Smoky Mirrors....

 

 

"The market today is phony baloney, good time rock and roll nonsense. It is nothing but smoke and mirrors..."

Yesterday we had a young man from an insurance company visit us to explain long term care insurance. After seeing how expensive long term care is for my Mother, this is something my wife and I decided might be a smart idea to get. Once the young man arrived, we chatted for awhile, and then he went into a sales pitch on redistributing our assets into the stock market. After a couple of minutes I stopped him (politely), and said two things - 1) we are interested only in long term care insurance and 2) anyone who puts even a dime in the stock market right now is playing with dynamite.

I glanced over at my wife just long enough to see her roll her eyes. She knew what was coming. She has heard this over and over again from me. However, it was important for me to "school" this young man. To let him know of the great conspiracy. How we are all being duped.

"Do you know how much the market went up today" I asked him. Not a clue he responded. "Over 300 points" I continued. "And do you know why it went up 300 points?" He looked a bit uncomfortable and said no. "It was primarily due to expectations that Europe is going to keep their interest rate artificially low until at least 2016. That is it. Nothing more. Oil was up a notch, but is still trading under $50/barrel."

I continued on. "Do you know the primary reasons for the market crash in 2008?" Now he was really squirming. "Lots of reasons" he safely replied. "That may be", I went on, "but the two primary reasons were the handling of toxic assets by Freddie and Fannie as well as too many derivatives held by banks. Today, we have two large banks that are holding $300T in derivatives. That is more money than all the currency in the world. In addition, the hedge used for these derivatives is oil being traded between $100 and $120 a barrel. In addition, with the Fed holding the interest rates below market as well as printing money like crazy, we have a huge bubble coming up once rates are normalized. The cost to service our debt of $18+T will be a back breaker for the economy."

By this time the young man was very happy to drop the topic of our asset redistribution and get back to long term care insurance. Johnny "rain cloud" had done his job again. I rained on another parade. I am sorry, but this is just too dang important to keep my mouth shut. The truth is simply this - our economy is NOT in good shape. We have only put lipstick on this pig. We are living on borrowed time. Some experts are already talking about the next crash. And it will not be good. This one might be really huge - much bigger than 2008.

Sorry this posting could not be more chipper. The good news is this - if you have any money, spend it now. Travel, buy something, or whatever. Until the bubble pops, it is still a bubble. And as kids say, blowing bubbles is fun.