In Denial
I’ve been way out of the country and have time to think about our economy. Today’s economyguy provides some more thought provoking action for you to think about in “Tonight’s Dinner Conversation.”
Stocks moved sideways today, and bonds are below 3.5%, so get your mortgage refinanced if you need to, and if you have an adjustable rate mortgage, you definitely need to. Oil is now testing $70, and gasoline went down too – great news. Gold fell slightly today.
In the news today…..
Greek Government to sue US Banks? - maybe is the answer to this question. The Greek President is asking the Greek Parliament to look into the causes of its dilemmas, and is asking if US banks pushed them over the edge??? Interesting question. Naturally, the Greek President is looking for an outside evil doer to blame all of the austerity measures on – so as to deflect the hatred being poured onto Greek politicians – who really caused their mess in the first place. However, they might have a point when pointing at US banks – and I’m willing to bet they will find some US banks who sold Greek bonds and Credit Default Swaps on those bonds, and then bet against those bonds – in other words, they weren’t working in the best interest of their customer – the Greek Government. Should be interesting to follow this story as it developes, and see if the name, Goldman, pops up….. In any case, this type of news is very bad for the US financial stock prices, and those tend to lead the rest of the market – just another reason to beware the “sell in May and go away” philosophy….
EU $1 TRILLION Bailout of Euro – what happened last week anyway? Well, Jean-Claude Trichet, the head of the European Central Bank, had to go back on his decision that the ECB would NEVER buy Greek bonds. Three days later, he said he would buy Greek Bonds. What changed? Well, all the leaders of Europe looked at the consequence of their actions to bailout Greece, and decided that they were about to push Europe over a cliff. They choked, and coughed up $1 TRILLION to bailout any European country in trouble – think Greece, Spain, Portugal, etc. Why? Because the Euro was crashing, and everyone was pointing to the breakup of the Euro. It may happen anyway. French President Sarkozy threated to pull France out of the Euro if German President Merkel didn’t support the Greek bailout. She choked and agreed. High stakes poker is being played in Europe. But, what really happened? The Greek bond issue is okay because Greece will pay off its nearly due bonds, and then float new ones – the question is “Who will be foolish enough to buy them? – and at what interest rate?” The Greeks will default on their next bond (unless there is a second ECB bailout), so the current shinanigans only delay the date of the inevitable Greek default – another Greek tragedy. So, what’s going to happen? I believe that Europe is on the road to depreciating its currency to allow all its nations to be more competitive in exports – as is the UK and Japan. What will the US do about that? We are chiding China to increase its exchange rate for the same reason. Will we go after Europe and Japan? My guess: we will deflate our currency too. Yahoo – first to the bottom wins.
Gold – has hit ALL TIME HIGHS last week. With all other commodity prices falling, have you ever wondered what is magic about gold that has it going up when all its cousins are going down? As most of you know, I own some gold, so I take special interest in this commodity, and what makes it move, and how it moves from a technical perspective as well as a fundamental perspective. First of all, Gold has risen against all currencies last week. So, it isn’t an exchange rate thing – it is a valuation thing going on. But, what is happening in the world last week that would push a LOT of people to buy gold? In my opinion, it is the Greek mess, and the impact it could have on the future of Europe, and the future of the value of the Euro, that is moving the gold price right now. Europeans are losing faith in their own currency, and are looking for some place to store their value. And, it doesn’t take many people to make gold move up. In the past, I believed it was the rest of the world – like China, India, Russia, etc., who were moving the gold up upwards. But, right now, I believe it is Europeans. But, who cares. If you own gold, sit back and enjoy the ride. If you like studying exchange rates, here is proof that gold is going up in all currencies:
Tonight’s Dinner Conversation….
Denial – that is the topic of tonight’s topic. The general agreement among the US public is that the stock market has come back and all is okay with stocks. In addition, the Dollar is strengthening to is just position in the world, and all is okay with the Dollar. Also, that low interest rates are being held down by the FED, and they have the best interest of the public in mind, so low interest rates will be around for a long time. Also, we have had US Federal Budget Deficits before and lived through them, so why should we worry about the current budget deficits??? Real estate prices have come down substantially, and are currently at the bottom and appear to be heading higher – so the worst is over and only higher real estate prices are in our future.
Now I would think that all those positions are positions of “denial.” We all know that stocks go up and down. We know that the Dollar goes up and down, We know that interest rates go up and down. We know that countries have defaulted on their debt – historically speaking. Real estate prices can go up and down – and the recent past proved it can go down. Those are facts. But, the general public doesn’t want to take those facts into consideration as it pertains to the US and to themselves today.
In other words, the general public is in denial today as it comes to the US economic position.
Now, here is my challenge to YOU. Are you in denial on ANY of these items? If the answer is yes, or if you have the slightest doubt about your position, then you should start questioning yourself starting right now. Why do you hold your belief? What is it founded on? Is it possible you could be wrong in your belief?
Why am I bringing this to your attention right now? Because denial is an enemy that will sap your desire to protect yourself and your family from potential future events. You will let yourself be “surprised” by world events, and not be in a position to save your assets. Oh, by the way, you will also NOT be in a position to GROW those assets if and when (and I believe it is WHEN) major world and US markets shift, and great values will be available for purchase at pennies on the Dollar.
So, if I got your attention, and you are asking what you can do to prepare yourself, here is my answer. Educate yourself as much as possible on the financial dealings of the US and the world. Don’t let the fact that you don’t understand “Budget Deficits” today stop you from thoroughly understanding them.
For my part, I will be bringing you my own ideas of these issues and what I plan to do to prepare my own situation for the future.
Here are the last numbers for today:
Dow Jones 30 Industrial – 10.625 (up 6)
10 Year Treasury Bond – 3.47% (up 0.03%)
Euro – $1.2400
Gold – $1224 (down $7)
Oil – $70.50 (up $0.42)
Gasoline – $2.04 (down $0.07)
