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The Destruction of your Investment and Prosperity is at Risk if you do not Act.
The collapse of the U.S will blow up the Global Financial world.
Let me emphasize that I do not relish in delivering negative news - on the contrary, I would be much happier telling you that the economy was truly reviving. That, however, is just not the way it is.
Instead we have a large number of officials, media, analysts, etc. who are deliberately misleading the public in their assertions that everything is "Back to normal."
Not only is this morally reprehensible in light of reality, it is luring naive investors back into the market just as it is about to plunge again.
Who am I? Lyn Summers - a trader that has been researching and trading the Market for 10 years.
I was right when I screamed a 'Bear Market' in 2007, and I am right again.
"Nothing has changed it's about to get worse"
There seems to be very little conscience left in the investment world, if there ever was any. America's bankruptcy is evident in its publicly funded $23 trillion bailout of Wall Street and the City of London.
Five million jobs have been lost under President Obama. 32 million Americans (over 20 % of the population) are now officially unemployed, forced to work part time, or have simply dropped out of the labour force in the last 21 months.
48 out of 50 States are, by their own figures bankrupt, and unlike the Federal Reserve, cannot print their own money.
A commercial mortgage crisis is now unfolding, which is far larger even than the still ongoing Sub-Prime mortgage crisis. U.S Banks continue to fail at a rate of 10 per month - 109 have collapsed in the last 12 months. The point is, why there is so little public knowledge on the Global situation, the real economy, and that of the stock market? More specifically, the lack of information about the stocks of the companies that caused most of the pain that is felt Globally.
I believe that so many people have been affected and demoralized by what has happened to them over the last year or so, that they have become almost catatonic. They have had to focus as never before on the reality of survival in an economic climate that has seen unprecedented declines in net worth.
Many are unable to focus on the perverse activities of their regulators, financial executives, etc. because they are presently focused on surviving the maelstrom that has been unleashed.
Many are struggling to pay their bills, and most have found the previous facilities they relied upon, such as easy credit and virtually unlimited employment opportunities, have disappeared.
Although they should be furious to note that the major banks and investment banks that caused most of their problems are now flourishing while they flounder, they just don't have the energy or time to consider these facts. Obviously, this is not lost on the culprits.
Source: Bureau of Labor Statistics
When the most recent US employment data was released on October 2 for the month of September, you may recall that 263,000 jobs were lost in the nonfarm area.
At first, being that this was worse than expected, the market reaction was negative. But very soon the unbelievable spin that was put on the data somehow convinced most that this was actually a good report. Nothing could be further from the truth.
When you look at the details of the report, it is clear that not since the Great Depression era has the labour market been in worse shape.
More Americans are unemployed now than ever before. The fact that "only" 263,000 jobs were lost in September compared to the 700,000 jobs lost per month in the first quarter of the year (as pointed out by Christina Romer, Chair of the White House Council of Economic Advisors, on Bloomberg TV shortly after the release) is irrelevant.
The economy needs to create 200,000 jobs per month just to break even with respect to population growth.
So, in September, we still saw a deficit of almost one half million jobs compared to what is needed to break even. This is not a pretty picture. But conditions are actually much worse than the first blush view.
If you look at the above table, you will see that in September, as shown, the unemployment rate stood at 9.8 percent.
That is the number most focus on and as bad as it is, it does not tell the real story. If you look down the table to where I have drawn the arrow, you will note that the "real" unemployment rate is actually 17 percent!
This number more properly accounts for all those who are not fully employed or have simply stopped looking for work.
Consider this sad fact: nearly one in five Americans who would work are either out of work or employed far below their need and desire.
Yet, what do the economists, analysts, administration officials and the media say?
Of course, "things are getting better." They had better wake up, start telling the truth and taking appropriate action, or it will be too late to reverse this disastrous course.
Much has been said by many officials that the key to job creation is through small business. In truth, the small enterprises in the country are the real engine of job growth. Yet, due to the fact that money is not getting to these employers through the normal banking channels, they have not been able to expand and in many cases have been forced to cut back their employee levels substantially. This is really one of the most outrageous consequences of the current approach to "saving the world" as engineered by the Federal Reserve, Treasury Department, and the current and most recent Administrations.
While trillions of dollars have been funnelled into the banking system, all this has done is create a situation where the chosen banks have been engorged with taxpayer money and have used the proceeds to grow even bigger, continue their previous habits of bonuses and risk-taking, and generally carry on as if nothing at all happened over the last year.
As you can clearly see in the above chart, lending activity to businesses, which are the backbone of the American economy, has fallen off a cliff since the financial crisis began.
Does anyone really think that a true economic recovery can occur without money getting into the hands of businesses and the American consumer? I don't think anyone with any knowledge of the system believes this.
There seems to be no other logical explanation as to why the Federal Reserve and the Treasury Department in particular continue to propagate this obviously false notion of recovery based on making the banks whole, other than it is the financial community that is really pulling the strings.
We know that the Federal Reserve is in reality controlled by its member banks and is not subject to revealing the truth or answering to anyone.
For example, in the recent report by the Inspector General for the Troubled Asset Relief Program (TARP), it was noted that the findings indicated that government officials knowingly misled the public regarding the health of the banks receiving government aid.
Specifically, it was noted how former Treasury Secretary Henry Paulson described nine large institutions as "healthy" when, in internal meetings, senior government officials indicated they were well aware that these institutions were not healthy.
The report stated that "government officials should be particularly careful, even in times of crisis, of describing their actions, and the rationale for such actions, in an accurate manner." In effect, the report chastises Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke, and FDIC Chair Sheila Bair for misleading the public regarding the bailouts in October of last year.
Market Watch, part of the Wall Street Journal's Digital Network, stated that "the lies told about TARP and the refusal of the Fed to this day to provide any details about its other bailout programs have fuelled universal public scepticism about the government's credibility.
And with the Treasury Secretary personally involved in the outcome---Paulson was the former chairman of Goldman Sachs---few people trust the government to put the public's interests above those of Wall Street.
The Federal Reserve was granted a stay in a lawsuit brought by Bloomberg seeking to find out the details of monies given to banks and others.
The Fed claims its need for privacy and independence; I say that hiding what it is doing with trillions of our dollars is outrageous. Handing money to the same entities that caused this mess, expecting that will solve the problems they created, is the epitome of insanity. Yet, that is the course the Fed has taken.
The current Treasury Secretary, Tim Geithner, also is a cause for concern. It has been discovered, thanks to the Wall Street Journal's Freedom of Information request, that Geithner provided a virtual open door to some of the institutions that were at the very heart of the economic collapse.
For example, the CEO of Goldman Sachs conversed by phone or met with Geithner some 15 times during the crisis. Something definitely did not smell right in the reasoning Hank Paulson put forth to urge the adoption of his bailout plan.
You will remember, for example, that AIG was given billions of taxpayer dollars, $10 billion of which later flowed to Goldman (saving the firm) as part of its role as counterparty to AIG trades.
Many other top executives of the financial community also had frequent contact with Geithner over the last number of months. The Treasury Department says this is normal; to me, it is pretty clear evidence of collusion to drive the stock market higher (by means of the Fed handing the financial companies trillions of dollars---a lot of which found its way into the stock market) so that the public could be somewhat mollified with some minor recovery of their decimated net worth.
The argument that the stock market is rallying because earnings are about to explode is pure myth. The reason for the stock market rally is quite clear: typically a bear market rebound will take hold after an initial collapse. The market still has not rallied as much as it did in 1930 after the crash of 1929.
The recent continuation of the rally, in light of further deterioration in the economy, and the fact that earnings are only higher than expected in most cases due to cost cutting---not improved conditions---clearly indicates manipulation in the market to create the illusion of recovery.
Remember, it was the same Tim Geithner who publicly stated that they "flooded the market with liquidity" during the bank capital raising period after the stress tests in order to "insure their capital raising efforts would be successful."
If all of this misrepresentation, manipulation and intrusion into the free market could really accomplish some good outcome for the country as a whole, it could be argued, I suppose, that it may be justifiable. (I would never argue such a thing though, because I believe the best approach is always telling the truth, allowing the market to determine value and decide which entities should survive).
So far, after a year of concealment and wastefulness, no good outcome has been produced other than a rise in the stock market, and in particular in the stocks of the financial companies that caused the problems in the first place
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Look at another representation of the effects of this "rescue" with respect to the real economy.
Never in modern history have we seen such a collapse in consumer spending patterns. Of course, most often the reports will cheerily compare one month to its previous month, in order to paint a better picture. But when you look at the falloff in spending from preceding years, the picture is pretty scary. Yet that is reality and that is why, with 70 percent of the economy driven by consumer spending, they had better find a way to get money into the hands of the consumer soon or the Great Depression might end up looking like a picnic in comparison.
Despite the spin that is constantly put on almost all data and the proclamations that the recession is over, this downturn is gaining momentum, not losing it.
The distraction of the stock market rally will not be enough for individuals to start spending again, especially when they are losing jobs in record numbers and unable to obtain credit or easily refinance their homes. The problems are not confined to the lower echelons of society either. Observe the following chart of foreclosure activity.
 As you can see, foreclosure activity is rising sharply in the highest priced real estate. While the bottom tier is declining, as much of the subprime property inventory has been foreclosed on, the more expensive properties are falling into foreclosure at a very accelerated pace.
These are the pricier properties which carry very large mortgages and will create massive losses for banks and other lenders. Combined with the coming wave of commercial defaults, continuing lower tier mortgage write-offs, and this current acceleration in prime mortgage defaults, the next wave of losses in the financial system will likely prove to be crippling.
This Is Not 2003
I continue to hear comparisons made between the rebound that began in March of this year and the one that started in March of 2003, which eventually led to a new nominal high in the DJIA. Although we expected a bear market rally to begin, and indeed it did begin in March and has continued, the conditions now are nothing like they were in 2003.
For one thing, the consumer had the ability in the previous period to borrow to spend. The incredible lending practices in the mid-2000's, set the stage for the collapse we are going through now.
During the period from 2003 to 2007, the consumer could still refinance their mortgage with rising home values and spend their way to oblivion. Credit lines on credit cards were generous, interest rates were relatively low, and credit in general was easy to get. That is why debt ballooned to record levels. But, unfortunately for many, the fallout has been dramatic and unprecedented.
The environment now is so much different than it was in 2003 and for the following few years that there really is no similarity at all, other than rising stock prices.
In 2003, the stock market began to rally because of massive spending on the war in Iraq, and the aforementioned easy money policy of the Fed, which allowed for a lot of liquidity in the system. This resulted in robust consumer spending, which in turn translated into profits for many companies and justifiably rising stock prices (at least based on the spending - but the time bomb of rising debt [and unserviceable debt] was still ticking away).
Now we are in the heart of earnings season and everything possible is being done to put a positive spin on the results, even though the actual results are anything but good. In this quarter and the last, virtually all companies that met or beat their earnings estimates did so via cost cutting - not improved revenues. The spin masters claim earnings will rebound as the economy improves, but I ask the question: what if the economy gets worse? I believe that is not only obvious but inevitable.
In actual fact, Standard and Poors predicts average earnings to be down 25 percent this quarter from a year ago, after having declined 27 percent in the first quarter from the previous year. How these results could be spun as being indicative of an earnings recovery is beyond me. But for those whose ulterior motives always outweigh the telling of the truth, this has unfortunately become just standard practice.
One of the most glaring divergences that has appeared in the bear market rebound from March, and one that virtually assures us that this is nothing more than a normal bear market rally, assisted by manipulation, is the dramatic drop-off in volume that has accompanied the rally.
As you can see, from March as prices moved higher in the DJIA, volume consistently weakened and lately has been anaemic. This is not a sign of a healthy market and tells us the rally is close to being over, if not already.
Add to this evidence the massive amount of insider selling that is currently taking place ,and you understand just how dangerous the stock market really is right now. If insiders that run the companies are dumping their shares in droves, is it likely the rebound will continue? Only if earnings continue to improve and this justifies prices. I don't think so. Coupled with the other continued evidences of economic weakness, the decline should be very dramatic.
Way Beyond Coincidence!
If you consider the many similarities that exist between the environment now and that of 1930 - 1932, you cannot help but ask why the outcome would not be the same.
I have pointed out for example, the eerie parallels between the two eras that include, among other things: a bubble that collapsed leading to a massive contraction in liquidity, a dramatic decline in net worth; a massive stock market decline followed by a huge rally that led most to believe the worst was over; interventions into the market to insure it would rise, giving the impression everything was returning to normal after the stock collapse (in the 1930 era, some of the major banks combined to buy up stocks in order to provide a floor for prices and try to push them higher), burgeoning trade wars that were sparked by declining economies around the world (every country, in light of declining activity, wants to preserve its own status quo), deflationary forces unleashed by the bursting of investment/debt bubbles and inept responses by regulators and others which actually exacerbated the problems.
I could go on and on, but I think the point is clear: there are too many similarities to just slough them off as being irrelevant.
Yet, as illustrative about our likely near term outcome as the past era is, we must ask a further question: if consumers now are in much worse condition, financially, than they were in the 1930's (and they certainly are because of the massive debt load the average American now carries), and if the fiscal condition of the United States is much worse now than then (it certainly is since the U.S. was a creditor nation back then while now it is the largest debtor nation the world has ever seen), could not the outcome this time around be even worse than what happened in the 1930's? Unfortunately, I believe the answer is yes, it could be much worse.
Just observe the following chart of the DJIA during the previous period to remind yourself of how dramatically stocks can fall once the illusion of recovery is pierced.
As I have pointed out in the past, the decline that began after the model would have issued a deflationary spiral signal in early 1930 far exceeded the initial decline which occurred during the famous crash of 1929.
In fact, as you can see, after a 50 percent retracement rebound from November 1929 to point #2 on the graph, the market began a virtual freefall after the emergence of the deflationary spiral signal in 1930. Prices essentially went straight down, finally bottoming in July 1932 at a level of 40 on the index (#3). This represents an overall decline of 90 percent from the all-time high in the DJIA.
What level would that translate to in the current timeframe? Well, from the all time high two years ago, such a percentage decline would see the DJIA bottoming at a level of around 1490!
Wait a minute, you may say, that is just not possible. Oh really, and why not?
When Alan Greenspan, Ben Bernanke, the Administrations of the last two presidents, the heads of all the major brokerages and banks, and the talking heads on the various news programs all decried the possibility of a meltdown such as we have recently seen and which I predicted back in 2007 and onward, why do you think the same gang will be correct in their forecast that the storm is over and that everything is back to normal? No, it would be very wise to look at history as a guide and not rely on those who have very obvious special interests at heart.
Again I will be taking advantage to profit from this
I know it is difficult to maintain one's point of view when virtually everyone else is saying the opposite.Yet without question that is the way major gains are made.
When nobody saw it coming in 2008 we were prepared and profited from the fall by 1000 per cent.
You can never succeed, especially at major turning points, by holding the same view as everyone else.
I hope you will continue to consider this most important fact in the investment world and prosper with us in this coming opportunity. Remember, we did not create this coming financial calamity, but we can, with foresight and patience, benefit from it and need not feel remorse about doing so.
See you on the next Webinar!
Managing Director
StockCourse Pty Ltd
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