by Phoenix Capital Research
What 2013 Means For You, Your Portfolio and the Economy at Large
Now that Obama has been re-elected, the BLS and other Government entities have begun to revise all of the positive data from before the November election downward. New jobless claims are back over 400,000. The amazing new home sales of 389,00 from October has been revised back down to 369,000. And a new record has been set for food stamp usage.
Things are only going to get worse for the following reasons:
1) Increased taxes
2) Increased regulation
Both of these items will result in people parking their cash rather than investing in the economy. Case in point, last week $132 BILLION was suddenly parked in bank savings accounts. That’s $132 billion (nearly 1% of US GDP) leaving the US economy and plunking into savings accounts
To put this number into perspective, this is more than the amount of money that fled to the safety of savings accounts when LEHMAN FAILED.
In simple terms capital is going into hibernation. Without the investment of capital, the US economy will continue to weaken. Between this, the fiscal cliff, the earnings disaster for corporations and more, the market is set for a truly horrendous 2013.
Economic bell-weathers such as Caterpillar (green), Fed EX (red) and McDonalds (purple) are already discounting this in a big way.
However, we’re not quite there yet. Unless things come unhinged sooner due to some event in Europe, it will probably be the end of December (when the fiscal cliff will be hitting) before things really get messy in the markets.
I want to alert you to all of this in advance because I believe 2013 will be the year in which the BIG Collapse happens. As I’ve explained in earlier articles, it almost hit last summer. It was only through the ECB and Fed promising to buy everything that the system held together. But now even the Fed has stated outright that it cannot contain the impact of the fiscal cliff.
Please prepare well in advance. What’s coming next year will be worse than 2008. There is literally nothing positive I have to say about what I see. At the very least, we’ll face an economic slowdown on par with that of 2008 accompanied by a market crash. And this will happen at a time in which Central Banks will be totally out of ammo.
We get additional signs that those in charge are out of ideas in Europe. There the latest proposal for Greece is a debt buyback plan through which Greece would use €10 billion to buy some €30 billion worth of debt. Greece doesn’t have €10 billion lying around so it would likely tap a bailout fund (the EFSF or ESM) to do this. This means Greece would need (you guessed it) another bailout in order to buy its own debt.
It would also need to convince Greek bondholders to sell their stakes, which was a huge issue during the Second Greek bailout earlier this year.
So once again, we have yet another non-solution (the goal of this plan is to help Greece get its Debt to GDP to 120% by 2020) which will require a great deal of arm-twisting and political machinations to accomplish almost nothing.
The same idiocy is playing out in Spain. The latest plan there is for the country to cut the balance sheets of three nationalized banks by 50% sometime in the next five years. How will they do this? By dumping their toxic property assets into a “bad bank.”
The idea here is that somehow someone will want to buy this stuff. Spain already had to postpone the launch of the bad bank by a month because no one wanted to participate in it (despite the mainstream media claiming that the idea was popular which is untrue).
So, here we have Spain proposing that it can somehow unload a ton of garbage debts onto “someone” even though there is no “someone” to buy them. And the whole point of this exercise is to meet conditions so that Spain would qualify for another €40 billion in aid.
€40 billion in aid.
On an annualized basis, Spain has experienced portfolio and investment outflows of more than €700 billion. And the latest plan to address this situation (as well as the implosion of the Spanish banking system) is to dump toxic bank assets into a bad bank to free up €40 billion in aid.
Oh, and Spain needs to issue over €200 billion in debt next year.
Again, a non-solution which doesn’t fix anything.
As I mentioned before, without a doubt 2013 will be a disastrous year for the global economy and for the financial markets. Things could get ugly before then due to any number of issues that are boiling just beneath the surface… but barring any sudden developments, most of the key players will try to hold things together into year end.
At that point, there’s really not anything to look forward to (compared to this year when many pinned their hopes on the US elections or on more intervention from the Central banks). And that’s when things will get really ugly.
If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US debt bubble bursting, then you NEED to check out my Private Wealth Advisory newsletter.
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You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.
These reports outline:
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To take out an annual subscription to Private Wealth Advisory now… start profiting from the market’s gyrations (again we’ve made money on 76 out of 90 trades in the last 18 months)… and gain access to all my Special Reports…
- Bundesbank sees “noticeable” German GDP shrinkage
- Japan’s new government to get aggressive
- U.K. Debt Expected to Top 27 Billion reports Debt Consolidation Loans
- Amount Greeks owe their state rises to 54 billion euros
- Debt Loads Climb in Buyout Deals
- Irish bailout could make record books
- Greek Debt Unsustainable Without Official Sector Losses -Moody’s
dailyreckoning.com.au / By Dan Denning
No matter how many times you ask a dog what it’s trying to tell you, it’s always going to tell you the same thing: bark! The language of dogs is indecipherable. True, there are happy barking sounds and angry barking sounds. You can sometimes tell what it means by the tone of its bark. But the vocabulary of dogs is pretty limited.
We bring up the subject because the stock market is failing to communicate accurate information about the economy. The stock market is barking at investors. The bullish analysts are slobbering all over themselves. The ASX/200 briefly reached a 17-month high last week when it traded above 4,600. But the volume of the bark doesn’t really reveal the quality of the stock market, which to our mind OUGHT to be awful.
The stock market is under no moral obligation to perform in the manner we expect. It would be nice if it did. But investors have always thought this way. This is why the stock market is so good at humiliating the over confident and humbling the proud. Prices are what they are, no matter what you think they should be.
For what it’s worth, we think prices will eventually go lower. Two of the world’s three largest economies – the United States and Europe – are on the verge of another recession. But that is just a textbook definition. The reality is much worse.
The reality is that consumption in both economies is likely to remain low for years, as households deleverage. To the Keynesians, consumption (aggregate demand) is what drives GDP. If you want GDP to stop falling, you have to make up for the ‘lack of consumer demand’ by spending more at the government level. This textbook solution is complicated by the fact that most governments are already deeply in debt….