Tag: us economy

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The Secret Behind The Wealthiest 0.01%

Belfast Telegrapsh Writes: Combined wealth of the 85 richest people is equal to that of poorest 3.5 billion

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The wealth of the 85 richest people equals that of half the world’s population, says development charity Oxfam.

Global inequality has increased to the extent that the £1 trillion combined wealth of the 85 richest people is equal to that of the poorest 3.5 billion – half of the world’s population – according to a new report from development charity Oxfam.

Oxfam chief executive Winnie Byanyima said: “It is staggering that in the 21st century, half of the world’s population – that’s three and a half billion people – own no more than a tiny elite whose numbers could all fit comfortably on a double-decker bus.

“We cannot hope to win the fight against poverty without tackling inequality. Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table.

“In developed and developing countries alike we are increasingly living in a world where the lowest tax rates, the best health and education and the opportunity to influence are being given not just to the rich but also to their children.

Read The Rest Of The Article

Indeed, this is staggering. Just think about it for a second. Just 85 of the wealthiest people control the same amount of wealth as the poorest 3.5 Billion – half of world’s population.

At least a part of me wants to say, “So what?  Work your ass off and become part of the elite.”  Yet, after starting a number of businesses and being a part of the investment community,  I now know it is a lot easier said than done.  It takes favorable circumstances and luck to get anywhere close to that level. In other words, for most of us, approaching the pinnacle of wealth is nothing but a pipe dream.

That is why I am starting to shift my point of view towards the view shared by both Warren Buffett and Bill Gates. They argue that the taxation structure in place is disproportionately setup to favor the rich. That should not be a surprise to anyone as the system is setup by the rich.  The problems begin when we have a situation where 85 people control more wealth than the lowest 3.5 billion people.  It’s bad on two fronts. 

First, it stagnates the economy. The accumulated wealth held by so very few people is not being properly allocated to benefit the overall economy. For the most part, it just sits there accumulating interest. Second, it creates social unrest. If history teaches us anything, eventually, this type of a “social setup” leads to revolutions or worst, wars.

What is the answer? I am not sure, but this cannot continue over an extended period of time.  Some changes must occur. 

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The Secret Behind The Wealthiest 0.01%

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Is 30-40% Unemployment The Future?

The Economist Writes: Coming to an office near you The effect of today’s technology on tomorrow’s jobs will be immense—and no country is ready for it

robotics and job distruction

INNOVATION, the elixir of progress, has always cost people their jobs. In the Industrial Revolution artisan weavers were swept aside by the mechanical loom. Over the past 30 years the digital revolution has displaced many of the mid-skill jobs that underpinned 20th-century middle-class life. Typists, ticket agents, bank tellers and many production-line jobs have been dispensed with, just as the weavers were….

Read The Rest Of The Article Here      

The article above is an interesting “must read” for anyone with a job. While I agree with the overall premise of the article they have missed a few significant points.

First, as productivity and technology improves over the next decade, what will happen to all of the “white collar jobs” that our economy used to, and to a certain extent, still supports. Will there be another advance, either technological or otherwise, that will eat up excess labor force as it did in the 21st century? That is a difficult question to answer. While I am looking incredibly hard to find some sort of a catalyst, as of right now, I don’t see anything. Maybe it will and maybe it won’t. However, the article is missing a few other points.

Robotics & Outsourcing: Having lived in Asia for a few years, I am here to tell you that outsourcing will take a large bite out of US labor force over the next few decades. Why should I hire an American and pay him at least $15/hour when I can pay a Filipino worker (who is just as good) $2.50/hour. This is basic economics. Plus, robotics are advancing so rapidly now that in many cases the cost of labor is being pushed into the $2/hour territory. I believe you would agree that such a cost will be pushed even lower over the next decade as the cost of technology drops further. Will anyone be able to compete with $0.50/hour robots?   

Finally, there is the question of the US Economy. As I have stated repeatedly on this blog, the state of the US Economy is dismal at best. The unemployment rate is being under reported. The recovery we have experienced thus far has been driven by nothing more than speculation and massive credit infusion. When it ends and the bear market starts, the unemployment rate will surge again. Sadly, I do not see any outcome to reverse my position.    

I know I have asked more questions than I have answered. Yet, a clear trend is evident. There is a tremendous amount of pressure on the US labor force. All of it is negative and none of it is going away anytime soon. If anything it will intensify over the next two decades.

So, is 30-40% unemployment rate possible? While it seems extreme, I wouldn’t rule it out. Anything is possible. Some sectors of Greek and Spanish economy are already there. One thing is for sure. Make yourself as valuable as possible so your job cannot be axed.

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Is 30-40% Unemployment The Future? 

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Did Bernanke Predict The Stock Market Crash?

bernanke meme

AP Writes: Bernanke likens ’08 financial crisis to car crash

WASHINGTON (AP) — In his final public appearance as chairman of the Federal Reserve, Ben Bernanke took a moment to reflect on the 2008 financial crisis and compared it to surviving a bad car crash.

During an interview Thursday at the Brookings Institution, Bernanke recalled some “very intense periods” during the crisis, similar to trying to keep a car from going over a bridge after a collision.

The government had just taken over mortgage giants Fannie Mae and Freddie Mac. Lehman Brothers had collapsed. He recalled some sleepless nights working with others to try and contain the damage.

“If you’re in a car wreck or something, you’re mostly involved in trying to avoid going off the bridge. And then, later on, you say, ‘Oh my God!'” Bernanke said.

Read The Rest Of The Article Here

An innocent car crash Mr. Bernanke? Just an accident? I guess that’s one way to look at it. There is another. How about getting so drunk that you drive your car into a pole.  

Of course, the above is an analogy for using entirely too much credit to propel our financial system and our underlying economy right after the Tech crash. As we know, that led to the housing bubble, the stock market bubble and the credit market bubble that all blew up in 2007-09. Now, you can’t blame Mr. Bernanke for that. For the most part, another “brilliant economist” under the name of Mr. Greenspan was responsible for the financial collapse we have all suffered during that time.

You can, however, blame Mr. Bernanke for what happened between 2007 and today. It seems like he took Mr. Greenspan’s playbook, squared it and then multiplied it by 100. By pumping a tremendous amount of credit into the system since the market meltdown of 2007-09 Mr. Bernanke upped the ante for any reasonable resolution to our current financial issues.

Make no mistake………..the current stock market, real estate and economic recovery has very little to do with the underlying fundamental economy and everything to do with massive infusion of credit into the financial system by the FED.

It is a speculative illusion at best. When the credit card is finally maxed out, there will be hell to pay. Based on my mathematical work we are just a few short months away from the start of the bear leg. Get yourself ready.

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FED Economists…Stupid, Liars or Stupid Liars?

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Reuters Writes: Fed’s Evans: Optimistic 2014 will be the year economy takes off

CORALVILLE, Iowa, Jan 15 (Reuters) – Chicago Federal Reserve President Charles Evans on Wednesday said he’s optimistic that 2014 will finally be the year the economy “takes off,” adding that monetary policy must remain accommodative for it to do so.

Wait a second. The economy hasn’t “Taken Off” yet? I am confused. If you listen to the financial media “propaganda machine”, most investment advisors and money managers, even our own president, the economy is doing great. The stock market is up over 100% in the last 5 years and everyone is getting rich.

Of course, such statements are viewed as fallacy on the main street.  For most people, things haven’t improved. If anything, they have gotten a lot worse. The reason you are seeing “perceived” improvements has nothing to do with the real economic growth and everything to do with speculation and corruption.

Yes, corruption. If you want someone to blame, there is only one place you need to point your finger. At the US Government and the FED. They have pumped our economy full of hot air in the form of credit and speculation.

That is not without cost. Eventually, our economy and our capital markets will have to readjust themselves. When they do, there will be hell to pay. As my earlier posts indicate, the bear market is about to start and when it does, we shall once again see who is swimming naked.

At least for me, only one mystery remains.  Are the FED officials (as above) good liars or are they just plain stupid. Judging on what they did to the economy thus far, I am leaning towards the later.     

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FED Economists…Stupid, Liars or Stupid Liars?  

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Why The Bear Market Will Start In 2014

InvestWithAlex Wisdom 8

 

Today’s 5 Minute Podcast Covers The Following Topics. Why The Bear Market Will Start In 2014?

    • Why we are still in the bear market that started in 2000.
    • The secret behind the final leg down. 
    • Does fundamental and technical analysis confirm the bear market? 
    • When will the bear market end and how low will it go?  

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Why Stocks Are Poised For Huge Losses In 2014

Yahoo Finance Writes: Stocks poised for huge gains in 2014: Top strategist

rocket ship to the moon investiwthalex 

Even though 2014 has started off with a whimper for the markets, Jonathan Golub, Chief US Market Strategist at RBC Capital Markets, believes that stocks could hit record highs this year.

“If we’re looking at an economy that’s probably going to grow at 2.5% this year – which is a very reasonable number,” says Golub, “that should be enough to drive something between 7% and 8% or more of earnings growth.”

“If you look at valuations, [stocks] still look very cheap relative to bond,” says Golub. “You add those two together and I don’t see why you wouldn’t have a double-digit return this year.” Golub says history shows stocks can still have a good year after a great year. In 2013, the S&P 500 had return of 29%. 

“If you look at the 10 best years over the last 75, the average return has been about 14% following really great years,” says Golub.

Read The Rest Of The Article Here

The article above represents a prevailing view on Wall Street today. With bearish sentiment at an all time low, NO ONE sees any potential downside. If you are to listen to the main stream financial propaganda machine and most of the large banks, the stock market is going to the moon and beyond. 

Yet, for any reasonable investor this time period should represent a perfect opportunity to pause and reflect on where we really are. Let’s think about this for a second….

Is our economic recovery real?

NO. The main street is not feeling any type of an economic recovery. With poverty rates being at 50 year highs and with “real unemployment” pushing over 15%, only financial entities have been able to benefit from any type of an economic recovery.  Once again, the perceived economic recovery has been driven by massive infusion of credit into the financial system through QE, low interest rates and speculation.    

Is the stock market overpriced?

Absolutely. While everyone will have their own definition of “overvalued”, as a value investor, I cannot find anything to invest in.  Everything is overvalued and the prices I see today are reminiscent of 2000 and 2007 time frames.  However, if you enjoy buying $1 bills for $5, go for it.

Is there extreme Bullish sentiment?

Yes. Most sentiment indicators show that most bears have been killed. Some of the bullish sentiment readings are at an all time highs. Higher than 1987, 2000 and 2007.  

What does history teaches us about such times?

Well, the history teaches us that such times are dangerous. Listen, there is no doubt that the market is overpriced and highly distorted by credit and speculation. This cannot continue for an indefinite period of time. No matter what, the markets always readjust themselves.  As my mathematical work clearly indicates, the bear market is about to start in 2014. Get yourself ready. 

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Why Stocks Are Poised For Huge Losses In 2014

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Still Unemployed? Don’t Worry, Many Others Will Be Joining You Soon

Reuters Writes: U.S. job growth weakest in three years

 unemployment investwitalex

WASHINGTON (Reuters) – U.S. employers hired the fewest workers in almost three years in December, but the setback was likely to be temporary amid signs that cold weather conditions might have had an impact.

Nonfarm payrolls rose only 74,000 last month, the smallest increase since January 2011, and the unemployment rate fell 0.3 percentage point to 6.7 percent, the Labor Department said on Friday. The unemployment rate was the lowest since October 2008 and in part reflected people leaving the labor force.

Read The Rest Of The Article Here

WOW. Really? Due to cold weather? I am shocked.

The real reason behind this is rotten fundamentals of the US Economy that are getting worst by the day. Please don’t get me wrong. I am acutely aware of how the US Government and our financial media “propaganda machine” portrays recent gains in the stock market. According to them the economy is doing great, everyone should join hands and sing kumbaya as the stock market takes off to infinity and beyond. Making us all wealthy in the process.

Yet, the reality is quite different. Even thought they have pumped a tremendous amount of money into the economy, it is getting weaker by the day. There is no pricing power and businesses are not hiring due to uncertainty. I continue to see this in the quarterly reports that I read. No matter what they want you to believe, the jobs are not coming back anytime soon. In addition to poor economic conditions, productivity gains, outsourcing, technological advances and even robotics are all taking a tall on real job creation.  

The bottom line is this. If you have a good paying job….treasure it. If you don’t, try to get whatever you can.  As the bear market starts in 2014, corporations and businesses throughout the US will hand out pink slips by the million. Just as they did in 2000-2004 and 2007 – 2010.  I wish that wasn’t the case, but the reality can be harsh sometimes.    

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Still Unemployed? Don’t Worry, Many Others Will Be Joining You Soon

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Dr. Doom Needs To Grow Some Cojones

Business Week Writes:  Dr. Doom’s Upbeat Prognosis

doom and gloom investwithalex

Nouriel Roubini, the New York University economist who earned the nickname Dr. Doom with his early predictions that the housing slump would trigger an economic collapse, is trying on a smile as he looks to the coming year. In his outlook for 2014, which he laid out in a Dec. 31 piece on the website Project Syndicate, Roubini says the risk of unexpected shocks is becoming “less salient” as growth in industrialized countries accelerates to just under 2 percent. That number is close to the 2.2 percent expansion forecast by economists at Goldman Sachs (GS) and Deutsche Bank (DB).

His predictions have been less on target since he warned on his blog in early 2007 that “the party will soon be over.” At the World Economic Forum in Davos, Switzerland, in January 2009, he said, “I’ll be the first to call a recovery, but I just don’t see it yet, and it’s getting uglier.” He got that one wrong: The U.S. emerged from recession that June.

Read The Rest Of The Article Here

This should come as no surprise to real Wall Street operators. Most economists change their opinion at exactly the wrong time. They cannot see the forest through the tree.  I don’t even know what and why they teach economics.  Allow me to point your attention to a couple points from the article above to prove my statement.  

1. “Roubini says the risk of unexpected shocks is becoming “less salient” as growth in industrialized countries accelerates to just under 2 percent.”

Salient? What kind of crap is this. First, it doesn’t mean anything. Second, it absolutely wrong. The chances of “System Shock” has risen significantly over the last few years. Why? Because most of the recovery has been driven by massive credit infusion and speculation. The FED is literally creating credit cards out of thin air and then proceeds to max out said credit cards to get the economy going. Yet, it’s not working. If anything, the risk of “Unexpected Shock” is higher today than it was in 2000 or 2007.

2. “At the World Economic Forum in Davos, Switzerland, in January 2009, he said, “I’ll be the first to call a recovery, but I just don’t see it yet, and it’s getting uglier.”  Plus, he has maintained his bearing stance until now.

As my earlier work clearly illustrated, I called the March of 2009 bottom to the day and was only 100 trading points away from the actual bottom. His view shouldn’t surprise anyone. Mr. Roubini is acting like the heard. Selling at the bottom and buying at the top. Should you follow his advice or his economic forecast, you are bound to lose money.

Simply human psychology is the culprit. Just as everyone is jumping into the stock market right now (exactly at the wrong time), Roubini has changed his opinion as well. Dr. Doom my ass. All bears have been killed over the last 5 years and he is one of them. A Bear without big cojones is more like it. They should give the title to me.    

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Dr. Doom Needs To Grow Some Cojones 

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What You Ought To Know About The Upcoming Economic Storm

CNN Money Writes:  Financial risks recede in 2014

bear market is coming investwithalex

Eurasia, which advises businesses on political and economic concerns, released its annual list of potential risks to global economic stability in 2014 — and impending financial doom is not among them.

“That’s over,” the Eurasia analysts wrote in the report. “In 2014, big-picture economics are stable if not yet comforting.”

Europe has emerged from recession and Japan’s economy is shaking off decades of stagnation. The recovery in the United States is expected to accelerate this year even as the Federal Reserve gradually reduces its stimulus policies. China’s new government is implementing reforms to make the world’s second-largest economy more stable.

The relatively calm outlook comes after a period of heightened financial risks. Investors and economists have been on alert for another meltdown since 2008. But none of the dire predictions came to pass. The euro is still around. China has not crash landed. And the U.S. didn’t fall off the fiscal cliff.

Read The Rest Of The Article Here

I am sure you have heard of the “Calm Before The Storm”. The report above pertains to exactly that.  Just because the “storm” hasn’t arrived yet, doesn’t mean that it never will. Let’s take a look at the reality.

Has Europe emerged from a recession?

Is there any evidence to support this statement? Of course not. As far as I am concerned only German economy is doing good. The rest of EU members are not doing so well. While the Socialist Party in France is working overtime trying to destroy their economy, countries like Spain, Italy and Greece are going through downright depression with 20%+ unemployment and an insolvent banking systems. Maybe the EU emerged from a recession right into a depression.

Japan’s economy is shaking off decades of stagnation?

It might seem that way at the initial glace, yet the reality is different. The perceived improvement in Japan has nothing to do with real economy or any sort or real economic growth and everything to do with currency debasement and massive credit/stimulus expansion.  As always, short term gains will eventually turn into a long term pain.

As for the US and China, all of the fundamental issues remain there. Just because the calendar year turned 2014 doesn’t mean that all structural issues got better or vanished into thin air. If anything, things are getting worst. The only reason things haven’t blown up, just yet, is because both Governments pumped a huge amount of liquidity into the system to paper over issues.  Eventually, this will force the markets to correct themselves with greater intensity in the future.  

Bottom line is, the report above is garbage. Don’t believe it for a second.  This is the calm before what might be “The Perfect Storm”. 

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 What You Ought To Know About The Upcoming Economic Storm 

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Warning: Obama Admits. Another Depression Is Just Around The Corner

Huffington Post Writes: Larry Summers’ Desperate Depression-Fighting Idea May Soon Be Reality

Learning From History

If you think people who save money are being punished by low interest rates, wait until they have to deal with negative interest rates.

Slashing rates well below zero to make it painful not to spend money is the desperate approach to avoiding an economic depression recently endorsed by Larry Summers, President Obama’s former top economic advisor and one-time pick to run the Federal Reserve. With economic growth likely to be weak for the next infinity, the job market stubbornly awful and inflation disappearing, central bankers around the world have been toying with the idea for a while. Every day it gets closer to being a reality.

Read The Rest Of The Article Here.

Well, there you have it.

First, why are they talking about a depression?  If you listen to Bernanke, Yellen and/or Obama you would believe things are great and getting better. Unemployment is down, economy is up, stock markets are surging, etc….   What the hell do they mean by “desperate approach to avoiding an economic depression.”  Is Larry Summers on drugs?

Maybe the FED’s are not as stupid as I make them out to be.  If that is true, that makes them liars and criminals, committing economic crimes against the American people. Technically speaking that is exactly what they are doing. Uhmmmm, moving on before I get a call from NSA……

Listen, they know what they did and they know what is coming. The only way to combat that is to continue pumping a tremendous amount of money into the economy while hoping that interest rates stay low. However, they are running out of options.  Given current economic backdrop there isn’t that much more they can do.  Will bringing interest rates down to zero work ?

The answer is NO. Japan has tried that for 20 years without any success.  All they succeeded at is destroying their economy while trying to stimulate it. Here is the kicker….

Everyone, and I mean everyone believes that the markets behave based on what the FED does. Everyone believes that the FED’s can control and manipulate financial markets at will. That is the biggest and the most dangerous misconception everyone has. It might look that way, but they do not.

Remember 2007-09? Eventually markets will readjust on their own accord. When they do, there will be hell to pay. With or without 0% interest rates. The bear market is coming in 2014. 

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Warning: Obama Admits. Another Depression Is Just Around The Corner