Posted on 03/08/2008 5:31:18 AM PST by Travis McGee
Prior to my last appearance on CNBC in October 2007, I had made more than 50 appearances on the network over the prior two years. In those segments, I repeatedly exposed the superficiality of our prosperity, described the American economy as a “house of cards”, pointed out that borrowing and spending were a ticking time bomb rather than a viable plan for long term economic health, and explained how investors could prepare for the tough times ahead. At the time, those forecasts were met with ridicule and led to my being nicknamed “Dr. Doom”. Now that these predictions have come to pass, most on CNBC now claim that no one saw it coming!
In my 2006 and 2007 on-air appearances, to a chorus of sneers and laughter, I predicted the bursting of the housing bubble, the collapse of the subprime mortgage market, the credit crisis, tightening lending standards, waves of defaults, bankruptcies and foreclosures, weakness in financials, retailers and homebuilders, stagflation, surging gold, oil and other commodity prices, soaring federal budget deficits and a collapse in the value of the U.S. dollar. You would have thought that some of the reasons I gave for making those predictions would now be given some credence. They have not.
The current line at CNBC is that, prior to the “unexpected” contagion emanating from the subprime mess the U.S. economy was experiencing a “Goldilocks” era of optimal health. They now believe that if the Fed and the Government can divine the right combination of fiscal and monetary policy, Goldilocks will once again be blissfully picking daisies…or more precisely, buying SUV’s. Unfortunately, as I said then, Goldilocks was, and still is, a fairy tale. In fact, the unfolding economic disaster is a direct consequence of the misguided faith placed in that absurdly optimistic parable. And since they were incapable of diagnosing the disease, is it any wonder that their cures are completely ineffective?
This lack of understanding is further confirmed by the skepticism with which the mainstream financial community still regards my diagnosis. For example, in a Feb 22, 2008 article in TheStreet.com, entitled “Dr. Doom Zeros in on Inflation”, Mike Holland, a CNBC regular leveled two common criticisms often used to discredit me. Holland says “investors who listened to Schiff throughout the recent bull market missed out on some attractive returns in the stock market” and “A broken clock is right twice a day. If you say things are going to be bad long enough, eventually you're going to be right."
What attractive returns does Holland think my clients missed out on? Those who followed my advice invested in foreign stocks, bonds and currencies, as well as precious metals, oil and other commodities. Investors who listened to me instead enjoyed much greater returns by participating in the real bull markets. It’s amazing how few people have managed to figure this out!
The “stopped clock” analogy is one I have been dealing with for years. Those using it maintain that my early warnings invalidate my forecasts. It is precisely because my warnings were so early that they were so valuable to investors. In addition, such charges assume that the current downturn is unrelated to those warnings and that my critique of the U.S. economy was inaccurate until now. My critics, the real stopped clocks, still do not understand that the phony prosperity they were defending and that I was challenging lies at the root of the current crises. When the bubble was still inflating it is understandable that those trapped inside viewed me as a stopped clock. However, now that it has burst, it is amazing how many still cannot get the soap out of their eyes.
If a picture, or in this case a video, is worth 1,000 words, this CNBC match up from August 2006 between me and Arthur Laffer, a CNBC favorite, is priceless. Some of Laffer’s best one-liners include ‘the U.S. economy has never been in better shape”, and “monetary policy is spectacular”. I kid you not -- Click Here and enjoy the show.
...but aren't you the FReeper who always used to post the "Mr. Housing Bubble" photo?
(I'd love to see it again, Hint, hint).
Cheers!
Page 73
The discovery by financial capitalists that they made money out of issuing and selling securities rather than out of production, distribution and consumption of goods accordingly led them to the point where they discovered that the exploiting of an operating company by excessive issuance of securities or the issuance of bonds rather than equity securities not only was profitable to them but made it possible for them to increase their profits by bankruptcy of the firm, providing fees and commission of reorganization as well as the opportunity to issue new securities.Tragedy and Hope: A History of the World in Our Time', by Carroll Quigley;
The "operating company" being the American Dream.
The American Dream was doing just fine before Subprime Posterboy, (Ex)Ambassador to the Netherlands, Roland Arnall, and his pirate armada sailed out of Long Beach:
Godfathers of subprime Established in 1979 by Roland Arnall, Long Beach Savings grew rapidly after Wall Street opened the credit tap. It moved to Orange in 1991 and gave up its banking license in 1994, converting to a pure mortgage company. In 1997, Long Beach Savings split into privately-held Ameriquest and a publicly traded subsidiary, which sold for $350 million in 1999 to become the subprime arm of Washington Mutual Inc. Other companies were started by executives who learned the ropes at Long Beach Savings: ResMae Mortgage Corp. in Brea in 2001 and Encore Credit Corp. in Irvine in 2002. ... "You also had the Godfathers of subprime." Daurio said the Godfathers were Arnall, Brian Chisick of Irvine-based First Alliance Mortgage Co., Russell and Rebecca Jedinak of Guardian Savings & Loan in Huntington Beach, and John T. French, founder of Santa Ana-based Plaza Savings & Loan. http://www.ocregister.com/business/how-subprime-lending-1950724-all-started
What a snake pit to untangle!
The only time equity is money is when a person or couple sells their home, takes the capital gain, moves to an area of the country where the property taxes are much lower, and buys a smaller home 30-50% what they sold the previous for.
Though there are market sectors and individual stocks that can return 8% or better at times, as a whole, it is counter productive for the entire economy to average a pace like that. The population and the standard of living have to increase at 3-4% annually to create the demand for the economy to grow and the rise in our standard of living cannot be leveraged.
Why?
Because they are beholding to the corporate financial sector and it was the only near term solution to slow catastrophic failure of the big banks and securities firms.
Travis IS NOT WRONG. We are in a period of stagflation and inflation is going to continue with food and energy and medical and taxes in the near term and at least 2 years out.
Why?
Because China and India's and Asia's on other nations' economy have grown much faster than ours, but, they will still have to eat too.
The next gold mine is in the food commodities and the politico's know it.
In the meantime, the buying power, savings / investment effect of America's middle class will be trashed by 20% permanently from here on out. Average wages will lag 4 years behind this current recession.
Until American government gets its financial houses in order (cut spending and pay off some debt) and reinvests in domestic manufacturing and domestic consumption of those higher quality / better technology goods, the strength of the dollar will be even less now as I type.
When it comes to real value, you can't BS the world and a continued trade deficit every quarter and every year is nothing but US dollars flowing out to other countries economies so their wealth can increase.
We ain't seen nothing yet.
Layoffs, nationwide, in half the business sectors are coming by early summer.
Funny how that record figure of $38 billion in bonuses to Wall Street in December doesn’t get a lot of press exposure, neither. Reminds me of the looting in the aftermath of the LA riots and Katrina.
What I find difficult to believe is that all the preachers of the faux prosperity over the past eight years could believe their own BS.
Millions of Americans have been using their home equity for several years just to survive. And then they tap out their 401K, in spite of the penalties and additional taxes. Unless they fit into some government statistical report (i.e. employed, recently unemployed, in default or foreclosure, etc.) they simply don't exist.
And most people really, really don't understand -- until their number comes up.
Am I screwed?
Looting is exactly right. Look at Countrywide's Mozilo: he quietly sold $100s of millions of his own stock last year, while recommending Countrywide as a strong buy to the sheeple and his own shareholders.
Did they really believe it, or were they just knowingly pulling Mozilos? (See above)
You can always leverage them for more.
I like your investment style.
It can be dead bang certain. A lead pipe cinch in a pinch.
Florida Times Union: FBI begins investigation into Countrywide Financial Corp. for securities fraud
/jasper
Amazing that don't get more play in the headlines.
The suckers at the bottom 2 tiers of the Ponzi pyramid of the mortgage crap and the American taxpayer are left holding the bag.
Of course it would be very counter productive for the MSM to report the truth of what actually happens in business and government and politics.
A raising tide lifts all ships - a falling one, lowers them.
Given the multiple effects of ballooning inflation, collapsing dollar, shrinking economy, higher commodity prices, more unemployment, lower home prices, tighter credit, and more government debt... what does one do?
Well, other than be poor?
A raising tide lifts all ships - a falling one, lowers them.
Given the multiple effects of ballooning inflation, collapsing dollar, shrinking economy, higher commodity prices, more unemployment, lower home prices, tighter credit, and more government debt... what does one do?
Well, other than be poor?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.