muses of the moment

October 31, 2011

William Black at Occupy

Click here for a video interview with Bill Black, who worked the last crisis in 1987-1992, at the Occupy Wall Street Protest. Good interview, summary of the size of crisis we are facing.

MF Global Holdings

Filed under: MF Global bankruptcy, Odds 'n ends, The Banking Crisis — totallygroovygirlfriday @ 2:11 pm

Not sure if this bankruptcy will affect other companies/banks/funds, but my bet is: yes, it will. Since everyone and their brother is on MSM saying that any fallout from MF Global bankruptcy (caused by its large European debt exposure, Italian bonds) is completely contained. Huge red flag. Check zerohedge for the latest.

It is again risk-on day, sell everything. So glad that European bailout calmed the roller coaster markets down ­čÖé

October 29, 2011

Inflation-adjusted DOW

Filed under: Dollar Crisis, DOW and S&P500, Economic Crisis, Stock Market — totallygroovygirlfriday @ 1:19 am

Today, we revisit the long-term inflation-adjusted DOW. This chart is from 1925 through today. Lots of good information in this chart. Click here.

As you know, gg is a long-term trend investor, so she is looking at this chart with long-term (10-year plus) investing in mind.

 

  • This chart clearly shows that we have still not recovered to the late 90’s high, even though in dollar terms it seems as if we have.
  • This chart clearly shows the long-term cycles in the DOW.
  • This chart also clearly shows how debt bubbles effect stocks: late 1920’s, late 1970’s and early 80’s, and of course, 2007-2008.
  • This chart shows that we could still move lower in the current trend, as we are in the middle of the long-term trading channel.
  • In gg’s mind, the jury is still out if we have hit a bottom on the inflation-adjusted DOW. So, if you sold in 1998, gg would not necessarily get back in yet for the long-term. Let’s wait and see what happens in this chart going into 2015-2016, when Mr. Armstrong thinks the panic cycle will turn.
  • If you are in the stock market, now, don’t panic. Even in a down market, you can have profitable stocks. However, to really know that for a fact, you should chart the stock’s history in an inflation-adjusted chart like this one.
  • If you put this chart up against a gold chart, gold would be moving up when stocks were down and vice versa. This is a key long-term trading tool. If you just switch investments at the turn, you can generally keep your purchasing power over 80-100 years. And in a fiat currency system, that is your main goal, stay ahead of inflation.
  • The main lesson this chart teaches is that fiat currency can distort real profit.

October 28, 2011

John Williams

Filed under: John Williams shadowstats — Tags: — totallygroovygirlfriday @ 12:01 pm

John Williams from shadowstats.com latest summary:

– Consumer Confidence and Sentiment Sink to Levels Never Seen Outside of the Worst Recessions
– No Economic Recovery Is in Place or in the Works
– Third-Quarter GDP Gain Not Statistically Meaningful
– GDP Nonsense:┬á Consumption Surged 1.7% While Disposable Income Collapsed 1.7%?

Doctored data for media spin. We are NOT in a recovery.

The Devil is in the Details

Filed under: Bailout Nation — totallygroovygirlfriday @ 3:23 am

The President is trying to fast-track a student loan relief program. Click here.

As always, the devil is in the details and these details are NOT beneficial to students and it will not help this growing issue at all. It will also not help students pay off their loans, so they will not be buying any houses.

Details are still a little fuzzy, but there it goes:

This reform only effects loans issued 2012 and forward? What about previous loans?

Department of Education is now taking over the process of the government giving loans directly to students (banks are not in that business anymore). Actually, I am sure they neglected to mention that the Dept of Ed will insure the loan and then sell it to Wall Street, so if it fails, the US taxpayer will cover the default for Wall Street. Groovygirl is not confident that the Dept of Ed is in any position to handle this issue, let alone all of the conflicting interests involved. Let’s face it, they can’t even get kids to graduate high school and those that do, can’t read. I’ll stop going that road for the moment.

Students with no income, don’t have to make a payment, but they don’t say if interest and fees will pile up.

Students over the poverty line, must pay 15% of their income to the loan to avoid default. Again, no mention of any fees or penalties for not paying the full payment due. Let’s do some math here. 25% is taken out up front for social security, medicare, and withholding , then another 15% is gone to the loan, that’s not a lot of money for living and especially any other debt payment.

And here is the ringer…..they will forgive the loan after 25 years. How nice? 25 years of 15% of your income, that is your relief package.

If you are making an average of $20,000 a year for the next 10 years (and the unemployment rate will be the same or worse for the next 10 years), you only pay back $30,000. If you have $100,000 to $200,000 in loans, you are screwed.

The kids will just default like before…..

The make or break of this plan is if fees are nixed when you can’t pay the full amount or you are unemployed.

And since this is now a government loan, if you don’t pay the 15%, will they take your tax return?

ALL DEBT WILL DEFAULT…student loans, mortgages, bonds, sovereign debt, everything. So you can discount all the debt now across the board, or have it come crashing down and destroy the credit markets and entire financial system later.

October 27, 2011

Usury

Filed under: Good Debt Bad Debt, Odds 'n ends — totallygroovygirlfriday @ 2:51 pm

This is a quick and simple lesson about different types of loans. This should be taught in all schools, if not taught at home. It is simple enough for an 8-year-old, and some bright 3-year-olds, to understand.

(When teaching children, use physical dimes and loan a dollar at 10% for 10 days. Remember to bring out your credit cards and mortgage document, so they may understand the real life translation.)

If you understand this lesson, you will know if you are getting scammed. I will use the same amounts on each example.

Loaning money

Loan with no interest (in some cultures, this is the only loan type available to anyone, as interest is considered immoral)

Party A loans $100,000 to Party B with no interest. The loan is to be paid back in 15 years at 0% interest and monthly payments of $555.56. At the end of the term, Party B will have paid $0 for the use of $100,000 for 15 years. The total amount paid to Party A is $100,000.

Loan with interest

Party A loans $100,000 to Party B for interest. The loan is to be paid back in 15 years at 8% interest. The monthly payments would be $600. At the end of the term, Party B will have paid $8,000 (or 8%) for the use of $100,000 for 15 years. The total amount paid to Party A is $108,000.

Usury

Revolving credit loan (credit card)

Part A loans $100,000 to Party B with 8% annualized interest rate. The loan is paid back in 15 years. The monthly payments would be $955.65. At the end of the term, Party B will have paid $72,017 (or 72%) for the use of $100,000 for 15 years. The total amount paid to Party A is $172,017.

Amortized Loan (mortgage)

Mortgages are set up the same as revolving credit. Yes, that means that you pay 72% more (depending on your interest rate) than the sale document says you paid for your house.

Weekly Loan (“payday” loans)

Payday loan companies are legal loan sharks. Their annualized rates can run to 300% plus if not paid back by next paycheck. NEVER use payday loan companies.

Conclusion

The global economy, particularity the Western economy, is set up to achieve growth only by more debt. The 99% borrow money at 72%, while the 1% borrow money at 0%. Because of this disconnect within the system, the 1% can make a lot of money from their debt, and the 99% fall into debt-serfdom.

In a fiat currency system, the debt repayments must be paid back in usury rate terms, because the underlying currency keeps losing value. For example, if in the course of 15 years, the currency was devalued 15%, but you loaned money at 8%, you would be losing 15% of the purchasing power of your principle investment and your interest return, creating a negative return. But if, you lent money at 72%, you would not care much about the devaluing of the currency over time. Even a mortgage amortized at 2% or 4% would far out pace the falling purchasing power of the money loaned out.

Education and access are the difference between the 1% and the 99% in a debt-fueled economy. The 99% can do something about one of those differences. They can stay out of debt, or only have debt for an income-producing asset. Your home, car, doodad, or college education is NOT an income producing asset.

Or the 1% could loan money that is loaned to them for 0% or 8% rather than 72%-300%, but the fiat currency system doesn’t allow them to do this and still make a real return.

If this debt-based economic system is not modified, the 100% will collapse together under the weight of unsustainable and unpayable debt.

Horace Giddens from The Little Foxes:

“Maybe it’s easy for the dying to be honest. I’m sick of you, sick of this house, sick of my unhappy life with you. I’m sick of your brothers and their dirty tricks to make a dime. There must be better ways of getting rich than building sweatshops and pounding the bones of the town to make dividends for you to spend. You’ll wreck the town, you and your brothers. You’ll wreck the country, you and your kind, if they let you. But not me, I’ll die my own way, and I’ll do it without making the world worse. I leave that to you.”

October 26, 2011

Durable goods numbers out today

Filed under: Odds 'n ends — totallygroovygirlfriday @ 11:08 am

Click here for zerohedge’s take on the record-breaking durable goods numbers.

This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.9 percent August increase.

Said otherwise, we are back to the old model where economic “growth” is only due to stockpiling as producers hope that tomorrow, and tomorrow, and tomorrow someone will actually buy record inventory stockpiles at market value instead of LIFO liquidation prices.

Groovygirl has some knowledge of the industries involved in this number and here are a few of her comments. Factories cut production drastically in the last 3 years. So much so, that it takes twice as long to get anything in stock. (It also takes twice as long to get anything transported, too.) And it is not because factories are too busy to fill orders, it is because they cut production and laid workers off. This cut, plus the credit freeze in 2008-2010 which screwed up just-in-time inventory systems, caused the lower inventories the last 3 years. And though demand is not up, these industries are putting cash into inventories to make sure they have stock to actually sell.

To groovygirl, this number shows companies making sure they have stock in case of another credit freeze or production cut, not customer demand. In addition, inventories are just as good a place for excess cash (which every company is making sure they have in abundance) as the bank, since the bank pays no interest.

A quote

Filed under: Odds 'n ends — totallygroovygirlfriday @ 1:00 am

The purpose of the US Constitution is the protect the people from the government, not protect the government from the people.

October 25, 2011

Lira speaks

Filed under: Bailout Nation, Credit Derivatives, The Banking Crisis — totallygroovygirlfriday @ 3:22 pm

Lira had an interesting post on zerohedge.com. Click here.

He says that the Lehman credit crisis we are awaiting in Europe will not arrive. He lays out a very good argument for that outcome. But, groovygirl is not sure. Since no one really knows all the interconnections of the financial markets, let alone the unregulated markets of CDS and such, how do we know for certain that they can really stop every crisis possible?

And what about the ability to print money? I understand that we can turn $1 billion (an example) into $1 trillion by loaning it out a billion times, but they still have to sell enough debt on the global market (at whatever interest rate) to get the initial billion. If we keep having “the crisis”, soon there will be no market for sovereign debt. Since it is clear the debt is used to cover bad debt or pay interest on old debt or bail someone out, and not produce a higher GDP.

It just seems that printing money is going to be the short-term future, but I don’t think we can say a Lehman event will never happen. If you look at the global banks’ stocks, it can be argued that it happened from March to September (when it was clear to all that Greece must default) with the major liquidity crisis starting in June.

Remember throwing money at bad debt only slows down the train wreck, you still wreck. And I think that may be the distraction. It doesn’t matter if Lehman was thrown under the train or not, we would still be in the same place we are now….too much global debt and creating more by the minute.

I thought NPR was leftist?

Filed under: Odds 'n ends — totallygroovygirlfriday @ 1:05 pm

We leave the global economic breakdown to visit the continued unethical activity of the US media.

Groovygirl found this whole drama rather interesting, not because of the whole republican vs. democrat thing. (I think gg has made it clear, that she feels that both parties are equally to blame for the state of our country.)

Groovygirl listens to NPR to get a taste of the leftist side of things and FOX to get a taste of the conservative bent. It is always humorous to see the same story, spun in various half-truths to support two drastically opposite political agendas. Somewhere in between, you may get all the actual facts. And if you listen to one or the other, you will only get half the story. Always know the agenda of those telling the story.

So, groovygirl was very surprised to see the quick and certain reaction of NPR to Lisa Simone’s involvement in the Occupy Wall Street protests. Click here for the whole drama, since Lisa isn’t actually employed by NPR and she hosts an opera show, not an editorial or news show. She got fired anyway. Apparently, NPR’s ethics policy includes a clause about exercising your first amendment rights.

And it’s very funny that the story suggests that NPR is conservative and linked with FOX.

But I thought NPR was liberal after they were crucified by the conservative media in that whole under cover leftist agenda video, where NPR was slamming the Tea Party?  So much so, that conservatives were calling for NPR taxpayer funding to be taken away.

What is going on here? Is NPR conservative or liberal?

Now, that this whole Simone drama has occurred, groovygirl fully understands NPR’s agenda. They are beholden to corporate interests, and not a particular political party. (Groovygirl always thought that was the case, since they never say anything negative about gg’s favorite corporation, Monsanto.)

Groovygirl sure hopes Click and Clack stay far away from any protest.

So, the moral of the story: it doesn’t matter what your political leaning, if you speak out against corporations or the government, you have surely violated some corporate ethics code or government terrorist law.

For the record, totallygroovygirl is completely in support of all governments, main street media, and corporations, since everything they do is for the good of the people.

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