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The Poisonous Cocktail Of Main Street Woes And Federal Reserve Liftoff
Submitted by Tony Sagami via MauldinEconomics.com,
Wall Street was impressed with the October jobs report that showed the creation of 271,000 new jobs and a decrease in the unemployment rate to 5.0%.
It is widely believed that those strong jobs numbers paved the way for the Federal Reserve to raise interest rates in December. In fact, the likelihood of a December rate increase jumped from 58% to 70% based on federal-funds futures trading data.
The business of will-they-or-won’t-they predictions is a fool’s game, but “liftoff” is coming—whether in December or sometime in 2016. Wall Street has good reason to pay so much attention to the Federal Reserve: all of the last seven bear markets we’ve seen have been fueled, if not started, by the actions of the Fed.
A common denominator of the last seven bear markets was a sea change in monetary policy in the form of either (a) increasing interest rates or (b) the withdrawal of monetary stimulus.
Today is very different—and more dangerous—because the stock market must deal with the double-whammy of higher interest rates and the removal of quantitative easing.
NOTE: I welcome your comments—GOOD and BAD—and encourage you to post those comments on the message forum at the bottom of every issue.
At the same time, the signs of economic stress are piling up higher than a hippie in a hot-air balloon.
Stressed Out #1: Treating 401(k)s Like an ATM Machine.
Withdrawing money from your 401(k) before age 59 1/2 is one of the worst moves you can make. Not only do early withdrawals cost you a 10% penalty as well as additional income tax, they also put a giant dent in your retirement savings. That didn’t stop 30 million Americans from tapping their 401(k) in the last year.
Moreover, according to the Employee Benefit Research Institute (EBRI), another 21% of 401(k) savers have borrowed against their account with an average unpaid balance of $7,153.
Stressed Out #2: Hi Mom, I’m Home!
This may hit too close to home for many people reading this column, but an astounding number of young, working-age adults are living in their parents’ basements.
Of women age 18-34, a shocking 36.4% are living with their parents, the highest percentage since record keeping began more than seven decades ago.
The percentage of young men is even higher, a mind-boggling 42.8%!
Why?
If you believe the jobs numbers and the White House’s self-applauding rhetoric, it certainly can’t be because of the lack of jobs, with a 5% unemployment rate.
And it certainly can’t be because of interest rates as the rate on a 30-year conventional mortgage is below 4%.
As always, there’s more than one answer, but the growing number of basement dwellers is likely a combination of delayed age of marriage, burdensome student loans, stagnant wages, and the reality that most of the jobs our country is creating are low-paying service jobs.
“Would you like some fries with that, sir?”
Stressed Out #3: Death of the American Dream.
Despite super-low mortgage rates, the homeownership rate has dropped to the lowest number in 30 years.
Those low-paying service jobs make it difficult to qualify under the stricter post-Financial Crisis rules. In fact, more than 82% of Americans don’t qualify for a conventional, 20% down mortgage today.
Stressed Out #4: Foreclosures Are Going Through the Roof.
In the month of October, RealtyTrac reported that home foreclosure notifications spiked by 12% and bank repossessions—the final stage of foreclosure—surged 31%.
All told, more than six million homes have been foreclosed on since the start of the 2008 Financial Crisis.
Stressed Out #5: Shopaholics Slow Down.
Our consumer-driven economy is not getting any help from suddenly sober shopaholics. In the most recent report, the Commerce Department reported that retail sales rose by a measly 0.1% in September.
And it didn’t matter where you wear Gucci loafers or Red Wing work boots.
- Macy’s saw a 5.2% year-over-year decline in quarterly sales to $5.874 billion, and its earnings dropped from $0.61 to $0.56 per share.
- Macy’s stores are awash in unsold merchandise, witnessed by a 4.6% increase in inventory in the month of October.
- To combat sluggish sales, Macy’s promised to offer aggressive discounts during the holiday selling season.
- Business is so good at Macy’s (sarcasm) that it is closing up to 40 stores.
Walmart, the biggest retailer in the world, predicted that its profits will shrink by 6% to 12% in 2016.
Sure, the stock market had a great October with the Dow Jones Industrial Average jumping by 8.5%, but the disconnect between Wall Street and Main Street is too stark to ignore, and the Federal Reserve is about to pop the easy-money financial bubble.
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Good article. Cliff notes version added: We are fucked.
wrong presidency to give up pot...need to take more drugs to dull the pain
and the Federal Reserve is about to pop the easy-money financial bubble.
Don't count on that happening anytime soon, if ever.
Tonight give them strong drink; for tomorrow many perish in their whoa.
Hah.. Author still thinks that anyone under the age of 40 will be able to actually retire.
If you're 40 or younger, it's probably a better idea to stop contributing *and* withdraw from your 401K and put it into PMs or something else secure than to expect it all to be available to you when you're 65+
You can have PM's in your 401k and keep the stuff in your own posession. Then you can get the company match too to really accelerate the "Stack". Its a better solution than opting out.
You can't keep PM's bought with 401K money it in your possession. You have to have custodian and pay him fees.
Yes you can.
http://finance.yahoo.com/news/augusta-precious-metals-introduces-home-11...
Why would you do that??? Just get a gold ira
Dont trust the govt not to raid gold accounts if they need to.
I'm 32 and had an old IRA I could access. I withdrew, paid the taxes and penalty and now hold my own assets. A promise of an asset at a later date didn't sit right with me. "One in the hand" and all that...
I've withdrawn everything from my 401K to survive.
Let's see...homeless, or pay rent? Easy decision. Retirement? That is a fantasy that funnels money into Wall Street's casino. Most of the population cannot afford to "save for retirement"; it is now a very small pool of .gov mandarins who can put anything away - and pensions are disappearing or broke.
2008 made it clear that I was the fool who had been duped into trusting the financial system and government's lies. No more. I'm out of the casino and not playing responsible mule anymore - this is war after all.
I'll second that. I transformed my 401k into hard assets this year.
@CrisisMode
"and the Federal Reserve is about to pop the easy-money financial bubble.
Don't count on that happening anytime soon, if ever."
The Fed can raise rates and then helicopter money out all the way up 200 bps as per Goldman Sachs story per ZH.
i Guess some Folks Believe they'll Raise the Interest Rate..
I'm Not one of them.
I keep Hearing Gold under $1000 an ounce soon..
Gold will drop below cost of production.
Let the serfs work the land...from their serf parent's basement. The lords of the land need servents to tend their estates
"Maybe I'll be there to shake your hand (Shake your hand)
Maybe I'll be there to share the land (Share the land)
That they'll be givin' away
When we all live together, we're talkin' 'bout together, now:"
https://www.youtube.com/watch?v=C-nY_B-K-TU
We are entering the next phase, they will remove your blindfold so you can see whose boot is on your neck.
Hopefully it's not Caitlyn's boot. I don't want to be looking up her dress and see that she still got her package.
I don't want to be looking up his dress at all.
Nowhere to hide.
Surround yourself with family and friends.
There is still a lot of good in the world.
Yep,,, keep your enemies close and your family and friends closer.
.
It seems they need to suggest a possible raise as an option as to hide the fact that it isn't.
When Hawaii RE goes on the block and the banks are offering -1.0% 50yr mortgages to take the shit off
their hands is when i'm all in.
Flip those burgers, beotches!
I'll believe the FED bursts the free money bubble, or even pees a little bit in the free money punch bowl, when I see it.
Remember...they make money on the way up and the way down, and going forward it's going to be A LOT easier to make money on the way down because of similar attitudes...they've Pavlov'ed a generation of investors who will stubbornly stay in their positions,even as they decline with the false promise that the fed's got their back...while all the time the bankers will feed them what they want to hear, keeping them in losing positions until those positions are at zero, at which point their short exercise will conclude and it will be 3/3/90 all over again. History proves the point.
We are in a topping pattern: this is the time it takes for the A$$holes to unload their stinking bags of $hit to the BTFD-trained "investors"
There is no 'money', just the control of means of production.
The South will rise again!
Dont count on it. They too have been infected with fuckbook, kim k's juicy ass, and way too much football.
Also, too many Hispanics, blacks, and 3rd world retards.
The Blacks was always there, mang!
Yeah, but before it was just in smaller population numbers though.
But if you look at a current map of the south based upon population by race you'll see states in the deep south up into the Virginia tidewater, except Florida, are heavily African American.
True, but Texas is even more heavily Mexican.
"So gather 'round, gather 'round chillun'
Get down, well just get down chillun'
Get loud, well you can be loud and be proud
Well you can be proud, hear now
Be proud you're a rebel
'Cause the South's gonna do it again and again"
https://www.youtube.com/watch?v=WeZFPcoQr0k
New Buying Algo ()
{
City = "Paris"
NumBullets = PoliceReport(City)
For Each (NumBullets,BuyEquities)
}
Let's get the party started. Fuck Zion.
The author states a rate hike is coming but then describes how bad the economy is. Huh?
The 10-year will see 1% before it sees 3%, maybe even 2.5%.
Pretty soon you won't even be able to ask if they'd like fries with that since the fast food industry is clearly moving toward automation and robotization.
You might be able to ask if they'd like a blow job with that unless they're able to perfect the sex robots first. Then who'll need prostitutes?
Those automated fucking machines with dildos attached in the porn industry just might make the human male animal unnecessary for female coitus.
Of course if you want personal hands on service that'll just cost extra. I'm sure the high priced girl friend experience will always be around.
Or the pocket pussy.
Watch out for the robots. They are programmed by Microsoft. No tellin what may happen to Mr. Happy.
Heard this one already. Same old jawboning crap. The right excuse will emerge between now and then. They aren't raising rates.
C'mon Janet 'make my day', 'You feelin' lucky?'
Why do Americans put their kids in basements once they're 18 years old?
Same reason they send them off to that meat grinder called military.
Because having them brainwashed in college costs too much.
Because, deep down, they are good people.
Because Child Protective Services wouldn't let them do it when they were 5.
"“liftoff” is coming" No it isn't. They can not and will not raise rates. Any .025 or .01% rate increase will be purely symbolic and will be offset by more money-printing.
"Withdrawing money from your 401(k) before age 59 1/2 is one of the worst moves you can make."
Yea, baby. Just leave your money in so we can enjoy all our fee's while you wither on the vine and are losing +10 % through the inflation they say doesn't exist.
The main reason your stock is going up is due to buybacks. When the sheet hit's the fan, those 401's are going to be the first to go sending those 'matching dollars' to your friendly banksters.
PM's in a IRA or 401k is a really bad idea. Never ending manager fee's which constantly go up each year including those custodial fees. I was paying upwards of $300 per year to these parasites while the PM's were decreasing in dollar value. Pulled and sold most of them, taking a hit on my taxes after 11 years of this robbery. These day's I wouldn't trust anyone holding my PMS. Too easy for them to use and you would never know it until you tried to pull them in species.
While two out of three AmeriKano's today would rob you blind when/if they could I would bump that up to 100% of all financial types.
What % loss did you get on your PMs ?
Actually it was about break even as I purchased the PM's in the 1990's. Had I left them in the IRA any longer then I would have went negative. IMO the goverrnment will make them illegal again, OR, make their exchange to Fiat illegal both with large fines and incarceration. I have been trying to convert to useful items when the SHTF. Of course after awhile people will start trading and taking PM's but you have to survive long enough to get there from here.
Also,,, You don't own them if you don't have them in your possession and can protect them. Most cannot do this which is why government is not too concerned.
Fofoa has posted cogent arguments as to why there will NOT be confiscation of gold in the future. Rooseveldt had to (if he was to preserve the dollar) as we were on a gold standard then). The current dollar has no tie to gold. It is not like the Euro which does hold gold on its balance sheet. The Fed has only 'gold certificates'. It is like a pretend promise that the US Treasury will bail out the dollar if it fails...it won't, it can't.
All bad news; more upward momentum for the markets.
FEDS raise interest rates; where have we heard that rumor before and it is ONLY a rumor; unless you call 15-25 bp's a hike...they can't even do that UNLESS they have more stimulus or other shady vehicles already in place to cover the carnage that would "normally" ensue. How about more death and destruction; good for markets.
Hey when the market does make a minor correction, then it will because they didn't do "lift-off" or because they did do "lift-off". Same is true if the market gets a lift; it will be cause of one of the above. Just paint the narrative and treat it as factual.
"Withdrawing money from your 401(k) before age 59 1/2 is one of the worst moves you can make."
It's actually secondary to opening up a 401k plan in the first place....
When government supports it, parents, relatives, etc., along with nearly every member of the $Financial $Services $Industry, who $$$administer this Fraud upon the unsuspecting, one should really question first before handing it over...
Why...? Why would one essentially give up the rights to his hard-earned savings - under threat of multiple layers of $$$penalty should he decide to withdrawal, for the sake of taking it out later only to pay the taxes deferred initially when one's ability to earn has decreased by 50% or more...?
Why...?
Because you're not (smart) enough, (wise) enough, (prudent) enough, or (financially savvy) enough to manage your own money Yourself... Or at least, that's what you've been sold by the Biggest $$$Bubble in history, hiding in plain view, right in front of you: The Financial Services Industry, and their perpetual (but highly effective) fear-mongering scary story about 'Retirement Planning' - which, essentially is what the entire Fraudulent Fee-based system is based upon; to scare you into handing over your money to them, on the pretense that they're there to 'help you', no less.
Fuck 'em...
Blood in the streets in a few days or follow the Japan model, which would you do?
"withdrawals cost you a 10% penalty as well as additional income tax, they also put a giant dent in your retirement savings"
And the alternative is what, leave your money in the 401 and maybe take a 50% hit when the stock market crashes? In 2008 the 401's took at least a 30% dive. The next time the stock market crashes, It's not going to come back to it's present level for a decade or more if it ever does reach todays level.
The dollar index will probably pop above 100 today or soon. If theFed raises rates with the dollar at long term highs the Fed will appear to be crushing the world with a strong dollar after luring it in with previously cheap loans. It will appear to be doing the very things Jefferson warned about.
I wonder how the Fed will respond if it crashes the rst of the world even as it lifts banks in the US.
My guess is that the Fed cannot/will not raise rates. It would cause too much asset damage and open itself to blame for destroying the entire monetary system. Perhaps the Fed is willing to do this as the collapse will come no matter but it would be odd.