The Grand Summary: Our Empire of Debt Is Collapsing

[Crewleader]

The Grand Summary: Our Empire of Debt Is Collapsing (July 28, 2008)
by Charles Hugh Smith


Every once in awhile it pays to stand back and locate one's position in reality, by dead reckoning if no better tools are at hand. With all the financial legerdemain in our system--bogus unemployment and CPI numbers, Level 3 assets held safely off balance sheet, and innumerable other financial rats scurrying for cover--we have no choice but dead reckoning.

And by my reckoning, our financial system is dead.

Right now, Bernanke and Paulson and Congress and the rest of the power elite have the shock paddles frantically pressed to the chest of the American financial system, hitting the erratic heart of our Debt Empire with shock after shock, hoping and praying the debt bubble of the past 25 years can somehow be extended.

Alas, the patient is already dead. But with reporters' noses pressed against the window a few feet away, the stalwart crew around the corpse is making a heroic show of lying: "The patient is stabilizing," "the patient is recovering nicely," and so on, and by artificially stimulating the heart to keep producing a weak but visible pulse for all to see.

But rather than be reassured, we are disgusted by the lies, for we have seen the patient bloat up and sicken and then weaken unto death for years.

http://www.oftwominds.com/blogjuly08/empire-debt7-08.html?

[defendandprotect]

1. remember peace and a surplus . . . pre criminals in charge of government?

[aspergris]

2. the SMART MONEY

was saying this 2,500 dow points ago.

calling it dead NOW after a HUGE pullback in the banking index, and a nice bear market in the dow is yet another contrarian indicator, and a bit late to the party.

Look at MER 6 months ago. Look at it now.

never ceases to amaze me.

[sendero]

4. Yes but..

... the MSM is still playing along.

Believe me, this might not be a revelation to you, but it would be a revelation to 90% of Americans at the very least.

[aspergris]

5. the revelation

is that when the MSM and the blogs (including this one) are screaming it's the end of the world - it's not

contrarily, when they are bullish- i start selling short.

i was VERY bearish on dec 28. that's when I started getting bearish.

now? Im keepin my powder dry. got some oil shorts (from 2 weeks ago as mentioned), some gold longs (ditto), and some targeted longs. but these people said this 2000 pts ago, they would be prescient. saying it now, they are reactive and useless

[sendero]

6. Gee..

... did we read the same article? This is not a market call article, this is the herald of a coming global economic collapse.

The markets are the least of your concerns.

[aspergris]

7. and again

when the MSM says it's the end of the world... it's not

[sendero]

8. It's not the end of the world..

.. and the MSM is certainly still not covering reality at all.

But, it is the beginning of a long grinding depression. If you don't think so, come back here in a year and capitulate.

[aspergris]

9. i'd love another 1-2k down in the dow

i aint making predictions. we are at an inflection point right now. thats why i keeping my powder pretty dry.

I'd love the downmove cause it would expose more value.

[northernlights]

10. the stock market

is not synonymous with the economy. It is one small piece of the economy, and important as far as giving investors a way to invest in companies, and companies a way to raise capital to grow their businesses.

Aspergris, I'm happy for you that you have the talent to spot the short-term market trends combined with the stomach to go against cv and "make" some money. You'll be able to ride that talent right through whatever comes, I'm sure.

But that is not investing, it's trading, and it's not contributing to the economy, it's skimming. You are not gaining money in exchange for provide something of value. Your gains are somebody else's losses, period. Not everybody can do what you do successfully, and thank goodness for that, or nobody would actually be producing anything of value at all, they'd all spend their days staring at the ticker and gambling.

This article is about the whole economy -- the one where people produce goods and provide services and exchange them. That economy is in serious trouble, for all the reasons listed in the article.

[crazymans economics]

11. AMEN Northernlights!!

95% of people don't understand the house of cards is falling, and a select few make money and play their golden fiddles while Rome burns. That's America.

[aspergris]

12. my advice to garden variety investors

has been the same for 20 yrs. as long as i have been doing it in my investment account.

dollar cost average. EVERY month (or 2 weeks). period. don't panic when it's down, don't get euphoric when it's up.

your stocks as a %age of portfolio should of course be based primarily on time horizon.

[northernlights]

13. Asper -- your advice is the same

standard advice given by every financial "consultant" to every garden variety investor for a couple decades now. Not knocking dollar cost averaging -- in the past it's been generally sound advice for long-term investing by garden variety investors saving for retirement (i.e. people who invest a percentage of their income usually in 401Ks and mutual funds, but who are gainfully employed and therefore presumably don't have all day to watch the ticker and trade).

However, based on what you write in most of your posts, you aren't following your own advice, you are trading. You're watching trends, you're shorting xyz, expecting based on current events that it will soon fall, and you're buying abc expecting based on current events that it will soon rise.

I'm not saying that's right or wrong, only that is what you are doing and that is how you are interpreting every thread on the economy, even though trading has nothing to do with the economy (other than screwing it up royally when speculative bubbles are created by piles of traders.) There are great opportunities for trading. That is true in a market heading down as well as one heading up. Maybe one reason we're seeing so many of these speculative bubbles is the unemployed hordes who saved for a long time are now spending *their* days staring at the ticker, pushing their money around to try to hang onto or even grow their savings. That thought certainly had occurred to me after my high tech career crashed several years back. But it's a talent I sorely lack, along with the necessary courage.

There are also great opportunities in health care. That doesn't mean everybody has the ability to do it, though. If you're biochemistry-challenged, don't even try to go there.

So right now, there are fewer and fewer "broadbased" opportunities in the economy as a whole, as it continues to decline. There are targeted opportunities to make a living for those who have specific talents and skills. Unemployment is far higher than the numbers show. Many of us (myself included) never found a toehold after the 9/11 layoffs. We simply don't exist when unemployment numbers are added up. We're mostly in our late 40s to mid-50s. We were dumped and now nobody wants us.

[aspergris]

14. simple really

"However, based on what you write in most of your posts, you aren't following your own advice, you are trading. You're watching trends, you're shorting xyz, expecting based on current events that it will soon fall, and you're buying abc expecting based on current events that it will soon rise."

actually, I am following my advice. in my INVESTMENT (DCA) account.

I also trade. trading and investment are entirely different things. they both use the same vehicles (stocks, etc.) but the goals, methodologies, etc. are markedly different. For example, in trading the most important thing is exits, followed by risk management/money management, and price action. Value isn't even an issue. They are VERY different things.

I don't mix the two. trading is a means to generate income. investing is a means to build wealth.

here's a big difference. in a trade, i want to see price action go my way. in an investment, I'm frequently happy when something i buy goes DOWN, because it means I can buy more cheaper. In investing, I'm looking at balance sheets. In trading, I'm looking at price action.

again, different things.

"I'm not saying that's right or wrong, only that is what you are doing and that is how you are interpreting every thread on the economy, even though trading has nothing to do with the economy (other than screwing it up royally when speculative bubbles are created by piles of traders.) There are great opportunities for trading. That is true in a market heading down as well as one heading up. Maybe one reason we're seeing so many of these speculative bubbles is the unemployed hordes who saved for a long time are now spending *their* days staring at the ticker, pushing their money around to try to hang onto or even grow their savings. That thought certainly had occurred to me after my high tech career crashed several years back. But it's a talent I sorely lack, along with the necessary courage."

my point is that investors need to stop panicking and complaining and LOOK FOR FRIGGING VALUE and understand some contrarianism. for pete's sake. oil is down well over $30 since a few weeks ago when all the nimrods were saying OH NOES OIL WON"T STOP GOING UP.


People need to be disciplined and prudent, and understand that there has never been a 20 yr period in the history of our stock market where DCA'ing wasn't a good idea. ever

and that includes the great depression.

"So right now, there are fewer and fewer "broadbased" opportunities in the economy as a whole, as it continues to decline. There are targeted opportunities to make a living for those who have specific talents and skills. Unemployment is far higher than the numbers show. Many of us (myself included) never found a toehold after the 9/11 layoffs. We simply don't exist when unemployment numbers are added up. We're mostly in our late 40s to mid-50s. We were dumped and now nobody wants us."

no. imo, the exact opposite is true. there has been a lot of panic (real estate comes to mind), and exposed value AND opportunity.

Here's a hint. Buy what others hate. Sell what they love.

[northernlights]

15. again you morph a discussion into trading

"actually, I am following my advice. in my INVESTMENT (DCA) account."

I'm sure you are following your own advice, but you rarely write that side of what you are doing. You write about our trading as the opportunity to make money in every thread about the economic problems the country faces.

As an income "opportunity," trading depends on one having spare money to trade with. A lot of people don't have it laying around, and most of those who do have some laying around don't want to trade stock because it's not their talent and so will be a bad bet for them.


"So right now, there are fewer and fewer "broadbased" opportunities in the economy as a whole, as it continues to decline. There are targeted opportunities to make a living for those who have specific talents and skills. Unemployment is far higher than the numbers show. Many of us (myself included) never found a toehold after the 9/11 layoffs. We simply don't exist when unemployment numbers are added up. We're mostly in our late 40s to mid-50s. We were dumped and now nobody wants us."

no. imo, the exact opposite is true. there has been a lot of panic (real estate comes to mind), and exposed value AND opportunity.

AND HERE AGAIN is an example of you taking a statement out of context and morphing it into a stock trading discussion. The context of my statement was about JOBS, as in "there are fewer and fewer broadbased (job) opportunities. If you continue down the paragraph, it continues about UNEMPLOYMENT and LAYOFFS. I have no doubt that UNEMPLOYMENT is higher than the official numbers show. THIS HAS NOTHING TO DO WITH TRADING STOCKS. It does, however, have a lot to do with the economy. Jobs are disappearing.


"my point is that investors need to stop panicking and complaining and LOOK FOR FRIGGING VALUE and understand some contrarianism. for pete's sake. oil is down well over $30 since a few weeks ago when all the nimrods were saying OH NOES OIL WON"T STOP GOING UP."

Except in the face of gravity, most things don't go straight up or down. But once again, you are morphing a discussion of the economy into a discussion of trading. They are not the same thing.

[DemReadingDU]

3. Lots of very interesting graphs in this article

Thanks for sharing