Monday, June 30, 2014

The U.S. Economy Has Collapsed: “This Is A Monstrous Negative GDP Revision”...AN ENORMOUS PESKY FACT!

The U.S. Economy Has Collapsed: "This Is A Monstrous Negative GDP Revision"

For months the administration, financial pundits and Wall Street analysts made it a point to inform Americans about the healthy state of our economy. One of the key metrics they've used as proof of recovery was the Gross Domestic Product (GDP) which measures the productive output of the U.S. economy as a whole.

Earlier this year the U.S. Bureau of Economic Analysis noted that this measure was showing positive growth. But now, after a second official revision, all of that purported growth used to goad consumers into spending more money on homes, cars and other goods has been revealed to be nothing but conjecture. According to the BEA, not only did economic growth stall during the first quarter of 2014, it completely collapsed, signalling a significant shift in consumption habits amid increasing food and energy prices:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 2.9 percent in the first quarter of 2014 according to the "third" estimate released by the Bureau of Economic Analysis. -2.9!

The government first made consumers believe that the economy grew. Then they revised this down to slight negative growth. The latest revision of -2.9% growth is significant, because even with official inflation at over 2% America's economic output has declined. It seems that no matter how much money they pump into the system, it isn't enough to offset the lack of income or job growth.

This is a monstrous negative revision.!!!!!!!

A big part of it was non-residential fixed investment.  Rather than invest, companies have issued debt and bought back stock.  But this does nothing for the economy — it simply blows a bubble in the market.  

How long before all the lies come home to roost?  

If you think companies don't expect a recession inbound, you're nuts.  Inventory draw-downs subtracted 1.7% from the GDP number.  Companies don't build inventories if they don't think they can sell them — as such this is a forward looking indicator.

Oh, and current production profits?  They're down while current taxes were up.  Obamacare anyone? Worse is that undistributed profits decreased too and this is the second quarter sequentially in which they did.  What does a company pay dividends with?  Undistributed profits.

So for two quarters the markets has risen like a rocket while the fuel for that rise has been exhausted for the last six months.  SOUNDS LIKE REAL ESTATE IN 2005 TO 2006. 

This will turn out equally well, I'm sure.

Officially, we have not yet entered a recession. That requires two quarters of negative growth. However, the current trend indicates that's exactly what's going to happen. In the next 30 days the BEA should be releasing the GDP rate for the second quarter of 2014. According to economist John Williams that will more than likely show a negative print and will lead to an official confirmation that the U.S. has entered another recession.

What's worse, unlike the previous recession that followed the collapse of 2008, there is no way out of this one.  WHAT INSTITUTION WILL SAVE US THIS TIME? WHO WILL PEOPLE TRUST OR BELIEVE AFTER ALL THE PROMISES TURN OUT TO BE NOTHING BUT MASSIVE LIES BASED ON FALSE HOPE?

The reason for this is that the consumer is strapped… doesn't have the liquidity to fuel the growth in consumption.

Income… the median household income, net of inflation, is as low as it was in 1967. The average guy is not staying ahead of inflation.

As a result – personal consumption is more than two thirds of the economy – there's no way you can have positive sustainable growth in the U.S. economy without the consumer being healthy. A SIMPLE MATHEMATICAL FACT. THE 1% CANNOT SUSTAIN OUR ECONOMY, PERIOD.


As the renewed downturn gains wider acceptance or wider recognition, that will intensify the selling pressure.  

When the selling starts, it's going to be a race for the door.

This could lead to a dollar selling panic.

We have entered the next leg down of the crisis and it was inevitable based on all the false solutions. Given that the governments of the world have pretty much used up all of the arrows in their quivers, there is nothing to stop what's coming.

And what's coming is nothing short of a complete collapse of our way of life. Hard to believe? Yes. Implausible? No.

It is so plausible, in fact, that well known radio commentator Mark Levin recently noted that the U.S. government has been actively preparing for and simulating the collapse of our financial system, as well as the widespread violence that will follow.

I BELIEVE WHAT IS OUTLINED BELOW WILL HAPPEN IN STAGES,AS TRUST CONTINUES TO ERODE AND EACH WAVE MAKES THINGS WORSE. WITHOUT A 180 DEGREE SHIFT IN COURSE, I BELIEVE IT IS INEVITABLE. FOR THE FIRST TIME IN HISTORY A VAST MAJORITY OF AMERICANS DON'T TRUST OUR GOVERNMENT OR OUR MONEY MASTERS. IN ADDITION WE ARE AS DIVIDED AS WE HAVE EVER BEEN AS A NATION AND THE MAJORITY HAVE CLEARLY REJECTED GOD. THE PRESSURE ON THE FAULT LINE OF COLLAPSE IS ENORMOUS, WHO KNOWS WHEN IT GIVES WAY, BUT THAT IS CLEARLY THE DIRECTION WE ARE HEADED. NEVER IN HISTORY HAVE POLITICS AND ECONOMICS BEEN BIGGER LIES THAN THEY CURRENTLY ARE IN AMERICA. WORSE THE MEDIA AND ACADEMIA PROMOTES THE LIE. BELIEF IN THE MIRAGE GROWS MORE FRAGILE WITH EACH FAILURE OF THE LIE TO PROVIDE RELIEF FOR THE AVERAGE CITIZEN. OUR WAY OF LIFE IS BASED ON TRUSTING THE MORAL ACTIONS OF LEADERSHIP, THAT HAS FAILED MISERABLY!

What are our leaders preparing for?

The collapse of our financial system, the collapse of our society and the potential for widespread violence, looting, rioting in the streets, because that's what happens when an economy collapses.

I'm not talking about a recession. I'm talking about a collapse, when people are desperate, when they can't get food or clothing, when they have no way of going from place to place, when they can't protect themselves. There aren't enough police officers on the face of the earth to adequately handle a situation like that.

This is happening right here and now. The streets may not devolve into madness tomorrow or next month, but piece by piece the foundations of America's economic health and social structure are crumbling.  It's going to go from bad to worse as trust continues to erode.


What's The Biggest Business In Your State?..........GREAT INFO!

What's The Biggest Business In Your State?

A state economy is nothing without the businesses that call it home. But, as WaPo notes, those businesses are not created equally - bigger businesses naturally have outsized influence, generating more revenue, paying more taxes and employing more people. As Bloomberg notes below, some are less surprising - GM runs Michigan, ExxonMobil runs Texas, and Berkshire Hathaway runs Nebraska but for Washington (home of Microsoft), it is CostCo that runs the state.  SEE THE LIST BELOW THE GRAPHIC.



 
State CityTop company by revenueRevenue (billions)
AlabamaBirminghamRegions Bank $5.89
Alaska*Juneau First National Bank Alaska$2.4
Arizona PhoenixAvnet, Inc.$25.45
ArkansasBentonvilleWal-Mart Stores $476.29
CaliforniaSan Ramon Chevron Corporation$228.84
Colorado EnglewoodArrow Electronics, Inc.$21.35
ConnecticutFairfieldGeneral Electric $146.04
DelawareWilmington E.I. du Pont de Nemours and Company$36.14
Florida DoralWorld Fuel Services Corporation$41.56
GeorgiaAtlantaHome Depot International, Inc. $85.53
HawaiiHonolulu Hawaiian Electric Industries, Inc.$3.23
Idaho BoiseMicron Technology, Inc.$9.07
IllinoisDecaturArcher Daniels Midland $89.80
IndianaIndianapolis WellPoint$71.02
Iowa Cedar RapidsTransamerica Life Insurance Company$19.64
KansasWichitaKoch Industries, Inc. $115
KentuckyLouisville Humana, Inc.$41.31
Louisiana MonroeCenturyLink, Inc.$18.09
MaineScarboroughHannaford Bros. Co. $3.98
MarylandBethesda Lockheed Martin Corporation$45.35
Massachusetts BostonLiberty Mutual Holding Company, Inc.$38.50
MichiganDetroitGeneral Motors $155.42
MinnesotaWayzata Cargill, Inc.$136.65
Mississippi LaurelSanderson Farms, Inc.$2.68
MissouriSt. LouisExpress Scripts Holding $104.09
MontanaBillings Stillwater Mining Company$1.03
Nebraska OmahaBerkshire Hathaway$182.15
NevadaLas VegasLas Vegas Sands Corp. $13.76
New HampshirePortsmouth Sprague Resources LP$4.60
New Jersey New BrunswickJohnson & Johnson$71.31
New MexicoAlbuquerquePresbyterian Healthcare Services $2.05
New YorkNew York Verizon Communications$120.55
North Carolina CharlotteBank of America$101.69
North DakotaBismarckMDU Resources Group, Inc. $4.46
OhioDublin Cardinal Health$101.09
Oklahoma Oklahoma CityLove's Travel Stops & Country Stores, Inc.$26.09
OregonBeavertonNike, Inc. $25.31
PennsylvaniaChesterbrook AmeriSourceBergen$87.95
Rhode Island WoonsocketCVS Caremark$126.76
South CarolinaHartsvilleSonoco Products Company $4.48
South DakotaSioux Falls Sanford Health$3.10
Tennessee MemphisFedEx Corporation$44.28
TexasIrvingExxon Mobil $438.25
UtahSalt Lake City Huntsman Corporation$11.07
Vermont WaterburyKeurig Green Mountain, Inc.$4.35
VirginiaMcLeanFreddie Mac $81.22
WashingtonIssaquah CostCo Wholesale$105.15
West Virginia MorgantownWest Virginia University Hospitals, Inc.$42.73
WisconsinMilwaukeeJohnson Controls, Inc. $42.73
WyomingGillette Cloud Peak Energy, Inc.$1.39

(Source: Hoover's, via Broadview Networks)

* Note: Broadview's original list included a government-owned entity as Alaska's largest company. First National Bank Alaska is the state's largest corporation, according to a review of a compendium of business data on Lexis Nexis.

Sunday, June 29, 2014

God's Presence in Crisis Moments Part 2............

God's Presence in Crisis Moments

When you pass through the waters,  I will be with you; and when you pass through the rivers,     they will not sweep over you. When you walk through the fire,  you will not be burned;  the flames will not set you ablaze.

                                  Isaiah 43:2

I. THAT SPIRITUAL EXPERIENCE IS THE SAME IN ALL AGES.

These words were written by 
Isaiah, who could speak of himself and his comrades as passing through the waters. He shows in this way that he realises that the exiles are one in experience with their ancestors who passed through the waters of the Red Sea and the Jordan. Though their circumstances were different, the variation in outward detail was insignificant. The same parts of their nature were tested, and the same virtues were disciplined. Thus this prophet becomes the link between us, who are the disciples of Christ, and the Israelites who crossed the Jordan.

II. THAT IN EVERY LIFE THERE ARE A FEW BRIEF BUT INTENSE TRIALS.

There was the long and weary strain of desert life to be constantly borne. The passage of the sea and the river came but twice, and then lasted but a few hours, though the agony for the time was intense. They entered the sea in a night of awful storm, because the terror of their enemies was upon them. They entered the river in broad daylight in utter trust of God, knowing that only thus could the enjoyment of Canaan's goodly land be theirs. One was a struggle of fear, the other the yielding of all to God in simple faith. In the Christian life peace only comes after this second struggle.

III. THAT LIFE BEFORE AND AFTER SUCH A CRISIS IS WHOLLY DIFFERENT.

The Red Sea was the boundary line between bondage and freedom; the Jordan between wandering and rest, between hope and possession. It seems as though such struggles were the birth-throes of a new life. To pass on to a higher plane such struggle must be encountered. It was such a trial as God called upon Job to pass through.

IV. THAT ONE SUCH CRISIS IS DEATH.

In the life of Christ it would appear that the temptation connected with His baptism was His Red Sea, just as St. Paul tells us that the sea was Israel's baptism: "They were all baptized into Moses in the cloud and in the sea." We know that this temptation was one of the crises of our Saviour's life. Then the devil leaveth Him for a season, not to return with like power until he meets Him again at Gethsemane. This was Christ's Jordan. Not until this was passed was His sorrow vanquished or His labour "finished." When Christ reached this river he was dazed and despondent, and began to look this way and that to see if he could not escape the river. Truly, death is the last and not the least enemy.

V. THAT HUMAN FRIENDSHIP CAN AVAIL BUT LITTLE HERE.

Friends may say, "I am with you" in sympathy; but they can render little 
help. Viewing the struggle, they may long to share it, but here they must leave their friends in the hands of God.

VI. THAT GOD IS WITH US IN ALL SUCH CRISIS MOMENTS.

Hopeful's comforting words did Christ little good. But he heard a voice say, "When thou passest through the waters, I will be with thee; and through the rivers, they shall not overflow thee." Indeed, that is His name, Immanuel, God with us. And Christ has said, "Lo, I am with you alway, even unto the end." If God has brought us through the sea, if He has commenced the good work within us, He will bring us through the Jordan, and thus complete what He has begun. In view of such a precious promise we need have no fear.

Trust in the Lord with all thine heart; and lean not unto thine own understanding. In all thy ways acknowledge him, and he shall direct thy paths.

                                                                               Proverbs 3:5-6

Be careful for nothing; but in every thing by prayer and supplication with thanksgiving let your requests be made known unto God. And the peace of God, which passeth all understanding, shall keep your hearts and minds through Christ Jesus. Finally, brethren, whatsoever things are true, whatsoever things are honest, whatsoever things are just, whatsoever things are pure, whatsoever things are lovely, whatsoever things are of good report; if there be any virtue, and if there be any praise, think on these things. Those things, which ye have both learned, and received, and heard, and seen in me, do: and the God of peace shall be with you.

                                                                                 
Philippians 4:6-9

Friday, June 27, 2014

A Terrorist Attack Bigger Than 9/11 Will Happen Before End Of Decade............

A Terrorist Attack Bigger Than 9/11 Will Happen Before End Of Decade

Appearing on Hugh Hewitt's radio show, Dick Cheney explained that he "doubted" whether the US would "get through this decade" without another "massive attack on the homeland." 

But it's what he said after that makes Obama's NYC nukes concerns pale in comparison...

"I think there will be another attack. And the next time, I think it's going to be far deadlier than the last one."

"Imagine what would happen if somebody could smuggle a nuclear device, put it in a shipping container, and drive it down the beltway outside Washington, D.C."

Whatever is coming, it's going to be huge. A lot of people are going to die in horrific ways. Ghastly pictures will be plastered all over the news to reinforce the awful event and make certain it is foremost in the minds of America.  The Ministry of Propaganda mainstream media will diligently traumatize people like it's their job. (Because, you know, it is.) Someone will be painted as the boogeyman and we'll have a new enemy to hate.

It's coming...

 

10 Ways Rich People Think Differently......

10 Ways Rich People Think Differently

1. Rich people believe their habits have a major impact on their lives.

"Daily habits are critical to financial success in life."

Rich people who agree: 52%

Poor people who agree: 3%

Wealthy people think that bad habits create detrimental luck and that good habits create "opportunity luck," meaning they create the opportunities for people to make their own luck. A lot of rich people said they were lucky and a lot of poor people said they were unlucky. THERE IS NO SUCH THING AS LUCK!

2. Rich people believe in the American dream.

"The American dream is no longer possible."

Rich people who agree: 2%

Poor people who agree: 87%

The American Dream is the idea of unlimited potential, that you can make it on your own. The vast majority of rich people believed that wealth is a big part of the American dream (94%), and that the dream is still possible.

3. Rich people value relationships for professional and personal growth.

"Relationships are critical to financial success."

Rich people who agree: 88%

Poor people who agree: 17%

Not only do rich people feel that their relationships are critical to their success, but they put a lot of effort into maintaining them, making a habit of calling up contacts to congratulate them on life events, wish them a happy birthday, or reaching out just to say hello. 

4. Rich people love meeting new people.

"I love meeting new people."

Rich people who agree: 68%

Poor people who agree: 11%

Hand in hand with valuing relationships comes making new ones. Rich people both love meeting new people and believe that being liked is important to financial success (in fact, it's a whopping 95% that believe in the power of likability, compared to 9% of poor people).

5. Rich people think that saving is hugely important.

"Saving money is critical to financial success."

Rich people who agree: 88%

Poor people who agree: 52%

Being wealthy is not just making a lot of money. It's saving a lot, and accumulating wealth. Many people aren't wealthy because they made a lot, but because they saved a lot. 

6. Rich people feel that they determine their path in life.

"I believe in fate."

Rich people who agree: 10%

Poor people who agree: 90%

Poor people are significantly more likely to believe that genetics are important to becoming wealthy, and significantly less likely to believe that they're the cause of their own financial status in life. Most of the wealthy people were business people who weren't always wealthy,but they had this attitude that they could do anything.

7. Rich people value creativity over intelligence.

"Creativity is critical to financial success."

Rich people who agree: 75%

Poor people who agree: 11%

While rich people are more likely to believe that creativity influences success, poor people are more likely to think that being "intellectually gifted" is critical. They're also more likely to believe that wealth is usually accidental. A lot of wealthy people were C students. "There's more to wealth than just being smart.

8. Rich people enjoy their jobs.

"I like (or liked) what I do for a living."

Rich people who agree: 85%

Poor people who agree: 2%

"Many of the wealthy in my study loved their job — it's not an accident. In fact, 86% of the wealthy worked an average of 50 hours or more per week (compared to 43% of the poor), and 81% say they do more than their job requires (versus 17%). It's related to the idea of creativity being important to financial success: These people found a creative pursuit that could turn into monetary value. When you engage in a creative pursuit that can make money, the rewards are often obscene.

9. Rich people believe that their health influences their success.

"Good health is critical to financial success."

Rich people who agree: 85%

Poor people who agree: 13%

You can't make money in a hospital bed. Wealthy people think that being healthy means fewer sick days, which translates into more productivity and more money.

10. Rich people are willing to take risks.

"I've taken a risk in search of wealth."

Rich people who agree: 63%

Poor people who agree: 6%

A lot of the wealthy people are business owners who started their own businesses. They became successes because they were master self-educators who learned from the school of hard knocks. In fact, 27% of the wealthy people in this study admit they've failed at least once in life or in business, compared with 2% of the poor. Failure is like scar tissue on the brain. The lessons last forever.

The Five Reasons To Own Gold..........A GREAT GRAPHIC!

The Five Reasons To Own Gold







The Pocket Guide To Understanding The Different Schools Of Economics...........GREAT INFOGRAPHIC!

Here is the ultimate pocket guide to the differences (and similarities) between all the economic schools of thought.


Here's The Flashpoint That Could Soon Plunge Iraq Into Full-Blown Civil War...........

Here's The Flashpoint That Could Soon Plunge Iraq Into Full-Blown Civil War

The golden-domed Samarra shrine is once again a flash point that threatens to plunge all of Iraq into a full-blown civil war.  

Samarra's al-Askari Mosque contains the mausoleums of two Shia Imams, making it a key pilgrimage point and one of the most significant sites of worship for Shia worldwide. The bombing of the mosque in 2006 set off a vicious cycle of violence that was followed by Shiites carrying out revenge attacks against Sunni mosques and religious leaders.

Now, the militant jihadist group ISIS is attacking the shrine. ISIS follows a deeply puritanical Sunni thread of Islam that believes shrines are antithetical to Islam and should be destroyed — a practice they have carried out in areas they control in Syria. 
1280px Al_Askari_Mosque
The al-Askari Mosque after being bombed in 2006.
Samarra Mosque Golden Mosque


Procuring Freedom With a 'Razor'.............

Procuring Freedom With a 'Razor'

What does a medieval philosopher, simplicity and a "razor" have to do with freedom?  

July is just around the corner and will bring to mind the thought of freedom as Americans observe Independence Day.  While many of us think of those things that have made our freedom and independence possible, less of us think of those things that actually take away our freedom and independence.

Freedom means many things to many people, almost to the degree that the word's meaning is abstract.  What represents freedom to one may represent enslavement or subjection to another. More commonly, those things most considered to be liberating and/or productive have paradoxical consequences.  I would like to call to mind some things that may be inhibiting your freedom, but perhaps you may have first thought of as liberating or productive.

"Entities should not be multiplied unnecessarily." 

                                                               Sir William of Ockham (c.1288 - c.1348)

Why add complexity if it is not necessary?  

Sir William of Ockham certainly agrees.  Who is Sir William of Ockham?  He is credited with the principle of Occam's Razor (or Ockham's Razor), which "recommends the selection of the hypothesis that introduces the fewest assumptions and postulates the fewest entities while sufficiently answering the question." The simplest solution is the best solution!

With regard to the "hypothesis" of how to lead a fulfilled and meaningful life, simplicity is one of the greatest virtues in this pursuit.  For example, if you reduce your daily activities to half the current level and are able to maintain the same or greater level of meaning and fulfillment, then Occam's Razor says that is what you should do.

Let's consider some of the means of procuring freedom, in the spirit of Occam's Razor, via the pursuit of simplicity, viewed through the lens of personal finance:

More choices often lead to less decisions, poor decisions or no decision at all.  While some choice may be good, more choice is not necessarily better.  With regard to personal finance, social research has shown that more investment choices in a 401(k) plan has led to lower participation on the part of employees.  How many investments do you need?  If you are a mutual fund investor,  the benefits of diversification will more likely diminish than increase beyond eight or ten funds.

Allocation of Attention:  Most of us are familiar with investment assets, such as stocks, bonds and cash; however, we tend to forget an asset that may be more important -- our attention -- which is certainly one of the only assets where we can control performance.  Much like the allocation of a portfolio of investments, you should allocate where and how your attention is spent and determine if your information sources are adding to (or reducing) simplicity in your life.  

What adds value?  

What adds complexity?  

What takes time away from your priorities?  

Do you really need cable tv, video games, newspapers, magazines, cell phones, or blogs?  

If so, to what degree? 

Align who you are with what you do:  This is the essence of freedom.  Do you enjoy what you do? How much time do you spend on activities that you simply do not care to do?  Why are still doing them?  How soon can you minimize or remove them and increase the time and energy spent on things you enjoy -- your priorities?  Essentially, an increase in time spent on activities you enjoy will reduce time available for activities you do not enjoy; thereby increasing your freedom.

The definition of terms:  Define the word productive.  If anything can slice needless complexity out of your life, this may be the most simple and effective strategy to do so.  To define what productive means to you, simply make a short list of the thing(s) you wish to produce.  Is it time with family? Is it time to write the book you've always wanted to write?  Is it money for a well-deserved vacation? Is it money for a charity?  While you're at it, define a few other terms, such as wealth, strength, weakness and happiness.

Turn down the noise:  One thread running throughout our modern world is the idea that conventional wisdom has more influence on the "average person" than is healthy.  Media sources, educational institutions, parents, and other social influences are constantly trying to tell you how to act, what to study in school, what career to pursue, where to invest your money, which car to drive and what things bring you most happiness.  Only YOU should choose these things.  Tune out (or significantly turn down) outside influences and simplify, simplify, simplify...

Beware of 'Luxury:'  I'll simply quote Socrates here:  "Luxury is artificial poverty."


I'll add one more thought from, Walden, by Henry David Thoreau, perhaps one of the greatest teachers of simplicity that ever lived;

Most of the luxuries, and many of the so-called comforts of life, are not only not indispensable, but positive hindrances to the elevation of mankind.  With respect to luxuries and comforts, the wisest that have ever lived, lived a more simple and meager life than many of the poorest.  The ancient philosophers, were a class which none has been poorer in outward riches, yet none so rich inwardly.

Thursday, June 26, 2014

Ebola Outbreak Is Now The Worst In History And 'Totally Out Of Control'...A VERY DANGEROUS WORLD!

Ebola Outbreak Is Now The Worst In History And 'Totally Out Of Control'

An outbreak of the terrifying Ebola virus emerged in the West African nation of Guinea in February and has been spreading ever since, infecting people in Sierra Leonne and Liberia as well. It is now the biggest and deadliest outbreak of Ebola since the virus was identified in 1976.

Recent investigations by public health authorities suggest that it actually may have first emerged undetected as early as December.

The disease's spread seemed to slow down for a while, but has picked up in recent weeks. An estimated 599 people have been infected, and 338 have died in Guinea, Sierra Leone and Liberia. While it's likely that many cases go uncounted, the Associated Press notes that previously, the largest reported death toll was in the Congo in 1976, when 280 people died. (The most widespread outbreak infected 425 people in Uganda in 2000, killing 224.)

"The epidemic is now in a second wave," Bart Janssens, the director of operations for Doctors Without Borders told the Associated Press. "It is totally out of control."

The 32 new cases reported June 24 were all in Liberia and Sierra Leone; two new deaths (but no new cases) were reported in Guinea. The three countries affected by this latest outbreak met on June 23 to "enhance coordination, information management, and communication," according to the World Health Organization.

"There needs to be a real political commitment that this is a very big emergency," Janssens added. "Otherwise, it will continue to spread, and for sure it will spread to more countries."

This outbreak is unique because it has struck densely populated areas like Monrovia, the capital of Liberia, and Conakry, the capital city of Guinea, where there have been 65 cases and 33 deaths. Ebola usually emerges in sparsely populated rural regions, where fewer people pass through.

"Major challenges faced by all partners in the efforts to control the outbreak include its wide geographic spread, weak health-care infrastructures, and community mistrust and resistance," the CDC noted in a recent update.

In an interview with NBC News, Robert Garry, a microbiology professor at the Tulane University School of Medicine, warned that the outbreak so far is just "the tip of the iceberg."

Still, in its latest update, the World Health Organization said it "does not recommend any travel or trade restrictions be applied to Guinea, Liberia, or Sierra Leone based on the current information available."

Ebola is one of the deadliest viruses ever known, with the most fatal strains killing up to 90% of people infected. The current strain has killed 66% of those infected in Guinea, 51% of those infected in Sierra Leone, and 73% of those infected in Liberia.

Ebola begins as fever, weakness, muscle pain, headache, and sore throat, but soon progresses to vomiting, diarrhea, rash, and impaired organ function. A large proportion of those infected also bleed profusely, both internally and externally. It's considered highly contagious, though it isn't transmitted through the air — instead it's spread by bodily fluids like blood and saliva, which can be very hard to avoid when someone is bleeding heavily from every orifice.

Ebola first emerged in humans in 1976, and there have been more than 18 outbreaks since then. There is currently no vaccine and no cure. 

The Student Loan Bubble Is Going To Burst..........A MUST READ!

The Student Loan Bubble Is Going To Burst

The end of the student loan bubble will be like the housing bubble, where tuition collapses the way the price of homes collapsed. These collapses will put colleges out of business.

It's inevitable at some point there will be a cap on student loan guarantees. And when that happens you're going to see a repeat of what we saw in the housing market: when easy credit for buying or flipping a house disappeared we saw a collapse in the price housing, and we're going to see that same collapse in the price of student tuition, and that's going to lead to a lot of 
colleges going out of business.

YEP!

The change in the number of higher education employees since the mid-1970s, broken down by job category. One can almost see why preserving the status quo of the Keynesian religion is the lifetime goal of most professors.

And then, the change in average salaries across the higher education spectrum.


BEST AND WORST COLLEGE MAJORS........AN IMPORTANT GRAPHIC!

infographic experian higher education

SPX vs. CLMI.............ANOTHER PESKY FACT!

SPX vs. CLMI

An interesting chart to look at, is the CLMI vs the SPX. If you are not familiar with it, the Capital Link Maritime Index (CLMI) is a composite index of all US listed shipping stocks.

STOCK VALUATIONS ARE WAY OUT OF LINE WITH REALITY.......




War Has Become Very Complicated......AN IMPORTANT GRAPHIC!

War Has Become Very Complicated.........Everything You Need To Know About Modern Warfare

The conflict ecosystem" perfectly captures the complexities of contemporary conflict — where the combatants are far from the only factors contributing to the outcome. A conventional army is just one component of this environment, a fact that should inspire humility in military strategists and policymakers. 

Screen Shot 2014 05 28 at 2.55.11 PM



Wednesday, June 25, 2014

The Market Has Never Been More Fearful Of An Extreme Event.......ANOTHER PESKY FACT!

The Market Has Never Been More Fearful Of An Extreme Event

"There's something going on in derivatives land," is the warning from ADM's Andy Ash and as Paul Mylchreest notes the relationship between VIX and SKEW suggests the options market is pricing in the possibility of a major market event. The process enables professionals to maintain the illusion of calmness in VIX while hedging their positions as they attempt to unwind. Whether this 'event' is a crash or melt-up is historically unclear but given the taper and the trend of the last few years, we suspect the former more likely that the latter.

A rather thought-provoking chart which we've been looking at is the ratio of the SKEW (the chance of an extreme or outlier event, i.e. OTM versus ATM options) versus the VIX (the expectations for more 'normal' day-to-day volatility - the price of hedging implied by ATM options)... and is an indicator of how the market is pricing the possibility of a potential black swan event.

You can see how extended we are right now… (actually at record highs)




While (curiously) 2000 didn't register, the two previous highs in the SKEW/VIX ratio were 1994 and 2007 which turned out to be pivotal dates in terms of changes in market direction.

Which does it look like this time?

Think briefly about who is buying and who is selling? Think about who is buying deep OTM protection? Smells like the professionals are a little less sanguine than their chatter suggests...

Institutional clients are dumping equities off to retail clients... thank you very much...



and those that can't dump their assets are hedging aggressively (while maintaining the illusion with VIX that all is well)

Q1 GDP Crashes To -2.9%.........Worst non recession GDP revision in history!

YOU HAVE TO BE AN IDIOT TO TRY AND SPIN THIS IN A POSITIVE LIGHT. WITHOUT THE FED WE ARE IN A DEPRESSION!  FACTS DON'T LIE....... AMERICANS NEED TO WAKE UP!


the final Q1 GDP revision and it's a doozy: at -2.9%, far below the -1.8% expected and well below the -1.0% second revision, it is an absolute disaster,and is the worst print since Q1 2009.

Worst non recession GDP revision in history!

Even assuming 3% growth every other quarter in 2014 means 2014 GDP will be 1.5% at best!








How A Country Dies......AN ABSOLUTE MUST READ!

How A Country Dies   

A country dies slowly.

Those living during the decline of Rome were likely unaware that anything was happening. The decline took over a couple of hundred years. Anyone living during the decline only saw a small part of what was happening and likely never noticed it as anything other than ordinary. THINGS HAPPEN MUCH FASTER TODAY, BUT IT STILL TAKES TIME AND MOST ARE UNAWARE.

Countries don't have genetically determined life spans. Nor do they die quickly, unless the cataclysm of some great war does them in. Even in such extreme cases, there are usually warning signs, which are more obvious in hindsight than at the time.

Few citizens of a dying nation recognize the signs. Most are too busy trying to live their lives. If death occupies their mind, it is with respect to themselves, a relative or a friend. Most cannot conceive of the death of a nation.

A Country Dies Slowly First

Many signs or symptoms precede the death of a country as they do for a person. There is a pattern that involves the following:

1. The Economy

Economically, people become poorer. It becomes harder to feed a family. Economic growth stalls and then reverses. Work opportunities decline. Disincentives to work rise as government tries to ease the burden on the unemployed and lower skilled. These efforts require more revenues which means higher taxes or debt financing. Disincentives to create jobs are magnified by attempts to address the problem. Higher taxes and other burdens are imposed on the productive making work less attractive.

The response should not be surprising. Capital flees first. It goes to areas where adequate returns are still available. Jobs are created but not in the host country. Finally a "brain drain" begins. Talented people leave the country for places that offer greater opportunity. In the case of the US, to escape US taxes these people must renounce their citizenship. Citizenship renouncements are currently at the highest levels in history.

The flight of capital, both real and human, further  lowers standards of living. Signs of stagnation become more apparent. They may begin as seemingly benign as roads which have too many potholes. "For rent" signs are seen more frequently. Classified job ads decrease. "Going out of Business" sales are no longer marketing gimmicks.

Initially, people dig into their savings or begin to borrow in order to retain their standard of living. Most believe it is a temporary situation. Eventually bankruptcies increase. Strip malls close. Large areas like Detroit become close to uninhabitable.

These conditions characterize the beginnings of the decline. As the decline continues, things get much worse. ALL OF THESE ARE BEING SEEN IN AMERICA.

2. The State

The State is threatened by a decline. Generally it moves into full pretend mode. 

Three behavioral traits characterize its behavior. 

The State must convince citizens:

Things are not as bad as they seem.
The State is not responsible for the situation.
The State must do more (grow bigger) in order to solve the problems.

Statistics issued by the State are fudged to convey a false image of well-being. Government spending soars in an effort to juice reported economic activity. Much of the spending is unproductive in terms of providing things that would have otherwise been bought. It is also counter 
productive to a proper functioning economy as price discovery is disrupted and consumer and investment decisions are based on false signals.

Incentives are  provided to encourage people to live beyond their means. Debt appears nearly free and readily available. Bubbles occur and then burst. New bubbles are necessary to replace old bubbles. People and businesses are encouraged to make imprudent decisions, all in the attempt to make the economy appear better.

The State has one objective and that is to remain in power. Laws and regulations multiply at ever faster rates. Tyrannical rules and legislation are passed under the pretense of protecting the people against some threat. In reality, these laws are passed to protect the leaders against the public when they finally understand what has been done to them.

"Bread and circuses" increase to divert peoples attention from the developing problems. Dependency increases reflecting an attempt to placate the masses. A "wag the dog" war or crisis is often used as a means to rally the public against some phony enemy. AGAIN, 
ALL OF THESE ARE BEING SEEN IN AMERICA.

3. Society

Society becomes less honest and respectful as 
this process progresses. People increasingly are unable to provide properly for their families. Some desperately turn to unethical behavior, even criminal acts.   Common decency declines.

The regulations imposed from above reduce the sphere of voluntary interactions between people. The government decides more and more what you must do, when and how you must do it. What you can say comes under attack. Finally how you must live is increasingly determined.

Free markets are slowly replaced by a command and control ordering of society. Coercion displaces freedom as the coordinating force for society. People increasingly do what they must rather than what they want.

Interest groups, i.e. politically preferred constituents, created in good times don't demand less when there is less available. The inability to meet their demands creates political strife and eventually civil problems. Honoring their demands divides society even more. Not honoring demands may produce rioting and civil unrest.

Society 
becomes increasingly divided in terms of the "makers" and the "takers."  As the takers grow in numbers, the makers shrink in numbers. Soon the parasites overwhelm the productive. Society collapses at that point. AGAIN, ALL OF THESE ARE BEING SEEN IN AMERICA.

Are The People Aware?

The United States, once the 
beacon of freedom and wealth, shows advanced deterioration in all three areas above. The rate of deterioration is accelerating. 

To paraphrase Ernest Hemingway's response to a bankruptcy question:

How did your country die? Two ways. Gradually, then suddenly.

Do people understand what is happening to them and their country? I suspect they are not aware of the full consequences. Most people are not trained to think in these terms, nor should they be. For most of us, it is a chore to get through each day. That is true of the dullards and the brilliant.

People sense there is something very 
wrong even though they may be unable to identify what that something might be. Many probably believe that whatever is happening is temporary, sort of like an economic slowdown that reverts back to normal. For them, it is tighten the belt until the good times return. UNLESS THERE ARE BIG CHANGES AMERICA WILL DIE LIKE SO MANY COUNTRIES BEFORE IT!

It's never different this time.........AN ABSOLUTE MUST READ!

It's never different this time

"One of the largest bullish factors is burgeoning worldwide liquidity, thanks to expansive monetary policies by central banks. That has helped fuel a surge of foreign investing that could propel US stocks higher, regardless of what happens to the American economy, some analysts say...

Low interest rates also help stocks by making Treasury securities, certificates of deposit and other interest-paying investments less attractive. The sluggish economy, meanwhile, keeps the Federal Reserve from driving up interest rates and prevents inflation from overheating...

Also, the sluggish economy--by keeping manufacturing rates low--discourages money from flowing out of financial assets into such investments as factories and machinery."

The above is from the LA Times, March 8, 1987; a few months before the October 1987 crash

The more they print, the more inequality there is, the weaker the economy will become. Simply put, it's a catastrophe, what the Fed has done is to lift asset prices, and the cost of living. In the meantime, the cost of living increases are higher than the wage increases. The typical American household income is going down in real terms. What Recovery?

Tuesday, June 24, 2014

Systemic risk is worse now than in 2008.....AN ABSOLUTE MUST READ!

Systemic risk is worse now than in 2008

Since the crash of 2008, huge attention has been paid by regulators to systemic risk, the risk that some event will cause the crash of the entire banking system, not just of an individual bank. Tens of thousands of pages of financial regulations have been written, and almost as many thousands of speeches have been bloviated, about how we now understand the dangers of "too big to fail" and therefore a crash such as occurred in 2008 can never happen again.

Needless to say this is nonsense; systemic risk is worse now than it was in 2008. 
What's more, the next crash will almost certainly be considerably nastier than the last one.

The main issue addressed by legislation has been "too big to fail," the idea that some banks are so large that their failure would cause a catastrophic economic collapse and hence they must be propped up by taxpayers. It will not surprise you to learn that I don't regard this as the central problem.

Most of the risks in the banking system today are present in a wide range of institutions, all of which are highly interconnected and getting more so. Hence a failure in a medium-sized institution, if sufficiently connected to the system as a whole, could well have systemic implications. At the same time, pretty well all banks use similar (and spurious) risk-management systems, while leverage—both open and more dangerously hidden—is high throughout the system. 

Foolish monetary policy is foolish for all, and if a technological disaster occurs, it is likely to affect software used by a substantial fraction of the banking system as a whole. There are a number of good reasons to break up the banking behemoths, but breaking them up on its own would not solve the systemic risk problem.

Systemic risk has been exacerbated by modern finance for a number of reasons. 

The system's interconnectedness is one such reason, because of the cat's cradle of derivatives contracts totaling some $710 trillion nominal amount (per BIS figures for December 2013) that stretch between different institutions worldwide.

Some of these contracts such as the $584 trillion of interest-rate swaps are not especially risky (except to the extent that traders have been gambling egregiously on the market's direction). However, other derivatives, such as the $21 trillion of credit-default swaps (CDS) and options thereon, have potential risk almost as great as their nominal amount. What's more, there are $25 trillion of "unallocated" contracts. 

If you are dependent on the market in any way your sleep should be highly troubled by the thought of 150% of U.S. Gross Domestic Product (GDP) in contracts which the regulators can't define!

The problem is made worse by the illiquidity of many of these instruments. Any kind of exotic derivative with a long-term maturity is likely to trade very seldom indeed once the initial flush of creation has worn off. These risks have been alleviated by trading standard contracts on exchanges. But even if banks' risk management were good, failure of a major counter party or, heaven help us, of an exchange, would cause systemic havoc because of its interconnectedness.

Another very serious systemic risk worsened by modern finance is that of inadequate risk management. This has in no way been improved by the 2008 crash. THE SMART ASSES ON WALL STREET BELIEVE THAT SAYING THEY HAVE MANAGED THEIR RISK IS THE SAME AS REALLY MANAGING IT. THEIR ARROGANCE BLINDS THEM! HISTORY PROVES IT,NOT JUST ONCE BUT OVER AND OVER AGAIN AND WITH INCREASING FREQUENCY. THE IDIOTS THAT CAUSE THE PROBLEMS, AND BENEFIT FROM THE LIES WILL NEVER SEE THE NEXT PROBLEM COMING OR SOLVE OUR PROBLEMS. REMEMBER IRAQ WAS FIXED AND WE COULD GO HOME.....THE SAME PEOPLE ARE RUNNING OUR ECONOMY.

More than three years after the crash, J.P. Morgan was still using a variation on Value-at-Risk to manage its index CDS positions in the London Whale disaster. Morgan survived that one, but there seems no reason from a risk-management perspective why the Whale's loss should not have been $100 billion just as easily as $2 billion—which Morgan would not have survived. Regulators have done nothing to solve this problem. Indeed, the new Basel III rules continue to allow the largest banks to design their own risk-management systems, surely a recipe for a massive future disaster. POLITICIANS GET THEIR MONEY FROM THESE BANKS, POLITICIANS TELL THE REGULATORS WHAT TO DO, YOU HAVE TO BE BLIND NOT TO SEE THE PROBLEM AND EVEN THEN IT STINKS SO BAD YOU COULD SMELL IT FROM ONE SIDE OF OUR NATION TO THE OTHER. THIS PROBLEM WILL NEVER BE SOLVED UNDER THE CURRENT SYSTEM, NEVER! WOULDN'T YOU THINK THE MEDIA WOULD DIG INTO THIS, JUST A LITTLE. NOPE, THEIR ALL OWNED, BOUGHT AND PAID FOR, DON'T ROCK THE BOAT OR WE WILL BLACK BALL YOU. EVERYBODY THAT UNDERSTANDS THE TRUTH AND SPEAKS IT IS LABELED A NUT JOB OR WORSE AND THE PUBLIC IS TO IGNORANT AND OR BUSY WITH IMPORTANT STUFF LIKE REALITY TV TO BOTHER, THEY JUST KEEP ELECTING INCOMPETENT COWARDS OR COMPLETE CROOKS, OR THE PEOPLE THAT SAY NICE THINGS AND ARE LIKABLE.

You may feel that risk management, at least, is a problem exacerbated by the size of the too-big-to-fail banks. However, this is not entirely so. Each bank will commit its own trading disasters, so that a reversion to smaller banks would equally revert to smaller but more frequent trading disasters, surely an improvement (and the London Whale's successors would be less likely to get megalomania and attempt to control an entire market). 

On the other hand, if the market as a whole does things not contemplated by the risk-management system—Goldman Sachs' David Viniar's "25-standard deviation moves, several days in a row" as in 2007—then since all banks use risk-management systems with similar flaws, they are all likely to break down all at once, producing systemic collapse. 

I expect the next market collapse to take place in pretty well all assets simultaneously, with nowhere to hide. 

Hence a collapse in the global banking system's risk management, affecting most assets, will cause losses to pretty well all significant banks. No amount of regulation will sort that one out.

Modern finance has also made systemic risk worse through its incomprehensibility, opacity and speed. Neither the traders nor the "quants" designing new second- and third-order derivative contracts have any idea how those contracts would behave in a crisis, because they have existed through at most one crisis, and their behavior is both leveraged to and separated from the behavior of the underlying asset or pool of assets. Banks do not know their counterparties' risks, so cannot assess the solidity of the institution with which they are dealing. And in "fast-trading" areas, computers carry out trading algorithms at blistering speed, thus producing unexpected "flash crashes" in which liquidity disappears and prices jump uncontrollably. REASSURING ISN'T IT?

The opacity of banks' operations is made worse by "mark-to-market" accounting, which foolishly causes banks to report large profits as their operations deteriorate, the credit quality of their liabilities deteriorates and their value of those liabilities declines. This makes the banks' actual operating results in a downturn wholly incomprehensible to investors. SURE AN ASSET IS WORTH WHAT WE  THE BANK OR BANKS 
SAY IT IS...MAKES PERFECT SENSE! IF YOU ARE AN ELECTED OFFICIAL WHY WOULD YOU TRUST THEM ON THIS, OH YEA,THEY OWN YOUR ASS!

The leverage problem has not gone away, in spite of all the attempts since 2008 to control it. Furthermore, much of the financial system's risk has been sidelined into non-bank institutions such as money-market funds, securitization vehicles, asset backed commercial paper vehicles and, especially, mortgage REITs, which have grown enormously since 2008. These vehicles are less regulated than banks themselves, and where the regulators have tried to control them, they have got it wrong. For example, huge efforts have been made, backed by the banking lobby, to mess up the money market fund industry, which has only ever had one loss, and that for less than 1% of the value of the fund. Conversely, the gigantic interest-rate risks of the mortgage REITs, which buy long-term mortgages and finance themselves in the repurchase market, are quite uncontrolled and a major danger to the system.

Let us not forget the role of technology, a substantial and growing contributor to systemic risk. The large banks these days develop very little software of their own, relying instead on packages both large and small from outside suppliers. The "Heartbleed" bug of April 2014 showed that even tiny programs such as 
OpenSSL, universally used, can be attacked in ways very difficult to defend against, and that bring vulnerability to the bank's entire system. A malicious hacker somewhere in the vast and expanding Russo-Chinese sphere of influence, or even a domestic teenager, could at any time produce a bug that slipped through the protective systems common to most banks, damaging or even bringing down the system as a whole. I HAVE NUMEROUS FRIENDS THAT WORK FOR THE GOVERNMENT BOTH CIVILIAN AND MILITARY THAT HAVE TOLD ME THIS PROBLEM IS ENORMOUS, THE NUMBER AND SERIOUS NATURE OF THESE ATTACKS WOULD SURPRISE EVERY AMERICAN. TO A PERSON THEY HAVE GUARANTEED ME THAT ONE DAY SOON WE WILL ALL WAKE UP TO A FAILED SYSTEM AND CHAOS. AS GOOD AS THEY ARE,THEY KNOW THEY CAN'T STOP WHAT IS COMING.

However, the greatest contributor to systemic risk, and the reason why it is worse today than in 2008, is monetary policy. It had been over-expansive since 1995, causing a mortgage finance boom in 2002-06 which was anomalous in that less prosperous areas and poorer people received more new mortgage finance than the rich ones. However, its encouragement to leverage has never been so great as in the period since 2009. Consequently, asset prices have risen worldwide and leverage both open and, more importantly, hidden has correspondingly increased.  WORSE EVERYBODY IS IN THE SAME TRADES AND ALMOST EVERYONE IS A GENIUS! THIS TIME IS DIFFERENT! YOU CAN'T GO WRONG....NOTHING TO WORRY ABOUT HERE.

In general, very low interest rates encourage risk-taking. Monetary policy makers fantasize that this will produce more entrepreneurs in garages. Actually, banks won't lend to entrepreneurs, so it simply produces more fast-buck artists in sharp suits. The result is more risk. 

When monetary policy is so extreme for so long, it results in more systemic risk. It's as simple as that.

Precisely what form the crash will take, and when it will come, is still not clear. It's possible that it will be highly inflationary. If the $2.7 trillion of excess reserves in the U.S. banking system starts getting lent out, the inflationary kick will be very rapid indeed. I WOULD NOT BET ON THIS OUTCOME!

However it's also possible the mountain of malinvestment resulting from the last five years' foolish monetary policy will collapse of its own weight without inflation taking off. I WOULD BET ON THIS AND A SERIOUS DEFLATION OR ASSET REPRICING.

Either way, the banking system crash that accompanies the downturn will be more unpleasant than the last one, because the asset price decline that causes it will not simply be confined to housing, but will be more or less universal.

After that, systemic risk may be very much reduced—mostly because we won't have much of a banking system left!  

Former Fed Governor, Hedge Fund Billionaire Slam Fed: "Government Fiat Does Not Create Wealth".........

Former Fed Governor, Hedge Fund Billionaire Slam Fed: "Government Fiat Does Not Create Wealth"


Economist Richard Koo diagnosed Japan's crash in the early 1990s and subsequent two decades of economic malaise as a "balance-sheet recession." That conclusion wasn't lost on the Federal Reserve during the financial crisis of 2008-09. The Fed engineered an emergency response to craft what can best be described as a balance-sheet recovery.

At its policy meeting earlier this week, the Fed made clear that it's scarred, if no longer scared, by the crisis. Extraordinarily loose monetary policy will continue in force. While the Fed's monthly asset purchases will decline, short-term interest rates will remain pinned near zero. And long-term rates need not move higher—the Fed assures us—even with improving inflation dynamics, credit markets priced-for-perfection, and stock prices at record levels.

The aggregate wealth of U.S. households, including stocks and real-estate holdings, just hit a new high of $81.8 trillion. That's more than $26 trillion in wealth added since 2009. No wonder most on Wall Street applaud the Fed's unrelenting balance-sheet recovery strategy. It's great news for those households and businesses with large asset holdings, high risk tolerances and easy access to credit.

Yet it provides little solace for families and small businesses that must rely on their income statements to pay the bills. About half of American households do not own any stocks and more than one-third don't own a residence. Never mind the retirees who are straining to make the most of their golden years on bond returns.

The Fed's extraordinary tools are far more potent in goosing balance-sheet wealth than spurring real income growth. The most recent employment report reveals the troubling story for Main Street. While 217,000 jobs were created in May, incomes for most Americans remain under stress, with only modest improvements in hours worked and average hourly earnings.

It's taken a full 76 months for the number of people working to get back to its previous peak, a discomfiting postwar record. Unfortunately, during the same period the U.S. working-age population increased by more than 15 million people. That's why the share of the working-age population out of work is now at a 36-year low. There are now more Americans on disability insurance than are working in construction and education, combined.

Meanwhile, corporate chieftains rationally choose financial engineering—debt-financed share buybacks, for example—over capital investment in property, plants and equipment. Financial markets reward shareholder activism. Institutional investors extend their risk parameters to beat their benchmarks. And retail investors belatedly participate in the rising asset-price environment.

All of this lifts balance-sheet wealth, at least for a while. But real economic growth—averaging just a bit above 2% for the fifth year in a row—remains sorely lacking.

Higher asset prices are not translating into meaningful increases in capital expenditures, and the weak growth in business investment is proving to be an opportunity-killer for workers. Those with jobs have some job security. But they are less willing to run the risk of finding a better opportunity, or negotiating for higher wages.

Those without jobs, especially in the younger cohorts without a post-high school education, do not attach to the workforce, thus never gaining the entry-level skills and discipline to build a career. The malaise in the labor markets—and muted business investment—help explain why productivity measures are a full percentage point below historical norms.

The Fed's latest forecast has the economy growing above 3% during the balance of this year and next, and the unemployment rate falling to about 5.5% by the end of 2015. If the Fed's sanguine scenario finally comes to pass, interest rates are likely to move meaningfully higher across the yield curve. The money pouring into the financial markets may be redirected, in part, to the real economy. Stocks, leveraged loans and real estate are likely to re-price in a higher interest-rate environment. If rates move quickly or unexpectedly, the vaunted balance-sheet recovery could suffer a blow.

What if there is an unexpected shock that causes the economy to slow in the next year or two? The Fed would surely be called upon to bolster asset prices and stimulate the real economy. But would a return to $85 billion per month of bond-buying really be effective? We are skeptical that either Wall Street or Main Street would be comforted by quantitative-easing redux.

Balance-sheet wealth is sustainable only when it comes from earned success, not government fiat. Wealth creation comes from strong, sustainable growth that turns a proper mix of labor, capital and know-how into productivity, productivity into labor income, income into savings, savings into capital, capital into investment, and investment into asset appreciation.

The country needs an exit from the 2% growth trap. 

There are no short-cuts through Fed-engineered balance-sheet wealth creation. The sooner and more predictably the Fed exits its extraordinary monetary accommodation, the sooner businesses can get back to business and labor can get back to work.

What is the difference between 2% growth and 3% growth in the U.S. economy? As the late economist Herb Stein recounted, the answer is 50%. And the real difference is one between a balance-sheet recovery that helps the well-to-do and an income-statement recovery that advances the interests of all Americans. THE STOCK MARKET IS AN UNSUSTAINABLE MIRAGE, A 50% FALL IN PRICES LIES SOMEWHERE UP AHEAD.