Please join me along with Tom Essaye in our War Room briefing — Tuesday, Novemeber 16!
Here are the key facts:
Date: Tuesday, November 16
Time: 12 Noon Eastern Time (9 AM Pacific, 4 PM GMT)
Subject: Market Update and Portfolio Review
Your participation: Question and Answer Session
And here’s what to do …
Step 1. Post your questions here in advance.
Step 2. A few minutes before 12 Noon on Tuesday (9 AM Pacific, 4 PM GMT), click here.
That’s it! Tom and I look forward to seeing you there.
Regards,
Claus
P.S. If you have trouble logging in, please call 1-800-711-4090. Technical assistance will begin on Tuesday at 11 AM (8 AM Pacific, 3 PM GMT).
P.P.S. Later, the recording of the briefing will also be available on the weissresearchissues.com website. But we recommend you participate during the event on Tuesday.
{ 64 comments… read them below or add one }
Dear Sirs/Madames,
It is now self evident that the markets are egregiously manipualted by the fagitious actions of the Federal Reserve’s Permanent Open Market Operations (POMO) via the legacy banks acting at the best of it–Ben Bernake has just affirmed that “… higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion;” See http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html?hpid=topnews, and Alan Greenspan’s acknowledgement that “if the stock market continues higher it will do more to stimulate the economy than any other measure we have discussed here.” See http://www.zerohedge.com/article/alan-greenspan-financial-system-broke. In short, the Fed could just continue to inject more billions to the market as it is necessary and making it go higher and higher.
In some of our positions we have short investments that are yet to materalize such as PSHRT RUSSELL2000, ProShares Short Financials, ProShares Short S&P500, etc. In spite of a heavily over-valued stock market where the forces that be continue to extend spurious rallies based on monetization, for how much longer can they keep the brazen manipulation in place?
While I did not see any notice, Safe Money report said that they advised sale of GLD a short while ago. I note that we did not do the same thing in this portfolio. Apparently there are many times when your program differs from Martin’s, but this one surprises me. Is he a short term trader with his gold positions?
Any reason not to take a short position in US bonds? They cannot go much higher, price-wise, based on the current interest rate. .. or can they?
Claus, you point to record lows in mutual fund cash holdings as an indication that the market is unlikely to go higher. According to this logic, there is no money left to buy with. But might that simply mean that investors have been holding their cash on the sidelines instead of in mutual funds? And they can pour money into the funds – once they are convinced that the market’s direction is up?
Does the U S Federal Collectables Tax make it better to hold GDX that doesn not subject to this tax rather than GLD which is subject to the tax?
I am a UK based investor.Which currency or currencies should I be keeping my cash in? [i currently have some in Norwegian Kroner,some in Australian dollars and some in Canadian dollars].
How do the safest utilities perform during market falls ?
Are we not “fighting the fed” in owning inverse etfs on the market? Won’t the fed’s easing overcome the technicals now signeling a market decline just as it did in March ’09 ?
Several other financial advisors are suggesting that the market may dip slightly now and then continue on an upward trend for the next two years and possibly longer. They have suggested that the Q2 will have this positive impact on the stock market rallying. Since I started with this MCP program it seems we have been invested in the wrong side of the market most of the time. What are the odds that we will continue to be on the wrong side of the market in the future?
Claus
If the Euro closes below the € 1.3690 level vs-s-vis the dollar, then how low do you expect the Euro will go before it finds firm ground on which to settle and /or possibly stage a rebound?
Thanks
There is a lot of doubt about the dbl dip or downturn in what I’m reading online. I get some of that from you when you said we may have been too soon with our inverse ETF’s. What will the plan be if you determine the big dip is farther away than last plan. When I talk about the dip with people, I get
about a 50-50 split in dip or no dip opinions .
Claus,
L. Edelson suggests that stocks may act as a hedge against the dollar (long term) which is in a long term bear trend. If he’s correct, would it not be prudent to be long on the market? It seems there are 2 very disparate versions of what to expect among the Weiss “experts”. Inflation of the Stock market on the one hand versus the same old “Sky is Falling” scenario we’ve been hearing since the inception of this sorry portfolio. Does Martin have a take on this issue or does he defer to you guys?
Jim,
Congratulations, you have finally had your ‘Weiss Epiphany”. Now you see the light…… if 50% say it’s red and the other 50% say it’s green when the results are revealed to be green then you claim victory, likewiess if your the 50% that said it’s red and it turns out to be red you still can claim victory. You never loose. :0
Hi Claus:
Martin Weiss, as I am sure you know, along with Monty Agarwal launched a new million dollar portfolio. Leading-up to the launching of that service, the presentations where primarily concentrated on informing potential members of the Three Trillion Dollars Lie by the Fed Chairman. With the Fed Reserve launching its QE2, how are we positioning our portfolio to capitalize on this action? What should we be purchasing now?
My understanding is that inverse ETFs especially leveraged ones are for short term trading. The long holding period on some of our inverse ETFs are just digging us a deeper hole. I hope Claus will address this issue in the next “War Room”. Also, we have been fighting the Fed for a year and a half and it looks like the Fed has won. At least in comparison to the missed opportunity in the market rally over the last year. Are we ever going to be on the right side of the trend?
Why did you put us into an ETF [KRS] with such low trading volume?
PAULS,
May I respectfully suggest that you look over the marketing material that came with your MDCP membership. You will note something referred to as the “11 Laws….”, please note that there is one ‘Law’ that makes mention of not purchasing equities , to paraphrase, whose trading volume is low or not buying illiquid securities. The MDCP broke that particular ‘Law’ the first time over a year ago and a half ago with several low trading volume purchases like AAN, EPI and DAI to mention just a few. Chances are you will not get an answer to your question from anyone at Weiss as it’s difficult for people to admit they themselves did something they said stated in absolute terms that they would never do, as well as something they suggested that you the MDCP member should not do as it would be difficult to get out of a low volume stock quickly in the event of a market sell-off. It’s somewhat hypocritical in nature but consistent with previous MDCP words and actions. In actuality 8 of the 11 laws were broken within the first six months of the MDCP existence.
For the last 2 years or more I have been and am a subscriber to a number of Weiss subscriptions ,including to name a few, Safe Money, Million Dollar Portfolio and Foundation Alliance. My question is this, when are these programs going to just break even, or start making a little money? Each program is down 3 to 9%.
I realize these investments are not risk free, and I respect Martins opinion, but unless your crystal balls get clearer, I will need to move on.
Sincerely,
Rick Eckhart
Gosh, PAULS,
The 7000 total shares that traded for the entire trading day today (11-15-2010) in KRS was by some measure of standard when compared on an historical basis considered a fairly common trading day as share volume goes.
In fact the average monthly volume over the last 3 months is: 21,553 shares*
Another disconcerting and interesting little factoid concerning KRS’ is that today’s total daily trading volume of only 7000 shares is considerably greater than the below sampling of the total daily trading volume from several other trading days KRS has recorded:
Nov 12, 2010 = 6,400
Nov 9, 2010 = 8,300
Nov 8, 2010 = 2,700 <– Is this a “Law #4″ violator?
Nov 2, 2010 = 9,000
Oct 29, 2010 = 1,400 <– WOW! This one is surely a “Law #4 violator!
Oct 22, 2010 = 7,900
Oct 7, 2010 = 3,300
Oct 1, 2010 = 2,300 <– Does this day’s volume qualify as ‘low’ or ‘anemic’?
The truth be known that since the MDCP’s purchase of KRS (ProShares Short KBW Regional Banks) on October 19,2010, the single greatest daily volume of shares traded occurred on Nov 5, 2010 when KRS traded an anemic 53,500 shares.
Claus, with all due respect, please explain to me and other perhaps confused members as to how the average daily trading volume of KRS along with other MDCP positions, both past and present, square with the following paragraph, copied and pasted for accuracy, from the ‘Welcome Package’ that I received when I joined the MDCP:
Law #4 “We will invest exclusively in liquid, heavily traded investments.”
In other words, we will stay away from investments that are easy to buy but hard to sell. We also recommend you stay away from investments in mutual funds, annuities, insur10 <–[MDCP's typo error here]
Million-Dollar Contrarian Portfolio [sic]ance policies or even bank CDs that lock you in with sales fees or penalties. And for our part, we will always avoid thinly-traded smallcap stocks, municipal bonds or exoteric plans that can entrap you. It doesn’t matter how good the investment may appear. If we can’t jump out at a moment’s notice, it’s no good for these uncertain times.
We will also remain continually vigilant regarding potential liquidity problems of normally well-traded investments. If we see the danger of declining trading volume or even stoppages, we’ll take prompt protective action. ^
The latter section in Law #4 immediately brings PSQ, AAN, CME and our initial previous position in SEF to mind…… that often what is said and written by the MDCP is not what the MDCP in fact actually does, and that’s unfortunate. When there’s a disconnect between words and deeds, between implied results and actual results then unfortunately a loss of confidence nearly always results. Statements made by the MDCP including the following excerpt extracted from Law#4 above:
“We will also remain continually vigilant regarding potential liquidity problems of
normally well-traded investments. If we see the danger of declining trading volume or even stoppages, we’ll take prompt protective
action.
Again Claus please be kind enough to explain KRS’ Oct 29′th volume of only 1,400 shares traded and how that conforms with the words written in Law #4. A brief investigation reveals that fully 10 days after the portfolio purchased KRS that KRS was indeed in the midst of “the danger of declining trading volume” as October 29, 2010 marked the bottom of a declining volume scenario that KRS was in fact in the midst of. Further investigation reveals that when the MDCP issued its 48-hour buy alert for KRS the declining volume KRS was experiencing had been well underway long before the decision to purchase it. Why? It was obviously a purchase that was in complete contradiction to significant portions of Law #4?
Finally, how does holding only two (2) classes of non cash investments vehicles, gold and inverse ETFs conform to Law #9 which states the following:
Law #9. We’ll diversify and balance our portfolio for added risk reduction and profit potential.
And when we say “diversify,” we mean across all asset classes that can be bought in an ordinary stock brokerage account — not just traditional stocks and bonds, but also instruments that give us a stake in rising or falling currencies, rising gold and other commodities, falling stock markets, falling real estate prices, falling bond markets, and more.
Is possible Claus, please explain how Law #10 and the continued ownership of PSQ, RWM and KGC are consistent and harmonious? Doesn’t Law #10 state:
Law #10. We will always be ready to cut a loss or take a profit.
We will never fall in love with our investments. Even if they are still good long term, to
protect our capital we will cut any losses. And even if we see them continuing higher, there
will be times when it pays to be less greedy, and bank the profits, building a cash position
for new opportunities.
Thank you Claus.
Sources:
* http://finance.yahoo.com/q?s=krs
^ Weiss Research’s:
Million-Dollar Contrarian Portfolio Quick Start Guide
by Martin D. Weiss, Ph.D. and Claus Vogt
Copyright © 2009 by Weiss Research / Publication Date: September 2009
Please take note of the public inception date of the MDCP [3/2009] and the date of the above referenced publication [9/2009].
Yes, there is a previous version(s).
Yes, it was modified seven months later, not the six months the date suggests. Does anyone wonder why? Perhaps Claus would be so kind as to address this matter during a hopefully unabridged episode of War Room Theater.
Thanks, Claus
What action should holders of I-bonds take. Hold or sell??
Claus,
How confident are you that a double dip of any real consequence is still likely to happen? I am heavily invested in inverse ETFs anticipating such a downturn. I have stayed the course so far but am wondering if I should consider cutting my losses.
Of concern is the potential money in bonds that could be shifted to commodities and stocks should bond yields continue to increase.
Don
I believe that Larry Edelston said that inflation will drive up asset prices.
This latest news, “Inflation fears slam Chinese stocks again” would contradict that statement.
Everyone is recommending gold because they expect inflation. However, assuming deflation comes about, what happens to gold pricing?
What is driving the strength of the U.S. Dollar and how long do you see this continuing?
When can we expect some very positive recos.???? I joined about 1 1/2 yrs ago and I haven’t seen the great growth of my investments like I anticipated.
I see A lot of people making money, When will we start
L. gary Miller
Claus,in stagflation, – if there is enough inflation – while the stock market may not protect you against that inflation,won’t you still lose money in cash and inverse ETFs ?
Is China a warning sign???
Maybe insiders are selling in such large numbers because of the uncertainties of tax rates going forward? Would you expect a large market bounce if current tax rates are pushed forward?
The $600 billion QE2 translates to 10 times liqidity as the market makers with other instruments and can swing the markets to affect the short side squeezed as they do it at their whim, and without investors knowing . The market is manipulated and therefore may be the short side may not work for another 6-8 months. What should we do now as we lose money.
With historical information on QE from Japan. Why did we not take advantage of this information when the Fed announced QE?
IS TODAY A GOOD TIME TO BUY GOLD AND SILVER
When the down turn happens, will MLPs go down less than other stocks.
Master limited parternships
Lost tramsmission at 32:20 of 48:15 transmission 12:40EST November 16,2010.
Regarding Emerging markets : Claus just mentionned these markets will follow Amecan Markets and fall down.
My question: the Emerging Markets fundamentals being healtier, will they fall less and bounce back sooner than the American’s
I watched the War Room presentation today and was appalled at the lack of any coverage to the valid questions raised in this blog. Does anyone at Weiss Research read this blog? I would think at least Weiss would want to address the misrepresentation of the promotional material to the actual actions in the portfolio.
a) Since I have impaired hearing I could not understand the information from the live video and discussion. Would appreciate very much if a written transcript can be e mailed in a day or so .
thanks
mahendra
Hi again,
didn’t get to see the “War Room” so an early transcript was much appreciated.Did anyone get a direct answer to anything?My subscription is due in a few days so in the abscence of encouragement from the MDCP can any of you bloggers step in with reasons to stay.Am a bit addicted so in way another three months could be fun.
Something’s afoot in the UK.When the British establishment roll out a Royal wedding you know they’re up to no good,
cheers,
Bob J
The funny thing is. Though I am unhappy with the current performance of the portfolio and the lack of response to the questions posed by this blog, I believe Claus will be right in the long term.
Fred,
I agree that Claus may be right in the long term…but how many years of pricey subscriptions are you (or anyone) willing to cough up to see it happen?
What ever happened to “making money in any market conditions”?
Being right in the long run is only of value when you know how to time purchases. Gerald Celente, Nouriel Roubini and Peter Schiff were “all right in the predicted scenarios but not one of them could transition their being ‘right in the long term’ into fortunes.
There is a huge difference
in actually being right and profiting in the long term or hoping one will be right in the long term; In hoping to profit and in actually profiting.
The market is up 50% in just over 20 months yet my MDCP investment is sitting at a loss. One of the greatest bull markets in history and I have a loss. How much longer does the ‘waiting for profits game’ need to continue? Hope doesn’t pay the bills nor can it be banked, only profits can. Lost time is just that ‘lost time’ and that too can never be regained.
How’s your inverse ETFs working out for you in the era of quantitative easing?
Clause, still didn’t see an answer as to how much the market has to decline before PSQ becomes just a ‘break even’ position let alone a profitable portfolio position. I respectfully ask once again: Who’s doing the math on PSQ? Now SEF, RWM and SH, same question.
Thank you Claus
I am still unhappy about the portfolio performance but do appreciate the response by Claus to the blog questions.
With the quick recent gains on EUO, should we take profits on this position?
Fred,
No it would be more in line with the portfolio performance to keep EUO until any gain has evaporated and become an embarrasing loss. (e.g. RWM: case in point).
Thanks Jim. I forgot this was a contrarian portfolio. The object is opposite the goal of most investor to make money.
Hey, Fred & Jim
Look at the market correction we’re undergoing….. the market went from about 12,000 down to around 10,000 and change yet PSQ went from -40.00% to -39.84% .
This is why I’ve asked Martin, Claus, The MCP Team or anybody else who’s listening at the MDCP…….
Who’s doing the math on PSQ? How much must the market decline before PSQ becomes a ‘break even’ position let alone a winning trade?
Have you guys noticed in nearly a year not one person at the MDCP nor Claus has even addressed that question? They know the answer but won’t let on because it’s far greater than a market declining of 40%.
Since nobody from the MDCP will address that question I will. As of last Friday’s close the market has to decline over 70% before PSQ becomes just a ‘break even’ holding.
Now let try with RWM. Claus, how much must the market decline before RWM becomes just a ‘break even’ position? It appears that besides ‘timing’ problems there are also problems with mathematics.
Respectfully
Hi WakeUp, you sound like me! Are you my doppelganger? I thought so.
I have an answer to your/our question as to how much the Russell-2000 would need to decline before our 25.11% loss in RWM becomes just a ‘break even’ holding, let alone a profitable trade. According to Merrill Lynch, my broker, their ETF – ETN research people tell me that the Russell-2000 would need to decline around 42% before my position in RWM becomes a ‘break even’ proposition.
Considering this market has been range bound [10k+ - 12k+] since March 2010 my understanding of market behavior suggests that this range bound behavior, in the absence of any major financial event(s) or geo-political event(s) could persist for possibly years.
The “Lost Decade” (a real misnomer if ever there was one) in Japan is in its 18′th year. Some of America’s best economists are estimating that current economic condition here could last until 2012 while others are predicting 2015 before we see any meaningful market movement and/or a significant recovery in jobs creation, the housing market, severe state and federal budget shortfalls and last but not least a banking sector that is once again sound and cleaned up with the removal of trillions of dollars of worthless ‘off balance sheet’ derivatives entries falsely valued at face value rather than at their true market value.
Claus, the S&P is attempting to break through the 1220 -1224 resistance level for what I believe is the third time. If this third attempt succeeds doesn’t that mean our current large position in inverse ETFs will take one terrible beating down? Isn’t it true the this scenario has at least a 50% chance actually happening? Do you consider gold a hedge? If so, are you attempting to use our gold positions [not counting that perennial looser KGC] as a hedge against the leveraged inverse ETFs in the portfolio? The MDCP’s portfolio performance when taken in its totality clearly shows that our gold positions have at best only served to mitigate some of the portfolios’ losses at best.
Thanks, Claus
CORRECTION
The above blog sentence should have read: “I have an answer to your/our question as to how much the underlying universe of stocks that compose the Russell-2000 Index would need to decline before our 25.11% loss in ……” . Sorry for the incomplete definition.
Hi,
thought I’d hang in just a while in case things got interesting. I said in May when Claus was looking for things that might tip the market “it’s behind you” Meaning the Greek problem. Just a few quotes from one of our broadsheets(today) regarding German opininion of the ongoing Euro debacle.
“A chorus of influential voices in Germany has warned that any attempt by the ECB to prop up Club Med with loose money would be a grave error, undermining German political support for monetary union”
“It would be fatal if the ECB was to squander its credibility,” said Klaus Zimmerman, head of the DIW German Economic Research Institute”
“Thomas Mayer from Deutsche Bank said that if the ECB is put in a position of having to buy up to €2 trillion of debt to support Spain and Italy, it will cross a ruinous line. “If the ECB is thrown into the fire, who knows what will happen,” he said”
The Irish bailout is by no means a done deal given the amount of anger by the electorate and the precarious position of the government. I guess The Fed and it’s European counterparts will weigh in with great fire power but the outcome is still uncertain.
Don’t think Kevin the markets will get down to the levels you need to rescue some of the ETFs but it would make some of the gold profits look better.
Claus, you’re nearer the the epicentre of this Euro thing, what do you think?
Cheers,
Bob J
Bob,
The smell of a July 6,2010 ‘en masse’ sell-off is once again in the air. I suspect we’ll soon be getting an alert to sell our inverse ETFs soon.
It’s interesting to note that many of the stocks we sold in the first ‘en masse sell-a-thon’ are substantially higher then where were both bought and sold many of them at. What conclusions are we able to extrapolate from this experience?
In his last Special Update: S&P 500 Potential Double Top Clause makes the following statement: “If the S&P 500 breaks out convincingly above the current high Price Momentum Oscillator around 1.225 points, I will react and sell all my inverse ETF positions.” This particular pronouncement to sell, or even to buy when a condition or set of conditions are met has the ring of a déjà vu experience but with the portfolios’ gold positions. As others have observed and written on this blog that despite what seemingly appeared as Claus’ plan of action for gold if its’ price retreated in reality resulted in a plan that took no action at all.
Without a fundamental understanding of the new American investor psyche post the 2000 dot-com bubble and the severe 2008 bear market, fundamental and technical analysis merely produces a distorted picture that consistently leads to missed opportunities and poorly timed portfolio acquisitions and sales as well as a host of other undesirable consequences.
Sitting here in the middle of this debacle as an enlightened American who’s taken this new investment psyche I spoke of into account along with what most Americans know, that Bernanke, Geithner as well as the other self-serving interested parties will tell any lie, omit critical information do whatever they think they must do in order to maintain the false illusion of a recovery.
Has anyone heard the term ‘green shoots’ or ‘Goldilocks’ being bantered about by the media and politicians any more? VP Joe Biden’s “Summer of Recovery” was indeed just that…. a wreck.
I’m more inclined to trust the judgement of Germany’s Chancellor Angela Merkel than that of our consistently wrong Fed. Chairman Ben Bernanke when it comes to matter of quantitative easing.
This manufactured ‘good times’ recovery’s days are numbered. Q1 and Q2 of 2011 seems to be about the longest time the government can persist and afford in trying to cover up the almost certain coming collapse of both the US and global economies. I too believe , as I have written for nearly a year now, that China will fall just as hard and as fast as America. Why Claus if you and most Germans didn’t believe the economic numbers produced by Erik Honecker’s financial apparatchicks why would you or anyone believe the economic numbers produced by Hu Jintaos’ apparatchicks? Have Communist economists suddenly become the standard bearers of truth? What’s next…….. Castro’s Creative Capitalism 101 or Kim Jung Il’s Perpetually Perfect FASB Accounting Rules?
This manufactured upward trend [anemic volume numbers bear this out] in the markets may be nothing more then a prelude to an unsuspecting investment public of the advent of a sudden and devastating “shock and awe” attack upon the markets.
Just like the past dips in the price of gold have been opportunities to purchase gold equities ‘on sale’, the current strength in the market may be offering opportunities to buy inverse ETFs ‘on sale’.
After all, how many times do you expect us to take losses on the likes of SH and SEF? Both are down three times for the count.
Hi again,
well the S&P hit 1224.7 on friday just as Claus was going into print. His finger must be hovering above the eject button.Have we got a parachute?
Seems that we’re in a different universe than the one in which Claus’s charts apply.Bernanke is not fighting an economic war but a phsycological one.Is it possible that there won’t be a big sell off as no one believes there will be one(no moral hazard)?The Fed has stated that a rising market is good for morale so why pull your money out when if there is a decline the Fed stormtroopers will march in and jack it back up.Big sell off?Just make some more money,simple!
cheers,
Bob
Claus,
If Germany is the powerhouse of the EU economic zone and their banks and financial are ‘strong’ why then does no one speak of the ten of billions of euros owed to German banks by the faltering economies of many Eastern European nations (Poland excluded)?
The ECB’s Trichet [President of the European Central Bank] has stated the the ECB would not engage in quantitative easing yet they continue to buy the debt [debt monetization] of the weaker EU economic zone members like Portugal, Ireland, Spain, Greece, Latvia and others? Isn’t that the same thing as quantitative easing?
Isn’t this another excellent example of yet another central banker parsing words to cover the fact that his words do not match his actions? Trichet seems to have caught ‘Bernanke’s Syndrome’ which is why the Germans want him out and replaced with a German as the President of the ECB?
Thanks
CORRECTION:
The above sentence should have read: If Germany is the powerhouse of the EU economic zone and their banks and financial institutions are ’strong’, why then does no one speak of the ten of billions of euros owed to German banks by the faltering economies of many Eastern European nations (Poland excluded)?
Hi again,
good insights Kevin.I think the Germans know exactly whats going on.How long their electorate will put up with it is another thing.
S&P hanging below Claus’s sand line at the moment.Probably the aftermath of Ben’s statement.Am I just a little too cynical but is there something not quite right about the head of the Fed recording an interview on the 30th November but not aired until five days later.In the meantime the Dow bounces more than 350 points. How’s an honest contrarian supposed to make a living?
cheers,
Bob.
Another day gone and the S&P is still on the high wire.Your comment Kevin on another sell off like July reminds me of,
The Grand old Duke of York
He had ten thousand men
He marched them up to the top of the hill
And he marched them down again
When they were up they were up
And when they were down they were down
But when they were only half way up
They were niether up nor down
Not a very good analogy as I don’t think there are ten thousand of us and we’ve certainly never been up.
Still you have to have something to do on nightshift,
take care, Bob J
Claus, appreciate your thoughts on these thoughts.
Federal Reserve Chairman Ben Bernanke was a guest on ’60 Minutes’ recently offering up his perceptions of the ongoing credit, employment and mortgage/real estate crises, many were unusually insightful especially in light of the fact that he was either directly or indirectly directly responsible for many, not all, just many, of the ingredients that went into this depression stew we now find ourselves simmering in , speedily heading towards a rapid boil, akin to the the seemingly ubiquitous social unrest that daily grows exponentially throughout Europe.
Bernanke claims to be concerned primarily about two things: unemployment and deflation. Bernanke says between the economic peak and the end of last year, 8.5 million jobs in America were lost with only 1 million jobs being regained since then. He says it could take 4 to 5 years for the U.S. to get back to a “more normal unemployment rate of 5% or 6%”.
The truth is, real unemployment in the U.S. today once you account for everybody who has given up looking for work as well as everybody who is underemployed, is already about 22%. it is more likely that in 4 to 5 years from now, U.S. unemployment will rise to Great Depression levels. Bernanke’s policy of printing money and creating inflation will not create jobs because the money the Fed creates is going to fund non-productive and wasteful U.S. government spending. The only jobs being created are artificial government jobs.
U.S. government spending is up 108% from 10 years ago. We have a U.S. government spending bubble that will eventually go bust by the U.S. dollar becoming worthless and the U.S. government no longer being able to meet its obligations. Bernanke says we should only be concerned about the long-term deficit because in “10, 15, or 20 years from now the entire budget will be spent on Medicare, Medicaid, Social Security, and interest payments on the debt” and “there will be no money left for the military or other services the government provides”.
The truth is, the U.S. currently has a budget deficit from just Medicare, Medicaid, and Social Security alone and even if the U.S. got rid of all government spending besides Medicare, Medicaid, and Social Security, it wouldn’t be enough to balance the budget (including changes in our unfunded liabilities). Countries usually see hyperinflation of their currencies once interest payments on their national debt reach about 50% of tax receipts, and the U.S. is at risk of seeing interest payments on its debt reach 50% of tax receipts in the middle of this decade. In other words, the U.S. should be concerned about surviving these next 5 years, before it worries about surviving the next 10, 15, or 20 years.
According to Bernanke, inflation is “very very low” and this is a major concern to him because we are very close to falling prices or deflation, which he says would lead to falling wages. Bernanke believes that with his $600 billion in “quantitative easing”, the risk of deflation is now “pretty low” but if he didn’t act, deflation would be a more serious concern.
The truth is, gold is the best gauge of inflation, not the government’s phony CPI numbers. Gold is above $1,400 per ounce and near a new all time high. If deflation was as serious of a risk as Bernanke says, we would be seeing falling gold prices. Bernanke’s quantitative easing has now made deflation absolutely impossible and Americans need to be concerned about the risk of massive inflation and perhaps hyperinflation. If we saw deflation, it would actually be a good thing because the savings and incomes of middle-class Americans would be worth more and prices for food and energy will become cheaper.
Bernanke says that those who look at the $600 billion in quantitative easing as being inflationary are “not looking at the risks of not acting”. He says the Fed has “very carefully analyzed inflation every which way” and that fears of inflation are “way overstated”. Bernanke claims it is a “myth” that the Fed is “printing money” because the “money in circulation is not changing in any significant way”.
The truth is, the Fed’s M2 money supply has risen by $44.9 billion to $8.8092 trillion over the past month. If you annualize this increase, we are talking about a 6.1% increase in the M2 money supply. All Americans who shop for food, gas, or clothes, realize that the U.S. currently has around 6% price inflation and the CPI’s 1.17% rate way understates inflation. The U.S. Bureau of Labor Statistics uses geometric weighting and hedonics to understate inflation. The government’s CPI simply cannot be relied upon.
Bernanke admitted in his 60 Minutes interview that he did not see the panic of 2008 coming. His excuse was that the Fed didn’t have oversight of AIG or Lehman Brothers, and if the Fed had more powers they would have seen the crisis coming.
The truth is there were many Austrian School economists who did see the panic of 2008 coming. Every Austrian economist who predicted the panic of 2008 now believes that massive inflation is in our future. It make no sense for Americans to trust Bernanke about inflation when he was wrong about the housing bubble and just about everything else.
Bernanke went on to say that the reason the U.S. has the largest income disparity gap out of any country in the world is because of “educational differences”. Bernanke claims that unemployment for Americans with college degrees is only 5%, compared to 10% unemployment for Americans with just a high school education.
The truth is, the reason for our income disparity gap is inflation. When the Fed prints money, it steals from the incomes and savings of the poor and middle-class and transfers this wealth to those on Wall Street who have access to the Fed’s cheap and easy money. It has nothing to do with education. In fact, because of Bernanke making it so easy for college students to get student loans, the U.S. has a college tuition inflation crisis.
College tuitions now cost 60% of the median U.S. income, triple the rate of 20% which held strong from 1950 to 1980. Americans today who have college degrees are now worst off, because they are deeply into debt. The only reason their rate of unemployment is lower than those without college degrees is because those with college degrees are more determined to find jobs. If you ask any college graduate who has a job if their college degree helped them become employed, the overwhelming majority of college graduates polled will tell you no.
Bernanke says that he is “trying to achieve balance” and “will not allow inflation to rise above 2%”. He says the Fed can “raise interest rates in 15 minutes if we have to” and the Fed will have “no problem raising rates, tightening monetary policy, and reducing inflation when the time is appropriate”.
Many credible, non partisan economists believe the appropriate time to raise interest rates now. The real rate of inflation is already a lot higher than 2% and if Bernanke waits for the U.S. to be in an all out currency crisis, it will be impossible to contain inflation. The U.S. will have a major inflationary problem with rising precious metals, food, energy, and clothing prices, until the Federal Reserve raises interest rates to a level that is higher than the real rate of price inflation. If the Fed waits for real price inflation in the U.S. to be in the double-digits, it means we will need to see double-digit interest rates, which will send our interest payments on the national debt to over $1 trillion per year.
Bernanke says that all the Fed’s quantitative easing is doing is, “lowering interest rates”, but in fact, yields on the 10-year bond are now 2.97%, a new four-month high. It is likely that bond yields will continue to rise dramatically in the months ahead, with 10-year bond yields likely to rise above 4% in the first half of 2011. The Fed’s goal of keeping interest rates low is obviously failing. The bond bubble is getting ready to burst, which will collapse the U.S. government debt bubble with it.
Americans simply cannot trust Bernanke, who has continuously lied to the American public and been wrong about everything. All Americans need to realize that the real economic crisis is still ahead and it will come as a result of Bernanke’s dangerous and destructive actions. Americans need to be preparing now for hyperinflation if they want to survive, because the U.S. government will soon no longer be able to provide for them.
This contagen, global in nature, has now erupted first in Europe and is growing like a super aggressive cancer and soon most of Europe will become a mass of national civil unrest. Make no mistake this contagen will come to the Western Hemisphere and then onto Oceania and eventually Asia, leaving both great misery and great opportunity in its’ wake.
Thanks
The Xerta DAX is testing its two year high, the success or failure of the DAX’s test will act as an indicator of anticipated future Euro zone activity. The poorly received German bond auction may be even more telling as to what’s really happening under the surface in Europe and what the professionals are truly thinking as to what the EU’s and in particular Germany’s economic prospects are perceived to be by the professionals. Watch Germany keenly as it holds the keys to Europe’s economic future.
Hi,
superb post Kevin.I knew this was worth an extra three months subscription.Your comments on Europe appear spot on.As you guess I’m not very financially astute or that old but the uneasy calm over here I guess is like the prelude to the second world war.We all know somethings afoot but are trying to ignore it,
cheers, Bob J.
And the portfolio’s performance deterioration continues:
Number of Holdings: 11
Total Invested $637,818.92
Cash $296,558.31
Total Portfolio Value $934,377.23
Total Return Since Inception (-6.56%) <——–
S&P 500 Return Since Inception +54.80% <——–
Contrarian Portfolio vs. S&P 500 (-61.37%) <——–
I remember speculating on this blog last month as to what would happen to our portfolio’s performance if gold ‘s price pulled back and the market pushed higher, as to how that would effect a portfolio that consisted of just inverse ETFs and gold positions. Look it up, it’s there. Clause I’m no market expert but this was another obvious situation that could have been avoided. If I could see it coming then trust me it was very obvious, hence the reason for my initial concern and questioning of placing the portfolio in such a vulnerable position. consisting of just these two ‘supercharged’ investment classes.
Thanks
Huh? We are now going short silver while holding GLD and GDX? I guess the goal is to hedge our portfolio 100%. At least it will stop the bleeding but forget about any profit.
Hey Fred,
Isn’t it great to watch ZSL loose 7% of its’ value within one hour of buying it! This must be part of the “ride” we signed on to. Weeeeeeeeeeeeeeeeeeeeee!!!!!!!!!!!!!!!!!!!!!
And the portfolio’s deterioration continues:
Number of Holdings: 11
Total Invested $637,077.19
Cash $296,558.31
Total Portfolio Value $933,635.50
Total Return Since Inception (-6.64%) <—
S&P 500 Return Since Inception +56.06%
Contrarian Portfolio vs. S&P 500 (-62.70%) <—
As of today, Monday Dec 13, 2010 @ 11:40 AM/ GMT-5
again @ 2:45 PM /GMT-5
Number of Holdings: 11
Total Invested $634,248.39
Cash $296,558.31
Total Portfolio Value $930,806.70
Total Return Since Inception ( -6.92%) <—–
S&P 500 Return Since Inception +56.18%
Contrarian Portfolio vs. S&P 500 (-63.10%) <—-
Weeeeeeeeeeeeeeeeeeeeeeeee!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Why did you not supply a “stop-loss” figure for the ZSL entry.
I , like you , have lost a lot of money on this trade, and Ultra ETFs are usually for DAY trading and not “sit back and wait” trading.
What concerns me is that the prices are slowly drifting up on low volume (which suggests that the price of silver could in fact go up when the volume picks up in the New Year , and this could send ZSL down further).
There is no old fashioned logic to the market . Other countries are slowly buying up Gold and Silver. I appreciate the logic that Silver had gone up “too fast” and was due for a “pull back”, but a “stop loss” would have allowed you and everyone else to get back into ZSL again at a lower price. What makes you so certain that the market is going to function logically according to your logic ?
P.S. I think you have “excellent” logic, but we appear to be living in a world without logic. (except perhaps that printing more US $ will send, the price of silver up “relative” to the US $ )
Thank you