Waiting.
For what, I don't know. Who cares if the Fed raises rates by 0.25% or not? We all know it's coming and whether it comes tomorrow (it won't) or October (it will) has nothing to do with the health of the economy or earnings for the last 3.5 months of 2015.
We know the Fed can't lower rates below 0, so they have nowhere to go but up and it's just a matter of when, not if, rates are going to rise. No jobs will be gained or lost, no factories will be opened or closed, no ditches will be dug or filled in based on what the Fed does tomorrow. The Fed has not in any way, shape or form done anything to help the real economy in 7 years – why start now?
Yes, they've made interest cheap so you could refinance your house and buy a new car (ie. take on more debt for the Banksters who own the Fed) but they've also destroyed the value of savings and incentified our Corporate Masters to leverage, merge and lay off workers, which has the net effect of driving wages to record lows in relation to Corporate Revenues and Profits:
Do you see that red line on the top chart? That's ZERO – you can't go much lower than zero unless you figure out how to get the employees to pay you for the privilege of coming to work (I know, we shouldn't give them any ideas!). NO Corporate profits are shared anymore, workers are paid as little as possible and given no credit whatsoever for a company's success and, thanks to drastic cutbacks in pensions and benefits – they are discarded like a broken machine after a lifetime of service to the company.
It's no wonder Bernie Sanders is striking a resonant chord among the voters. While most candidates have tin ears when it comes to the state of the real economy, Sanders knows how bad conditions are for the majority of the people in this country and he's willing to point the finger at the people who are grinding them down.
60% of the people in this country work their whole lives and have NOTHING to show for it – not a house, not one share of stock, not even money in the banks. They are born, they work, they consume and they die – and even that is expensive!
Yet there is an entire political party in this country that thinks they are not paying their fare share of taxes, that their kids shouldn't get a free lunch in school, that if they can't afford college it's their problem, that if they get sick – it's tough luck. There's even talk of a $15 Minimum Wage and that's being fought tooth and nail yet $15 an hour is $600 a week and $30,000 a year (if they dare to take a vacation) yet that's just $24,602.83 take-home, less than $500 a week.
If you can live on $500 a week, God bless you, you're a way smarter consumer than I am. I'm not sure one of my teenage daughters could get by on that – certainly not where we live. That's not even the Minimum Wage, that's the wage they are fighting against. If you have a wife and a kid (or should those things be denied to people?) how do you house, clothe and feed them while saving for college and retirement? And remember – $15/hr is DOUBLE what millions of people are actually making under the current rules.
If you have a Big Business, that generates a lot of revenue overseas, you don't have to worry about this. The nice thing about the Top 1% is there's 70M of them on this planet. So many, in fact, that Apple can sell them each a new phone every year and even some watches that require the phone to operate (why not?). Catering to the rich is the only growth segment left in this World because the rich are getting SO MUCH richer while the bottom 80% have almost no disposable income left – so all you can sell them are the things they absolutely need to survive.
This chart isn't that interesting because it's obvious from the wages chart above that workers have no money but, if you have a busisness that depends on customers in the bottom 80% – you'd better be concerned with this trend! It's not just the workers that are suffering from runaway Capitalism in the US but small business owners as well – who can't rely on growing overseas profits to offset the fact that their customers simply can't afford to buy as much as they used to.
Where is a real recovery supposed to come from on this chart? Certainly not from cutting Social Programs and cutting Jobs Programs and cutting Benefits to pay for another round of tax cuts against those record Corporate Profits. That's just common sense, something there's not much of in this country since it was cut out of the school budget under Bush II.
It's not just our country, of course. The whole World is run by these multinational Corporations. Wal-Mart (WMT), for example, has 300 stores in China and 85,000 Chinese employees and about the same in Chile, Canada, the UK and Brazil while Mexico has 1,500 stores with 170,000 employees. In the US they have 8,400 stores and 2M employees. In each country, the pay the minimum legally allowed and, of course, they pay the least taxes allowed as well.
It's not just WMT, of course, many other stores, fast food, endless service jobs – all pay below poverty wages and funnel money out of the local communities and into the hands of far-away owners who create enormous pools of wealth for the very few people lucky enough to own these companies.
Sure, as investors, we can say "well, if you can't beat them, join them" but how is that good for this or any other country in the long run? Perhaps, as Bernie Sanders contends, we CAN beat them. Teddy Roosevelt and his "Trust Busters" broke up the big corporations over 100 years ago and the Unions beat them back after World War II 60 years ago – maybe we're about due for another round...
Meanwhile, back in the markets: Japan had their debt rating downgraded by S&P this morning and that's one of the major dominoes yet to fall in the Global economy. I have long warned that if people begin to understand how server Japan's 250% debt to GDP ratio really is, confidence in the entire global financial system could begin to unwind. In fact, the main reason we were worried about China was that it would have a spillover effect that would push Japan's economy over the tipping point.
China is still doing their part by faking the closes, as illustrated by today's 5% jam-up into the close. We can't really point fingers as yesterday's US "rally" was nothing but low-volume BS and the only people being fooled by this are the hapless retail investors, who have been brainwashed into buying every dip and are now ready to be the ultimate bag-holders when the Top 1% have finished unloading their shares on them. As noted by Dave Fry:
Of course in this environment you either surrender to the dictates of the tape or you probably won’t make any decent returns. Clearly we’ve entered an Orwellian period the past 7 years.
The Fed has given bulls everything they want with low-zero interest rates. This has permitted massive stock buybacks and M&A given cheap financing to do so. But the stock market is not the economy. For a rally to continue from here it won’t be supported by fundamental economic data or even good earnings for that matter.
Tuesday given the worse than weak economic data (Retail Sales, Empire State Mfg Survey, Industrial Production & Business Inventories) the “bad news is good” pimps rushed to seize the tape believing the Fed won’t be raising interest rates any time soon—perhaps not in my lifetime.
Is this time different historically? It could be since I’m not aware of any historical period where there’s been 7 consecutive years of nearly uninterrupted returns. Even the dotcom period lasted just 6 years by my reckoning. And of course we’ve not seen this type of central bank manipulation ever.
As Dave notes, it's almost impossible to play the market in the midst of Global manipulation by our Central Banksters so we're sitting on the sidelines, mainly in cash, but we did up our index hedges into yesterday's silly rally. I expect the Fed to state tomorrow that they will raise rates in October, which is a wishy-washy way to kick the can down the road. I don't see how that will take us to new highs though – so I'm leaning short.
Good morning!
Nice job Craigs!
LOL Malsg.
Boy I'm starting to love Bernie – he is so popular that he got bored talking to Democrats and now he's out talking to Conservative crowds and handling the toughest questions like a pro:
This guy could actually win!
By the way, notice how the media generally ignores him still – hoping he will go away…
Morning Phil – To you think the TLT short still has some legs? OR would you reduce(close) as we get closer to the FED decision?
TLT/Delboy – Into the Fed it could go very sharply either way. I wouldn't play it.
By the way, on that Billionaire chart above – those aren't even the 36 richest, just a set of the Forbes 400 – $1Bn doesn't even make the list anymore. So, if we keep going at this pace – just those 36 guys will turn $300Bn into $5Tn in the next 30 years. That means in EACH subsequent year, they will remove $156Bn from the American Pie under the current tax policies. That's $1,000 per year from EVERY SINGLE working American going to just these 36 people. When you do that math on the whole 400 – it costs the American Worker about $5,000 a year in that completely unequal distribution of profits I talked about in the above post.
THAT is the Republican platform and THAT is what I'm very firmly against. This country barely survived the last 30 years but that's NOTHING compared to what's in store for us if we keep heading down this path. This growth is EXPONENTIAL and we're not even talking about the 500 richest Corporations and what they've accumulated over this time period – this is just a snapshot of some of their owners.
That Monopoly thing above is very apropos, this is the game we'll all be playing if we let this continue. Well not all – I know at least one of you guys is on the other side of the board and congrats for that but the rest of you are mainly deluding yourselves if you think you're going to win this game. Those of us in the top 1% know how hard it is to make further headway – it didn't used to be like that but the game is closing out and the winners are the winners and they are not keen on sharing and, in fact, they want more – so they are only going to take it from each other (hard) or us (easier) or the people below us (piece of cake).
As long as those of us in the top 10% keep getting crumbs, we're happy enough to play along because the crumbs from a $150Bn annual transfer of wealth to the top 400 can be maybe $15Bn divided by 150,000 of us top 1% workers is another $100K a year falling in our pockets, so we're "doing better" but even within the top 1% there's a really wide margin. The bottom half of the top 1% earn $368,000 a year while the top 1/10th of the top 1% make $1.7M a year but, as you can see – all of us appreciate another $100K or our share of it – so we mostly shut up about this insane system and enjoy our crumbs.
But the beast we are feeding in the top 0.0000027% (the top 400 out of 150M workers) gets bigger and hungrier each year. They want their wealth to grow too so, even when they have $5Tn, they want to make 10% (clearly they never want to lose, right) an that means they'll need $500Bn a year contributed by the rest of us to be content (and keep in mind they are currently averaging 50% a year so this is VERY CONSERVATIVE) and that means 150M bottom 99.9999973% workers will have to send $3,333 each up to the top each year. And that's only if "THEY" are content with 10% growth and again, we're not counting corporations. Clearly the bottom 80% don't have $3,333 to give, so who do you think they'll turn to for their tribute?
That's why, over the next 20 years, those crumbs we get will get smaller and smaller and eventually reverse and we (in the top 1%) will scramble and eventually turn on each other as we fight over our ever-smaller slice of the pie. That's the Future we're creating for our children – right here, right now – and THAT is why I don't like the GOP or their programs or their phony bastard representatives who are clearly nothing but puppets for the 400. They WILL destroy this country and they WILL sell your children and their children into economic slavery.
The time to stop them is now – in 20 years it will be far too late. Maybe it's already too late but I'd like to at least try…
Pitchforks. When money buys politicians, that's all the people have left. I thought the death tax was 50% over 5 million… I would personally benefit from this, but I'm with you. This is crazy, and I truly believe nothing short of rebellion will change anything. The tree of liberty must be watered from time to time with the blood of tyrants and patriots. It's been far too long. Go Bernie.
If you want to avoid a lot of estate tax, set up companies for the people you want to leave money to. The problem rich people have is they don't trust their own children so they want total control until the day they die. Your charitable donations aren't taxed so you just need to look at your will and if you intend to leave your kid $2M in 20 years, then set up a business with him that he'll own after you die. Then he keeps collecting revenues and eventually pays just capital gains if he wants to cash out.
People screw around with IRAs and 401Ks but how many of them pay better than a commercial property (simple LLC) with tenants where you put $200K down on a $1M 15-year mortage that's breaks even on $10K/month ($6K payments, taxes, etc)? Even if you KNOW it's losing a few thousand a month – there's your tax-deductible losses (as good as an IRA) while you build up to $1M equity that is cleanly passed to your child (with a built-in revenue stream too!). If you are rich enough, you can have a bunch of these and have them administrated professionally and it's great passive income for decades to come.
Your kid can manage a hedge fund and you can put your money in and pay them as little or as much as you want as a management fee which is currently taxed at just 20%, so you can transfer massive amounts of money to your kids (or whoever you want) at a 20% rate (and they can deduct things like school, rent, phones etc. to run the business).
It always amazes me how uncreative people with a lot of money can be. Makes you wonder how the Hell they made the money in the first place. Of course some estates are not so liquid but still, even if you have a farm, you can have your kids set up a trust to buy it from you and share in the profits/labor for a good price over time instead of inheriting it flat out but again – it's that trust thing. If you live too long, the kids will own the farm and you won't. If you can't live with that – pay your taxes because you need the Government to protect you from your evil children!
"God fearing"
More fear. I do not fear God. I don't feel guilty. That is what organized religion uses to extract it's pound of flesh. God is love, he's on your side. There was only one group Jesus went after… the money changers. End the Fed. Break up TBTF corporations. End unfair advantage, bring back competition. Allow and protect free market competition, capitalism is not a dirty word, but help and protect the poor and disadvantaged.
Oh, forgot to mention an easy one. If you are going to give a lot of money to charity, set up a foundation and put your wife or kid in charge. Again, nice salary, a job for life…
God fearing/Mk – Oh I just thought it was a great video despite the religious undertones. Really great selection of images to go with the song and could have done without the sermon but still found that interesting (don't forget what a huge percentage of our countrymen feel that way). And you're totally right, Jesus would be hanging with Bernie and Liz today…
And don't forget the Pope is coming next week! This is going to be great – I hope he doesn't wimp out because there's no way the media can ignore him (as they usually do) if he goes off on Capitalism in a US address.
I tell you, this guy makes me want to convert!
LOL, total control. I know it well. It's been used against me for as long as I can remember, but I have enough that I don't need, so I ignore it. Mom passed on her mother's estate to us, 3 million split 3 ways simply because she couldn't stomach the thought of "Obama getting any of it". Seriously. She has voiced regret ever since, and still tries to control everything. Put my sister in charge because she is the most compliant, the house sits and rots because my mother won't allow it to be sold… and my brother and sister are afraid they will be out of her will if we do anything but pay the taxes on it and wait. It's ridiculous.
Any idea what the reaction will be after the fed announcement?