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This Is Where "The Money" Really Is - Be Careful What You Wish For
We have long shown that "investors" whatever that term means in the New Normal - those gullible enough to put their money in Bennie Madoff, pardon Bennie Bernanke Asset Management? - have been not only reluctant to put their money into stocks, but despite week after week of artificial, low volume highs, driven entirely by Primary Dealers (and now European banks post the $1.3 trillion in LTROs, not to mention even foreign Central Banks recently buying high beta stocks) spiking the market ever higher courtesy of record reserves, but in fact continue to pull their cash out of the stock market with every thrust higher. Why, just last week another $1.4 billion in cash was pulled from domestic equity funds, nominal Dow 13,000 be damned. The truth is that the banks are desperate to start offloading their risk exposure to retail investors, and instead of selling, are furiously trying to send the market ever higher just to get that ever elusive "investor" back: just look at how much the market rose by last week, CNBC will say: do you really want to be out of this huge rally? Alas, the damage has been done: between the Great Financial Crisis, the Flash Crash, a massively corrupt regulator, rehypothecating assets that tend to vaporize with no consequences, and a central bank which effectively has admitted to running a Russell 2000 targeting ponzi scheme, the investor is gone. But what if? What if the retail herd does, despite everything, come back into stocks? After all the money is in bonds, or so the conventional wisdom states. What harm could happen if the 10 Year yield goes back from 2% to 3%, if the offset is another 100 S&P points. After all it is good for the velocity of money and all that - so says classical economic theory. Well, this may be one of those "be careful what you wish for." Because while investors have indeed park hundreds of billions out of stocks and into bonds, the real story is elsewhere. And the real story is the real elephant nobody wants to talk about. Presenting: America's combined cash hoard, which between total demand deposits, checkable deposits, savings deposits, and time deposits (source H.6), is at an all time high of $8.1 trillion.
Indicatively, this consolidated number was a modest $5.9 trillion the week when Lehman failed. In other words, in the period in which the Fed dumped $1.6 trillion in cash on Primary Dealers' balance sheets, and gave them a carte blanche to buy NFLX, AAPL, and Crude of course, which they did in keeping with the Fed's Global Put mandate, i.e., no bank will ever fail again, American consumers added $500 billion more than even the Fed parked with the banks, or $2.2 trillion.
And therein lies the rub. As a reference, America currently has about $1 trillion of currency in circulation. If, and this is a big if, the gullible US consumer-cum-New Normal investor, does fall for the oldest herding trick in the book, and not only converts their bond holdings but their cash holdings into stocks, which in turn goes right into money velocity, into currency, and thus, into inflation, America may promptly find itself with the most unprecedented inflationary outcome it has ever experienced. Because while the Fed may have control over Excess Reserves, or so it believes, via the interest charged on overnight reserves, it will have absolutely no control over the herd mentality and the avalanche of money, should it proceed to rotate not so much out of bonds into stocks, but far more importantly, out of electronic cash (which for all intents and purposes is the US M2 these days), into the stock market.
Crude at $200 will then be the least of everyone's concerns.
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ya... evil terrist too.
It is a difficult awareness to have. I've come to the conclusion you have to let people wake up by themselves, while quietly preparing for you and your nearest and dearest. There are so many people I care about that I would like to "rescue" by making them aware or stocking more food, but I've found it damages my relationships with peopl and I can't afford it.
But Evil, we still love you!
By law your 401k will have a "cash account". It may be called a money market.
Nothing wrong with sitting in cash for several months or even a year. The yield between the cash and bond a fnds are probably minimal anyway.
You can buy some gold outside the 401k to hedge inflation on the cash.
"laws"... how quaint a concept!
Laws are a refletance of how much money you donate to election campaigns.
Thanks, I'm going to look into that. I haven't heard of that before.
money markets can break the buck in a crisis
http://articles.marketwatch.com/2008-09-17/finance/30738259_1_peter-cran...
yes it is a shell game, use the cash account to dodge the stock / bond crashes and then dive in after the crash... get out early and sit again. Surprised you can't take a loan out, that sucks.. then you can really cash your chips and take the loan and buy gold and just pay interest on the loan to yourself
This is exactly what we did a few years back, parked it in " money market" ie "cash". Unfortunately we can't figure out what money market truly is...have a sinking feeling it's sitting on top of treasuries. Because my husbands pension was capped in the mid 90s we had ( in hind sight like complete morons) dumped cash into are 401ks in the hope we could make up the difference. Makes me throw up in my mouth just thinking about it. Now our 401ks are in the crapper, we probably won't see a penny of the pucilanimous pension and we're pissed off as hell. Now our motto is gold, guns and grub. The 401k s are as good as gone and we don't sweat it anymore.
Thats exactly what I was trying to avoid. I need to see if I can move it to a money market ASAP I guess or it will all be gone. We can't even take a loan out on it. My company is stupid when it comes to these 401k's, though I'm grateful to have a job.
I am trapped in an annuity that my employer pays into but I don't, every month. I have to lose my job to have access to it. I have raged and become resigned to my fate there. I wrote off social security too. If either or both come through I will be pleasantly surprised. Gold and silver have been awesome. ;-)
I am going to say something ugly. I am still digesting it. It is not our fault, we were socialized to believe that the government and the economic system, if we participated in a certain way, would take care of us. It has always been there to see, the numbers never added up. It has never been possible for the government to take care of us. There is too much of a need to tell us what we want to hear, instead of telling us how it is, so that they can keep their power. Also, concurrent with our host's motto "On a long enough time line the survival rate for everyone drops to zero" they might add "It has always been everyone's job to take care of themselves."
Like the character Neo in The Matrix, many of us start asking questions (the little voice in the back of our minds tells us it does not all add up, or it at least wonders how deep the rabbit hole of corruption goes), and we end up on blogs like this one and rudely awakening. We were duped into thinking the system would take care of us if we participated correctly.
We were never entitled to that. It was never going to happen. That is the awakening.
But if we talk, plan, act, share our disappointments and triumphs, the awakening at first is painful, but I would argue it is also refreshing. And then enlivening.
I think this is the path to freedom.
But that's just me... I can be a little dramatic. ;-)
Welcome here and good luck.
Great post MsCreant.
EE - can you rollover your 401k into a self directed IRA? then you can at least use your IRA funds to buy hard assets like precious metals and even real estate after it hits rock bottom
I have to take a look at that. I tried to take a withdrawl and was just going to eat the penalty, I figured it's better than losing it all in a crash. I mean we aren't talking hundreds of thousands of dollars here but it's all I have in a retirement.
if you cant pull it out then see if they have some type of commodity fund
Put it in the equity index and short the index outside the 401k in another IRA if you can.
That's after borrowing as much as possible from it.
If there is no way out, and you have a very sizable 401k, then tell them you want to quit and be rehired.
Better yet, just watch fight club and you will figure out a way to make them give in...
I had a 401k with Fideltiy at a former employer. They do suck! I "borrowed" money from my own account (see the PDF for your plan - don't settle for a summary - get the full plan document - contact HR if you need help getting your hands on it - you likely can borrow against your account with some parameters) and bought ASEs and junk silver. I had to make "repayments" out of my pay check (4 year repayment plan I think plus interest) so you will need some spare income to blow on the repayments. I left the job about six months later. I cashed the whole thing out, which was considered a disbursement of the entire balance (I paid the 10% penalty).
The other posters are correct regarding cash/MM/MMMF (all zero interest short term accounts).
I have a retirement plan at my new gig. I am in MMMF here. If the stock market corrects to 6k or something similar, I will go balls deep on stocks. No *major* correction and my money stays in cash. I figure at this point hyper-inflation is pretty much a guarantee unless RP gets the white house, so I would prefer to be in stocks for that event (given the very limited choices).
So, I am just waiting on two things; (1) a major correction in stocks or (2) RP in the white house. If (1) I go stocks. If (2) I stay cash. Eventually I may have to go stocks anyway because of inflation, but that is down the road a ways still I think.
If I could pull my funds today, at any penalty, I would do it in a heartbeat and buy metals.
Regards,
Cooter
I would do the same damn thing Cooter. Unfortunately I can't pull it. If I quit or get fired I can get the whole thing out but I'd rather have my job so i'm stuck. At this point i'd rather stay employed as long as possible.
Makes me laugh when I tell people the .gov can, and will take their 401Ks and give them treasuries, or take them 'temporarily' to get through a budget bump - then go bankrupt. "They can't do that!" LOL they can do whatever they want. Including making it hard to get your cash out.
Only thing you can likely do is take out a loan against your balance- maybe to buy PMs, stay in cash, or buy a small farm. I took a loan and if I spend it, will burn 70 percent and keep 30 in cash to pay the 'penalty' and tax hit.
Only other thing you can do is fake a divorce, and act sad as the judge forces you to convert your 401K to cash to serve up to the missus.
If you quit your job, then you can cash out. :)
I hope you are in ultrashort us gov/mm bond funds. Anything longer and you would be safer in equity funds. Just my 2 cents...
I guess you mean short term. Not a short position.
Correct
Now I know bonds aren't safe either but unfortunately there is no where left to go. My company doesn't allow any pulling of our 401k's out. Not even a hardship or one time withdrawl...nothing. So it will just go poof one day and it's gone. I wonder how many others in my position have done something similar.
Can you borrow against it? My brother did that, he borrowed a bunch of money from his 401K. You just end up paying yourself back, plus interest, but the money is in your pocket today. So if they let it all go up in smoke you got your money out!!
The only thing we can borrow against is the portion that we have contributed to it. Now at least I was smart enough not to have contributed a damn dime to it. But I have worked for the company for 10 years now and they have put in a sizable amount for me so it's not like I've done nothing to earn it and I'd rather do something to save some of it than see it go up in smoke. Seems futile at this point. My only options it seems are to try and park it in a money market if I can or, I'm good friends with one of the VP's of the company, if I can talk to him and get him to have the company change our 401k rules there may be some hope. Unfortunately as everyone here has noted, trying to wake people up to this stuff makes them think you are a crazy person. I know his 401k has to be 10 times the size of mine so I think that's my only angle right now.
I doubt many would recommend doing this, but I gave my month's notice earlier this week. I'm cashing out the 401k, putting it all into PMs and moving on to another job. It will cost me a year's worth of contributions to my 401k by my employer and a 10% penalty, but at the rate we are going, I believe I will ultimately come out ahead.
IF we are all wrong and Bernanke is somehow right, I will take a ding that is only slightly painful. However, if we are right, I will have provided for extending the timeline before my survival rate reaches zero...monetarily speaking, that is.
I did the same since a few years ago, and I was able to avoid the 10% by using it to pay the house or something like that. I think hardship is another valid reason. Man I have to brush up on this, but there are ways to avoid the penalty or there use to be.
Many 401k allow you to borrow against them for specic purposes. I forget. Consider that as an option.
Financially, it does NOT make sense to get a loan to pay off a mortgage for instance because of tax advantages or what have you. However, as a defensive measure increasing your cash flow is also a valid argument if you can payoff the housee. I paid my house off and then been unemployed, but my expenses are so low now that it takes away a great deal of the pressures. I even used the extra cash to buy some PM on a timely basis. Also, I was able to adjust home insurance to actual needs which under a mortgage you are at their mercy on that regard. They want you to have coverage up the wazoo since it is not their money, they don't care. Don't forget PMI also.
If you can borrow against it to pay off your car that is a no brainer in my opinion. Same deal with the insurance. Credit card debt again a no brainer. Opportunity cost.
Also, depending on the amount. I have read of people who ask their employers permission to quit their jobs for a month or whatever vacation time and then roll the 401k to an IRA which gives you more flexibility.
Also, look at the options that you have. Defensive stocks, international stocks, commodity stocks, etc.
perhaps he can get 10 credit cards and max them all out on PMs and then cry poor that he needs to take withdrawl out to pay the cards off....
or run for congress... get elected... then go on a rape & pillage spree... You'd get free midget tranny porn to serve as a BONUS to all that as well...
CAll JG Wentworth and tellem you want your money now! Wonder how much they'd charge to borrow against a 401k? That'd probably be cheaper then paying penalties of a withdrawal.
If you have only promises on paper and electric money, when there is a power failure, you wait until it comes back.
You need a plan for the day the power does not come back on. Paper FRN's will be good until they aren't. What does that leave you?
We become our "own", worst enemies.
Silence is XAU!
The Bond Market is "Re allow/ acation. Yields have peaked. China is Bid.
If dowm=n grades matter ? I guess one of S& p'S 27 downgrades count,
I'll let the market dictate. Moves like that are easy!
My guess would be older folks takiing money out of stock (as QE2 officially ended) and going into "fixed rate" annuities and other fixed rate accounts at the big banks. At the end of the day, these folks have more in the market (from the 70's and 80's) and after two crashes in less than ten years they probably said "fuck it" and are trusting the devil they know.
Exactly. Everyone got tired. As a guy I met in a bar last fall said to me , "got sick of losing $40k/day so I went all cash". Not making anything sure as hell beats the hell out of losing everything. Money is in the banks & MMs. Lots of it pouring into fied annuities that are paying almost nothing but that beats nothing, at least until none of it matters.
And some of us went into PM.
Yeah ~ but we still lose $40k a day due to boating accidents...
How pray,is the Govt.FDIC scheme going to pay that when the bank runs start ?
Depositors will lose everything. Banks will be reimbursed for the losses of the depositor funds to their co-mingled balance sheets.
I was re-reading the article and this scene popped into my head.
Roadrunner had run 50 ft. over the cliff and what suspended in mid air looking perplexed ast to why
gravity was not working ,the puf.
I think thats exactly where we are now,looking on perplexed .........
I like the analogy but wasn't it the cyote with the perplexed look?
Well there was this one episode where the roadrunner ran off a cliff and then kept going, and the coyote followed him and then had a "that look" moment...wait a minute, what do you care Peter, you can fly!
In this Bernanke world... You're ALWAYS the coyote...
& the Road Road Runner runs to the edge of the cliff & goes "Beep Beep"... whereby a fissure forms between yourself & the promontory where he is standing... You're standing on perfectly solid ground, yet it still manages to crash & fall while he stands there suspended on a piece of rock in mid-air with a shit eating grin on his face...
How will they handle it? Simple.
Easy, they just guarrantee the amount, not the inflation adjusted value. They can just print.
Put a 3rd shift on at the printing company?
Yes they are attempting to herd the retail suckers back in but so far no luck... even with the DOW making highs everyday without going down to fill that GAP!! Without someone to sell to, how much is something worth?
Both ways I see epic failure for central planning and inflation for everyone!!
Got gold?
The big banks trade to eachother, on the back of Fed-sponsored liquidity, but ultimately, it will be the pension funds left holding the bag.
They probably hold big meetings related to how to find more bagholders.
http://www.youtube.com/watch?v=kUwHyEd-wAQ
I'm guessing the FED won't allow the bond market to drop much farther before attempting to induce some 'safe haven buying' by pulling the plug on the stock market. Because the ponzi only works if everybody can continue to be convinced that a 15Trillion debt and +1.5Trillion deficit is somehow sustainable. And that can only be done with interest rates at around 0.
combined cash horde
Try Cash HOARD
Or is it a cash Alliance?
I was thinking more of...CASH WHORED.
Lok'tar!
Cash whored
I'd rather have the horde--imagine one with pitchforks and torches showing up at every Federal Reserve branch!
WHEN, WHEN!!!! Let's get that party started, I am ready. Although I am sure Fed Res banks are precisely why HR347 was written and signed.
I think the elite are starting to pick up on the escape velocity potential of inflation. Amity Shales just wrote A piece on this:
http://mobile.bloomberg.com/news/2012-03-14/watch-bernanke-s-little-infl...
It's starting to dawn on people that there's a lot of money sloshing around out there.
there's a lot of money sloshing around out there
BWAHAHAHAHAA!... That one had me LOL!
"money sloshing around"... OK... I'll give you a free pass on that... Try "FIAT PAPER" sloshing around & we'll revisit this thesis...
Keep an eye on real estate. The Fed began overprinting to prop up banks and reinflate real estate. They may be close to getting their way.
Individuals have moved money, or rotated money among PMs, BRICs until they teetered, oil & gas, cash, ag land, stocks, and specifically dividend-paying stocks.
Many who had sworn off home ownership are in their third year of double-digit rent increases with 93% average occupancy rates in the U.S. With stagnant wages and CDs losing to inflation, many will rethink their rental decision.
Though real estate still has many problems, it's like the TBTFs were a few years ago and stocks are today - shaky fundamentals and questionable prospects, but supported by the Fed.
On a relative basis, residential RE is looking better. It's still a pig just like the large banks, but it's wearing lipstick, and as this thread reveals, people want to trade their fiat for something real.
people get those pshycopaths off the streets
http://www.theithacajournal.com/VideoNetwork/1505080580001/Owego-jail-beating
maybe that's the fed's plan.. sop up excess liquidity via $8 gas.. the Muppets can walk.
It sort of is--we're repleneshing their balance sheets by paying high prices for fuel, food, and clothing.
Just think of how all the new public transportation works will stimulate the economy!
Huge money flows out of apple today... 1.35 billion and the days still not over yet...
'As a reference, America currently has about $1 trillion of currency in circulation. If, and this is a big if, the gullible US consumer-cum-New Normal investor, does fall for the oldest herding trick in the book, and not only converts their bond holdings but their cash holdings into stocks, which in turn goes right into money velocity, into currency, and thus, into inflation, America may promptly find itself with the most unprecedented inflationary outcome it has ever experienced.'
Why do you think old man Warren is out there putting doubts into the peoples heads about the bond market?
Shit.
I down arrow you, only because after 2 weeks you'd think a guy could figure out how to post an avatar.
?
latest three CapitalAccount(s) with Lauren Lyster...
- - -
Investigative Journalist Teri Buhl Blows the Whistle on Sex and Money Scandal in New Canaan, CT!
http://www.youtube.com/watch?v=6JpIFMMcE94
Goldman Banker goes Rogue amid the Fed's Recent Stress Tests w/Naked Capitalism's Yves Smith
http://www.youtube.com/watch?v=z1J20wvO1ZY
Whistle Blowing becoming a new Growth Industry on Wall Street amid Phony Stress Tests?
http://www.youtube.com/watch?v=9Nb3Bv2__sI
33 weeks 6 days = check
Avatar looks like a ying/yang tree and root mirror = check
??
nope-1004....you do realize that when you load an avatar , your pc name is probably going along for the ride and saved on the server....so any pretense of anominity is gone.
No log VPN mate.
Is this that $3.6 trn that missing from the REP market Tyler ?
Somewhere in my long term memory, now lost to the ages, was the relative and somewhat stable percentage of US (cash) FRN's held outside the USA. As I recall that figure was GREATER than the total amount of cash held by Americans. People residing in less than stable parts of the world like to hold US dollars. I believe the Benjamin Franklin ($100) note is the favorite, which is why it is recognized around the world.
Does anyone recall where that data resides? I submit that if our foreign brothers and sisters all decide at once to dump US dollars for (fill in the blank - euros, yen, gold, silver, crude, food...), the transition to hyperinflation will be mind bogglingly quick. Perhaps that is the statistic we should monitor as the last cracks in the dam before the flood?
I recall telling an idiotic co-worker some time back, who was pulling for Trump as a possible POTUS candidate, that all this huffing and puffing about China was ridiculous.
If they seriously had the intention of doing damage to the US they could blow us up economically overnight simply by liquidating their current TSY holdings.
1.18 trillion dollars rapidly put into circulation would be catastrophic.
Mutual desctruction of course, but definately something to think about.
+1
Once Ben gets stored up usdollars moving, that sucking sound can become a tsunami in an instant.
This is the best post in the history of Zerohedge.
1 quadrillion stars.
One thing though, that money will never come back to stocks. The holders of that money are too old and too scary and already retired or about to retire, with house price under the water.
I foresee a 1987 dow drop, 2000 points in one, 1000 pts trip, then curcuit breaker, then 30 min break, then another 1000 pts.
Quite, quite quite soon, unless they want NYSE to get out of business.
a "planned" dow drop? Surely TPTB would have to orchestrate it? They control everything else.
Planned or not planned, there is no choice. Either NYSE goes out of business and primary dealers are stuck with BAC shares (100% up since 4.92 low in december??????????), or cheapen the stock prices and increase volume by either generating a crash (as I believe happened in 2008 with Lehman) or have another primary dealer collapse on margin calls like MF Global.
Right now, there is no market, it's pure a communist system, the one I lived in for 20 years in eastern europe.
There's definitely no market, but there's a number, and right now it's 13,000. That's all that matters. There is a zero percent chance stocks go down at least until Obama is re-elected. They will never let them go down.
That's exactly why the "non" market is staying high, because people believe they won't allow it to go down. It's called communism.
Based on my life experience, any kind of trust on government control leads to riots and collapse. We will have stock market "riots" soon, as far as I am concerned.
BAC closed at 9.80, it was 4.92 in december. Do the math, 100% in 11 weeks.
Full Trust in Government Control = Riots later
I think the stock market is mainly serving as a QE distribution mechanism. It is one of the best ways to get money into relevant parts of the economy such as retirement funds, etc. Money to the banks, though a clear part of the game because they "own" the system, does not keep the masses propped up.
Who knows for sure, but my sense is that the stock market is under almost complete control for central planning purposes. It will drop when they want it to and not before.
I really appreciate you input because it proves my points as per my life experience.
I am not a Buddhist, but know a bit about the tradition. There are many expressions of the Buddha you can see illustrated in the statues and statuettes. One is the joyous Buddha having a belly laugh, but another is a figure with his head buried in his lap, compassionate for all the suffering of humanity. I always felt that I understood this, but now it takes on a whole new meaning. So much suffering at hand and it appears so much more to come. Really overwhelming.
I have already seen poverty and repression in my life. I'm 39. There's more coming, particularly as of March 19 which is the day of greek CDS auction.
It seems like everybody forgot about those. Hm.
Poverty and Regression?
I'm OLDER! Junior.
I'm sure you must be questioning that usd/cad resistance?
sorry boss. that's not a buddha... it's a putai. or a hotei .
Lay off the Buds. You are non sensexcal!
I don't like being lied to! EKM! You are Captain Dis- Array though?
Why do you foresee a drop?
See reply to valley chick
EKM I'm waiting for an Answer? 10 year yields?
HFT units are allowed to plug themselves in between the market and retail to maintain control.
Having 46 million on food stamps with virtually no mention of it by politicians avoids the visible soup lines of the 1930's. The potential powder keg has been soaked in calories.
Printing to prop up Europe and weakening the dollar to prop up exports are all elements of extend and pretend.
I see no planned crash. A crash at this point signals a loss of federal control. For awhile, HFT was used to make quick money, but buying low overnight and ramping back up during the day only drove retail away, lowering trading profits in the long run. Notice the market has tended to open each day with rarely more than a few point gap.
The market needs to be propped up so insurance companies and pension funds don't crash like banks did.
Unless there is a tactical misstep, extend and pretend will continue with small, incremental, positive progress. Small pullbacks are used to collect enough short volume to slingshot the next move forward. After repeated short burns, Pavlovian dip buyers make halting a falling market cheap and easy.
There will be no severe pullback until the U.S. dollar is rejected as a medium of international trade, and that point is probably still $trillions away from this point.
Great article. It is important to remember that the game is rigged and normal investing in a market that functions is not possible. If you want to read about how I figured that out about 6 years ago check out the following. I think it captures age we live in pretty well.
http://vermont.academia.edu/RobertSkiff/Papers/1296012/The_Beggar
Just downloaded. Thanks for the link.
And the FED has no choice but to put a torch under all that cash with more QE
why would anyone give this comment a negative rating unless they are part of the fed or the primary banks....?
So, if people pull their Money out of the Banks the Banks then have no Money to Gamble with?
Since when did the banks "having any money in them" have to do with anything? ('gambling' in particular)?
Can you say "Crack-up Boom?"
I knew that you could !
(and so did Mises, Faber, etc., etc.......................)
Buy guns and AAPL, you'll be okay
Just one question: When does the BAC equity deal get announced?
I removed all the cash from my 401k, IRA, Roth IRA, brokerage and banks accounts long time ago.
Converted 85% that fiat to G&S in 2005/06.
I sleep well at night.
Took my lumps with taxes and disintigrated my 401k into PM's and farmland.
Agreed. Have never slept more soundly.
I did the same but I am now so excited I cannot sleep at night.
I lurk at the moon lit places where a killing may be found in G and S when no one is around to hear the screams or smell the blood.
The bank and credit union is nothing more than one gigantic money moving to either cash or metals. Nothing is left behind. except maybe a dollar or so to keep account open.
for the average fixed income investor with a nestegg of cash earning 1/2% per annum the decision is tough. negative real rate of return does not reflect true risk, as we saw in 2008 when some money market funds could not meet NAV. should you go to cash then?.
there's no doubt that the DJIA is the inflation index. you're never going to make more than (real) inflation in stocks. of course the risk here is greater than losing the NAV on your MM, but not by much, as long as they are willing to print money to cover the losses. either way you rely on the kindness of stranglers (to paraphrase Flannery O'Connor)
the difficulty with buying assets is the Feds position against economic recovery. the premise is you borrow assets and hypothecate the rise in their underlying value. if you buy assets you just don't get it. so you can't hold cash, because of inflation, you can't buy stocks because all you stand to gain is inflation, with more risk, and you can't buy commodity assets because there is no economic growth, and that is a matter of policy as much as anything. damned few alternatives here.
So wouldn't buying hard asset based equites be amoung the best options? REITs and mining stocks, etc.
if you could buy a gold mine with a no down payment mortgage, and when the mortgage value goes underwater mail in the keys. or why would you pay cash for a home?
one expert yesterday said the most important thing to the stock market is buybacks. companies borrow money to buyback shares. the CEO levitates the assets, shareholders open a (hopefully) wider line of credit, and buy more shares on margin, (rinse and repeat).
never buy an asset other people can borrow.
and while i wouldn't put hard cash into a REIT, which is a paper promise held up by a lot of people with IOUs, i would buy a piece of property if i thought it wasn't overpriced, or it had some income. and i was certain i was getting this price because i had cash.
my old mother tried to buy a car with a cash a few years ago and the dealer laughed her off the lot. how much for cash she said? same price he said.
the difference between buying something and putting up equity has to be made here. you can margin those gold stocks 3-1? think before you put up hard money. if you go in deep on margin then your lose your equity, so yes there are few alternatives if you are trying to preserve captial except to impeach all the politicians and the Fed.
- Who are the American consumers that added $2.2 trillion, and where did it come from?
-
They sold assets and never bought anything.
Remember, this is just cash with easy access. It's not their net worth.
thinking a couple possible reasons.... 1) new employees = new 401ks = new funds into the market. 2) I know several people that doubled their contributions at the market low a few years back.
i use this information to try to explain to keynesians how money printing creates inflation. they say even though the fed bails out the banks behind the scenes, that money doesnt enter into trade, therefore has no velocity and creates no inflation. but they seem to forget about the $1 trillion annual cash deficits run up by the USSA and how about 80% of that is funded by outright money printing by the fed and its primary dealers. there is the fucking velocity - through govt deficit spending. thats why real inflation is between 10%-12%. thats how fast actual money in circulation is growing. i dont have a phd, but this is something a 5th grader can understand. how the fuck are keynesians so stupid?
'keynesians' are the ones that are benefitting from the money printing. the banks the unions the gov employees, all the welfare recips that get a gov check.
Indeed.
I made that point innumerable times in the great inflationista v. deflationista deathmatches of a few years ago - thankfully the latter have recanted. Just took off their uniforms and went home they did.
Federal spending last year was ~25% of GDP. Let's be generous and say only 50% of that spending was financed through inflation. That would mean that last year there was money creation equivalent to 12.5% of GDP. Derrrr, that's NOT SMALL!
..and that's base money, not counting any lending on top of it.
If money in circulation is exploding please explain the $1.7 trillion in excess reserves at the fed. There is no "printing" per se or much less than you allude to. It doesn't mean this isn't inflationary but what you're saying is not correct.
i use this information to try to explain to keynesians how money printing creates inflation. they say even though the fed bails out the banks behind the scenes, that money doesnt enter into trade, therefore has no velocity and creates no inflation. but they seem to forget about the $1 trillion annual cash deficits run up by the USSA and how about 80% of that is funded by outright money printing by the fed and its primary dealers. there is the fucking velocity - through govt deficit spending.
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Deficit spending certainly didn't increase velocity in Japan after hammering over 6 trillion USD into their economy by building bridges to nowhere-
http://bit.ly/zmnlcS
In fact velocity collapsed-just like its doing here-
Today-all Japan has to show for it is a debt to GDP of 230%
Thinking that deficit spending will increase velocity is the Keynesians money multipliers wet dream-
By that "logic", since deficits don't matter (channeling Dick Cheney in addition to Bernanke, now, are you?), you should be advocating that the US federal government go into debt to the tune of $10 trillion or $100 trillion annually --- I mean, since they aren't really "printing" any of it, right?
You really are a nitwit --- do you happen to hold a PhD in economic "science"?
By that "logic", since deficits don't matter (channeling Dick Cheney in addition to Bernanke, now, are you?),
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Its obvious by your weird reply that you are not comprehending at a high enough level of understanding to reply to the topic "deficit spending"-does or does not increase velocity-I showed you a chart of Japan-I can show you a chart of US velocity-
Lets see from you--some data/proof that does show that deficit spending "does" increase velocity-
Sooo--Show the rest of the class how smart you really are-ya know-how deep into this you can go-
Behold the troll endlessly trying to obfuscate and cloud the issues, which are simple and stark: NO government trapped in a cycle of overspending and with rapidly rising levels of debt has EVER seen its fiat currency appreciate in value --- but ALL of them have seen their fiat currencies fall or collapse in value, each and every time.
So tell us plainly: Why do you believe that "this time it's different"?
NO government trapped in a cycle of overspending and with rapidly rising levels of debt has EVER seen its fiat currency appreciate in value --- but ALL of them have seen their fiat currencies fall or collapse in value, each and every time.
**********
Do you read and understand even at an elementary level?
This is not about the "valuation" of currencies-this is about "velocity" of currency due to deficit spending and you have no answer for it-so you try and cloak it in something entirely different-
You're done-
What a persistent and disingenuous bastard you are --- is your last name "Nadler", by chance?
Yes, it is EXACTLY about valuation of fiat currencies, because the average person, myself included, does not give a FUCK about monetary velocity or any of your other obfuscating issues. What matters to REAL people, and not pro-Establishment academics and propagandists such as yourself, is what are the values of my income and my savings, and what will their values be in the future? THAT is what is important! And it is those values that are going to be negatively impacted by the ongoing fiat currency debasement, and the future catastrophic fiat currency collapse.
It is enlightening to observe, however, how you constantly try to divert the conversation, and obfuscate the truth and the simple fact that we are facing a devastating fiat currency debasement and/or collapse, NOT a fiat currency appreciation such as never before been observed in all of monetary history.
Address monetary history in light of your laughably feeble neo-Keynesian arguments, you lying and malicious bastard, or shut the fuck up already. I am sick of your lies and attempts to smokescreen the simple facts here.
ya got nothin huh?
In your malicious and twisted mind, apparently, several thousand years of monetary history, and literally hundreds of examples of overspending, exponentially indebted governments having their fiat currencies debased or collapse as a direct result of that overspending and overindebtedness, is "nothing".
Fascinating.
But talk about spinning one's intellectual and rational wheels!
This troll is impervious to all facts and all logic --- just as is his hero, the Great Ben Bernanke himself.
This troll is impervious to all facts and all logic.
**********
Yes-I've noticed with you--anyone who kicks your ass is a troll-
Anyone who thinks that a falling currency velocity and currency devaluation are in anyway even connected--needs to be studying at least some of those 6000 years of monetary history-that you constantly bring up to try and prove "something" ?
"Deficits don't matter", right Shotgun Dick?
Why do you keep pointing to minutia and irrelevancies instead of acknowledging the meat of the issue --- that EVERY fiat currency throughout history has been radically debased and/or collapsed as a result of the kind of governmental overspending and unsustainably rising debt that we are experiencing today?
You have pointedly NEVER deigned to acknowledge or address that fact --- because it blows your laughable deflationary thesis right out of the monetary water.
Theocracy is pase' .
communication = fail
what is the historical cash to market cap ratio
Thank you Tyler for this article, and thanks ZH'ers for the comments.
This (and my constant nagging) may finally convince my dear old retired mum to pull out her RRSPs/Stocks and put it all into physical silver in the next few days. She has all ready lost half since 2008 I would hate to see her with nothing.
Tell mum to get physical Ag.
10oz NTR bars for the win!
"This (and my constant nagging) may finally convince my dear old retired mum to pull out her RRSPs/Stocks and put it all into physical silver in the next few days"
Even the best investors never put all their eggs in one basket. no one knows (except JPM) how the silver market will continue to be manipulated.
Fix your Spanish...it's "Come Mierda"
O, podria ser "Coma mierda" si el esta tuteando.
Parece que a alguien no le guste mi castellano.
For a dumb person can someone tell me "Who are the American consumers that added $2.2 trillion, and where did it come from?"
I thought the consumer was poorer since 2008?
Cash deposits increased by $2.2 trillion from a starting point of $5.9 trillion over three years (an increase of 37%), but inflation averaged 10% annually for those three years (33% total), so the increase in real terms (the purchasing power of that cash) is only (37%-33%) 4%, or $236 billion in 2008 dollars.
...that doesn't really answer your question I know, and here's some more info that also doesn't, but it's interesting.
The DJIA is up 83% over the last 3 years (the March 09 lows). In real terms, it's only up (83%-33%) 40%.
Meanwhile, the ishares Barclay 7-10 year treasury fund is up 9%, or down (9%-33%) 24% in real terms.
In conclusion, I have no idea what any of this means for the flow of funds.
- I concur. Data is garbage, same as all the other ..employment figures, CPI, etc.
Yeah, what or whose figures can we rely on? The CBO is just a part of O'Bama's imagination now.
Can Diogenes find an honest numbers man anywhere?
no f%cking way any retail investor will go back into the market after the ass raping of the last 3 years. the fed and the gov are going to have to take over the savings accounts of regular people, steal the money to push it into the equity markets.
Of all the ways that our fucked to infinity economy is likely to finally roll over and die, people trusting Wall Street with their money and investing again in stocks seems the least probable. (Not that it couldn't happen.)
Big up moves to draw "investors" in have recently been a precursor to trend reversals lower:
http://chart.ly/4daqlr2
holy fiat, mother of invention, batman!