Wednesday, May 24, 2006


I want to get in a short post about what's been happening with the stock market. There are several reasons for the recent weakness, but the main one is the Federal Reserve. The market wants and needs the Fed to stop raising rates. For the past year, I've been writing that the Fed cannot stop raising as long as oil and gold betray excess liquidity; I've been correct on that, and the "8th inning crowd" is well into a double-header at this point. I do think we may be getting close to the Fed pausing for a meeting or two---and that would be more likely with continued weakness in the stock market---but I don't see the Fed stopping for an extended period, much less lowering rates as some expect. Why? Part of the answer lies in the Fed's new mantra of "data dependent." Fedspeak translation: we need to see the data on the willingness of foreigners to buy our national debt. There are unmistakable signs of that interest waning. The dollar and gold are proxies for that interest; to cite just one example, Japan's position in U.S. treasuries is smaller than at any point in the last two years.

What's troubling is that we don't determine our own interest rates at this point. Essentially, the rest of the world is telling us that if we want to borrow to pay for preemptive wars and a reckless fiscal policy, we can---but other nations won't underwrite it on favorable terms. Think about that the next time your mortgage or credit card payment increases. President Bush gets blamed for a lot, and justifiably so. But this de facto ceding of monetary power to foreigners is an inexcusable and dangerous screw-up. It didn't have to happen.

Another factor behind the recent weakness in stocks is Ben Bernanke. When Bush nominated him last year, I expressed reservations about Bernanke's naivete. Those reservations have proven justified, as Bernanke's first few few months---like Alan Greenspan's in 1987---have been rocky. Here's a stark illustration of that. Because Greenspan lasted almost twenty years, we've come to equate the job tenure of Fed chairmen with that of Supreme Court justices. But historically that's not the case. I suspect Bernanke's longevity may be a reversion to the mean.

I'll mention one other point because it's on the radar of some sharp colleagues of mine. Right now, there are some very powerful interests who not only want but desperately need something to take the spotlight off their own misdeeds. Here's only the latest entry in what's now a long list of those bearing the brunt of public outrage over various forms of ethical misconduct. If something suddenly came along to distract the public and divert its focus elsewhere, some of those in a tight spot would no doubt welcome that. And if it happened before November, all the better. A summer of Duke lacrosse players and Florida alligator attacks won't quite cut it, will it?


Anonymous thirdeye said...

TCR, are you suggesting various politicos who may be in trouble are trying to tank the market? Me thinks you give too much credence to the politicos.

The market is tanking because $70 oil hurts. Period.

5/25/2006 12:45 AM  
Anonymous Anonymous said...

I think the Fed is out there stating they are data dependant to reassure the market they will avoid ‘overshooting’ and tightening too much. The problem with this approach, imo, is they are essentially telling the market rates could go in any direction and that is not good for risk taking. Furthermore, by stating they are data-dependant, they’re essentially saying they don’t know enough about the current state of the economy and cannot determine if interest rates are too high or too low or just about right.

5/25/2006 1:39 AM  
Anonymous Anonymous said...

Regarding your prediction for a summer extravaganza, I've always wondered when the headlines would read: OSAMA CAPTURED or BIN LADEN DEAD! Not only sufficiently distracting but also the shot in the arm desperately needed before November rolls around.

5/25/2006 6:29 AM  
Anonymous Anonymous said...

Gee, isn't this a wonderful country we live in? For the last 5 years or so, I wonder.

5/25/2006 10:31 AM  
Anonymous Anonymous said...

Excellent column, we will have to wait and see what the distraction is.

5/25/2006 12:36 PM  
Blogger jucojames said...

Drawing linear cause/effect relationships between specific issues and the financial markets is folly. The markets are far to complex for there to be any specific reason driving their direction. Who is to say that interest rates have gone too far? Based on legitimate inflation numbers (i.e. those not tortured by hedonics, substitition, etc.), we still have negative real interest rates. We have had negative real rates for a while now and all of a sudden it "matters"? Hardly. The real reasons why the markets are in the beginning stages of a cyclical bear market are complex - one would do better to study how to guage such things in the financial markets than to focus on such linear relationships like "the Fed" or oil.

5/25/2006 1:08 PM  
Blogger copy editor said...

Excellent post. Much better than usual, and you are usually pretty good. We've lost control of our own economic rudder, bravo. And the quick fix you are alluding too is even more ominous in its effect.

5/25/2006 2:32 PM  
Anonymous todd said...

The attempts at distraction have already begun. Bill Frist is trying to revive the ridiculous Federal Marriage Amendment despite the fact that it has virtually no chance of passing. Republicans feel they can go back to the well that worked in 2004 and get the homophobic electorate to focus on this non-issue and forget about the mess they have created. Pathetic.

5/25/2006 5:03 PM  
Blogger Jason said...

I'm waiting for Russia to finish capitalizing the Ruble, convert it into an internationally accepted means of trade, and cause the collapse of the dollar (which is backed by nothing more than our $8.6 trillion in national debt - Thanks Bretton Woods Convention!) Wouldn't that be a kick in the behind if the world moves to a ruble standard for buying/selling oil. And America won the Cold War, right?

Sweden already reduced their international currency holding of the dollar from 36% to 20%, causing the dollar to drop 2%. I can't wait to see what happens when Iran/Saudi Arabia/etc. move away from the dollar and pick up the Euro as their standard. Not to mention the $200 billion in T-bills China has purchased.

The dollar is toast. I'm just waiting to see what flavor jam the rest of the world eats it with.

5/25/2006 8:17 PM  
Anonymous DaveB said...

Excellent post, clearly this is your field of expertise. As a life-long republican it makes me nervous to recognize that the fall elections will most likely bring an overwhelming Democratic takeover in Washington. But I guess that is how a democratic republic is supposed to work. If only it didn't result in so many Clintons, Kennedys, and Kerrys!
My take from your second paragraph is that on a personal level we should avoid ceding our financial destiny to the wreckless whims of others by paying off our mortgages and staying out of debt. Sounds like excellent financial advice.

5/25/2006 9:31 PM  
Anonymous FB said...

Parroting what many others say the reason for the market's precipitous decline surprises me. It isn't just the fed, nor $70 oil or $650 gold, real inflation,or the fiscal and political mess our country "suddenly" finds itself in; we've been there for a few years! But the psychology of markets---the market often exhibits beastial behavior and now we all want out. A lotta sheep trying to get through a small gate at the same time.

5/26/2006 2:39 AM  
Anonymous Anonymous said...

I trade the markets everyday and everyday I read what the talking heads say about why the market went up or down. It was so funny the other day an AP writer posted a story explaining the days market action to that point, then the market reversed and headed strongly the other direction. AP's story was replaced shortly by another story by the same writer giving a new explanation. I was laughing so hard I had to take a break from the computer. Its really simple. Lots of traders, big money guys, close their positions just before memorial day and head for an extended vacation. Check the flippen charts and you will see. The remaining traders will bid the markets back up through the freekin summer and when the rest of the crowd returns around labor day everybody will ride the wave down as mutal funds manuever to close their fiscal years by the end of October. Guess what happens then. Yep. We bid the market back up through the holidays and into the spring. Sure sometimes its different but not nearly as often as the idiots would have you believe.

5/26/2006 10:19 AM  
Anonymous Anonymous said...

Those that bought var rate loans at interest rates so low deserve what they get don't you think. It's like buying stocks at the top of a bubble. Personal credit card interest rates, don't buy what you can't afford. Problem solved.

The higher interest rates will be welcomed by retirees so they can lock in some annuitized rates and have a more stable quality retirement. Yes the quality of your retirement now more than ever depends on whether you retire during a bull or bear market. Ho hum.

In the book, In An Uncertain World, Robert Rubin talks about the National Economic Council and Treasury Sec. positions. I found it interesting when James Carville argued Clinton should stay on message because the deficit didn't have a constituency (huh?), while Rubin argued for being fiscally conservative, disciplined, and reducing the deficit (and yes he's a Democrat). I don't understand it all, but the thought and political process was interesting. I highly recommend this book. It is very conversational in tone and you get to see Washington from a Wall Streeters perspective (Goldman, Citicorp). Rubin argues that no one has been able to explain to the public adequately the ramifications of our fiscal situation. It was surprising for being in the WallStreet business, how anti-stock mkt he was. And then you have Cheney come in and say, Reagan proved deficits don't matter. Oh yeh! I would say we are spending like drunken sailors, and we are going to feel the hangover in the morning. I think the warning might be akin to the August 6th PDB that was ignored. We either do something today, or it will be a lot more painful tomorrow.

5/26/2006 6:21 PM  
Anonymous Anonymous said...

But I guess that is how a democratic republic is supposed to work. If only it didn't result in so many Clintons, Kennedys, and Kerrys!

So true! Much better to stick to the towering intellects and sure-footed competence of Bush, Cheney, Hastert, DeLay, Rove, Rice, (stop me when I get to one who knows what he/she is doing), Frist, Santorum, ....

5/26/2006 11:46 PM  
Blogger jj said...

Oh that the last 5+ years had been under a Clinton, Kerry or Kennedy instead of W. What a far, far better world we'd be living in.

5/29/2006 6:06 PM  
Anonymous todd said...

But I guess that is how a democratic republic is supposed to work. If only it didn't result in so many Clintons, Kennedys, and Kerrys!

And just what was wrong with Bill Clinton after all, aside from his personal flaws? Bill Clinton was an absolute champion and makes George W. Bush look like the blithering idiot he really is. How can any self-respecting Republican vote Republican in 2006? The least you can do is stay away at the polls. At best, vote Democratic and let's try to get the country back on track for once !

6/04/2006 6:51 PM  
Anonymous personal development said...

The personal development industry has never been bigger! It consists of a myriad of authors basically telling us how to improve our lives. We are constantly being told self help and self improvement has never been easier. New techniques, gadgets and potions adorn the shelves of new age shops and the 1 billion dollar industry, that is personal development, offers many different approaches to help better our lives. They offer ways to increase our bounty and ultimately alter our own reality. A great example of this is how to develop a Prosperity Consciousness. But does this state really exist and if it does will it bring the effortless unlimited wealth promised?
A lot has been written about prosperity and how to attain it. We have been told by many religious traditions and every personal development guru that the Universersal Source (God, Spirit, Cosmic Mind or whatever label you chose to give it) is boundless wealth. We are also told that abundance, wealth and prosperity are our birthright! Why then are so many people ill, broke, frustrated and unfulfilled? Can a person really develop a prosperity consciousness and effortlessly attract wealth? Well as with everything in life there is only one way to find out. Test it for yourself!

Before we can attain and then test the effectiveness of having a prosperity consciousness we need to understand some basic truths. Let's start by explaining three fundamentals of personal development namely; 1. The Universal Source is all wealth, abundance and prosperity; 2. Prosperity is our birthright; 3. You get more of what you focus on.

1. Why are we told that the Universal Source is unlimited wealth? - Because the Universal Source is the consciousness of the Universe - a universe that is still expanding. It is the driving force behind physical reality. It created everything you see, hear, touch and smell as well as all that we are unaware of (microwaves, radiation, air etc.). It has been stated in religious and metaphysical traditions that this intelligence is not only the Source of everything but that it is also the substance of it! It creates the Universe from itself! It is omnipresent (everywhere present). That means that the entire seen and unseen aspects of the universe are a part of this Universal Source. Science reaffirms this theory as it states that nothing is solid and everything is just one mass of pure energy that vibrates at different frequencies and gives the illusion of separateness.
So we can now claim that the Universal Source is unlimited wealth, abundance and prosperity with some belief. For if this Source is the very substance of everything then it is all the wealth, abundance and prosperity that exists at this very moment!
Ok so far? Now lets look at the second point - prosperity is our birthright.

2. If this Universal Intelligence is the source and substance of all things then there can be only one intelligence in the Universe. Jesus said to his disciples "know ye not that you are the temple of the living God?" Buddha attained enlightenment and "oneness". The list of these religious teachings are too numerous to mention but their message remains the same - God (Universal Substance) resides within and around us. It's very substance makes up our physical body and the world around us - "For in him we live, move and have our being" Acts17:28. Therefore, if this Universal Source is at the very core of our being and is the substance from which we take physical form then it stands to reason that we are connected to everyone else and in fact everything else around us - we are a part of all the wealth, abundance and prosperity of the universe. Just as your hand or foot is a part of your body, so every grain of sand, blade of grass, wisp of wind, bar of gold and brick that is laid in a mansion is part of you. The unlimited wealth of the universe is yours for the claiming. It is already yours, always has been and always will be. It is a part of you.
Ok let's go the third point - you get more of what you focus on.

3. "It never rains but it pours", is a saying I have used myself in the past. Have you ever wondered why such a statement appears to be true? Well metaphysics and religion tell us that "as a man thinketh in his heart, so is he" or as Job cried out to God "For that which I greatly feared has come upon me". What we focus our conscious attention on increases! Don't believe me? Test it for yourself! If you can muster up the strength to do it then think in negative terms for a week. Judge everything that happens to you in negative terms and think only of a negative outcome and watch what happens in your world!!! This is a relatively easy experiment as we are conditioned to think negatively by the world. A word of warning though - once you prove that your focus determines your reality stop thinking negative thoughts as best you can.
I will not go into the 'hows' of why our focus has such a profound influence on our lives (that would be the subject of a book or perhaps a future article) just prove to yourself that it does. A clue can be found in the teachings of Jesus when he said "The Kingdom of heaven is within".
So now we have the three principles of the prosperity consciousness explained let's put it to work. The attainment of a prosperity consciousness is relatively simple - just think on the first two principles until you fully understand them and integrate them into your consciousness. As you focus on them you will discover that your feelings of lack disappear and you begin to feel a connection with everything around you. It is really just an attitude shift - nothing metaphysical or mystical about it at all. You begin to consciously realize that everything is a part of you. Your focus changes from poverty to wealth.
If it helps make a list of affirmations that correspond to the two principles outlined e.g. "God is the Source and substance of everything", "I am at one with everyone and everything around me", "I am a part of all the wealth, abundance and prosperity of the Universe" etc. Don't just rhyme them off in a parrot like manner, think on them and realize the scientific or spiritual truths behind them.

Will it work? Well I can say now that if you follow the above instructions a real change will happen in you. You will start to see the beauty of the world and the unlimited resources that are available within and around you. Will you attain wealth, abundance and prosperity? Test it for yourself! hypnosis

8/23/2006 10:19 AM  
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10/21/2006 5:53 PM  
Blogger vkk1_hypno said...

Many people try to achieve goals. Most fail. Some strive, work hard and plan for all the details yet they achieve little or nothing at all. Others strive, work hard, plan and achieve huge success. Yet there are a few individuals who do little else than take small steps and seem to achieve a great deal with what seems like effortlessness. What is the difference between these people and which one would you like to be?
Most members of the human race fall into two categories - those who live in the past and those who live in the future. Most live in the past. Many of these are the people who achieve very little in their lives and are so fearful of the future that they dare not strike out to get anything. They are the under-achievers who hang onto bad episodes in their lives and either relive them time and again or look at new situations as similar potentialities. They say things like "all men are deceivers" or "all women are interested in is money" or "I can't do it. I tried before and it didn't work so why bother!". Due to bad experiences in the past they believe that all future events will turn out the same way if they dare to go after what they want.
The other type of person lives in the future. This type tends to create more of the things they want in life. They have a vision of where they want to go and exactly how they are going to get there. They work diligently at making concrete plans and they pursue those plans with a persistent ferocious appetite for success. These people are the high achievers - The Richard Branson and Bill Gates of the world. These people have much to teach us about setting and achieving goals.
However, there is a third type of person who almost goes unnoticed. They are the person who takes life in its stride and yet achieve most of what they want. I am sure you know of such a person in your life that just seems to saunter through life and yet they always come out on top. Or a person who you hear of that has decided to open a shop. You meet them a few months later and they have three shops all doing well! So what makes these people so successful and if they aren't living in the past and aren't living in the future where are they living?
I suppose you guessed it! Whether they are consciously aware of it or not they are living in the present. It is in the 'living' present that we have our greatest power. Everything happens in the present. You live your entire life there - even if your mind does not!

By becoming more aware of the present and by 'accepting' it as it is we are much more in control of our emotions and focus. When we live in the past we are fearful of making bad choices and/or getting hurt. We do not wish to recreate the past again! When we live in the future we can also be fearful of what might happen. But even if your future vision is full of power and worthy of working towards many people can, and often do, get stuck there. By constantly reaching for bigger and better goals they fail to enjoy what they have in the moment.
If you wish to start living a life that is almost effortless begin first by living in the present. Accept your situation the way it is and then you can enjoy what you have. Your focus changes from a memory of what was or a vision of what might be to a realization of what is. You become much more empowered to then see the beauty of life and also look at where you wish to make changes. But to make changes you must first accept the situation as it is. Trying to escape from your present only increases your focus on your problems by creating resistance to what is. Accept your life as it is now. Make no judgement, just accept it and then you will be free of doubt, worry, pain and fear. For you only experience these things when you live outside the 'moment'. subliminal

11/08/2006 7:47 PM  
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