Tuesday, April 21, 2009

You can’t polish a turd!

I want to firmly state that I do not believe any of the Main Street Media hype that this rally in anything more than a suckers rally bought with about by massive propaganda and manufactured results. This is just one more attempt to fleece the sheeple before the hammer comes down and crushes the markets again. Nouriel Roubini shares my belief that this is a suckers rally; believe Jim Cramer if you want but Roubini has actually been right this decade, Cramer the Bear Stearns cheerleader, not so much.

Sure a few banks are claiming profit but at what cost to the public who’s picking up the bail out costs of TARP and other plans designed to benefit the guilty. You also have to wonder how many of these results are going to be restated later or are simply hiding the real numbers until years end.

It seems daily that the Government creates more schemes to let the biggest, baddest and guiltiest of the banks sell their toxic assets to the either the government directly or to other investors subsidised by the government. The end result? the Government moves that much closer to default or hyper inflation, the public moves that much closer to tax revolt or downright insurrection and the big banks get a “get out of jail free card” all while taking their mega wages and watching for opportunities to prey on small banks consolidating yet more market share and power.

So what is really happening?

1. Have defaults on houses stopped or even slowed? NO

2. Are defaults on credit cards increasing? Yes

3. Is the Employment situation improving? No

4. Won’t number 3 make 1 and 2 worse? Yes

5. Can stimulus create jobs faster than they are destroyed? No

6. Are Government revenues down at all levels? Yes

7. Can towns, cities or states balance their books any time soon? No

8. Are government debt sales fully subscribed? No

9. Are Governments buying their own debt and creating money? Yes

So what do the financial reporters see in this mess that makes them claim the worst is over? Oh yes, a memo from above telling them what’s this week truth should be, encouraging you to invest more money in those things they want to short next week. Don’t fall for it; follow the basic truths of money.

You cannot indefinitely spend more than you have.

No government can expect to meet obligations of 5-6X GDP with a plan that increases spending and borrowing while revenues fall, unless they resort to destroying their own currency. With GDP and revenues falling and spending increasing obligations could reach 7-8x GDP in no time at all. The point of no return is here or fast approaching and the failure of the U.S. in particular and the west in general is no longer just possible but probable

When governments destroy their own currency you must retreat to physical assets that will maintain their value over time. Since housing prices are still falling I will maintain as I have for 3 years that silver, gold, and productive land are the three best long term assets. If you must delve into equities metals, energy and food still represent items of limited supply trying to contend to an ever growing population.