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It’s A Mad World After All

On Monday, the Federal Bureau of Investigation released their crime statistics for all of 2008. And, I, for one, am surprised at what the data revealed. From the Associated Press:

Cities in the United States got safer in 2008, while small towns grew more dangerous, according to FBI data released Monday.

The FBI says violent crime nationwide dropped by 2.5% last year. Property crimes also fell by 1.6%, according to the preliminary data collected by the FBI.

Cities with more than 1 million people saw murders fall by 4.3%; cities with 500,000 to 1 million people saw murders fall by nearly 8%, according to the FBI.

Yet in towns with fewer than 10,000 residents, murders rose 5.5%, rape increased 1.4%, and robbery 3.9%, the agency reported.

The latest data show violent crime fell for a second straight year, after increases in 2006 and 2005…

Nationwide, murder and manslaughter dropped 4.4% in 2008.
Aggravated assault declined 3.2%, forcible rape decreased 2.2%, and robbery dropped 1.1%, according to the FBI. The country also saw a huge drop in car thefts — more than 13%.

The western region of the country saw the biggest declines, with a 4.2% drop in property crime and a 3.4% drop in violent crime. The Northeast saw a slight increase in property crime, which rose by 1.6%.

Also just released were the results from an annual study of global violence. In comparison to the U.S. crime numbers, there wasn’t much of a surprise here. From Reuters’ Peter Griffiths yesterday:

The economic downturn has made the world more violent and unstable in the last year, according to a study Tuesday that ranked New Zealand as the most peaceful country and Iraq the least.

The impact of high food and fuel prices in early 2008 and the deepening recession later in the year eroded peace, according to the Global Peace Index, compiled by a unit of The Economist magazine group.

Economic weakening has increased political instability, demonstrations and crime in some countries, according to the study, which is online at www.visionofhumanity.org/gpi/home.php.

“Rapidly rising unemployment, pay freezes and falls in the value of house prices, savings and pensions is causing popular resentment in many countries, with political repercussions,” the report says.

Iceland, the most peaceful nation last year, fell to fourth place after violent protests over its economic meltdown.

“There is a very, very strong correlation between peace and wealth,” Steve Killelea, founder of the Global Peace Index, told Reuters. “Peace is a leading indicator on economic prosperity.”

New Zealand replaced Iceland at the head of the table of 144 countries. The top 10 included all the main Scandinavian nations as well as Austria in fifth place, Japan seventh and Canada eighth…

The United States rose six places to 83rd, wedged between Ukraine and Kazakhstan.

Kazakhstan…

Sources:

“FBI: U.S. crime falls, but small town violence up”
Associated Press, June 1, 2009

“Global recession making world more violent: study”
Peter Griffiths
Reuters, June 2, 2009

Is Iceland A Preview Of Things To Come?

Is the situation in Iceland a preview of what’s in store for the United States? I seriously hope not. From the Washington Post’s Mary Jordan this morning:

Iceland’s coalition government collapsed Monday, the first government to fall as a direct result of the global economic turmoil.

Prime Minister Geir Haarde said he and his cabinet would resign immediately. As personal savings have been wiped out and joblessness has soared, Icelanders — once among the world’s wealthiest people — have taken to the streets in protest, banging pots and pans and throwing eggs and toilet paper at Haarde and other parliamentary leaders…

Iceland’s economy is forecast to shrink by almost 10 percent this year. Its banks, which had expanded into global powerhouses, had embraced risky investments that far exceeded the reserves of the nation’s central bank. The country was forced to accept a bailout from the IMF.

Further proving that politicians are the same the world over:

In recent days, protests intensified as no leader took responsibility for the crash, prompting police to use tear gas for the first time in half a century.

People felt that the government was “playing the violin while the Titanic was sinking,” best-selling Icelandic author Andri Snær Magnason said in a telephone interview from Reykjavik, the capital. “Everybody who has a loan is paying 20 percent interest,” and even those who own modest homes find their salaries cannot cover what is owed, he said.

Haarde announced Friday that he would call early elections and said he would step down. He cited health reasons and said doctors were treating him for cancer.

Kind of perplexed the Icelandic government didn’t use the ol’ South Korean blogger story.

And now, a little ditty from some angry Icelanders…

“This wasn’t… supposed to happen”
Björk/The Sugarcubes, “Hit” (1991)
YouTube Video Link

Source:

“Global Financial Crisis Fells Iceland Government”
Mary Jordan
Washington Post, January 27, 2009

It’s The Hoovers We Remember

From the Wall Street Journal’s “Washington Wire” blog last Friday:

The top congressional leaders from both parties gathered at the White House for a working discussion over the shape and size of President Barack Obama’s economic stimulus plan. The meeting was designed to promote bipartisanship.

But Obama showed that in an ideological debate, he’s not averse to using a jab. Challenged by one Republican senator over the contents of the package, the new president, according to participants, replied: “I won.”

The statement was prompted by Senate Minority Whip Jon Kyl of Arizona , who challenged the president and the Democratic leaders over the balance between the package’s spending and tax cuts, bringing up the traditional Republican notion that a tax credit for people who do not earn enough to pay income taxes is not a tax cut but a government check.

Obama noted that such workers pay Social Security and Medicare taxes, property taxes and sales taxes. The issue was widely debated during the presidential campaign, when Sen. John McCain, the Republican nominee, challenged Obama’s tax plan as “welfare.”

With those two words — “I won” — the Democratic president let the Republicans know that debate has been put to rest Nov. 4.

For me, these two words go beyond signaling the end of the debate over the contents of the stimulus package.

The significance behind the President’s statement is that the Obama administration will no longer be able to escape the blame of the American public should efforts to jump start the economy fail and the nation’s economic health deteriorates further.

But couldn’t they blame the Bush administration for the crisis?

This might work in the short-term, but not for the long-haul. History shows it’s the Hoovers that we remember.

What do I mean by this statement?

If we look back at the Great Depression of the 1930s, which American president is blamed for letting that fiasco happen on their watch. Why, President Hoover, of course. Think “Hoovervilles.”

A “Hooverville”

Herbert Clark Hoover was the 31st President of the United States, serving in that office from March 4, 1929, until March 4, 1933. A number of historians cite October 29, 1929, the “Black Tuesday” stock market crash, as the beginning of the Great Depression in the United States. While a number of President Hoover’s actions only made the country’s economic situation worse, a strong case can be made that the seeds for the crisis were laid during the years of the prior administration.

While the “Roaring Twenties” are depicted as being a time of great economic prosperity in the United States, the truth was anything but:

• Uneven income distribution- in 1929 the top 0.1% of American families had a total income equal to that of the bottom 42%.
• Massive consumer debt- In this era of individualism, Americans abandoned their spend-thrift ways and engaged in an orgy of mass consumption. And when the money wasn’t available, consumers gladly opted to participate in new “buy now, pay later” programs.
• Unstable banking system- After World War I the United States became the world’s chief creditor. American bankers lent heavily to European borrowers, especially Germany, who would have difficulty repaying the loans in the event of a significant economic downturn.
• High tariffs- The United States maintained high tariffs on goods imported from other countries. At the same time, it was making foreign loans and trying to export products. As other nations could not sell their products in the United States, they could not buy American goods or repay loans from U.S. banks.
• Stock market bubble- Wealthy Americans fueled a stock market “bubble” in the latter part of the twenties. This, in turn, drew many less-affluent Americans into the market as well. And in an era of easy credit, these new investors bought millions of stock shares using margin.

The end result? Robert S. McElvaine, author of The Great Depression: America 1929-1941, wrote:

The stock market crash announced the beginning of the Great Depression, but the deep economic problems of the 1920s had already converged a few months earlier to start the downward spiral. The credit of a large portion of the nation’s consumers had been exhausted, and they were spending much of their current income to pay for past, rather than new, purchases. Unsold inventories had begun to pile up in warehouses during the summer of 1929.

Now, the American President during this time was John Calvin Coolidge, Jr., who served in that role from August 2, 1923, until March 4, 1929. Yet I never hear President Coolidge’s name mentioned in the same sentence as the Great Depression. It’s always President Hoover.

Last year’s stimulus program proved to be a failure. As President Obama said the other week, “Anything is possible in America.” So is the potential for “I won” turning into “We lost” if this next stimulus package fails. And to add insult to injury, like President Coolidge, it won’t be the previous administration in the White House that the American public will blame. As with President Hoover, it will be the man at the helm during the crisis who will be remembered. 

For better or worse. 

Sources:

“Obama to GOP: ‘I Won’”
Mary Lu Carnevale
Wall Street Journal (Washington Wire blog), January 23, 2009

“Great Depression in the United States”
Robert S. McElvaine
Microsoft® Encarta® Online Encyclopedia 2008

401(k) Plans To Lose Preferential Tax Treatment?

Remember all that talk some time ago about the U.S. government ending tax advantages for 401(k) retirement savings accounts? Well, the topic’s back in the headlines these days. In October, U.S. News & World Report’s James Pethokoukis wrote:

I hate to use the “S” word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers’ retirement accounts (Efharisto, Fausta’s Blog). Now, even Uncle Sam isn’t that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans.

House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created “guaranteed retirement accounts” for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, said that since “the savings rate isn’t going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that’s not generating what we now say it should.”

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On December 19, Bloomberg’s Jeff Plungis reported the following:

Holders of 401(k) retirement savings accounts oppose changes to the tax deferments 401(k)s receive, according to a survey conducted for the Investment Company Institute released today.

And 87 percent reject the idea that government should make the investment decisions rather than individuals, the Washington-based group said. The survey of 3,000 people was done by Princeton, Jersey-based market research firm GfK Custom Research North America with a 1.8 percent margin of error.

“Some policy makers would have us abandon the system,” said Paul Schott Stevens, president and chief executive officer of the ICI, an association of companies that promotes investment issues. “But millions of Americans who are saving for retirement through that system want nothing of that sort.”

The survey said 72 percent “strongly” or “somewhat” disagreed with the idea of ending tax advantages for the savings accounts.

The Congressional Budget Office estimated that workers lost $2 trillion in retirement savings over a span of 15 months from declining stock markets at an October hearing of the House Education and Labor Committee. Chairman George Miller, a California Democrat, questioned whether the U.S. has gotten its money’s worth out of the estimated $80 billion in tax subsidies the retirement accounts receive each year.

One witness, professor Teresa Ghilarducci of the New School for Social Research in New York, suggested investors would be better off with government-run retirement savings accounts that would guarantee a 3 percent return above inflation.

3% return above inflation? Not exactly the path to wealth. However, my biggest hang-up regarding this proposed “guaranteed retirement account” is, who’s to prevent Uncle Sam from fudging the inflation numbers? Some suspect this has already been taking place for some time now.

However, getting back to the issue of eliminating the preferential tax treatment of 401(k) plans, I wouldn’t be too surprised if this became a reality. For if the nation’s precarious financial situation gets as bad as I think it will, Uncle Sam is going to need all the money he can get his hands on…

Sources:

“Would Obama, Dems Kill 401(k) Plans?”
James Pethokoukis
U.S. News & World Report, October 23, 2008

“Americans Want to Keep 401(k) Tax Break, Survey Says (Update1)”
Jeff Plungis
Bloomberg, December 19, 2008

Quote For The Week

There is certainly no shortage of finger pointing to go around for the current global economic crisis. But after exhaustive research and contemplation, I have determined that the majority of blame lay squarely at the Manolo Blahnik adorned feet of only one person: Paris Hilton…

Paris Hilton has achieved global iconic status without ever having accomplished anything. She taught us all that that it is ok, even fashionable, to have success without substance, to live well beyond our accomplishments, and that the perception of success was more important that having ever earned it.

Paris Hilton’s designer garments fell to the floor, and with them the personal responsibility and accountability of an entire generation!

Not surprisingly, Ms. Hilton’s yoga inspired trist soon led to a wave of dramatic societal changes. To keep up with the Jones’, we bought McMansions with zero interest loans. We leased BMWs with no money down. We sucked dry home equity lines of credit well beyond what our homes were worth. (turned out the Jones’ were broke too…)

We stopped saving altogether, and increased our spending annually to an average of 5% MORE than what we earned.

CEOs took out millions in options and bonuses, often in amounts exceeding the profits of their entire companies. States created entitlements they could never sustain. And the federal government began writing checks that will bounce for generations to come.

Could any of these changes have occurred absent the influence of Paris Hilton? Perhaps. But all occurring simultaneously? That is just too much coincidence for this observer to believe.

Success without substance…

As Warren Buffet once stated, “Only when the tide goes out do you discover who has been swimming naked.” The economic tide will likely continue to wash out over the next 12-18 months, and with it the false perceived success of all those living beyond their means. In they end, millions will be lined up on the beach completely exposed, standing alongside Paris Hilton, and all wearing the Empress’s New Clothes.

-From “Stripped! How Paris Hilton Caused the Second Great Depression,” by Richard A. Smith of The Huffington Post this morning.

Stock Market Losses Threaten Baby Boomer Retirements

It’s never a “good” time for the bear to growl down on Wall Street. But this one couldn’t have come at a more inopportune time, as far as Baby Boomers are concerned. From Reuters staff earlier today:

Wall Street is currently in its worst bear market since the Great Depression, and its stunning destruction of wealth and retirement savings has sent a wave of distress through investors, especially older ones…

The Organization for Economic Cooperation and Development estimates U.S. household wealth has taken a $7 trillion hit from the tumbling housing and stock markets.

Last week’s stock market losses took the S&P 500 down to 11-year lows and amounted to a 52 percent decline from record highs hit a year ago.

Source: American Chronicle

What makes this stock downturn so potentially devastating is that a sizeable portion of retirement assets belongs to older Americans. From the Reuters piece:

Households aged 50 and older held $5.1 trillion in retirement accounts as of Sept. 30, 2008, according to the Urban Institute. That means 71.5 percent of all retirement account assets are in the hands of those vulnerable to financial losses as they approach the end of their salary-earning years.

Of households ages 50 and older, 49 percent own retirement accounts, and nearly 80 percent of those accounts include stock holdings, according to the Urban Institute.

The typical retirement account for 50-and-older savers has half its assets in stocks, compounding the damage just as many enter the final stretch before retirement. This could also have a chilling effect on the economy if they are forced to adopt a more austere lifestyle to shore up savings.

FREE VIDEO FOR TRADERS/INVESTORS: Is gold the last store of value?

Source:

“Falling Stocks Crush Boomers’ Retirement Funds”
Reuters, November 28, 2008

Give It Away, Give It Away, Give It Away Now

I came across the following observation from Cody Willard on the FOX Business Network’s website this afternoon. While I don’t always agree with what Cody says— he struck a chord with me this time out. From “The Cody Word” blog:

If you risked money on real estate in the last few years and now you own couple houses and a lot in town – The government’s gonna take from someone else and help you out.

If you chose not to sell any stock when your stock was up a bunch at some point in the last few years and now you don’t have enough money to pay your bills – The government’s gonna take from someone else and help you out.

If you bought and sold people’s mortgages and got paid handsomely for your time in the last few years but now find your bank insolvent because you lied to yourself and your investors and your customers about how valuable those mortgages are – The government’s gonna take from someone else and help you out.

If you borrowed billions in the last few years to take big companies private, collecting huge pay days and having the companies you buy stop investing in new technologies and laying off as many people as you can in the company in order to maximize short-term cash flows – The government’s gonna take from someone else and help you out.

If you’re not making enough money to pay taxes or you’ve been laid off recently or been hurt on the job recently – The government’s gonna take from someone else and help you out.

If you’re gambled with your developing country’s currencies and tax base and now your economy is in shambles and social unrest is rising – The government’s (IMF in this case) gonna take from someone else and help you out.

If you’re a giant corporation in the world’s second largest economy and your exports are being hurt by the big improvement in your country’s currency in the last few weeks – The government’s (Japan’s government) gonna take from someone else and help you out.

If you’re an insurance company and you blindly wrote policies on corporate defaults, mortgage defaults, and currency derivatives without bothering to make sure you had enough reserves to actually pay for any, much less all, of those claims – The government’s gonna take from someone else and help you out.

And if you’ve been working, renting and saving – THE GOVERNMENT’S GONNA TAKE FROM YOU AND HELP SOMEONE ELSE OUT.

Confidence won’t return until private ownership of losses is enforced again. The more losses the government puts on us, the more they socialize our markets, the more they spend trying to buy confidence, the less confidence we’re going to have.

Red Hot Chili Peppers, “Give It Away” (1991)
YouTube Video Link

Source:

“Paulson, Obama, McCain: Money For Everyone Who Doesn’t Have It”
Cody Willard
Fox Business (The Cody Word Blog), October 28, 2008

Quotes For The Week

Learn how to drive a tractor.

-Legendary investor Jim Rogers, who gave this advice to out-of-work Wall Street MBAs the other week while speaking at the Toronto CFA Society’s annual forecast dinner.

These are extraordinary times and… we could possibly see a breakdown of our society like you and I have never experienced. We may want to replace grains and oil with guns and butter because that’s what we’re probably all going to need plenty of if this thing really gets out of hand.

-Dale Doelling, chief market technician at Trends In Commodities in an October 10 MarketWatch piece.

My fears have now been confirmed, and the U.S. Government is now set to destroy all hope of economic recovery.

Make no mistake; had the government resisted the political pressure to interfere with the markets, we would now be experiencing a very deep recession. But by refusing to let the markets work, policy makers are resisting the only medicine capable of curing the economic disease that afflicts us. The same mistakes were made in the early 1930’s, causing a severe financial crisis to morph into the decade-long Great Depression.

The government will now attempt to keep bad loans from failing and real estate prices from falling. Rather then allowing market forces to rein in excess borrowing and replenish savings, it will encourage even more borrowing and drain what is left of our savings pool. Rather than allowing our economy to return to one based on legitimate production, it will continue to encourage reckless consumption.

In the end, by refusing to allow market forces to work their cure, our economy will inevitably die from the disease. Our economy will now face death by hyperinflation, which will cause a complete loss of confidence in the dollar and result in prices and interest rates skyrocketing out of sight. The evaporation of our national wealth will lead to civil unrest, food and energy shortages, and the possible imposition of marshal law. If such a scenario unfolds, what is left of our Constitution will surely be completely shredded.

-Peter Schiff, President and Chief Global Strategist of Euro Pacific Capital, in an article last week entitled “The Beginning of the End.”

Retirement Bliss Becomes Nightmare

I feel so bad when I hear of retirees who are experiencing financial distress. True, there are no guarantees in life, and that includes financial security. But it still saddens me that a person could work so hard, for so long, and not retire comfortably, if at all. And the data points to more of these heart-breaking stories ahead, according to the New York Times’ John Leland and Louis Uchitelle. Back on September 23, they wrote:

Today’s retirees have less money in savings, longer life expectancies and greater exposure to market risk than any retirees since World War II. Even before the last week of turmoil, 39 percent of retirees said they expected to outlive their savings, up from 29 percent in 2007, according to a survey by the Employee Benefit Research Institute, an industry-sponsored group in Washington…

Older people with few assets, including the one-third of retirees who rely on Social Security for 90 percent or more of their income, may not suffer directly from the decline in the stock market, but they feel the pain of higher gas and food prices and reductions in volunteer services like Meals on Wheels, which have been curtailed because of fuel costs.

The collapse of the housing market has hit older homeowners. According to the Center for Retirement Research, Americans over age 63 pulled $300 billion out of their home equity through refinancing from 2001 to 2006, lowering their net worth.

Surveys by AARP, the Transamerica Center for Retirement Studies and the Employee Benefit Research Institute have found that more workers nearing retirement age are putting off their plans to retire, curtailing contributions to their 401(k) accounts and borrowing from the accounts to pay for living expenses, including credit card and mortgage debt.

After three decades of decline, a higher percentage of Americans older than 55 are now working than at any time since 1970, the Bureau of Labor Statistics reports. Some are working because they want to, but many because they need to.

The McKinsey Global Institute reported in June that the typical worker would have to work to age 70 to maintain his or her standard of living in retirement.

Source:

“More to Fear in World of Retirees”
John Leland, Louis Uchitelle
New York Times, September 23, 2008

New Study: Housing Bust Causing Massive Losses In Household Wealth

Just wanted to share a press release with you from the think-tank of our old friend, Dean Baker:

Housing Market Meltdown Will Cause Massive Losses in Household Wealth

Plummeting house prices will leave millions of homeowners dependent almost exclusively on Social Security in their retirement

For Immediate Release: July 9, 2008
Contact: Alan Barber, (202) 293-5380 x 115

WASHINGTON, DC- As Senators McCain and Obama fine-tune their plans for Social Security in preparation for the 2008 presidential election, a new report from the Center for Economic and Policy Research (CEPR) shows that, due to the collapse of the housing bubble, the vast majority of Americans have accumulated little or no wealth. This means that they will be almost completely reliant on Social Security and Medicare to support them in their retirement years.

The study, “The Impact of the Housing Crash on Family Wealth,” analyzed the wealth holdings of families in all age cohorts in 2004 and projected the wealth of these families in 2009. The findings are presented by income quintile under three scenarios- real house prices remain at current levels, real house prices fall by an additional 10 percent, or real house prices fall by an additional 20 percent. In all three scenarios, the vast majority of these families will have little or no housing wealth in 2009.

“This extraordinary destruction of wealth will have tremendous implications for millions of families,” said report co-author Dean Baker. “Coupled with a very low personal savings rate, this means that many people, especially those near retirement will only have Social Security and Medicare to rely on once they leave the workforce.”

The report projects that if house prices stay the same through 2009, the median household headed by a person between the ages of 45 and 54, those in their prime earning years, will have 24.7 percent less wealth than did the median household in this age group in 2004. These households will have accumulated just $113,268 in net worth in 2009, barely $15,000 more than their counterparts in 1989, whose net worth totaled $97,600.

If real house prices fall 10 percent, the median household in the 45 to 54 cohort will see a 34.6 percent loss in wealth compared with the median in 2004 while families in the 18 to 34 cohort will lose of 67.6 percent. If prices fall by 20 percent, the most pessimistic scenario, families in the 55-64 cohort will experience a loss of 49.6 percent of their wealth compared to the same cohort in 2004.

This analysis should also prompt serious re-examination of policy proposals to cut Social Security and Medicare for near retirees. Baker commented, “policies that perhaps could have been justified at the peak of the housing bubble make much less sense now that tens of millions of near-retirees have just seen most of their wealth disappear.”

In analyzing wealth holdings for these families, the authors used data from the Federal Reserve Board’s 2004 Survey of Consumer Finance. The authors also used the S&P 500 and the Case-Shiller 20-City Composite Index to adjust for equity values and home price changes between 2004 and 2009.

###

The Center for Economic and Policy Research is an independent, nonpartisan think tank that was established to promote democratic debate on the most important economic and social issues that affect people’s lives. CEPR’s Advisory Board of Economists includes Nobel Laureate economists Robert Solow and Joseph Stiglitz; Richard Freeman, Professor of Economics at Harvard University; and Eileen Appelbaum, Professor and Director of the Center for Women and Work at Rutgers University.

Source:

“Housing Market Meltdown Will Cause Massive Losses in Household Wealth”
Press Release
Center for Economic and Policy Research, July 9, 2008

Playing The Markets? Caution Is The Name Of The Game

Caution is not cowardly. Carelessness is not courage.

-Unknown

Here’s one for the traders and investors out there. I came across the following list of reasons yesterday from Bennet Sedacca (with Professor Rob Roy) of the financial website Minyanville.com as to why caution is a must in the markets these days:

1. Stocks are firmly in a downtrend.
2. Corporate spreads are rapidly widening.
3. Everyone I know is saying “All is well, buy America.”
4. European equities are taking out the lows of the year.
5. The capital-raising window is closed.
6. Earnings estimates are too high.
7. While much of the move in financials is done, it should spread to other industries.
8. If the “best of breed” are missing their numbers, what happens to the real dogs?
9. We are entering the worst part of the Presidential cycle.
10. We are at war. On multiple fronts.
11. The consumer is tapped out.
12. Corporate buybacks are gone.
13. Net equity issuance is very high.
14. Oil above $100 is very bearish.
15. The savings rate is 0.
16. The U.S. is actually one of the best performing markets in the world this year.
18. Level III assets continue to grow.
19. “Credit rot” is spreading from sub-prime to prime.
20. The dollar is sinking to new lows.
21. The Federal Reserve’s balance sheet is impaired.
22. Mutual fund equity cash remains low.
23. Individual investors are now taking money from their retirement accounts to survive.
24. The market is technically on the verge of breaking down.
25. We’ve broken the 200-week moving average in the Dow Jones for the first time since 2003.

Sedacca and Roy explained each reason in detail, and offered this advice:

Risks remain high and, as always, being cautious will only lose you opportunity – not capital.

Source:

“25 Reasons To Remain Cautious”
Bennet Sedacca, Professor Rob Roy
Minyanville.com, July 1, 2008

Why Americans Should Worry

Let me tell it to you straight. The. Math. Politicians. Sell. Does. Not. Work. And if we don’t start dealing with the truth soon, this country could face dire consequences.

-David L. Walker, Comptroller General of the United States, October 2007

On February 15, David M. Walker, Comptroller General of the United States, announced his resignation as head of the U.S. Government Accountability Office (GAO). Since November 9, 1998, Walker has served as the nation’s chief accountability officer, leading the GAO in its mission to help improve the performance and accountability of the federal government for the benefit of the American people. Back on February 15, Richard Cowan wrote in Reuters that:

Walker repeatedly urged Congress to waste no time in reforming massive government programs, such as health care for the elderly, which will grow significantly as the U.S. population ages.

“The picture I will lay out for you… is not a pretty one and it’s getting worse with the passage of time,” the blunt-talking Walker told Congress more than once.

Despite those warnings, Congress and the White House have yet to begin cooperating on how to tackle the huge growth in health care and retirement benefit costs.

Back on December 18, 2007, I wrote:

On Monday, the Bush administration released its Financial Report of the United States Government for the 2007 budget year. And guess what? The U.S. government is promising $45 trillion more than it can deliver on Social Security, Medicare, and other benefit programs, according to the Associated Press yesterday…

Even worse, when the gap in funding social insurance programs (Social Security, Medicare, Railroad Retirement, and Black Lung Program) is added to other government commitments, the total shortfall as of September 30 increases to $53 trillion, up more than $2 trillion in just a year, according to the report. Comptroller General David M. Walker, who serves as the head of the Government Accountability Office (GAO), said Monday that, “Our government has made a whole lot of promises in the long-term that it cannot possibly keep.”

Yesterday, Bill Donoghue from MarketWatch had this to say about Walker’s departure:

Facing indifference on the Hill and unrealistic spending promises, Walker is resigning with five years still remaining in his term to head the newly formed Peter G. Peterson Foundation. Peterson, senior chairman of The Blackstone Group and Commerce secretary in the Nixon administration, has pledged an astounding startup budget for the foundation of $1 billion.

That money will attack what the foundation considers “the most substantial economic, fiscal and other sustainability challenges of our current age” — including federal entitlement programs, health care, unprecedented trade and budget deficits, low savings rates, mounting foreign debt, soaring energy consumption, an uncompetitive educational system, and the proliferation of nuclear warfare materials. Maybe Congress will listen this time.

The departing Comptroller General told Reuters:

As Comptroller General of the United States and head of the GAO, there are real limitations on what I can do and say in connection with key public policy issues, especially issues that directly relate to GAO’s client — the Congress.

My new position will provide me with the ability and resources to more aggressively address a range of current and emerging challenges facing our country.

MarketWatch’s Donoghue lamented:

This sounds to me like the ultimate sell signal on America…

When the nation’s best-informed watchdog resigns and few are acting on his recommendations on his “Fiscal Wake-Up Tour,” it’s time to reconsider over-optimistic domestic stock investments and look elsewhere, or bet against the U.S. market.

Source: stock.xchng

The “Fiscal Wake-Up Tour” is a joint public engagement initiative by the Concord Coalition, the Budgeting for National Priorities Project at the Brookings Institution, and the Heritage Foundation, created for the purpose of explaining in plain terms why budget analysts of diverse perspectives are increasingly alarmed by the nation’s long-term fiscal outlook.

(Note: The author disclaims any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)