The Wealth Code - How the Rich Stay Rich in Good Times and Bad 2010 Finalist: Independent Book Awards - Personal Finance
Government Shenanigans - The Inflation Lie! 01/30/2010
 Have you ever looked at that box of Cheerio's and wondered how the price has not gone up for many years even though many other things like gas and the cost of a movie ticket have gone up tremendously. Look at the box carefully. The same general height, the same general width. So walking down the aisle and looking up at the shelfs of cereal it looks the same as it always has. Thankfully your Cheerio's has not gone up in price like everything else! But when studying the contents you notice the actual cereal content is going down dramatically and then you realize the box is getting skinnier. This is the trick the cereal makers and actually most food producers are using to hide the massive effects of inflation at the grocery store. The gallon of ice cream now comes in a thimble for the same price. The bottle of water now has a giant bubble in the bottom of the container displacing a lot of the water. The government and mainly the Federal Reserve loves to brag about how low inflation is under their watchful eye, but is it? What’s really happening is they keep changing the method for which they calculate inflation to hide the real effects going on in our economy. This way they can justify issuing Treasury Bonds at absurd levels. They can barely bump up the payments for Social Security and Medicare to the US citizens, and they can run massive deficits without paying much for the interest. Below is the latest chart showing the Pre-1983 Consumer Price Index (CPI) method for calculating inflation (the one that actually shows food and energy and real housing costs) and the CPI method used today. The NEW method has clearly shown that the CPI has been very tame the last 20 years, merrily bouncing between 2-4 % and recently even going negative (Deflation!). The reality is we’ve been running at over 7.5% since 1996 and in mid-2008 even hit as high as 13%. Ask yourself a question. Have your CD’s been paying 7.5%? What about those Muni-Bonds? Stocks? Inflation is indirect theft from the person who keeps their money in Paper Assets (Stocks, Bonds, Variable and Fixed Annuities, and Cash) and transfers it to those who keep their money in Wealth Assets (Real Estate, Oil/Gas, Equipment, Bullion and Rare Coins). This Rich get richer in inflationary times and the masses get poorer. The person who keeps $100 in the bank sees their purchasing power drop by 50% while the person who keeps their $100 in Oil sees the price of a barrel of oil go up 100% and thus their value of the oil investment goes up by an equivalent amount and they have maintained their purchasing power. To truly understand how much purchasing power we have lost over the last 10 years. In order to buy the equivalent stuff for $100 in January 2000. According to the Government’s CPI you would need $127.93. Using the Pre-1983 CPI method, Today you would need $241.44. Now I know why my box of Product 19 only has 5 flakes in it?   Money printed since begining of 2008 Recession! Add Comment The banks are falling, the banks are falling. Bad Government for talking about regulations. The reality is the banks have been lying about their financials for over nine months now and the truth is starting to come out.The run up of the stock market has been based on three major issues. Government Shananigans (not true reporting of inflation, GDP, and Unemployment); Federal Reserve printing of money which began in March of 2009; and lastly the Bank Accounting gimmicks used to show lots of profit and hide massive losses. Below is a small sample of the banking gimmicks which allowed them to show lots of dough being made and lead the charge for the stock market rally we experienced from March 2009 to January 2010. 1.Changing the mark-to-market accounting principal. Wouldn't it be nice to sell your house today and get the price it was worth in 2006. This is the reality of what the banks have done on the accounting standards when evaluating the value of the assets they own. They have magically gone back in time and now say they have all their assets back to full market value even though the assets are maybe 20-50 cents on the dollar. The April accounting change implemented by both banks and the government allowed them to deviate from mark-to-market accounting principal, basically letting banks to assign favorable value as they want to their portfolio which will be written off in future days. When banks raised the value of their toxic assets, they book them as earnings. For example, Bank of America last year took over Merrill Lynch and in Q1 it increased the value of Merrill's assets to prices higher than Merrill kept them, booking a $2.2 billion gain in the process. They are all paper "gains" for one accounting period for the sole purpose of painting a rosy picture. 2. Taking advantage of "creative" accounting loopholes.One loophole is to book earnings while your debt is actually losing value. A good case here is Citigroup, which last week ended a five-quarter losing streak, took advantage of an accounting rule that allows companies to record declines in the market value of their own debt as an unrealized gain. That turned a $900 million loss into a $1.6 billion gain. The accounting gimmick lit the fire of the March10th, 2009 400 point “Citigroup” rally. Lies, Lies, Lies… 3. Just plain cheating! Switching from Fiscal Tax year reporting to Calendar year to hide losses.The best award goes to Goldman Sach’s for the best accounting gimmick of them all. Switching to calendar year reporting. By switching to calendar year from a fiscal year ending November, suddenly the credit losses of $780 million disappeared from both 2008 report and Q1 2009 report, nowhere to be seen in the future. Of course, this has driven the stock price way up, a perfect timing to dump more shares to the public as far as they are suckers out there. Bottom line. The market pulling back from 10,700 and change back down to the 10,100 level in three days and blaming it on “New” Regulations is just short sighted and wrong. Though the tough talk on regulations was a factor, China suspending lending for two weeks and numerous other reasons had as much if not more effect. The reality is the stock market rally was built on a house of cards and it is beginning to fall. The Second Wave of Foreclosures is Coming! 01/20/2010
A hurricane has two walls and an eye. The first wall is bad, causing lots of damage, but usually it just gets thing really wet and soggy. The eye is deceiving, because the seagulls come out, maybe the sun shines through and the wind calms down. A false sense of security. The problem is the second wall. This is what packs the wallop with the storm surge and devastating winds. We are in a Real Estate hurricane and the storm is comprised of the adjustable Mortgage resets which are the driving force behind the foreclosures and the foreclosures are the driving force behind the drop in Residential real estate. The two charts below show how 2008 was the first wall of the hurricane. Take a basic, rational viewpoint of 2008. If the first wall caused as much damage to our economy and stock markets, what will the effect be of the second wall being 10 times worse. According to the T.V. and financial folks of Wall Street and our Government, it does not exist. They are blinded by the Eye of the storm, or 2009, the lull in chaos. They see the partial rays of sunshine and announce the recovery has begun. Don’t be deceived. They are blinded by the fact that their paycheck comes from a rising stock market, and if they announced that they believed the market had further declines ahead, all their clients would ask a simple question. “If you believe the markets are going down, and you lost me 20%, 30%, or whatever % in 2008, why should I keep my money with you considering you do not know how to protect me from a declining market?” Thus, blinded by their paychecks, the only thing the financial talking heads will ever say is, “Stay the course, and the recovery has begun!” The second wall is coming, Batten down hatches!   The government came out with its December unemployment number. A drop of 85,000, and the overall unemployment is still 10%. This is contradictory to “The Recovery” talk we hear all day but the REAL numbers are much worse. The US labor force decreased by 661,000 jobs in December 2009. These are the number of workers who have officially given up looking for work. That definition is anyone looking for work over four weeks is considered by our government to be NOT LOOKING ANYMORE, and are not counted. Over the last year, there have been 1.7 million workers who “Gave Up”. Adding these workers back into the official number and adding the “underemployment” people, those who only can get part time but want full time, the real unemployment rate would be 17.3%. Going back to the 1994 method on how they calculated unemployment, the real number would be 21.9%. Before 1994, people looking for work over a year were still added in the official number. No longer today. Bottom line: 1 in 5 Americans are out of work, but according to the government shenanigans, they don’t exist! Tell that to their families that depend on their paycheck!!!!!  Who Would You Rather Follow? 01/20/2010
Monday, January 4, 2010 On December 29, 2009 two articles came out back to back on Bloomberg. One, in my opinion symbolizes the Wall Street media hype machine and one completely contradictory. The first was about Bill Miller, manager of Legg Mason Value Trust. Touted guru who beat the SP500 16 out of 20 years. His 10 year average is -3.2%, that is he lost investors 32%of their money in the last decade. Mr. Miller touts how great 2010 will be and says everyone should get in to the gravy train. The second article came from Erik Sprott, manager of the Sprott fund. He's made his client 496% in the last decade. His message is about how the SP500 will plunge below the March 2009 lows due to a fortitude or solid reasons. Mr. Millers reasons for the economy to be going up, not a whole lot other than fluff. So Miller (aka Wall Street hype machine) say markets going up and Sprott (aka someone who actually made a lot of money for his clients) says markets are going down. Who are you going to follow down the yellow brick road? Miller Article: http://www.bloomberg.com/apps/news?pid=email_en&sid=aoXm1ChySOEg Fleecing of America Paying Back TARP! 01/20/2010
Wednesday, December 16, 2009 All the headlines scream how great the banks are for paying back TARP. Except they don't discuss HOW the banks are paying back the billions borrowed. They are doing it with the printing press as the Federal Reserve does with the government. The banks are issueing new stock, diluting their current shareholders value, and selling the new stock to the next sucker in line. All shareholders are hurt by the dilution as it will make it harder for the stock to appreciate in the future. So to recap: No actual money earned to pay back borrowed money, just printing press. Does that sound like a good thing as the headlines say? The Recovery? 01/20/2010
MONDAY, DECEMBER 7, 2009 The Recovery! Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in seven mortgages is in default or foreclosure. One in four mortgages which was "Modified" to lower the payments and interest is back in default. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down. Municipalities debt if factually rated would have junk status and many would default. Incomes have risen 1.6% the last 10 years while inflation, (the governments version) has risen over 30%. And Wall Street is set to pay themselves bonuses 30% higher than the record 2007 bonuses while the stock market is still 30% below its October 2007 high. ? Inflation Tidal Wave is Coming! 01/20/2010
THURSDAY, DECEMBER 3, 2009 Gold at 1200! Art auctions going through the roof with the super wealthy buying up anything they can get their hands on that is tangible and rare. The recipe for storing value in a falling currency environment. The world is telling us they are losing confidence in our dollar and are protecting themselves with gold and art. Most studies have shown that the people in a country where the currency was begining to collapse had no idea until it was too late. Russia, Argentina, Brazil, Germany, Holland, ... All the same. At a snap of the fingers, you've just lost half your wealth or more in cash and cash equivalents, bonds, and other debt. Gold has run too far, too fast with the last $100 rise in price coming from speculators more than fundamentals. We are easily on the pathway to $1500 gold within a couple of years, but will likely re-test $1000 range. Don't bury your head in the sand and watch your money go down the drain. Use a bank like Everbank.com and give yourself the ability to switch to other currencies other than the dollar. THURSDAY, NOVEMBER 19, 2009 News is bad, and the market keeps plugging along.. Generally when there is a major divergence between the reality of the economy and the performance of the markets, we are getting close to a major turning point in the market. As of yesterday, the SP500 had regained half of the losses from the high. Only half mind you. From the exuberance of the record payout of Wall Street bonuses you would think they made back all the losses. Nope, only half. Crunch time is in store for this market. Next stop Dow 3500....possibly 2nd quarter 2011. The Pro's are Selling, the Joe's are Buying! 01/20/2010
THURSDAY, NOVEMBER 12, 2009 The pro's are selling, the Joe's are buying! As the unemployment number, the government version, jumps unexpectantly to 10.2% does it seem strange the market goes up 200 points? As foreclosures accelerate to there 8th consecutive record month, gold hits 1100 and the dollar drops like a rock, yet the market goes up 57 points. Would you expect the economists to point this out or talk about the rally which in their opinion only goes one direction, Up! Institutional selling is through the roof but the media is pushing the public’s "Buy" button over and over again, and the Joe's follow suit. Insider selling is 31:1, indicating they know their companies are going to get clobbered next year, but someone has to buy their shares right? How convenient that joe six pack is being led to slaughter by the Wall Street controlled media. Buy high, sell low is the all too often mantra of the everyday man... | FREE SUBSCRIPTION!Receive Emailed Articles as they are Posted. Click Below on RSS Feed!Jason's Thoughts!My goal is to use this format to bring important and timely ideas to the surface on recent events which I feel will affect all of us financially. ArchivesAugust 2011 Categories |
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