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Fed Blows (Bubbles)


By Robert Sproul   Follow   Mon, 11 Feb 2013, 11:35pm PST   708 views   15 comments
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Interesting discussion of Fed policy, and its effect, by the Bay Area's own, invaluable, Charles Hugh Smith.

"The financial media and economists want us to believe that the Fed printing is "stimulus" when in fact it is part of the "liquidation" of Fed member banks' balance sheets of bad assets."

http://www.oftwominds.com/blogfeb13/low-yield2-13.html

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E-man   Tue, 12 Feb 2013, 11:27pm PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 1

Why things are falling apart and what we can do about it? My question to you and Charles is that what can you do about it?

Sorry, but I'm not going to drop $9.95 to buy that book. There are times to be a bear, and there are times to be a bull. You don't make money by being a perma-bear, but you can make a living selling doom and gloom information to the bears. Gotta pay the bills somehow.

Robert Sproul   Wed, 13 Feb 2013, 1:50am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 2

This is all such a hideously complex and personal issue. I am convinced that we are in the middle of structural, generational shifts that are unprecedented in living memory. (End of debt super-cycle, end of cheap oil, corporate domination of the political process) I do not look for any truth, on any issue, from mainstream sources. There has been a thread on PatNet about media left/right bias. The real bias is pro-corporate. Brian Wiiliams is a highly paid employee of GE, or whoever the hell owns NBC now. Kyle Bass tells the truth when he says that the power elite always lie when things go critical, it is their job to reassure and promote confidence. No matter the consequence for me and you.
http://www.zerohedge.com/news/2013-02-01/kyle-bass-tells-nominal-stock-market-cheerleaders-remember-zimbabwe

What to do?
I am staying out of obviously manipulated markets, i.e. all of them. Smith explains this idea here:
http://www.peakprosperity.com/blog/80879/dont-worry-be-resilient
Peak Prosperity is Chris Martenson's terrific web site. His "Crash Course" changed my whole world view.

The only other thing that I believe in beyond personal resilience and community building is direct action against the Too Bigs, as explained by Taibbi:
http://www.huffingtonpost.com/2013/02/07/matt-taibbi-reddit-ama_n_2638951.html
The political processes in America are hopelessly corrupted, but we could buy time by holding the Banks accountable for their frauds and failures.

The truth is out there, but it is uncomfortable. My one strong suit is that I have never been a comfort seeker.
My weather reporting comes from:
Chris Hedges- explains why no change to the status quo will come from within the 2 party system
Kyle Bass- the real smartest guy in the room
Charles Hugh Smith- fantastic layman commentary
Yves Smith
James Howard Kunsler
Glenn Greenwald

All of these (and I have vetted and read a few more) have a bleak view of this critical moment in history. None of them are profiteers, I don't think.

tatupu70   Wed, 13 Feb 2013, 3:43am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 3

Robert Sproul says

All of these (and I have vetted and read a few more) have a bleak view of this
critical moment in history

When everyone you follow has the same view, you probably need to expand your reading list. You appear to be exhibiting confirmation bias....

Robert Sproul   Wed, 13 Feb 2013, 4:08am PST   Share   Quote   Permalink   Like   Dislike     Comment 4

tatupu70 says

you probably need to expand your reading list. You appear to be exhibiting confirmation bias....

Feel free to cheer me up.
Who do you think is coming up with enlightening analysis on a positive tip?
I hope it doesn't involve Fed inspired asset inflation or speculative new energy plays.
Have you read any of the sources that I listed?

Robert Sproul   Wed, 13 Feb 2013, 4:18am PST   Share   Quote   Permalink   Like   Dislike     Comment 5

E-man says

there are times to be a bull

In Real Estate, when there is job or income growth. In the Stock Market when there is market movement based on something more than free money.
I don't like being manipulated into risk trades by financial repression.

MsBennet   Wed, 13 Feb 2013, 8:21am PST   Share   Quote   Permalink   Like   Dislike     Comment 6

Robert Sproul says

What to do?

I am staying out of obviously manipulated markets, i.e. all of them. Smith explains this idea here:

The stock market might be manipulated but a conservate allocation of stocks and bonds has gone up over 20 percent in the last three years for me! I will take that! Not as much a return as all stocks but a lot less risk, plus there are the dividends, too! Don't throw the baby out with the bath water.

Robert Sproul   Wed, 13 Feb 2013, 8:44am PST   Share   Quote   Permalink   Like   Dislike     Comment 7

MsBennet says

20 percent in the last three years

For me that is like saying that the card game is crooked but Mr Soprano lets you win for the first few hands.
Over 60 percent of the daily volume on the NYSE is program, high frequency trading. I have heard that a large percentage of that is by the 6 largest trading desks and HFT firms. This is a long way from an honest marketplace to funnel our surplus capital into productive enterprise in order to realize a share of the profit.
This is in my view a rigged game where they let you win until they don't.
And then the retail suckers give back a decade or so of gain.

Mark D   Wed, 13 Feb 2013, 8:45am PST   Share   Quote   Permalink   Like   Dislike     Comment 8

E-man says

Why things are falling apart and what we can do about it? My question to you and Charles is that what can you do about it?

Sorry, but I'm not going to drop $9.95 to buy that book. There are times to be a bear, and there are times to be a bull. You don't make money by being a perma-bear, but you can make a living selling doom and gloom information to the bears. Gotta pay the bills somehow.

may i add one more thing to this great post.

here is the list of perma-bear, gloom & doom experts to avoid if you wish to make money (and not miss the boat, AGAIN (lol)):

jim rogers
max kaiser
peter schiff
schilling
case shiller
....
- add your own here -

Robert Sproul   Wed, 13 Feb 2013, 11:17am PST   Share   Quote   Permalink   Like   Dislike     Comment 9

Mark D says

here is the list of perma-bear, gloom & doom experts to avoid

How interesting.
Of course none of the financial people on my source list is in any way a perma-bear. All have been fully invested in various markets, just not this market.
Who are the paid prophets and corporate salaried shills you are suggesting as more accurately in tune with the times?
I also wonder who you think has missed which boat?

MsBennet   Wed, 13 Feb 2013, 11:57am PST   Share   Quote   Permalink   Like   Dislike     Comment 10

Robert Sproul says

MsBennet says

20 percent in the last three years

For me that is like saying that the card game is crooked but Mr Soprano lets you win for the first few hands.

Over 60 percent of the daily volume on the NYSE is program, high frequency trading. I have heard that a large percentage of that is by the 6 largest trading desks and HFT firms. This is a long way from an honest marketplace to funnel our surplus capital into productive enterprise in order to realize a share of the profit.

This is in my view a rigged game where they let you win until they don't.

And then the retail suckers give back a decade or so of gain.

Okay. Suit yourself. I will double my money every ten years at a minimum in fairly conservative investment, that is less risky than 100% stocks. At least I will keep up with inflation or better. Of course, I have some gold, too. But it hasn't gone anywhere lately. If not real estate, if not bonds or stocks, then what? Please don't tell me under your mattress!

Robert Sproul   Wed, 13 Feb 2013, 12:25pm PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 11

MsBennet says

I will double my money every ten years at a minimum in fairly conservative investment

The Dow was 11,000 in 2000 and 11,000 in 2010, did you double your money in that 10 years? The stock highs of 1931 were not seen again until 1955.
My boy Kyle Bass, referenced above, says this is the most difficult investment environment in a lifetime.
Part of the purpose creating a zero interest rate environment for savings (financial repression) is to drive us into risk trades. I am afraid this fraud riddled, manipulated market is riskier than you realize.

MsBennet says

Please don't tell me under your mattress!

Your money is, of course, most welcome under my mattress.

MsBennet   Wed, 13 Feb 2013, 12:42pm PST   Share   Quote   Permalink   Like   Dislike     Comment 12

Like I said, there is more than just stocks. There are bonds (which are the ying to stock's yang) and dividends that accumulate because some stocks pay dividends to holders.

http://www.longtermreturns.com/2012/03/salute-to-wellington-and-wellesley.html

Wellesley, started in 1970, also got its start at rough times for the markets, in the beginning of the big inflation flare-up, but still managed to deliver enviable performance since:

$10,000 invested in Wellesley at its inception would be worth $530,000 now -- 53 times more in 42 years!

and if you have this fund in an IRA it accumulates tax free until retirement.

or better yet in a Roth IRA, and it's tax free forever!!!

Robert Sproul   Wed, 13 Feb 2013, 2:30pm PST   Share   Quote   Permalink   Like   Dislike     Comment 13

MsBennet says

$10,000 invested in Wellesley at its inception would be worth $530,000 now -- 53 times more in 42 years!

Except nobody actually got to take that ride.
We are just going to have to disagree.
You think the glass is half full. I think the glass was stolen, replaced with a fake glass stuffed full of fraudulent instruments and false promises.
I see nerve wracking exponential charts everywhere, Govt. debt, student debt, credit card debt, default rates, unfunded pension obligations, ad infinitum.
Treasury bonds are perhaps the biggest bubble in history.
The next 40 years will be nothing like the last 40 years.

MsBennet   Wed, 13 Feb 2013, 4:25pm PST   Share   Quote   Permalink   Like   Dislike     Comment 14

Robert Sproul says

MsBennet says

$10,000 invested in Wellesley at its inception would be worth $530,000 now -- 53 times more in 42 years!

Except nobody actually got to take that ride.

We are just going to have to disagree.

You think the glass is half full. I think the glass was stolen, replaced with a fake glass stuffed full of fraudulent instruments and false promises.

I see nerve wracking exponential charts everywhere, Govt. debt, student debt, credit card debt, default rates, unfunded pension obligations, ad infinitum.

Treasury bonds are perhaps the biggest bubble in history.

The next 40 years will be nothing like the last 40 years.

It's true that bonds may not do as well in the future. I doubled my money since 2000 in that particular fund without adding any new money and letting the dividends reinvest. Now, if the fund goes down, your dividends will reinvest at a lower share price. That's the secret.

No one knows how the next 40 years will go (and I will be dead for some of it). Right now while I'm alive I'm going to take advantage of what's out there.

If the stock market plunges, I can simply go online, enter my password and click on "sell." Takes about 20 seconds.

Robert Sproul   Thu, 14 Feb 2013, 12:12am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 15

MsBennet says

(and I will be dead for some of it)

My retirement plan is to outwit them by dying before my money is confiscated through Fed debasement as well.

MsBennet says

If the stock market plunges, I can simply go online, enter my password and click on "sell." Takes about 20 seconds.

Ah yes, that is the same "Click your heels together three times and say, "'There's no place like home' and you'll be there." plan that many have.
I wish you luck.

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