Where We Are And Where We're Headed
publication date: Apr 22, 2010
|
author/source: Brad Hamill
Greetings,
I stepped away from economics for the last number of weeks to take a breather from the subject – and to reassess my thoughts on the direction in which we are headed.
Today seems as good of a day as any to jump back in with commentary, as many investors are probably wondering what just hit them upside the head.
My time in reassessment left me with a very clear opinion that we are still heading in the very direction which I have long been writing about. It’s just taking us a little longer to get there than I had expected since I didn’t take into proper account how “creative” the Federal government is at creating new debt (money). This has gone a long ways towards slowing the credit (money) crash that the international banks have brought upon us. It hasn’t solved anything for the positive – just prolonged the inevitable.
Permit me to outline some of the things which I have been mulling over the last number of weeks. As a reminder, these are all my own opinions and should not be considered as investment advice.
The stock market had a significant drop today due to growing instability in the European Union (EU), specifically Greece and Portugal. Both of those countries suffered significant downgrades on their sovereign bonds (“debt” – money). In fact, there are very few investors that are willing to buy Greek bonds at anything close to a “reasonable” yield (or rate of return). This leaves many with the incorrect opinion that the European Central Bank (ECB) will step in and purchase those bonds in order to keep the government of Greece from collapsing.
Why would the ECB do this? They would have to create a huge amount of additional Euro’s to buy those bonds with, which would add to the EU money supply and create inflationary pressure. This would make sense if government were trying to solve the problem, but the ECB is not a government institution – it is run by international banks. The banks are creating deflation in every industrialized nation, so why would they now turn around and let any government out of the death grip around their neck? Look for the various governments of the EU to figure out how to create a bailout, which will eventually lead to a splintering of the EU and a possible complete collapse. Also, look for the International Monetary Fund (IMF) to offer ludicrous terms for some bailout loans. The IMF is completely owned and controlled by the bankers – and has a long history of strengthening their power hold over countries that have come crawling to them for relief.
What does all of this mean for the good ‘ol U.S. of A.? Foreign investors are sprinting towards the perceived safety of the U.S. dollar. The yields (interest rates) on long-term treasury bonds dropped precipitously today – meaning that investors don’t need to be enticed nearly as much to buy them. The U.S. Dollar Index rose to a level of 82.40, the highest it has been in quite some time. Remember all of the news articles not too long ago about how the U.S. dollar would get destroyed and become worthless? They were wrong.
We also saw gold increase by over $15/oz. today. It was the only commodity which rose in value. It’s amazing to me how many people will flee to gold during situations like we now see. Gold should have realistically dropped by a large amount due to the U.S. dollar’s gain – but the emotions of investors overtook fiscal reality. The only way that gold will have the increase that some predict is if a large government decides to use gold as their monetary supply at some point in the future. That would cause gold to ramp considerably since there is not enough of a supply to account for the demand. However, no country is going to do this – there is no reason. Even if they did then you can rest assured that gold would be confiscated beforehand so as not to make the “wrong” people rich. Gold is a very poor investment right now, in my opinion.
Let me show you a graph that will hopefully drive the point home. Quite a long time ago I created a formula that takes into account the various types of markets in our economy (equities, bond, credit, currency, etc). I applied this formula against economic data and weighted things so that the period prior to the major crash in September 2008 had a value of 100. Remember, that period was not a “healthy” time – the recession began in December 2007, it just preceded the big stock market drop.
There are a few things to notice. First, we are still at the 40% level of what was considered “normal” in September 2008. Things are not improving in any significant way. Then why are we seeing all of the headlines trumpeting the new recovery? It’s because people are seeing the move from 20% that we touched last November to the current 40%. Folks in our country have a VERY short attention span. Things right now are actually no better than they were last July, or last February.
Where is the safest place in all of this economic malaise? It’s by getting as “liquid” as possible – cash or short-term Treasury securities with a 10% side of physical gold as a hedge against being wrong.
We will be seeing even more government rebate programs. These should be avoided at all cost unless one is able to pay cash for the underlying asset. The lesson to be learned is that those with cash will do well, those with debt will suffer greatly.
It is my opinion that buying a home in this market is insanity. I believe we’ll be seeing another 20% drop in real estate, with a very real possibility of 50% in some geographical areas.
Likewise, selling a house in this market is the right thing to do, but folks shouldn’t be surprised when they don’t get their asking price. It’s probably better to take $20,000 less in price right now than to wait for the market to drop another 20%.
Where is our country headed?
The Federal government is going to have to pass Cap and Trade legislation soon in order to create the ability to garner more fees and taxes using “green technology” as the Trojan horse.
The strengthening U.S. dollar will continue to create a scenario where the Federal deficit will become harder and harder to service. Deflation always makes existing debt harder to pay off. This is why it is imperative for families to exercise every available means to get out of debt as quickly as possible.
One last thing that we can expect to see is an announcement in the coming month or two of the necessity to increase military funding and/or troop commitments to Afghanistan and/or Iraq. War is the quickest way to spend lots of money. I am completely in favor of protecting our country against foreign invaders that seek to do us harm. However, we have let our troops linger in the Middle East for no other reason than to spend lots of money to falsely prop up our economy. This means that men are being maimed and killed nearly every day so that our Federal government can keep propping up their power structure. Not only is this a major travesty, but it is also TREASONOUS!
If you are not currently on the Hamill Economic Update email list you can email me at: brad@newfamilyeconomics.com to be added.
There is no charge and your email address will never be shared.
I stepped away from economics for the last number of weeks to take a breather from the subject – and to reassess my thoughts on the direction in which we are headed.
Today seems as good of a day as any to jump back in with commentary, as many investors are probably wondering what just hit them upside the head.
My time in reassessment left me with a very clear opinion that we are still heading in the very direction which I have long been writing about. It’s just taking us a little longer to get there than I had expected since I didn’t take into proper account how “creative” the Federal government is at creating new debt (money). This has gone a long ways towards slowing the credit (money) crash that the international banks have brought upon us. It hasn’t solved anything for the positive – just prolonged the inevitable.
Permit me to outline some of the things which I have been mulling over the last number of weeks. As a reminder, these are all my own opinions and should not be considered as investment advice.
The stock market had a significant drop today due to growing instability in the European Union (EU), specifically Greece and Portugal. Both of those countries suffered significant downgrades on their sovereign bonds (“debt” – money). In fact, there are very few investors that are willing to buy Greek bonds at anything close to a “reasonable” yield (or rate of return). This leaves many with the incorrect opinion that the European Central Bank (ECB) will step in and purchase those bonds in order to keep the government of Greece from collapsing.
Why would the ECB do this? They would have to create a huge amount of additional Euro’s to buy those bonds with, which would add to the EU money supply and create inflationary pressure. This would make sense if government were trying to solve the problem, but the ECB is not a government institution – it is run by international banks. The banks are creating deflation in every industrialized nation, so why would they now turn around and let any government out of the death grip around their neck? Look for the various governments of the EU to figure out how to create a bailout, which will eventually lead to a splintering of the EU and a possible complete collapse. Also, look for the International Monetary Fund (IMF) to offer ludicrous terms for some bailout loans. The IMF is completely owned and controlled by the bankers – and has a long history of strengthening their power hold over countries that have come crawling to them for relief.
What does all of this mean for the good ‘ol U.S. of A.? Foreign investors are sprinting towards the perceived safety of the U.S. dollar. The yields (interest rates) on long-term treasury bonds dropped precipitously today – meaning that investors don’t need to be enticed nearly as much to buy them. The U.S. Dollar Index rose to a level of 82.40, the highest it has been in quite some time. Remember all of the news articles not too long ago about how the U.S. dollar would get destroyed and become worthless? They were wrong.
We also saw gold increase by over $15/oz. today. It was the only commodity which rose in value. It’s amazing to me how many people will flee to gold during situations like we now see. Gold should have realistically dropped by a large amount due to the U.S. dollar’s gain – but the emotions of investors overtook fiscal reality. The only way that gold will have the increase that some predict is if a large government decides to use gold as their monetary supply at some point in the future. That would cause gold to ramp considerably since there is not enough of a supply to account for the demand. However, no country is going to do this – there is no reason. Even if they did then you can rest assured that gold would be confiscated beforehand so as not to make the “wrong” people rich. Gold is a very poor investment right now, in my opinion.
Let me show you a graph that will hopefully drive the point home. Quite a long time ago I created a formula that takes into account the various types of markets in our economy (equities, bond, credit, currency, etc). I applied this formula against economic data and weighted things so that the period prior to the major crash in September 2008 had a value of 100. Remember, that period was not a “healthy” time – the recession began in December 2007, it just preceded the big stock market drop.
There are a few things to notice. First, we are still at the 40% level of what was considered “normal” in September 2008. Things are not improving in any significant way. Then why are we seeing all of the headlines trumpeting the new recovery? It’s because people are seeing the move from 20% that we touched last November to the current 40%. Folks in our country have a VERY short attention span. Things right now are actually no better than they were last July, or last February.
Where is the safest place in all of this economic malaise? It’s by getting as “liquid” as possible – cash or short-term Treasury securities with a 10% side of physical gold as a hedge against being wrong.
We will be seeing even more government rebate programs. These should be avoided at all cost unless one is able to pay cash for the underlying asset. The lesson to be learned is that those with cash will do well, those with debt will suffer greatly.
It is my opinion that buying a home in this market is insanity. I believe we’ll be seeing another 20% drop in real estate, with a very real possibility of 50% in some geographical areas.
Likewise, selling a house in this market is the right thing to do, but folks shouldn’t be surprised when they don’t get their asking price. It’s probably better to take $20,000 less in price right now than to wait for the market to drop another 20%.
Where is our country headed?
The Federal government is going to have to pass Cap and Trade legislation soon in order to create the ability to garner more fees and taxes using “green technology” as the Trojan horse.
The strengthening U.S. dollar will continue to create a scenario where the Federal deficit will become harder and harder to service. Deflation always makes existing debt harder to pay off. This is why it is imperative for families to exercise every available means to get out of debt as quickly as possible.
One last thing that we can expect to see is an announcement in the coming month or two of the necessity to increase military funding and/or troop commitments to Afghanistan and/or Iraq. War is the quickest way to spend lots of money. I am completely in favor of protecting our country against foreign invaders that seek to do us harm. However, we have let our troops linger in the Middle East for no other reason than to spend lots of money to falsely prop up our economy. This means that men are being maimed and killed nearly every day so that our Federal government can keep propping up their power structure. Not only is this a major travesty, but it is also TREASONOUS!
If you are not currently on the Hamill Economic Update email list you can email me at: brad@newfamilyeconomics.com to be added.
There is no charge and your email address will never be shared.
Christian Economics, Christian Finances, Christian Money, Christian Wealth, Christian Mortgage, Christian Mortgage Advice, Christian Mortgage Counsel, Christian Mortgage Consulting, Christian Investing, Biblical Economics, Biblical Finances, Biblical Money, Biblical Wealth, Biblical Mortgage, Biblical Mortgage Advice, Biblical Mortgage Counsel, Biblical Mortgage Consulting, Biblical Investing, Creating Wealth, Mortgages For Christians