Dinks

dinks

Will the US default on Thursday? There are a bunch of people hoping so. And, no, they’re not all Tea Party fruitcakes, desperate gold fanatics or anti-America zealots. Oh yeah, plus Bashar al-Asssad and that little numbnuts running North Korea.

But is this realistic? Could the American government actually run out of money?

Of course it won’t. It makes the money, which is real handy if you need more. The issue is not the ability of the world’s largest economy to pay its bills (it can do so, and always will), but the mechanism for it to happen. As I write (Sunday evening, October 13th) the political process allowing the States to function normally is screwed up. What looked like a deal on Friday is currently uncertain.

This is a problem, since even if a compromise between Democrats and Republicans were to be found by noon Monday, it might not be enshrined into legislation and passed by Thursday, when the current borrowing authority lapses. And the two sides may actually be growing further apart in a giant game of chicken, with global consequences.

If you recall, we last went through this stupidity in 2011. Then President Obama compromised with the hard-line Republicans who want less spending, smaller government, fewer services and lower debt. The result was a new law which mandated spending cuts if more compromise wasn’t reached – cuts which came into effect at the beginning of 2013. As a result, the US deficit is shrinking, but political anger is rising. Obama won’t back down again. The Tea Partiers want blood.

Now, a large-scale default on government securities is highly unlikely. But if a mistake happens and the October 17th deadline is missed, there will be short-term consequences. Bond yields would spike along with gold, and equity markets fall, because investors hate surprises. However nobody credible believes for a moment this is any indication the US is damaged, unlike the mental quality of its newest politicians.

The Democrats (they control the Senate and the White House) are insisting the debt-ceiling debate should have nothing to do with policy decisions like Obamacare. The Republicans (who control the House of Representatives) say they won’t budge until the health care law is gutted and spending caps put in place. On the weekend the head of the IMF, France’s Christine Lagarde, called it all “very, very concerning” – which it is. It’s nuts.

So what’s likely to happen next?

Well, if equity market mayhem affects your sex life, don’t watch CNBC on Monday. Investors romped and hooted their way to giant gains for stocks late last week in anticipation of a Washington deal. Ergo, there are a lot of asses hanging out there if the news turns south. On Sunday afternoon Dow futures were pegged 142 points to the good, reflecting Friday’s reality. By Sunday night they were 110 points in the red, as the impasse dragged. About what you’d expect.

But let’s remember where things sit. So far in 2013 the US stock market (S&P) has gained over 21%. The Toronto market is a laggard (thanks to gold in large part) at just 6%. Ever since the last US political-economic crisis, the ‘fiscal cliff’, turned out to be a pfttt, American stocks have not looked back. In other words, it’s high time for a correction, especially since the current crop of corporate earnings is likely to be a meagre one.

If we get close to the debt precipice, or slide past the deadline by hours or days, investors who’ve been sitting on cash, fretting that stocks were too expensive, may get their chance to pounce. And history will be on their side.

For example, in 2011 when the last debt ceiling crisis turned brave, macho posters on this blog into shimmering puddles of goo, the Dow plunged 4.6% in a single day (August 10th). Three months later it was all being gained back, with one of the largest single-day rallies (4.2%) coming on November 30th.

This is a pattern worth noting. Big actions get big reactions. The best time to buy (obviously) is when people are throwing themselves off buildings. Remember the mess we were in during 2008 as the global financial crisis mounted? You bet. On October 15th the stock market melted 7.8% in a single session. Buyers looked like idiots – until two weeks later when prices exploded higher 10.8% on October 28th.

How about the biggest one-day stock massacre in history? That was October 19th, 1987, when I was just five. The Dow was creamed for a 22% loss. Two days later the sellers learned a bitter lesson when prices surged 10.1%. And even the Great Crash of 1929 has a similar tale. They were jumping from the top stories on October 29th as the market shed 11.7%. But the buyers that day were geniuses by the next afternoon, a Wednesday, when a 12.3% surge had lined their pockets.

The point is simple, and clear. The US is in recovery mode, and will stay that way. The debt ceiling debacle is political theatre. If some elected dinks come along and deliver a crisis, why waste it?

116 comments ↓

#1 Randy on 10.13.13 at 8:53 pm

I live in the country…Fire Hall is 40 minutes away and firefighters are volunteers…They assured me that in case of a fire at my residence they will be here to save my foundation.

#2 Cici on 10.13.13 at 8:55 pm

Could I be first? Wait, I’m not allowed to ask that question.

Great post tonight Garth!

#3 takla on 10.13.13 at 8:58 pm

garth:could America actually default on its debt”of course not it makes its own money”…..thank you garth for putting that in print and letting us know your stance on that issue.For now ,being the country issueing the world reserve currency provides them the ultimate hedge.hopefully Canada can go along for the ride for some time{until they want our resources?}.So why the charade.why not just print up the 3 plus trillion in debt they owe their creditors and be done with it?

#4 Randy on 10.13.13 at 9:01 pm

“The debt ceiling debacle is political theatre.” Makes sense… Like they say…Politics is Hollywood for Ugly People…

#5 Freedom First on 10.13.13 at 9:02 pm

Right on Garth! When you are doing it right, it just doesn’t matter what any market does. Allows a person to remain calm,clear thinking, and able to seize opportunities as they arise. Freedom First.

#6 Randy on 10.13.13 at 9:07 pm

Since the U.S. Debt is really likely in the hundreds of Trillions and will never be paid off….Would this crisis be a good time for them to devalue the currency ?…..since it will have to happen at some time in the future …..

#7 Canadian Watchdog on 10.13.13 at 9:08 pm

Yale professor explains the mechanics of U.S. government bonds in 30 seconds. Video

#8 Rabbit Killah on 10.13.13 at 9:09 pm

“The issue is not the ability of the world’s largest economy to pay its bills (it can do so, and always will)”

Garth, you are a refreshing fall breeze in the world of real estate and investing. Which I why I would be so interested in what you would say if you stopped saying asinine things like this.

Everything dies eventually. The Roman Empire lasted centuries longer than the US has, and still fell. Detroit just went bankrupt, along with many other cities. The US can’t afford to repair its bridges or pay for healthcare for its veterans. So, to make statements like the US will always be able to pay its bills is to believe in the tooth fairy and the healing powers of unicorn poop.

Wealth comes from two places–the resources created by natural cycles, and the transformation of those resources by human labour. All the paper-pushing in the financial world is just more unicorn farts.

And it takes actual gravel and oil to repair roads, and actual steamrollers and trucks, which have to actually be fuelled and run by actual paid workers. Not with Bank Preferreds.

And all these actual things and people are in shorter supply. So, what would your strategy be for a non-squirrel-eating contraction that may include defaults or bankrupties?

That is a serious question for a person I respect. I hope you treat it with respect.

The US is solvent, and will stay that way. Period. — Garth

#9 Default Shmeefault on 10.13.13 at 9:09 pm

The US has enough cash on hand to easily cover it’s upcoming debt obligation which I believe is around $425 billion. That’s a drop in the bucket when compared to what the govt takes in. This is more about prioritizing payments than borrowing money so there will be no default no matter what. Services might be cut to the bone but not one payment will be missed. Fortunately, the market will go on sale tomorrow and I’ll be there when it opens.

#10 MarcFromOttawa on 10.13.13 at 9:11 pm

The Rent Is Too Damn High

#11 JOHN777 on 10.13.13 at 9:12 pm

So, you think:America’s ‘Exorbitant’ Privilege Will Continue?

#12 Wonk on 10.13.13 at 9:15 pm

As the worm turns.
We watch the DOW lead to the down side and with the QE pedal to the metal, 10yr US treasuries yields lead to the upside (uh that’s not supported to happen). I think the S&P is about to figure out what is going on.
Government shutdown or not this thing has tired legs.

#13 Ben on 10.13.13 at 9:17 pm

The US, like the UK, can and will default on it’s debt. But it will be a *soft* default through inflation. And not a lot of inflation, but it all adds up compounded over 10 years.

It’s a real default as abuse of fiat means it’s not a store of value.

#14 Contender on 10.13.13 at 9:23 pm

In order to keep ahead of the debt steamroller the world economy has to grow at 7 to 9 % per year, basically forever, with no recessions. And no, I will not provide a source; look it up yourself.

#15 Retired Boomer - WI on 10.13.13 at 9:26 pm

Garth-

Good Post tonight. Bad Theatre in Washington. I’ll probably be a “buyer” about Wednesday I figure. Always best to buy closer to the “expiration date.”

Like that gallon of milk for $1.49 that “expires” 10/15 it will be gone before then.

IF we default, so be it. Mexico, Argentina and many others have as well. So we cut geezer healthcare & pensions and goose up taxes. The world will NOT end. Bring it on if you must.

#16 HogtownIndebted on 10.13.13 at 9:30 pm

You can almost hear the air going out of the Ontario economy with news like this:

http://www.meridiancu.ca/meridian/Media/latest-news/Pages/75-per-cent-of-Ontario-small-buisness-owners-have-no-plans-to-hire-next-year.aspx

75% of small businesses see no hiring in 2014
90% have no expansion plans

So with such a major part of the economy flatlining, where, exactly, will the energy come from to prevent a faster deflation of the RE bubble?

#17 Figmund Sreaud on 10.13.13 at 9:32 pm

“It does not matter how many times something succeeds, if failure is too great to bear.” – The Black Swan.

I suspect, probability of the next swan being black is rather low, but I also suspect if it is black, consequences will be severe. No?

F.S.

#18 FTP - First Time Poster on 10.13.13 at 9:33 pm

The U.S. is no more in a recovery mode than Richard Simmons is going to go straight. If that were the case, why are major US corporations slashing their payrolls all while recording record profits? Because they’re counting the shrinkage in payroll as profit – its not and it only buys them a few more quarters of positive numbers. Wal-Mart is a prime example – and even their numbers are down. You’re missing the big picture Garth – gold bugs, doomers, etc, aside.

The real issue here, isn’t the debt ceiling, its the global debt burden world wide. It’s the agreement amongst the G-20 to hunt down taxes globally. You’re under the assumption that the “bail in” has to do with banks defaulting – it doesn’t, it has to do with being able to push public debts on private pensions and wealth funds.

One only needs to look at the U.S. and the tax grab they’re doing by “nationalizing” (aka: seizing) private pension funds to pay debts to see what is coming down the pipe. Do you honestly think that the bail-in clause passed by Parliament was a rainy day bill? I doubt it. The truth is that the middle class is being squeezed by higher taxes, higher costs of living and a smaller paycheck at the end of the day. It’s self evident in the declining profits of some of the largest global corporations – McDonalds and Wal-Mart just to name two.

If that weren’t enough, 2013 will undoubtedly go down as one of the worst years for natural disasters (ie: Alberta floods at $5B) so insurance premiums are set to rise. And all of this is on top of a world of declining natural resources as evidenced in this presentation here: http://www.youtube.com/watch?feature=player_profilepage&v=8WBiTnBwSWc

You’re a bright individual and an excellent writer and orator, however, this time you continue to be off the mark. You’re cherry picking your sources and failing to see the big picture.

Have a nice conspiracy. — Garth

#19 john m on 10.13.13 at 9:41 pm

“That was October 19th, 1987, when I was just five.”…..lol

#20 Ottawanian on 10.13.13 at 9:53 pm

This is all just trying to predict the future with only 1% of the facts. These guys know things we don’t. It is best to watch this from afar and play with others people’s money. If you are investing your only future, thinking you know what will come next you will fail. What Washington needs right now is 3 feet of snow. What investors need is a history lesson on what has happened to every other economy that has been through this. The “but it is different here” has been tried and I am surprised people still fall for it. Hawks are watching this and they don’t play nice. The US will not fail because they can easily bring everyone else down to their level. The US will not fail because too many stupid people have too many guns. I predict the unpredictable will happen and it will be of no surprise or news worthy. But every Americanadian will become a little poorer. Nobody really cares or notices.

#21 juno on 10.13.13 at 9:56 pm

You can’t run out when you can create it out of thin air.

Kudo’s to the USA for creating this infrastructure. Basically they provide the world with nothing for their goods and resources.

When will the world open their eyes and get the US to back their dollars with something!

#22 Stomper on 10.13.13 at 10:07 pm

“How about the biggest one-day stock massacre in history? That was October 19th, 1987, when I was just five. ”

I hate to tell you this BUT you have either led a very fast life or the stress of this blog is taking it’s toll!!!!

#23 not 1st on 10.13.13 at 10:11 pm

The US is solvent, and will stay that way. Period. — Garth
____

Your definition of solvent is radically skewed. Basically the U.S. “solvency” is running the printing press faster than the debt which is already on an exponential path. 10 trillion added in 5 years. Math is the one true master and the U.S. will find that out sooner or later.

We’ll both be dead. And your grandchildren. — Garth

#24 WJR on 10.13.13 at 10:20 pm

You were 5 in 1987? You’ve aged gracefully…………

#25 tigerbaby on 10.13.13 at 10:24 pm

> The Roman Empire lasted centuries longer than the US has, and still fell.

we’ve all heard of “The market can stay irrational longer than you can stay solvent”, and here is the second part: “The empire can stay afloat longer than you can stay alive.”

#26 Cristian on 10.13.13 at 10:27 pm

“Could the American government actually run out of money? Of course it won’t. It makes the money, which is real handy if you need more. The issue is not the ability of the world’s largest economy to pay its bills (it can do so, and always will)”

This simplistic explanation would be OK if your blog was read only by idiots. Things are a lot more complex than you want to make them sound.
Zimbabwe was also printing money and it didn’t help much.

America = Zimbabwe: who is the idiot? — Garth

#27 Serge on 10.13.13 at 10:31 pm

GTA weekly Price drop .

http://gtapricedrop.blogspot.ca/

#28 Doug in London on 10.13.13 at 10:34 pm

If some elected dinks come along and deliver a crisis, why waste it?
———————————————————–
Consistent with my thoughts. On this sad blog, we read a lot about of how many Boomers are ill prepared for retirement. Why not take advantage of these sales that have been going on for the last 5 years to make up for lost time by scooping up some good cheap equities?

#29 ripped on 10.13.13 at 10:39 pm

Bring on the uncertainty. I love the 3X ETF’s moves like UVXY

… but i’d rather see some interest rate rise calamity even more. Sure would nuke the house huggers in Canada.

#30 [email protected] on 10.13.13 at 10:39 pm

There is a big different here when it comes to the USA. When Europe couldn’t pay, austerity was called for. How come we don’t hear austerity regarding us default? Don’t understand how inflation remains low?

#31 Inglorious Investor on 10.13.13 at 10:47 pm

The US federal government cannot technically run out of money because [email protected] or OldYellen can just create more currency units to buy gov bonds.

Currently the bond market (the real one, not the fake one created by the Fed) is reluctantly obliging because major creditors know one way or another (cough––confiscation-–cough), they will get their money (or at least most of it).

Also, there is no other place to go right now as Europe is in even worse shape and no one else has a bond market that’s large enough, deep enough and liquid enough to take America’s place. (It also helps to have war ships all over the place reminding everyone how wise it is to keep doing what America wants.)

Did I mention confiscation? How about a 10% surtax on savings? This is actually being contemplated in Europe. See how the bond holders get paid?

As for running out of money, sure the US can “print” all it needs. But under the rubric that there is no such thing as a free lunch, printing more money does not mean more wealth. You can change the nominal, but you can’t change the real without increasing REAL wealth. The US government can send everyone a cheque (er, check) for a million bucks and tell the people they have to spend that money (as per the maniacal Steve Keen). But almost overnight milk would cost $100 per bag. Gasoline would cost $50 a gallon. And so on. In other words, more currency units in circulation does not mean a better real economy or richer citizens. All it means is that those with money (savings) will have their purchasing power diluted.

America’s default is not a question. It is assured. The only question is: what form will the default take? Refusal to pay or inflate away? Well, they are already defaulting, and thus far they have chosen the inflate away approach. So far, the pent up inflation has not been fully realized. But if the velocity of money were to increase (for whatever reason) LOOK OUT! That $100 bag of milk may not seem so crazy after a short while. Regular working stiffs better hope for 25% annual pay increases going forward.

I said before I would not be surprised if the US fed gov actually did try the default option (just a bit) to see how bad it could actually get before people riot and for political purposes (like destroying the Republican party). People who have been enamoured by Obama’s charms will one day realize just how evil his presidency was. Of course, it’s not Obama per se. Just about ANY POTUS would do the same thing at this point because the forces at work are far greater than anything the Prez can do.

No matter what the gov or the central banks do, you cannot evade reality forever. The longer they wait, the deeper the fiscal hole becomes. The best long run solution for the country at large would be to face reality, take a serious looks at the books, make a real budget, have a chat with China, Japan, Russia, the Saudis etc. and realign spending with reality. There would be pain. For a while. Maybe lots of it. But the only other option is crash and burn.

In 2008 when they let Lehman die, I said it was the bankster’s way of avoiding an even larger crash that would indeed take down the entire system. They could not avoid the crash, but they could contain the damage. This is what needs to be done now on a national/global level. A crash-and-burn approach would mean even more pain and utter chaos. But of course, there are very powerful, entrenched interests who benefit from the current extend-and-pretend meme, so it’s up to the people to raise their voices (if they can look up from their iPads and iPhones long enough to notice the real problem).

So, if this time around a panic creates a great buying opportunity for stocks. Fine. Count me in. But just remember, that at some point there will be no more opportunities. But the longer they wait, the risker it gets.

In other words, you were wrong. — Garth

#32 TurnerNation on 10.13.13 at 11:00 pm

Pic: firefighters taking prescribed Union break.
Won award for Most Foundations Saved.

#33 Smoking Man on 10.13.13 at 11:01 pm

It’s turkey day and the Smoky family will not be attending the official thanksgiving family dinner. It’s we do.

My wife is a raving psycho that’s why I love her. Conviction, fair play, honesty burned in her soul. Always goes with what’s right consequence be damned.

She is the youngest of 5. Oldest is brother, followed by 4 sisters.

Now sis number 4 is certifiably insane. Gone threw 3 husbands, that’s where we are going tomorrow. The loony bin.

Prior to us deciding to fake poverty in order to have our kids worry about the future and get off there ass, and video games, and make something of there lives, Bro and sisters 2 and 3, kissed our ass, we where celebrities. Sister 4 was always too insane to notice what was going on.

4 years ago the second, and I mean second we announced to the world, we are broke, our relationships with Bro1 sis 2 and 3 went in the toilet. Sis # 3 who by the way did not even graduate high school built up a million dollar business.

Bro and sis 2 can not get close enough to sis 3’s ass. I trained 3, she’s a Smoking Woman.

I set bro #1 up in two businesses. Took him to south east asia, showed him the ropes in the 90’s, we have secrets. Not one thank you, you see it was his idea people.

And when I called him twice this month to invite sis number 4, he blew me off.

Ya see Sis 3 the Newvo rich has issues with Sis 4.

Sis 4 lost it in front of a lot of people this summer, and legitimately embarrassed 3. But see’s nuts, and has two great kids, Bro 1 could not careless. I love sis 4 kids.

So bro 1 being the opportunist, knowing 3 is pisses at 4 did not give 4 an invite even after I called him. He thinks if he keeps in with 3 she will just shower him with loot.

He’s always been an idiot.

So tomorrow we are having dinner with a loon who truly loves us, and shunning normal people who only know how to chase carrots.

What they all don’t know is I am a silent partner with 3. We are tight. and she loves my wife.

O To be a fly on the wall at the other dinner…..

#34 Castaway on 10.13.13 at 11:01 pm

# 18. http://FTP…….If that weren’t enough, 2013 will undoubtedly go down as one of the worst years for natural disasters (ie: Alberta floods at $5B) so insurance premiums are set to rise.

If your gonna post get your facts straight. This was one of the most benign years for natural disasters in decades. That $5 billion insured loss in Alberta hardly registered in the international markets. Yes your rates will rise in Calgary. And they should. You built on a friggin flood plain!!

#35 Canadian Watchdog on 10.13.13 at 11:02 pm

#16 HogtownIndebted

Who needs small businesses to expand their operations when CUs can earn big money by lending taxpayer-backed subprime loans to global investors. Chart

#36 FATHER on 10.13.13 at 11:06 pm

I didn’t know you are only 30 years old garth, that is a lot of accomplishments at a early age, but you look older, maybe 31 hehe

#37 FATHER on 10.13.13 at 11:09 pm

I’m with # 29, higher interest rates

#38 Cici on 10.13.13 at 11:30 pm

#19 John M

What’s even more hilarious is that I skipped over that one: must be pretty tired tonight.

Oh well, at least I got into the Top 5…A first, LOL–but as second!

#39 john on 10.13.13 at 11:35 pm

Will the Canadian housing ponzi bubble ever deflate Garth?

It’s hard to understand how people without money or financial sense have been allowed to buy houses? It’s like the most foolish and careless have been rewarded for taking dangerous amounts of debts. Those with financial sense are now forced to live house poor if they want to own a house because the conservatives don’t mind gambling over one trillion and counting on mortgages that many will walk away if the ponzi scheme comes crashing down. You talk to anyone and they all think prices are crazy but will keep going up some how. My wife and I make above average incomes and yet can not afford the average house in Toronto. Yes the banks will lend more then we feel we could payback but this is normal practice? The choice is rent which is much cheaper then owning but it would be nice to own your own place. Considering that we make more then the average income and yet we can’t afford the average home and at the same time watching below average income earners buying the average house without a care in the world. What is going on?

#40 Inglorious Investor on 10.13.13 at 11:43 pm

Did not like my previous rejoinder? No problem; how about this one:

“In other words, you were wrong. — Garth”

About what?

#41 Porsche on 10.13.13 at 11:47 pm

Back in 2008, things were bad. So bad that many thought the stock market wasn’t going to survive.

Financial experts, analysts, and journalists shunned the markets. They said banks were in horrible conditions and the economy was about to contract even further. They told me it was financial Armageddon and they were probably right.

But they failed to mention the other side of the story; the part about the record amount of stimulus that would take place in the aftermath.

They failed to realize that the world’s most powerful governments and central banks would not allow the world to fall any further.

They failed to mention that the, “do whatever it takes” mentality by the world powers would be deployed to record extent.

If you invested in the U.S. market 5 years ago you would be one happy camper today.

The time for near-term speculation via fundamentals is gone. Robot traders who react to “tweets” from Twitter control the market. The world has gone mad. And in the process, politicians and bankers are allowing the biggest derivatives and stock market bubble in history.

QE money enters the system but the money isn’t really being loaned out to consumers; otherwise, we would see it directly reflect in GDP growth.

In reality, that money sits in the banks and is used as collateral to put major risk bets into derivatives and such – for example, the same ones that led to JP Morgan’s $6 billion plus loss, and to massive legal claims against the bank.

We know this because of record deposits at JP Morgan. One look at JP Morgan’s data and you can see the widening discrepancy between its loans and deposits. While loans have remained relatively unchanged in the last five years, its deposits have skyrocketed from $750 billion to $1.28 trillion. The deposit to loan gap at JP Morgan now sits at $423 billion courtesy of the Fed.

Those who claim that inflation has yet to hit the market can now rely on this data to understand why. We’re not seeing inflation in the core measures because the money hasn’t gone into core inflation assets.

The trillions of dollars injected into the system have gone into placing massive bets on financial instruments. In other words, it has inflated the price of paper assets and has created the biggest stock market bubble of all time.

But why?

If they lend to those who don’t qualify for loans, they get scrutinized for bad lending practices. Meanwhile, they’re being forced by the Fed and the government to make loans.

Why would the banks put themselves in a position of scrutiny to generate negative-zero interest rates via high risk loans to Americans who may or may not pay their bills? Wouldn’t it be smarter to use that money as collateral to make big bets in paper assets?

Heck, investing simply in the S&P index alone would’ve returned them nearly 90% in the last five years, that’s 90% more than they would’ve made lending to Americans at negative-zero per cent interest.

If you were a bank, what would you have done? Welcome to the biggest stock market bubble of all time.

#42 FTP - First Time Poster on 10.13.13 at 11:49 pm

Have a nice conspiracy. — Garth

What part is conspiracy? Declining sales/profits at both McDonalds & Wal-Mart? That’s a matter of public record.

Diminishing natural resources? I wasn’t aware we were drilling 18,000ft down in the Gulf for kicks. Those damn Arabians must be sitting on tons of oil to screw us.

G-20 hunting down assets and nationalizing private pensions?? Well, it started in Europe – Merkel just announced a seizure of 10% of all deposits to go toward Sovereign Debt, the U.S. has talked about Nationalizing 401(k)’s

All of these are a matter of public record and can be found on any “non doomer” website with current news. So what’s left for conspiracy – the squeezing of the middle class? Hardly.

If you’re that out of touch and your only response to rational arguments is to start waving the conspiracy flag – its time to shutdown the blog and find a hobby.

(a) McD’s clears $500 million a month in profit, Walmart makes $1.3 billion a month. (b) The US is closer to energy self-sufficiency now than in many decades. (c) There is no such law in Germany and the US will never nationalize private retirement plans. How can you believe such crap? — Garth

#43 Cici on 10.13.13 at 11:53 pm

#33 Smoking Man

There are a few great scenes for you movie in here. Especially the scene where the tried-and-true, looney yet loveable sis 4 loses it and legitimately embarrasses sis 3…Oh please, can we have the replay…I need the full dialogue ;-)

#44 Inglorious Investor on 10.14.13 at 12:05 am

#18 FTP – First Time Poster on 10.13.13 at 9:33 pm

Chris Martenson’s analysis makes sense. But what he and others seem to ignore re: energy is that the story of energy depletion is not as simple as they say. A combination of alternative sources (solar, natural gas [?]), technology that saves energy––either directly or indirectly (transportation, mobile computing and IT), smarter use of current energy (automation systems), conservation strategies and social engineering (we waste a lot of energy right now), etc. mean the future is not as cut and dry as he seems to imply.

That said, as of now, there is no replacement for oil. Petroleum was truly a gift of abundance which we may never see again (abiotic oil notwithstanding). So, the future may be radically different from the present, and more like the past. We will have to wait and see.

One thing seems pretty certain. That if we truly are at peak oil with nothing to replace it in a timely fashion, the order of the day will be disorder and volatility as real supply and demand remain tightly correlated (i.e. no reserves, just find and burn).

That’s why I said in a previous post, “pray for free energy.” Energy is the basis for EVERYTHING. When energy is cheap, life is good and easy. When energy is scarce, life is hard and short. Free energy would go a long way toward helping the world out of our debt crisis and reduce the actual burden on future generations. Of course there is no such thing as free energy, but you get the idea.

#45 zee on 10.14.13 at 12:13 am

If we all know that there will be no default then why the sell off.

Who is dumping their stocks as we closer to the deadline.

#46 Nosty in Knickersville on 10.14.13 at 12:17 am

#18 FTP – First Time Poster on 10.13.13 at 9:33 pm — “. . . it has to do with being able to push public debts on private pensions and wealth funds.” and #31 Inglorious Investor on 10.13.13 at 10:47 pm — “. . . because major creditors know one way or another (cough––confiscation-–cough), they will get their money (or at least most of it).”

Funny both of you should mention that. Some may remember Nostradamus Jr., who maintained that the US would bankrupt TROTW first so these are interesting words, because Russia, China, China II, China III and the TPP. Commentary in first China is good. BTW, Syria, Russia and Iran are three countries left with public non-profit central banks. The wars are not over.

#47 the prophet elijah on 10.14.13 at 12:36 am

The prophet shook garth’s confidence in no default and his superficial beleif in US politicians. Repent and beleive, and buy some golden protection too.
The prophet has spoken

#48 Scott in Gibsons on 10.14.13 at 12:41 am

Cool!! Garth teaches market timing!

#49 Victoria Tea Party on 10.14.13 at 1:00 am

JAMES GRANT DARES TO PUMP FOR GOLD

As US lawmakers muddle through the latest will-they or won’t-they “default” on US government obligations, James Grant puts much of this political back and forth into historical context.

Grant, a major American economics writer and author of Grants Interest Rate Observer says US lawmakers have done this movie before, lots.

IN HIS LATEST COMMENTS, GRANT NOTES

The US government defaulted after the Revolutionary War, and again during the Great Depression, when the gold standard was altered causing great consternation in the City of London, an action described then as a “default.”

President Nixon’s removal of the gold standard altogether in 1971 was another technical default, he opines.

Mr. Grant explains past and present American administration and congressional attitudes towards the legitimacy of the Greenback thusly, and it is not a pretty sight:

“This is the unsustainable conceit of the world’s superpower-cum-super debtor. By deed, if not audible word, we Americans say ‘The Greenback is the world’s great monetary brand. You have no choice but to use it. like it or lump it.’ But the historical record of paper currencies is clear: Governments always over-issue it. The people finally do lump it.”

He concludes by calling on gold to help rescue the situation:

“We will default in the future…And let us preempt the world’s flight from our intangible money by taking steps to fashion a 21st-century improvement. We have the gold and the brains to find the solution.”

SO ST. GARTH OF STOCK MARKET UPSIDE

is right in this current context and 2011 is his supporting case. I agree.

The good advice is to take a market swoon as a buying opportunity. Default debates will come and go, and any market downside, in the result, is a buy not a sell.

But there is a longer term danger as Mr. Grant describes:

“Across the seas (China/Japan) this imprimatur (US dollar supremacy) is starting to look a little tenuous. Lend us your dollars for 10 years, the Treasury proposes. We will pay you the lordly interest rate of 2.7 percent per annum. And at the end of those 10 years, we will hand you back your principal, which will almost certainly buy less than the money you lent.”

In other words, the issuance of US government bonds (debt) is legitimate in huge part because the US dollar is ALSO the world’s reserve currency.

That’s why China on the weekend made very loud demands for the US dollar to be brought to its knees and some other arrangement made.

China and many emerging markets see the US dollar as being a rapacious agent of American imperial over-reach, leaving economic destitution in its wake, since the 2008 debacle.

That’s why we’re in such a crappy economic condition STILL around the wrold including right here in good old Canada, nevermind the Zombie US economy.

Sleeping with the Devil and all that?

#50 gold & debt on 10.14.13 at 1:19 am

Reducing the debt would be bearish for gold – it’s the increase that is bullish. 2011 was not just the political bickering, it was also the fact the debt went up that boosted gold. Failure to increase the debt would initially be bullish, but then turn bearish as the US got it’s fiscal house in order. That won’t happen, so expect increased debt and no end to QE.

#51 Mel on 10.14.13 at 1:51 am

Many seem to pay too much attention whether U.S. will default on it’s debt. That is not the primary long term threat, it is long term debt of U.S. and the rest of the World.

Many seem to think that most of the problems that were build up over the last 30 years are all but gone.
Not so fast! I would argue most of the same stuff that made the world economy collapse in 2008/2009 is the same stuff that will make another collapse in 2014/2015. This time however, there won’t be the capacity to borrow like the last time.

The real world recession is on the way. It will come sooner then you think. Perhaps, it is here already.

#52 Josh on 10.14.13 at 2:07 am

Great article Garth.
I believe the gold bugs actually want more debt thou. But a default would cause some panic. But Mr Obama I believe has the power to raise the debt ceiling by using some amendment if he wants. So it all is just a game, the question is what for. I wonder if you could exsplain what could happen if the rest of the world decides to trade in the yuan instead of the US dollar. In case the rest of the world is, or getting tired of the circus and constitutional or unconstitutional wars (depending on what you believe) that have been going on with our neighbor and us.

#53 Buy? Curious? on 10.14.13 at 2:15 am

I’m ready, Garth. This morning, I’m transferring most of my line of credit into my trading account and I’m going to BUY! Remember in Sept 08 when General Electric was at $5? I’m not missing that boat again!

http://www.youtube.com/watch?v=5gGDIxeKgdU

#54 angela on 10.14.13 at 2:53 am

a couple points
1 .If you were 5 in 1987 then you are by far the oldest looking 31 year old I seen
2 Your remarks to the most logical intelligent post here are truly asinine (makes me wonder were you get your info from )
3 IF the us is truly in recovery why raise the debt ceiling ,why not just pay down the 16.9 trill debt with the tax revenues collected from the tax payers of the USA, please enlighten me budget man (ps i actually do know the answer to this just curious and im sure others are too just to see what your response would be so spare me the smart ass comments and see if you can respond politely you big bully)

#55 Mr. BigStuff on 10.14.13 at 5:01 am

Waiting to buy Canadian Financials, US Industrials, Consumed Discretionary and some Material ETFs. This correction is long overdue. Good times!

#56 Future Expatriate on 10.14.13 at 6:42 am

Personally? I hope the idiots take the US over the brink. It is so much fun to watch right wing dinosaurs hasten the process with the self-immolation that would come from a 2000 point fall in the Dow over several days.

I do know this: Obama ain’t budging. And the idiots with the lighters won’t wake up to this fact until, say, 11:59 PM on Wednesday EST.

About that “deal”? I wouldn’t hold your breath.

#57 Stickler on 10.14.13 at 8:15 am

Nice article. Hopping for a big dip as well…but don’t discount the fact… a 50% drop requires a subsequent 100% rise just to get back to even.

Meanwhile in UK housing:

The government last week introduced the second phase of its Help to Buy program, which offers mortgage guarantees that allow purchases with down payments as low as 5 percent.

The first phase, which began in April, provided interest-free loans for buyers of newly built homes.

Great googely boogley…

#58 live within your means on 10.14.13 at 8:18 am

#33 Smoking Man on 10.13.13 at 11:01 pm

Loved your post. I`ve 2 sisters & 3 brothers so can well relate.

#59 Stickler on 10.14.13 at 8:26 am

For you fact chasers, watch this video about doubling rates…and think about it for a min.

http://www.youtube.com/watch?v=F-QA2rkpBSY

#60 EIT on 10.14.13 at 8:27 am

My money is on Obama printing money straight out of the white house. THE OBAMA BOND!!!

#61 economictsunami on 10.14.13 at 8:31 am

“Will the US default on Thursday?… But is this realistic? Could the American government actually run out of money?…
Of course it won’t. It makes the money, which is real handy if you need more. ”

It may just be a matter of semantics to some but the US government does not make money; it merely issues debt.

It is the Federal Reserve who creates money; seemingly out of thin air.

They speak about their mandates of employment, inflation and setting rates but it is their mishandling of monetary policy (rates too low for too long) that has made this financial/ economic mess much worse then need be.

They may have prevented a sharp collapse of financial markets but their ability to use extraordinary monetary policy to rev the Main St economy has been severely curtailed.

Global growth is so sluggish, central banks are just itching for an excuse to further intervene in the running of “free and efficient markets.”

Congress can be just the lightening rod they are looking for. A truly man made disaster…

MORGAN STANLEY: We May Get A New Wave Of Global Central Bank Easing In The Coming Weeks

http://www.businessinsider.com/morgan-stanleys-fels-sees-new-wave-of-monetary-easing-coming-2013-10#ixzz2hhN4nP1W

#62 Smoking Man on 10.14.13 at 8:40 am

#42 Cici on 10.13.13 at 11:53 pm
#33 Smoking Man
There are a few great scenes for you movie in here. Especially the scene where the tried-and-true, looney yet loveable sis 4 loses it and legitimately embarrasses sis 3…Oh please, can we have the replay…I need the full dialogue ;-)

……………………………………

On the surface it didn’t look like much. Sis 3 and Sis 4 both have sons at about the same age. Like all cousins specially boys in and around 15 they occasionally beat the crap out of each other.. Not a big deal but Sis 4 loses it on the other kid.

Normally it would not have been a big deal, we all know Sis 4 is nuts. But she did it in front of Sis 3s life long rival and competitor, who in my view makes satin look godly.

The humiliation Sis 3 experienced was real, The competitor witnessing this moment of insanity, her entire body lifted having a massive spiritual orgasm watching all this unfold.

Just so you know Sis 4 last male friend had just purchased air and cruise tickets, the man, a big burly man, afraid of no one on this planet. He saw momentarily Sis 4 un masked, he just ran away like a frightened child, as did a few other males prior him.

This is were I’m a little nuts.

Sis 4 in my favorite.

#63 Hrundi V. Bakshi on 10.14.13 at 8:41 am

Garth, I just finished reading your favorite author’s (Peter Schiff) latest book, The Real Crash. His views and prognostications are anything but hysterical, and seem quite plausible.

I suggest everyone read this book.

I respect your point of view, but Schiff makes a clear and compelling case that America is not recovering. In fact, the 2008 crisis was just the opening act; the real crisis is unfolding right now. QE and emergency interest rates are a misguided and feeble attempt to treat symptoms of a fatal disease. America jailed Ponzi and Madoff for what today stands as economic policy. It makes dollars but no sense.

Mr. Schiff sells gold. — Garth

#64 ILoveCharts on 10.14.13 at 8:43 am

Let’s chat about Canadian housing for a minute again…..

Throne speech on Wednesday will focus on Consumer Protection. If there was ever a time for the federal government to hold the real estate sector accountable, this would be it.

Unfortunately, it looks like they will be focused on the small stuff like cable TV instead.

#65 raider on 10.14.13 at 8:57 am

Those SPY puts bought as just-in-case portfolio insurance last week will come handy this week.

I almost felt bad about it when the whole thing looked like coming to a no-event peaceful solution on Thursday & Friday last week. I just thought this is US politics, better hang on they might still fuck this up.

Now anxiously waiting for the opening of the market :)

Btw, Garth you talk about all the doomers posting here, have you read Bloomberg recently.
http://www.bloomberg.com/news/2013-10-13/u-s-risks-joining-1933-germany-in-pantheon-of-deadbeat-defaults.html
they’re almost marching into the direction of the FEASTA study…
http://www.feasta.org/2012/06/17/trade-off-financial-system-supply-chain-cross-contagion-a-study-in-global-systemic-collapse/

#66 Steven on 10.14.13 at 9:04 am

If the USA crashed and burned especially the banks, government,MSM and real estate market it would be the very best thing that happened to the USA since its founding and the only thing better would be for the criminals running those institutions to be the guests of honor at a mass neck tie party. Kill every last god damned one of them and destroy everything they have done. Set Americans free of those politically correct evil doers. It is far too late to fix the problem by firing a few ass holes and changing a few laws and to hope for the best. The criminals and perverts that run the world and america must die! No more good times for bad people; end of story.

Hope you enjoyed your last, violent, loser post. You are done here. — Garth

#67 BullionTastesGood on 10.14.13 at 9:11 am

“But is this realistic? Could the American government actually run out of money?”

The true question is : Is it desirable that the US runs out of money next month?

Of course yes, since it seems to be the only way into negotiating an end to US deficits..

However, when a given blogger advises everyone and their grandmas to buy a balanced portfolio of stocks (and no gold, yuk! only an idiot would buy something that has lost more than 20% ) it is utterly normal that they wish this deficit producing nation continues down the path to insolvency since it makes stocks levitate in the process.

And when you’re out of arguments or funny dog pics, why not bully people who think otherwise by labeling them funny names and having the last word at their comment…

Period.

I do not counsel people to buy equities, since diversification is essential in a volatile world. And, for the record, I feel sorry for people like you who are so wedded to a one-solution existence. — Garth

#68 pbrasseur on 10.14.13 at 9:31 am

The point is simple, and clear. The US is in recovery mode, and will stay that way. The debt ceiling debacle is political theatre. If some elected dinks come along and deliver a crisis, why waste it? – Garth

Exactly. But somehow this time i’m not even sure we’ll get a buying opportunity out of it…

#69 Josh on 10.14.13 at 10:00 am

Porsche # 41
Awesome post !

Angela # 53 chill a bit.
We should all be more thankful to Garth for even having a blog where people actually post comments and discuss real issues. Which most westerners avoid these days and turn on there honey boo boo. Yes his ego sometimes gets to a guy, but he is consistent and to the point. I couldn’t imagine continually researching and writing every day. Let alone responding to comments.
Garth can you bring in the like button already.

#70 the prophet elijah on 10.14.13 at 10:21 am

Garth will be terrified of the prophets next prediction, stay tuned

#71 LL on 10.14.13 at 10:23 am

Your reply to Post # 18:
“Have a nice conspiracy.” — Garth

It’s not conspiracy, it is fact!
Great comment FTP!

Anyone who comes here saying the US will nationalize private retirement assets is not worthy of a spirited reply. They’re doomed. — Garth

#72 economictsunami on 10.14.13 at 10:48 am

Putting competition pressure on TELCOs for lower cellphone rates and attempting to ensure that Canadians have more pick & pay options from their TV content provider.

This election platform of consumer focused approach is telling and insults the intelligence of the Canadian electorate.

The Princes of Populace Politics are attempting to use consumption policies as a carrot; just when Canadian Consumers are deeply in debt…

Hirsh: Unfortunately, skeptics have reason to doubt official statistics…

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/unfortunately-skeptics-have-reason-to-doubt-official-statistics/article14815029/

#73 BullionTastesGood on 10.14.13 at 10:58 am

“I do not counsel people to buy equities, since diversification is essential in a volatile world. And, for the record, I feel sorry for people like you who are so wedded to a one-solution existence. — Garth ”

Well Garth, what I don’t understand is how you are categorically opposed to owning even the smallest fraction of a portfolio in bullion…

If you are truly committed to liquidity and diversification, why would putting 5% of a portfolio in physical PM be a bad move?

#74 CrowdedElevatorfartz on 10.14.13 at 11:04 am

@#66 Steven

Hmmmm, based on your suggestion as a ‘final solution” to all our world leaders….

Perhaps you should have posted as #666

#75 Ralph Cramdown on 10.14.13 at 11:10 am

#3 takla — “So why the charade.why not just print up the 3 plus trillion in debt they owe their creditors and be done with it?”

#54 angela — “IF the us is truly in recovery why raise the debt ceiling ,why not just pay down the 16.9 trill debt with the tax revenues collected from the tax payers of the USA, please enlighten me budget man “

This may seem a trifling point, a mere nitpick, but I don’t think the bondholders want to be paid back. At least not now, and not all at once. They want their semiannual interest payments and their principal returned at the end, just like the borrower promised. If they wanted their money all at once, they wouldn’t have bought the bonds in the first place, or would have sold them when they changed their minds.

#76 Figmund Sreaud on 10.14.13 at 11:18 am

Dinks
__________________

Parallel, and fitting, story to the faith of the United States, … but, picture first (we must always start with appropriate picture, right?):

http://www.thereporteronline.com/apps/pbcsi.dll/storyimage/RO/20130702/LIFE01/130709905/AR/0/AR-130709905.jpg&maxh=400&maxw=667

Resting in her Delaware River berth in South Philadelphia, the SS United States looks like a ghostly apparition succumbing to the pallor of neglect, the indignity of rust blemishing her skin, and the insistence of time and weather chipping away at her red, white and blue smokestacks. ….

SS United States in danger of losing her race against time
http://www.thereporteronline.com/article/20130702/LIFE01/130709905/ss-united-states-in-danger-of-losing-her-race-against-time

F.S.

#77 ozy - Talk is CHEAP on 10.14.13 at 11:29 am

Talk is CHEAP, why is the shipment of cheap affordable house for the under-class being still delayed after 6 years of crying WOLF, Garth?

Those unhappy renters with ugly decorated units (landlords keep them at kollonial level) are still waiting for a miracle, make it happen Garth!

It is any possibility you could build some million dollar houses in best burbs and offer them at a 50% discount….cause they did not dare buy in 2007, 2008, 2009, 2010, 2011…

comments welcome!

aloha

#78 Mr. Monday Night on 10.14.13 at 11:49 am

#66 Steven on 10.14.13 at 9:04 am

Could we just delete this one and downgrade it to irrelevant? It’s of no utility here.

Happy Thanksgiving BTW.

#79 Drill Baby Drill on 10.14.13 at 11:54 am

Dear 31 yr old blog God : I am young enough to remember when interest rates were +20% for a home mortgage. My first home mortgage rate was a 6mth @ 20% at our local small town Alta credit union, the year was 1983. Paul Volker walked in down south and ratcheted up interest rates big time thereby wrestling inflation eventually to the ground. If the timeline for this Thursday is extended and a resolution is not forthcomming for several days and or weeks there could be a repreat of history in 2014 similar to ’83. Please note Obama is an idealogue with a serious socialist bent and the fiscal conservatives are just as entrenched in their beliefs. I fear this will not end quickly nor well. I put ALL of my investments into cash this past week and there was very little discount to do so. Now I wait as you say for the time to buy back in.

#80 AK on 10.14.13 at 11:55 am

#68 pbrasseur on 10.14.13 at 9:31 am
“Exactly. But somehow this time i’m not even sure we’ll get a buying opportunity out of it…”
====================================
The S&P 500 is trading at (14X) forward PE. What kind of a buying opportunity are you expecting?

#81 Nemesis on 10.14.13 at 12:50 pm

“The US is in recovery mode, and will stay that way.” – HonGT

You know, AuldPol – I know exactly what you’re talking about… indeed, I would even go so far as to say that today, as regards WryWitticisms, you have truly surpassed yourself [admittedly, not an easy thing to do].

PureGenius!… employing LindsayLohan as a metaphor for the ailing YanquiPolity/Economy – or, ‘perpetual rehab’ as it were… speaking of which:

[LV GuardianExpress] – Lindsay Lohan Wants to Open Her Own Rehab Facility

http://guardianlv.com/2013/10/lindsay-lohan-wants-to-open-a-rehab-facility/

EnoughLohan… SoberStudents of HegemonicDecline [YanquiStyle] may well enjoy the following ‘slightly’ more serious pieces…

[CommonDreams] – The Folly of Empire, by Chris Hedges

http://www.commondreams.org/view/2013/10/14-0

[NYT] – Bankruptcy for Ailing Detroit, but Prosperity for Its Teams

http://www.nytimes.com/2013/10/14/sports/bankruptcy-for-ailing-detroit-but-prosperity-for-its-teams.html?hp

LastUp… A ThanksGivingTreat for SaltyDogz who prefer their Zen KosherStyle – but first, your Quote ‘O TheDay!

“We take an electric cattle prod… I guarantee that if you’re in the van, you’d give a get to your wife.” – Rabbi Mendel Epstein

[UK Independent] – Orthodox Brooklyn Husbands Cattle-Prodded Into Divorce by Renegade Rabbis

http://www.independent.co.uk/news/world/americas/rabbis-accused-of-kidnapping-and-torturing-reluctant-orthodox-husbands-who-refuse-divorce-8874702.html

#82 Spaccone on 10.14.13 at 1:33 pm

“How about the biggest one-day stock massacre in history? That was October 19th, 1987, when I was just five. ”

LOL
Wow, I really need a coffee and a reboot vacation…this one went over my head until I read the comments lol.

#83 maxx on 10.14.13 at 1:39 pm

#39 john on 10.13.13 at 11:35 pm

“What is going on?”

Good question. My guess is that setting up a fiscal framework so that millions more homeowners create a fresh, continuous and very large river of taxes is far more attractive/valuable than a much smaller cohort of solvent people buying houses: welcome tax, municipal tax, not to mention building permit revenue, sales tax on retail purchases for repair and/or renovation as well as all of the stuff to put into the pressed cornflakes palaces. Then, after a decade or so, major renovations start to manifest, so, even more tax influx.

Price increases, lower savings yields, more investment risk, generational warfare- lovely!

#84 Canadian Watchdog on 10.14.13 at 1:44 pm

This is 2007-2013 mortgage application data by city from CanEquity.com. Data from previous years was extracted using WayBackMachine for the month of August.

CSV Series Download

Date
City or Town
Percentage of Inquiries
Average Age
Average Income
Average Co-Income
Average Loan
Loan To Income Ratio
Loan To Co-Income Ratio

Burnaby BC, North York and Scarborough ON seem to have the highest loan inquiries relative to income.

#85 Mike T. on 10.14.13 at 1:52 pm

The Quote of the Decade:

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. Increasing America’s debt weakens us domestically and internationally. Leadership means that, ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”

Senator Barack H. Obama, March 2006

It’s a one party system dressed up as two, maybe three. People that read this blog should be smart enough to figure that out. Political theatre is political theatre. Even Gerald Celente got that one right, show business for ugly people…

If you find yourself discouraged by such foolishness and you find yourself at the edge of despair (hello doomers) investigate your spirituality. That will add context to this life beyond anything you can imagine right now.

I am thankful that I did.

#86 FTP - First Time Poster on 10.14.13 at 2:02 pm

(a) McD’s clears $500 million a month in profit, Walmart makes $1.3 billion a month. (b) The US is closer to energy self-sufficiency now than in many decades. (c) There is no such law in Germany and the US will never nationalize private retirement plans. How can you believe such crap? — Garth

a) Both are seeing declining sales QoQ during all of 2013 meaning the middle class is being squeezed.

As per Bloomberg:

Wal-Mart Stores Inc. is cutting orders it places with suppliers this quarter and next to address rising inventories the company flagged in last month’s earnings report.

U.S. inventory growth at Wal-Mart outstripped sales gains in the second quarter at a faster rate than at the retailer’s biggest rivals. Merchandise has been piling up because consumers have been spending less freely than Wal-Mart projected…

(b) The US will NEVER be energy independent, shale oil sees the highest rate of decline of any type of oil recovery (b/w 75-80% by Year 2). Shell had to write down $2B in losses due to their shale oil investments.

From the WSJ: Shell Earnings: Energy Giant Falters in Shale – Profit Tumbles 60% as Drilling Problems Lead to Write-Down

c) The article referred to was in a Greek newspaper and was for the entire EU. You above all people should know that politicians (yourself excluded) look out for their own interests first. And what’s a common political tactic – to float trial balloons first. Did everyone forget about the “banking holiday” and seizures in Cypress already?

The world has changed a lot in the last 20 years. Those who fail to see the growing headwinds are in for a rough ride.

You have no case. — Garth

#87 The Prophet Elijah on 10.14.13 at 2:07 pm

Anyone who comes here saying the US will nationalize private retirement assets is not worthy of a spirited reply. They’re doomed. — Garth
—————————————————————-
They just did it in Poland, its a trend.

#88 simkev on 10.14.13 at 2:12 pm

Generally in agreement with you Garth except you know theatre, it mimics life !

#89 Ralph Cramdown on 10.14.13 at 2:23 pm

#63 Hrundi V. Bakshi — “[Peter] Schiff makes a clear and compelling case that America is not recovering.”

He does. I’ve read some of Peter’s stuff. He is an erudite and persuasive essayist.

Unfortunately, he’s wrong. And when I say ‘unfortunately,’ that’s exactly what I mean. Following this man’s advice for the last five years would have been very costly indeed. In this age of data, it would be a shame only to read his book and not look at the actual data to see whether America is recovering.
http://research.stlouisfed.org/fred2/series/RSXFSN

http://www.truckline.com/News_and_Information_Reports_Truck_Tonnage.aspx

https://www.aar.org/newsandevents/Freight-Rail-Traffic/Pages/2013-10-10-railtraffic.aspx

http://www.greaterfool.ca/2012/11/16/lost-causes/#comment-207650

#90 simkev on 10.14.13 at 2:28 pm

Its not lack of money, resources or the ability to print said money that ruins empires. It’s complacency.

Rome did not fall in a day and nor will the USA if at all. It will most likely be around long after all of us on this site are in a better place. Well most of us anyway !

#91 simkev on 10.14.13 at 2:30 pm

I respect your point of view, but Schiff makes a clear and compelling case that America is not recovering. In fact, the 2008 crisis was just the opening act; the real crisis is unfolding right now. QE and emergency interest rates are a misguided and feeble attempt to treat symptoms of a fatal disease. America jailed Ponzi and Madoff for what today stands as economic policy. It makes dollars but no sense.

Mr. Schiff sells gold. — Garth
—————————————————————–
In all fairness Garth you sell the Stock Market !
Punch Bug!

Of course I don’t. You should not own individual equities. — Garth

#92 eddy on 10.14.13 at 2:43 pm

Re Walmart. I was in one in Florida 2 days ago, lady in front of me had a bag with 50 limes and a competitor’s flyer (Bravo) ’50 limes for $1.’ They have a price match policy and they matched it.

#93 Raginnn on 10.14.13 at 3:18 pm

Did housing kill exports?

http://www2.macleans.ca/2013/10/10/did-housing-kill-exports/

#94 espressobob on 10.14.13 at 3:28 pm

#73 Bullion Tastes Good

Theres nothing wrong with your reasoning. Gold has a place in ones portfolio. Thing is, as a diversified ETF investor you already own this sector.

As an investor,better to own the producers, not the product!

#95 Victor V on 10.14.13 at 3:37 pm

She makes $71,000 a year, but lives paycheque to paycheque

http://www.thestar.com/business/personal_finance/investing/2013/10/12/she_makes_71000_a_year_but_lives_paycheque_to_paycheque.html

Emily, 28, lives in Toronto and has a good job with the provincial government in the health care field. She earns $71,000 a year, has a full benefits package and her defined benefit pension plan with matching money from her employee is giving her a good head start on retirement.

Emily’s problem is that she finds herself living from paycheque to paycheque and she wants to start saving for a down payment on a home.

She has debts of $34,000, most of which are student loans and money borrowed to buy a car. She also has a high credit card balance.

She finds she’s spending all her free cash keeping up with the payments and day-to-day expenses and wonders if there’s a better way to do it.

“I feel stuck,” Emily said. “I don’t know where to start and what to do first.”

#96 Coho on 10.14.13 at 3:52 pm

It’s Thanksgiving. The people through their labour have raised the crops and turkeys and have prepared and cooked a wonderful bountiful meal with all the fixings for dinner. Sitting at the table are highly placed politicians, wall street, the military industrial complex, big oil and the pharmaceuticals feasting like there’s no tomorrow. But, where are the people at the table? Show us the people. THERE ARE NO PEOPLE. There should be — after all they have created this feast. Oh wait, look under the table. That’s where they are, with the dinner guest pets, hoping to luck out on a table scrap that might have fallen from the saggy jowl of one of the guests.

Thanksgiving comes but once a year for the people, but for those who are supposed to be working FOR THE PEOPLE, feasting at the peoples’ table is a daily event.

#97 Smoking Man on 10.14.13 at 3:53 pm

Vlad never followed

Trans-Pacific Partnership (TPP) agreement that closely.

Thanks

I will now.

To bad Garth is not still in parliament, tell us what’s going on.

But then how could he, to MP’s the details are off limits.

This pathetic blog could become illegal.

One bad link by a user and Gratho goes to the slammer.

Harpo Democracy

#98 Yitzhak Rabin on 10.14.13 at 4:39 pm

“However nobody credible believes for a moment this is any indication the US is damaged”

Yes, a nation may default on a portion of its debt. Nothing to see here, buy stocks, they rallied last time.

Default is what they should do. The whole idea raising a debt ceiling implies default at some point if you can’t go deeper into debt. Paying your old bills with new debt is not paying bills, it is avoiding (and growing) them.

A real default would be bearish for gold in $USD terms.

Regardless of whether they exceed the debt limit for a couple of days, they will raise it again and again. Look at the food stamp fiasco over the weekend when they system went down. Americans are now dependent on government like never before.

The real crisis is raising the debt ceiling together with the FED’s moronic QE. Inflation and a sovereign debt crisis is the road ahead.

China and India are experiencing inflation pressures. China is letting the Yuan rise while buying enormous quantities of gold. India is raising rates.

There are just as many dollars overseas as there are domestically. What happens to prices when they come home to roost?

FYI, inflated stock values and home prices are not a “recovery” of a nation’s economy. By that logic the US was in pristine condition in late 2007 when we now know it was rotten to the core.

#99 Coho on 10.14.13 at 5:00 pm

Just a comment about the Canadian Senate. There is currently a push for senate reform if not the total abolishment of the senate. What appears to have triggered this debate are the recent senate scandals. Of course, those who dictate to our elected leaders are behind this. I’d wager there are questionable practices, impropriety or outright criminality going on at any time somewhere in government. After all, it is people who make up government and for those who have a low regard or trust for individuals in general because of ego and human fallibility, just imagine a fallible individual with an incredible amount of power.

Those behind world affairs choose if, when, how, and to what extent certain things are exposed and covered by media. On the surface the senate scandal serves to dirty certain senators and raise the question, ‘Do we really need the senate and the costs involved in running it?’ This is for us, the cattle’s consumption. And if enough of us are manipulated to pile on and demonize certain senators and the senate in general, then the hidden dictators molding society will be happy that their plan is working very nicely.

We know that our elected representatives are supposed to reflect the will of the people – to serve their constituents’ interests, but in the virtual ‘real world’ they fall in line behind our elected dictator otherwise known as the PM. And he or she, in turn is dictated to by those above them.

Control is expedited much easier and more efficiently through a leader which controls the lower house and doesn’t have the senate to deal with because it may not always rubber stamp new laws as they are initially put forth, if at all. Even though senators are appointed by PM’s, they are not as easily controlled by them and thus they serve as what has been called a ‘Chamber of Sober Second Thought’.

It’s not a stretch to conclude the abolishment of an upper house serves those who dictate to our elected leaders in that there are less checks and balances in government. Of course the argument for the eradication of the senate is served up to the people that it saves money and makes for more efficient government. That senators are not elected, is inconsequential, but rather preferable because they hopefully will not compromise themselves as easily as those whose main focus is to get re-elected and/or be appointed to cabinet. We can see the impotence of our elected representatives in Ottawa and my opinion is that we are much better off having a second legislative body as opposed to just one.

#100 FormerSaskie on 10.14.13 at 5:17 pm

#92 What do you do with 50 limes?

#101 jim on 10.14.13 at 5:38 pm

#99

Fair enough. However, if the powers that be (e.g., big banks, industrialists, wealthy families) can exert influence on the political parties in the house, can they not do so on the senate? Perhaps the senate cannot be readily controlled by the PM, but it does not follow that its members are not influenced by the same power brokers that influence the mainstream parties.

“Democracy is the illusion that my wife and I combined have twice the political influence of David Rockefeller.” – Butler Shaffer

#102 TurnerNation on 10.14.13 at 5:52 pm

#73 BullionTastesGood

At what percent is it in yours? We eagerly await.

#103 real estate savvy on 10.14.13 at 6:07 pm

I see vast numbers of your posters are wetting themselves in anticipation of a US debt default regardless of your post today which indicated it would not happen.

So desperate are they that the country they hate so much fail.

Amazing how hatred grows from significant economic dependence. perhaps it is because of that.

Human nature is fascinating

#104 TurnerNation on 10.14.13 at 6:13 pm

I mentioned this a few times on the blog a number of months ago.

http://www.thegridto.com/life/real-estate/exile-on-queen-street/

A walk down Queen Street West yields evidence of this decline: Between University and Bathurst alone, there were 13 empty storefronts at the time of this writing; only two were reportedly leased out by a major retail franchise. Just a bit further west towards Shaw Street, where Carpenter now lives and works, another three storefronts remain empty.

For many business owners, the rent alone is too steep for most upstart businesses to afford, resulting in widespread vacancies.

#105 Devore on 10.14.13 at 6:19 pm

I thought this was going to be about the other kind of DINKs: Dual Income No Kids.

#106 Coho on 10.14.13 at 6:31 pm

Point taken. All of us can be and are influenced in many ways through various means. In government, senators are more secure at their post than their MP counterparts because they are appointed basically for life (up to 75 years of age) unless they move out of their region or commit crime. Depending on their character they are more in a position to make a stand on principle and what is right and perhaps not as much pressured or beholden to tow the party line.

#107 Canadian Watchdog on 10.14.13 at 6:51 pm

#101 jim #99 Coho

Take a wild guess at which one of these government structures is a dicatorship (fake prime minister) and which one is a democracy. Link

I assure you, one of those two governments spends a lot of time making sure its foreign-born migration stock of seven million people (20% of population) don't understand what those diagrams mean for their wealth and livelihoods.

#108 Old Man on 10.14.13 at 6:58 pm

Well Thanksgiving is almost over and Christmas shopping is keeping me busy, as have ladies in waiting for gifts and my orders begin in a few days. There will be custom made hats from the Hat Junkie in Nova Scotia; combo cheese and fruitcakes from the Gethsemani Farm Monestery in KY; and native goods from Manitbah Mukluks Winnipeg. This will break the bank on me for sure, as women cost so much money.

#109 brainsail on 10.14.13 at 7:10 pm

#100 FormerSaskie on 10.14.13 at 5:17 pm

“#92 What do you do with 50 limes?”

Key lime pies and G&Ts.

#110 [email protected] on 10.14.13 at 7:22 pm

So as the ceiling is raised again and again this will have the effect of an overall stock market bull?

Why? US borrowing authority has no routine impact on stocks. — Garth

#111 TheManWhoStaresAtSheeple on 10.14.13 at 7:24 pm

The point is simple, and clear. The US is in recovery mode, and will stay that way. The debt ceiling debacle is political theatre. If some elected dinks come along and deliver a crisis, why waste it?
======================================

Agree 100% and this is clearly visible on the following graph:

http://i42.tinypic.com/2ibes8m.jpg

#112 Obvious Truth on 10.14.13 at 8:17 pm

Reading through comments tonight you’d think it was Halloween. It’s not even a full moon and all the wing nuts have emerged.

There will not be a default. More than a couple days over would be very dangerous however. It will trigger lots of selling and govt knows it. They won’t go there.

Market is looking for spending. It went up when sequester rollbacks entered the discussion. Make no mistake. The US economy needs spending stimulus. When they get it right it will take off. You just can’t cut 200 billion in govt spending and expect a robust economy.

Let’s put back the doomsday zombie costumes and get back to investing.

Anyone else notice the xlu today?

#113 espressobob on 10.14.13 at 8:22 pm

#91 simkev

USD rules, hate to break it to you! Gold? Sucker punch! Commodity plays are what they is!

#114 will on 10.14.13 at 8:24 pm

To Ben #13, most interesting comment. It won’t SEEM like a default, and we won’t CALL it a default, but that doesn’t change what it really is which is a default. By printing fiat money that through inflation over time loses value. Incrementally of course, hence the nice term “soft”.

#115 Peter Schiff on 10.14.13 at 11:57 pm

#89 Ralph Cramdown

Hey Ralph – I don’t think you read Peter Schiff very well. He never said there was no recovery – his point is that the recovery is fake. Take away the low interest rates and QE and it would be a recession. I guess the real test for Peter (after predicting there would be no taper) is to see Yellen increase QE. At that point he will have alot more attention again if true. He has also done very well investing in foreign stocks; he is not all gold.

#116 No Debt on 10.15.13 at 2:50 am

“How about the biggest one-day stock massacre in history? That was October 19th, 1987, when I was just five.”

Uhm, Garth…. You were 5 what, exactly?