Dow Nosedives 1000 points! Important Update Money Matters. May 8, 2010

Marc's Notes:

The market plunged close to 1000 points (DOW) on Thursday and left no doubt what I have been trumpeting. This market is a very dangerous place. The plunge is being investigated but the answer needs no close inspection by me.
It was a culmination of Wall Street losing control in an environment that is as close to “dire” as you can get.
Huge amounts of money are being thrown at the banks for free from the Federal Government to “liquefy” the system. In short, the banks made billions on home mortgages, insuring home mortgages, packaging home mortgages, betting on AND against home mortgages, using almost interest free money from your government. The government was asleep at the switch and turned the other way as home prices exploded upward. The social agenda trumped politics (what else is new) so while everyone was making money, no one cared to look. Congress insisted banks loan to low income families to satisfy minority interests. Banks were actually punished for NOT LOANING to low income buyers so they HAD TO in order to get federal money and stay afloat.

Washington ignored warnings that a bubble was forming. The banks paid off Congress and their friends so they would look the other way. They showered politicians with money to allow the charade to go on. Countries and investors and banks and everyone bought into the hype that housing never goes down.

The rating companies rated all of it AAA. NO RISK. Idiotic home buyers either couldn’t read the contracts or didn’t understand the terms. Appraisers, realtors, loan agents, insurance agents and everyone else sucked off the housing gravy train. No one bothered to heed the warnings. The sign were AS CLEAR AS DAY that a dangerous and familiar asset bubble was forming.

Countries and nations everywhere printed money like rain and showered their respective public with minimum wage, health care, union demands, sick leave, free housing, food stamps, unemployment benefits, welfare, over staffed government jobs, pensions, bureaucracies, office of this, office of that, regulations, paperwork: you name it, the governments printed the money to pay for it.

Simple Math:  Printing = borrowing = debt.

Worldwide massive debt amounted to literally trillions.

BORROWED, BORROWED, BORROWED.

Debt exploded worldwide fed by social agendas, ignorant politicians, retired school teachers turned congressmen and women, spurred on by nutcases like Bernanke, Greenspan, Keynesian economists, Pelosi, Feinstein, Waters, Dodd, Franks, Obama, Bush and power mad politicians everywhere.

Basic economic sense or historic precedent was absent. Entitlement mad unions and citizens clamored for more and voted out anyone who dared to take away their free lunch.  
The banks suckered millions into the “I DESERVE THE GOOD LIFE” mentality and the public bought it on credit, just like the banks wanted. The “Compassion Con” replaced common sense and anyone trying to rein in this foolishness was either called racist or uncompassionate.

But nature can only take so much and the idiocy was revealed and the bubble starting imploding. Housing was the catalyst followed by a wholesale collapse of everything paper money debt based.

Governments of the world refused to acknowledge their foolishness and applied more debt to try and solve a debt problem. Instead of reining in spending, they spent more. More calls for “compassion” were heard from the same liberal groups calling for even more spending and therefore more debt.

Instead of paying for our debt, they spent more, borrowed more then ever, in amounts inconceivable and incomprehensible. First homeowners were bailed out, then companies, then the banking system, now entire countries need bailing out. The IMF is the last one in line.

Who will bail out them?

Meanwhile Obama passes a trillion dollar economic anchor to our children in the health care bill, extends unemployment benefits 3 times, bails out even more companies, throws money overseas to help other countries, installs more massive regulations on business (Check this link out: http://money.cnn.com/2010/05/05/smallbusiness/1099_health_care_tax_change/)
and looks to increase spending even more.

Obama, supposedly an American has said: “A some point, you don’t need to make any more money”.
Incredible.

Does this man not know what country he is in?
The right to make money and have no one tell you how much is enough IS AMERICA. It’s what MADE AMERICA.
Redistribution of money by a central government is called SOCIALISM.

I now believe this man is dangerous.

Government is getting massive and intruding into all of our lives. Into our health records, bank records, internet access, jobs, schools, homes, sex lives, politics, friendships, right to travel, right to work, right to borrow, right to go broke, right to get rich.

Intruding into our basic lives on almost all levels.

It decides who gets money and who doesn’t. Who gets bailed out and who doesn’t, what insurance I have to buy, what wages I have to pay, what paper work I have to file, what neighbors I have to tolerate, who gets a home loan, who doesn’t. What religion I can profess and where I can profess it.

Goodbye US CONSTITUTION.

Meanwhile, the market runs historically UP in the last year spurred on by stimulus money which is more debt. He talks of creating jobs but that is an oxymoron.

DEMAND creates jobs, not borrowing more money. You can pay people to dig holes and increase GDP and “create” his type of job, but in reality he spends much needed money to dig a hole and fill it. Then we have a filled hole and a bigger debt bill later.

Greece, a microcosm of the problem follows GM lead and can’t pay its bills from overspending. They can’t print money like we can as they have a common currency called the EURO.  Now other nations have to agree to help. That causes problems we now see in Greece and the match then hits the tinder and the markets tank. Rumors swirl about wrong buttons being pushed or this or that, but the reality is the system, computer run, generates the fastest sell off in history.

500 points in 5 minutes.

Everyone scratches their head and I remind them we were promised that would never happen after the 1987 stock crash. It was attributed to a similar computer based system.

We now realize the system is even MORE DANGEROUS then ever. Many investors were burned yesterday as stock prices were in fairyland. Millions of shares were exchanged and we now find out at prices nowhere near reality.

Many investors will not recover their losses but if any of the banks or large firms suffered losses you can bet the government will bail them out.

Back on the farm CNBC and the major news media again tell you not to panic, not to sell.

Why do you think that is?

Because they hold stocks too. And they don’t want YOU bringing the markets down.

Meanwhile I am listening to another show on the radio with the same name of my show.
I started MONEY MATTERS in 2006 yet I can only find their audio back to 2007. Hummm… go figure.

Anyway, these guys are discussing 70 % stocks and bonds, 30% money market funds. PLEEAASSE..

That’s about as diversified as my cat.

What about offshore accounts, foreign currencies, contrary funds, gold, silver, and the host of other things you should do to protect yourself. These guys discuss bonds like you should own them.

Are you kidding me? Bonds are debt. What do we have a lot of right now?

DEBT.

Why would I want to own bananas in a bumper crop of bananas?

ANSWER: YOU WOULDN’T!  

Over supply means lower prices. And what happened this week? BONDS GOT HAMMERED, except US GOVT bonds which is the ONLY bond you should own.

These guys also apparently sell insurance products. Does that mean ANNUITIES?
I guess.

I recall no investor I have met with that owned one and liked it. Why? Because American US ANNUTIES are, in my opinion, as close to criminal fraud without being illegal as you can get. I would NEVER, NEVER, NEVER buy nor own an American insurance company annuity. These are one of ways insurance companies made billions if not trillions.

And for them to mention Money Market funds?

Don’t these guys know money markets funds ARE NOT INSURED by the US Govt. unless they are US Govt. MONEY MARKET FUNDS?

And don’t they know the recent change in money market fund rules allow them to NOT PAY YOU your funds in times of market turmoil if they choose not to?

LINK:

http://www.sec.gov/rules/final/2010/ic-29132.pdf

And what did we just have?

MARKET TURMOIL! I don’t know about you but in times of turmoil I might want my money. Maybe these guys should call their show “Turnip Truck Matters”.

BONDS:

I spoke to many investors in 2007 and 2008 who owned Fannie Mae bonds or private corporate bonds or GM bonds. I told them SELL, SELL , SELL. Many of you did. Some did not. What happened? Bonds got HAMMERED! Except US GOVT bonds. Some of those that did not heed my advice lost almost all of their money in these bonds.
I do not hold ANY BONDS or BOND FUNDS except FAX and FAM which are mostly foreign bond funds of foreign governments and don’t hold much of these!
I have a SELL out on all US COMPANY BONDS.



WHATS NEXT:

Greece will get its bailout but it won’t solve anything. Greece won’t be able to pay it back nor cut back its social program significantly without major social strife. The interest on the loan alone will be too much strain on its already strained balance sheet. Speculators and investors and the bond traders will hammer Greek bonds again soon and probably continue their assault on the next in line to fail, Portugal, Ireland, Italy and Spain, only they are much larger. This is the start of the European Contagion and the threat is it spreads and crosses the Atlantic and infects the US DOLLAR. Keep in mind the Greek bailout IS a bailout of not only Greece but the BANKS THAT HOLD GREEK DEBT.
This “hidden” agenda of the Central Banks of the World is really just a continuation of a bank bailout as the big mega banks hold BILLIONS in Greek debt. If Greece was allowed to fail, the bank rout would probably be “on” again and another wave of misery would soon take hold world wide. Not that it won’t reignite anyway. It probably will as it “wont be enough”, but the bailout may calm the markets albeit temporarily.
I mentioned this EURO issue might be “THE” event that touched off the new wave of selling in the markets. I may have been right. The sentiment definitely has changed and many investors are surely wondering what the hell happened in that 1000 point plunge. Like I said, we have many investors “on the trigger” this time around who weren’t going to ride the markets down again like they did in 2009, so the next plunge could be frightening and IT WAS!  Look out! Sentiment has shifted and many investors may be realizing this market may NOT BE THE PLACE for their retirement funds.
I agree.

Take heed. Did you see how fast that happened? I keep telling you. These things can happen fast and before you expect it. Many people tell me they will sell when the market turns down. REALLY?  How many of you did? How many of you were caught off guard last week?

Read past newsletters for what to do. Please !  Get prepared or the next one could be 2000 points or 3000 points or who knows! The US DOLLAR is rallying right now but look at Greece to see our future.

Get gold, silver, money OFFSHORE, bank savings accounts, foreign currency funds, dividend payers, contrary funds.

Special Note: The plunge triggered STOPS at ridiculous levels . Some investors got 1 penney for stocks worth 40 dollars due to the computer issue. The exchange is only going to make good on about HALF those rip off stops. Seeing what happened, I am suggesting you UP YOUR STOPS to 10 % lower then where we are now and remove some of your stops entirely. The system obviously is flawed when investors are getting stopped out and getting paid a penny for their shares. You will have to watch your stock prices manually and execute your sell orders on your own. Sorry, but that’s the world we now live in. Don’t blame me, I am trying to protect you.

Want to meet and discuss your positions? I have a few slots late May and a few in June.
Schedule it on the website. They will go FAST now that the market has accelerated.
Case in point: The next 3 weeks filled within 24 hours of the 1000 point crash.

All for now, I will keep you posted and issue more newsletters more frequently like I do when markets accelerate.

But one more time.  DON’T SIT THERE! DO SOMETHING! PREPARE or you will have no one to blame but yourself. This thing is a powder keg in a room full of matches filled with drunken fools smoking pot.

It’s only a matter of time.

Marc