A Comprehensive Breakdown of America’s Economic House of Cards

I guess what I’ve been trying to get across to everyone over the past month or two in my writing is that this all time high market has absolutely no positive impact on the economy whatsoever.  The reason I would suggest is because secondary financial markets are actually outside of the economy.  They are entirely irrelevant to the health of America.  It certainly is making some rich folks richer.  And that’s not a bad thing on its own.  However, it has created such a devastating misallocation of resources within our economy which had already lost any sense of the economic efficiencies we boast of from the 1990′s.  And it is because of these misallocations that the American consumer has suffered.  We’ve masked the problem of deteriorating demand by flooding consumers with debt but all we’ve done is to cannibalize future consumption while burying and already struggling consumer in debt. Compounding this problem over the next 30 years is an increasingly difficult demographic landscape in the US with the baby boomers moving from net payers to net payees.

AAII-INVI-BullBear-Ratio-120414Where does this leave us?  Well in a very bad spot.  We have the information right before us that essentially spells out the end of American economic prowess.  The info isn’t from some obscure source, it is the Congressional Budget Office projecting such things.  Now in order to avoid panic, the CBO isn’t going to say it like I am that such projections are not survivable.  But one who understands the projections understands the implications.  However, as did the congressional finance committee members, Americans are unwilling to accept the fact that we are facing an incredibly precarious economic landscape going forward.  And our policymakers have done everything in their power to exasperate the problem.

I expect being America has created a moral hazard for all Americans in that we feel we always have a fail safe no matter what we do because we’ve always succeeded.  But so too had every other great dynasty until it didn’t.  If we do not force a change in our economic policies we are very close to and perhaps already past the point of no return.  I have no witting quip to end this article.  The economic landscape we face today is nothing short of dire.  And at the risk of sounding overdramatic we either force a policy change, suffer the short term pain and restructure or we and all future generations will live in a very different America from the one our folks left us.  And that my friends is what, as teenagers, we  would have called the balls-out-truth back in my small Canadian hometown.

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via A Comprehensive Breakdown of America’s Economic House of Cards | First Rebuttal.

Near Perfect’ Indicator That Precedes Almost Every Stock Market Correction Is Flashing A Warning Signal

house-of-cardsAre we about to see U.S. stocks take a significant tumble?  If you are looking for a “canary in the coal mine” for the U.S. stock market, just look at high yield bonds.  In recent years, almost every single time junk bonds have declined substantially there has been a notable stock market correction as well.  And right now high yield bonds are steadily moving lower.  The biggest reason for this is falling oil prices.  As I wrote about the other day, energy companies now account for about 20 percent of the high yield bond market.  As the price of oil falls, investors are understandably becoming concerned about the future prospects of those companies and are dumping their bonds.  What is happening cannot be described as a “crash” just yet, but there has been a pretty sizable decline for junk bonds over the past month.  And as I noted above, junk bonds and stocks usually move in tandem.  In fact, junk bonds usually start falling before stocks do.  So does the decline in high yield bonds that we are witnessing at the moment indicate that we are on the verge of a significant stock market correction?

That is a question that CNBC asked in a recent article entitled “Near perfect sell signal says stocks should drop“…

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via ‘Near Perfect’ Indicator That Precedes Almost Every Stock Market Correction Is Flashing A Warning Signal.

As we enter the final month of the year, the markets advance got me thinking about something known as the “Unstoppable Force Paradox.” While you may not be familiar with the name, you will certainly know the definition which questions “What happens when an unstoppable force meets an immovable object?”

Even Frank Sinatra sang about it in “Something’s Gotta Give:”

The paradox arises because it rests on two premises—that there exist such things as irresistible forces and immovable objects. The paradox is that both cannot both be true at same time. If there exists an irresistible force, it follows logically that there cannot be any such thing as an immovable object and vice versa.

However, that has become the general view of the financial markets currently. Asdiscussed in yesterday’s missive on excessive exuberance, investors have been lulled into a state of complacency due to a seemingly “unstoppable” rise in the financial markets. Bad news remains good news, and even small drawdowns are quickly reversed sending stocks surging higher.

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Health Insurance Spending Up 42 Percent – Thanks, Obama!

While analysts try to figure out why Americans are spending less money this Christmas, a new report from the Wall Street Journal might just clear up the confusion. According to their numbers, American spending on health insurance went up 42 percent from 2007 to 2013. At least two factors are in play when it comes to these numbers: one, people are forced to buy insurance or pay a penalty. Two, the Affordable Care Act has done little or nothing to slow rising premium rates.The WSJ looked at middle class spending across the board, of course, and health insurance isn’t the only area where Americans are spending more.

Home internet, cell phones, homes, and education expenditures are up as well, while residential phones, household textiles, and women’s apparel are among the areas where Americans are spending less. But it is the health insurance rise that can’t be ignored, only because Obama’s healthcare plan was supposed to ease spending for the majority of the country. That has obviously not come to fruition.Not only are Americans spending much more on health insurance, they aren’t even getting to enjoy the process. A new survey from Bankrate.com showed that 82 percent of recent Obamacare shoppers thought that sifting through Healthcare.gov was “as bad or even worse than doing their own taxes.” Large majorities also thought it was as bad as getting the middle seat on a crowded plane or getting a tooth drilled at the dentist. Now, people have a tendency to overdo their complaints, but there’s no reason Obamacare should be this painful.

via Health Insurance Spending Up 42 Percent – Thanks, Obama! | Lean Right America – Advocating our rights for a better America.