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Economic/Market Highlights….12/15…

By Larry Doyle on December 16, 2008 at 7:30 AM in Current Affairs

While the Madoff Ponzi scheme will provide plenty of grist for the mill for the foreseeable future, there are no lack of other stories and developments in the economy and market. Let’s dive right in….

Markets: I would expect relatively light volumes trading for the balance of the year as Wall St. starts to move into holiday mode. Markets today were down 1 to 2% on weak economic news (industrial production) and lousy earning expectations (primarily for Apple, down 3% and JP Morgan down 7%). As far as industry groups real estate finance companies were particularly hard hit (down 6-8%) indicating continued concerns about likely continued increased vacancies in commercial space. Gold mining stocks were up about 7% as gold itself rebounded back up towards $840 an oz.
The fact that gold firmed 2-3% while the dollar traded down fairly hard today indicates to me two things 1. increased fear in the economy overall 2. potential for inflation amidst dollar decline.
I remain concerned about earnings in general and thus it is hard to be constructive on equities overall.

Dollar: trades down fairly hard vs the Euro and also vs the Japanese Yen. Currency valuations are a function of national interest rate policies and trade deficits. Our dollar has benefitted over the last few months from a bit of a safe haven play primarily vs the Euro. However, a few market analysts think that our dollar has topped out and is likely to continue to decline. The expectation of another .50 rate cut (50 basis points) by the Federal Reserve tomorrow to a whopping overall rate of a .50 (yes, that’s right!!) will not likely help the economy overall because we have not seen a strong correlation between the Fed Funds rate and longer term consumer and corporate rates.

The cut in the FF rate should help bank earnings.

That said, we do run the risk though that foreign buyers of our government debt, specifically the Chinese and Japanese, may slow their purchases given dollar weakness and anemic rates (3 mo T-bills now pay 1.5 basis points). That means that if you buy $1000 of 3 mo T-bills that you will get back $1,000.15 in 3 months. That’s right. A full 15cents!! Please buy a 3 mo, 6mo, or 12 mo CD today at upwards of 4%. I found that rate today for one of our loyal followers at Corus Bancshares. They are a solid bank but please make sure not to purchase a CD over the FDIC insured level.

Oil/OPEC: expectations are that OPEC will announce a fairly significant cut of 2-3% in production at their meeting this week. That said, the burden will fall primarily on the Saudis as may other members of OPEC clearly cheat. I chuckled when I read that OPEC believes that the “fair market level ” for oil is $75. They must not have been listening to our show last evening when we said, “the market is the market” and right now the spot price (meaning immediate delivery) is $44.50 a barrel. Goldman Sachs is calling for oil to move to between $25 and $30 although in late Spring they called for $200 oil. Just a little bit off on that call!!

Auto Situation: not much new news on this story today, although it was very interesting to learn that the UAW was very supportive of the foreign auto companies entering the USA and establishing plants in the southern states over the last ten years. Why were they supportive? They believed that they, the UAW, could and would unionize those plants. That obviously did not happen and now those plants are eating Detroit’s lunch. That, boys and girls, is free market capitalism.

**Breaking News: Hearing that GM and Chrysler (not Ford) may receive upwards of $40bln from the administration and the Fed through use of TARP funds and elsewhere to expedite a restructuring and to provide funding for the finance units to make loans.*** I raise the question again if using TARP funds for a purpose outside of the TARP legislation is constitutional.

How Bernie “Madoff” with 50bln:
–it turns out that Bernie’s niece, who just so happens to be the chief compliance officer at the firm, started dating an SEC attorney in 2003 as he was investigating Bernard Madoff Investment Services. They married in 2006. I reserve comment as anything said here likely could be used against me.

–supposedly Bernie was close friends with Arthur Levitt, a former chairman of the SEC during the 1990s….Bernie seemingly espoused the principle of “keep your friends close and your enemies closer”…

– if you can believe it, Bernie’s investment advisory business was not even properly registered until 2006. How is it possible that this could have happened when the SEC had been tipped off as early as 1992 that something may be remiss at BMIS.

– the list of investors at BMIS includes a mix of “rich and famous” along with “high profile philanthropies” and “some decent well to do families but not outrageously rich”. Hearing some of the pain and anguish and knowing that many people/families will be likely wiped out is hard to fathom.

–expect investors that had previously received interest and principal payments to have to return some of this money. This is known as “fraudulent conveyance”. Can you imagine getting that call!!

–expect some of the “Funds of Funds” that brought money to BMIS to be aggressively sued for not fulfilling their fiduciary responsibility.

–The WSJ editorial wrote today, “for investors the lessons are the eternal ones of diversification and diligence.” I concur….perhaps the WSJ editorial board was listening to our show last evening. (LOL)

Credit card proposal: a new federal proposal is being launched that would restrict banks from increasing credit card charges for consumers with outstanding balances. This proposal sounds like a good consumer proposition and it is surmised would save consumers $12bln. That said, do you think that the banks will not try to “replenish” that $12bln elsewhere? Perhaps banks will just increase rates on new cards right from the outset.

Pingback: Economic/Market Highlights….12/15… : NO QUARTER
wodiej

I am all for the credit card rate freeze. A credit card I had raised my rate from 9.9% to 19.9 and I have excellent credit. When I called customer service they said they were doing it to everyone. I got a lower rate card and promptly closed my account. they’ll never get any of my business again. A better way for CC companies to handle late payments is to not only freeze the rate but freeze use of the CC for a certain period of time. I know people lose their job and then can’t make the payment. The CC companies are trying to make those of us still working pay for it. How about cutting some of that waste at the company w all the CEO bonuses and benefits.

Bernie needs to be hung up in the middle of Wall St and every single person who benefited from his schemes knowing what he was doing, should be prosecuted and their financial assets seized.

I wonder since this financial crisis is starting to affect the wealthy if finally someone will pay attention to what is going on or at least realize, greed always ends up backfiring.
workingclass artist

Hmmmm…Tip o’ The IceBerg?…Good Article NQ…
William L. Donlon

OBAMA MUST BREAK OUT AND BRING REAL CHANGE TO THE ECONOMY!!

The official definition of recession is:

“Two or more consecutive quarters of contracting real GDP.”

“A depression is a recession in which the peak-to-bottom growth contraction is greater than 10% of the GDP.”

“A GREAT DEPRESSION IS ONE IN WHICH THE PEAK -TO-BOTTOM CONTRACTION EXCEEDS 25% OF GDP.”

In the period from August 1929 through March 1933, President Herbert Hoover oversaw a 43-month long contraction of the US economy of 33%.

Barack Obama will break that record.

He will preside over the Very Great Depression of 2008-2014.

He Must get serious and find a new cast of financial advisers before Inauguration Day, January 20.

Recycled New York Fed presidents, Paul Volckers or Larry Summers are not the “CHANGE” the markets need.

What Is Needed is a radically new strategy to put virtually the entire United States economy into some form of an emergency ‘Chapter 11′ bankruptcy.

A Reorganization that would allow Banks to write-off up to 90% on their toxic assets.

Forget yesterday’s “Stimulus Packages.

Obama must make BOLD NEW STROKES to save the real economy for the American population and the rest of the world.

Obama’s choice is between shredding Paper or human lives.

If this is not done by May 2009, it will be to late.

lark

and the rest of the world

Exactly who cares about the rest of the world? Was Obama elected by the rest of the world?

First of all, caring about the rest of the world will effectively reduce caring about the U.S. and will effectively reduce your concerns.

Obama will do nothing of the above any way, maybe he can do something for the rest of the world since he will be moving now into an election campaign to get elected World Emperor.

Obama not only knows squat about doing presidential work, he has ZERO credibility and does not know about ‘WORK.’ He only knows about ‘DUCKING WORK.’ Obama is Bush 3. Recession in, ‘there is no word yet invented for the state of the economy at the end of Obama’s terms,’ but depression will not describe it.

The solution is to go back to the Clinton years and make the entire U.S. economy a fantasy made for TV movie.

William L. Donlon

Lark:

“Who cares about the rest of the World?”

I do!

The British Pound Sterling and then the U.S. Dollar have been the “standard” by which the World Economy have been marked for over one hundred and fifty years.

Economic instability leads to Domestic and World unrest.

World War II, with 50,000,000 dead was the unrest of the 1929 – 34 depression.

The Depression saw the rise of Hitler, Tojo, And Mussolini.

Today’s “World” economy is far more interdependent than it was Eighty years ago and the consequences will be far more catastrophic when it fails.

Like it or not, Obama’s election will effect the residents of every country on the Planet, thats just a fact of economic life in 2008.

lark

You care but I don’t. Not anymore. And I care even less that the U.S. president should divert his attention to the rest of the world when I pay him only to pay attention here where he was hired to do an specific job.

And I don’t want to pay also for world caring. Not with tax dollars. U.S. tax dollars are for U.S. business and not for world business. Let other countries raise taxes to fix their own problems.

I would sell them IBM computers to keep track of every penny they earn and tax every penny also.

And about world unrest. I don’t care also. Each citizen of each country should solve the problems in their own country, fight their own wars.

LD

Lark….whether you like it or not, our economy is merely part of the global economy, albeit a big part of the global economy. Increased protectionist policies at this point will likely accelarate economic decline here at home, much as they did back in the ’30s.

lark

LD you are right it does not hinge on my preferences. But his point was that we need to ‘save’ the economy of the rest of the world, specifically Obama.

I did not say nor do I say not to engage or participate in trade or in strategic notions of economic uplifting policies.

I object to our president ‘saving’ anyone else except us. They can save themselves. I believe they should be equipped to do so as well as us.

Lets stop thinking we are some Papi and Mami of the world. They are grown ups and should start fending. As Mami and Papi it seems we are not only broke but poor models to follow. I said we should sell them IBM computers.

Remember what I said to you a few threads ago, that your mistake is no factoring IBM in your analysis. And yes, I never said that if anyone messes with our IBM computers they would not automatically self destruct.

wodiej

my only concern w the rest of the world is because all of our economies are intertwined. If one goes down, we all go. As for anything else, instead of just giving hand outs to other countries especially while people here go hungry, we should be helping countries learn to HELP THEMSELVES. This is the problem w America now. Gimme, gimme, gimme but no accountability. Show countries how to take care of themselves then we can worry about what is going on here.

LD

William….Thanks for the post. I will grant you that the “stimulus” package we are seeing outlined by Obama is consistent with the New Deal implemented by FDR and the programs implemented by Japan in the 1990s.

Certainly there can be a healthy debate over how effective those worked or not but there is plenty of analysis to say that they were not very effective.

I will provide some of that in an upcoming post.

lark

LD you sound like Obama, for it before you are against it. A healthy debate begins without prejudgments. One needs to define ‘healthy debate’ before assuming one can reach one intuitively.

LD

Lark…I will admit that I have a little bit of a tough time tracking your flow of comments and ideas.

I am not trying to be inconsisent. I believe in fair and free trade in open markets. I don’t think protectionism is productive over the long haul.

That said, I agree that the US can not be the “savior” for the world.

I hope this clarifies the situation.

lark

I think that was a hand shake. My hand felt your warmth.

lark

it turns out that Bernie’s niece, who just so happens to be the chief compliance officer at the firm, started dating an SEC attorney in 2003 as he was investigating Bernard Madoff Investment Services. They married in 2006. I reserve comment

When will the movie made for TV be coming out in the Love channel. I want to watch it.

There are also there plenty of scripts for TV movies, specially for FX, Sci-fi and Comedy Central.

LD why not do us a favor and recommend us a good acting school where we can learn acting, a good writing school to learn to write movie scripts, a good agency and a list of producers that we can call.

The money is the the movie business, re-enacting life.

oowawa

The money is in the movie business, re-enacting life.

If this turns out to be anything like the Great Depression, the money will be in the movie business, helping people to forget about the real world outside. With our last shrunken dime we will rent a place in the dark theater and watch people dance and sing and find romance.

http://edgeoforever.wordpress.com/ Not Your sweetie

Unka Dick knows his cousin will protect his legacy: the authoritarian executive
http://edgeoforever.wordpress.com/2008/12/16/unka-dick-my-cousin-will-cling-to-the-power/

lark

Yeah, well fat chance. Things change and with difficulty Obanana will get anything he wants from Congress, specially now after Blagogate. Congress will find a way to starve Obanana and make him as thin as Rice zero accomplishment SOS.

oowawa

**Breaking News: Hearing that GM and Chrysler (not Ford) may receive upwards of $40bln from the administration and the Fed through use of TARP funds

Forgetting for the moment about the constitutionality of using TARP funds to bail out the auto industry, I thought that Chrysler, 80% owned by predatory and affluent Cerberus, waa the least needy of the Big 3? How come they get the TARP moola and not Ford?
mountainaires

Credit card proposal: a new federal proposal is being launched that would restrict banks from increasing credit card charges for consumers with outstanding balances. This proposal sounds like a good consumer proposition and it is surmised would save consumers $12bln. That said, do you think that the banks will not try to “replenish” that $12bln elsewhere? Perhaps banks will just increase rates on new cards right from the outset.

It would “save” consumers $12 bln. Perhaps, in the aggregate. But that won’t solve the problem as well as a credit freeze on accounts constituting more than a certain percentage of allowed credit. I like that idea more, precisely BECAUSE it forces banks to police their own predatory practices even as they are policing their consumers’ profligate spending.

Allowing banks to continue to RIP OFF consumers with usurious rates of interest won’t send the message home to either the bank or the consumer.

Don’t feed the predators, people. Stop charging altogether, and pay cash. Stop shopping and hoard your money in an FDIC insured bank CD. Until American consumers stop their own “pay-to-play” schemes, they’ll continue to spend their way into serfdom.
oowawa

Offered without comment:

Housing starts plunge 18.9% to record low
Single-family building permits fall 12.3% in November, setting 27-year low
By Rex Nutting, MarketWatch
Last update: 9:54 a.m. EST Dec. 16, 2008

WASHINGTON (MarketWatch) — U.S. home builders threw in the towel in November, slashing construction of new dwellings far below the worst levels seen in 50 years, according to Commerce Department data released Tuesday.
New starts dropped an eye-popping 18.9% to a seasonally adjusted annual rate of 625,000, the lowest since the Commerce Department began keeping records in 1959. According to similar records kept elsewhere, it’s the slowest pace of construction in the post-World War II period.
Sammie

Now, what’s up with the insider trading and so called ponzi scheme at Citi that is supposed to make Madoff’s dealings look like small potatoes? I’m beginning to fear that the entire financial sector has been one big scheme for the last decade or so.

lark

It has been and everyone loved it. And when I say everyone loved it I mean pastors and priests. It kept the coffers of their churches pretty full. Communion on the other hand still worked out with broken crackers and the new grapefruit drink that contains on 10 percent grape juice.

Think about it. 10 percent grape juice used for communion. About the same degree of faithfulness as any of those business entities.
LD

Sammie,

If you have not read the piece that I wrote on Novemer 12th, “Wall St. Model is Broken….and Won’t Soon Be Fixed”, I would strongly encourage it. I provide a review of developments on Wall St. for the last 20 yrs. I hope you find it informative.

Sammie

http://www.nypost.com/seven/12042008/business/ponzi_scheme_at_citi_142511.htm
William L. Donlon

$50,000,000,000 is a big miss.

Why does the person who oversaw the Fed in New York deserve a Promotion?

That is exactly what Barack Obama is doing with these Cabinet Appointments.

Our Economy is going into free fall and it needs real “Change” in our approach.

We need new Eyes to take a “look under the hood”.

I have no faith in rearranging the Deck Chairs on this Titanic.

Obama is going to oversee a 44% downturn, from top to bottom, in this 2008 – 2014 economy.

We are talking about a “Super Depression” between 2008 and 2014.

Unemployment will reach 35 — 40%

We need a “NEW” New Deal, not warmed over 1930s.

Obama MUST pick new people for the economic positions in the cabinet, before January 20.

Nothing that is now being done is having any effect on the final outcome of this Economic Crisis.

Bailouts? Economic Stimulus Packages? Lowering the Interest Rate?? Come on let’s get real.

It’s time for the “Fed” to throw in their hand and draw five “NEW ones if they hope to pull this out.

Start listening to the people who saw this Elephant sitting in the room back in 2002, not the ones who are still asking; “What Elephant”?

Barack, Give Me or Larry A Call! We need to talk.

And then you need to look the American People in the eye and level with them.

LD

William…If I hear from Barack, I willtell him to hold the line so I can get you conferenced in. Great idea!!
LD

William…If I hear from Barack, I will tell him to hold the line so I can get you conferenced in. Great idea!!

William L. Donlon

Larry:

Do you get the feeling you’ve seen this movie before?

Curly Larry & Moe push their Lamborghini into the Blacksmith shop to get it fixed.

The blacksmith tells them they need a specialist so they push it over to the Veterinarian.

Obama is tapping Economists that are living in the Age of Magellan.

One of the problems that landed us in this situation is the Fed kept interest rates to low to long.

Look at these statistics on Wal Mart that is not in Washington looking for a “Bailout” and are not on Obama’s speed dial.

At Wal-Mart, Americans spend $36,000,000 every hour of every day.

This works out to $20,928 each minute.

Wal-Mart will sell more from January 1st to March 17th than Target sells all year.

Wal-Mart is bigger than Home Depot + Kroger + Target+ Sears + Costco & K-Mart combined.

Wal-Mart employs 1.6 million people and is the largest private employer. Most don’t speak English.

Wal-Mart is the largest company in the history of the world.

Wal-Mart now sells more food than Kroger & Safeway combined, and keep in mind that they did
this in 15 years.

During this same period, 31 grocery chains sought bankruptcy (e.g. Winn-Dixie).

Wal-Mart now sells more food than any other store in the world.

Wal-Mart has approximately 3,900 stores in the USA of which 1,906 are Super Centers.

This is 1,000 more stores than they had 5 years ago.

This year, 72 billion different purchasing experiences will happen in Wal-Mart stores.

This is eleven (11) times the population of the earth.

90% of all Americans live within 15 miles of a Wal-Mart.

So, let Wal-Mart bail out Wall Street . . . . .

No!

Compared to the Big Three Auto People the Wal Mart people know their Shit.

They should at least be consulted by the Obama Team as they start to tackle this problem.

Maybe Obama should look there for the experts to fill his cabinet.

Barack, you have got your head out of the Daily Kos and start reading No Quarter. Stay in touch, give Larry or me a call.

lark

I applaud your statistical info posting on WalMart but do not share your confidence just entirely.

I have had my fights with WalMart and yes I have had good efforts rewarded. But WalMart lately have devised ways to hold back customers who care to complain. Although my very last effort has a success, at least up to my knowledge today.

No, WalMart stores now are robots. Robots working on auto pilot. Not that there is anything wrong with that, except no one knows anything in there. That is there is not one employee that will give you an answer to a consumer question. And General Managers are now unavailable – totally. You can get an assistant manager but they would more often than not advise you that they have no ‘saying’ power.

And by the way, the Dept of Agriculture of my state will not deal with WalMart. They don’t know how to.

But yes, WalMart for the most part is a good citizen and a great American success. And yes your idea seems a good one. Maybe. But is outside their business model.
LD

Provide customers good products at fair prices…sounds like capitalism. Novel concept. Perhaps more outfits should pick up the model.

rolling_thunder

These are scary times with all the ongoing corruption and criminal behavior. Now this week we are faced with a nearly inexplicable alleged fraud involving Madoff Securities in which somewhere between $17 billion and $50 billion has just disappeared. When will the madness end?
rolling_thunder

Riding a sea of unprecedented liquidity, leveraging beyond reason, and believing one’s own press has led many to a false sense of ability in the past few years. Only now is reality coming back into their space. They should embrace this reality, clean up their acts and stop blaming unusual market conditions for their troubles. Assumption of responsibility for their own actions is the only path to take to restore trust. As an old saying goes, “trust is something that is earned and rarely freely given.”

lark

True. One might even say that 24/7 news and financial channels should be limited to only the time required for truthful reporting. All the rest should be slowly but surely censored by self-censoring or self-reflection. If you don’t have something truthful to say, then run cartoons.

interested party

This quote from Karl Denniger at Market Ticker:

We can’t have things for free.

We can’t spend more than we make.

Houses can’t sell for more than 3x incomes and be sustainable. Prices must come down.

We can’t keep charging up the nation’s (or our personal) credit cards.

We can’t have both good-paying jobs in the US and $30 DVD players. Pick one but don’t bitch when the other disappears.

We can’t tax or spend our way out of this mess. The bad debt must be defaulted, and this will mean bankruptcies among both people and companies (including banks) – lots of them. This is inevitable.

We can’t kick the can down the road any longer. The mathematics do not lie and can no longer be ignored. The longer we continue to deny and kick the can the worse the destruction will be in our economy, employment and capital markets.

The swindlers must go to jail. It is the only deterrent that works.

This is the hard news folks. Will Obama fix the problem?
This quote about Obama:

I’m planning for the worst, because while you may be from the Land of Lincoln, I don’t believe you have what it takes.

Prove me wrong sir, and make me proud of our nation and its President.

The ball is now in your court; Barack.

LD

Interested….greeat post. We here at NQ can and will keep publishing stories and insights to keep our loyal readers “in the know”.
lark

One smart learned fellow in a country. Another 299 million 999 thousand 999 to go.
rolling_thunder

Who’s Barack? Oh that guy that wanted to be president by any means..that’s right.
Now based on his history of a failed district with 11.5% taxes, leaking nuclear power plants, backroom dealings, lack of care for the ‘people’ why even muse his capabilities? He is not the savior. If anything, his stolen election has created a worse downturn than otherwise would have been had we had an honest election and an honest winner. Barry is a failure before he gets started. I know, when I was 19 and lived in NYC, I could bullshit my way to a cushy job hire but had no idea what I was doing. I couldn’t perform on the job because I lied about my abilities like “Bark” does. Lieing didn’t make me competent for the job just because I said I could..NO. That’s what Barry did. He screwed the pooch voters and the American people by implying he was fit to take the job. NOT! So no one is minding the store. Man up. Get your guns and food in order. It’s going to be mayhem. Can we impeach him before he gets inauguarated?

lark

I am glad that you relate the Obama election with Resume pushing. I agree with you 100 pc and admire you for this post. You can see it because you have lived it. Most people want to believe that Resume pushing is necessary and the way to keep going. They prefer to believe what is ‘just words.’

Corporations simply need to know that people are smart and they can learn to do anything if you allow them a few days and a few access dollars to get trained – even at home if they want to. What works is ‘MOTIVATION.’

Obama is at the top of Resume pushing a disaster. You are right. Obama’s motivation is adulation.

rolling_thunder

But most positions are not trainee unless otherwise stated. That’s the point. They hire you to perform right away with no training. Bullshitting and saying yes I can do that when you can’t is disaster. You can’t last on the job and you make a fool of yourself.

justsomeone

what in the hell was Madoff thinking? Shame on him. As for the SEC, what a joke.

lark

This all began when Regan increased government but decreased the Agriculture’s Dept consumer complaint protection divisions, not only Federal but States too. Corruption started to grow to the monster it is today.

Even today when I find something wrong anywhere that affects consumers, I have a very difficult time going at it. One would think that there would be a church ministry dealing with corrupted business practices but not that I know of any.

At least last time I did call WalMart and the Regional Mgr. called me and he said they would fix the problem and I believed him. My compliments to WalMart. But do you imagine complaining to Citi about malfeasance within their ranks?

rolling_thunder

Hillary won the primary and would have beat Mac. Hillary is my president. FU all ignorant OBOTs-liars. Bite the Barky. He sucks. Yes, see my disgust. It’s based on how far down BarrySoetoro will take this country monetarily. Liars never succeed in the end. They will get their karma. Barky said he wasn’t qualified but ran anyway. Then he stole the election with help from his usual ‘third party’ operatives.
Money is only a means. The means is to be spiritually fit and to keep body and soul together. The ultimate goal for all alive is to love. Or at least that’s what life is meant for. NOW put the real winner in the white house. Stop this Baracky nonsense NOW!
Hillary is the winner. Payback’s gonna be a betch. If Hillary was not cheated out of her win at roll call and the RNC meeting, this would NOT be blowing apart in our faces. We deserve better! Hillay is competent. Baracky Barry Soetoro is not. Proceeed thugs.. Karma is coming to get you! As Bob Dylan says, you either work for the Devil or for GOoD. Looks like we know who BarrySoetoro works for..
He’s the emissary of the Devil and there is no denying it!
Linda C.

Pushing the interest rates to near zero is not going to help and will probably hurt. It did not work in Japan. The banks aren’t lending so it matters not what the interest rate is when it comes to that. The stock market rallied for a day o n the news. However, actually getting that money from the bank is another story. The banks are sitting on their capital to cover the losses they see coming down the pike. They are not going to lend it out and leave themselves exposed. Madoff made off with a healthy share of bank money btw that is beyond the write downs they were already expecting.what The unfortunate fallout from lower interest rates is the devaluation of the dollar, this will push oil prices back up and make OPEC happy, but we will get screwed royally. The economic model of the Wiemar Republic should have the same results now as it did then.

I often wonder what the relationship is between our bailout and sovereign wealth funds whose money is from oil. It seem the only ones who benefits from the lower interest rate and the weaker dollar are the oil companies and commodity exchangers. Higher commodities will result in higher food prices and unrest especially in poorer countries.

The problem with the New Deal is that it was enacted too late. Unemployment was already about 20 percent when any of those programs were initiated. The prior thinking was letting the market correct itself, but that didn’t work either in terms of suffering and poverty. WWII started the heavy industry going again, but consumer spending was limited due to rationing. Has anyone else noticed that with this long war we have, that heavy industrial output has not risen? Or has it and I just missed it.

LD

Thanks, Linda….I agree with a lot of what you are saying. Thanks for sharing.

Lizzy

LD, do you advocate owning some gold when the economy is so bad and if so how much?

LD

I think it would be irresponsible of me to advocate a general positon on a comodity like gold. If a person already has a fairly diverse portfolio with limited debt then perhaps buying gold is a prudent way to further diversify nad add some inflation protection. I would make the play more on the actual commodity, than through gold mining stocks. I am fairly certain that you can purchase an ETF thaat tracks gold.

For the overwhelming majority of people though I would think about paying down debt first, then adding some diversity within your current holdings.

To the extent that you are concerned about inflation, another good move is to buy Treasury Inflation Protection Securities (TIPS).

Lizzy

The facts and analysis of the post were great and there were some very good comments. At this time I am trying to develop strategies for hard times. When I was young my church advised having a two year suply of food staples on hand; I never paid much atention to the idea but I think I will start stockpiling.
Hot Librarian

The interest rate in USa have ben shockingly & disarmingly low . Money is worth more than that. Somewhere sometime ago much of this wealth was earnt the hard way .

As a contrast the official interest rates in Australia was between 6 – 8.5% since 2000. They were put high to stop the economy overheating as it had 12 + years of growth-one of the stars of the OECD.

But a mid level house in a mid level suburb in Sydney will cost 450,000. If we default on the mortgage the bank sells it & the difference must still be repaid.

Recently there have been some drastic contractions & deferred major schemes but so far not too bad.

We did nothing wrong economically -we have little govt debt but we will get the backwash although it is expected that Australia will do better than most.So far we are about 15th on the world economy scale & we hope to rise one point per year during this recession.

So feel free to ask any questions -esp Lark -as one of the world out there!

For example our National health is 1.5% of income & extra private insurance (I know I just paid ) is $188 per month for a family.

One thing is for SURE -American financial & business is no longer an export. age in FTAs.(BTW these were generally to the US advantage.

We have one & incidentally Rahm Emanual voted against it!
justsomeone

A continued spiraling down in values (devaluation)is a depression. The Great Depression technically lasted from 1929 to 1934 but actually for a lot of practical purposes it drug on until after WWII. That’s almost 20 years, some sources say until 1954. There’s really no precedent for what’s going on now. Things have never been so interconnected & we have no history of what happens when massive deforestation is combined with wild patterns of mass migration, etc. Ron Paul & his Mises economic theories conclude the FED itself creates bubbles, & many times it does seem that way. While riding a bubble upward & jumping off right before it bursts can be very profitable I’m not sure the rush is worth the inevitable economic pain that ensues. Bubbles are a lot like ponzi schemes. The FED loves to partner with social engineers, currency values are constantly being manipulated, supply & demand models are constantly being muddled. There’s just no way to get a clear picture. Gold mining & the DBI both up ticked a bit recently, but it’s too soon to tell what that means…no uptick in DBI means, in part, not much grain is moving, means people may starve, riots, etc. Erratic weather patterns & droughts necessitate the movement of grain & other food stuffs & so far they’re not moving enough. An upswing in gold usually signals fear in the currency markets. If gold mining stocks & GLD really rally way above the DJI hang onto your hats, the ride downward could get wild. I can’t wait to hear Sarkozy’s economic proposals & I’m in countdown mode waiting to see how long it takes Barney Frank to try & tax net worth, rather than just income. China, with its new majority young male population will likely have little patience with high unemployment & a lot of devaluation. As for the planned massive infrastructure projects: I find it hard to imagine laid off bankers, brokers, real estate agents, etc laying brick or pouring asphalt. So if we’re looking for happy indicators, sorry I don’t see any.
justsomeone

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