Posts Tagged ‘financial crisis’
Central banks around the global economy are involved in a race that will not end well. Of course, I’m talking about the race to the bottom of currency devaluation, which is being achieved through the printing of more and more paper money backed by nothing.
Almost weekly, I hear news about different central banks in the global economy cranking up the speed of their printing presses; they are fixated on printing money because these central banks believe they can solve their economic problems by printing. They are wrong!
Our own Federal Reserve is creating $85.0 billion a month in money with the hopes of bringing economic growth to the U.S. economy. But this strategy is failing the masses in America. Those who have benefited the most from this exercise have been big banks, Wall Street, and the rich. The poor and middle-class are in a worse situation now than in 2007!
But it’s not just the Federal Reserve that’s printing massive amounts of new money. Other central banks are doing the same under a fancy phrase: “quantitative easing.”
In its most recent monetary policy statement, the Bank of Japan reiterated it’s take on printing. It said the central bank will continue to work towards increasing the monetary base in the country by 60 trillion to 70 trillion yen per annum. The central bank will buy Japanese government bonds, exchange-traded funds (ETFs), and real estate investment trusts with the freshly printed money. (Source: Bank of Japan, November 21, 2013.) (Yes, the Bank of Japan is buying securities that trade on the stock market. As our next American financial crisis approaches, … Read More
The mainstream and politicians tell us the “wounds” of the financial crisis are over and the U.S. economy is in recovery mode. This simply isn’t true.
A few of the key indicators I follow to see where an economy stands are personal income, consumer demand, and businesses’ activity. All three of these indicators are telling me the U.S. economy is definitely going in the wrong direction.
First of all, the income gap in the U.S. economy continues to grow. The top earners make more, while the lowest income earners make less. According to the Wage Statistic from Social Security, in 2012, 23 million of the lowest wage earners earned a total of $47.0 billion in the U.S. economy. But those who earned $10.0 million or more annually in the year 2012 earned $64.3 billion! Here comes the kicker: there were only 2,915 wage earners in this category in the U.S. economy last year. (Source: Social Security, November 5, 2013.) Yes, you read that right. Less than 3,000 people cumulatively made more than 23 million people.
The bottom line: while Wall Street and big business has boomed again, the average working American family is struggling under an after-inflation personal income that is lower than it was in 2009—four years ago. In 1999, real median household income (that’s adjusted for inflation) in the U.S. economy was $56,030. By 2012, that number was $51,017. (Source: “Real Median Household Income in the United States,” U.S. Department of Commerce, September 18, 2013.)
Next, American consumers are pulling back on their spending—something that’s not supposed to happen when an economy is recovering.
One indicator of … Read More
This market has been due for a major correction for quite some time. The marketplace expected it (including myself), but what we got instead was share price consolidation with continued leadership from blue chips and small-caps.
Countless stock market indices are right close to their highs, including the S&P 500, Dow Jones Industrial Average, and Dow Jones Transportation Average. There’s also the Russell 2000 Index of small-cap stocks, which has performed exceptionally well throughout this year. Finally, the NASDAQ Biotechnology Index continues to be a powerhouse wealth creator, having doubled in value over the last two years.
All this in an environment of satisfactory earnings but very little in the way of top-line growth. While the stock market has every reason to pull back significantly, fighting the Fed has proven to be unprofitable in equities. The opportunity cost of not being in the stock market since the financial crisis has been significant.
The monetary reflation has seemingly worked for the stock market so far, but it’s very clear that corporations remain unwilling to make major new investments, which would go a long way in helping the Main Street economy. Instead, they are keeping shareholders happy by returning their excess cash in the form of dividends and paying for those dividends with share buybacks. (See “If You’re Looking for Rising Dividend Income…”)
Given current information, I see no reason why prevailing conditions in capital markets might change significantly near-term. With funds continuing to flow into equities, the stock market needs a catalyst to effect a major retrenchment in share prices.
Balance sheets among many large U.S. corporations continue to … Read More
Profit Confidential — IT'S FREE!
"A Golden Opportunity for Stock Market Investors"