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Obama’s Bear Market: How to Survive and Prosper

November 11, 2009 by  

Obama’s Bear Market: How to Survive and Prosper

They say you can just buy just about anything, even love. But the truth is you can only rent a bull market and the lease on this one is about to run out.

After devastating losses that pushed the Dow Jones Industrial Average to 6,440 in early 2009, the Dow broke above 10,000 last month for the first time in 53 weeks. All thanks to President Obama and his bagmen at the Federal Reserve.

You see, President Obama and Federal Reserve Chairman Ben Bernanke have already injected more than $1 trillion in new money.

Part of this has been in the form of bank bailouts. More has been given to Detroit automakers. And finally, Washington has inserted a whopping $850 billion directly into the U.S. banking system. It is this final act that will wreak the greatest havoc on the U.S. stock and bond markets.

When the credit crisis hit last year the Fed began “running the printing presses.” We are talking about the creation of hundreds of billions of dollars, so presses aren’t really running. Instead, the Fed has created all this money with the touch of a key-stroke. Soon this mountain of money will spill over into the economy and the markets.

The graph above shows the Fed’s unprecedented creation of U.S. bank reserves.

In his Nov. 2, column, Robert Murphy of PrisonPlanet.com explained: “The United States has a ‘fractional reserve’ banking system, meaning that if you added up all of the checking account balances for the customers of a given bank, the total amount of deposits would far exceed the amount of cash reserves in the vaults of the bank.”

As a result, said Murphy, all this fresh Fed money will soon be lent out at a multiple. A conservative estimate is five times the amount injected. That means that the $850 billion in new bank reserves will be transformed into more than $4 trillion in new money. That would take M1 money supply from $1.7 trillion to $6 trillion in just the next few years!

To read all of Murphy’s story, click here.

 

Even before the avalanche of new money, M1 has risen 50 percent since January 2001 (see graph M1 Money Supply).

With all this fresh cash on the bank’s books, M1 could easily double to more than $3 trillion in the next two years. That would make M1 money supply almost 10 times higher than it was when Ronald Reagan took office.

We haven’t seen this kind of excess monetary growth since the stagflationary 1970s. It was bad for stocks and bonds then and it will be just as bad for them today.

A Short History of Stagflation
Between 1970 and 1981, M2 money supply tripled. A record amount of liquidity was being injected into the economy by the Fed. But all this money wasn’t helping an economy that was just limping along.

From the beginning of 1971 to the end of 1979 the gross domestic product (GDP) rose by just one-third—from $3.9 trillion to $5.2 trillion (in constant dollars).

As the amount of money in the economy vastly exceeded the goods and services being produced, inflation was inevitable.

The consumer price index for the 1970s rose by a staggering 6.5 percent each year. By 1980 a 1970-dollar that had been stuffed in the mattress would buy you just 52 cents worth of goods and services. It marked the end of dollar stability and the post-war economic boom that fueled a bull market in stocks.

In January 1950, the Dow Jones Industrial Average was under 200. In January 1966, it breached 1,000 for the first time. Over the next few years, the Dow moved sideways, twice testing, but never again breaking above the magic 1,000 point level.

Stocks fell into a funk. Money supplied by the Fed was not producing real gains and the stock market reflected this.

In April 1980, the Dow was trading at 759. That might not seem too bad compared to its 1966 apex, but factor in inflation and the 1980 Dow, measured in 1966 terms, was really trading at $329. In real terms the Dow had lost two-thirds of its value in 14 years.

Bond investors also did poorly. In the late 1970s prices on 30-year Treasury bonds fell more than 25 percent as the yields-to-maturity on the bellwether 30-year Treasury bond climbed from a rate of 7.75 percent in 1977 to 14.7 percent in 1981.

The end result was a massive renunciation of paper as investors began switching out of dollars and buying real assets.

Yet while many Americans lost their savings in Big Board stocks and bonds, some investors made incredible gains in precious metals.

Pitfalls and Profits
I first began investing in gold when I was just a teenager and it was selling for $35 per ounce. I kept that gold until it topped out at $840 and corrected back to the $650 per ounce range. So even though I didn’t get out at the top, I did get an 18-fold profit.

If that sounds like ancient history and something that can’t be repeated, don’t be so sure. Nine years ago last month I started writing Outstanding Investments. I told subscribers then to buy gold, silver and platinum as well as precious metal equities. At the time gold was selling for less than $280 per ounce.

Today bullion is trading back over $1,050 per ounce and I have been bullish on the precious metals throughout the decade. I still believe that bullion prices could very well double in the next two to three years. Given the excess of Obamabucks, I can see gold trading for more than $2,000 per ounce by the end of 2012.

And don’t be surprised to see silver rising to $80 per ounce (versus $17 today) and platinum to more than $3,000 per ounce.

Action to Take

It is imperative that you get out of Big Board stocks and all long-term debt instruments including Treasury notes and bonds. Look for a major correction to come in the Dow, the S&P and the NASDAQ in early 2010. I wouldn’t be surprised to see the markets hit new lows. At the same time, bonds are just as susceptible to huge losses as I expect interest rates to go up. I urge you put your money into cash in the form of three-month T-bills.

A T-bill is simply a short-term debt obligation backed by the full faith and credit of the U.S. government. The key to a bill is that it’s very short-term (and pays an incredibly small interest return). It has a maturity of less than one year and is sold in denominations of $1,000. You can buy maturities of one month, three months or six months. I like the three-months T-bills because you are not locked in very long but you don’t have to constantly roll them over.

Three Ways to Buy T-Bills

  1. Go to your local bank and ask to buy Treasury bills. This may be the easiest option because you already make periodic trips to your bank.
  2. Call your investment broker. Tell him or her that you want to purchase three-month T-bills and roll them overuntil further instructions.
  3. Buy Treasury bills directly from Uncle Sam. The Treasury Direct Website will guide you through this process and give you lots of information as well. You can access that site at: www.treasurydirect.gov.

I also urge you to buy some physical gold. If you are just starting out, I suggest you buy 1-ounce U.S. American Eagle coins as well as 1-ounce Canadian Maple Leaf and South African Krugerrand coins.

—John Myers
Myers’ Energy and Gold Report

PS—Next week I will be writing the first of a two-part series on energy. If you think wind power is the answer to tomorrow’s problems you will want to read Part I. It will include why fanciful presumptions by the Obama administration are, at best, ignorance, and at worst, the purposeful deceit of the American public. In Part II, I will tell you the core truth about America’s dwindling petroleum reserves and I will give you a new energy stock pick that should be in your portfolio.

John Myers

is editor of Myers’ Energy and Gold Report. The son of C.V. Myers, the original publisher of Oilweek Magazine, John has worked with two of the world’s largest investment publishers, Phillips and Agora. He was the original editor for Outstanding Investments and has more than 20 years experience as an investment writer. John is a graduate of the University of Calgary. He has worked for Prudential Securities in Spokane, Wash., as a registered investment advisor. His office location in Calgary, Alberta, is just minutes away from the headquarters of some of the biggest players in today’s energy markets. This gives him personal access to everyone from oil CEOs to roughnecks, where he learns secrets from oil insiders he passes on to his subscribers. Plus, during his years in Spokane he cultivated a network of relationships with mining insiders in Idaho, Oregon and Washington.

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  • Johnnyrite

    Just mkore gloom and doom nonsense. My stock broker says the Dow is headed past 15,000 soon. Myers is Chicken Little through and through. The sky is always falling.

    • Robin from Indiana

      Johnnyrite… Your stock broker is very optimistic, heh? I guess we’ll see. I am not a savvy investor or anything remotely close to that, but I’ll bet we don’t see the stock market hit 15,000 for quite some time. It would be nice, but I am not counting on it!

      • s c

        Robin, johnnyrite suffers from severe ‘just because i voted for comrade obama doesn’t mean i’m biased’ and ‘my stock broker no longer sells discounted tickets for Titanic cruises – so he’s infallible.’
        I’ll bet you that johnnyrite’s stock broker was an integral part of the brainwashed chorus that sang ‘real estate always goes up.’ So much for that.
        Nowhere does Meyer claim the sky is always falling. What little johnny won’t admit is that he’s obligated to sing the ‘praise obama’ chorus. Even when jobs continue to disappear, the dollar is worth less and less, and comrade obama’s utter ignorance of economics becomes obvious around the world, johnny boy will be in comrade obama’s amen corner, singing his praises.
        This is simply one more sad tale of ultralibs seeing what they want to see (also known as a terminal case of ‘don’t bother me with FACTS’).
        Boring, predictable, and supremely pathetic.

        • Johnnyrite

          Check the stock market… it is up again today! Soon gold will be recognized as the relic it is. I checked out the gold report link by Myers… What a waste. I’m betting on stocks.

          • DaveH

            Johnny,
            Keep in mind the broker makes money whether you win or lose. Before you do anything foolish, research the Carter Era (1976-1980). Money is being wasted right and left by the government and that is not a good thing for the economy. Probably you can enter “stagflation + Carter” into your search window and get information on the net. I don’t know, I haven’t tried that yet. I have studied markets for 30 years and I can’t say the market will rise or fall, I just know that these are very risky times. If you have to invest, get into a “natural resource” mutual fund or a “precious metals” mutual fund. The coming inflation will probably cause the prices of a lot of stocks to go up, but that will be only because the dollar is becoming worth less. The aforementioned funds will give you protection against the dollar’s decline without the risk of the general stock market.

          • Robert

            Prudent man rule. Only bet 5% of your liquid assets in the stock market. Too much manipulation going on right now. Stay away from hedging unless you know what your are doing. It’s a very tough market to select any one sector because of all the unknows Washington is putting out there. Commodities are a crap shoot. Equities are not too far behind. Real estate could work but you need to do your homework. Illegal drugs and guns, now that’s a sure bet. Dowside though is that you go could go to jail or become dead. Tough choices, eh buddy?

      • Robert

        Robin, you might not be a savy investor but you get an A for caution. I saw a broker contact one of his clients towards the end of the month one time. You know what he said. ” Hey, lets put some cash in your account”. So he sold off a position and made $3,200.00 in commission. About three weeks later he contacted the same investor and said ” This market is driving higher and higher each day, let’s not miss the boat” so he bought into a stock his firm was underwriting. Bang, about $1,100.oo in commission. Sure the investor made a few bucks, but the broker made a whole lot more. Remember one thing about brokers. They have to eat and pay bills just like us. Buying and selling is how they earn a living. If they’re not trading, they can’t eat or pay their bills. Don’t get me wrong, unless a broker is churning and account (illegal) what they are doing with an investors account is always to make a profit for their client. It just so happens, they always get a nice chunk of the profits.If they sell at a loss, they still make commission. Usually in that case, they discount the firms normal commission rate so it doesn’t drive you to another competitor. This is the rule of the jungle on Wall Street. Hope this makes some sense for you.

    • jbird

      Just curious, Johnnyrite: Did this stockbroker also tell you last year the Dow would drop below 6,500?

    • Trisha

      Johnnyrite; you can’t say you haven’t been warned. I hope you are right, but feel strongly you are not. sorry

      • Robert

        Dow will swing 700 point both ways before the end of the year. Doubt it will hit 11,000 but should settle around 10,600. Lots of realignment happens in December and historically it’s a big gifting period, so a little volitility is normal. January and February are a look and see for bargains with no big bets made until 1st quarter earnings are disclosed in April. But these models are now out the window. What Washington does impacts the market more than it ever has in our markets history. Only way I see us hitting 15,000 is if we invade Canada and sack all their natural treasures. But 11,500 by mid-summer is possible if Cap and Trade and Health Reform doesn’t pass. If it does pass, my gut feeling is the market will tank.

  • Lou

    It appears that there is approximately 250 to 300 trillion dollars worth of derivatives liability floating around in wall street. The next melt down wall street is working on will make the last one look like childs play. This phony market must collapse before the stock market can get back on track.

    • s c

      Johnnyrite has been inhaling the Greenspan vapors for too long to realize that Bernanke is a talking-head puppet reincarnation of Greenspan. For those who don’t remember (or never knew), GREENSPAN was responsible for the government praising and adoring and BLESSING derivatives.
      Maybe we need tea leaf readers at the Fed. I don’t think they could do any worse than what passes for typical ‘leadership’ there. I’m still waiting for Bernanke’s world-class knowledge of the Great Depression to materialize (HA!).

    • Robert

      That’s just on Wall Street. Don’t forget about all the other markets. Multiply your number by 22 and that’s extremely conservative. That’s the real worldwide derivitives exposure. Scary, huh? Here’s an insider tip. US Government selling Moon acreage. And do you think Wall Street wouldn’t package it and sell it to us? You bet they would. Anything to make a buck. Who cares who gets hurt. Uncle Sam will pay for it.

  • Dexter

    you don’t have to be a financial or economics expert to know we’re in for a long period of modest to no growth… with inflation looming and threatening to send up into another recession or worse… when we have the governemnt printing money and piling on debt like there’s no tomorrow… when you have an all out assult on freedom and capitalism… when you have government taking over banks, car companies, our healthcare, and job killing policies abound… when you have an unprecedented partnership between the governemnt and the unions… when you have endless demonization of the producers of our great nation… and when American entrepenuers are discouraged to innovate because there is nothing in it for them except for more taxation and government intervention… DOW @ 15,000? In your dreams!

    • Robert

      Nicely put. You hit the nail on the head.

  • Lou

    Now would be a good time to you tube peter schiff, And find out just that the working class of america is in for if correction action isnt taken immediately

  • Normal American

    Johnnyrite, you need a new stockbroker. He makes money when you buy and sell and if you think the Dow is going to 15,000 he’s got you hooked. Ask him how it makes any logical sense whatsoever that the Dow peaked in the 14,000′s at a time when everyone thought that the gravey train was going to roll on forever, and now that it’s painfully obvious the train has come off the tracks we’re going to blow past the previous top? Nonsense. Myers is Chicken Little becuase he’s RIGHT, for the most part. Stocks are going to tank. But I disagree with the assessment of inflation and gold, at least in the short run. In my opinion the “money” being created by the government pales in comparison to the “wealth” that has been destroyed over the past 2 years and which I expect to continue. This wealth destruction takes many forms including massive home value declines, stock portfolio declines, defaults on consumer and mortgage credit, derivitives wiping out, etc. So now not only has all this wealth evaporated, but we have sky high unemployment (which I expect to go much higher), and those fortunate to have jobs are so worried they’re not spending. These people are not buying gold, they are selling it in the form of all their gold jewelry so they can pay the rent and put food on the table. This will continue until people feel confident again. So in the next few years not only do I not expect inflation, but I expect massive DEFLATION. This will be bad for gold in the short run. The speculators who have been promoting the shit out of gold and driving up the price are going to get rich and the average Joes are going to be left holding the bag, again.

    • DaveH

      Normal,
      I suspect you are probably right. I have always been ahead of the curve a year or two. But you know, I would rather be early than miss the train. I would put at least 30% of my cash savings in precious metals (preferably silver at this time). With the way government is spending, even if the economy remains bad (and I think it will) we are still going to have inflation. You’re right – we can’t eat precious metals – but they have been sought after as a means to preserve wealth for much of mankind’s history. I don’t think that will end soon. Remember that the money supply has not disappeared. It is sitting in accounts waiting to be deployed. When that happens, bam, we get inflation.

  • Lou

    It’s amazing there all in on it together.Example every economic advisor kept stating that 4 negative GDP quarters in a row is not a recession but a depression all the main street media channels must have got the memo not to bring it up because no one even talked about it.But what they are saying is where out of the recession

  • DaveH

    This Sunday Fox news, is going to air a very important documentary about Barack Obama, Sunday night at 9 PM Eastern. The report will go back to Obama’s earlier days, showing even then his close ties to radical Marxist professors, friends, spirituaadvisers, etc. It will also reveal detail his ties to Rev. Wright for 20+ yrs. How he was participating with this man, and not for the reasons he states! The report has uncovered more of Obama’s radical past and we will see things that no one in the media is willing to put out there. It will be a segment to remember. Mark your calendar and pass this on to everyone you know: Sunday night, 8 PM. CT ; 9 PM ET. Democrat or Republican, this report will open your eyes to how YOUR country is being sold down the road to Totalitarian Socialism. If you care about the direction of our country, pass this notice on to everyone you know.

    • JeffH

      DaveH, thanks and can you see the Obamanation attempting to preempt this broadcast. One could almost bet on it.

  • Joe

    You all should be converting some or most of your U.S. Dollar based investments into other currencies. Everbank has foreign currency CD’s (FDIC ins) Swiss francs, Aust $$, Canadian $$, Singapore $$, Brazil Real…etc. Yes… Gold and Silver also — but get physical delivery. Gold also holds up reasonably well in a Deflationary period. Look at 2008. Better to be left holding a bag of Gold than a bag of decreasing dollars. Stockbrokers only push mostly what’s good for them. Do your homework. Go on Youtube…listen to Jim Rogers, Peter Schiff, and Marc Faber. These guys predicted this mess before it happened. Read what they say.

    • DaveH

      Good advice Joe. I would add that before you invest in foreign currency, please do a lot of homework. You may otherwise find that you’ve gone from the frying pan into the fire.

  • Lou

    When the country wants to start wondering just how in the hell this country got into this mess.We could thank people like nancy pelosi speaker of the house.Theft by deception.Most up in washington went around the world and sparing no expense of our tax dollars and using human rights issues to give our industrial and manufacture base to foreign nations.There accomplishments.Kids thrown into sweat shops making 25 cents an hour, and flooding our nation with junk products.And will probably take about a decade to clear off the shelves. So when americans are fighting over 2.00 an hour jobs with 4 billion people from foreign nations don’t forget to give washington a big round of applause

    • DaveH

      We got into this mess because very few people learn anything about economics in public school. I would guess that well over 60% of the population has no clue about the effects of Big Government, excess money creation, or anything else relating to economic matters.
      Whether this was by design, or just happenstance, is anybody’s guess.

      • s c

        Public education is THE common denominator in America’s
        coast-to-coast ignorance of economics. This is not an accident, DaveH.
        Homeschooling and heavy use of the internet can compensate for the sick joke known as public education. However, it also
        needs to be said that only a sudden, mass exodus of students can make a difference.
        America has millions of confused parents who blindly assume that uncle scam wouldn’t ‘dare’ muck up education. Look at the yahoos who take up space in the white house. Supposedly, biden has a good education. Comrade obama graduated from Haavid. Between those two, America might as well have trained chimps making economic decisions.
        I’ll put my money on the chimps. At least they can’t be ‘bought.’

        • http://www.personalliberty.com sepa

          S C

          You did hear that in Germany and several of the Scandinavian countries that Homeschooling has been outlawed or made almost and impossiblity for parents to do. This was on 2 Christian News channels yesterday. They said that the UK is headed in the same direction. It looks as if they do not want any of those radical homeschool ideas in those kids heads, eh.

          Sepa

          • DaveH

            Yep, they can’t indoctrinate the kids if they are home schooled.

        • denniso

          S C…I’ll match Biden’s and Obama’s public education against you and anyone on this site..no comparison,you lose!! Many,not all, home schooled kids wind up provincial,narrow minded and religious fundalmentalists..not so good for a modern superpower,do you think?

      • denniso

        I wonder if you have any real education in econ?? Would you agree that we’ve essentially had ‘big gov’t’ since FDR?? Yes? What has happened since FDR? We became the largest superpower in the history of the world, for better or worse. We put 2 or 3 cars in every driveway. Many people own 2 or3 or more houses. We consume 25% of the worlds output by ourselves. We dominated the world militarily and economically for 60 yrs and still do. Big gov’t the enemy?? It looks like ‘Big gov’t’ has mostly done a pretty good job of increasing wealth(on average) in our country to levels never seen before. The problem is that Big gov’t has to be kept out of the control of the big corporations that constantly try to get a bigger piece of the pie. The voters have to put in politicians that are not owned by corporate America, like almost all Repubs are.

        • DaveH

          First of all, I am assuming that you are talking about me with your Econ comment. Too bad. I have two 4-year degrees (neither was Economics). I graduated with honors in both. Also, I have one years worth of CS courses under my belt. I learned my economics over 30 years of home study and investing in the stock market. I never said I have an Economics degree. You did. Too bad.
          From another of your comments: “I don’t see any credit being given to Obama here or in the article for stabilizing the markets and helping the Dow recover by more than 50% from a yr ago”.
          Now folks, here is a guy that claims he has a degree in Economics. And he is not bright enough to look up the Dow charts and see that the Dow is only up 10-15% from a year ago. The low actually occurred a month after Obama was in office, and was probably precipitated by fear of his policies. See my later response to Denniso for more on this. Here is a one-year chart on the Dow average so you don’t have to take my word for it:
          http://finance.yahoo.com/q/bc?s=%5EDJI&t=1y&l=on&z=m&q=l&c=

          FDR kept us in almost a decade of Depression with his social policies. Jimmy Carter almost ruined our country 30 years ago. After the stagflation caused by Carter and the Democrats, he had the audacity to tell the American people that they needed to “tighten their belts”. It takes time to destroy the wealth that the US has built up, but Obama is up to the task.

          • denniso

            DaveH…Picking the starting point for when Obama had contol of the economy and markets on the day he came into office is more than absurd..it’s clear bias from an Obama hater. The market was in freefall before he came in and only if he were the god you people claim he thinks he is, he couldn’t reverse the ongoing collapse overnight. The actual bottom of the fall was in march at about 6500, not long after he had gotten the the bailout through congress w/ no help from Repubs. It’s reasonable to assume that his and even Bush’s earlier actions stabilized the markets and the Dow has recovered 58% of it’s value from that low. You can never prove absolutely what did or didn’t work, because you can’t go back and recreate the situation and try it another way, so we have to make reasonable asumptions.
            The vast majority of highly trained economists around the world agree that we had to do some serious bailing to stop another great depression, Reasonable people disagree about the details of what should have been done..the size of the stimulus, how it’s directed,etc.
            I know the Repub party line is to blame FDR for lengthening the Depression..HOGWASH!! Once again, you can’t re-do it, but almost all global economists disagree w/ you. One thing FDR probably did wrong was to bow to the rightwing nuts back then and try to balance the budget too soon by cutting spending..it slowed what had been a modest resurgence in the economy and didn’t help.
            But I forgot, you whining partisans who never lived through the depression think you are smarter than all the educated economists who spend their lives studying this stuff..does that mean they know everything or are infallibe,like the pope is to some of you,NO! but they know more than this group of knownothings. Oh, and what party was the prez in power when the real depression happened? Repub you say?

          • Joe H.

            Oh, but Denniso lived through the great depression though!!! Right!!!! Is there anything you haven’t done denniso??

    • Sandy

      I think you can than the institution of the Federal Reserve. The Feds are totally unregulated, able to loan money to the government and not accountable to anyone but their board, which are all big bankers. Ron Paul is right – we need to enforce John Kennedy’s Executive Order 11110 or pass his bill that allows us to audit the fed. Executive order 11110 says that the Fed can no longer loan the government money which essentially puts them out of business which is good for the US people.

  • http://none Annie

    Wouldn’t it just be a whole lot easier to just get out of the US currency altogether and buy British Pounds or Euros or something?

    • DaveH

      Annie,
      I’m not so sure they would be much safer. You should do your research and find countries that are doing the right things before you stick your neck in their money noose.

      • JeffH

        I can see Soros sitting back waiting for the right time reap his reward for the weakening dollar.

        • Robert

          Jeff. He’s already reaping the profits. He’s been shorting the dollar for the past 3 years and really upped his bets when Obama got elected. You wont hear about that from our conscientious main stream media. He has a hedge fund firm that does this trading and it is not subject to public or regulatory disclosure. Ain’t that a pip. You think Nancy P. will start an investigation or God Forbid introduce legislation to regulate hedge fund activities and require full dsclosure. Naw! Would adversly impact their campaign contributions stream.

  • DaveH

    By the way, T-Bills scare me. I guess short term would be okay, but once the inflation starts that interest gain would be wiped out quickly. And the way things are going, it wouldn’t surprise me a bit if the government repudiates their debt.
    Another thought – by buying their debt instruments, you are allowing them to borrow more and thus spend more.

    • Robert

      The greatest risk we face now is monetization of our national debt. Monetization is akin to using your credit card to pay off other bills. Sooner or later, you have to pay the piper because you’ve exhausted your credit limit but haven’t cut back on your spending during this time. This unfortunately is what Washington is doing now and it won’t be long before the piper knocks at the door. We just better hope those people in Washington speak Chinese.

      • DaveH

        For those who don’t know ‘monetization of the debt’ is when the Federal Reserve buys debt instruments from the US Government thus increasing the money supply which will ultimately lead to the hidden tax of inflation.
        A couple of months ago Bernanke denied that the Federal Reserve was monetizing the debt. Glenn Beck showed tracking of a $5 Billion dollar note that was first bought by a private party and 3 days later showed up at the Federal Reserve. A little shell game there.

    • John Myers

      DaveH,
      You are right to worry about. That is why I only recommend 3 month T-bills. Avoid T-notes and T-bonds like the plague.

      John Myers

  • http://www.personalliberty.com/liberty/obama%e2%80%99s-bear-market-how-to-survive-and-even-prosper-during-the-coming-collapse-in-stocks-and-bonds/ Jeanne

    What is M1?

    • s c

      Jeanne, look at Myers’ M1 money supply chart above. Basically, it will tell you all you need to know about comrade obama and his ‘qualifications’ to make economic decisions. It also says much about Bernanke and his ‘qualifications.’

    • John Myers

      Jeanne,
      M1 is a narrow measure of the money supply and includes currency in circulation plus demand deposits or checking account balances. Larger measures such as M2 include a broader measure of money such as time deposits. Only cash in circulation is a more narrow accounting of U.S. money supply.

      John Myers

    • Robert

      One measure of the money supply that includes all coins, currency held by the public, traveler’s checks, checking account balances, NOW accounts, automatic transfer service accounts, and balances in credit unions.

  • http://www.ProudlyMadeInAmerica.com Mark

    There is a problem, and I am afraid it is far worse then then article indicates. What is going to be the biggest problem is the Chinese stimulus. As I read at ProudlyMadeinAmerica their stimulus is mostly on the production side. There is already a steel glut, and China is ramping up production on items that there is still no market for. In the end, China, in their goal to prevent civil unrest, will distroy the already weakened economies of the west.

    • DaveH

      When any country subsidizes one sector of goods, it comes at the expense of the rest of their country. China, by protecting certain of its manufacturers would be shooting itself in the foot, while Americans would benefit from their low-priced goods.
      Certain Americans with vested interests promote such fears for obvious reasons — self-protection. It’s up to the rest of us to not fall prey to such fear-mongering.

  • Robert

    I’ve worked on Wall Street for 42 years. Derivitives are a toxic atomic bomb waiting to explode. If you only knew how these worthless instruments are being peddled you would demand the regulators, the Fed, the Treasury put an end to it. But they wont. Derivitives make money for the elite and well connected. Think about the Bernie Maddoff ponzi rip up and mutliply that scam by 100,000. That is the true toxitity that has not been owned up to. Uncle Sam can’t do a damn thing about it nor all the governments in the entire world. The value of exposure exceeds the entire wealth of this planet. I hope you get the picture. Governments allowed this to happen and they can’t let the truth be known because it would result in worldwide chaos. There is no solution to this. If this situation is owned up to, it would result in something far worse than a worldwide pandemic virus. Why do you think Paulson didn’t use the TARP funds to buy the Banks toxic assets? Because subprime loans and the garbarge that Wall Street repackaged as investments was a drop in the bucket to the real exposure. Just look at AIG. Hundrends of Billions in taxpayer bailouts and it covered less than 7% of their derivitives exposure. And what they are reporting now is a figment of their imagination with the government’s blessings. And the stock is selling above $35.00 a share. Wall Street got it right. The average person is stupid and believes anything as long as good old Uncle Sam says it’s ok and not too worry. Ask you representative in Washington to explain what they are doing about this or if they even understand what is happening and the risks this out of control market is leading us. I’ve been an outspoken banker for the past 15 years on this subject but you know what I’ve been told? You like getting a paycheck? Then shut up and mind your own business. And believe me a lot of my peers have been told the same thing. But in 2 years, I’m out of here with a decent pension. Then you’ll have a new crop of bankers to live with. There are just too few of us to fight the system. Especially when the government looks at us as troublemakers. You have no idea what true honest bankers have had to deal with for the last 15 years.

    • Hulk

      Sounds like regulation may be the only answer. Thanks to ronnie alzheimer for dismantling regulations and the middle class with his rhetoric and actions.

      • Robert

        It started way before Ronnie was president. He didn’t help but there are a lot others, Republicans, Democrats, Independents and Conservatives that all contributed. And it started when the Federal Reserve Banking system was created. By the way, this system is illegal according to our constitution. An who created it, Politicians. Americans don’t create national problems, politicians do. Let’s get real and call a spade a spade. Politicians create these messes and they come from all parties.

        • http://www.easyinvest.co.za pete

          Absolutely right – funny how folks vote for the candidate (who by the way they would never ever actually want in their own home!), immediately elevate the winner (usually the best of a bad choice)to godly status, beleieving everything (even the lies) that emanate from his/her lips, forgetting that they are actually politicians, trained to deceive and differ in no way from each other whether they be Repubs or Dems!
          No wonder the politicians get it right all the time, perceiving us for what we are – their slaves! No wonder they look upon us with huge contempt, since we are actually inferior! If we were not these hoodlums would be gone!

    • DaveH

      What are derivatives, Robert?

      • DaveH

        How do those “derivatives” hurt people who don’t buy them?

    • DaveH

      Robert says “You have no idea what true honest bankers have had to deal with for the last 15 years”.
      And I still don’t, Robert. At least not from your comment.

      Some reality about “derivatives”:
      http://reason.org/news/show/meddlers-at-the-gate

  • Hulk

    It’s time to re-enact tarrifs again (as many other nations have to protect their industries and manufacturing)as we have ALWAYS had until recently(when jobs were all sent off shore); BUY American or not at all; and do what is necessary to support a population that can afford our products (aka as “the middle class”)

    ALSO, our infrastructure needs MAJOR investment. PUT AMERICA TO WORK FIRST! Once we are all working, we are all paying taxes that make the burden less for those paying with high unemployment.

    • Robert

      I agree with you 110%. Too bad all the politicans don’t see it that way. America first. And stop sending our money to other countries. We need to take care of our own first.

    • DaveH

      Protectionism caused the Great Depression. Let’s not go down that path. Protectionism for companies is akin to welfare for people. Both make it easier to be non-achievers.
      Our problem is too much government draining our resources. We need to cut the size of government and put those people back to doing productive work instead of interfering with the productive work of others.
      Please type ‘economic freedom’ into your search field and start reading articles. The only way to stop our decline is to free up our productive citizens and lessen the size of government.

      • DaveH
      • Johnnyrite

        You are exactly right Dave. Protectionism is the worst way to go. Free markets are what is needed. But these days common sense is not very common.

    • Sandy

      Hey how about deporting the 24 million or so illegals that are holding GOOD jobs in this country. The do nothing but cost us money. More money that both the Iraq and Afghanistan wars. 3 President have done this in the name of the getting the economy going again and freeing up jobs for Americans. Eisenhower was the last one and he did it in less than two years. Our southern borders are a sieve and I have to take my shoes off at the Airport – doesn’t make a lot of sense to me. These people are here illegally and broke are laws. They pay less or no taxes than the average legal Immigrant, they are over-running our hospital emergency rooms and living in subsidized government housing while collecting food stamps and welfare. Nice system we have in place here. Our economy would get a hugh influx of money and jobs if we got rid of these lawbreakers.

  • http://personallibertydigest Dutch

    Mr. Myers,
    Thanks for the good work you do. Concerning the 91-day T-bill: If I invested $10,000 in buying the Nov. 9th T-bill at the non-competitive rate, what would be my return on investment at maturity?
    Thank,
    Dutch

    • John Myers

      Dear Dutch,

      Your return would be virtually zero. Today the yield on a 3 month T-Bill is 0.7 percent, far less than the rate of inflation. So in fact you will have negative real rate of return. But keep in mind, the whole idea behind T-Bills is to safely put money on the sideline; funds that can then be invested back in the stock market later at far reduced prices.

      A good place to check out Treasury yields is this site: http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml.

      Best,

      John Myers

      • http://personallibertydigest Dutch

        Thanks John. I know the return would be very minimal, but let me explain. I have about a third of our savings in tangible gold and silver; a small investment in Iraqi dinars; and 55% in liquid dollars. I am looking at some ETF’s in commodities(such as oil), and some currencies(such as India, Austriala, etc.). However, as we are retired on a fixed income(no debt except mortgage, which is minimal), we want to be conservative in all our investments.
        Thanks,
        Dutch

        • John Myers

          Dear Dutch,

          It is hard to know what is conservative these days. Back in the mid-1980s, when I was trying to hit my stride in this business, men and women with fiduciary responsibilities were being held liable for not having their clients in the stock market. Then the Crash of ’87 happened. Suddenly, being responsible again meant being safe.

          Much the same cycle occurred with the Dot Com Bubble nearly a decade ago.

          I appreciate that low interest rates are difficult for you and others with your circumstances. But I am reminded of something my late father use to say: “Watch out Sonny for the return of your capital… not the return on it.”

          I might wrong about a Bear Market. But I think we will know either way by spring ’10. If so, a bit of prudence now could pay huge dividends later.

          Best,

          John Myers

  • hunter

    Obama has been behaving exactly like president Robert Mugabe of Zimbabwe! Before long we will be just like that country where the goverment has taken over everything from banks to farm land. The latter is why they are starving to death there. The stock market is up because the lying, stealing, cheating, lowlife bankers have figured out a way to take the bailout cash and infuse it in the stock market. The only game in town, why in the world would they loan it out to someone to start a business in this risky climate? As far as supply of dollars, just wait till the dollar reaches the critical point, and all of the dollars that have been used for drug transactions, buried for safety, used as a secure currency come racing home. Maybe then we can have trillion dollar notes, just like Zimbabwe. Ohh wait, thats how we can pay for the trillion dollar healthcare. That Obama, hes so smart! Don’t Belive me? Look up Zimbabwe, Cathy Buckle has a newsletter out every Saturday.

  • Lou

    ATTENTION VOTERS just in case you missed it, And didn’t get it. Last election the republicans are stating they picked up 2 seats,And the democrats are stating they picked up a seat after 60 years.Wrong It’s all about incumbents.Voters don’t need washington to pass a bill on term limits.We the people will do it for them. Every voter is so preoccupied to see if they can win and reelect their incumbent, they forget to stop and think if they should.As congress activated the water pumps on the titanic, with all the bailouts to wall street and the big banks, And the water pumps did just what there supposed to do. Now would be a good time to send them all back to the devestation in all states ,That they created .Get them out of that taxpayer borrowed money, washington bubble that they created for themselves. There is a cancer that grew in washington,And only WE THE PEOPLE can remove it.Your kids and grandkids are counting on you!

  • Johnnyrite

    Watch Wall Street climb this wall of worry. I am sick and tired of gold bugs preaching their message. Stocks are heading higher and so is the dollar. Europe is weak. China is not really a threat. How can any of you believe this nonsense?

    • Lou

      WRONG,check out the dollar.It’s at a 15 month low and rapidly dropping And everybody that watches the stock market can’t understand why it’s going up with all the bad news If you have money in the stock market you better watch it. Because the next melt down is going to make the last one look like childs play and just like last year telephones and computers will be down. and by the time they come back up.You’ll have pennies on the dollar Good Luck

    • DaveH

      Why does that make you sick? Anyone who doesn’t listen to all advice, and think about it, is destined to failure. Keep your blinders on and lose your money. It’s that simple. There has been a 2 Trillion dollar increase in the National Debt in just the last year. That’s almost a 20% increase from last year and about 15% of the United States GDP. Where do you think all that money goes? How long do you think the government can go hog wild with the money printing until the dollar collapses and with it a further collapse of our economy?
      For your sake, I hope the Liberals get stopped.

    • denniso

      J Rite…agreed…The gold pushers have been doing the same thing for decades..it’s been doing well for a couple of yrs now, but look back a little,like history guys! In the middle ’70′s gold had a run up to about 285/oz then soared to near 1,000..hordes were jumping on the wagon like drunks to a party..problem is the party flopped! Gold then crashed and fell to 300 or less and later moved a little and sat at 3 to 400 os so until just a few yrs ago. Gold still hasn’t caught up w/ inflation from it’s price of 285/oz 35yrs ago. Millions of people who listened to the pushers and needed their $$ 5,10,20,25yrs after buying, lost huge sums due to inflation. Sure,some who are clever or quick enough made $$ even 30 yrs ago and some now are making $$..mostly it’s mining co’s and brokers making ton’s of $$ off of the fearmongering that leads well intentioned folks down the path..it’s not new!

  • Bernie

    Just noticing an apportionment of blame in your article, Mr. Meyers. Basically, it sounds as though you’re saying that everythins is going down the tubes, “All thanks to President Obama and his bagmen at the Federal Reserve. You see, President Obama and Federal Reserve Chairman Ben Bernanke have already injected more than $1 trillion in new money.” My memory may not be the best, but wasn’t it George Bush who first went to Congress on his hands and knees asking for $700B? Obama trumped that with a cool $787B, but who set the original precedent? It seems as though while Bush was trying to infuse the banks, Obama has been trying to address employment issues, much aligned with Mr. Hulk who stated, “ALSO, our infrastructure needs MAJOR investment. PUT AMERICA TO WORK FIRST!” What is being doled out by the federal government is being (or is intended to be) used by states for major public works projects. Personally, I’ve never been a fan of trickle-down economics, and I believe that a person with good shoveling arm and a few dollars in his pocket is tantamount to our country’s success. Putting our blue collars to work is, in my opinion, the best way to get us all out of this mess, and I’m glad I have a president who agrees with me.

    • John Myers

      Dear Bernie,
      I don’t argee with you on everything, but you are right about one thing — the buck(s) started with George Dubyah.

      Best,

      Johm Myers

    • JeffH

      …and I respectfully disagree with the bailout money being used to put blue collars back to work. States recieving monies are bailing thier budgets out.

      • Bernie

        But regardless of the outcome that was the intended purpose.

  • James Corbin

    You can see what Obama, is trying to do spend, spend until the $ isn’t of any worth. One way or the other he want’s government control!
    REMEMBER: You won’t be able to buy or sell!

    • denniso

      More paranoia from James…I don’t see any credit being given to Obama here or in the article for stabilizing the markets and helping the Dow recover by more than 50% from a yr ago. Doesn’t that positively affect millions of regular Americans’ pensions and private investment accts? Of course it does. We were in a free fall toward an actual depression and as distasteful and expensive as it is to bail out fatcats who helped cause it, so far it appears to have worked. Bush even deserves credit for doing something about it when most Repubs resisted and Bush got assistance from the Dems. We’ll never know what would have happened w/ out the action that was taken, but most good economists agree that we had to do something to avoid a depression that would make ’29 look like a picnic…give credit where due!

      • DaveH

        The Dow is only up 10-15% from where it was before Obama took control. Of course when you flood the economy with $2 trillion dollars of spending the market will go up temporarily. That is because the dollar has lost 15% of its value so far this year meaning that the current prices are only increased in nominal terms. If you compare the puchasing power of today’s dollar to the purchasing power of the pre-2009 dollar the Dow’s market value has really not increased at all. Meanwhile, every man, woman, and child in this country has been saddled with another $2 Trillion dollars worth of debt.

        • DaveH

          And the unemployment rate is now over 10%. So how bad does it have to get before you Liberal Hopers and Dreamers throw in the towel?
          That was a rhetorical question. Don’t bother answering; I know the answer – Never!

        • denniso

          DaveH…can’t give a liberal any credit..built in bias? When Obama came in the market was in a steep decline..look at a graph. Of course, Obama didn’t have control instantaneously,it took a little time to get things passed and going. The decline continued until it bottomed out at about 6500 in march,then began a steady rise up to about 10,300 yesterday.Obama can’t be blamed for the ongoing market decline when he came in,it was in freefall. From the low of 6500 in March, the Dow is up 58%…You’re right it cost a lot, but it’s what happens in a capitalist system w/o enough control..but I don’t know too many people who aren’t happy about it, except you and Limbaugh.

          • DaveH

            Did you even read my above comment? You probably don’t understand, do you? The increase in the Dow stock prices from a year ago could be attributed almost entirely to the decrease in the value of the dollar (more dollars chasing fewer goods).
            As you finally admitted – the low occurred after Obama was in office. So if someone smacks you down and then gives you a hand back up they should be praised? Amazing logic.
            See my previous response to an earlier arrogant comment by you.
            Yes, you are right Denniso, I am biased, biased against ignorant theiving Liberals.

          • DaveH

            By the way, if you really do have a degree in economics you must not have learned much. The Stock Market Investors typically think 3-6 months ahead. In the case of the Dow Jones plummet the investors were no doubt anticipating trouble from the bailouts and Obama’s known leanings to the left.

          • denniso

            DaveH…You’re driving a bus filled w/ people on vacation..you’ve been drinking and fall asleep at the wheel(Bush)..the bus starts going off the road and toward a cliff, a passenger(Obama) shoves you out of the way and grabbs the steering wheel and tries to get the bus back on the road,but can’t do it and the bus goes over the cliff. The cops find the passenger in the drivers’ seat and file negligence charges against him…Who’s the actual culprit DaveH?? Is that simple enough?
            If you know anything about ‘the market’, you should know,especially now, it’s made up of a myriad of complex variables and is almost totally unpredictable in any scientific fashion. It’s more emotional russian roulette than well oiled, finely tuned machine..that’s why everybody can’t make money in it all the time..that’s why it behaves like a psychotic human at times.

          • denniso

            DaveH…just a modest proposal..go back to school!

  • James Corbin

    Jusr because George Bush, wanted a stimulus, wasn’t a sign that Obama should follow suit. He has tripled spending ( more than any president in history) People voted for him thinking he would do better. WRONG!!!
    He is a destruction to our country.

  • Robert

    That democratic congressman who said: “Republicans answer to Health Care reform is: Die quickly”. I think that is the response of all politicians in Washington to us that are in our mid fifties and early sixties. God help those older than us. I think Wahington’s response to those are “Just die”. And if you don’t, we’ll do it for you. That’s why

  • Robert

    NEWS FLASH!!!!!!!!
    Several media outlets report today that the number of jobs created with the stimulus package are overy exagerated or outright bogus lies.
    Separately, President Obama has rejected all four recommendations on Agfhanistan troop increase. Reliable sources, who asked not to me named, state that Rahm Emanuel has suggested that the requested troops would be better used to eliminate those news media outlets that reported the truth. President Obama is said to be leaning heavily towards Rahm’s recommendation. In the meantime, 1,276,375 foreigners confirmed with the HIV virsus have applied for visas into the US. President Obama stated that this is the tip priority facing the US today and is expected to approve the visas within the next 72 hours. He said, and I quote, “This is the greatest challenge facing America today. Denial of these visas would be turning the clock back to Colonialism”. Keith Obberman of MSNNBC said ” And the party of NO is objecting, what is new. BUUUUUSSSSSH!!!!” On a happier note, Federal OMB states America is so broke, bankruptcy is not even an option. New York Times will start running sales ads for Yellowstone National Park tommorrow. Government expects to raise enough money to pay for their salaries and bonus for at least 2 months. Reliable sources say the White House is not up for sale. Walmart is said to be in private talks with Robert Gibbs on how to sell the property and let let on during his daily White House Briefings. I keep you all informed as this breaking news is further twisted.

  • James Corbin

    DENNISO, Please, Please tell me one thing Obama has done ??? Every thing he has done is against us!!!!

    PS The jobs that have been created is in the Whitehouse! Michelle Obama, has more people working for her than any other presidents wives!!!! By-the-way Denniso, I lived pretty good under George Bushs
    administration and I bet you did too!!!!!

    • denniso

      Corbin…I’m afraid you have to do your own research to find what good things Obama has done…i’m not about to waste my time w/ you when you won’t believe anything anyway.
      once again…did the collapse happen after 7 freaking yrs of Bush and 6 yrs of repub control of congress? Did Bush enter office w/ a budget surplus for the first time in decades? Did Bush bust the budget w/ a trillion $ tax cut for the rich? Did Bush burn up what will be another trillion $$ on a totally unnecessary war in Iraq and waste more billions by not finishing the Afghan war?? open your mind Corbin..I know it’s hard but you can do it. Just because everything didn’t collapse immediately upon Bush entering office,doesn’t mean things went well. All it does mean is that it took some time for things to fall apart.

    • Joe H.

      James,
      He’s not going to do that research cause he can’t find anything good he has done. Hel It’s hard to find ANYTHING he’s done period!!!

  • Brian O

    You want to know what’s coming in the future.
    Watch America Freedom to Facisim. Then support legislation to Audit the Fed. So we can cancel the Feds charter. Ask yourselves Why do we borrow money from a private bank. That we have to pay back @ interest. When the Constitution gives us the right to print and distribute our own money with out interest.
    watch how the Money Masters How International Bankers gained control of America.
    It is the goal of the Money Masters to destroy this country.
    So they can install The New World Order.
    Obama is purposely destroying the economy to bfurther thier goals.
    Watch Fall of the Republic.
    I assure you Gold and other precious metals will be the only thing we can rely on.

    • denniso

      False advertising…are you a metals broker?? NO ONE can ‘assure’ anyone about anything in the investment world..haven’t you learned that at least?

  • James Corbin

    dENNISO, iT SEEMS you don’t understand—Obama, isn’t making things better—- He is making everything worse!!!!!!!! If you can’t see what is happening —-you are lost, friend!!!!!!

  • denniso

    I’m watching Warren Buffet on the Bill Moyers show. He likes trains hauling goods around the country because it’s the most efficient and best mode of tansport to help with global warming..he indeed thinks it’s real and a problem. He is supportive of Obama and his financial people dealing w/ the collapse..he said they’re the ‘right people in place and not acting like deer in the headlights’. He doesn’t agree w/ every detail of the bailout and stimulus but says we had to do something and gives credit to this administration for their effort.
    So one of the great capitalists in the world agrees w/ me and Obama, not you and the complaining hatemongers on this post.

    • Robert

      Buffett has also said recently that Federal Spending needs to be controlled else the dollar will continue it collapse on the FX markets. He cited his concern over the ever growing Federal deficit and said that unless it is brought under control and reduced it will fuel hyper-inflation and result in much greater job losses. You right, buffett doesn’t agree with all of this Administrations economic policies. But the White House cherry picks only those things that Buffett comments on that make them look good. As I’ve said many times, the problems we face today were created by all politicians. Not just Republicans, but democrats, independents, conservatives and all the rest. Health care debacle! Who created it? The politicians did. Federal Deficits! Who created it? The politicians did. If you want to bash someone for the problems we face today, just say politicians did it to us. I rest my case professor Denniso.

    • Joe H.

      The only trouble is it kinda puts a lot of long haul truckers out of work!!!

  • James Corbin

    http://www.youtube.com/watch_popup?v=tCAffMSWSzY#t=28

    No wonder Obama, went to Rev. wright’s church–Rev. preached hate toward america. Here is proof!!!

  • James Corbin

    The web site that I just put on the posting did not pick up the first part—-Obama, starting by speaking Arabic——Don’t know why it doesn’t show that??????

  • OU812

    Just the rich playing with the money. Please invest yours so that this time when they pull their money out they will get yours too.

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