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Money Matters New Market Update- October 20, 2012 Please Read!
Marc’s Notes:
Just finished our membership show. Thanks to those who pledged!
Powers at be only wanted me to offer the newsletter and website this drive so no classes or consults were offered. As a result the show only raised a little over a grand for the 2 hour special, off about 80 % or so from past shows. Don’t say I didn’t warn them!
It was not my decision so my apologies to those wanting to sign up for consults or classes. I received many emails asking what happened and why they could not sign up for these things during the drive. Plainly put, I didn’t make the decision but next drive I think they will let me run the show as I see fit to get back to the usual raises of 10 K a show. Meddling politicians strike again!
Meanwhile you can email me direct for consults or Money Classes and please do so. Cost is $199.00 for class and $625.00 for one on one personal meetings.
Classes are class one and two. Learn what you need to learn to make more money, watch and grow your money and know whether to buy real estate, stocks, gold, silver, annuities…. You name it, we cover it. Also learn what NOT to do which is as important as learning WHAT to do.
Learn all of it in 3 hours and we feed you lunch to boot. Just email us for a spot, it’s that easy.
On to the markets:
I don’t think the markets will crater anytime soon due to the simple fact that the Federal Reserve is doing QE3 to infinity and forever and a day, and in unlimited amounts. (Their words).
That being said, an occasional mini crash is always possible. Now that the FEDS have determined they must print till we hear the “moo”, the famous economist Ludwig Mises’ “Crack Up Boom” is all but baked into the cake.
The crack up boom is where higher and higher deficits are made to pay the interest on all the debt. Previous bouts of money printing have generated huge debt and the only way to keep paying it is to print even more. They also print to finance government spending that they feel is necessary to “create jobs”. The government can’t create jobs as the paychecks are paid with more borrowed money and the jobs they “create” don’t make anything lasting.
They just build roads and buildings. Once the money is spent, the person is unemployed again but the debt remains. Additionally the salary for that job was first TAKEN from someone else, someone who was WORKING. It’s like robbing Peter to pay Paul.
The Crack Up Boom part is all this newly created money causes massive inflation in everything. House prices will eventually rise, stocks are already in new territory, food and lumber prices are rising as is healthcare, school tuitions and everything else. It will feel good for a while as prices rise you will think we are recovering and you are getting richer but your salaries (wages) will not keep up.
You will find it harder to make ends meet as prices rise. It will be a deceptive inflation with rising stocks and prices, but eventually inflation will pick up speed as they print more and more. Interest rates will start to rise, the US will find it harder to sell its IOUS’ (Treasuries) and the evening news will again start talking about higher prices.
The government will then continue to print to try and stave off the higher rates and higher prices but the more they do the more these things will rise. This Crack Up boom will boost the prices of everything UP, but it will “crack up” in the end. The BOOM part is the rising prices seductively making you believe everything is recovering.
There will be bouts of inflation and intermittent market sell offs. Economic stats will be up then down. Confusion will rein as to which way the economy is going but through it all they will continue to print.
As they do, and things get more out of control, they will instill more controls over where we can invest, what we can invest in, tax us more in attempt to pay for more spending, and regulate our money more. (Monetary-financial oppression).
Seen throughout history, these moves are nothing new. It always leads to the same result once you adopt a money printing solution to economic ills. The alternative is spending cuts but people will not stand for cuts as checks will not go out, programs will be cut, more people will then need help, which will silence the calls for further cuts and they will resort again to more printing until such a time when a Mexican Peso moment arrives for our dollar.
More taxes and onerous regulations fueled by “tax the rich” calls will drive even more jobs offshore. California is already losing jobs by the thousands due to the higher taxes the state is calling for and its strict regulations and requirements.
To those familiar with ever expanding governments and paper printing, this leads to the same destination. Loss of jobs, more poor, higher prices, and more misguided policies.
The only way out is to stop spending which leads us back 3 paragraphs and round and round we go.
What to do:
Keep most of your money STILL in savings accounts and US insured accounts. (not money market funds).
Increase your gold and silver holdings (Physical). Keep adding. You will need this final currency when things go south.
Increase your dividend stocks including some gold and silver dividend payers. They help participate in inflation and can hedge you.
Move some money offshore and get a foreign bank account or 2 if you can afford to. If low income, work as much as you can and SAVE! Don’t buy big ticket items just yet as we are not done with the “deleveraging” part of the equation. (see article at end)
Stay away from US annuities but consider Swiss annuities.
Hold some foreign currency funds. There are some great ones like Merk funds and Nuveen offers some good ones. Some pay good dividends too!
If you can afford to buy some rental income and it doesn’t stretch your budget, go for it but make sure you can pay your bills even if the renter doesn’t pay you.
Keep your mortgage if you can afford it as they may inflate it away and consider refinancing as rates are LOW LOW LOW.
Keep reading the newsletters and listening to the show, Download the shows at the website and attend a class if you can make one. All will help you as what is coming is going to make your life difficult. Trust me on this one. For now, don’t panic. The “crack up booms” materialize slowly but don’t wait TOO LONG.
All for now, now send in those emails!
Marc
Turkey Matters:
Turkey Matters is where I match your funds to buy turkeys for the needy at the NC FOOD BANK of INTERFAITH FOOD MINISTRIES. Every dollar you send in makes me give them one too! Join with me to make your Thanksgiving great! Feed thousands and know on Turkey day many, many families will eat thanks to you!
Mail check made out to the either the Nevada County Food bank or Interfaith Food Ministries and I will deliver it to them mid November with a matching check from my own pocket. (I will match up to $10,000.00)
Mail to: Bay Area Process (make check to Food bank of your choice) PMB 101, 578 Grass Valley, CA 95945
Delveraging:
When the economic world falls into a black hole like it did a few years back, what is happening beside the obvious stock market crash and economic meltdown is called deleveraging.
We as consumers and participants of this great country should be versed in economic jargon and the term deleveraging is an important one as when it occurs, it can be quite devastating as we found out during the housing blow up.
Deleveraging is the reduction and destruction of debt where the opposite condition is amassing more debt, something we seem to be quite good at. It’s getting rid of the debt or the “deleveraging” of the debt where apparently we have some problems.
To visualize deleveraging, suppose your household had borrowed too much because you spent too much and now the bills are so high you can no longer pay them.
You must then deleverage which means somehow solve the problem of having too much debt and not enough money to pay for it.
You can attempt to work out some sort of payment schedule with whomever you owe the money, attempt to have the amount you owe reduced or worst case, entirely default which means not pay what you owe.
The restructuring of this debt in any of these forms is the deleveraging part of the equation.
In essence the debt can’t be paid under its current conditions and you have to change the terms of the deal.
The creditor isn’t to wild about restructuring the agreement and definitely not happy about any default, partial or otherwise, but it is what has to happen as you just don’t have the money to pay.
What’s important to understand is that debt doesn’t ever disappear because if you don’t pay, the person you owe money to takes the hit. In neither case does the debt just go away. Somebody always loses as debt is simply a promise to pay, and if you break that promise and deleverage the debt, somebody else takes the loss for you.
When the world deleverages, as it is doing now and has done over the last 5 years or so, the government central banks of the world have paid the debt that was amassed with newly printed money and by increasing public fees and taxes.
They paid the mega banks of the world that held all this mortgage debt because when homes crashed in price, the people who owed that money couldn’t pay.
Governments would like us to think the debt is now gone, but as illustrated above, debt never “just disappears”.
It just gets transferred from the persons who owe the money to somebody else.
It would have been the banks who took the hit had the governments allowed it. After all, the argument could be made that if the banks made billions in profits during the boom they should take the losses when the bets went bad.
Unfortunately world governments don’t believe the banks can absorb the losses. They claim the `system` would collapse and it’s this belief that allows them the leeway to take public money and pay the debt so the banks don’t have to.
Whether they tax the money away from you, or just print the paper to pay for it, all of it eventually comes out of your pocket.
Deleveraging is better categorized as a transfer of debt, and in the case of the massive deleveraging we see today and have seen for the last 5 years, it just means all that debt from the housing and banking blow up is being transferred from the banks to each and every one of us.
This article expresses the opinions of Marc Cuniberti. Mr. Cuniberti hosts “Money Matters” on KVMR FM 89.5 and 105.1 FM on Thursdays at noon. He has been featured on NBC and ABC television and on a host of made for TV documentaries for his economic insights. His website is www.moneymanagementradio.com
