Tuesday, October 26, 2010

What Would You Do if Your Income Disappeared?

What would you do if your sole source of income dried up tomorrow?

Would you be prepared? Do you have a plan?

In the Age of Turmoil, many income sources that were considered ‘stable’ in the old system will be at risk; this includes retirement pensions, investment income, salaries and wages, and small business profits.

For example, retirees living on company pensions could easily see their monthly stipends fall due to corporate bankruptcies. And while public pensions like Social Security are unlikely to change in the short-term, this broken system will undoubtedly see massive restructuring in the next decade.

Meanwhile, many small business owners and self-employed professionals may suffer reduced revenue as market conditions and consumer priorities shift; this has already happened to many businesses in the retail and real estate sectors.

For salaried workers, we live in a rather bizarre time when corporate profits are surging, yet revenue growth is lackluster. Companies are cutting back on expenses by reducing their headcounts and squeezing every ounce of productivity out of a smaller workforce. (more)


Pound forecast to tumble on 'insane' spending cuts

"I think what Britain is doing is absolutely insane" John Taylor, the founder of the $8bn FXConcepts fund, told The Sunday Telegraph. "The Conservatives will lose their stomach for this."

Reducing Britain's £156bn budget deficit is the cornerstone of the government's plan for restoring the economy's health. George Osborne, the Chancellor of the Exchequer, told Parliament last week that the £81bn in spending cuts would pull "Britain back from the brink."

Although Mr Osborne's plan has won support from many economists, there remains concern that it will damage a recovery that is already showing signs of faltering.

"The last retail sales numbers were pretty ugly and then we have to go through the VAT hit," said Mr Taylor, who at 67 is one of the oldest operators in the foreign-exchange markets. The pound will fall below 1.40, possibly this year, he expects. Sterling reached 1.43, its weakest against the dollar this year in May.

The Bank of England has publicly welcomed sterling's decline since the financial crisis erupted in 2008, but the central bank is not alone. Having already yanked hard on monetary and fiscal levers, an increasing number of governments are eyeing a weaker currency as a way of securing their share of an uneven global recovery. (more)

Uranium Index Stocks

Why Dollar's Loss Is Wheat's Gain

Whatever goes up comes down as life moves in cycles especially in the trading world. Testimony to the fact is that United States of America was the world's most expensive wheat producer in the first half of the year but now with the recent slide in the US dollar, the US suppliers are not only more competitive than their European counterparts despite higher freight costs, but the country is expected to dominate the international wheat market until the end of the year as the weak dollar makes the country's exports the cheapest in the world.

Weak Dollar Driving Wheat Prices

The movement in the dollar index has a lot of effect on commodities and other currencies, even if it does not replicate the action of the index. The dollar has been hovering around its lowest level against the euro since January and at 1215 GMT.

The euro was at $1.3949, up from $1.3888 in early trade, while US wheat futures at the Chicago Board of Trade (CBOT) ended mostly higher Friday since dry growing regions may not receive as much relief as they previously expected. (more)

No Gold Or Silver Bubble Says Sprott's John Embry

On one hand, one has professional stock bubble top-tickers (of the variety that would benefit from some error-checking)-cum-amateur precious metal pundits claiming that the gold bubble is unmistakable. On the other, there are those who have made hundreds of millions of dollars for their investors actually investing in precious metals, such as in this case Sprott's John Embry, who states that there is no bubble in either gold or silver. "Jim Rogers, who is one of the world's leading authorities on commodities, dealt with the bubble issue recently by recounting an interesting anecdote. While addressing a group of high-end money managers, he inquired as to how many of them held gold or silver in their accounts, and remarkably, 75% replied they had never owned either precious metal. When gold is trading at several multiples of the current price at some point in the future, you can be assured that every single person at a similar gathering would be long and then discussion of a bubble might be legitimate. In my considered, opinion we are many years and thousands of dollars away in price from that debate." Whom does one believe? That's obviously rhetorical. Amusingly, Embry takes a stab at the Financial Times, which he dubs a conduit for the establishment: "The FT has been speaking much less disparagingly about gold recently. The paper consistently denigrated gold and its change in tone might be instructive." Of course, a variety of second-rate media outlets are more than happy to step in and fill the "goldbug" bashing void in the FT's absence.

Embry Oct22 -

WSJ: Deficit Panel May Cut Mortgage-Interest Tax Break

The popular mortgage-interest tax deduction could be eliminated by a bipartisan commission charged with finding ways to chop the deficit, The Wall Street Journal reported.

The Journal also reported that child tax credits and payment for health insurance with pretax dollars all could be cut by the deficit panel, which will issue recommendations on balancing the budget by 2015.

The report hinted that these tax breaks could be preserved at a lower level.

The Journal reported that the panel is expected to steer clear Medicare, Medicaid, Social Security and a broad rewrite of the tax code in its short-term recommendations. The panel could still make long-term recommendations to change these issues, but they would be less concrete, the Journal reported.

The Obama administration said earlier this month the federal deficit hit a near-record $1.3 trillion for the just-completed budget year, the Associated Press reported. That means the government had to borrow 37 cents out of every dollar it spent as tax revenues continued to lag while spending on food stamps and unemployment benefits went up as joblessness neared double-digit levels in a struggling economy. (more)

Is Today's Rate of Unemployment Higher than During the Great Depression of the 1930s?

It is difficult to compare current unemployment with that during the Great Depression. In the Depression, unemployment numbers weren't tracked very consistently, and the U-3 and U-6 statistics we use today weren't used back then. And statistical "adjustments" such as the "birth-death model" are being used today that weren't used in the 1930s.

But let's discuss the facts we do know.

The Wall Street Journal noted in July 2009:

The average length of unemployment is higher than it's been since government began tracking the data in 1948.


The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

The Christian Science Monitor wrote an article in June entitled, "Length of unemployment reaches Great Depression levels".

60 Minutes - in a must-watch segment - notes that our current situation tops the Great Depression in one respect: never had we had a recession this deep with a recovery this flat. 60 Minutes points out that unemployment has been at 9.5% or above for 14 months: (more)

Chart of the Day

Dollar at Risk of Becoming 'Toxic Waste': Charts

The dollar's slump could get far worse if the dollar index takes out last year's low, Robin Griffiths, technical strategist at Cazenove Capital, told CNBC Monday.

"If the (dollar index) takes out the low that was made roughly a year ago I really think that will not only encourage more sales, it will cause a little bit of minor panic," Griffiths said. "A year ago it was deemed too cheap, if it goes any lower than that it's actually become toxic waste."

The dollar [.DXY 77.11 0.005 (+0.01%) ] resumed its recent downtrend Monday in the wake of a meeting of finance ministers from the Group of 20 nations at the weekend. The meeting failed to yield a definitive agreement on currencies, putting selling pressure on the greenback.

"The dollar is being trashed, we've actually had effectively devaluation of about 14 percent in the last two months," Griffiths said.

His view is contrary to that of HSBC foreign exchange strategist David Bloom, who told CNBC that a continuation of the currencies war after the G20 might put pressure on risky assets, causing a flight to safety into the dollar. (more)

The Great IMF Fire-Sale of the UK has Begun

The British Government is about to sell off over half of all UK Forests that are currently under the control of the Forestry Commission to private corporations as the asset-stripping of the UK is begun on behalf of the International Monetary Fund and the Big Six Beast Banks.

Caroline Spelman, the environment secretary, has just announced plans to sell around half of our forests to the mega-corporations – that is 150,000 hectares of prime woodland – as well as numerous other properties. The New Forest, Sherwood Forest, and the Forest of Dean could be targeted for sale.

The Sunday Telegraph provided a map of which forests are owned by the state through the Forestry Commission:

The vast majority of these forests are in Wales, West Scotland and the North East of England.

Most of these forests will be sold off to housing developers, timber merchants, power generators and Centre-Parcs Ltd for golf courses and holiday camps. Our right of access to these forests will be severely curtailed, and we will have lost a great natural resource that can never be bought back for the People. (more)