Monday, September 1, 2014

The Turning Point May Be Soon Upon Us

Timing a market top is difficult. Last labor day I wrote the article below. It is appropriate because it is about money the main thing so many people trade their labor for. Again, I offer it up with some minor updates. Many people work hard for their money and even harder to save a bit of it but are lulled into complacency when it comes to protecting it. One of the saddest thing to witness is someone who has worked so hard loose all their money when an investment turns south. This reminds me of the story about how many people describe going bankrupt, slowly at first then quickly at the end. This market has far exceeded the upside expectations of many bulls while the economy has languished and in many respects failed to regain all the ground lost since 2007. The question I put forth is, are we reaching the turning point?

In the past I have written about the unpredictability of predictions so I will spare you having to read another one. A random black swan crashing through your front window plays havoc with the idea of always and never. Currently America and much of the world has been washed along on a wave of freshly printed money and by the momentum it creates. Housing and auto sales have flourished, maybe to much on super low interest rates. This mask the reality of serious structural problems within the economy. Washington has failed to make the reforms necessary to make America more competitive, problems have been ignored and allowed to fester.

Job creation has been the weakest seen during any recovery on record, not only not enough jobs have been created but the quality of them is poor. The mark is low pay, no or little in the way of benefits, and many are only part-time. Consumers are not in a position to spent the economy forward and out of this mess. Massive numbers of Americans have been unemployed forever and a day or simply dropped out of the work force giving the illusion that the unemployment rate while a bit high has returned to an acceptable level, it has not. The decay and harm being done and the toll this is taking can be seen on city streets throughout America as building and houses sit empty and unable to be sold. The cost of carrying and maintaining this underused resource is staggering.

This leaves the government with the burden of carrying a large number of people that need help, the projections made years ago had not envisioned such numbers. Noise that the budget deficit is rapidly coming down misleads many Americans into thinking that things will be fine, but make no doubt we are still spending far more then we take in, cutting more in the near future will be difficult, and last but not least is that in just a few years as entitlement programs kick in things will get really sticky. Even future budgets based on optimistic projections are ugly. Lies and changing rules such as recalculating how the GDP is figured only takes us further down the rabbit hole.

Congress is always returning from another break, a thing most Americans would call "a paid vacation." Again they will confront many of the issues they have continually kicked down the road. Making sense of our massive deficit has become far more difficult in these hard times yet cutting spending remains unpopular with many Americans who want more from their government. Central banks have been printing money for years with mixed results and all indications are that sooner or later interest rates will be rising putting even more stress on a struggling economy. Figures show the rich have grown richer while the middle and lower class have been smacked in the chin. The "too big to fail" banks have become a symbol of what is wrong with America.

Let us ice this cake of  "difficulties" with a mix of troubles brewing throughout the world and the drumbeat of war in Syria, Iraq, Ukraine, and many other hot spots. Currency games, the carry trade, and money rapidly flowing across borders coupled with computer trading has distorted the markets. Forget all the hocus-pocus from the media and clowns about what historically is the best and worst months for the market or how well the market does when a certain team or party wins this or that. This bull market market has gotten long in the tooth and exceeded the average length they normally run, caution would be in order. It might not be a good time to go double or nothing.

Footnote; Your comments are welcome and encouraged. If you have time check out the archives for other post that may be of interest to you. The post below takes a closer look at the quality of recent growth.


  1. On the, the current story is one I have seen several times: two "influential" people are recommending that the government provide a dividend of between $600 and $1,200 per household, for the bottom 80% of households.
    With extra spending and taxes, the government supposedly makes a profit by dropping dollars on most of American families.
    The authors state this has never been done in American history, but isn't this similar to "cash for clunkers?"
    It seems to me a shallow, short-term fix to increase demand and supply.
    If we are down to recommendations such as this, have we reached the end of America as we know it?
    Don Levit

  2. will germany accede to goldman sach's (draghi) demand for 1 trillion of stimulus?
    i don't know.

    but if the market crashes in the next week or two----and the alibaba IPO is cancelled, not only will barclays suffer as underwitier, but yahoo stock will crash as they have 20 some odd percent locked up as 4billion of the expected IPO. i'm sure they expect to dump much of it onto the public as quickly as possible within the next 3 to 6 months or less.

  3. Those of us who want programs that spy on us disbanded have created a bizarre alliance that The Turning Point May Be Soon Upon Us.very useful info you have given

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