Daily Digest 1/31 - Countdown To The Collapse, Backyard Farming Gets Fancy
U.S. at Crucial Crossroads; Are We Becoming European? (Nervous Nelly)
Let’s take a look at another European nation that has had a large increase in government debt similar to America’s and with an even worse economic growth trajectory: France. While Sweden has a low government debt level and an essentially balanced budget, France has not been able to balance a single budget since 1981. This has resulted in the government debt ballooning to over 90% of GDP from 22% of GDP during this time period. (Source: “The Time-Bomb at the Heart of Europe,” The Economist, November 17, 2012, last accessed January 28, 2013.)
One of the tell-tale signs of a late-stage bubble is the ease with which tried-and-true business practices get tossed aside in favor of “innovations” that are really cons designed to maintain the deal flow. Day trading during the tech stock bubble and house flipping during the housing boom, for example, were hailed as genius at the time and revealed to be impossible (or at least too hard for amateurs) when those bubbles burst. Loading up on equities (private or public) or using leverage (inherently, unavoidably risky) to goose a portfolio of bonds simply creates a portfolio that behaves more like equities, which is to say far more erratically than bonds. Just like all go-long-the-bubble strategies, it’s brilliant while the markets are going the right way and catastrophic when they turn.
Critical Warning No. 7: Banks crash economy again (Nervous Nelly)
In short, “the broad cultural failure on Wall Street has arisen in part because disclosure rules encourage the banks to be purposefully opaque.” If “bank managers faced real consequences,” as Reagan did prosecuting over 3,000 bankers in the 1980s, we might finally see real change. Until then, “all of us will remain in the dark, neither understanding nor trusting the banks. And the rot will spread” until the system collapses as it did in 1929 and causes America’s Second Great Depression, forcing a return to Glass-Steagall.
How To Make A Million Dollars An Hour? (Arthur Robey)
A recent government report criticizes the US Treasury Department for approving salary raises for executives at the companies the taxpayers had to bail out. AIG, General Motors and Ally Financial - all of these corporate giants benefited from the taxpayer bailout and all of them got big boosts in pay packages. Les Leopold a journalist and author joins us to speak more on why are they allowed to enjoy big bonuses on the taxpayer's dime.
Markets Soar But the Retail Investor Is Not Back (Yet) (Arthur Robey)
The Wall Street Journal printed the following headline on its front page Wednesday: Individual Investors Help Drive Stock Surge. The article cites a report by mutual-fund tracker Lipper Inc. showing that $6.8 billion has flowed into stock mutual funds in just the first three weeks of this year.
It was an astounding discovery. The mountain was more than 150 miles from the nearest settlement, in a spot that had never been explored. The Soviet authorities had no records of anyone living in the district.
Get ready for some serious belt-tightening (westcoastjan)
Setting that money aside would mean the average Canadian would have to max out their registered retirement savings plan (RRSP) to the 18% limit, with a bit left over for a tax-free savings account (TFSA) or other investment.
But this kind of dramatic shift seems unlikely given historic under-use of RRSPs. The Bank of Montreal estimates the amount of unused RRSP room will reach $1-trillion by 2018, and a recent TD Canada Trust poll revealed 32% of Canadians in their forties have yet to open one of the tax-deferring retirement saving plans.
Countdown To The Collapse (adam)
There has now been a resumption of hostilities. The first shots were fired by the Japanese, where national elections were held in December. The victorious LDP party campaigned on a platform that, if elected, they would increase the powers of the Ministry of Finance to force the Bank of Japan into more aggressive monetary easing. The LDP also has voiced support for either a higher BoJ inflation target or a nominal GDP growth target.
China tells U.S. to slow money printing presses (Nervous Nelly)
Deutsche Bank co-chief executive Anshu Jain said the euro had appreciated partly because fears of a break-up of the currency area had receded, and more recently because of quantitative easing in the United States.
The U.S. Federal Reserve announced a third wave of asset purchases last month and has vowed to keep monetary policy exceptionally loose until unemployment falls below 6.5 percent in a drive to stimulate economic growth.
A report on Wednesday showed the U.S. economy unexpectedly contracted in the fourth quarter as inventory investment slowed and government spending plunged. Analysts said superstorm Sandy, which slammed into a large swath of the U.S. East Coast in late October, also disrupted the recovery.
US banks in stress-test ‘global shock’ (Dana T., Registration Required
On Monday, the Fed made public for the first time the assumptions the six banks had to use when stress-testing their portfolios.
They included a 42 per cent slide in Brazil’s main equity index and a fall in the price of triple A-rated corporate bonds from advanced economies equivalent to spreads widening by 168 basis points.
What Mr. Manning is calling for is a little more patience, and not just in politics. It’s a virtue that has been dying out in our high-speed culture, eroded by our reliance on the Internet, gnawed away at by our smartphones and tablets and by our busy lives. This shift toward impatience has made it harder to wait in a lengthy coffee shop line, easier to lose our cool and more prone to making mistakes that could have lasting effects.
The mining industry’s merger and acquisition missteps have been compounded by higher costs for energy, labor and construction materials. That has trimmed profits, sapped investor appetite for further deals and spurred calls for greater returns.
Why Buy Gold? (GE Christenson)
The price of gold in US dollars since the year 2001 has been strongly correlated with the ever-increasing official national debt of the United States. Read $4,000 Gold! Yes, But When? Does anyone believe that the national debt will decrease or even remain constant over the next several years? NO! The national debt will increase even more rapidly over the next four years and so will the price of gold. Skeptical? Then look at the chart of national debt and the nearly parallel price of gold. Still skeptical? Do you remember gasoline selling for less than $.20 per gallon and gold selling for about $40? They have increased in price because there are currently many more dollars in circulation than in the 1960s – hence, it takes more dollars to buy an ounce of gold, a gallon of gasoline, a loaf of bread, a cup of coffee, or a fighter jet.
As China Builds, Cambodia's Forests Fall (Nervous Nelly)
"It's just like in the United States in the 1960s, when every single redwood tree was a target for illegal logger[s]," says Suwanna Gauntlett, head of the Phnom Penh office of Wildlife Alliance. "It's the same thing in Cambodia. It's a natural resource worth a lot of money."
Backyard Farming Gets Fancy (adam)
What would posesses a person to buy a $1,200 chicken coop, or a $45 white-enamel pail? Outdoorsy activities are getting a high-end makeover and consumers are flocking to the trend. WSJ's Anne-Marie Chaker and Terrain Brand President Wendy McDevitt join Lunch Break with details.
he meme of the moment remains China's 'rotation' to urbanization as the new growth engine, but as SocGen's Wei Yao notes, while this shift from farmers to manufacturers has raised productivity, urban population growth is set to decelerate rapidly in the current decade. Yao comments that the impact of urbanization has been "misunderstood and overstated by the market" as it is now official that China’s working-age population has peaked and is starting to decline. China’s National Bureau Statistics announced that the share of population aged between 15 and 60 years old declined for the first time in 2012 by 0.6ppt to 69.2%.
According to a Huffington Post translation of an earlier report in the Chinese-language Beijing Youth Daily, Chen has been selling his canned air since September 2012. At the time, Chen told reporters that sales of the air product had been relatively good, with more than $800 worth of canned air being sold in Beijing on the first day alone.
Heavy Rains in Australia Leave 4 Dead (jdargis)
The flooding was comparable in scale to the catastrophic floods of 2011, which left at least 38 people dead and caused about $30 billion in damage in Queensland. The four deaths reported in the latest flooding have all been in Queensland.
The state’s premier, Campbell Newman, visited Bundaberg on Tuesday, where he warned that the rapidly moving floodwaters were threatening to carry away entire buildings.
Gold & Silver
Provided daily by the Peak Prosperity Gold & Silver Group
Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."