Week Ahead 6-7-2010

on 06 7, 2010

Last week brought on the unemployment report that sent the market into a tailspin.  I had seen reports that were expecting the over hiring by the census to create at least 500,000 false jobs.  Yes, you read that right false jobs.  They have been hiring people, training them, making them work for a few hours, then laying them off.   Then they will rehire them and create a new job.  So census workers say they account for 3 new job hires.  Just insane to me that our government is trying to over hire and waste tax payer money to give the American people a false sense of security of the hiring of jobs.  Unfortunately, this is nothing new.  The seasonal adjustments, birth/death rates all seem to be “massage-able” to fit whatever is needed.  This report came in pretty ugly since some analysts were expecting over 700k new jobs, 500k of that from census BS.  It is no wonder the market went into a tailspin.

It seems like the smart money is finally catching on and cashing out before it is too late.  We are seeing more money flow out of stocks and they have plenty of room to fall.  The major indices have taken a beating and all of the bulls are using the 10% correction plan to get people back into the market.  May was an awful month and I even heard one talking head on CNBC say that when May is bad you need to buy the summer months because on average it is up some 10%.  That is not a reason for me to buy.  There is a time to take seasonality into consideration, but when you are facing the wall of problems that our world is facing, now is not the time.

The wall of problems are insurmountable.  I can not say it any clearer then that.  There is no way for our country to get out of the problems that government has put us into.  It seems that our leaders are completely ignorant to what our country has ahead or blatantly taking us down a path of destruction.  Big government depends on the country to need it or it will die.  Our country is finally starting to wake up to the fact that our leaders have abused the taxpayer’s money for years.  In fact, the world is starting to wake to the fact that taxpayers are sick of paying for the welfare state.  Productive countries can only exist for so long under a welfare society.  Productive members of that society will get sick of paying for the non productive members.  It happens in every facet of life, business or relationship.  If your partner brought nothing to the table and ended up making you do more work for the same result then partnership wouldn’t last long.

We need to have some support for the sick, poor and unemployed, but there also has to be a line.  Health care reform is a joke and should be revoked.  CBO admitted that their numbers were double counted and that their projections were optimistic.  That just means the taxpayer is on the hook for more.  Health care costs are going to keep going up, which was one of the reasons to pass this bill in the first place.  There is a incredible junction coming in the near future, where Doctors refuse to treat people from Government run programs like Medicare and Medicaid.  I wrote about it last week on the problems with Medicare.  Government will force Doctors to take Medicare/Medicaid patients and that will be the end of our medical system as we know it.  Government will do this through licensing.  If you don’t see “X” number of medicare patients then you will not get your license renewed.  Nice free market capitalism right.

The US has become the big brother of the world.  Ready to stand and fight for anyone on the playground.  In order to do this we have a base in almost every country in the world.  Taxpayer do you see Dollar Signs flashing here.  There is no reason for us to be the world’s police.  Why are we defending some of the richest nations in the world and getting nothing in return.  If the rest of the world is not behind ourn wars, then why are we there?  Mainly to keep big government in business.

European fears have now started to hit countries that were not on the original PIIGS list.  Hungary has made recent comments that they need to take drastic measures so they do not end up like Greece.  There are simple facts that these austerity programs that were enacted many decades ago were built on backwards looking data.  Now that our world is facing an aging population, and a decreased population to pay for that aging population, we have to make changes.  The aging population made a great system for themselves.  Younger generations doubt they will see a penny from our retirement system.  They are being forced to pay into a system that has to support the aging population.  Our country has repeatedly borrowed against these programs with IOUs.  This year is the first year that they will be paying out more than they are taking in.  The further we go into the retirement cycle the more we will have to pay out.   These programs will be a major drain on our economy in a few decades.  This is from optimistic numbers from the CBO.  What happens when we are faced with less tax collections?  Our big government will raise taxes.  Taxes will need to go up to start offsetting the cost of our debt as well.

Bill Gross of Pimco put out in his June Outlook a great chart.  It shows the total credit market of our country.  You can see when the last time we spiked and what our stock market and economy did around that time.  We are facing the biggest wall of problems the world has ever seen.  We are global economy and the world will go through this together.  Some will be hit harder then others, but everyone will get pulled into this Depression.  Please protect yourselves!

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