The U.S. economy has had six full years to bounce back since the financial collapse of 2008, and it has not done so. Median household income has declined substantially, total household wealth for middle class families is down, the percentage of the population that is employed is still about where it was at the end of the last recession, and the number of Americans that are dependent on the government has absolutely exploded.
Even those that claim that the economy is "recovering" admit that we are not even close to where we used to be economically. Many hope that someday we will eventually get back to that level, but the truth is that this is about as good as things are ever going to get for the middle class. And we should enjoy this period of relative stability while we still can, because when the next great financial crisis strikes things are going to fall apart very rapidly.
The U.S. Census Bureau has just released some brand new numbers, and they are quite sobering. For example, after accounting for inflation median household income in the United States has declined a total of 8 percent from where it was back in 2007.
That means that middle class families have significantly less purchasing power than they did just prior to the last major financial crisis.
One research firm projects that will take until 2019 for median household income to return to the level that we witnessed in 2007:
For everybody wondering why the economic recovery feels like a recession, here’s the answer: We’re still at least five years away from regaining everything lost during the 2007-2009 downturn.
Forecasting firm IHS Global Insight predicts that real median household income — perhaps the best proxy for middle-class living standards — won’t reach the prior peak from 2007 until 2019. Since the numbers are adjusted for inflation, that means the typical family will wait 12
They call it the New Normal(sic) for a reason: that reason is that as a result of 6+ years of central-planning interventions in the global economy, an experiment that has grown far more monstrous than anything the USSR ever tried to do, everything is now broken: all conventional economic linkages, relationships and correlations you learned about in university are no longer applicable or practical in a world that has taken both Keynesian and monetary theory beyond their wildest extremes.
The result is a ghoulish, macabre collage of mishmash theories applied haphazardly in hopes that something will finally stick, and if not, at least kick out the day of reckoning a little longer.
All of that will fail, and, just as the Austrian economists predicted from day one, the entire house of cards will come crashing down in a heap of record credit. Yes, it could have been different, had the people in charge taken the correct, but difficult decision when Lehman failed, and purged the system of its credit excesses. But they didn't, as that would have wiped out trillions in equity value where the bulk of the "wealth" and net worth of the legacy status quo is located.
So they kicked the can.
For all those sick and tired of watching the grotesque pantomime in which only the rich get richer, while everyone else is ever more impoverished, we have good news – the experiment is coming to an end. Only it is not us postulating that the entire "modern" economic system is on its last breath – here are seven slides from Citi explaining the very much intractable "problems with traditional economics," and why the economic Titanic, floating on an ocean of central bank liquidity, is approaching the proverbial iceberg.
So, without further ado, here is everything that is broken with the traditional economic system as applied in today's bizarro world.
* * *
At the top level, the problem reduces to some quite simple axioms: savings, assets = liabilities, credit creation, and the inability to do so when there is simply too much debt already.
When the disconnect between theory and reality detailed above manifests itself in the real…
The multiple airstrikes launched by the US and its Arab allies against Islamist militants in Syria were the “beginnings of a sustained campaign” that could last for years, the Pentagon said on Tuesday.
The airstrikes represent a dramatic volte face for a president who has spent three years battling pressure in Washington to get more involved in Syria and who was elected on a promise to bring the country’s wars in the Middle East to an end.
The US separately bombed facilities controlled by the al-Qaeda affiliate Khorasan group in Syria, near Aleppo, after receiving intelligence it was planning “imminent” attcks on Europe and possibly the US, the Pentagon said.
The bombing of non-Isis militants angered some Syrian rebels groups who feared any Islamist group could be targeted, even if they had no intention of mounting attacks outside Syria, to the benefit of Bashar al-Assad’s regime.
“We did not request the regime’s permission. We did not co-ordinate our actions with the Syrian government. We did not provide advance notification to the Syrians at a military level, or give any indication of our timing on specific targets,” said Jen Psaki, the state department spokeswoman.
No Permission, No Coordination, From “Natural Allies”
Syria has “no reservations” about U.S. airstrikes against ISIS and wants to team up with Washington to tackle the militants, the country’s deputy foreign minister told NBC News.
Faisal Mekdad called Syria’s President Bashar al-Assad “a natural ally” for the U.S. in its battle against ISIS, saying in an exclusive interview that both countries are “fighting the same enemy” and should be working together — not antagonizing each other.
“When it comes to terrorism, we should forget our differences… and forget all about the past,” Mekdad said. “It takes two to tango…We are ready to talk.”
Obama Threatens Assad if US Planes Downed
Ready to Talk? The US is not ready to talk. Why talk when the battle for perpetual war has been won? …
Up until late last week, no US official had ever publicly mentioned the terrorist group known as the Khorasan. On Monday night, the US carried out unilateral airstrikes against the previously unknown group in northwest Syria.
And on Tuesday, US officials were describing the group as an imminent threat on par with or worse than the group calling itself the Islamic State (also known as ISIS or ISIL), which has been the focus of US airstrikes for more than six weeks.
The key difference between ISIS and Khorasan: US intelligence believes Khorasan poses a threat to the US and its homeland, while it believes ISIS does not currently have the capability to carry out a large-scale attack on the US homeland.
Khorasan was involved in "imminent attack plotting" against the US and its interests along with Europe, the Pentagon said Tuesday. The group has been portrayed as a collection of top Al Qaeda officials from Central Asia who have been taking advantage of the chaos in Syria to establish training camps. In a statement from the White House, US President Barack Obama called them "seasoned" Al Qaeda operatives.
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Hedge funds are further out on the same limb they occupied in 2007, right before the collapse shown on this chart of the HFRX Global Hedge Fund Index.
According to Eurekahedge, a global hedge fund monitoring service, hedge funds' gross assets hit 170% of capital in January, which surpasses the previous peak of 168% in 2007.
Leverage at many of the largest hedge funds is far higher.
For instance, in April, the New York Post noted that Citadel Investment Group, one of the 25 biggest US hedge funds, had implied leverage of about 8.8 times its total investment capital. The Post also noted that Citadel's "leverage last came under scrutiny in 2008, when it had to unwind a leverage of 8.2 times as the financial crisis unfolded."
The Elliott Wave Financial Forecast asserted in April that hedge funds will be even more of a focal point for losses in the next wave down. The chart of the HFRX Index shows that global hedge fund performance has been essentially flat since 2011. The A-B-C rally from 2009 has now retraced 63% (5/8) of the decline from 2007-2008, so an even more precipitous downtrend seems near for hedge funds.
The U.S. Senate's Permanent Subcommittee on Investigations confirms the imminence of a reversal.
In July, Congress opened a major probe into the inner workings of the hedge fund industry. A report from one set of hearings is titled "Abuse of Structured Products: Misusing Basket Options to Avoid Taxes and Leverage Limits." The subcommittee recommended that regulators "take steps to examine complex financial arrangements."
It never fails. When a mania ends, the instruments of the uptrend are often subject to recrimination and "reform."
Münchau’s opening gambit is “We need extreme and co-ordinated policy to make it possible for Italy to ultimately stay in the eurozone.”
Münchau states, “I think it is high time to address the consequences of failure with more clarity than is usually done. Put bluntly, Italy’s economic position is unsustainable and will result in eventual debt default unless there is a sudden and durable change in economic growth. At that point, Italy’s future in the eurozone would also be in doubt – and indeed the future of the euro itself.“
High Time For Honest Assessment
Actually, it is indeed “high time” for something. What we need is an honest assessment from political leaders and euro puppets that the euro is doomed.
The flaws of the euro are well understood. I am 100% certain that Münchau could write a playbook on them with ease.
Münchau even admits that it would be “naive” to believe economic reforms can save Italy.
“The economic adjustment needed goes much beyond a few structural reforms. Italy needs changes in the legal system, it needs to bring taxes down to the eurozone average, and to improve the quality and efficiency of the public sector. It needs, in other words, to change the entire political system. Even that may not be enough.“
According to Münchau (and I wholeheartedly agree), Italy needs economic reform, a new legal system, lower taxes, less government spending, pension reform, and more productivity. And even that might not be enough!
Nonetheless, to support his political beliefs, he seeks a miracle. …
That title wouldn’t make for much of a campaign slogan, and yet, it’s the natural outcome of one particular politician’s promise. As the editor of a retirement-focused newsletter, most of the notes I receive about the Affordable Health Care Act, or Obamacare, are first-person accounts of how a reader’s change in coverage or cost is affecting his finances. These (mostly sad) stories prompted several discussions with Andy Mangione, vice president of government relations of the Association of Mature American Citizens (AMAC). Andy serves as the lead legislative and government contact for AMAC in Washington, DC. He’s also responsible for national grassroots outreach and developing strategic partnerships.
Andy is AMAC’s man on the scene in Washington, and he kindly agreed to sit down for an interview on the significant budget cuts to home health care that have been made as a result of Obamacare. I’ll let Andy get into the details.
Dennis Miller: Welcome, Andy. Thanks for taking the time to educate our readers on the latest goings-on in Washington.
Andy Mangione: My pleasure, Dennis.
Dennis: Andy, let’s get right to it. I know you’re very concerned about how cuts to home health care will impact seniors. This is no longer a theoretical problem. I’d like to ask a two-part question: Can you tell our readers a bit about your organization and how these budget cuts will affect “mature American citizens?”
Andy: Dan Weber, a private citizen, founded AMAC as an alternative to and competitor of AARP. AMAC is a right-of-center, conservative member benefits and senior advocacy organization for Americans age 50 and older. AMAC offers many of the same benefits and services as AARP. The biggest difference, though, is our approach to advocacy. AMAC is a member-driven organization. We do not sit in a boardroom and determine our stance on issues unilaterally. We take our marching orders from our members. They determine the issues that I bring to Washington, DC and help us to determine our policy and issues positions.
We have over 1.2 million American members living in all 50 states. We add approximately 1,000-2,000 new, dues-paying members each week.
President Obama’s neo-Cold War is not about ideology or respect for borders. It is about money and global power. The current battle over control of gateway nations – strategic locations in which private firms can establish the equivalent of financial boots-on-the-ground – is being waged in the Middle East and Ukraine under the auspices of freedom and western capitalism (er, “democracy”). In these global gateways, private banks can infiltrate resource-rich locales fortified by political will, public aid and military support to garner lucrative market advantages. ISIS poses a threat to global gateway control that transcends any human casualties. That’s why Congress decided to authorize funds to fight ISIS despite the risk.
The common thread of today’s global gateway nations appears to be oil. But even more valuable are the multitude of financing deals that would accompany building new pipelines, arming allies, and reconstructing civil-war-torn countries. Indeed, hundreds of billions of dollars are at stake in America’s wars of “principle.”
Middle-East Gateways: ISIS and Money
Obama’s recent public address on fighting ISIS had a dash of economy sprinkled in. For him, US economic policy is foreign policy. It is also a product of an American political-financial expansionary land-and-resource grab that has been going on for decades. Obama’s execution may be far less authoritative than President Eisenhower’s. But his neo-financial Cold War has similar elements to those initiated by Eisenhower and the American banking elite in the 1950s when they collaborated to project American power into more countries, using the military and a combination of public and private capital, as tools.
The second World Bank President and 1950s Chairman of Chase Bank, John McCloy, and ascending and later Chase Chairman David Rockefeller both had aspirations to financially penetrate the Middle East. So did other major bankers. The US government and its banks first focused on Beirut as a gateway to the Middle East. Eisenhower dispatched military personnel to Beirut in 1958 not because he cared about the Lebanese, but because of the attractiveness of the country’s potential as a gateway to the region. By the 1970s, oil and money relationships between Chase and Saudi Arabia and Egypt grew, as they did with Iran…
Putting it bluntly, comparing the life of Anthony Nobles to ourselves is a fool’s errand — most of us would be happy to vacation near a beach in Southern California, or to
spend a few minutes behind the wheel of a Ferrari; Anthony Nobles calls that “Tuesday.”
Incredibly however, lurking here and there, are a ragged band of malcontents and embittered cynics who don’t see Anthony Nobles as a real life Tony Stark or even a community-minded entrepreneur.
Heretics all, they see a businessman whose true vocation is selling ideas and investible notions that never emerge as promised.
A better word for these people is “investors” and with few exceptions, they appear to be correct. Anthony Nobles has a storybook life yet, according to Southern Investigative Reporting Foundation research, it appears most (if not all) of the capital he has raised has failed to earn a return.
Over the course of two months SIRF investigated Anthony Nobles and his business career, conducting interviews with a series of his former investors and colleagues and analyzing documents from both his public and private ventures.
What follows are the broad strokes of how Nobles used a combination of imagined and overstated credentials about his schooling, his teaching career, and his success as a entrepreneur to craft his greatest invention — the legend of himself as a medical technology renaissance man.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
The backtest reported in a previous article showed that ranking the holdings of USMV, the iShares MSCI USA Minimum Volatility ETF, and selecting a portfolio of the 12 top ranked stocks, provided higher returns for the portfolio than for the underlying ETF. To test these findings out-of-sample we launched the Best12(USMV)-July-2014 model on Jun-30-2014 and published the holdings on our website then. So far this portfolio has gained 8.2%, while USMV is up a mere 2.2%. This test will be expanded by the launch of the second ...
The U.S. economy has had six full years to bounce back since the financial collapse of 2008, and it has not done so. Median household income has declined substantially, total household wealth for middle class families is down, the percentage of the population that is employed is still about where it was at the end of the last recessi...
Stocks were able to leverage some optimistic news and dovish words from the Fed to take another stab at an upside breakout attempt last week. Although readers have sometimes accused me of being a permabull, I am really a realist, and the reality is that the slogans like “The trend is your friend” and “Don’t fight the Fed” are truisms. And they have worked. Nevertheless, I am still not convinced that we have seen the ultimate lows for this pullback, especially given the weak technical condition of small caps.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector ...
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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
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Investors are dumping shares in Yahoo, sending the stock down 5.0% to $40.08 after shares in Alibaba made their debut on the floor of the NYSE just before midday. Shares in BABA for their part initially traded up to a high of $99.70, a near 47% increase over the IPO price of $68.00. Typically, one would expect put options that are 5% out of the money with roughly 4-hours left to trade to see waning implied volatility. But, at the start of the trading session and ahead of the first trade for BABA, the Sep 19 ’14 40.0 strike put options were trading with 271% volatility or $0.30 per contract amid uncertainty as to how the start of trading for Alibaba would take shape.
Administradora de Fondos de Pensiones Provida S.A. (PVD) shares will not be trading on the NY Stock Exchange after today. Tomorrow, shares will be harder to sell. Strangely, I wasn't able to find information on the internet, but Paul just sent me a copy of the email he received from Interactive Brokers.
We're selling PVD out of the Virtual Portfolio today at $87.18.
From: Interactive Brokers dated July 18, 2014
Holders of AFP Provida S.A. American Depository Receipts (ADR) are advised that the Company has elected to terminate the Deposit Agreement effective 2014-09-18.
Despite the various opinions on Bitcoin, there is no question as to its ultimate value: its ability to bypass government restrictions, including economic embargoes and capital controls, to transmit quasi-anonymous money to anyone anywhere.
Opinions differ as to what constitutes "money."
The English word "money" derives from the Latin word "moneta," which means to "mint." Historically, "money" was minted in the form of precious metals, most notably gold and silver. Minted metal was considered "money" because it possessed luster, was scarce, and had perceive...
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
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