Where is our "safe haven" - Hint, it is not the US Government debt

Taken from the prudent bear article (The Perma-bear website)

As I rant and rave about the bailout package about the American debt fueled lifestyle being solved by injecting more debt into our lifestyle. This is basically trying to cure a heroin addict with giving the addict more heroin. This episode is about how it is "expected" for other nations to purchase our debt, especially when the return rate is at near zero percent as some people like to say the ultimate safe haven against the market fallout is to get into American bonds.

As usual, in order to make money in the markets is to SUCCESSFULLY anticipate where the next bull market is going to be. A general rule is that once a particular bull market is heated up, it's already too late to get in, and you may be better off to short that bull market.

For example:

• The 1970's Gold bull market
• The 1980's Hair Spray market
  
• The 1990's Dot-Com boom
• The 2000's Housing Market

In order to anticipate the next bull market, it would pay to do your homework and make your own decision to decide the next bull market.

As far as a safe haven goes, my bet is on gold and commodities. In a nutshell I am betting on massive inflation problems within the next couple years. Since President Obama wants to pull off his second term, he will administer a dose of economic heroin by implementing second new deal into the economy and at least that will provide jobs and money flow in the short to medium term.

The massive side effect on this is inflation due to the simple law of supply and demand. They are printing dollars with unsold government debt bonds and when other nations start cashing in to jump start their own economies, the United States of America will be holding the bag once again.

With that said, go do some homework on why gold and commodities are the ultimate anti-inflationary investment.

Monetizing the debt - Our balls are in the hands of the asia

This blog is based on an article by Merk Funds

Before you read on, you may want to watch this Peter Schiff analogy

In this analogy (on the later half of the video), he mentions a group of people are stranded on an island. The people are several Asians and a dumb-and-fat American. For their survival on the island, the people are assigned jobs. One Asian forages coconuts, another goes fishing, another hunts a wild pig and so on. The American's job is eating (consuming).

In compensation, the American is basically giving "IOU's" to the Asians for all their hard work. Over time, the Asians are stuck with a barrel full of IOU's and decides to figure out that the IOU's are not worth crap as they thought it once was (the Almighty dollar). In the end, the Asians figure out that they don't really need the American dead weight on the beach to consume their resources so they eventually dump the IOU's on the market and the laws of supply and demand take ensue.

In today's real world, the Asians are losing their appetite to buy US treasury bonds since their interest rate is a whopping 1-2% (or whatever the peanut of the day is). Common sense tells me that there are better investments elsewhere. People may say that everything is dependent on the dollar. What about China's 2 Trillion in dollar reserves? They are about to cash out to stimulate their own economy. So are many other nations. And when that happens, they will figure out that the dollar is not the king of the hill anymore.

My guess is that we will get out of this panic of 2008 mess, and we will have some good times again probably by the end of Obama's first term. He will probably be one of the better presidents in US history and I think he is likely to get a second term (especially if the RNC picks Sarah Palin). But all this will come at the cost of inflation where everyday shit will be more expensive and 4-dollar gas will be considered cheap. Maybe we would be doing the 5... 5-Dollar... 5-Dollar-a-gallon... song

Whoever inherits the White House in 2016 will be in for a time bomb while people are enjoying the bailout that the Fed pulled off. Who knows when the next load of shit will hit the fan, but it's never too early to build your ark...

Why we suck (My version) - and what we can do about it

This is my own version of explaining why we suck, and what we can do about it

Dr. Denis Leary has written a book on it, an intresting review can be found at here.

My explanation in four words. We are friggin lazy.

Here is why:

1. Many of our kids are too lazy to work themselves through college.

It's probably because of the mentality of America's culture that it is the parent's obligation to put the kids through college. I call bullshit on this and I am not paying a dime for my step-son's college. But I am helping out by allowing him to live rent-free at home as long as he needs while completing college. My mentality on this is that if you put your own skin in the program, you will pass.

Why is it many of those kids who get a free ride through their parents end up partying in school and barely pass their classes and end up being total schlubs in the workforce. I was watching the Dave Ramsey show the other day and he said that he would rather hire the person who worked their way through college over the person who has 6 degrees and never worked a day in their life. I would take it step further, I would take the military veteran over any of the three because the military veteran is more likely to have the discipline and knows to handle life's everyday bullshit.


2. China will be the next superpower of the world.

Newsflash: America's shit does stink like everyone else's shit, and the world does not revolve around America. If you want to find out, just travel around
the world. Since the typical American is too damn lazy to do the heavy lifting, they send the work overseas to do it, so all the Americans do is just consume and blow up the national debt. For example: the housing market, low savings rate, the inability of the typical American to manage their own money (I am surprised a financial analyst is actually a profession), and above all, the stupidity of the typical American to get excited about a 401K without analyzing how a 401K works.

*In summary all a 401K is a savings account that you cannot tap until you are 59 1/2 and don't pay taxes on it until you withdrawal from it. Your employer
may contribute if they wish, and it is typically in an account with hefty service fees that you don't see)

Why will China be the next superpower? First of all, they value education. It has been in their blood since the ancient proverb days where scholars are respected above all (instead of Oprah and Brangelina). You every hear about the stereotypes that some asian kid getting crap from their parents with a "A-" in class? All I got to say is that stereotypes are based on reality. So in a nutshell, there are about a Billion people in China and they are ready to make their presence.

Another reason why China will be the next superpower? Their economy. They are a nation of savers and their nation is in a state of growth. They are going
to spend a good 600 billion on their infrastructure as a economic stimulus. And what do we spend our bailout money on? Bear Stearns, AIG, Bank of America,
Citi, and who knows what else... At least China gets something in return for their investment that could pay off dividends.

So who is pulling the weight in our nation? My answer is besides the few Americans who do, it is the Asians. So share a success story of a recent immigrant who has been living in America since 2001. In 2001, she barely spoke a lick of english, in her early 20's, and barely had a clue on how things are in America. Now, she owns her business, owns a house that is PAID OFF, bought a lexus in CASH, speaks perfect english (probably better than some people who
speaks English as their first language), and has a large rainy day fund in the bank. Too add insult to injury, she still does not have a high school diploma.

Here is a link of Chinese educational attitudes

Madoff Victims broke one of the most fundamental rules in investing

The part that really baffles me on this Madoff scandal is that one of the fundamental rules in investing is that you need to:

D-I-V-E-R-S-I-F-Y

This is a SIMPLE move to protect your ass from losing everything. Now you are talking about multi-millionaires who lost everything because they did not diversify. Even if they would of had 50% of their holdings into Madoff, they still would be a millionaire.

The way I look at this is that I do my own homework and make my own investment decision. If I were to put some skin in the game and if I got a lot of it, I will definitely do my homework and know what the hell I am buying into. It just makes sense. Period. If I am too lazy or incompetent to do it, then I would be better sticking to a CD's, Savings, or some kind of low risk index fund.

Duh...

The time bomb is ticking louder...

Referenced from the following two articles:

China's M2 Growth accelerates
China is losing it's taste for US Debt

Basically what is going on is that China is now starting to loosen up bank reserve requirements so they can easily lend money to other people. This ends up the increase in the M2 money supply in China. This is somewhat an indirect way if bringing up inflation. Now as you know how a communist government operates, what the Big Daddy Panda Bear says goes.

On top of this, China is losing it's taste for US Treasury bonds as it becomes more obvious that they are not buying them. Using the simple law of supply and demand, there will be more supply which will end up jacking up the treasury bond rates at the cost of the "taxpayer". All the US government will eventually do is print more money so it will not default on the treasury bonds it issues. That's probably the only reason why it "technically" has the AAA rating.

Now what I think is going to happen is that the economy will eventually recover in the short time being (about the next 2-5 years), and while the good news is spread, people are borrowing money from the money tree, people start flipping houses, banks become "forced" to lend to sub-prime lenders with prime rates, money becomes unusually cheap (that's already happened) and the shoe-shine boy starts to run his own hedge fund.


During all the next round of "good times" Chinese (and Japanese) will quietly dump their treasury bonds and Americans will buy them because they are paying out 15% or more because no one wants a subprime bond. And then some dumbass commentator will say "Deficits Dont Matter" while holding a 20 Trillion debt load along with a 40 Trillion dollar unfunded "promise". The only option is to kill more trees to fire up the printing press. You will see lots of government sponsored commercials that will promote buying bonds because it is the "American" thing to do.

Sooner or later the bond bubble will eventually bust, China and Japan will be out of it and guess who is going to be left holding the bag?

To All My Valued Employees

Subject: A boss that tells it like it is, and a message that most people (and all sheep) don't want to understand !

To All My Valued Employees,

There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job. What does threaten your job however, is the changing political landscape in this country.

However, let me tell you some little tidbits of fact which might help you decide what is in your best interests.

First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a back story. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You've seen my big home at last years Christmas party. I'm sure; all these flashy icons of luxury conjure up some idealized thoughts about my life.

However, what you don't see is the back story.

I started this company 28 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living apartment was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.

My diet consisted of Ramen Pride noodles because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a defective transmission. I didn't have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business - hard work, discipline, and sacrifice.

Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom's for the latest hot fashion item, I was trolling through the discount store extracting any clothing item that didn't look like it was birthed in the 70's. My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.

So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don't. There is no "off" button for me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden - the nice house, the Mercedes, the vacations ... you never realize the back story and the sacrifices I've made.

Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn't. The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed a decade of my life for.

Yes, business ownership has is benefits but the price I've paid is steep and not without wounds.

Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:

I am being taxed to death and the government thinks I don't pay enough. I have state taxes. Federal taxes. Property taxes. Sales and use taxes. Payroll taxes. Workers compensation taxes. Unemployment taxes. Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my "stimulus" check was? Zero. Nada. Zilch.

The question I have is this: Who is stimulating the economy? Me, the guy who has provided 14 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check? Obviously, government feels the latter is the economic stimulus of this country.

The fact is, if I deducted (Read: Stole) 50% of your paycheck you'd quit and you wouldn't work here. I mean, why should you? That's nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy.

Here is what many of you don't understand ... to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.

When you have a comatose man on the verge of death, you don't defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the poor of America are the essential drivers of the American economic engine. Nothing could be further from the truth and this is the type of change you can keep.

So where am I going with all this?

It's quite simple.

If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child's future. Frankly, it isn't my problem any more.

Then, I will close this company down, move to another country, and retire. You see, I'm done. I'm done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.

So, if you lose your job, it won't be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the constitution, and will have changed its landscape forever. If that happens, you can find me sitting on a beach, retired, and with no employees to worry about ...

Signed,
Your boss

Auto workers will suspend a program that paid workers for no work, and let companies delay health-care payments

From the business week article from this link

Now you really got to be kidding me... According to the article, workers retain 85% of their salaries while laid off. Wow, I would love to retain 85% of my salary while laid off and I could go do a little moonlighting and really start double dipping (being double paid).

I personally own three Toyotas and a Honda. And I am damn proud of it. As what I said earlier, what needs to happen is for these companies to fail (or at least one of them) and whatever is left of the American auto makers will get their fecal matter together.

Well, I think they will eventually fail sooner or later. If they don't, they will become like incompetent government workers. Or government workers will be like incompetent auto workers. Or it will be like a marriage in hell. Who knows...