Almost on cue, today the Dollar is rising and taking the DOW down as a result. This is not healthy long term and is a serious problem. Stocks going up with a worthless dollar is pointless as is a strong dollar with stocks worth nothing. Eventually, there needs to be some stability in this relationship for long term prosperity. They do not need to rise together all the time, but what we have now is just not going to work for long term economic prosperity.
The last 10% of the DOW’s rise has come at the expense of the US Dollar.
Meanwhile, Gold has surged during this same time period.
The 10 year bond finished today at 2.78%. The 10 year yield has fallen considerably from the 4% level from only a few months ago. The current yield is approaching the panic levels of late 2008 when it briefly bottomed at around 2.1%. The current yield is almost exactly where it was during the March 2009 stock market lows.
This is not good. The bond market is flashing major warning signs that deflation still persists and that the economy is about to get weaker, not stronger. Keep an eye on it. I always use my own brain to determine what is going on, but if I had a choice to believe the government and their economic outlook, or the bond market, I would choose the bond market every time.
I do not have time to respond to every e-mail I receive, but I am always happy whenever I receive one that thanks me for helping a reader make some money. It is hard to make a living these days and even harder to save money for a house, or raise capital for a business, or just taking care of your family so I am very glad I could help.
To those who are thanking me, you are welcome! I am happy to help when I can.
I am also asked alot in emails what I would recommend buying now and what advice I currently have etc. The thing is, I am a very patient investor. When I see something that is a sure thing, (or as sure as anything gets in life and the market) I bet big. Like anyone, there are some things I keep private of course. Also, in many cases what I am doing personally only makes sense for me given my situation. We all weigh risks differently depending on our own lives.
For example, maybe for me a 50% downside risk in a stock VS a 300% upside makes sense. For you, 50% downside might be simply unacceptable and therefore that advice would be worthless even if it turns out to be a great bet. That is why I made such a point about my March 2009 buy call on the stocks I listed. I KNEW you would make money on those and there was no ambiguity. Why? Because I bought those very same stocks that very day I published that post. The economy was still bad but the market was ready for a bullish phase. I was right. You made money. I made alot of money.
In 2003, I knew the economy and market would boom with the tax cuts and I bet big.
In late 2007, I knew we were headed for a deflationary credit collapse, so I bet big.
In March 2009, I bet big on stocks as you read on this blog.
In April 2010, I bet big against stocks when I told you it was time to get out.
These are just some of my calls over the last 18 months and you can go back the see the charts and the track record by reading old posts. Unlike the freaks on TV who push new stocks to you everyday, I keep my powder dry until I can see the whites of their eyes. “Their” being the next great investment opportunity.
Anyway, Thanks for the e-mails. It is always nice to be appreciated:)
Congratulations on the seemingly inevitable passing of a financial “reform” bill that does not reform anything of consequence and has ZERO CHANCE of preventing the next financial crisis!
Oh yeah, and it violates the 4th amendment.
“But Dan, I heard on the the news that…”
STOP!…There is no good way to end that sentence.
My calls have worked out pretty well as you can read here, here, here, and here as well as other posts you are free to read. It’s almost like I know exactly what I’m doing. Oh wait, It’s exactly like that!
I point this out because I feel it necessary to establish some credibility with you as I now have a track record that can be read and seen here. You are being sold a bill of goods literally everyday by the Lame Stream Media and they will bankrupt you and destroy this country economically with their reckless Keynesian policies if you aren’t careful. This economy is a tinderbox. Big things are coming, and I will warn you about them. I hope my track record gets you to listen or at the very least gets you to think about it.
A few people in the media in collusion with certain members of congress are accusing people who tell you to buy gold as being “fear-mongers” who just want to make money for themselves etc. Well, as you can see from this chart, what has been a better investment the past few years, gold or the S&P 500? So if these people were “fear-mongers” as they are described, you would have made alot of money listening to them! That is odd huh? Maybe, just maybe, they weren’t “fear-mongers,” but rational economic analysts and others who were worried about global instability and currency problems? Nah, that can’t be it.
Sometimes I own alot of gold in various forms. Other times, not as much. Sometimes, not at all. I am not telling you to buy gold. Buy it, don’t buy it, I don’t care. However, it should interest you that people have been telling you to stay away from gold for years as it has risen while stocks have been terrible.
The blue line is gold and the orange line is the S&P 500.
I had a conversation with someone yesterday about the FED’s interest rate policy and the booming expansionary recovery that our corrupt media tells us is taking place. He is a huge Obama fan and a Keynesian. Here is how it went…
HIM: I really think this is a real robust V shaped recovery. Obama’s stimulus worked and he saved us.
ME: OK, if that is true then we should raise interest rates back to a normal level so we don’t get hit with inflation.
HIM: Whoa, we can’t do that . That will kill the economy!
ME: You just said we had a robust recovery. If it was so robust, we wouldn’t need virtually zero interest rates.
I could have talked about so many other economic issues like unemployment for example, but why? My point here cuts to the core flaw with the argument that we are in a robust recovery. I see this on CNBC all the time. People say the economy is great and getting better and then bristle when higher interest rates are proposed.
The recovery is not real if it only can exist in a basically zero interest rate environment. A complete idiot could make tons of money if they were allowed to borrow unlimited money from the FED at .25%.
This is one of the most entertaining people I know who talks about the economy and makes serious points at the same time. He hits a few important issues here and does it with his typical delivery. Trust me, the video is five minutes you should see as there are too many gems for me to highlight. These quotes are great, but it is ALL in his delivery.
On those responsible: “They buried the American financial system, and they’re all working for Obama.”
On Chris Dodd: “His record is just a tad shaky.”
Below are two charts of the Down Jones Index and its similar counterpart in Japan the Nikkei 225. Notice how horrific the Nikkei has been since 1990. In the last 20 years, it is down roughly 70%. In the last 26 years it is flat. Our last 10 years in the DOW were essentially flat.
The steady drop since 1990 in the Nikkei can be described as a debt deleverage cycle. This has happened before all over the world including in the USA, but the last 20 years in Japan is an extreme example. The USA economy is far more dynamic than Japan ever was, which means it will be more difficult to repeat their anemic market performance.
However, we are making many of the same mistakes Japan made in dealing with our current economic crisis and therefore the economy will sputter along for years until we get our act together. What shape that sputtering takes is still in question. Just how bad will it get, and how long will it stay that way is a question that has a wide range of outcomes.
I have studied this situation non stop for years. I knew it was coming and I acted accordingly. I warned everyone on the blog and everyone who would listen to me in person. Here’s the problem…
Every scenario that I give a decent chance of happening going forward is bad. The staggering deficits and low interest rates (free money) from the FED point to serious inflation at some point in the future. At the same time, residential housing still has not bottomed, wages are doing anything but rising, unemployment is still a disaster, and credit has been cut and may still be contracting for consumers which all point to deflation. There is also the possibility that we enter into 1970′s style stagflation where inflation picks up and growth lags. Oh yeah, or the whole ponzi scheme the government calls the economy could just blow completely.
I have worked every number and model I can and I cannot see a good scenario playing out. Now, a less bad scenario could certainly occur, but that is still not good. People in America have gotten used to rising standards of living and luxuries most countries can only dream about, but that is changing due to inept government policies finally blowing up in our faces.
Does anyone believe the DOW would be up the way it has been the last year without the FED’s next to zero interest rate FREE MONEY policies? If you don’t, then what happens when these rates rise?
By the way, lately bond auctions have not gone that great and rates have started to climb.
It is is said that history may not always repeat itself, but it often rhymes.
You think nothing as bad as Japan the last 26 years can happen in America? Remember, it could happen to you.
About 9 months ago, I wrote here that Obama’s 10 year budget forecast was way off and I said it would end up with our nation being $20 trillion in debt minimum, as it will increase as more of his radical spending gets passed into law. Well, a few days ago the CBO said exactly what I told you 9 months earlier.
NEW YORK (CNNMoney.com) — If President Obama’s 2011 budget were put into effect as proposed, the U.S. federal government would add an estimated $9.8 trillion to the country’s accrued debt over the next decade, according to a preliminary analysis from the Congressional Budget Office.
Of that amount, an estimated $5.6 trillion will be in interest alone.
By 2020, the agency estimates debt held by the public would reach $20.3 trillion, or 90% of GDP. That’s up from 53% of GDP in 2009.
Ya know, I’m not that smart. I’m really not. However, I am a genius compared to the morons in our current government who are responsible for the economic policies that put us in this position. This is one reason why I am able to see this crap coming long before they can.
China is back on top after some revisions now showing on the treasury website.
United States Treasury Department. http://www.treas.gov/tic/mfh.txt
This is a good link to keep going back to as it is updated, so keep it in mind.
This chart was put together by ZeroHedge using BLS data. They have some interesting posts from to time but if you are not familiar with some of the more exotic investment and economic terms some of their writing might not make sense to you. This post however is right to the point. As you can see from the blue line, the trend looks like it will start to tick up again in the wrong direction.
http://www.zerohedge.com/article/mass-layoffs-surge-january-highest-july-2009
Financials lead us down and they just might do so again. Below is a chart and my predictions. Feel free to go back in the archives and read what I wrote back in March 2009. The DOW has held up a little better than these financials have the last few months, but that changed the past few days. It could be a sign of things to come. Back in March of 2009, I was talking about the overall market and the economy, but since financials lead us down before, this looks like the canary in the coal mine. Notice the last drop of the past few days right at the tail end of this chart. These financials could be opening act for the DOW correction. If only any of our leaders saw this coming as clearly as I did. Remember, they are geniuses (according to themselves and the media,) and we are just mere ignorant commoners. I hope you made money on it!
If every plumber in the USA disappeared tomorrow, what would happen? We would be in deep shit.
If every intellectual mainstream economist/columnist/thinker/pundit disappeared tomorrow, what would happen?
NOTHING.