-- Posted Thursday, 27 September 2007 | Digg This Article
If you want an example of schizophrenic disconnect other than my extensive medical transcripts, you need go no further than Total Fed Credit, which was down last week! By $4.2 billion! Down! Markets are zooming up, bonds are going up, and yet the very source of the excesses of fiat money and credit, TFC, was down! Down! And even the Federal Reserve's personal stash of government debt was relatively unchanged! What in the hell is going on? Where in the hell is the money coming from to do all of this buying?
Well, perhaps we need look no further than the line item labeled, "Foreign holdings of U.S and agency debt", which zoomed by a hefty $6.2 billion last week.
And if my yelling right in your face is not enough, and you want yet some more proof that not only is the economy flat, the future weak and (horror of horrors!) inflation rising, then you are in luck, as the latest readings of the Leading, Coincident and Lagging Indicators from the Conference Board have been released.
The future (Leading Indicator), was actually down, dropping to 137.8 from 138.7. Bummer! What is happening right now (the Coincident Indicator), wasn't much better, and it was up by the Least Bit Possible (LBP), rising to 124.6 from last month's 124.5.
The Big, Big, Bad, Bad, Big Bad News (BBBBBBN) was that the indicator of inflation and burdens (the Lagging Indicator) had (again!) the biggest rise, rising to 129.4 from 129.0!! Inflation is rising faster than anything! Again!
Put it all together and it stinks from an economics standpoint, and if you think that this adds up to higher stock prices, at this late-cycle stage, at these already-high prices, at interest rates that are at all-time lows, at debt levels that are at all-time highs, at inflation rates in prices that are raging, then you are born to be sheared by sharp dealers.
In that case, I realize you are not going to be able to send any money to me, so I appeal to your sense of fair play, and ask you to please stop sending your money to your retirement plans where the same old sharpies and liars and hustlers and crooks can have it, but instead send it to me, who is every bit as greedy, but pathetically not as sharp, nor as good a liar, nor as sleazy a hustler, nor as clever a crook as any of those Financial Services industry hoodlums, but I need money just as badly as they do! Even more so!
I can see that you are not interested in my not getting rich because you are not stupid enough to send money to me, but you are mostly interested in what to do with the money. If you are thinking that your little account manager is right in saying that corporate bonds are the place to be, I get the impression that this will be a bummer from reading ft.com, which reports that "Moody's Investors Service warned that default rates among high-yield-rated companies - one of the best indicators of the health of the world economy - will rise sharply because of the turmoil in the money markets."
And let me remind you that corporate bondholders are paid before everybody else gets a dime, and that means that by the time they default, the company has paid no dividends, the stock went down, you got squat, and you have lost your big, fat butt in both their equities or bonds.
How many defaults? Moody's reports, "Company default rates are forecast to rise nearly 300 per cent as the credit squeeze hits the wider economy and raises the prospect of a global recession. Moody's predicts that the global speculative-grade default rate will rise from 1.4 per cent - meaning only 1.4 per cent of the companies rated have defaulted in the past year - to 4.1 per cent in a year's time and 5.1 per in two years' time."
This tripling of defaults and losses is part of the phrase "We're freaking doomed!" And it is unstoppable because of the excesses of money and credit issued by the ridiculous Federal Reserve, especially by the Greenspan Federal Reserve, and especially, especially by the Greenspan Federal Reserve in the ten years since 1997, which have gradually driven the prices and number of stocks, bonds, real estate and government services to astronomical heights, so much so that such a huge load of financial crap can no longer be supported.
This is where it gets ugly, and where you realize the importance of gold, and you realize the importance of guns, and how you realize, perhaps too late, that you made a mistake for getting neither, although your real sin is that you did not realize that you were an idiot for believing any of that Wall Street "investing for the long-term" crap in the first place.
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Editor's Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications.
-- Posted Thursday, 27 September 2007 | Digg This Article
