ECONOMICS: Does anyone look at advertising?

Friday, December 13, 2013

FIOS, like all the others, have music channels.

(It’s better than coming into a dark quiet house alone.)

So for the most part, the music is white letters on a black background. 

In the “right half lower / upper window panel:, they put trivia and ads.

The ads are recycled from somewhere.

But they are colorful and garish.

And, they don’t sell (i.e., no UVP; no tie to the music; don’t ask for the sale).

So why bother.

Unless they are thrown in for free?

I think they are just a big negative!

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ECONOMICS: @tswif13 is cheaper in Chicago than NYC?

Tuesday, August 13, 2013

http://articles.chicagotribune.com/2013-08-08/entertainment/ct-ott-0809-taylor-swift-doit-20130808_1_taylor-swift-song-swift-red

Home>Featured Articles>John Mayer
Are we seeing Taylor Swift’s ‘Red’ again?
August 08, 2013

*** begin quote ***

You are probably thinking, wait, pop star Taylor Swift is coming to town again? Nope, she hasn’t been here with “The Red” tour. You’ve just heard so much about it already, and there haven’t been too many music award shows recently that haven’t had a Swift performance or sighting that makes it feel like we’ve seen her already. But, really can you ever have enough of the fresh-faced, spry Swift? Sure, her pop music niche is not for everyone, but neither is Lady Gaga’s.

*** and ***

Details: 6:30 p.m. Saturday at Soldier Field, 1410 S. Museum Campus Drive; $59.50-$99.50; 800-745-3000, ticketmaster.com

*** end quote ***

Now there is no doubt that Ms. Swift (@tswift13 or Tay to us “swifties”) is an economic engine. A phenom! I’m curious to see if she can transition over time. (All the great women performers do — Dolly Parton, Reba, Madona!)

What I found interesting in this story is that the price range of Chigao tix was dramatically different that the NYC prices of 80 to 2500. (No scalpers!)

Either the Chicago story is wrong or there is a premium to going to New York.

Considering that the show is essentially the same — except for the special guest and the banter about the location — one wonders if it might not be a better experience to travel to the show in a cheaper region.

For example, I’d travel to Chicago to get on the floor or in the pit. But I wouldn’t pay 2500$; but I would pay $100.

Laff, yes old swifties are a sad lot trying to recapture our lost youth.

#tswift #tswift13

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ECONOMICS: Why a free market

Sunday, April 21, 2013

http://youtu.be/TnS2OtzSTq0

50 minute video of Tom Woods.

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Econmics: The recent IRA grab

Tuesday, April 9, 2013

Interesting discussion with my “financial” about the 3m$ cap on IRA/401Ks … …

… stupidity. Basically at that level, the poor befuddled individual is turning what could be captial gains — taxed at 15 or 20% — into ordinary income.

Not that the rich need advice from me!

But bullion — gold, silver, or even nickels — have a tendency to “disappear” off the radar.

Unfortunately, “Uncle” extracts every pound of flesh from IRAs and 401Ks.

Up to you, bit I prefer “magic”!

–30–


ECONOMICS: No free lunch

Monday, April 8, 2013

“Mr Stockman’s new book, The Great Deformation , highlights the enduring conservative appeal of a kind of economic primitivism that harks back to the days when laisser-faire ruled and macroeconomics had not been invented.“The modern Keynesian state is broke, paralysed and mired in empty ritual incantations about stimulating “demand”, even as it fosters a mutant crony capitalism that periodically lavishes the top one per cent with speculative windfalls,” wrote Mr Stockman in the New York Times article that set off a minor furore in Washington this week.”

http://buff.ly/16z0IF0

Seems like he has nailed it! They might not like it but it accurately describes the hole we are in. Getting out of it is going to be painful for the young, old, and not-rich. But we’ve been scammed with “free lunch”. Now there is a very ugle chicken coming home to roost!

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ECONOMICS: No safe store of wealth

Sunday, April 7, 2013

http://www.deviantinvestor.com/3506/3506/

A Tipping Point In The Financial System
Posted by Deviant Investor on April 4th, 2013

*** begin quote ***

In my opinion, the sign that a tipping point has occurred in the financial system is the real story:

* The veil of banker honesty has been lifted. The EU/IMF/ECB will do whatever is necessary to support the banks, even if it means they will confiscate (tax, steal, bail-in) customer deposits.

* Customer deposits are NOT assets held in the bank for safe-keeping, but are liabilities of the bank and are not guaranteed to be made whole.

* Billions of dollars were removed prior to the Cyprus freeze, so insiders clearly knew in advance of the ordinary depositors (see below). There is no “level playing field” when billions of dollars/euros are in play.

* According to Jeroen Dijsselbloem, Dutch finance minister and Euro Group President, this is “the template for any future bank bailouts.” In other words, your deposits are considerably less safe than you thought. Your bank could fail, and your deposits might be used to compensate for derivative losses or other losses that the bank incurred.

* The FDIC in the US, as well as England, Canada, and New Zealand, has announced similar policies, agreements, and plans to confiscate deposits in the case of an emergency. Is this a sign that an emergency is not only possible but probable and imminent?

* Confidence in the banking and financial system has been seriously damaged, perhaps irreversibly.

*** end quote ***

So a new definition of “counterparty risk” has appeared.

There is no safe store of wealth.

(There really never was, but there was an illusion.)

One has to think very carefully about keeping balances in banks.

imho

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ECONOMICS: The “ugly chicken” of unfunded liabilities

Tuesday, April 2, 2013

http://www.survivalblog.com/2013/03/become-your-own-central-banker-by-lbg.html

*** begin quote ***

Today the U.S. has spent the nation’s blood and treasure as well as our emotional capital on the conflicts in Iraq and Afghanistan. We have become involved in Libya, Egypt, and Syria.  Potential issues with Iran and North Korea loom large. There are 47 million people on food stamps. Unreported millions are unemployed. Spending on social programs has exploded.  The housing market collapsed and has never fully recovered. The banking system is on life support. The Federal Reserve is purchasing $85 billion dollars each month (a trillion dollars a year) in U.S. Treasury issues because no one else is willing to do so.  Despite government statistics and reports Inflation has driven prices on energy, food, clothing, health insurance, and everyday items beyond reason.  Expenditures outstrip tax revenues. Government spending is out of control and we are approaching $17 trillion dollars in national debt with untold (and unfathomable) amounts in promised future benefits, entitlements, mandates, and promissory notes.  By some estimates the U.S. has 238 TRILLION DOLLARS in unfunded liabilities.  We can’t cover it. We are flat busted.  And if our leadership refuses to address and fix the problem, the rest of the world will fix it for us.

*** end quote ***

And why are the Sheeple and Clovers happy? Dancing Idol is on TV!

Fools.

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ECONOMICS: “Mattresses” money?

Monday, April 1, 2013

http://www.deviantinvestor.com/3444/its-head-for-the-mattresses-time-for-savers-worldwide/

It’s head for “the mattresses” time for savers worldwide
Posted by Deviant Investor on March 28th, 2013

Guest Post from Liberty Gold and Silver

*** begin quote ***

Well, there is another turf war going on, a worldwide one, one that threatens the entire economic and political landscape of the planet. It is between all the hard working savers on the planet and the ever greedy criminal bankers and their cohorts in government. The real big canary singing out an extreme danger warning to all traditional savers who wish to entrust their wealth to banks and other paper vehicles – stocks, bonds, etc., is the incredible emergency banking shutdown in the tiny island nation of Cyprus. Granted, Cyprus represents only .02% of the population of the European Union. Yet what is occurring there is the harbinger of great risk to traditional savers on every continent; and equally important, there are many more scary danger signs raising their ugly heads as well.

*** end quote ***

Of course, Sheeple, it can’t happen here.

Why not?

Do you think that our politicians and bureaucrats are more “trustworthy” than theirs?

I keep looking back to the unfunded liabilities that the politicians have created in our names and the IRA/401k savings balances. 

I’m sure that they are looking at the fact that they only have to strong arm about 3k “custodians” and it’s all theirs.

And what are the Sheeple and Clovers going to do about it?

When they are putting people in the camps, it’ll be too late.

Can’t happen here?

Talk to the Japanese Americans, the American Indians, the follower of David Koresh!

In a heartbeat.

Argh!

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ECONOMICS: Why is the taxpayer the “bank” for the Bankers?

Saturday, March 16, 2013

http://www.bloomberg.com/news/2013-03-15/why-we-should-rip-the-banks-in-two.html

Why We Should Rip the Banks in Two

Equity-capital ratios in the range of 20 percent to 30 percent would make banks safer, so you’d expect the return on bank equity to fall. That’s a feature not a bug. Bankers who have been feasting on profits from excessive risk-taking will see their pay fall too. Count that as a further benefit. It might do a little something to slow the 30-year trend toward greater income inequality.

Bankers might call these proposals radical, but in fact they’re moderate. The structure of the banking system wouldn’t change. Banks would still operate two essentially different businesses: selling short-term debt and making loans. The potential for a mismatch would remain. More capital would certainly help, and taxpayers would be less on the hook, but the risk of bank failure wouldn’t disappear. The same goes for making banks smaller, so that more of them could be left to fail on their own. It would help, but it doesn’t address the underlying problem.

There’s a way to do that. Divide the banking business in two. Deposit-takers don’t have to be credit-creators — they can be told to hold entirely safe assets. Credit-creators don’t need to take deposits — they can fund their operations by borrowing in financial markets. As renowned Yale economist James Tobin once said, “The linking of deposit money and commercial banking is an accident of history.” He and other thoughtful scholars have been discussing how to correct this “accident” for many years.

*** end quote ***

Why does the taxpayer get stiffed?

That’s not supposed to be the way it works.

You fail; you go bankrupt.

I understand that we don’t want the poorest saving their pennies to be wiped out.

But they are being wiped out by inflation. Even the middle class is being screwed royally.

So why can’t we figure out a compromise?

“Crony capitalism”!

It’s the illusion of a “free market”. But it’s one where the politicians, lobbyists, and the “rich” can’t lose.

Kill the Federal Reserve. Andrew Jackson was ABSOLUTELY correct.

Restore GOLD as the basis for the monetary unit. (OK, if you don’t like gold, how about a loaf of bread, gallon of milk, barrel of oil? Or a basket of them?)

Economists are fond of mental experiments. Let’s try this one: “If money grew on trees, then it wouldn’t be very valuable.”

What is a dollar anyway?

Dammed if I know.

I know what it used to be.

Then Govenrments like Abe lincoln and FDR and … wanted to spend more than they dare take in in taxes.

Sorry!

I’d deny them the printing press and the debt window.’

Yeah, a road may need to be financed over it life. But our congress critters can’t be trusts.

Privatize everything!

Argh!

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ECONOMICS: Rebuilding in Flood Zones

Saturday, March 16, 2013

http://www.ritholtz.com/blog/2013/03/rebuilding-in-flood-zones/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29

Rebuilding in Flood Zones
By Barry Ritholtz – March 10th, 2013, 3:00PM

# – # – #  

Isn’t this the definition of insanity?

And as a taxpayer, why am I on the hook?

Argh!

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ECONOMICS: Understating inflation systematically

Tuesday, November 6, 2012

http://lewrockwell.com/roberts/roberts374.html

The Virtual Recovery
by Paul Craig Roberts

*** begin quote ***

Statistician John Williams (shadowstats.com), who closely follows the collecting and reporting of official US economic statistics, reports that consumer inflation, as measured by the 1990 official government methodology has been running at about 5%. If the 1980 official methodology for measuring the CPI is used, John Williams reports that the current rate of US inflation is about 9%.

The 9% figure is more consistent with people’s experience in grocery stores.

Officially the recession that began in 2007 ended in June 2009 after 18 months, making the Bush Recession the longest recession since World War II. However, John Williams says that the recession has not ended. He says that only the GDP reporting, distorted by an erroneous measurement of inflation, shows a recovery. Other, more reliable measures of economic activity, show no recovery.

Williams reports that the economy began turning down in 2006, falling lower in 2008 and 2009, and bottom-bouncing ever since. Not only is there no sign of any recovery, but “the economic downturn now is intensifying once again.” The absence of an economic recovery “is evident in the [official] reporting of nearly all major economic series. Not one of these series shows a pattern of activity that confirms the recovery [shown] in the GDP series.”

Williams concludes that “the official recovery simply is a statistical illusion created by the government’s use of understated inflation in deflating the GDP.” In other words, the reported gains in GDP are accounted for by price increases, not increases in real output.

*** end quote ***

This says it all. The Gooferment’s politicians and bureaucrats want to fool us.

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ECONOMICS: Tweedle dee and Tweedle dumber!

Monday, October 22, 2012

http://cafehayek.com/2012/10/no-debate-both-are-economically-ignorant.html

No Debate: Both Men are Economically Ignorant

by DON BOUDREAUX on OCTOBER 17, 2012

in SEEN AND UNSEEN, TRADE

*** begin quote ***

Each man insists that America’s economy can be harmed by inexpensive imports – in other words, harmed by opportunities for voluntary exchanges that lower Americans’ cost of living.

By promising to raise taxes on Americans who buy Chinese-made goods, Mr. Romney again promised to break his campaign promise to not raise taxes. That he is unaware of the contradiction isn’t promising.

Mr. Obama is no better. He bragged that he “saved a thousand jobs” with his “tough” trade action that – by raising taxes on Americans who buy Chinese-made tires – ensured “that China was not flooding our domestic market with cheap tires.”

By this logic, the President’s policy is inexcusably lame. If creating more jobs in U.S. tire factories justifies forcing consumers to pay higher prices for tires, the Obama administration should also outlaw the sale of used tires (which, like low-priced imports, are “flooding our domestic market”). Indeed, the president should seek legislation mandating that all rubber used to make tires be non-vulcanized. The resulting decline in tire durability will create even more jobs in U.S. tire factories by “protecting” our market from being “flooded” with cheap tire durability – that is, with tires that last for tens of thousands of miles before needing to be replaced.

*** end quote ***

It’s hard to imagine that there is any rationale for restrictions?

Do we want to be a nation of tire makers?

In the Sixties were more expensive for a poorer quality. Now they are “cheaper” and more durable.

(Remember that the value of money has been inflated away. Gas is up by a multiple of 100 in dollars but about 50% cheaper in silver. Tires in the Sixties ran about $20 each; some more some less. Priced in gold a tire was 20/35 = 4/7 = 0.57 oz. So today, just recently I paid over 100$ per tire; where as I should have paid over a 1k$ each. SO tires have gotten 90% cheaper. It’s the value of money that obscures our vision.)

I want Americans to have cheap tires so they can spend their money on other needs and wants.

If it means the tire industry has to go to China, all well and good.

If the Chinese are so dumb as to give us tires for worthless green pieces of paper, great!

The market will peacefully decide what gives us the most bang for our buck. With out a politician “helping”.

Argh!

—30—


ECONOMICS: My financial team says …

Saturday, June 2, 2012

This fellow leads the group that manages my portfolio (Four years? Average north of 10% for each or the years. One year over 20+%!). While I disagree with him about the long term prospects (i.e.,gold versus the US$), he’s been much “right-er” than I have over the last few years. I think he gives good advice — those four principles — for investors and savers of all sizes.

FWIW!

As usual, the talking heads, politicians, and bureaucrats have, and have had, the “story” all wrong.

Congress causes “bubbles” by messing with stuff it doesn’t understand!

* Either in “moving water from end of the pool to another” it sets off ripples that drown everyone (all of us in the pool). For example, “bailouts”. Failures, even big gigantic enormous ones, are GOOD!

Imagine that instead of enriching Big Labor UAW, the President / Gooferment had the huevos to say:

*** begin quote ***

“Well guys, that’s just too <Expletive Deleted> bad.

We’ll put extra folks on at the Unemployment Office and …

… remember “We, The Sheeple” guarantee your pensions up to 35k/per year just like we did for the Delta pilots.

Executives, we think WalMart needs help. 

And, hey, all you other executives that are running big companies, we want to help you focus — so effective First of Next Month — all salaries in the USA can NOT be more than mine / the President’s. You can’t believe your job is harder than his and hence worth more.

Boards of Directors, you can award more comp to your execs but it has to be in the form of a 25 year equal step ladder of your UNINSURED corporate bonds. I’m sure Treasury Secretary Little Taxcheat Timmy Geitner can explain the concept! (25M$ equals 25 1M$ bonds dated in successive years). By the way BoD’s, your comp regardless of amount will be structure the same way.

That should focus everyone on the big picture.

Thanks for playing “Capitalism version 2.0″

*** end quote ***

* By changing rules, they don’t understand. Example, Glass Stegal, Community Reinvestment Act, and my personal favorite “the short seller’s uptick rule” that allow bear raids on publicly listed companies.

(Note Bene: The “uptick” rule says you can ONLY sell short — borrowing the stock — after an uptick in the sale price of the stock. That means you can put in lots of short sale orders to drive the prices down all by yourself. And, that rule cause the brokers to charge lot’s more for the trade. I know it was at one time 10x the regular trade price at Merrill. They had whole parts of trading desks that managed short sales. Made lots of money doing it. And, when the genius changed that rule, those folks lost their jobs and corporations found themselves under attack (i.e., good companies perceived as weak were subject to bear raid, the stock price was driven down, they were taken over, privatized at that low price, the ordinary players got killed, and the raiders would reap big profits for moving paper.)

* By imposing MEANINGLESS regulations and laws (e.g., GBLA, SOX, Graham, Dodd, etc.) that were supposed to prevent abuses and (a) didn’t plus (b) made everything more expensive by increase admin.

* Finally, by excessive spending and borrowing, they robbed the money of its value. “King Dollar” is a great strategy for the poor and those on fixed incomes because their “money” retains its purchasing power. For example, three silver dimes int he late Fifties Early Sixties bought a gallon of gas; now those same three SILVER dimes can be sold for their melt value and buy 1½ gallons of gas. The politicians point blame at the EVIL oil companies, but IN FACT, gas is “cheaper” now. It’s the money that’s worth less.

At least in the days of King Richard and the Sheriff of Nottingham, the Gooferment had to send the Sheriff’s men out to rob the poor serfs. Or, shave the coins. That’s why coins originally had milled edges; so you could tell if they had been altered.

Argh!

So bottom line:

Ric says: today’s news is better than you’re lead to believe.

This fat old white guy injineer say: “The PAST was MUCH WORSE than you’ve been lead to believe. AND, structurally, you should be upset because the same problem makers are in charge! Still as clueless as they have ALWAYS been.”

Argh! to the N-th power.  

 

———- Forwarded message ———-
From: Edelman Financial Services <client@ricedelman.com>
Date: Fri, Jun 1, 2012 at 5:37 PM
Subject: Market Update
To: XYZXYZXYZXYZ@reinke.cc

Edelman Financial Services

Dear John:

I’ve heard about “A Tale of Two Cities,” but this is ridiculous! Indeed, rarely have we seen such a huge disconnect between the stock market and the economy.

To illustrate, allow me to share some facts with you.

In the past six months, one million Americans who were out of work have found jobs, according to the Bureau of Labor Statistics. The unemployment rate remains too high, but the BLS says the rate is currently at its lowest level in more than three years, despite this week’s “gloomy” news that 69,000 additional Americans found work last month.

Inflation (as measured by the Consumer Price Index) is running at the unusually low annual rate of 2.3% as of April 30. By comparison, inflation has averaged 3.2% since 1926. And I can remember when inflation was 15% back in 1980. (Data from the Bureau of Labor Statistics.)

The price of a barrel of oil fell below $90 last week, reaching its lowest price since October 21, according to the Department of Energy. Stockpiles are at a 22-year high, reports the Energy Information Administration.

Home sales in all four geographic sectors of the U.S. were 10% higher in April than a year ago, says the National Association of Realtors. And the Commerce Department reports that home prices are up 5% from this time last year. Moody’s Analytics called these reports “a genuine rebound” for the housing sector. No wonder that, as Investor’s Business Daily reports, homebuilder sentiment is at a five-year high. And mortgage rates have hit another all-time low, just 3.78% for the 30-year fixed, according to Freddie Mac.

Consumer debt is dropping rapidly. Equifax’s April National Consumer Credit Trends Report and TransUnion have reported:

A 52% decline in the number of write-offs compared to April 2009. We’re now at a level comparable to the pre-recession level of 2006 and the trend continues to improve.
Home finance balances have decreased $1.2 trillion since October 2008, posting the fourth consecutive year of decline.
Home equity revolving balances are $560 billion, down $115 billion from three years ago.
Foreclosures on home equity revolving credit have dropped 37% from a year ago. It’s the lowest in two years.
Auto loans at least 60 days overdue have declined 27% from last April. Meanwhile, Ford’s credit rating was raised by Moody’s to investment-grade for the first time in seven years.

The nation’s banks earned $35 billion in the first three months of 2012. That’s the biggest quarterly profit since 2007, according to the Federal Deposit Insurance Corporation. Two out of three banks reported higher profits than for the same period a year ago. Meanwhile, bank losses on failed loans fell to the lowest level in four years and the number of troubled banks fell for the fourth consecutive quarter, says the FDIC. And the National Credit Union Administration says credit unions have granted nearly $12 billion in business loans, setting a new record.

The banks aren’t the only businesses making money. After-tax corporate profits (as a percent of the nation’s GDP) were 9.75% as of December 31, 2011 – compared to just 5.7% in Q4 1999, at the height of the dot-com craze. (Source: Bureau of Economic Analysis, Department of Commerce). Corporate dividends are on pace for an all-time high, reports Standard & Poor’s, and American corporations have accumulated a record level of cash – $1.2 trillion, according to Moody’s Investors Service.

A new report by educational firm Financial Finesse on employee financial stress says that only 16% of employees now report “high” or “overwhelming” financial stress levels, down 30% from two years ago. And consumer sentiment, measured monthly by the University of Michigan, is now at the highest level since October 2007.

As these facts illustrate, the U.S. economy is continuing its recovery from the depths of the Credit Crisis of 2008, and in many areas we’ve returned to pre-crisis levels. And indications are strong that our nation’s recovery will continue for years to come.

Such positive news would suggest that stock prices should be soaring. And indeed they were for the first three months of this year (the Dow Jones Industrial Average1 gained 8.8% through March 31). And although the economic data continues to be good (as described above), the stock market was flat in April and fell sharply in May. (The Dow dropped 5.8% in May. That might not sound like much, but May produced only five daily gains; the last time a single month had so few daily gains was in 1968! And the last time we experienced a month with just four days of gains occurred – are you ready for this? – in 1903!)

Some folks might say that a pullback makes sense and that stock prices can’t be expected to continue rising at the pace set earlier this year. But that sentiment belies the facts. While the S&P 500 Stock Index2 is at the same level as it was in 2000, the current operating profits of the 500 companies that comprise the S&P 500 are 1.8 times higher than they were then. If prices in 2000 were accurate based on profits, then today’s stock market – based on that math – should be 81% higher than it is. In other words, the Dow Jones Industrial Average should be at 22,431, not 12,293 (which was Thursday’s actual close).

Consider this: the earnings yield on the S&P 500 is 8.7%; the yield on the 10-year Treasury Note is 1.6%. The last time the spread was this wide was 1967! This statistic from Standard and Poor’s, like all the others I’ve shared, is completely at odds with May’s performance.

And there’s more. Since October 2007, when the stock market last attained an all-time high, investors have yanked $420 billion from stock mutual funds. They’ve withdrawn $31 billion this year alone, through May 23, according to the Investment Company Institute. So there is no question that, despite gains in consumer confidence and robust corporate profits, investors are displaying no stomach for stocks. They’d rather own just about anything else, even if it means earning nothing (such as bank accounts and money market funds that pay 0.01% annually), losing money in a desperate effort to avoid, well, losing money (gold prices are down about 15% since the highs reached last August according to The Wall Street Journal, despite the claims of many that gold is a “safe haven”), blindly (and foolishly) chasing some get-rich-quick fad (ever hear of an IPO called Facebook?) or incorrectly thinking that long-term bonds are a safe haven (have you read my Special Report warning about “this most dangerous of assets”? If not, ask us to send you a copy).

We all know why investors are so averse to investing in stocks: their attitudes range from fear (Europe, the U.S. federal deficit and state pension-fund shortfalls top the list) to anger (about our do-nothing Congress, incompetent federal regulators and greedy Wall Street banks and brokerage firms) to confusion (conflicting news reports that are inflicted upon us moment by moment in a never-ending media frenzy, made worse by the fact that this is an election year). None of those sentiments cause one to feel confident about investing in stocks.

So, I’m stumped. Every week, Branderson and I talk to a million people on the radio, trying to explain to them why they shouldn’t be full of fear about today’s economy. Together with our colleague, Financial Educator Keith Spengel, we have talked to thousands of people this year in seminars and webcasts on the same subject. And, of course, all the advisors here at Edelman Financial talk daily with hundreds of people. In each instance, we try to show how much money American companies are earning, and how well positioned we are as a nation to confront, withstand and overcome the many serious challenges that we face. And most importantly, we try to help consumers understand that the key to their future financial security lies not in the actions of Congress or leaders of the Eurozone, but in their own personal actions. We want people to realize that it’s how they handle their money today that will be the key determinant for how much money they will have in the future – that what matters to them personally has more to do with how much they are personally saving and where they are saving it than with whatever new law or regulation comes out of Congress next month or next year.

Unlike the masses, you get it. I know you do. You understand that the key to investment success is found by following four simple rules: diversify extensively3 (so that disarray in the stock market won’t cause you too much harm), focus on your long-term goals (because today’s worries, no matter how severe they appear, will be nothing more than distant memories in the future), rebalance your portfolio (to benefit from short-term volatility by capturing profits and buying shares that are relatively low in price) and keep your costs low (by purchasing investments that are sharply lower in cost than most others). These four rules serve as the basis for your investment in the Edelman Managed Asset Program®, and they serve you well. I know you get it.

Still, it is frustrating when stock prices fall in the short-term due solely to absurd, illogical behavior. It’s disturbing when investors let their imaginations run wild, focusing on what might happen instead of what actually is happening.

So, yes, stock prices in May were down. Not only did U.S. stocks decline, as noted earlier, but it was even worse for foreign stocks. (The EAFE Index2, a measure of foreign stocks, fell 9.4% in May, or twice as much as the S&P 500 – reflecting current angst about Europe.) Despite May’s dreary results, we remain confident, and you should too. Current prices merely reflect the fear, anger and confusion of the moment. Those sentiments will pass, and when they do – as investors realize that they (once again) have been focusing on all the wrong things – we expect prices to rebound with a resurgence that will surprise a great many people.

How close are we to such times? No one knows of course, but consider the chart below: it shows each week’s average recommended stock allocation of the chief market strategists at six large financial firms (Bank of America Merrill Lynch, Bank of Montreal, Deutsche Bank, JPMorgan Chase, Oppenheimer and UBS). Currently, these “experts” are recommending that investors place only 51% of assets in stocks! That low an amount is practically unheard of. In fact, it’s occurred only twice in the 22-year history of this weekly survey. And those two other times were in May 1997 (immediately followed by a 77% gain in the NASDAQ over the next 24 months) and in March 2009 (immediately followed by a 100% gain in the S&P 500 over the next 25 months). If history is any guide, the bearishness of these “experts” is foretelling a major market upswing!

Wall Street Allocation Stock

In the meantime, though, rough markets are likely. As we’ve witnessed several times in the past few years, political leaders and natural disasters can create short-term havoc in the financial markets. Those who panic and sell during such times risk financial devastation, but those who keep their heads, stay focused on their goals and remain committed to their investment strategy discover that they can weather the storm with less volatility than others and potentially emerge with quicker recovery and the achievement of all-time-high account values faster than they might otherwise expect.

Storm clouds surround stock prices, but in our opinion, they are not accurately reflecting the true value of companies both in the United States and abroad. Don’t be surprised at your May statement, and don’t place too much emphasis on it. We certainly aren’t. All the advisors here at the firm still have our own money invested in the Edelman Managed Asset Program®, just like you, and we aren’t changing a thing.

To be sure, market volatility (meaning daily price movements) has been very low for the past six months. But as events continue to unfold in Europe, and as our election approaches, it would not be surprising for the markets to experience a resurgence in volatility, similar to what was experienced in 2011. Don’t assume that volatility is bad, or predictive of anything. High winds often accompany big storms, but in the end, the sun always returns, shining brightly. If you have any questions or concerns be sure to talk to your Edelman advisor.

As always, we’ll keep you posted.

Best,
Ric Edelman
Chairman and CEO

1The Dow Jones Industrial Average is an index that shows how 30 large, publicly owned companies based in the United States have traded during a standard trading session in the stock market.

2An index is a hypothetical portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance of securities. Indexes are unmanaged portfolios and should only be used as comparisons with securities with similar investment characteristics and criteria. It is impossible to invest in an index. The performance information for any of the indices does not take into account any taxes imposed on, or any fees, expenses, commissions or other charges which may be incurred by portfolio management or the investor for such a portfolio. Past performance does not guarantee future results.

3Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. There are no guarantees that a diversified portfolio will outperform a non-diversified portfolio.

Copyright © 2012 Edelman Financial Services. All rights reserved.

Ric Edelman is Chairman and CEO of Edelman Financial Services, a Registered Investment Adviser, and CEO, President and a Director of The Edelman Financial Group (NASDAQ: EF). He is an Investment Adviser Representative who offers advisory services through EFS and a Registered Principal of (and offering securities through) Sanders Morris Harris Inc., an affiliated broker/dealer, member FINRA/SIPC.

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This message was sent by Edelman Financial Services – 4000 Legato Road, 9th Floor, Fairfax, VA 22033 – (888) 752-6742.

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ECONOMICS: True “National Debt” is 211+T$

Tuesday, February 14, 2012

http://www.npr.org/2011/08/06/139027615/a-national-debt-of-14-trillion-try-211-trillion

A National Debt Of $14 Trillion? Try $211 Trillion
by NPR Staff
August 6, 2011

*** begin quote ***

When Standard & Poor’s reduced the nation’s credit rating from AAA to AA-plus, the United States suffered the first downgrade to its credit rating ever. S&P took this action despite the plan Congress passed this past week to raise the debt limit.

The downgrade, S&P said, “reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.”

It’s those medium- and long-term debt problems that also worry economics professor Laurence J. Kotlikoff, who served as a senior economist on President Reagan’s Council of Economic Advisers. He says the national debt, which the U.S. Treasury has accounted at about $14 trillion, is just the tip of the iceberg.

“We have all these unofficial debts that are massive compared to the official debt,” Kotlikoff tells David Greene, guest host of weekends on All Things Considered. “We’re focused just on the official debt, so we’re trying to balance the wrong books.”

Kotlikoff explains that America’s “unofficial” payment obligations — like Social Security, Medicare and Medicaid benefits — jack up the debt figure substantially. Laurence J. Kotlikoff served as a senior economist on President Ronald Reagan’s Council of Economic Advisers and is a professor of economics at Boston University.

“If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That’s the fiscal gap,” he says. “That’s our true indebtedness.”

*** end quote ***

It’s simple. The “game” is rigged against the little guy. So why do us “little guys” still allow ourselves to be fooled?

Stupidity!

It’s like the old joke about the accountant keeping two sets of books!

“Plus shipping and handling”. Like the TV offers that are bait ‘n’ switch. The politicians and bureaucrats throw around deficit, debt, and “cuts” that cut nothing.

Time is running short.

What happens when the Chinese and the rest of the world cut us off. Credit card declined!

I didn’t realize what some unknown executives at AT&T and CSFB by making the defined pension plans fully funded separate legal entities. There was no funny business. Pensions were a sacred trust. The money was taken and invested prudently so that now I’ll get my benefit for the rest of my life.

We’ve “cheated” Social Security recipients, and various Federal and State workers. They are going to get <synonym for the past tense of the procreation act> because the contributions have been stolen by past politicians and bureaucrats to buy votes.

Argh!

We need an honest accounting. Just how bad is it? I know in the Pepuls Republik of Nu Jerzee, guvs of both parties have not funded the pensions. That’s just wrong. If a private company did that, the execs would be in jail. Why are the guvs and bureaucrats exempt?

Argh!

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