co-dependency, and the kind of contagious chaos we now see spreading throughout Europe.

As with our Greek example -- think twittered-out, reckless teenager -- regardless of how they may have made a mess for themselves, the reckless ones would rather go down in economic flames, not caring one twit who or what they take with them, before they would ever "surrender" their centuries-old cultural identity and independence -- who cares what it cost.

"Economic Efficencies" may have been the stated goal at the outset, but the chaos that comes with all co-dependency is now the actual end result that is driving EVERYTHING! Like any parent who has experienced the co-dependency nightmare will tell you, it's to Hell and Back before you can break this vicious cycle once it gets started -- if ever. Or put another way, the rascals of the family are bound and determined to rule the family. Unless, of course, the adults in the room stand up, draw the line, and say, that's it, no more, and back it up with the appropriate, consistent action.

European leaders need to get themselves into a 12 step Alanon program - tout suite! One of the first things they will learn is that as long as there is one vulnerable enabler within reach who "thinks" they're stuck cleaning up the messes of the reckless ones, there is no reason, no self-preservation instinct that kicks in to change the predatory mindset of the "I'm entitled, you're responsble" type for the better. The vicious cycle of enabling/co-dependency will just continue on and on.

Planned Co-Dependency?

With all of this said, maybe co-dependency is really what the great minds of Europe were looking to accomplish from the very beginning of this whole exercise. In other words, establish built-in, perpetual justification for the highly-concentrated power "needed" to fix the same recurring problems, which, of course, they set up in the first place.

Perhaps what the Euro's founders envisioned from the get-go was a simple two step process. First, establish a monetary union that is doomed to fail without the fiscal union necessary to control spending, budgets etc. Then, when the transitional phase of planned, co-dependent chaos arrives, they're ready with, "Well, we've established the Euro as a world currency, and can always print more. Not to mention, it'll be a piece of cake suckering some of the world's deep pockets (think U.S.) into our bailout party which will bring us to step two and our ultimate goal..."

At the outset, there is no way member countries of the European union would have ever agreed to surrendering sovereign control of both monetary and fiscal policy at the same time. The Brits got it right and kept the Sterling.

So the strategy is to get step one of monetary union rolling first. And then, as the anticipated crisis mounts, to save the grand vision of the "United States of Europe," the second step of fiscal union is activated with acquiescence to statements like, "We've come this far...can't turn back now...what other choice is there?"

Thus, the original goal is accomplished whereby all co-dependent roads now lead to Brussels where there is a concentration of monetary and fiscal control over EVERYTHING.


Is this how you would define progressive? Or is it a swing backwards to the Medician/Machiavellian times of old Europe, where the self-annointed few are only concerned with concentrating power to control more?

The only thing progressing right now is institutionalized chaos and the mounting price tag that goes with it for the average, hard-working person.

The good people of all the countries and cultures that comprise Europe should be reminded that the United States of America was formed, first and foremost, to get the heck away -- a whole ocean away -- from these power and control games.

A Cautionary Tale For The U.S.

Where are the U.S. leaders who will truly look after the best interests of the average person who doesn't get to sit in on these lunatic planning sessions that result in disaster?

Where are the U.S. leaders whose natural-born, relentless instinct and ever-present first priority is to keep the focus, at all times, on the simple basics of life that throughout time and history have always trumped and taken priority over any clique-driven, self-serving ideological agenda? You know, simple, corny, old-fashioned stuff like you can't spend more than you make.

Here's some more corny stuff: staying grounded with fundamental life principles that have never and will never be denied is the simple -- that's right, simple -- way to avoid building these colossal houses of cards that eventually come tumbling down on the average, hard-working person with a big, fat cleanup bill attached.

The tough part: it takes guts.

Who's got guts?

The backbone that skipped my generation.

We can learn from the Euro Crisis and not get ourselves caught in a vicious cycle that will be mighty difficult to break -- if we aren't there already. And the costs? We're already having to learn new math terms to describe more and more zeros.

However, my personal opinion is that the generations following the Budget-Busting Boomers -- of which I am one -- will have the backbone that skipped my generation and say, "Not going to happen on our watch! No way, no how."

Back to basics is the way forward.

Only one trader?

May 15th, 2010 at 04:42 am

We have heard the reports that one trader, perhaps one automated trading program, may have been responsible for the Dow's recent 1000 point intra-day swoon.

If only one person hitting keys or one automated program -- regardless of who "they" may be -- can have that kind of incredible impact on the biggest system out there, in simple, logical terms, what does that say about current market vulnerability and stability?

We're all aware of the efforts being made to bring stability to the system, to the extent that such is possible. But in the meantime, how do you the indivual protect your core financial assets?

Rather than playing the market timing game with your future whereby you are forced to constantly skip around, generate turnover fees, and maybe or maybe not dodge these market bullets, consider the automatic protection and sustainable growth provided by the Step Stucture of Financial Conservation.

Visit: What is Financial Conservation?


What is Financial Conservation?

March 29th, 2010 at 07:24 am

Market Wave Patterns & The Dynamics of Compound Loss

March 29th, 2010 at 07:20 am

New Rules and Regulations

December 18th, 2009 at 11:56 am

New rules and regulations are necessary to provide better safeguards that more accurately reflect the changing "road and weather conditions" of our economic environment. However, as the pendulum of ethical behavior swings back and forth through time, well-founded rules and regulations are only as good as their level of enforcement.

Had there not been such a significant breakdown in the ethical standard of enforcing the rules and regulations that have been on the books for some time, "crisis" would not be the dominant word used to describe our current economic situation.

When we get behind the wheel of a car, it is the responsibility of each and every one of us to drive their vehicle in such a manner that maintains safety for themselves and others, regardless of what the road and weather conditions may be -- or we pay the price.

Through Core Asset Conservation, the individual takes back control and ownership of their future. By taking the initiative to reduce the level of risks associated with one's core assets, the individual is in a much stronger position to keep themselves and their families in step with the unalterable cycles and milestones of life, regardless of what a changing economic environment may put before them.

Ultimately, ethical systems that stand the test of time are built, maintained and sustained by a preponderance of ethical individuals... a simple fact of life.

The Dollars and Cents of War

December 2nd, 2009 at 08:52 am

"The additional 30,000 troops for Afghanistan will cost an additional $30 billion per year, or roughly $1 million per soldier per year. (It's an extraordinary sum especially considering how relatively little enlisted soldiers are paid; meanwhile, private contractors in Afghanistan now outnumber U.S. forces, The WSJ reports.)"

The point is made with all due respect: Military recruitment has gone up as unemployment has risen. Is this the best type of job opportunity we have to offer our young people?


Have We Become a Nation of "Mama's Boys"

December 2nd, 2009 at 07:15 am

or "The United States of Wussess"? Read on...


Will it take 20 years for the U.S. to learn its lessons like Japan?

December 1st, 2009 at 11:23 am

As indicated in my previous post, in its struggle to get back to reality, Japan has finally brought in a new breed of politician who is actually delivering on the campaign promise of bringing real transparency to how government spends the peoples' money.

In the following link Howard Davidowitz lays out how our current problems (artificially low interest rates and a bailout culture, to name a few) are similar to those that have dogged Japan for two decades.

In their search for answers, the Japanese sought advice, no less, from the same guy who now has our president's ear, Lawrence Summers, Director of the White House's National Economic Council, and he's been singing a different tune recently.

Is it overly optimistic to think that maybe we can learn from the experience of others and not take the same long, hard road back to recovery?


Dealing with Reality

November 25th, 2009 at 12:17 pm

The Fed stated in documents released from it closed-door meeting held earlier this month that in its efforts to fuel the recovery it is holding to its bank lending rate at basically zero. It acknowledged that there is the possibility, although "relatively low" in their estimation, that it "could lead to excessive risk-taking in financial markets" causing another speculative bubble.

The Fed anticipates that it could be five or six years before employment levels and the economy return to consistent health.

The Fed also announced that it has tightened its regulations regarding conflict of interest rules governing the boards of directors of its 12 regional banks.

Unlike pre-crisis days, I take it as a positive sign that there is some movement from public officials towards a more realistic and forthcoming attitude about dealing with our current state of affairs.



Dr. James Galbraith's Rx for Wall Street Reform

November 20th, 2009 at 01:46 pm

"The post-op on the great crash of 2008 continued in Washington Thursday as the Joint Economic Committee (JEC) held a hearing on financial reform.

'Unfortunately, the regulatory regime that failed so terribly leading up to the financial crisis is precisely the regulatory regime we have today,' Treasury Secretary Geithner declared. 'We need comprehensive financial reform.'

There is a way to have a financial system with a 'reasonable degree of stability' and 'serves a public purpose,' Galbraith says. 'But it does require having a government which is not run by the financial sector.'

Galbraith didn't use the term 'Government Sachs,' (see link to New York Times article in the attachment) but said 'we're not going to get where we need to get...if you have this revolving door where all the people from Wall Street go down to Washington and offer their services and basically serve their own worldview and the financial interests of their friends.'"

MED Comment: Arsonist or Firefighter? You can't wear opposing uniforms at the same time. Which one is it -- really?

Secretary Geithner served in key economic roles such as an Under Secretary of the Treasury for former Secretaries Robert Rubin and Lawrence Summers (current Director of the White House's National Economic Council for the President), and more recently as President of the Federal Reserve Bank of New York.

Clearly, Secretary Geithner and other members of the major insiders club who exercised powerful influence on the economy while shuttling back and forth between Wall Street and Washington -- in both democratic and republican administrations -- knew all to well the state of the "regulatory regime" during the 20-30 year period of time that our severly under code financial house of cards was being constructed.

Now that the house is on fire, these public displays of concern and outcry are following the standard script.

The media thrives and depends on obsession of all types. It is becoming increasingly more obvious how the tremendous focus given to the democrat vs. republican win-at-all-costs obsession is serving as a convenient sideshow distraction to divert the little guy's attention away from a power clique virus that, with no allegiance other than self-dealing interests, has targeted and infected the heart of our economic system.

It defies common sense to accept the notion that this inbreeding of revolving officials, who wear for show hats from all sides of the political spectrum, will suddenly in earnest stop enabling and start demanding from fellow co-dependent power club members -- with heavy interests in the status quo -- the kind of across the board transparency critically necessary to restore the health of our economy.

It's out there, but we need more of that real type of independent stand-up leadership that when the heat is on will not shy away from flipping on the lights to dissolve these veils that cover the hidden agendas of those -- on all sides -- whose priority is not finding real solutions to society's real problems beyond their own tight circles of self-serving interests.

Real change for the greater good sounds and feels warm and fuzzy, but it's just another empty slogan until you back it up.


The New York Times - Banks Bundled Bad Debt, Bet Against It and Won


PIMCO's Bill Gross: Assets Are $15 Trillion Overvalued...Keep The Fantasy Alive

October 28th, 2009 at 10:16 am

"PIMCO's Bill Gross with a great monthly letter. Here are the key points:

- Over the past 30 years, paper asset prices rose 2X as much as they should have based on economic fundamentals

- This was the result of leverage

-The asset price rise in turn pumped up the economy's fundamentals (Soros's reflexivity)

-The government wants to restore the "old normal" (2007) not the 'new normal' (slower growth as asset prices return to trend)

-Therefore... The Fed will keep rates at 0% for at least 18 months into sustained 4% growth

-Next year, when the inventory restocking effect wears off, 4% will be tough

Bill Gross:

In a New Normal economy (1) almost all assets appear to be overvalued on a long-term basis, and, therefore, (2) policymakers need to maintain artificially low interest rates and supportive easing measures in order to keep economies on the 'right side of the grass.'

Let me start out by summarizing a long-standing PIMCO thesis: The U.S. and most other G-7 economies have been significantly and artificially influenced by asset price appreciation for decades. Stock and home prices went up - then consumers liquefied and spent the capital gains either by borrowing against them or selling outright. Growth, in other words, was influenced on the upside by leverage, securitization, and the belief that wealth creation was a function of asset appreciation as opposed to the production of goods and services...

My point: Asset prices are embedded not only in our psyche, but the actual growth rate of our economy. If they don't go up - economies don't do well, and when they go down, the economy can be horrid.

To some this might seem like a chicken and egg conundrum because they naturally move together... if long term profits match nominal GDP growth then theoretically stock prices should too.

Not so. What has happened is that our 'paper asset' economy has driven not only stock prices, but all asset prices higher than the economic growth required to justify them..."

Legalize It: Insider Trading Is a Victimless Crime...

October 27th, 2009 at 12:24 pm

"But of course, there's a reason why it's not legal. Allowing insider trading would annihilate the concept of a level playing field in the market. Altucher says hogwash. That's just an illusion. 'There's already no level playing field,' he says. This problem of insider trading is 'so widespread' retail investors are already at a disadvantage."


America on a "Shaky Bridge Over a Volcano"

October 26th, 2009 at 09:28 am

"A year after the financial collapse of 2008, indeed some firms are reigning in risky behavior.

'But, the rest of the financial industry does not warrant as much optimism,' says Leo Tilman, president of L.M. Tilman & Co. and author of 'Financial Darwinism: Create Value or Self-Destruct in a World of Risk.' 'We're seeing a lot of very similar behaviors that have led to the previous crisis.'

With a meaningful economic recovery facing an uphill battle, Tilman says it may require another bubble before serious financial reform takes hold. 'I'm thinking about the current environment. Unfortunately it's this shaky bridge over a volcano,' he says.

Meanwhile, Tilman points to three big themes:

- The timing of the next bubble will depend on the U.S. economy and the dollar.
- Economic signs point to extreme caution by mid-2010.
- Ultimately, we still need the right kind of transparency among financial institutions for true financial reform."