Archive for May, 2009
Currently, the US federal debt stands at more than $100 trillion. According to the recent US stock market rally, the fact that the US government is not only bankrupt but has put every four-person family in America on the hook for more than $1.45 million does not merit concern. Of course, in reality, the US economy and the US stock market are two entirely different creatures. Perhaps, if the Plunge Protection Team took a prolonged vacation, US stock market behavior would begin to reflect the fundamentals of the US economy again. However, it is important for an investor to understand that due to the not-so-invisible hands of Goldman Sachs, JP Morgan and the Plunge Protection Team, quite often, the US market can move higher for sustained periods of time even when the fundamentals of the US economy at large are atrocious. This is the fiat money-induced phenomena otherwise known as irrational exuberance. In the long run, the fundamentals of the economy at large will catch up and drive US stock market behavior once again. Despite the recent stock market rally, the fundamentals of the US economy are downright scary. According to the figures released by the US government, as of May 25, 2009, the US federal debt stood at $11.3 trillion, about $37,000 for every man, woman and child in the US (we’ll get to the real federal debt figure soon). To accommodate this growing debt, the US government merely raises its debt ceiling every so often to avoid default in the US Treasury market. Currently this debt ceiling stands at $12.104 trillion. Recently foreign appetite for Treasury auctions has dried up and the US Federal Reserve has resorted to buying US Treasuries in the absence of foreign demand to keep the US Treasury market from collapsing. However, what if the largest foreign holders of US Treasuries realized that the current US federal debt already exceeded the national debt ceiling by $98 trillion? How would they feel about keeping the US Treasuries they currently hold? Read more …
May 27th, 2009
The fact that I’ve been able to accurately predict the significant stages of this ongoing crisis for over 3 years has nothing to do with intelligence or my ownership of a crystal ball. It merely has to do with the fact that I have understood from the very beginning of this crisis that the origin of this crisis was rooted in our global monetary system. It really is that simple. The “experts” that parade around TV and in the media have consistently been egregiously incorrect about their assessments regarding this crisis not because they are incapable of reaching the same conclusion as I. To the contrary, as insiders at the highest levels of the US Treasury, the US Federal Reserve and Wall Street, they almost certainly understand the mechanisms of this crisis even more than I do. However, they have been consistently wrong about the direction of this crisis because most of them have ulterior motives that are better served through the deliberate and systemic concealment of the true nature of this crisis. Read more …
May 21st, 2009
Today, I am analyzing how a conscious effort to track history can serve as an intelligent guideline for future investment behavior. More than 18 months ago, I wrote an article on my investment blog, the Underground Investor, called “The Coming Investment Crisis: Beware the Turbulence that Lies Beneath the Surface”. Since my commentary in this article regarding the foolishness of calls for a new bull market materializing back then, even taking into account this latest market rally, the DJIA is still down 40.87% while the S&P 500 has lost 42.99%. I have not changed anything about the below article that I wrote on October 15, 2007, so as you read it, please remember that this article was referring to the state of the US markets on October 15, 2007, NOT the state of the US markets today.
Still, the important point I want to make by republishing one of my old articles is that many times, many relevant lessons can be applied to today’s markets by studying past market behavior. It is very difficult to ignore the parallels and similarities between the optimism stated by the bulls on October 15, 2007 and today. Read more …
May 18th, 2009
Below is a story that originated out of London today. In any event, it ties in nicely with my How the Financial Elites Enronized America story, so I’m just reposting it below for a quick review. It should be a self-evident truth that an honor system among regulators that have consistently failed to regulate is not the smartest system to use. Read more …
May 15th, 2009
Okay, well not the current President, but If you listen to our President from three decades ago, he would tell you that we are in a bear market rally that is going to come to an end very soon. It’s irrelevant to me even should US markets rally for several more days or several more weeks because the fundamentals behind this rally are lousy. Though the speech from below is more than three decades old, history does have a way of repeating itself and one can use many of President Nixon’s points to illustrate what will happen in the future with our current economic crisis. Interestingly enough, given the comments in his speech, US President Richard Nixon, also known as Tricky Dick for his deceitful ways, could have easily spotted the fundamental flaws in this current global stock market rally led by US markets. Read more …
May 14th, 2009
For the past couple of weeks, bank shares have grown in share price faster than a steroid-induced bicep. There has not been much reported by the media in terms of negative news about the US financial industry from Ben Bernanke, bank CEOs, or even the Federal Reserve, even though the bank stress tests resembled a public relations campaign much more than a stress test. Despite the rosy picture painted by the financial media of the US banking industry and the consensus that “the worst is behind us now” by financial executives, the 3-ring circus that is the US Federal Reserve, the US financial industry, and the US Treasury still can’t seem to get their stories straight. Read more …
May 12th, 2009
I do not profess that the main structural arguments of the following essay are mine. Rather they belong to a rather famous former Chairman of the US Federal Reserve named Alan Greenspan as noted in his rather seminal 1966 essay titled “Gold and Economic Freedom”. However, I have taken the specific arguments of that very prescient essay and modified and reinterpreted them to fit into the contemporary situation of our current global and financial crisis. It is clear that at some point after his appointment to the Chairman of the US Federal Reserve in 1987, Alan Greenspan turned his back on the very structural beliefs about gold’s inextricable connection to freedom that he championed some twenty years earlier. However, Greenspan’s failure to uphold the ideals he once championed does not invalidate their keen insight and validity. Today, these very ideals are especially pertinent to the impending economic catastrophe we face today, despite the continued three-ring circus of government, Central Bankers, & corporate executives that continually tell us that the financial crisis has bottomed. Read more …
May 8th, 2009
Often, during confusing economic times, people turn to icons in the investment world such as Warren Buffet and bond king Bill Gross for direction and blindly absorb the opinions of such men as their own without any critical analysis. To allow a handful of prominent men to guide the direction of public debate regarding our global financial and monetary crisis is an extremely dangerous and counterproductive habit, for a great many of these men possess ulterior motives that drive the vast majority of their public actions and statements. Consider if you owned hundreds of millions of shares of a single stock (Warren Buffet reportedly owns more than 300 million shares of Wells Fargo stock). Would you not be inclined to make statements that supported a rosy an outlook as possible for Wells Fargo if you were aware that your public statements held enough weight to move the stock higher? Read more …
May 7th, 2009
More than 2-½ years ago when I predicted a global stock market crash on my investment blog, even foreshadowing the duration and the severity of the impending crisis by naming it the Peak Investment Crisis, many called my predictions ludicrous and far-fetched. In that article, I specifically stated that the declines in global stock market indexes could easily “dwarf the pullbacks that caused a 10% decline in the London FTSE, a 35% decline in the Indian markets, a 30% decline in the Brazilian markets, and 20% decline in the Japanese markets over a several week period in 2006” and that “it [was] a potential disaster that 99% of people [were] unaware of.” Today, I foresee another enormous disaster with far wider-reaching and more serious implications than even our current global financial crisis. Read more …
May 6th, 2009
Last week, when almost every major US bank manufactured profits out of thin air by changing their regular reporting periods to exclude months in which huge losses occurred, by changing their definitions of bad debt, and by revaluing their assets at fantasy land valuations that they will never receive in the open market courtesy of FASB, this event was a non-event to me because it merely continued the process known as the Enronization of America. This event, the systemic injection of fraud and deceit into nearly every aspect of American life, has been unfolding for decades, even prior to the Enron scandal itself.
Recently, Bank of America CEO Ken Lewis testified that former US Treasury Secretary and ex-Goldman Sachs CEO Hank Paulson instructed him to disobey securities law and conceal material losses in the Merrill Lynch merger from investors. Lewis additionally testified that Paulson threatened to fire him and his entire board if he tried to back out of the Merrill deal. These revelations, too, did not surprise me Read more …
May 1st, 2009
