Working Man
columnist: Tim Gandee

Topic: Economics
Are You Still Trying to Save US Dollars? Really?

Are you still listening to your broker or 401(k)/IRA money managers? Do you still take Jim Cramer's stock suggestions on CNBC as sound investment advice? Have you done any research on what stocks these 401(k) and IRA plans are buying for your "retirement"? What about the stocks you currently own?

For banking products, did you know that on January 27 of this year the SEC implemented new rules on Money Market Accounts that restrict withdrawals? Were you aware that the U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into fraudulent government debt backed annuities? Has your money manager brought any of these items to your attention?

Here are some facts you should consider before you keep paying into this ponzi scheme of paper wealth. The total market cap of US stocks has been pushed up $6+ trillion since mid-March and the traditional investors are not a part of this increase of the market. According to TrimTabs Investment Research, ZeroHedge financial analysts, and financial analyst Max Keiser - Corporate America has been a huge net seller of equities. Their shotgun selling of shares has grown to $133 billion worth of shares sold since the start of April and coincides with large-scale insider selling from executives.

Retail investors have hardly bought any U.S. equities. U.S. equity funds and ETFs have received just $17 billion since the start of April from retail investors. Many doubt retail investors were big direct purchases of equities and this can be confirmed by international mutual fund changes. International mutual fund increases over the past 12 months were directly related to US domestic retail investors, so it is pretty clear where US retail investors have headed with their money. Market volatility in this decade for equities has been the highest since the 1930s, and there is no evidence of retail investors piling into individual stocks. No amount of cute commercials with babies trading stocks online will change that any time soon. Also, retail investor sentiment has been mostly neutral since the rally began.

Foreign investors have provided some buying power purchasing $109 billion in U.S. stocks from April through October, but foreign purchases slowed in November and December because the U.S. dollar was weakening. Weakening of course being a relative term as all currencies are sinking and most all fiat currencies are based on the fiat currency of the Dollar.

There is no way to track what hedge funds do real time and they may well have shifted some assets into U.S. equities, but that amount pales in comparison to the increase of $6+ trillion in the market experienced so far. Their buying power has to be small because they posted sales of equities amounting $12 billion from April through November. All the evidence indicates that pension funds have not shifted heavily into equities and have not moved more than about $100 billion from bonds and cash into U.S. equities since the rally began, according to TrimTabs. If they are not buying, then who the hell is? I know I am not.

From a technical standpoint, price/earnings ratios for most US equities are trading at multiples substantially higher than actual profits. The only profits many companies listed on the US exchanges have are directly because of massive operational cost cuts and accounting changes that skew reality of these financially insolvent companies. The manufacturing surge that was experienced over the last few months was primarily because of inventory replenishment, so don't expect much more from manufacturing as a whole. The government owns some of the biggest money losers in our economy (GM, Fannie, Freddie, etc.) and we the people will be responsible for all appropriate loses while they remain on tax-funded life-support.

Accounting rules have changed for financial institutions, so now insolvent banks can list off-budget liabilities as assets. Any true assets held are inflated, as government support is the only reason that many of these assets are even performing. Their share prices don't reflect reality by any stretch and could simply be considered fraudulent insanity. The proven captive regulators that turn blind eyes to this fraud are skewing the entire financial picture of publicly traded companies. Who could investigate equities with any sound financial analysis and true due diligence if the entire financial picture is not being accurately represented because of accounting changes?

Much evidence supports the fact that the stock market is overtly being manipulated and supported in volume and price by algorithm based high frequency trading. The whole system rests on a festering pile of synthetic debt-based derivatives. $70 trillion in derivatives are left to unwind from the heydays of banker fraud over the Bush administration and much of the money these banks stole during the 2008 Congressional extortion have been used to create more synthetic debt instruments over the current Obama administration. These wretched piles of financial stench will again require more funds from the people of the US, as evident through the new stimulus and jobs plans being pushed out by Congress and the President.

Throwing money at these equity scams is a practice of ignorance and blind faith in your money managers or financial talking heads on TV. Your blindly trusted money managers could not have possibly fully understood the financial situations of these companies, as these companies don't have to play by the same rules of reality regarding their insolvency.

Even if the US equity market reflected some sort of sanity or true reality more financial bombs are set to detonate. We have the current Alt-A and Option Only home mortgage market resetting at a pace and dollar volume beyond what we experienced in sub prime. The Federal Reserve is supposed to stop its purchasing of mortgage backed securities this month, just $45 Billion left to spend, and their balance sheet has ballooned to $2.27 Trillion. Many homeowners owe significantly more than their house is worth and realize they will never recoup their investments. Strategic mortgage default is becoming as common a buzzword as IPO used to be. Banks are also sitting on millions of foreclosed homes, as they don't want to flood the market and risk having to mark to market their non-performing loans again. Investing in a house is a misnomer indeed based on these facts alone, unless of course investing means losing each mortgage payment made.

Along with the mortgage backed securities' bomb fuse being lit, commercial real estate is cranking up the defaults as many of these loans were extended to entities that relied on constant and frivolous debt-fueled binge spending for them to be viable entities. Wall Street has created derivatives to hedge their bet against eventual default of commercial and home mortgage backed securities, as well as derivatives tied to unsecured credit card debt, signature loans, student loans, and every other debt out there in the system. They have insurance on the losses they know will be incurred. Do you?

True U6 unemployment is over 17% and layoffs are not slowing down. Emergency unemployment claims, those who go beyond the States currently bankrupt unemployment funds, are skyrocketing and the window to file for extended unemployment benefits has just been closed down for the time being. This will increase the number of foreclosures substantially and destroy any leftover mortgage equity for the few that can and do hold onto their home. Fannie and Freddie just stated over the weekend that they will not prop up...I mean buy interest only mortgage backed securities, so the government knows its coming. Do you know it's coming? Are you still buying equities or saving your money with the government or with banks?

The entire paper money/stock system that we are forced to rely upon in the US is showing itself as the ponzi scheme that it is and a currency crises seems eminent if the current actions of the market and government keep going in the trend that they are. Hundreds of banks are insolvent as is the FDIC. The off-budget cost for our current wars, $1 Trillion a year for 700 military bases throughout the world, upcoming unfunded liabilities for Medicare and Social Security, and $23.7 Trillion in money/credit/guarantees for the Wall Street banks put our government liabilities at well over $100Trillion. All the while, Congress and the President are finding new and ingenious ways to promise more for the people in one hand, while taking the savings of those the people with the other. The path of our country is unsustainable as is the overall fractional reserve nature of banking and debt. In fact, the entire domestic equity market seems to be following that same path of insolvency and eventual decline. So I ask again politely, are you still buying US stocks? Still "saving" money in a bank? Still buying Government Bonds? Really?
There is an option available to retain whatever wealth you have left over from the recent pillaging of the Congress, Wall Street, and the President. The stock junkies that keep pushing for your excess reserves to be stuffed in stocks don't want you to know about it as it takes away their ability to get as many transaction fees as they can. It's gold. Remember the thing that used to back the US Dollar?

China is buying gold along with encouraging their citizens to purchase. India is buying gold and central banks have shifted to buying gold as opposed to selling. The OPEC nations want to fund oil transactions in currencies other than US Federal Reserve Notes and the IMF is calling for a new world reserve currency. Europe is a mess with Greece and as the Euro is being threatened as Portugal, Italy, Ireland, and Spain are also in the same mess as Greece. Iceland is fighting the bankers and Dubai is still a festering mess of debt as well.

Currencies of the world are backed by the Dollar. The Dollar is backed by government debt and nothing more. No more gold. This cannot continue and the other central banks of the world realize this. They are shifting from being net sellers of gold to net purchasers of gold. The Dollar will end and actually has as a matter of fact. We are watching it happen before our eyes. The post 1971 Nixon irredeemable Bretton Woods Dollar world reserve currency system has collapsed. Does your money manager know this? Is he/she still pushing your life earnings into dollar denominated assets?

I don't have any money in the stock market, I have no dollars in any saving accounts at any banks as manipulated and artificial interest rates by the Federal Reserve discourage any incentive to save. Returns for saving with CDs or savings account do not keep up with inflation, so "saving" money in those instruments is not saving at all. I use my Federal Reserve Notes for regular transactions through my checking account and focus on a cash only basis when possible, but the evidence is indicative of the government decreed fiat/paper money system in its death throes. It's just a question of how long it takes for something else to take its place and what specifically will take its place.

Further evidence that gold is the path to travel is shown by looking at the Dow priced in gold. The Dow is about is about 9 ounces of gold now and the Dow has been declining in value, when compared to gold, since 2000. The period of 2000 to today coincides with gold's current bull run. The Dow is trending lower against gold and looks as if it will trade at one ounce of gold here in the future. How far in the future and what that dollar amount will be is of anyone's guess. I will buy physical gold over paper shares of stock or paper dollars any day.

I was never a gold bug, I would have been considered a paper bug as I relied on the advice of my employer's money managers. In fact, I never paid attention to much of anything going around me unless it involved the bread and circuses that America offers. I base the purchase of gold on a fundamental understanding that Wall Street cannot produce more gold and Washington cannot print it. Realize that it has only been since 1971 where all currencies were based on nothing other the US Dollar and the Dollar being based on nothing but debt. Prior to this past 39 years gold was considered money for over 5,000 years.

Technically speaking, from a trading perspective, bullion has had its appropriate retrenchment according to the Fibonacci rule. Traders say that the trend is your friend and gold is trending higher when compared to paper around the world. Gold has been in a bull market trend since 2000, so the trading pattern suggests we will see a significant up tick in gold's current bull run to maybe $1,500 this year or next.

Fundamentally and technically, stocks are not worth one's time and money unless one has good inside information and front-running ability in trading. If you are working in anything other than financial services, chances are you don't have any inside information and can't front run the market like Goldman Sachs can. Gold, on the other hand, seems technically poised to break out to the upside. Fundamentally speaking gold has more buyers now chasing a limited supply (limited when compared to US Dollars). Add to that the fact that gold seems to respond well to economic instability and fear. Whether a deflationary environment or an inflationary environment gold has done historically well. Much argument exists whether we are in an inflationary or deflationary environment, but that just seems to add to gold's attractiveness.

I might be spot on or insane; it really is hard to tell when you compare these facts with the drivel coming out of mainstream financial programs and print. The fact of the matter is that I wish I didn't take the time to try and figure out what is really going on out there. It consumes me from time-to-time and I find I cannot enjoy the musings of the bread and circuses anymore. My American Dream has disappeared and the lies of the propaganda are revealing themselves to me. These same bread and circuses seem to temper the rest around me and that just causes me anguish, as I know those living the American paper dream are being punished for their ignorance. Part of me laughs as those same people seem me as nuts and believe I have no grasp of reality. I guess it is all a matter of perspective as I am indeed nuts when compared to the prevailing knowledge. I just see the world much differently than I ever did before and it seems as if the rest around me in my neck of the woods are oblivious to the fact that we are just in the eye of the storm. Based on what I understand I am not buying stocks, I am buying physical gold. Are you still buying stocks? Really?

Don't take this at face value; investigate the facts above for yourself. I would highly recommend watching this interview with a financial analyst I follow pretty regularly. This will open your eyes wide - [link edited for length]. I challenge you to look at the facts presented before you. Ask you financial manager about the first two paragraphs alone. If they are unaware of any of this, I would highly recommend reconsidering why you invest where you do.

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©2010 Tim Gandee, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Tuesday, March 2, 2010
Last modified: Tuesday, March 2, 2010

The views expressed in this article are those of Tim Gandee only and do not represent the views of Nolan Chart, LLC or its affiliates. Tim Gandee is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.

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