Chief U.S. Accountant Quits, America “Will Fall Like Rome” States David Walker

David Walker, Comptroller General of the United States, has said that our government is “bankrupting America” and is using unethical accounting worse than Enron’s. He sees “striking similarities” with Rome and thinks both [political] parties are gluttons in a spending orgy.

You must read this article:
Bernanke’s Recession

Chicken Smith View:

That article provides 11 reasons why we’re already in a recession. There are many more reasons. Just browsing through the previous posts on this blog you can find a lot more.

Gold is nearing $1,000 per ounce. Something most people last year or the year before would have told you is “unreasonable”. Most people don’t know what’s going on.

Think about it. The top United States Government accountant. Yes, America’s Comptroller General, David Walker, the guy who has access to all our government books (cooked or otherwise), has spent the past few years on a nation-wide Fiscal Wake-Up Tour trying to wake-up Americans (laymen, industry leaders, politicians & the Federal Reserve) to the fact that we’re overspending and under-saving and that we’re headed for a collapse (ala Roman Empire). That very same guy has decided to quit his job. Did he just get tired of speaking to the wall?

If that doesn’t scream “the recession is here” to you, then please carry on with your spending and market “investments” as usual (and pray that 401k will still have something in it when you need it). Otherwise, “Wake Up!” we’re in a recession and possibly headed for a Second Great Depression, and it can easily take 5 years or more to see any signs of an improvement. If you haven’t saved anything up until now, now is a good a time as any. It could get ugly.

Economy Fails, Lose A Turn (or a year or more)

Chicken Smith View:

One year ago on January 31, 2007, the DOW closed at 12,621.69.

Today, on January 31, 2008, the DOW closed 12,650.36. This is growth? This is cause for celebration?

So what happened to all the records that the DOW broke over the course of 2007? What happened to that glorious bull market everybody was rushing to be a part of? Nothing. It was never really there. And now we’re back to January 2007 levels. What’s next 2006, 2005, 2004?

Oh, the numbers did get to 14,000, but it was all irrational exuberance. Not a true representation of a market economy. That got left behind along with the old century. Today, it is no longer supply based on demand, rather it is demand based on supply — if you’ve got the money (or credit) and it’s available, just buy it. Who cares if it’s any good, everything eventually goes up, doesn’t it? Besides, when stocks are down, isn’t that the best time to buy?

Have you purchased eggs lately? Inflation is going through the roof! I don’t have to remind you of the housing mess, but what about the dollar mess? Or the frivolous lawsuit mess? Or the credit crunch? Or the political mess? Or the health care mess? Live in Massachusetts and can’t afford health insurance? No problem, just pay an outrageous fine for every month you weren’t insured to the Department of Revenue and at least those who don’t even work will be able to get some sort of sub-standard subsidized health care while you get taxed to death (you can thank Mitt Romney for that one).

It seems every aspect of our modern, “first-world” civilized life is taking a turn for the worse. And remember that the stock market is a trailing indicator, so that means we’ve yet to feel that pain. And that talk of a recession? Too late, we’re already waist deep in it.

What to do? You’ve got me. I’ve recommended everything from getting solar panels and digging your own water well to learning another language and exiting our currently collapsing U.S. society. The truth is, nobody knows what’s going on, nor what the best course of action is. For all I know, the rest of the world will suffer right along with us.

My feeling is that the U.S. will be in a recession and/or depression for at least five years. I’ve heard numbers as high as 15 and 20 years, which lead me to believe it can easily get to 10 years of economic turmoil or more. If the Great Depression is any indicator, we may be in this for over 20 years! According to this chart of the stock market crash of 1929, I’d say we might be headed for a big drop, followed by a “Short Recovery” followed by never-ending drops.

Head for the hills? Fuggit about it, just charge up your credit cards and hope Visa & MasterCard collapse before you do.

Why Hasn’t The Stock Market Crashed Yet? Joe?

Chicken Smith View:

As our markets keep trying to correct themselves (ie, come down off their high horse), there are major players in the system who are constantly propping up the markets with unnecessary and undue infusions of capital. Among these players are the Federal Reserve, corporations, foreign investors, and an ever growing group of individual investors — your average Joe.

It used to be that the majority of traders were, to a large extent, all professionals. In today’s financial markets, that no longer seems to be the case. Given the right tools, every Joe-six-pack can be a day trader.

What does this translate into? Potentially, a bunch of novices could be keeping (or at least helping to keep) our financial markets afloat. Every Tom, Dick and Harry now has a brokerage account or three, and the problem is that they all know just enough to make them think their “buy low, sell high” strategy combined with their computer savvy (so called “smart” trading software) will keep them out of trouble. They’re wrong.

The idea is simple; buy when prices are at their lowest and sell when prices are at their highest. However, this simple notion assumes one knows when something is at its lowest or highest price in real time. Retrospectively, we can all check the charts and see when something peaked or bottomed, but while its happening, we simply just don’t know, the price of a stock can climb or fall dramatically in a matter of minutes if not seconds.

The very concept that the “buying low and selling high” strategy will produce great returns is fraught with error, as one should never base their investments on price alone.

Even seasoned professional investors will sometimes fall for the herd mentality and begin following the bulls and buying when the markets are taking a tumble (also known as everything being “on sale”). Something that has, coincidentally, been occurring a lot lately. So it’s not too difficult to see how Tom, Dick & Harry can easily fall for it as well.

With online brokerages and local banks offering $7, $4 and even free online trades, it is now easier than ever to be a day trader, even if you don’t know a single thing about stocks or short term capital gains.

But that’s not enough to discourage your average Joe, who is just itching to jump in the stock market game, especially since he was one of the fortunate to be watching TV at 3am on a Sunday morning and plunked down hundreds of dollars for an investor kit that included “smart” trading software. Which, by the way, if properly configured, can do all the thinking for him… and we all know how much thought Joe wants to put into this.

Recently, whenever the Dow Jones Industrial Average Index (DJI) takes a 100 point nose-dive, it seems the very next day there is a 100 point jump. And vice-versa. So, is this really the natural and logical effect of a market driven by a bunch of professional traders? Or should the question really be: Just how many “Joes” are out there?