Last week at its regular policy-setting meeting, the Federal Reserve announced it would double down on the policies that have failed to produce anything but a stagnant economy. It was a disappointing, but not surprising, move.
The Fed affirmed that it is prepared to increase its monthly purchases of Treasuries and mortgage-backed securities if things don’t start looking up. But actually the Fed has already been buying more than the announced $85 billion per month. Between February and March, the Fed’s securities holdings increased $95 billion. From March to April, they increased $100 billion. In all, the Fed has pumped more than a half trillion dollars into the economy since announcing its latest round of “quantitative easing” (QE3) in September 2012.
Although many were up in arms when the Fed said it would buy $600 billion in government debt outright for the previous round, QE2, all seems quiet about the magnitude of QE3 because it doesn’t come with huge up-front total price tag. But by year’s end the Fed’s balance sheet could hit $4 trillion.
With no recovery in sight, where’s all this money going? It is creating bubbles. Bubbles in the housing sector, the stock market, and government debt. The national debt is fast approaching $17 trillion, with the Fed monetizing most of the newly issued debt. The stock market has been hitting record highs for the past two months as investors seek to capitalize on the Fed’s easy money. After all, as long as the Fed keeps the spigot open, nominal profits are there for the taking. But this is a house of cards. Eventually, just like in 2008-2009, the market will discipline the bad actions of the Fed and seek to find the real normal.
In the meantime, real families are suffering. While Wall Street and the government take advantage of access to the Fed’s new “free” money, the Fed claims there is no inflation. But who hasn’t paid higher prices at the grocery store, the gas pump, for tuition, for insurance? It’s bad enough that household incomes have stagnated, but real purchasing power has declined so much that one in seven Americans, 47.3 million people, are on food stamps. Five million are collecting unemployment insurance with 21.5 million afflicted by unemployment according to the government’s own figures. That’s 13.9 percent — close to double the 7.5 percent unemployment number reported last week.
We are certainly not in a recovery. We don’t see the long unemployment and soup kitchen lines like in the Great Depression, but that’s just because the lines are electronic now.
It is not surprising the Fed has decided to hand the American people more of the same failed policies. But it is disappointing. We know what the real solution is: allow the marketplace to work. Allow entrepreneurs the chance to create instead of stifling innovation with arbitrary regulations. Allow interest rates to rise to equal the risks in the economy. Allow bad debts to be liquidated so we can build on a firm foundation. Stop printing money to benefit the government and big banks. Restore sound money to the economy and the American people. Sound money is the bedrock for prosperity and the best check on big government and crony capitalism.
Hi everyone. I came across this interesting video on youtube a few minutes ago and I thought I’d share it with you all. I totally agree with Peter Schiff on this one. It boggles the mind how messed up the structure of the global financial system is these days. Enjoy the video:
I recently came across Jim Rogers’ new book – Street Smarts: Adventures on the Road and in the Markets – and I’d figure some of you may enjoy reading a brief review of it.
For those of you who do not know who Jim Rogers is, permit me to give you his brief bio. James Beeland Rogers, Jr. (born October 19, 1942) is an American investor and author. He is currently based in Singapore. Rogers is the Chairman of Rogers Holdings and Beeland Interests, Inc. He was the co-founder of the Quantum Fund with George Soros and creator of the Rogers International Commodities Index (RICI). Jim is a well-known investor who has appeared on numerous financial TV shows.
He has written several other books, some of which are: Adventure Capitalist, Investment Biker, A Gift to My Children, Hot Commodities, A Bull in China. I haven’t read any of his other books but I plan on grabbing a copy of each one soon.
Now on to the book. First of all I should mention that this book is not a “how to” guide on investing. Instead this books is part memoir, part investment primer, part history lesson, part travelogue, part sermon, and just an all around good read. Jim Rogers is a strongly opinionated guy and I for one can definitely appreciate and respect that. He has a wealth of investing experience so what he says is not a bunch of hot air or rehashed investment cliches. So if you get a chance to read the book (and I suggest you do) and you get to a parts where Mr. Rogers espouses his passionate opinions, take a deep breath and consider what he is saying before you react in a sort of “knee-jerk” fashion.
I’m not a literary critic by any means but if I was to comment upon how the book was written I’d say that Jim did a fine job. His language is simple, clear, concise, and empty of any jargon or run on sentences. Put simply, it is terse and pithy, which is precisely how a book should be in my opinion. It is also not a super long read either, so I think if you dedicate an hour tops per day you should be able to finish it in a week or two.
In this book Roger puts forth several personal viewpoints that I believe are worth considering. Some of them you may not agree with some of them you might. I found myself agreeing with quite a few of them. Some of them I can’t comment on as I do not happen to have the relevant background experience (such as the US educational system – I was not educated in the US , etc). Here are some of the interesting “core” ideas in this book:
- The US is declining as fast as Asia is rising.
- If you want to give your kids a good education, make sure they learn Chinese.
- The best investment opportunities are in Asia.
- The US spends twice as much on healthcare as the average nation and gets terrible outcomes.
- High healthcare and litigation costs are the major reasons why American carmakers can’t compete globally.
- The fourth leading cause of death in the US is hospital infection.
- The US will go the way of Rome, Timbuktu, Morocco, Portugal, Spain and Greece.
- The cure for high prices is high prices.
- Jim Rogers is always two or three years ahead of the curve.
- Because governments are debasing currencies, commodities are the best investment.
- Don’t believe government statistics.
- According to government stats, there are more pets in Japan than children.
- The school system in Singapore is far superior to any in the US.
- Marco polo did not have a passport.
- Throughout history, the most prosperous societies have been open ones.
- In the US, the primacy of the individual has become subordinated to the state.
- If you want to save America, change to a consumption tax, change our education system, institute healthcare and litigation reform, and bring home our troops (from over 100 countries.)
- The only real failure is not to try; the only improper question is the one unasked.
What do you think? These ideas are definitely unconventional, but wisdom is rarely conventional – especially when one truly has a pioneering ideas. History will prove Jim Rogers right or wrong, and thus far he’s been right with a remarkable level of accuracy. Let me know what you think of his ideas and if you get a chance to read his book let me know what you think.
So this concludes my humble review. Overall id’s give this book a score of 9 out 10. It is in my opinion a good read and I definitely recommend it. Now on to ebay and amazon to find me some copies of his other books.
Happy investing to you all!
My dear American readers/followers. This video is for you. Hopefully after you’ve watched it you understand who are your TRUE masters.
A sober look at the Canadian real estate market:
According to investment analysts, Canadian citizens are feeling more optimistic about their financial futures than they have since 2011. Consumer confidence indexes leapt by a full five points to a resounding 99 halfway through 2012. Data collected by Nielson reflected the fact that only seven out of 58 analyzed countries enjoyed such dramatic rebounds. Ideally, such optimism would have a profoundly positive impact on the economy, launching increased spending and rising property values. Idealism, however, has no place in the property market today. Happy homeowner outlooks could potentially dig consumers into deeper debt holes because the optimism boom bares no reflection on the reality of the national economy.
Forty percent of Canadian citizens believe that property purchase is currently an excellent idea. Inflation levels are dwindling, which is responsible for much of the boom. Hourly earnings have also climbed by just over three percent. Nationally, retailers are focusing on exploiting the opportunity to claim additional market share by offering reduced prices. In Canadian minds, financial circumstances are looking bright, yet in reality, citizens are heavily weighed down by increased debt loads. Only 38% are funneling their negligible disposable incomes into debt relief. Almost half of Canada`s consumers are aware that they exist in a recession, but many of these foresee a far brighter future for the economy within the next 12 months. The perspectives of central banks are far gloomier than those of consumers. As 2013 dawned, The Bank of Canada saw a subtler outlook for the rebound. Intentions to stimulate the potential rebound have been reigned in as bonds rise and the Canadian Dollar declines. The Bank of England aims to push up rates, an action that has been avoided for three years.
Analysts such as Nielson offer little more than the personal perspectives of local consumers. A more realistic perspective of the housing market can be found from investment analysts seeking to draw a clearer picture of household debt and property sales. Price rises have begun to dwindle as the housing market finds balance. In an attempt to calm down debt loads, attempts are being made to discourage lending by increasing interest rates on loans. At the close of 2012, those in the know were in a panic about the imminent rates increases that were expected to arrive. Governor Mark Carney had been encouraging rate hikes to save unwary consumers from taking on additional debt loads. On 23 January, these expectations were analyzed again in terms of the low inflation rate and currency changes. Carney took a kinder approach to rate hikes and increases are now expected to occur only in April 2013. Some more optimistic analysts predict rate increases only in 2014.
One of the main goals of stimulus packages is the intention to keep inflation beneath two percent. The property sector is also a concern, but it appears to be balancing itself out despite continuing increases in building. The resultant rising inventories are not expected to cause dramatic imbalances in the housing sector.
Certain strategists are even interpreting the pending rate increases as prequels of future rate cuts. Carney has stated that he has not ruled out the option. The housing sector has improved slightly, which means that adjustments have become less necessary. Investment analysts predict that Canada will have experienced a full economic recovery by 2014, a slightly less optimistic vision than that communicated in 2012.
Debt to income ratios are expected to find equilibrium at the current level as consumers spend more carefully on credit. Despite these positive changes of opinion, if the housing sector rebounds, the results may negatively impact income-debt ratios in the future, which is decidedly risky for the economy. For ten years, the housing market has been working towards a boom and a growth of property credit is one of Carney`s most profound concerns. Demand for property experienced a sudden upsurge, followed by a dramatic decline in demand. Real estate professionals found themselves in a sudden market crash. In response, The Bank of Canada tried to induce a bubble by pushing interest rates down. The decline might have dire impacts on the local economy. Job loss, recession and the debt crisis happened simultaneously, pushing housing values down by as much as 22 percent. It is suspected that consumer confidence was responsible for the crisis. Inflated property offers may well have banished households into too much debt, perfectly demonstrating the power of overconfidence. National debt relief remains one of the most efficient ways to stabilize first world country housing bubbles that coincide with credit balloon.
Greetings fellow Canadian investors. A while back I blogged about how my current stock broker – Questrade – is offering 3 months of free trades. Well, I just wanted to remind that this promotion is still active, so if you’re thinking about switching brokers or thinking about getting into either trading stocks as a daytrader or simply want to build your own custom stock portfolio now would be the time to make a move. One reason to switch to this broker is that they offer the lowest commission rates in Canada.
So anyways, what you need to do to qualify for 3 free months of trading is visit this link and then use this offer code: RSP2013
Good luck and happy trading!
Btw, if you wish to discuss stocks – especially Canadian stocks – join me at the Stocks Nirvana forum.
Greetings fellow Canadian investors and traders. I have a pretty cool promotion passed on to me by Questrade – my current stock broker. They’re having a special promotion where you can get free unlimited trades for a period of 3 months. Use offer code RSP2013 before March 1, 2013 to get unlimited free trades. It’s really all that simple. Is there a catch? Nope, but there is fine print that you should read, and speaking of which here it is:
Terms and conditions
How to qualify
Open a new registered, margin or TFSA* account by 11:59 p.m. ET, March 1st, 2013 and, depending on your funding level, get up to 3 months of unlimited free stock trades. The free trades are in the form of commission rebates.
Get started here
- Enter the promotional code RSP2013 online when completing the application for a new account.
- The offer is open to new and existing equity clients.
- The free trades apply to equity trades only (sorry, no option orders, gold trading, mutual fund trading, or foreign currency trading).
- Foreign exchange (forex) accounts are not eligible.
- If you are funding your account by transferring from another broker, the transfer must be initiated by 11:59 p.m. ET, March 1st, 2013 and must be completed within 60 days of initiation to qualify for the offer.
- New accounts by existing Questrade clients cannot be funded by transferring funds from another Questrade account.
Depending on your funding levels, get 1, 2, or 3 months of free trades: details
- The minimum required funding to get 3 months of unlimited free stock trades is CAD $50,000. All equity trades completed within 90 days of account activation are free.
- The minimum required funding to get 2 months of unlimited free stock trades is CAD $25,000. All equity trades completed within 62 days of account activation are free.
- The minimum required funding to get 1 month of unlimited free stock trades is CAD $1,000. All equity trades completed within 31 days of account activation are free.
And to make it easier to get started…
- You have an additional 30 days from the date the account is activated to reach the minimum funding requirement for additional month(s) of unlimited free stock trades. That sounds complicated, but really it’s quite simple. Here’s an example: fund it with $1,000 immediately so you get started trading. Then before the month is up, add another $49,000, and your free trades continue for the full three months. Nice, huh?
Some terms and conditions
- Your account will be charged for the trading commission during the qualifying period and the commission will then be rebated to your account within three business days of the trade execution up to a maximum of $9.95 per trade.
- Account holders must maintain the following minimum account balance for at least 6 months of account funding in order to be eligible for the corresponding offer:
- $50,000 for 3 months of unlimited free stock trades
- $25,000 for 2 months of unlimited free stock trades
- If the account balance falls below the minimum required amount before the end of the 6 month period due to withdrawals on your account, you will no longer qualify for the offer and Questrade will apply a charge to your account based on the credited amount. If the account balance falls below the minimum required asset amount due to market fluctuations, you are still eligible for the offer and no charges will be applied.
A few more terms and conditions
- Other trade fees including exchange and ECN fees may apply.
- This is free trades only. You will not receive cash compensation for any unused free trade commissions.
- Amounts quoted are in CAD.
- You are solely responsible for any tax consequences or other amounts which may be associated with the Offer.
- This offer is not available to Questrade employees or members of their household.
- This offer is subject to change without notice.
- This is a one-time offer per client. This means pick your account wisely: put the free trades in the account you want to trade in!
- This offer cannot be combined with any other Questrade offer except free to transfer (see below).
FREE TO TRANSFER
Questrade will pay your transfer-out fees up to CAD $150 when you move a minimum of CAD $25,000 to Questrade from another brokerage. Payment of the transfer-out fee is capped at CAD $150 and is limited to one account per client.
To take advantage of this limited time promo simply open an account by visiting the Questrade homepage.
Enjoy your free trades!
The widely reported $16.1 trillion federal debt is a drop in the bucket
By Elliott Wave International
Financial transparency is a must for U.S. publicly traded companies. But if the federal government had to abide by those same regulations, more Americans would know that the often-reported $16.1 trillion federal debt doesn’t come close to the truth about the nation’s liabilities.
In a Nov. 26 Wall Street Journal opinion piece, a former chairman of the Securities and Exchange Commission and a former chairman of the House Ways & Means Committee write:
The actual liabilities of the federal government — including Social Security, Medicare, and federal employees’ future retirement benefits — already exceed $86.8 trillion, or 550% of GDP.
The authors say that few people know about the $86.8 trillion figure because that figure is not in print on any federal government balance sheet.
Federal debt is staggering enough. Municipal liabilities also pose a danger to the nation’s financial health.
Illinois has an unfunded pension liability of at least $83 billion. It had 45 percent of what it needed to pay future retiree obligations as of 2010, the lowest among U.S. states.
Bloomberg, Aug. 29
The article also noted, “California, with an A-ranking, one level below Illinois, remains S&P’s lowest-rated state.”
Budget shortfalls in California and Illinois are just the tip of the municipal financial iceberg. Many other state governments are financially swamped.
How did municipal spending get so out of control? Well, a stupefying story out of Bell, Calif., provides a hint. On Nov. 26, CNN reports that the Bell police chief earned $457,000 a year, and “He is now asking for more money.” In 2010, the Bell city manager resigned after controversy over his $787,000 yearly salary.
States Are Broke and Approaching Insolvency
… States’ legislatures continue to blow money. For years, state governments have been spending every dime they could squeeze out of taxpayers plus all they could borrow. (The lone exception is Nebraska, which prohibits state indebtedness over $100k. Whatever Nebraska’s official position on any other issue, by this action alone it is the most enlightened state government in the union.) But now even states’ borrowing ability has run into a brick wall, because the basis of their ability to pay interest — namely, tax receipts — is evaporating. … The goose — the poor, overdriven taxpayer — is dying, and the production of golden eggs, which allowed state governments to binge for the past 40 years, is falling. The only reason that states did not either default on their loans or drastically cut their spending over the past year is that the federal government sucked a trillion dollars out of the loan market and handed it to countless undeserving entities, including state governments.
The Elliott Wave Theorist, November 2009
If there’s another leg of the economic downturn, expect a further dwindling of tax receipts.
Finally, consider the wobbly financial dominoes in Europe and what may happen in the U.S. after the first one falls.
This article was syndicated by Elliott Wave International and was originally published under the headline Gargantuan and Growing: The U.S. Debt Figure You’ve Probably Never Heard Of. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Economists who hold the popular view that expanding the money supply will provide the best medicine for our ailing economy dismiss the inflationary concerns of monetary hawks, like me, by pointing to the supposedly low inflation that has occurred during the current period of rampant Fed activism. In a recent blog post aimed specifically at me, Paul Krugman noted that the sub 2.5% increases in the Consumer Price Index (CPI) over the past few years are all that is needed to prove me wrong. In fact, Krugman and others have even suggested that the CPI itself overstates inflation and that the Fed would be better able to help the economy if less strict methodologies were used. However, there is plenty of evidence to suggest that the CPI is essentially meaningless as it woefully under reports rising prices.
Magazines and newspapers provide a good case in point. The truth has not been exposed through the economic reporting that these outlets provide, but in the prices that are permanently fixed to their covers. For instance, from 1999 to 2002 the Bureau of Labor Statistic’s (BLS) “Newspaper and Magazine Index” (a component of the CPI) increased by 37.1%. But a perusal of the cover prices of the 10 most popular newspapers and magazines (WSJ, Washington Post, Time, Sports Illustrated, U.S. News & World Report, Newsweek, People, NY Times, USA Today, and the LA Times) over the same time frame showed an average cover price increase of 131.5% (3.5 times faster than the BLS’ stats). This is not even in the same ballpark.
Some defenders of the BLS may conclude that prices were held down by the availability of free online news content or the convenience of digital delivery. But that is beside the point. Prior to the digital age, the BLS could have claimed that newspaper costs were held down by public libraries that provided free access. It’s also true that online publications deliver less value on some fronts. Not only do many people enjoy the tactile process of reading physical newspapers or magazines, but they offer the secondary value in helping to kindle fires, housebreak puppies, pack dishes, and line birdcages.
Another stunning example is found in health insurance costs, which is a major line item for most families. According to the BLS we can all breathe easy on that front because their “Health Insurance Index” increased a mere 4.3% (total) in the four years between 2008 and 2012. Interestingly, over the same time, the Kaiser Survey of Employer Sponsored Health Insurance showed that the cost of family health insurance rose 24.2% (5.5 times faster). But even if the BLS had reported higher costs, it wouldn’t have made much of a difference in the CPI itself. Believe it or not, health insurance costs are assigned a weighting of less than one percent of the overall CPI. In contrast, the Kaiser Survey revealed that in 2012 the average total cost for family health insurance coverage was $15,745, or almost one third of the median family income.
If the BLS could be so blatantly wrong in reporting the prices of newspapers and health insurance, should we believe that they are more accurate on all other sectors? If the inaccuracy of these two components were consistent with the rest of the CPI’s components, inflation could now be reported in double-digits!
Even more egregious than the manner in which prices are currently reported is the way that CPI methods have been changed over the years to insure that most increases are factored out. Since the 1970′s, the CPI formula has changed so thoroughly that it bears scant resemblance to the one used during the “malaise days” of the Carter years. Main stream economists dismiss criticism of the changes as tin hat conspiracy theories. But given the huge stakes involved, it’s hard to believe that institutional bias plays no role. Government statisticians are responsible for coming up with the formulas, and their bosses catch huge breaks if the inflation numbers come in low. Human behavior is always influenced by such incentives.
The newer CPI methodologies are designed to report not just on price movements, but on spending patterns, consumer choices, substitution bias, and product changes. In other words, the metrics have been altered to track not so much the cost of things, but the cost of living (or more accurately, the cost of surviving). But if you simply focus on price, especially on those staple commodity goods and services that haven’t radically changed in quality over the years, the under reporting of inflation becomes more apparent.
As reported in our Global Investor Newsletter, we selected BLS price changes for twenty everyday goods and services over two separate ten-year periods, and then compared those changes to the reported changes in the Consumer Price Index (CPI) over the same period. (The twenty items we selected are: eggs, new cars, milk, gasoline, bread, rent of primary residence, coffee, dental services, potatoes, electricity, sugar, airline tickets, butter, store bought beer, apples, public transportation, cereal, tires, beef, and prescription drugs.)
We know that people do not spend equal amounts on the above items, and we know their share of income devoted to them has changed over the decades. But as we are only interested in how these prices have changed relative to the CPI, those issues don’t really matter. We chose to look at the period between 1970 and 1980 and then again between 2002 and 2012, because these time frames both had big deficits and loose monetary policy, and they straddle the time in which the most significant changes to the CPI methodology took effect. And while the CPI rose much faster in the 1970′s, the degree to which the prices of our 20 items outpaced the CPI was much higher more recently.
Between 1970 and 1980 the officially reported CPI rose a whopping 112%, and prices of our basket of goods and services rose by 117%, just 5% faster. In contrast between 2002 and 2012 the CPI rose just 27.5%, but our basket increased by 44.3%, a rate that was 61% faster. And remember, this is using the BLS’ own price data, which we have already shown can grossly under-estimate the true rate of increase. The difference can be explained by how CPI is weighted and mixed. The formula used in the 1970′s effectively captured the price movements of our twenty everyday products. But in the last ten years it has been quite a different story.
If these price changes in our experiments had been fully captured, CPI could currently be high enough to severely restrict Fed action to stimulate the economy. Instead, the Fed is operating as if inflation is extremely low. As a result, they are making a huge policy mistake that will come back to haunt us. During the last decade the Fed spent many years denying the existence of a housing bubble, even as a mountain of evidence piled up to the contrary. That error caused the Fed to hold interest rates too low for too long, blowing more air into the bubble and imposing enormous negative consequences on the economy. The Fed, now similarly blind to the inflation threat, is repeating its mistake, only this time the negative consequences will be even more dire.
Apart from the statistical problems that hide inflation, there are also macroeconomic factors that have helped keep prices down despite the quantitative easing. Massive U.S. trade deficits and foreign central bank dollar accumulation mean that much of the printed money winds up in foreign bank vaults, not U.S. shopping centers. As foreign consumer goods flow in, and dollars flow out, a lid is kept on domestic prices. In effect, our inflation is exported as foreign central banks monetize our deficits and recycle their surpluses into U.S. Treasuries. The demand has pushed down bond yields which has allowed the U.S. government to borrow inexpensively. Of course, when the flows reverse, bond prices will fall, yields will climb, and a tidal wave of dollars will wash up on American shores, drowning consumers in a sea of inflation.
Unlike Krugman and the Keynesians, I would argue that it is impossible to create something from nothing. I believe that printing a dollar diminishes the value of all existing dollars by an aggregate amount equal to the purchasing power of the new dollar. The other side takes the position that the new money creates tangible economic growth and that real economic value can therefore be created by putting zeroes onto a piece of paper. I think that those making such absurd claims should bear the burden of proof. For more on the interesting topic of hidden inflation, see my video that I just posted.
Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital, best-selling author and host of syndicated Peter Schiff Show.
As you probably know, there are over 7,000 stocks to choose from on just the U.S. exchanges alone…
But what you might NOT know is that about 97% of these stocks are PURE POISON for your portfolio, meaning that the odds are stacked AGAINST you before you even place a trade.
Recently, I discovered a way to automatically FILTER OUT the ‘poison’ stocks and leave you with:
- The Top 3% that offer the most profit potential every time you trade.
These are the safest, most predictable stocks that give you the best odds…
-and if you’re NOT trading stocks in the Top 3%, you could be unknowingly KILLING your portfolio.
I recorded a series of training videos that reveal my discovery, and show you how to filter out the poison stocks yourself.
After you watch it, please leave a comment below the video and let me know what you think.
I think we’re on to something big here…
p.s. With this discovery, you have the potential to BEAT the S&P500 by 4,760% or MORE. I know, it sounds weird, but it’ll make sense after you watch the video…