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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POLITICAL: Why do I suspect that the taxpayer will be paying

Tuesday, August 2, 2011

http://www.impactlab.net/2011/08/01/banks-turning-to-bulldozing-foreclosed-homes/

August 1st, 2011 at 12:23 pm
Banks turn to bulldozing foreclosed homes
in: Business, Economy, Latest Trend

*** begin quote ***

Increasingly, it appears banks are turning to demolition teams instead of realtors to rid them of their least valuable repossessed homes. Last month, Bank of America announced plans to demolish 100 foreclosed homes in the Cleveland area. The land is then going to be donated back to the local government authorities. BofA says the recent donations in Cleveland are part of a larger plan to rid itself of its least saleable properties, many of which, according to a company spokesperson, are worth less than $10,000. BofA has already donated 100 homes in Detroit and 150 in Chicago, and may add as many as nine more cities by the end of the year.

*** end quote ***

Wow, what an interesting concept!

They get a write off for the donation. And, they don’t have to pay property taxes.

Argh!

Ouch!

What a waste of capital housing stock.

# # # # #


POLITICAL: NO more bailouts … … for ANYONE!

Friday, January 28, 2011

Tuesday, January 18, 2011

Honorable Republican Representatives,

On behalf of roughly 45 million Americans who voted for you in the November 2nd Elections,

On behalf of the more than 10 million Tea Party Supporters and Sympathizers among them…whose votes gave you victory,

For the purposes of federal government and state government fiscal responsibility, solvency, and financial common sense,

We request that all 242 Republican Members of the U.S. House of Representatives pledge to actively oppose and vote against all federal government bailouts for state governments or local governments.

No Funding bailouts for state or local governments.

No Loans for state or local governments.

No Loan Guarantees for state or local governments.

No cash. No loans. No loan guarantees. No co-signing.

Not for California. Not for Massachusetts. Not for Illinois. Not for New York. Not for any state or local government.

They must live within their own means. They must reduce and remove fat and non-essential spending from their budgets. They must seek and find ways to accomplish their essential duties – with lower overhead and less money.

Just like private sector businesses.

You must not enable them to continue their reckless and irresponsible spending.

You must not enable state and local governments to postpone the day of financial reckoning.

They have behaved like spending junkies, like money drunks. Now they face detox. Some are begging for ‘just one more’ drink, ‘just one last dose’ of narcotics. Tomorrow they’ll get clean and sober…

That’s the addiction talking. Ignore it.

Once state and local officials realize that you will not bail them out, they will solve their own spending problems.

Once they come to terms with economic reality, they will seek and find cheaper, better, smarter ways to do their government’s essential tasks.

They will become more responsible and accountable stewards of government.

Because almost all of you 242 Republican Members of the U.S. House of Representatives ran campaigns promising to roll back federal overspending, to exercise fiscal restraint, and to end federal bailouts, we ask you to notify state governments and local governments that you will vote against bailing them out.

Together, your 242 Republican U.S. House votes against bailing out state and local governments give you a “Veto.”

Promising to exercise this Republican “Veto” – and using it, if the Senate or White House demands bailouts for state or local governments – will show Tea Party supporters, fiscal conservatives, libertarians, and independents that you keep your campaign pledges.

This may create momentum for your proposed federal spending cuts.

It may create momentum for 2012 Republican candidates for the U.S. House and Senate who promise to substantially cut federal government spending, borrowing, and taxing.

Perhaps even a like-minded Republican candidate for President.

It starts with you. Now.

Will you make this pledge?

We eagerly await hearing about and publicizing your No Bailouts Pledge. It will be a beacon of hope during these crucial months of budget negotiations.

Small government is beautiful,
Carla Howell & Michael Cloud

# # # # # posted 2011-01-27 19:29


RANT: Bailouts are welfare and theft is just theft

Monday, July 19, 2010

http://irisheagle.blogspot.com/2010/07/mortgage-bail-out-recipients-should-be.html

Saturday, July 10, 2010
Mortgage bail-out recipients should be publicly named

*** begin quote ***

I also have sympathy for those who find themselves out of work and can’t afford their mortgage, but again I would like any help that we taxpayers are to provide …

*** end quote ***

Welfare is welfare. Theft is theft. And, there’s a “moral hazard” in this.

When the Gooferment takes over, “We, The Taxpayers” don’t get to decide who gets our charity and who doesn’t. Who’s worthwhile and who’s a bum! And, from thence all sorts of bad things come.

It’s welfare. Just more welfare. That enables bad behavior. Bad behavior on the part of the recipient, every one who knows about it, the politicians, and the bureaucrats. The recipient is not “encouraged” to make better decisions. Every one, who knows about it, takes on more risks “knowing” that “We, The Taxpayer” will chip in to our hard luck story. The politicians get to claim that they “care” — easy to care sending OPM Other People’s Money — while having favors, contracts, and jobs to dispense. And, last but not least, the bureaucrats can have high paying jobs with pensions while doing “good for the downtrodden”. Argh!

It’s welfare. It’s theft. And, it encourages future bad behaviors that we can only imagine.

To misquote the iconic Nike commercial, and to quote the stupid anti–drug one, “Just Say No”.

No Taxpayer-funded bailouts of any kind. Ever. No matter how sad the tale.

If the politicians want to pass the collection basket after putting in a few quid of their own, I’m happy to contribute. Just don’t rob me and expect me to be happy that the thief is doing good with my few scarce pennies.

Argh!

# # # # #


RANT: Good after bad

Thursday, December 31, 2009

Govt gives GMAC $3.8B in new aid, boosts stake

*** begin quote ***

WASHINGTON (AP) – The government gave GMAC Financial Services another $3.8 billion in cash and took a majority stake in the auto lender, aiming to stabilize the company as it struggles with big losses in its home mortgage unit. The fresh infusion is on top of $12.5 billion in taxpayer money…

*** end quote ***

How dumb!

Time to cut the taxpayer’s losses.

# # # # #


POLITICS: Increase savings and decrease spending at home

Saturday, October 3, 2009

http://www.lewrockwell.com/schiff/schiff49.1.html

The Price of Pretense in Pittsburgh by Peter Schiff

*** begin quote ***

Noting that a return to pre-crisis economics is impossible, the president assured the world that his administration will pursue policies to increase savings and decrease spending at home and challenged his Chinese counterparts to enact measures with the opposite effect in their own country.

While this is roughly what needs to happen, President Obama is actually doing everything in his power to prevent it. In point of fact, every policy move undertaken by his administration has exacerbated the very imbalances he supposedly wants to curtail. To so seamlessly profess one goal while simultaneously undermining it is an impressive piece of political theater. Unfortunately, this particular drama is likely to have an unhappy ending – and the ticket price will be staggering.

*** end quote ***

Upon reflection, when these very ugly chickens come home to roost, as also forecast by Reverend Wright, will there be any way to escape it?

It would seem that getting out of debt and getting very small in terms of exposures would be a good strategy.

Tactically, shift assets to durables, stockpile, and think defensively.

Argh!

# # # # #


CORRUPTION: Shills for the gooferment shilling the party line

Tuesday, September 22, 2009

http://www.ncc-1776.org/tle2009/tle537-20090920-05.html

That Sinking GM Feeling
by Jim Davidson
Special to The Libertarian Enterprise

*** begin quote ***

Later he lies again, “So we’re putting our money where our mouth is.” No, you bastard, you stinking lackey of big government, you filthy thief, you aren’t. GM tried putting their money where their mouth is, and they lost. They went under. So now they are putting our money where their mouth is. He isn’t a nice old man, he’s an evil old liar.

*** end quote ***

Absolutely correct.

This gooferment stooge ADMITTED he know nothing about cars. Didn’t do much for AT&T either. Guess he contributed big and get his reward.

Special place in eternity for all of them!

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