Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Financial Markets React to G20 Confusing Conclusion

Stock-Markets / Financial Markets 2010 Jun 28, 2010 - 02:25 PM GMT

By: PhilStockWorld


Best Financial Markets Analysis ArticleWe’re going to cut those deficits…  As soon as we’re done spending more money!

That’s the conclusion of the G20 summit this weekend as the official statement says

While growth is returning, the recovery is uneven and fragile, unemployment in many countries remains at unacceptable levels and the social impact of the crisis is still widely felt.  Strengthening the recovery is key.  To sustain recovery, we need to follow through on delivering existing stimulus plans, while working to create the conditions for robust private demand.  At the same time, recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, properly phased and growth-friendly plans to deliver fiscal sustainability, differentiated for and tailored to national circumstances. 

Those countries with serious fiscal challenges need to accelerate the pace of consolidation. This should be combined with efforts to rebalance global demand to help ensure global growth continues on a sustainable path. Further progress is also required on financial repair and reform to increase the transparency and strengthen the balance sheets of our financial institutions, and support credit availability and rapid growth, including in the real economy. We took new steps to build a better regulated and more resilient financial system that serves the needs of our citizens. There is also a pressing need to complete the reforms of the international financial institutions.

There’s 26 pages of this nonsense but the gist of it is:  We promise to keep bailing out the economies but as soon as that’s done then we are right on top of this deficit thing.  Of course, the underlying assumption there is that the bailouts are working in the first place - something that is difficult to convince the World’s 500M unemployed workers, who would rather have jobs than a robust banking system.  From a global perspective, our short-term outlook is less than robust so far:

We did a nice global economic overview on the weekend where we explored the austerity alternative to our previous assumption that the US will ultimately choose either "Default or Hyperinflation" and, after a raucous discussion in our Member Chat with good points being made on both sides of the aisle (the right side and the wrong one) - I will have to stand by my original conclusion that you will NEVER get this country to agree to go the austerity rout in any meaningful way so it looks like it’s Hyperinflation or, literally, bust…

I don’t mind inflation as long as it includes WAGE INFLATION.  Wage inflation solves many problems (see "Inflation Nation"), it allows anyone who is willing to work to create a realistic path to getting out of debt. It increases the value of middle-class people’s assets relative to the amount they owe on them and it helps people save for the future by paying them a reasonable rate of return for their wages.  Who doesn’t like inflation, then?  Creditors!  Banks don’t want to lend you $200,000 to buy a $250,000 home only to have you pay them back $432,000 (yes, that’s how much you pay them back!  See "Interest Scams and How to Avoid Them" where I show you how to save $100,000 on almost any mortgage) over 30 years in money that has less value than when you started. 

Here’s the scam in short:  They get you to borrow $200,000 for 30 years at 6% interest with a $1,200 monthly payment.  You take this payment on the assumption that your wages will go up and the home will be more affordable as life goes on.  Then the Fed (who works for the banks, not the government) does everything it can to fight inflation, which includes wage inflation and, a decade later, you realize you are not making more money than you were 20 years ago but you’ve already made $144,000 worth of payments that assumed some pretty high inflation that never happened. If your circumstances change and you need to lower your payment by switching houses - bad news - the house didn’t inflate either and you still owe the bank another $288,000 in payments for 20 more years. 

The article goes more into the math (and ways to save yourself) but this is how the Fed first tricked millions of people into taking on huge debt obligations and then did everything they could to make sure the underlying investments made no money for the homeowners while also making sure the banks were paid in full for all outstanding loans, no matter how many lending standards they violated to get those loans on the books!  Even as I’m writing this, Rick Santelli is having one of his "made for YouTube" meltdowns pushing for austerity - no matter how many of the little people need to suffer! 

Rick Santelli got famous for his "screw the homeowners" rampage on CNBC, which helped launch the Tea Party movement and helped insure that all those Trillions of bailout dollars went to the investing banks (including his employer, GE) with barely a rounding error’s worth of the bailout money (that the taxpayers paid for) actually finding it’s way to any taxpayers (and don’t confuse banks with taxpayers, they took write-offs that will have them living tax-free for a decade). 

We got our Personal Income data this morning and, what a surprise, it’s down 20% from last month to 0.4% from 0.5% as another 1.9M pink slips were handed out since the last report.  If you think that’s bad - just wait until we get the next report with the Senate Democrats unable to break the filibuster last week that sent 1.3M unemployed people’s income to zero with another 1M people joining them at that income level by the time we get the next report. 

Amazingly, Personal Spending went up 0.2% last month, but it turns out it was all spent at the pump as the massive surge in gas prices ripped the money out of consumers pockets so fast, they were forced into more debt before they could adjust their consumption habits.  Well, better luck next time consumers! 

The May Chicago Fed National Activity Index was down to .21 from .25 in April as weaker contributions from employment and housing dragged the numbers down.  Yes, Rick, what an ideal time it is to be cutting back on spending - I think I still see some people with hopes and dreams that haven’t been completely crushed…  Treasuries are thrilled with the action (rich people have lots of T-Bills) and 2-year yields dropped to 1-year lows this morning on the G20’s austerity promises.  Bond rates, on the other hand, are heading higher as the percentage of corporate bonds considered in distress is at the highest level in six months, signaling investors expect the economy to slow and defaults to rise

Likewise, commodity shipping costs continue to fall for the 21st consecutive day as the Baltic Dry Index falls below the 2,500 line for the first time since October, 2009.  Part of it is the slowdown in Chinese construction demand and part of it is the  7.2% increase in shipping capacity in the first half of this year as ships that were ordered in 2007 begin hitting the waters empty. 

Not surprisingly, Asia was mixed to flat this morning and the FTSE was up and now flat but the  CAC and the DAX are holding on to 1% gains and, despite the total incompetence of our global leadership, I’m still optimistic that we’re going to hold the bottom we formed last week.  We have a lot of data to get through, including Case-Shiller tomorrow and Non-Farm Payroll on Friday but then it’s earnings season and we will then see how innovative our great US Corporations really are.

It’s going to be an interesting week!

By Phil

Philip R. Davis is a founder of Phil's Stock World (, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (

© 2010 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in