"Sometimes behind every dark cloud is another dark cloud..."
A friend of mine, who I respect as a stock picker, recently told me he had NEVER seen a bigger disconnect between the value of the stock market and reality. Right after he told me that I thanked him many times over. Our record highs on the Dow have the most to do with the Fed and least to do with the financial metrics of the country. I have been saying this for a while now, and many people have looked at me like I need a drug test.
One of the smart people I like to follow is the "Dr. Doom" of economics, Nouriel Roubini. He is referred to as "Dr. Doom" because he is sometimes one of the few making the clarion call for sanity on our economy. His voice is often drowned out by the chattering class gushing over the fact the Dow is at record highs (for no good reason what-so-ever). Roubini has been warning about the dangers of the Quantitative Easing (QE) "Forever" initiated by the Fed. We are in danger of a great many harms from this policy, Roubini states, the least of which is creating "zombie" banks and corporations. A "zombie" institution is a term coined in Japan. It is used for a company or bank which is hollowed out and held up only by cheap cash or credit. Nothing good can come from this in the long run.
In the midst of all the celebration with the market, we seemed to have forgotten the ye old debt issue. Ahhh, the debt. If I just don't think about it, it will go away. The President himself has recently said the debt does not really matter, we don't have a debt crisis. We all know the President has been rock solid and consistent on this issue (not!). Who can forget that now famous speech by this young, very inexperienced senator from Illinois who rose on the Senate floor to say the following: “Mr. President, I rise today to talk about America’s debt problem. The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills.” So as of today, the national debt clock continues to spin, the Fed continues to print money, and there is no plan to fix this thing.
Hollowed out cities like Detroit will continue to go belly up, or be on the verge of it. Promises made of huge pensions and buy outs are now found to be folly. There is a ticking timebomb in our country that even the bravest is afraid to report on. Buckle up for this one - In November 2012 in the WSJ, Cox and Archer reported on the issue of our true debt:
"The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure."
The unsettling fact of this quote is some (much smarter than I) have said this number might be low. If you take into effect ALL the promises made by the Federal Government outside of entitlements, the number could be over $130T! And that does not even address the problems of the cities (Detroit?) and states (California?).
So the next time you are watching the Lap Dog Media tell you everything is "hunkey dorey", remember this - many times before a plane crashes the ride is very smooth. Facts belie the lie - things are so not "hunkey dorey"...
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