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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: fred woodall who wrote (89215)	7/30/2009 8:54:00 AM
From: ayn rand	1 Recommendation Respond to of 94695

ditto. i share the same sentiment. it will be crystal clear in retrospect, however i also have an open ear for discussion here. for now i have little conviction other than physical metals. .................. i find myself going round in circles trying to make logic prevail with so much manipulation and fraud. ... how to play the fraud and manipulation? it's not easy.

To: fred woodall who wrote (89215)	7/30/2009 10:45:05 AM
From: carranza2	6 Recommendations Respond to of 94695

I find that taking a look at the obvious is the best place to start. This is what I consider obvious: 1. In order to bail out the banks, a very large amount of debt was incurred by the federal government. 2. Medicare, Social Security and other unfunded entitlements must also be considered part of the debt structure. 3. We are witnessing the bursting of the largest credit bubble in the history of mankind. 4. As the debt is paid, delevered and/or devalued via the inflationary effect of the printing press, the value of the USD will inevitably go down, endangering the USD's status as the reserve currency. 5. Long term interest rates will rise as more Treasury obligations are issued to fund government operations. 6. As the repayment of debt takes up more and more of GDP, there will be less money to spend on education, infrastructure, national defense, research, etc. 7. As Bill Gross has recently pointed out, the days of 5% yearly GDP growth are over as some substantial amount of that 5% was an artifact of the credit bubble. If we are lucky, 3% GDP growth on a long term basis is a lot more realistic. 8. As 3% GDP growth, or some lesser number, becomes the norm, there will be higher unemployment on a long term basis because the employment capacity of the nation will be diminished. The same applies to the utilization of capital goods. In a word, we will inevitably downsize. 9. Now go back to points Nos. 1, 2, 3, 4 and 5 and ask yourself this question: "How is a downsized nation with a diminished GDP growth number, diminished industrial capacity and higher unemployment going to pay down the enormous amounts of debt we have incurred? Where is the money going to come from?" We will be hostages to debt. 10. We will deal with debt through default, an incredibly high taxation rate on high earners and corporations, as well as the stealth devaluation of the USD. None of this bodes well for us. 11. Combine all of this into a whole, and I think that it is obvious that our standard of living will go down and that we will suffer social tensions, perhaps even sporadic violence, as things get worse. 12. I blame the gangster banksters, a government that has spent like a drunken sailor while at the same time allowing a financial oligarchy to hold it hostage, an inept and incompetent central bank, a population that believes that entitlements (not merit) matter and globalization. 13. Like you, I am very pessimistic. The changes we need to make in this country are revolutionary; they are likely not to take place in time to arrest the downslope fall we appear to be headed into in the next 10-15 years. 14. I am making my investments based on this view of things, which I admit is saddening.

To: fred woodall who wrote (89215)	7/30/2009 2:46:56 PM
From: Elroy Jetson	1 Recommendation Read Replies (1) \| Respond to of 94695

I think we could easily look to Japan as a model: Real estate prices have declined each year for 16 years; Stock prices have traded in a wide range within a long-term decline; Treasuries have continued to yield little or nothing; In spite of massive quantitative easing, consumer price levels have remained flat; The suicide rate is among the highest in the world and thinly disguised homelessness continues to rise, as the grim years grin on. Large numbers of young people cannot find employment after education; In spite of "the Big Bang" banking, corporate and government accounting continues to be a game of make-believe we're just fine. This is the price paid to avoid a frank economic depression.

To: fred woodall who wrote (89215)	7/30/2009 3:07:25 PM
From: Elroy Jetson	1 Recommendation Read Replies (1) \| Respond to of 94695

An example of this is the "kick the can down the road" mentality with loan modifications. I have a friend who just received his "Home Affordable Loan Modification" proposal from Fannie Mae. treas.gov He bought his home in Palm Springs for $440k in 2005 with a 20% down-payment and a 5.4% 30 year fixed mortgage from the USAA Credit Union. They in turn sold this $350k mortgage to Fannie Mae. His home is now worth $200k, which is $150k less than the mortgage. If Fannie Mae foreclosed they would most likely lose $210k. Due the loss of his $150k income he stopped paying his mortgage two months ago. He was fortunate and starts a new job for $130k next week. The loan modification proposal lowers his mortgage rate to 2% for five years. After five years the rate rises 1% a year until it returns to the lower of the current rate or his old rate, so an additional partial subsidy for 4 years. If is not late on his payments more than twice over the five year period, Fannie Mae will reduce his loan balance by $5k. All told this is about $10k worth of concessions to induce him to start making mortgage payments again, so Fannie Mae could avoid a $210k loss. It's a great deal for them if he pays. They're hoping real estate prices turn around over the next eight years and this foreclosure problem simply fades away. The problem for the home owner, as I pointed out to him, is that it makes the payments affordable for him for 7 years, but he still ends up with $145k more mortgage than if he simply bought one of the many foreclosed homes on his street for $200k. Being age 63 he could take $200k from his SEP-IRA. Even if he took only $100k I'm sure someone would lend his $100k for a mortgage with 50% down, even with a foreclosure the month before. If he raids his SEP-IRA account and other savings to pay his current mortgage, he'd be left with perhaps only $80k in savings since the value of his stock portfolio took a swan dive. Even if he walks from his home and buys one down the street for cash, he would only have $230k in savings plus a paid for home. Not too glamorous, but better than the alternative. So I don't think he'll be taking the loan modification.