Great Depression 2.0 Underway

July 29, 2008

It’s all happening right in front of our very eyes. All that so many spoke and wrote about for so long. I tire in repeating the same things over and over again. So I won’t… and I haven’t for a few months now. Months that I have used for planning and putting into action an exit strategy in response to our current economic climate. Those who know me are aware of those measures. Those who don’t, can re-read my postings and get an idea of our current economic state and can devise their own plan.

You can also turn to your favorite news source to see what American bank, airline, auto manufacturer, or any other business has recently gone under or has been sold to a foreign entity. Feel free to post any comments to this blog. Best of luck! -C. Smith

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

March 3, 2008

David WalkerDavid 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.


The Economy Crisis Is Contained… Yeah, Right!

February 2, 2008

Some News Links From Contributing Editor RH:

NY TimesChina’s Inflation Hits American Price Tags…
http://www.nytimes.com/2008/02/01/business/worldbusiness/01inflate.html?_r=3&hp&oref=slogin&oref=slogin&oref=slogin

money.cnn.com‘It’s going to be much worse’ Famed investor Jim Rogers sees hard times ahead for the United States – and a big opportunity looming in China…
http://money.cnn.com/2008/01/30/news/international/okeefe_rogers.fortune/index.htm

bloombergU.S. Economy: Payrolls Fall for First Time Since 2003…
http://www.bloomberg.com/apps/news?pid=20601087&sid=agPvpBGH.EX4&refer=home

CountrywideCountrywide And Chase sent letters to customers last week telling them they could no longer borrow against their credit lines because the total debt on the home exceeded the market value of the property. The lender says it is using computer modeling to determine which of its customers would have their cash spigot shut off…
http://globaleconomicanalysis.blogspot.com/2008/02/countrywide-and-chase-shut-off-cash.html

Home DepotHome Depot to lower 10% of headquarters staff. For now!
http://www.marketwatch.com/news/story/home-depot-lower-10-headquarters/story.aspx?guid=%7BB2D577A3%2DA185%2D4D73%2D9AAF%2D377BDC78AB6A%7D

bloombergSay It Ain’t So, Municipal Bonds Are the New Junk: Joe Mysak
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_mysak&sid=auPmzvv3Al.g

Bush Says ‘Serious Signs’ U.S. Economy Is Weakening…
http://www.bloomberg.com/apps/news?pid=20601087&sid=aJZqcryZJIqw&refer=home

Where a recession is already hitting hard…
http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/WhereARecessionHasAlreadyHitHard.aspx

It’s just the beginning… -RH

Chicken Smith View:

I know, you’re probably thinking; “boy, these people don’t let up that the sky is falling.” Well, it ain’t just us. It’s a lot of people all over the world that recognize the trouble we’re in and the uncharted waters we’re headed towards.

As you can probably see, people are only now starting to wake up to this, just as I started waking up to this towards the end of 2006, and others, much smarter than I, have been predicting a decline for much longer than I have (check out Peter Schiff). Sooner or later you’ll have to recognize it. If you don’t see the signs that we’re in a recession and possibly headed for worse, I can only think of a few excuses for that reasoning at this point in time:

1. Your wealthy – I figure if you’ve got a lot of cash coming in, and someone else is managing your money, you might not feel all the cash that’s going out. I’m choosing to define wealthy as someone who’s combined household income after taxes is above $750,000. Although if you make that amount, chances are you probably have lost some money in the stock market recently, so you must have felt it.

2. You’re a hard working schmuck and your wife handles your money – Well, here’s how I figure it; the more inflation hits us, the more you have to work, the more you work, the less time you have to stop and see what’s really going on. As the bills come in, your wife simply insists that you have to work more, ok, well maybe she’s working more too, but the point is you can’t afford to stop to smell the roses.

3. You’re a student – Everything is already expensive, you already owe a lot of money, and you don’t know any better. Keep reading and learning, these are tough economic times we’re headed towards, similar to our depression years that started in 1929 and lasted well over 10 years.

If you don’t fall into one of those categories above, then surely you must be seeing it everywhere, from food prices to heating prices, from housing crises to financial crisis, from social woes to political woes, from health insurance to home insurance, from the falling dollar to the negative savings rate. Even global weather is lining up right along the rest of our economic uncertainties to produce the “perfect storm” of a world financial collapse that is being spear headed by the U.S. Granted, unless those terrorists decide to attack us again, we’ll all survive this and things will eventually get better, but they’ll certainly get worse before we even see the light at the end of the tunnel.


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

January 31, 2008

Chicken Smith View:

Stocks DownOne 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.

Great Depression ChartMy 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?

December 31, 2007

Chicken Smith View:

Market CorrectionAs 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.

DJIA Jul. to Dec. 2007

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?


The Economic Truth Is Hidden Between The Lines

November 20, 2007

Chicken Smith View:

Alan GreenspanIf you’ve seen Alan Greenspan’s recent peddling of his book in the media, you might think he’s an articulate fellow. However, the truth is he always had a convoluted way of saying things that left you either confused or thinking he agreed with you. This was dubbed “Fed Speak.” Even after leaving his post as Fed Chief, he still hasn’t changed his ways. Following are some recent quotes from Greenspan and what the average person might think of it, followed by what I think of it.

BloombergAccording to Bloomberg on November 18th: Former Federal Reserve Chairman Alan Greenspan said the dollar’s decline hasn’t affected the global economy and is a “market phenomenon.”
The Average Person Might Think: …Wow! Our dollar is doing phenomenally well. I’ll go shop for some more stuff made in China now.
Chicken Smith View: …what a bunch of crock! Define “market phenomenon.” Even the Great Depression can be classified as a “market phenomenon”.

And notice how Greenspan carefully crafts his sound bites with escape clauses and conditional statements…

Greenspan: “…dollar’s decline hasn’t affected the global economy…”
The Average Person Might Think: …oh, ok, so everything is fine with our economy. I mean the US is part of the global economy right?
Chicken Smith View: …the global economy is fine, but the American economy, taken on its own, is not fine.

Greenspan: the U.S. economy is “doing reasonably well”
The Average Person Might Think: …yeah, we’re doing reasonably well! My stocks are higher than last year, isn’t that all that matters?
Chicken Smith View: …considering how bad things will get later, we’re doing just fine. By the way, don’t forget to calculate inflation when valuing your stock earnings. Here’s a hint; it’s not 2%.

Greenspan: “So long as the dollar weakness does not create inflation”
The Average Person Might Think: …see, as long as there’s no inflation we’re ok. And the Fed says there’s no inflation, so we must be ok.
Chicken Smith View: …yeah, and I have brunch with Elvis & Lincoln every Sunday morning. Is he nuts? How can the dollar weakness not create inflation?

Greenspan: “If we can get beyond this housing problem I think we’ll do pretty well”
The Average Person Might Think: …it’s just a housing problem …everything else is actually doing pretty well. I mean, my stocks are up, right?
Chicken Smith View: …as soon as someone invents a time-machine, we’ll just skip over the forthcoming depression. Or not. Because we can’t just get beyond this housing problem, it’s a major part of this mess. So I guess that means we won’t do “pretty well”, huh Mr. ex-Fed Chief? BTW, isn’t the stock market a lagging indicator?

Read between the lines!!! A great economy does not need conditional statements like Greenspan is making. If the economy is doing well, it’s just that. You don’t need to preface it by saying it’s doing “reasonably well.” A great economy does not need “if this” or “so long as that” to quantify its position.

Greenspan is trying his hardest to sugar-coat the messes he made between 2001 and 2003. However, he’s actually telling some truth, it’s just not what you think you’re hearing. The truth is there’s an economic recession on its way that can turn into a depression if people (although mostly banks, corporations, and politicians) don’t wake up and stop begging the Fed to continue lowering interest rates to bail out certain sectors of the economy or groups of people.

People should request that their congressmen and senators express their constituency’s demands that the Fed not continue using stall tactics (ie, lowering interest rates) to delay an inevitable recession. It will only delay the problem thereby assuring an even bigger recession and/or depression.


Employment Plunges, Credit Tightens, Gold Climbs, Market Crash Forecast, Great Depression Ahead

September 8, 2007

The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987,” Greenspan was quoted by the newspaper as saying… http://www.reuters.com/article/ousiv/idUSN0640900320070907

Citigroup Unit Won’t Take New Mortgage Bank Clients… http://www.bloomberg.com/apps/news?pid=20601087&sid=aP1Ebhaa1J30&refer=home

The utterly ugly employment figures for August (a fall in jobs for the first time in four years, downward revisions to previous months’ data, a fall in the labor participation rate, and an even weaker employment picture based on the household survey compared to the establishments survey) confirm what few of us have been predicting since the beginning of 2007: the U.S. is headed towards a hard landing…. http://www.rgemonitor.com/blog/roubini/213894

33 percent of home loans didn’t close last month. A third of home loans originated by mortgage brokers failed to close in August as investors shied away from riskier borrowers, a new survey says… http://www.mcall.com/business/local/all-mortgages.6029291sep06,0,7164270.story

Countrywide May Cut Staff by 12,000. Countrywide Financial Corp., the nation’s biggest mortgage company, may reduce its workforce by 10,000 to 12,000 in the next three months, a 20 percent cut… http://www.bloomberg.com/apps/news?pid=20601087&sid=aQhytb8fv1Tk&refer=home

LEHMAN CUTS 850 MORE JOBS: Lehman Brothers Holdings Inc., which shut its subprime mortgage business last month, is cutting 850 more jobs, mostly at a U.S. subsidiary catering to borrowers with decent credit scores…http://www.nypost.com/seven/09072007/business/lehman_cuts_jobs_in_alt_a.htm

IndyMac to Cut 10 Percent of Jobs; May Post a Loss… http://www.bloomberg.com/apps/news?pid=newsarchive&sid=azgqnpf9trLM

Don’t you just feel real sorry for gold? Look at that poor chart below and weep. …Actually weep for those idiots who cannot recognize a gold bull market when they see one. Hah! Gold will yet go where gold wants to go and perhaps where it has never been before– higher Margarita… http://www.kitco.com/ind/vaughn/sep072007.html

Gold Prices Climb As Stocks, Dollar Fall… http://www.forbes.com/fdc/welcome_mjx.shtml

Debugging Wall Street’s funky math. Big chunks of investment banks’ earnings are from assets that few know how to value. Should investors and regulators be concerned??? http://money.cnn.com/2007/09/06/magazines/fortune/eavis_level3.fortune/index.htm?postversion=2007090710

As Housing Market Cools, Far Fewer Become Agents… http://www.nytimes.com/2007/09/07/business/07agents.html?em&ex=1189310400&en=78ece3289daf0498&ei=5087%0A

America is already in a recession and the U.S. Government is flat broke to the extent of 8.9 trillion dollars. In other words, every man, woman and child in America owes $29,672 dollars in Government debt… http://www.opednews.com/articles/opedne_allen_l__070830_america_broke__2f_aver.htm

US Economy: Drowning in Debt… http://www.opednews.com/maxwrite/link.php?id=21979

American Dream Slashed Along with Home Values… http://www.opednews.com/maxwrite/link.php?id=37915

The Great American Dream still exists — in Iraq! http://www.opednews.com/articles/opedne_jane_sti_070329_the_great_american_d.htm

America’s House of Cards Economy… http://www.opednews.com/articles/opedne_michael__070814_house_of_cards.htm

Economic Armageddon Is Coming… http://www.opednews.com/articles/opedne_joel_s___070423_economic_armageddon_.htm

Bush’s Economy Is Poverty Stricken, Bleeding Jobs and Ready to Crash… http://www.opednews.com/articles/opedne_dan_meri_070524_bush_s_economy_is_po.htm

China’s Passenger Cars Leave US in the Dust… http://www.opednews.com/articles/genera_braden_g_070327_china_s_passenger_ca.htm

Chicken Smith View:

I know what you’re thinking; “how can this great, rich, powerful, generous and glorious country collapse?” Well, starting with the fact that the Egyptians, the Greeks, the Turks, the Ottomans, the Romans, the Mayas, the Spanish, the British and basically anyone that’s ever been in or part of a “great empire” all thought the same thing (even more so right before it collapsed), and then proceeding to the fact that we are facing similar historical events that preceded their demise, I think it’s highly likely that our great nation can see a reversal of fortunes in the near future.

What to do? Save your money! Have some gold and/or silver (no I don’t sell any). Consider the possibility of moving overseas (or across the border, Canada eh?). Get some useful skills such as learning to modify a car to run on cooking oil, building a solar panel, fortifying your home against intruders, digging a well in your back yard, learn another language, and anything else that can prep you for some tough economic times (which in turn can lead to some tough social times). Hey, if nothing else happens, at least you’ve got some good skills that will help you in our new world economy.