Economic Reality Lining Up with Predictions

I have been referring to the Weiss analysts for some time now. I know that it is best to not rely upon only one voice/opinion when it comes to market predicitions, even when the predictions are based on solid evidence. There is always the risk of personal bias when interpreting/applying the data and evidence.

However, when more sources begin making similar observations, then perhaps it is time to sit up and take notice. Other sources, notabley MarketWatch and Bloomberg, have run articles with the following headlines: Lack of Jobs, Foreclosures May Keep U.S. Housing Depressed & Why today's declines are just the beginning. For weeks and months, the nature of their articles has been to deny, or at least question, the validity of "double-dip" recession talk. They may be beginning to change their tune. The folks at Weiss Research, meanwhile, have been anticipating these types of market moves for some time. At the same time, they have not ignored the positive market direction since March 2009. They do not believe in sitting on the fence when a visible trend is in place. They just want to keep from being enamored by wishful thinking.

Anyway, to get back on track, economic reality is beginning to settle in. Euphoria based on false hope can last only so long. Running bigger and bigger deficits can last only so long. If the feds still had plenty of resources and leeway in their fiscal and monetary policy bags, I would be writing a different slant. But they don't. They may pretend they do, but they don't. The Fed's interest rates are close enough to zero to call them zero. They can't go any lower to make a difference. Meanwhile, folks who have saved and made reasonable decisions for interest income suffer from these paltry rates. The Fed has no room to keep issuing debt. They will likely keep spending too much, but there is no room to make a difference here. They will keep printing dollars, which also hurts responsible Americans who have planned reasonably for their financial future. But creditors are not going to buy American debt when they know that the interest they receive is going to be essentially worthless when inflation resumes.

I wish we were entering just an economic quagmire. At least we could work in a stalemate environment. But it is not even a quagmire. The Feds are losing the economic war, and they are losing it in a hurry.

Nevertheless, there are those who do believe that there are actions to take to preserve, and even grow, wealth in this environment. The folks at Weiss Research are some who believe that. They still believe in the resolve of the American people. They are not the only ones, but they do have some easily actionable suggestions and resources. Keep giving them a look at Money and Markets.

"Therefore be as shrewd as snakes and as innocent as doves." (Matthew 10:16)

Why We Need LESS Government

It is no secret what lies at the heart of American patriotism and conservatism: limited government formed by the people to serve the people. Without limited government, there is no corner of our lives that government will not attempt to control. There is no element of life too petty for government to seek to coerce.

In Utah, the legislature passed a bill in March to legalize the personal collection of rainwater. For the first time, private citizens are allowed to "harvest" rainwater. But wait - as the infomercial ads declare - there's more! It is legal to "harvest" rainwater with a state permit and using state-approved containers.

Is this how we want to live? Do we want our almost every movement dictated by government? This is the antithesis of our American Founders' ideals. I do not suggest that they were perfect and free from a few control issues. But on the whole, they tried their hardest to institutionalize freedom, not tyranny. They sought to do this through the ideology of limited government. It still makes sense today.

Bankrupt?

My previous post about the president swimming in the Gulf coast was whimsical, satirical, and cynical.

Now, however, I turn to something in all seriousness: the continuing economic downturn. I refer to the Weiss analysis team frequently, I know. But they are far from the only folks seeing reality. And the reality of our economy - driven by the political policies of expediancy for way too long - is that it is running out of gas. Government has attempted to fuel it on taxpayer dollars - a lot of them - and there is little to nothing to keep it going. The private sector, which should be revitalizing the economy, has had the stuffing knocked out of it... and the hits keep on coming.

******

Herb Stein, chairman of the Council of Economic Advisers under U.S. President Richard Nixon, coined an oft-repeated phrase: “Something that can’t go on, will stop.” True enough. Uncle Sam’s Ponzi scheme will stop. But it will stop too late. And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills. Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece. (Laurence Kotlikoff, "U.S. Is Bankrupt and We Don't Even Know It," Bloomberg.com, 8/10/10)

******

On the basis of the current economic data, we are in for tougher times. But we are not left without tools to respond. Tools like inverse ETFs (Exchange Traded Funds) which are built to go up as their underlying issues go down. Tools like precious metals - gold, silver, etc. - which can offer a hedge against inflation. Tools like options which can give some leverage and portfolio hedge protection. Tools like historic dividend-paying stocks that can give an income boost to a portfolio even during downturns.

Used in resonable proportion, each of these can protect and boost a portfolio during a dowturn. At the very least, going to largely cash positions can protect hard-earned wealth.

It's going to be a scrap. Keep your eyes open and your wits about you.

God bless!

In Midst of Ecological Disaster, Gulf's Beaches Still Useable

In the wake of America's "worst environmental disaster," the president is encouraging Americans to vacation along the Gulf coast, stating that the “beaches all along the Gulf Coast are clean, safe, and open for business.” (Julianna Goldman, "Obama Swims in Gulf Waters," Bloomberg.com, 8/15/10) We are also assured that "he pledged to make sure the region’s seafood was safe to eat and he promised to expedite the claims process." While the spill was in progress, Obama apologists countered critics by asking how the president could personally stop the leak. Now, however, Americans can be certain that he will personally ensure that the seafood is safe to eat. Unless, of course, the seafood cannot be made safe to eat, in which case we will be left to understand that the president cannot personally make the seafood safe to eat.

One significant fact left out of all the credit-grabbing gobbled up and spit out with no reflection on the part of the lap-dog Big Media is that conservative commentators were accurate from the beginning: the environment itself will take care of the largest part of this disaster. In spite of this administration's best efforts to thwart the efforts of local and state agencies to contain the spill, libs are stymied that the oil is being gobbled up by natural enzymes and stuff in the Gulf. Yes, the spill has been and is serious, but the reaction among the left that this disaster legitimizes more government enlargement is bogus... just like all their claims. Indeed, Big Media - appropriately dubbed "drive-by media" by Rush Limbaugh - has already moved on to other more relevent and newsworthy crises. The only thing left to report is the harm done to oil workers by the drilling moratorium. That would reflect badly upon the source of the moratorium, which cannot be allowed.

So be sure to stop by the Gulf coast and search for the "worst environmental disaster in American history." While you're there, keep your eyes open for the Loch Ness Monster and Bigfoot, too.

Economy Still Heading South

Mike Larson's latest Money & Markets article tells us plainly that government options for continuing to stimlate the economy & keep it going are hitting the proverbial brick wall. There is no more room to maneuver, and the economy has still failed to get restarted by their previous efforts.

******

What nobody in D.C. will tell you … but I will … is that a big economic slowdown is already baked in. There is nothing the Fed can do … nothing Congress can do … nothing the Obama administration can do … to prevent it.
The massive, reckless credit bubble that built up over the past couple of decades needs to be unwound. If you prefer the jargon term, it’s “deleveraging” — and it’s something we’re just going to have to get used to. (Mike Larson, Fed Policymakers Screw It Up Again, 8/13/2010)

******

Fortunately, there are real and reasonable steps that can be taken to protect portfolio value even in the face of another severe economic and market downturn. Even though timingthe markets perfectly is highly unlikely, it looks more and more like the reality of lousy economic data is poised to take its toll.