I didn't say it

From Seeking Alpha.  I got the picture, seems perfect: 

The Greatest Depression Is Coming

204 comments

October 17, 2009    

Good times will not be returning any time soon.

We continue to lose jobs month over month. And, while the statistics being released are showing a slow down, this is basically a fabrication. There are thousands of people falling off of unemployment compensation each week — none of them are reflected in the official numbers. Shadowstats.com estimates unemployment is above 20%. Take it for what you will, but these numbers are rapidly approaching the unemployment rate during the last well known depression.

Credit is contracting. The last decade in America has seen credit, or debt, however you want to look at it, essentially become a second income. No more. The banks may be getting billions in loans, but for the individual on the street, credit is frozen. Couple this with the loss of primary income streams and you have a lot of people with no money for even essential goods.

Foreclosures continue to mount. In addition to the foreclosures of the last 2 years, we have millions more in play right now, regardless of the mortgage programs the government institutes. Job Loss + Credit Contraction means there is no way millions of people will be able to make their monthly payments. Nowadays, once you lose your job, you aren’t going to have an easy time finding a new one that adequately services personal debt. In real terms housing prices are not done dropping. There are some conservative down-side estimates that say an additional 15% is likely. But, what if they are underestimating? What if it turns out to be 30%, or more? If we are in a depression, the downside is huge. Japanese real estate lost 80% (adjusted for inflation) in the 1990’s (and so did their stock market!). In some parts of the country, home owners would probably agree that the 45% their homes have already lost would constitute a depression.

Debt defaults keep rising. Bank of America just released their numbers and lost upwards of $2 billion dollars, due in part, to credit card defaults. This is not the sign of a healthy consumer. When a consumer defaults on a credit card, that is leading indicator that they will not get easy credit if they need it in the future. A default in 2009 is a big red flag for lenders. Empirically, this seems like it may be a leading indicator for continued credit contraction on the consumer side.

Small businesses are getting hit hard. Small business is the engine that runs the entire economy, employing around 70% of the workforce. Right now, they have no access to loans, and the consumer is drying up. To survive, they’ve had to cut costs significantly. The next step will be to cut jobs. Many have already resorted to letting people go. As much as owners may not want to let go of their people, they realize they have no choice at this point. Incidentally, many major corporations showing “better than expected” results employed these same strategies. But, the businesses themselves, not necessarily by choice, are perpetuating the negative feedback loop. As they lay off employees, more consumer income is destroyed, leading to fewer revenues across the board for a majority of businesses, big and small.

The Middle Class is holding on for dear life. If small business drives jobs and production, it is the middle class that drives consumption. And the middle class is getting hammered for all of the reasons mentioned above. Many middle class families are realizing, or will realize very soon, that their lifestyle choices are going to need changes. Cut out the gym and take a jog instead. Why pay $100 for cable when you can get similar, if not better, news and movies online for $30 a month? Is organic really necessary at the grocery store when one can save 30% buying the regular stuff we grew up on? Do I really need to get a new car when my 2005 Explorer is just fine? Why go out and spend $100 when dinner and a movie at home a couple of Fridays a month saves enough money to pay the electric bill? These and other questions are going through the collective mind of middle class America. They are desperately trying to avoid becoming a member of working or under class America. The initial step to maintain stability is the same as with small businesses - cut spending.

Visualize a car engine. When there is enough motor oil, the pistons are firing up and down rapidly and the system runs efficiently. When the oil dries up, the engine begins to deteriorate. It’ll go for a little while longer. And it’ll become much more violent and volatile each time it fires. Invariably the engine seizes up and fails.

What we see in many aspects of the system right now are pistons that are firing violently. First a crash in the stock market. Then trillions in bailouts. Then an historic and massive stock market swing in the other direction. We see individuals speaking out in public, on the airwaves and on personal blogs en masse about one topic or another. Whether it is rep-on-Obama or dem-on-Bush bashing, there are extreme levels of divisiveness and heated, sometimes violent clashes. The system is moving into extreme peaks and troughs at a much more rapid pace now than anytime in the last 50 or more years.

We are in the opening stages of the Greatest Depression, a term coined by Trends Forecast founder Gerald Celente. The next stage, as Mr. Celente has said, will be “like nothing we've ever seen in our life time.”

Welcome to the Greatest Depression.

Disclosure: Short BAC

One never knows what will happen, but one can read the signs, like  leaves turning color.  

All manner of hypothesis is possible. We look at past markets and so on for a clue. But, keep in mind we just may in a very different track rights now. We have that 150 PE, you recall. All I can say is if you like stocks, don't like many of them.  

I see gold and oil coming down a bit. The leverage people ran into gold recently to grab some value, but the experts think it is oversold. If gold settles back, that is the time to stock up on gold or silver, followed by cans of yams. Again, if this is all poppycock (I never used that word before), you will have saved some money.  If it is 50% accurate, you will be prepared. 

Rght now, the market is the inverse of the USD. Remarkably so. One analyst said the dollar was reacting to the market. I don't know. I tend to think the market reacts to the dollar. In any event, we are at a 1.50 ratio with the EU which has been called a "disaster," so may see the dollar being supported (market goes down.)

Once the fed steps in to raise rates, probably next year, the game changes again. 

All this may be confusing, but the mega-trend is turning a bright yellow and orange on the trees.  So, what do we do?  I suspect the answer is not to spend a few trillion more.  The sad thing is, history suggests we need a war. I never before people thought like that, now I do.

What if

What if I am not chronically depressed and things are going to get far worse? I recommend you actually read all this for your families' sake. Indeed, if things really crash and you have prepared, you will profit by the collapse, though that is a hard way to look at things.

I gathered some notions as to how to create a plan, if you are so inclined to panic. What is the point of predicting gloom - just for the hell of it?

It is easy to mull over my grumpy observations as going overboard. Hope so.

What if they are not?

On the right is our money supply. Go here for definitions. However, note the out-of-control M3 that was no longer reported after 2005! I guess we didn't need to know what the banks and brokers were doing. As you suspect, the people who knew what was going on were working hard to hide it in the hope that it would, somehow, go away.

The green part is the real money. That is where we are heading.

First, read over what the Elliot Wave people say.

Excerpted from The Elliott Wave Theorist, January 22, 2009

"As we have long argued, because the current bear market is of one larger degree than that of 1929-1932, the depression it creates will be deeper, which in turn means that the unemployment rate will exceed that of 1933. The peak rate in 1933 was 25 percent. Therefore, unemployment in the U.S. should rise to about 33 percent at the trough of this depression. Fitting this expectation, U.S. job losses in the fourth quarter were greater than at any time since 1945, when World War II ended and defense factories shut down to re-tool. Even after this plunge, however, the 'official' unemployment rate is just 7 percent. But the true unemployment rate, as it would have been measured before the era of government support payments and statistics-fudging such as omitting the number of people who give up looking for work, is currently 17 percent. (This figure is courtesy of John Williams’ Shadow Government Statistics at http://www.shadowstats.com.) So we’re halfway there.

"Here is an excerpt from Conquer the Crash [Prechter's New York Times best-selling book]: 'When the bust occurs, governments won’t have the money required to service truly needy people in unfortunate circumstances.' It’s starting to happen: Agencies administering state governments’ 'unemployment benefits' are swamped and running out of money. In a depression, taking funds from healthy companies to pay people out of work is a scheme that cannot endure. Serious suffering will occur when reality strikes and governments are forced to rescind their promises to the unemployed and stop paying them."

Second, Mark S. Watson's blog:

10 Feb

Bullion Sales Hit Record In Rush To Safety - FT
Investors are buying record amounts of gold bars and coins, shunning risky assets for the relative safety of bullion amid renewed fears about the health of the global financial system.(end excerpt)

The key here is that we are not talking about 'paper gold' or ETF's. We are talking about put it in your hand and walk away with it gold. Now I don;t know if you can really get gold at the 'trading price'. I rather doubt it...

Third: From a Watson piece in Freedomwriter blog: The causes of our troubles, putting aside the charts and numbers, are

• Decreasing democratic input into national decision making

• Reduced or non-existent law enforcement on the rich and powerful

• Mental laziness on the part of the general population

• The increasing use of propaganda techniques in national news reporting.

• Plain old graft, theft, fraud and corruption.

These trends are accelerating and the wise should prepare for the coming economic shocks ahead.

Watson is a long-standing voice of warning. I used him because of his prior work.

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Things that must be done now for salvation, if worse goes to worst:

1. Delink from the "system." Assume you will have little to no money, soon. Now, you know how to delink because the entire problem is brought on by debt and consumerism. We are servants to mortgages, loans, and taxes; no, not servants - slaves. Time to throw off the chains. Now, as you know, the price of houses do not always go up.

If you can get out of a debt with a small loss, do it. Don't think about waiting because that small loss is like the treasure the bad guy would not release in King Solomon's Mines. It dragged him under. I could go on with detail, but if you just live each day like you will be broke in 6 months, you will get it.

Bank locally. The central banks are the tipping point and will continue to tip. You do not want your credit and debit card to stop being honored, one day.

If you are stuck in a mortgage, better start planing on turning the garage into an apartment. Sorry, but it may come to that.

2. Put away food, water, and items for barter. Recall, money may become irrelevant, as inflation skyrockets and you may lose your income. Seriously, store these items carefully.

Think about reality. What are the real needs, the real luxuries. A chocolate bar could be very valuable if all hell breaks loose, as would rifle ammunition. After food, think heat and power. Think hyper green: insulation, woods stoves, etc. Get that wood, etc. Perhaps, a water filtration system if you do not have your own sources.

3. If you have money, get rid of it. (If you don't - SAVE IT) At least get rid of American money. Buy any silver or gold, if you can find it, but it may be too late. Or, buy Swiss Francs and deposit them, even at 1% you are ahead of the game. Look for silver dollars, etc. I tend to think a nice gold mine stock makes sense. I think one can get Canadian precious metal coins.

You can argue that paying down debts in the future is better because money will be cheaper, that is assuming you have a job to make the payments. Even if this scenario works for you, why keep deteriorating currency? When the government tells you there is a 3% inflation, they tell as though it is the prices that are going up ----- the truth is the money is going down.

4. An interesting item I read all the time is: build your community. Get to know your neighbors as a tight community will hold together. Good time to plan a community cook out. I started watching the TV series Jericho on Joost.com, a sobering look at post-apocalyptic times. Today's Road Warrior.

5. The car is the big matter to deal with today. If there is a big debt, time to sell. If not, it may be time to become a mechanic.

Diesel is a better technology in the Third World. Be aware, if things go south, car insurance will become dear. It is mandated and an easy source of income. So, having extra cars may not be good idea. In all events, don't take out a loan. Buy crap that runs, if you think things are going to be bad. Even if you have cash to buy - wait a little while. Again, only secure a loan if you don't need a job to pay it (probably, the only time a bank will give yo one); then you will be paying down the debt with cheap dollars one hopes is in silver.

6. Change the mindset, the paradigm. It is not easy to be Scrooge McDuck while things seem to be just a little slow, but it may just be time to put off what others think. We do not believe in a collapse. It doesn't compute. Just doesn't happen, which is exactly why it can. The illusion of security and constant growth is secure in our minds and is our enemy. Do what you have to do and do so with a firm purpose.

If you live frugally, the worst that can happen is you save money for use in the future. Not a bad trade off for security.

I am off for a beer.