Posts Tagged ‘purchasing power’

Ron Paul Comments On QE2, Says Fed Will Self Destruct, Shocked That Krugman Has “Any Credibility Whatsoever”

Ron Paul Comments On QE2, Says Fed Will Self Destruct, Shocked That Krugman Has "Any Credibility Whatsoever"

Courtesy of Zero Hedge

Pic credit: William Banzai7

There were few surprises in today’s commentary by Ron Paul on QE2: the only man in Congress (with Grayson now gone) who is sufficiently intelligent to realize that the primary culprit behind the US economy’s boom-bust cycle is the Federal Reserve, continues to press for the termination of Ben Bernanke’s public "service" which has resulted in a collapse in American purchasing power in the 100 years since the first Jekyll Island meeting. Yet Paul takes a ‘John Lennon’ approach to the problem, believing that active intervention may not even be needed, as the Fed ends up cannibalizing itself: "I think the Fed will self-destruct. People will desert the dollar. I think the Chinese are hinting that already. They are not wanting our dollars as much as raw materials. This is a deeply flawed monetary system. Here we have a small group of people who can create $600 billion with the stroke of a pen… I don’t know where people are coming from to think that this can work. What really astounds me me is how tolerant the people are, the people in Congress and the financial market, where did this authority come from? Now somebody outside of the government can spend trillions of dollars and not think anything about it. It doesn’t work, it’s a failure. And next year it will be more. Bernanke is very clear on what he is going to do - he is going to create money until he gets economic growth and there is no evidence to show that just creating money causes economic growth." All logical and expected. Which is why nobody will endorse the Paul stance, it as it means an end to the trillion dollar wealth transfer system from the middle class to the kleptocracy.

Yet the funniest thing is Ron Paul’s commentary on that irrelevant, and now completely discredited Fed puppet, Paul Krugman,

Krugman is the exactly the opposite of a free market economist. I would think by now he would have been totally discredited and it’s tragic – i pray every night that his views will just disappear because what he wants to do is more of the bad stuff…He is leading the intellectual charge for the


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$8 per Gallon Gasoline Is Already Here (for some of us)

$8 per Gallon Gasoline Is Already Here (for some of us) & Two Charts: the Dow and Dow/Oil   

Courtesy of Charles Hugh Smith, Of Two Minds 

$8 per Gallon Gasoline Is Already Here (for some of us) 

I recently wrote about the possibility of $9/gallon gasoline in the U.S. $8/gallon gasoline is already a reality for some global consumers. 

Price Of Gas Rises For First Time In Six Months

Correspondent Bram S. from The Netherlands recently submitted this insightful response to Adaptation, Habituation, Consumption and $9/Gallon Gasoline.

Bram observes that gasoline is already $8/gallon (when converted from liters priced in euros) in The Netherlands, yet auto owners still spend hours every day commuting to work.

And this is a small nation with an extensive (if expensive) pubic transit system.

To the degree that every dollar/euro/quatloo spent on petrol/diesel is a dollar/euro/quatloo which is not available to be saved or spent on other goods/services, it is in effect a tax (notwithstanding the high taxes already tacked onto petrol/diesel in most of the EU nations).

Why would people continue to drive despite massive financial disincentives to do so? Could the high cost of housing be a factor, as Bram suggests? Or is personal transport so addictive that we are like the lab rats who famously starved themselves to death by continually pressing the button which released more cocaine for their "enjoyment"?

That experiment may be apocryphal, and I mention it only to suggest that there are clearly powerful emotional attractors involved in our decisions to own and drive autos. That is, it is not only a financial decision. But could the economy/society be modified structurally to bring work and home closer together, or to at least ease the financial and social decisions to move the two into close proximity?

Here is Bram’s informative commentary:

I read your story about fuel prices today. Here in the Netherlands the fuel prices are skyhigh, but everyone is still driving his metal cubicle and waiting patiently in traffic jams. Talking about the rise of hidden taxes. In 1993 it was 46.1% tax. Now in 2010 it is 72% on gasoline.

Gasoline Excise Tax (Netherlands) 
(If you are using the Google Chrome browser, just click the "translate" button in the top banner to read the entry in English)

The price per liter gasoline today is EUR 1.579 of which EUR 1.14 is tax….. In dollars per gallon: 7.95. Almost your estimation but no


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The Chinese Disconnect?

The Chinese Disconnect?

Courtesy of Leo Kolivakis at Pension Pulse
 


A follow-up to my last comment on the death-defying dollar. In his NYT op-ed column, Paul Krugman writes about The Chinese Disconnect and notes the following:

Many economists, myself included, believe that China’s asset-buying spree helped inflate the housing bubble, setting the stage for the global financial crisis. But China’s insistence on keeping the yuan/dollar rate fixed, even when the dollar declines, may be doing even more harm now.

Although there has been a lot of doomsaying about the falling dollar, that decline is actually both natural and desirable. America needs a weaker dollar to help reduce its trade deficit, and it’s getting that weaker dollar as nervous investors, who flocked into the presumed safety of U.S. debt at the peak of the crisis, have started putting their money to work elsewhere.

But China has been keeping its currency pegged to the dollar — which means that a country with a huge trade surplus and a rapidly recovering economy, a country whose currency should be rising in value, is in effect engineering a large devaluation instead.

And that’s a particularly bad thing to do at a time when the world economy remains deeply depressed due to inadequate overall demand. By pursuing a weak-currency policy, China is siphoning some of that inadequate demand away from other nations, which is hurting growth almost everywhere. The biggest victims, by the way, are probably workers in other poor countries. In normal times, I’d be among the first to reject claims that China is stealing other peoples’ jobs, but right now it’s the simple truth.

So what are we going to do?

U.S. officials have been extremely cautious about confronting the China problem, to such an extent that last week the Treasury Department, while expressing “concerns,” certified in a required report to Congress that China is not — repeat not — manipulating its currency. They’re kidding, right?

The thing is, right now this caution makes little sense. Suppose the Chinese were to do what Wall Street and Washington seem to fear and start selling some of their dollar hoard. Under current conditions, this would actually help the U.S. economy by making our exports more competitive.

In fact, some countries, most notably Switzerland, have been trying to support their economies by selling


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Stocks, Inflation, Speculation, Desperation

Is a flight from cash contributing to an over-inflation in stock prices? – Ilene

Stocks, Inflation, Speculation, Desperation

Dancing bears

Courtesy of Charles Hugh Smith Of Two Minds

Frequent contributor Harun I. submitted a chart of the Dow Jones Industrial Average from 1897 to the present. This is of course priced in nominal (not adjusted for inflation) dollars. Curious about what the chart would look like adjusted for inflation, I asked Harun if he could conjure up such a chart, and he kindly produced an inflation-adjusted Dow.

Now before we look at the charts, we should note the many ways both the Dow and the rate of inflation have been massaged (or manipulated); weak stocks are pulled from the Dow 30 and replaced with stronger companies, and inflation has generally been under-reported by tricks such as overweighting "owner’s equivalent rent" (some 40% of of the CPI calculation) and other suspect methods of calculation.

Be that as it may, the charts paint an unambiguous picture of a tremendous loss of purchasing power in the stock market as reflected by the Dow 30. We start with the nominal Dow, with a 200-month simple moving average line. 

Dow chart
Click on chart for a larger version in a new browser window.

Next up, the Dow adjusted for inflation.

dow, inflation adjusted
Click on chart for a larger version in a new browser window.

Notice how the inflation-adjusted price actually touched the 1966 high.

Even though stocks traded sideways during the 1967-1982 Bear market, adjusted for inflation the Dow lost a tremendous amount of purchasing power.

The recent nominal high in 2007 is revealed as no more than a double top when adjusted for inflation.

Next, the Dow -gold ratio (the Dow priced in gold).

dow, gold chart
Click on chart for a larger version in a new browser window.

Priced in gold, the Dow returned to 1987 levels of valuation.

These charts make me wonder if the rampant speculation we see in every layer of the economy isn’t just a reflection of (normal) human greed but a reflection of a desperation to catch up/not fall behind. In other words, investing "for the long run" hasn’t increased purchasing power as much as nominal prices suggest. Perhaps people sense they’re falling behind in actual purchasing value of their money and assets, and as wages have actually dropped for…
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The Shell Game – How the Federal Reserve is Monetizing Debt

Fascinating!  H/t to Zero Hedge for finding this excellent article by Chris Martenson. (See also Tyler Durden’s "Is The Fed Enabling Foreign Central Banks To Swap Out Their Agency Debt Into Treasuries?")  And welcome to Chris Martenson of ChrisMartenson.com!

The Shell Game – How the Federal Reserve is Monetizing Debt 

Courtesy of Chris Martenson

Executive Summary

  • The Federal Reserve and the federal government are attempting to "plug the gap" caused by a slowdown of private credit/debt creation.
  • Non-US demand for the dollar must remain high, or the dollar will fall.
  • Demand for US assets is in negative territory for 2009
  • The TIC report and Federal Reserve Custody Account are reviewed and compared
  • The Federal Reserve has effectively been monetizing US government debt by cleverly enabling foreign central banks to swap their Agency debt for Treasury debt.
  • The shell game that the Fed is currently playing obscures the fact that money is being printed out of thin air and used to buy US government debt.

The Federal Reserve is monetizing US Treasury debt and is doing so openly, both through its $300 billion commitment to buy Treasuries and by engaging in a sleight of hand maneuver that would make a street hustler from Brooklyn blush. 

This report will wade through some technical details in order to illuminate a complicated issue, but you should take the time to learn about this because it is essential to understanding what the future may hold. 

One of the most important questions of the day concerns how the dollar will fare in the coming months and years. If you are working for a wage, it is essential to know whether you should save or spend that money.  If you have assets to protect, where you place those monies is vitally important and could make the difference between a relatively pleasant future and a difficult one.  If you have any interest at all in where interest rates are headed, you’ll want to understand this story.

There are three major tripwires strung across our landscape, any of which could rather suddenly change the game, if triggered.  One is a sudden rush into material goods and commodities, that might occur if (or when) the truly wealthy ever catch on that paper wealth is a doomed concept.  A second would occur if (or when) the largest


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The Annihiliation Of The Dollar’s Purchasing Power

Wow!  This chart really makes the point. – Ilene

The Annihiliation Of The Dollar’s Purchasing Power

Courtesy of Tyler Durden at ZH
 
This is the chart they don’t want you to see: the purchasing power of the dollar over the past 76 years has declined by 94%. And based on current monetary and fiscal policy, we have at least another 94% to go. The only question is whether this will be achieved in 76 months this time.

Hat tip Teddy


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Phil's Favorites

Commemorating the 'Great War,' America's forgotten conflict

 

Commemorating the 'Great War,' America's forgotten conflict

Doughboys fighting in France, 1917. Associated Press

Courtesy of G. Kurt Piehler, Florida State University

World War I was still a living memory for most Americans when I was growing up in the 1960s and early 1970s.

Aging doughboys who had fought on the Western Front in 1917 and 1918 still marched on Vetera...



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Zero Hedge

As Of October 2018, The US Is Now Energy Independent

Courtesy of ZeroHedge. View original post here.

While the main event this weekend was the latest OPEC+ meeting which saw member states of the oil cartel and their allies scramble to promise that oil production will be cut if oil prices continue to drop due to excess supply now that Iran's oil exports may rebound thanks to waivers granted to its main trading partners by the Trump administration, a just as important event to take place was the news of record oil production levels in North America.

Helped by higher prices, total oil production has hit a record level in the US, reaching a combined 15.9 million b/d (crude oil and NGLs) in the past month and al...



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Kimble Charting Solutions

Is a 1,000% rally in 5-years enough?

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

This chart looks at the yield of the 2-year note and its 5.5-year performance since 1999. The 2-year yield looks to have double bottomed in 2013 and since then it has been swiftly moving higher inside of rising channel (1). The 2-year yield is currently up over 1,100% since the lows in 2013. This rally has yields testing the top of rising channel (1) and 18-year falling resistance at (2) at the same time.

Is the 2-year yield the only interest rate testing a long-term inflection point?

The 4-pack below looks at patterns of  2, 5, 10 and 30-year yields-

...



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Insider Scoop

Things Are Going From Bad To Worse For GE

Courtesy of Benzinga.

Related GE Putting GE's Horrible 3-Week Run Into Perspective Bulls & Bears Of The Week: Apple, Disney, Ford, Target And More ...

http://www.insidercow.com/ more from Insider

Chart School

Weekly Market Recap Nov 11, 2018

Courtesy of Blain.

This past week was saw another positive move up by bulls – especially in the Dow and S&P 500; the NASDAQ was not quite as enthusiastic.   Wednesday’s rally was on the legs of an election that was seen as market friendly or at least not as bad as it could have been.   Essentially – paying people a lot of money to get nothing done the next 2 years – woo hoo!

The market is interpreting Wedneday’s result as insuring that “no big things will get done,” in Washington between now and 2020, Craig Birk, chief investment officer at Personal Capital told MarketWatch. “The market appreciates the relative certainty of the slow legislative agenda.” he said.

“As President Trump plans his 2020 reelection campaign, a gridlocked Congress is unlik...



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Members' Corner

Factory of lies: Russia's disinformation playbook exposed

 

Factory of lies: Russia's disinformation playbook exposed

By Ben Popken, NBC News

Americans who want to be ready for the next Russian attack can just read an old newspaper.

During the Cold War, hundreds of bogus headlines around the world appeared: The U.S. invented AIDS. Wealthy Americans were adopting children to harvest their organs. If these sound like the kind of conspiracies pushed by Russian trolls during the 2016 election, there’s a good reason: They were once promulgated by Russian or Soviet agents....



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Digital Currencies

Bitcoin's high energy consumption is a concern - but it may be a price worth paying

 

Bitcoin's high energy consumption is a concern – but it may be a price worth paying

Shutterstock

Courtesy of Steven Huckle, University of Sussex

Bitcoin recently turned ten years old. In that time, it has proved revolutionary because it ignores the need for modern money’s institutions to verify payments. Instead, Bitcoin relies on cryptographic techniques to prove identity and authenticity.

However, the price to pay for all of this innovation is a high carbon footprint, created by Bitc...



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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

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).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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