The world is in crisis and the government thinks the only response is to strip you of your rights one by one. Kevin really knows what’s going on and he’s here to tell you. Plus, KT gives pointers on his tried-and-true investment strategy.
Government Power Undermines Empathy
Senate Removes Federal Judge For Kickbacks And Lying
Newborn Taken From Mother Due To False Drug Test
Cops and CPS Seize Child From Parents For Mistrusting Government
January 23, 2012
By John Rubino
As the Greek default (and it is a default no matter what they end up calling it) is finalized this week, the consensus seems to be that failure to reach a deal would cause a global financial apocalypse.
That may be true. And if it is, why aren’t we more worried about Illinois? It’s more or less the same size as Greece, its finances are in the same generally catastrophic shape, and its leaders are just as feckless and dishonest. It owes tens of billions of dollars to various investors and stakeholders and will clearly have to stiff many of them at some point. The following article captures the “failed state” dilemma perfectly.
The question isn’t whether Illinois’ finances are in dreadful shape, it’s how to fix the problem. Or perhaps more accurately, will legislators have the political will to fix it when they return to Springfield for their spring session?
Even though the legislature and Gov. Pat Quinn last year imposed a temporary 67 percent state income tax increase, Quinn’s office expects to have a $500 million budget deficit this year.
Quinn is calling for a 9 percent cut in most areas of state government, except education and health care. But even with cuts at that level, the state would have a projected $800 million budget deficit for fiscal 2015, the year when most of the tax hike expires.
Quinn’s budget spokesman, Kelly Kraft, said the state’s fiscal situation is not pretty.
“These projections clearly demonstrate that action must be taken to control not only Medicaid costs but also (pension) costs, or all other areas of government will continue to be squeezed,” Kraft said.
Looking at the bigger picture, the state has a backlog of about $8.5 billion in unpaid bills and owes about $27 billion in outstanding bonds. And then there’s the roughly $80 billion owed to the state’s public employee pension funds.
Now, legislative leaders and Quinn are floating ideas to cut the two areas that account for the biggest chunks of the state budget — pension contributions and Medicaid.
In the proposed $33.7 billion budget for fiscal 2013, the state’s pension payment will be $5.3 billion, and Medicaid will cost taxpayers about $7 billion.
Proposals include reducing the benefits or the eligibility for Medicaid. On pensions, ideas include decreasing the benefits and increasing the contributions for current employees. A new pension system was approved last year, but it’s only for new employees, and there’s debate on whether the benefits for existing employees can legally be changed.
November 16, 2011
By Steve Saville
This is a point we touched on in a couple of earlier commentaries, but it is important enough to reiterate. The point is that the sovereign debt crisis began in Europe because the countries of the euro-zone (EZ) do not have captive central banks. A captive central bank is one that stands ready, willing and able to monetise all government debt should it become difficult or impossible to find other buyers for the debt.
A government with a captive central bank could always CHOOSE to directly default on its debt, but it will never be FORCED to do so because it will always have the option of selling more debt to the central bank in exchange for newly-created money. In other words, it will always have the option of going down the inflation path. The US federal government, for example, will never run short of dollars as long as the Fed exists. Earlier this year there was a brief period when it seemed as if the US government was in danger of running out of money, but this was just for show.
The US government’s debt situation is only marginally better than that of Italy’s government. Furthermore, Italy’s government has a much healthier balance sheet than Japan’s government. And yet, the 10-year bonds issued by Italy’s government currently yield more than 6%, while the 10-year bonds issued by the governments of the US and Japan yield 2.0% and 1.0%, respectively. The critical difference is that the governments of the US and Japan have their own central banks whereas the government of Italy shares a central bank with 16 other European governments. Of greatest relevance, Italy shares a central bank with inflation-shy Germany.
By way of further explanation we point out that Italy’s government could not attempt to inflate its way out of trouble without imposing a cost on German savers, and German savers, strangely enough, aren’t keen on donating some of their purchasing power to a bailout of Italy (or, to put it more aptly, to a bailout of the Italian government’s bondholders).
September 37, 2011
By: Chuck Mikolajczak
Stocks extended their rally on Tuesday, sparked by euro zone officials’ efforts to solidify the region’s rescue fund in an attempt to alleviate the debt crisis.
Major indexes rose for a third straight session, with the S&P 500 up more than 5 percent over the period, its largest three-day percentage gain since mid-August.
European officials considered various approaches to maximize the bailout fund and to recapitalize banks.
“Nothing has drastically changed. We get conversations around how we can get out of this mess — and those are good. We need those,” said Michael Sansoterra, portfolio manager of the RidgeWorth Large Cap Growth Fund in Atlanta, Georgia.
“But we’ve yet to see any concrete action. Actions speak louder than words, so we’ll flail about until we get some action.”
Stocks also got a boost as investors rebalanced their portfolios in the last days of the quarter. The wide gap in performance between equities and bonds, favoring government debt so far this quarter, may partly reverse.
Market volatility could remain as traders react to headlines and attempt to gauge the commitment of governments and institutions as they work to prevent a Greek default.
The Dow Jones industrial average gained 257.70 points, or 2.33 percent, to 11,301.56. The Standard & Poor’s 500 Index climbed 26.38 points, or 2.27 percent, to 1,189.33. The Nasdaq Composite Index advanced 53.49 points, or 2.13 percent, to 2,570.18.
The S&P materials sector was up 3.2 percent and energy stocks added 2.9 percent as commodity prices rallied on hopes Europe would avoid a recession. Mining and energy shares were the top performers among large-cap stocks.
Copper prices jumped more than 5 percent, helped by a drop in the dollar index, while U.S. crude futures jumped 4.3 percent.
Apple Inc, which is expected to unveil its new iPhone next week, edged up 0.6 percent to $405.52.
In the latest economic data, U.S. consumer confidence was little changed in September and a gauge of labor market conditions deteriorated to its worst since 1983.
The S&P/Case-Shiller survey found U.S. single-family home prices were unchanged in July on a seasonally adjusted basis but the housing market showed little sign of stabilizing.
September 15, 2011
By: Will Longbottom
The EU Commission today warned that economic growth in the eurozone will come to a near standstill by the end of the year due to the European debt crisis and turmoil in the financial markets.
In its latest economic forecast, the commission said the financial gloom is likely to persist until spring next year, but it would not result in a double dip recession.
Economic growth in the 17 euro countries will be only 0.1 per cent in the fourth quarter – down from 0.2 per cent in the third.
For the second half as a whole, the commission said it had revised down its prediction from its spring forecast by half a percentage point.
The worsening debt crisis and financial market volatility has dampened economic activity says the forecast.
Olli Rehn, the EU’s economic and monetary affairs commissioner, said: ‘The outlook for the European economy has deteriorated.
September 14, 2011
The Raw Story
By: Agence France-Presse
The eurozone debt crisis now threatening banks could destroy six decades of post-war European integration, top EU officials warned on Wednesday.
The dire warning that post World War II Europe risks disaster came shortly after Moody’s credit rating agency downgraded two French banks and as financial markets increasingly calculate the domino damage if Greece defaults.
“Europe is in danger,” Polish Finance Minister Jacek Rostowski, whose country currently chairs EU meetings, told the European Parliament in Strasbourg ahead of emergency talks between leaders from Germany, France and debt-hit Greece.
“If the eurozone breaks up, the European Union will not be able to survive,” Rostowski said of the currency bloc that comprises 17 of the 27 EU countries, a day before European finance ministers gather in Poland alongside US Treasury Secretary Timothy Geithner.
EU officials have warned repeatedly that Athens will not receive the next slice of aid, worth eight billion euros ($11.0 billion), unless it can persuade EU and IMF auditors, about to resume work, that it can overcome its deficit crisis.
At his most dramatic, Rostowski even warned that “war” could return to Europe if the crisis weakens fatally the EU, founded amid the rubble of World War II.
But his underlying message that the ties binding the EU are under intense strain was backed up European Commission head Jose Manuel Barroso.
The head of the EU executive described the crisis as “the most serious challenge of a generation. This is a fight… for the economic and political future of Europe.”
German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou are to discuss the Greek emergency at a teleconference scheduled for 1600 GMT on Wednesday.
Sarkozy will “do everything to save Greece,” government spokeswoman Valerie Pecresse said.
Analysts say that decision makers on financial markets are broadly working on an assumption that Greece will default to a substantial degree.
That would hit government creditors as well as private banks and other investors which accepted a partial loss on their investments in July under a yet-to-be completed second rescue for Greece.
“The question of whether or not Greece will default is pretty much solved for the financial markets,” said analysts at German lender Commerzbank, terming a “short-term” default “more or less unavoidable.”
However, EU economic affairs commissioner Olli Rehn maintained that “a default or exit of Greece from the eurozone would carry dramatic social, economic and political costs.”
He added: “Not only for Greece, but also for euro area member states, other EU states, as well as global partners.”
The stakes are rising by the day: after US President Barack Obama called for greater efforts in Europe, the BRICS grouping — Brazil, Russia, India, China and South Africa — said they would discuss possible aid to Europe over Greece next week.
The BRICS are meeting on September 22 in Washington on the sidelines of the annual meetings of the International Monetary Fund and World Bank.
IMF managing director Christine Lagarde described their plans as “an interesting development,” and added that she hoped bond-buying interventions from these emerging powers would be “large and not limited to certain states.”
Moody’s ratings agency downgraded two top French banks on Wednesday — Credit Agricole and Societe Generale — over their exposure to Greek sovereign debt. It left French banking major BNP Paribas on negative watch.
Shares in all three banks have plummeted in recent weeks, although stocks were mixed and the euro steadied in volatile trading on Wednesday.
Merkel fought on Tuesday to soothe alarm on markets over Greece, saying everything would be done to avoid an “uncontrolled insolvency” and stressing that the eurozone would remain intact.
That followed Obama saying the Greek conundrum would be a “significant topic” for the next G20 meeting in France.
Geithner is to attend exceptionally Friday’s meeting of EU finance ministers and central bankers.
Many analysts are concerned that Italy could be the next eurozone domino to fall, with enormous debt which stands at 120 percent of gross domestic product.
Its foreign minister, Franco Frattini, insists Rome is willing to give over control to a more federal Europe.
“Italy is ready to give up all sovereignty needed for a genuine European central government,” Frattini said.
Battling to prevent a debt crisis that has already claimed Greece, Portugal and Ireland, Silvio Berlusconi’s government hopes deputies will on Wednesday pass an austerity package to balance the books by 2013.
August 11th, 2011
The Economic Collapse
How far does the stock market have to go down before we officially call it a crash? The Dow is now down more than 2,000 points in just the last 14 trading days. So can we now call this “The Stock Market Crash of 2011″? Today the Dow was down 519 points. Yesterday, an announcement by the Federal Reserve indicating that the Fed would keep interest rates near zero until mid-2013 helped the Dow surge more than 400 points, but all of those gains were wiped out today. It turns out that the Federal Reserve was only able to stabilize the financial markets for a single day. Fears about the European sovereign debt crisis and the crumbling U.S. economy continue to dominate the marketplace. With each passing day, things are looking more and more like 2008 all over again. So what is going to happen if “The Stock Market Crash of 2011″ pushes the U.S. economy into “The Recession of 2012″?
Just like in 2008, bank stocks are being hit the hardest. That was true once again today. Bank of America was down more than 10 percent, Citigroup was down more than 10 percent, Morgan Stanley was down more than 9 percent and JPMorgan Chase was down more than 5 percent.
Bank of America stock is down almost 50 percent so far this year. Overall, the S&P financial sector is down more than 23 percent in 2011 so far.
How soon will it be before we start hearing of the need for more bailouts? After all, the “too big to fail” banks are even bigger now than they were in 2008.
All of this panic is causing the price of gold to reach unprecedented heights. Today, gold was over $1800 at one point. If the current panic continues for an extended period of time, there is no telling how high the price of gold may go.
In the United States, much of the focus has been on the fact that the U.S. government has lost its AAA credit rating, but the truth is that the European sovereign debt crisis is probably the biggest cause of the instability in world financial markets right now.
The European Central Bank has decided to start purchasing Italian and Spanish debt, and there have been rumors that French debt could be hit with a downgrade. Europe is a total financial basket case right now and unless dramatic action is taken things are going to get progressively worse.
Of course the U.S. is also certainly contributing greatly to this crisis. The federal government is on track to have a budget deficit that is over a trillion dollars for the third year in a row. The U.S national debt is a horrific nightmare, but our politicians keep putting off budget cuts.
The debt ceiling deal that was just reached basically does next to nothing to cut the budget before the next election. Unless the “Super Congress” does something dramatic, the only “budget cuts” we will see before the 2012 election will be 25 billion dollars in “savings” from spending increases that will be cancelled.
The modest spending cuts scheduled to go into effect beginning in 2013 will probably never materialize. Whenever the time comes to actually significantly cut the budget, our politicians always want to put it off for another time.
But in the end, debt is always going to have its day. Our politicians can try to kick the can down the road all they want, but eventually a day of reckoning is going to come.
In fact, if the U.S. and Europe had not piled up so much debt, we would not be facing all of the problems we are dealing with now.
Things could have been so much different.
But here we are.
The truth is that this debt crisis is just beginning. There is no magic potion that is going to make all of this debt suddenly disappear.
Most Americans have no idea how much financial pain is coming. We have been living way beyond our means for decades, and now we are going to start paying for it.
Now that long-term U.S. government debt has been downgraded, huge numbers of other securities are also going to be affected. In fact, according to a recent Bloomberg article, S&P has already been very busy slashing the ratings on hordes of municipal bonds….
August 5th, 2011
By: Sheryl Nance Nash
The stock-market roller coaster has been wild enough to make even the most stoic, stiff-necked investors queasy. After falling in 10 out of the last 11 trading sessions, the stock market plunged more than 500 points Thursday, making it the worst day for the Dow since Oct. 22, 2008, the day that marked the beginning of the global financial crisis. On Thursday, the index lost 4.3% — erasing all the gains for the year — to end at 11,384.
What’s stoking the volatility? The U.S. dodged the default bullet, but not everybody is impressed. “The negotiated debt-ceiling settlement is being seen by world’s financial markets as a smoke screen,” says James DiGeorgia, publisher of the Gold and Energy Advisor newsletter. “No matter how many times my fellow Republicans repeat the mantra that Washington has a spending problem, not a revenue problem, the truth is we cannot make a dent in the national debt unless we reduce spending and raise revenues.
“Without swift tax reform lowering corporate and individual rates in exchange for eliminating the special-interest patchwork of tax breaks and subsidies, we’re going to continue to see the national debt spiral higher and the dollar weaken.”
The fact remains that the U.S. economy is not just lackluster, but flirting with recession part deux.
“Continued weakness has shown in the recent economic numbers. The [gross domestic product] at 1.3% is at a recessionary level and not nearly what is necessary to reduce the compounding effect of our deficit,” says Jeff Sica, president and chief investment officer of Sica Wealth Management. “Downward revisions on economic numbers make lagging indicators even worse, suggesting what we always believed: we never left the recession.”
Unemployment remains high, even though it fell to 9.1% in July, from 9.2% in June. And even worse, job cuts have surged 60%, which will boost unemployment much higher, Sica says.
At least the U.S. isn’t alone. “The European economy is collapsing,” Sica says.
Europe is addressing its fiscal and monetary problems way too slowly, DiGeorgia says. Greece, Italy, Spain and Portugal are in seriously bad shape. Banks in Europe are on the hook, he says, as are many banks throughout the U.S. that have been playing interest-rate arbitrage, borrowing at a quarter of a percent and lending to Italy for 6% and Greece for 9%, for example.
“For anyone in the know, its a catastrophe in the making,” Sica says. “Bottom line: A financial crisis worse than the one that took place in 2008 and 2009 could ignite at any moment.” And because many Europeans take the month of August off, the first emergency meeting to address the euro and the danger isn’t scheduled until Sept. 6th, in France. Europe is a dark cloud getting darker by the day, Sica says.
Another concern is China, points out Matt Freund, senior vice president of investment portfolio management at USAA. What if the Chinese economy falters — a scenario that seems much more likely than it did as 2010 ended? Real estate and construction have become dominant sectors in China’s economy, but easy credit and speculative building may be creating a surplus in luxury apartments and other properties that sets the stage for a major correction.
A reversal of China’s economic fortunes could have wide-ranging effect. It could lower demand for industrial and construction equipment, dampening revenues for the companies that make it; weaken demand for commodities, which could pressure the emerging-market economies that depend on them; and reduce overseas profits for large multinational corporations as growth stalls around the world.
What are Investors to Do Now?
A confluence of such factors are creating plenty of uncertainty. Investors are wondering what in the world they can expect from the market for the rest of this year.
“Given the debt deal, the likelihood of another stimulus package is decreased,” says Steve Wood, chief market strategist for Russell Investments.
And that will slow the recovery, says John Liu, president of Firstrade, an online broker. “Without government help, the market is going to get worse before it gets better,” he says. “It doesn’t mean it won’t get better, it will just take longer.”
Sica predicts that the market will decline 15%-20% by the end of the summer. Given the economic headwinds, it’s hard to envision a return to a robust and steadily growing economy anytime soon.
Investors should expect the recovery to remain choppy and uncertain, marked by below-average economic growth and periodic setbacks — including the potential for another recession, Freund says.
For sure, the outlook suggests investors should tighten their seatbelts and brace themselves for one jolt after the other. How can you protect yourself? Here’s what the pros are suggesting:
Keep your cool
“Don’t panic, and keep your emotions in check,” says Thomas Yorke, a Covester model manager and managing director of Oceanic capital Management. “These movements should flush out some of the more leveraged players and provide an opportunity to make some selective buys at a significantly lower levels. In situations like this, most investors are more likely to sell their best performers and hold their worst — the trading in gold today being a prime example of that behavior. When you are ready to make some adjustments, make sure you pitch your poor performers and opt for the market leaders who apt to recover more quickly.”
This is the time to re-evaluate your portfolio and determine how diversified you truly are, Yorke advises. But keep in mind that the correlations between different asset classes will converge at times like these, when the market is moving downward so strongly, he says. “You should study what classes performed best and plan to increase your exposure to them when things start to return to normal,” he says. “Doing this during high-stress periods will more likely have you buying things too expensively and selling things too cheaply. Your goal should be to create the proper asset allocation and understand that
over time this more balanced approach will achieve a better ‘risk adjusted’ return and enable you to sleep better at night.”
If you are a long-term investor, take a deep breath and stay the course, says Mark Fissel, a certified financial planner with Beacon Hill Investment Advisory. From the standpoint of price-to-earnings ratios, or stock prices compared to company earnings, the stock market is the cheapest its been since 1990. So, yes, there’s great uncertainty, but that also means there’s an opportunity to make money. By the time the sky is blue, the market will have already gone up, Fissell says.
Fred Dickson, senior vice president and chief investment strategist with D.A. Davidson & Co., has similar advice to investors: Find the upside. Use the recent 10% market dip to invest in high-quality stocks that have a long history of increasing dividends, he says.
August 5th, 2011
By: The Associated Press
Global stock markets tumbled Friday amid fears the U.S. may be heading back into recession and Europe’s debt crisis is worsening. The sell-off follows the biggest one-day points decline on Wall Street since the 2008 financial crisis.
Oil extended sharp losses to fall below $85 a barrel amid expectations a slowing global economy will undermine demand for crude.
In Europe, major markets fell, adding to losses Thursday. London’s FTSE 100 declined 3.5 percent to 5,393.14 and Germany’s DAX shed 3.8 percent to 6,172.00. France’s CAC-40 lost 2.5 percent to 3,238.80.
Wall Street was set for a lower open with Dow futures down 0.8 percent at 11,280 after Thursday’s 512.76-point fall, the steepest point decline since Dec. 1, 2008. S&P 500 futures fell 0.6 percent to 1,191.7.
Japan’s Nikkei 225 stock average slid 3.7 percent to 9,299.88 and Hong Kong’s Hang Seng dived 4.3 percent to 20,946.14. China’s Shanghai Composite Index lost 2.2 percent to 2,626.42.
“Losses today have been indiscriminate,” said IG Markets strategist Ben Potter in a report. “The big question on everyone’s mind is what will happen across European and US markets tonight and will there be any form of emergency policy response?”
Investors fretted over the U.S. economic recovery ahead of Friday’s release of crucial jobs figures for July, which often set the tone in markets for a week or two.
Many were also rattled by the lack of agreement in Europe about debt and how to stabilize the euro, said Tom Kaan of Louis Capital Markets in Hong Kong. He said they were watching to see if the U.S. Federal Reserve launches a new stimulus effort.
“It’s a general fear that is clouding the markets at the moment,” Kaan said.
Elsewhere in Asia, South Korea’s Kospi sank 3.7 percent to 1,943.75 and Taiwan’s benchmark skidded 5.6 percent to 7,853.13. Australia’s benchmark dropped 4 percent to 4,105.40 and India’s Sensex was down 2.8 percent to 17,196.06.
In China, state-owned oil producer CNOOC Ltd. plunged 7.7 percent. China Construction Bank Ltd., one of the country’s four major state-owned banks, lost 2 percent and Ping An Insurance Ltd. declined 3.9 percent.
Investors, already fidgety after protracted political bargaining to raise the U.S. debt limit and worries that Italy and Spain are getting deeply embroiled in Europe’s debt crisis, searched for assets considered safer such as gold.
“Stocks will continue to dive, especially in Euroland, where profits are disappointing analysts’ estimates,” said Carl B. Weinberg of High Frequency Economics in a report.
In currency markets, the dollar edged down to 78.48 yen from late Thursday’s 79.02 and the euro gained to $1.4153 from $1.4130.
On Thursday, Japan’s government intervened in markets to weaken the yen against the dollar to support exporters. Finance Minister Yoshihiko Noda said authorities acted to protect the economic recovery following the March 11 earthquake and tsunami.
The dollar had fallen as low as 76.29 yen on Monday. It hit a record post-World War II low of 76.25 yen in the days following the March 11 earthquake and tsunami.
The intervention was coupled with monetary policy easing by the central bank’s board.
Japan’s moves came only a day after the Swiss National Bank intervened to slow a rise in the Swiss franc, another currency perceived as a save-haven at a time investors are fleeing risky assets such as shaky European government bonds.
Benchmark oil for September delivery was down $1.68 to $84.95 a barrel in electronic trading on the New York Mercantile Exchange. Crude tumbled $5.30 to settle at $86.63 on Thursday.
Today, Kevin responds to the skeptics who claim Your Wish Is Your Command is a scam and reveals his solution to America’s debt ceiling issues.
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