In early 2009 I wrote a stock and investment guide for my children who were close to or at adulthood so they could live and invest in the Great American Dream. The first key to that is to understand how stocks, markets, and currencies all work together to make our system work. That book went on to become a #1 bestseller for 61 weeks on Amazon, and still is #22 bestseller today. It was called “Double Down Bounce” and became the fastest selling non fiction e-book in Amazon history.
The fact that Warren Buffett spoke about and put the book on his list of intelligent investor club ‘must reads’ did not hurt the effort whatsoever. My market predictions, successful tactics and strategies have worked for thousands of investors. My bonafide established, let’s get serious for a minute.
As I sit her watching the east Asian markets begin to come alive, (12:00am est Friday) I wonder if this is the beginning of another “Black Friday?” They all somewhat sneak up on us, but this one is very predictable and totally made up for political gain. Everyone with any insight knows there is no debt crisis; one small faction in the GOP has turned this into a crisis by not agreeing to pay our old bills and debt. None of this is about future spending or deficits, it is about paying for what we have already spent in the past. Bills that the Bush and the Republicans ran up for 2 wars, I might add.
How did we get here in just one short decade?
In 2000, the change of guard left a huge budget surplus to the new president, George W. Bush. The budget surplus did not wipe out the old debt of the country under Bush; Ronald Reagan had left us deeply in debt. Historic debt! The debt limit rose 18 times with no calamity under Reagan to reach historic trillions of total debt. Bush decided that we should not run a surplus and give big tax breaks to the wealthy, (trickle down) rather than pay down Reagan’s accumulated debt. Keep in mind democrats had retired a great deal of that huge debt and created a budget surplus under Clinton.
The Bush administration decided to do something unique; they created something called off budget accounts. They fought two wars and gave trillions in tax carve outs to major corporations in tax loopholes or corporate welfare. All off budget and not accounted for, because it was financed in debt bonds, treasury notes sold to China, the oil sheiks and despots around the world. Bush left office with a debt trajectory heading to the very sky and crashed the entire economy in the process. Nice cow-pattie to leave the new guy to step into.
The real deal:
Bush knew from the 2006 elections that they had lost the American voters and were going to lose big, all of it. Tactic, spend all the money and blame it on the new guy. Leave him no way out but to spend big to even spark this economy back to life. Now blame him for all the past and future spending or let the economy just collapse and crash.
The now deal:
The Tea Party & ultimately the Republican plan: Now debt and deficits suddenly begin to matter. Let’s implode the economy now that is in slowly taking a full breath and baby steps toward recovery. Let’s do something we have never done before, take the entire faith of our standing into question and have a total default of America’s credit standing. How much can we crush the American people before they actually wake up? Are you awake yet? Do you understand what is happening, this is a made up crisis. Past spending has nothing to do with future budgeting.
The money for two un-funded wars, a decade of tax cuts for the rich and wealthy, and a give away to the special interest medical and insurance lobbies has left us here in debt. We can in no way deal with this until we understand how and who brought us to this dance in hell. Just because the new boogeyman has a new name does not mean he is different. The tea-party is the crazy wing of the GOP, the clowns out of the closet to disrupt the entire class. And in the end, we are all left watching and blaming the wrong issue.
The Tea party is the diversion, it is a GOP shield for blame, but they all have an “R” by their names. This is slight of hand and Three Card Monte at its very best. This is a tactic used throughout history to overcome a losing strategy. Bring in a ringer to absorb the heat of battle as to make you look like part of the peace process. The GOP war on the middle class is in full swing and raging onward. The GOP created this massive debt and now they want the middle class and lower to pay it all off while the rich get off scot-free. As a wise man once said, follow the money trail. Who is funding this and what do they have to gain. Who is the real loser once the chips are all cashed in? My book will explain all of it and I will give it to you for less than a buck at the end of this. The Republicans claim that lower taxes on the upper tier will create jobs. If that is true, WHY aren’t there more jobs? The rich already have these tax breaks but the fact of the matter is they are NOT creating jobs nor have they since they were given these breaks!
Where’s the beef?
Black Friday, Black Monday, Black Tuesday and flash crash:
All major crashes fall into this venue, except the flash crash that I predicted in 2010 and spoke about on CNN in May of that year. I coined the phrase “Flash Crash” live on the Rick Sanchez show on CNN May 6th of 2010. I cannot say this will be a flash crash; it may be a full cascade, resulting in a total market crash. A total market crash results when all paper issuances (stocks, bonds and paper assets) decrease in value across the board, “hedging”. This is a Bear run to capital assets or convertible currencies, “CASH”. When paper becomes risky everyone converts to cash, and for now, cash, good cash is US dollars.
If stocks and bond begin to collapse the markets will go for US dollars, there are only so many dollars and the more they are wanted the more they are worth. Stocks and bonds are just a sheet of paper or a promise of a promise. US dollars are Cash. When the stock market crashes, US dollars go up in value. When bonds deflate, the US dollar surges or goes up in value. US dollars are real currency, stocks, bonds and other structural notes are just paper. Those types of investments rise and fall based on the demand for them. If all demand is gone, they are in the end just a piece of paper.
This is a stop gap tactic, not a strategy. In the stock market, this is called a “stop loss” or barricade. Protection of assets from instrumental devaluation and conversion is a must in this time of chaos. Conversion occurs when a high value yesterday becomes a lower value today. This is called loss of ACV (actual cash value) or deflation of your net worth. Anyone who has read my book knows this is a time to “park it!” I would not leave a single asset in paper at this time because cash will increase in value and has.
The fish tank (from my book) view of markets.
All markets are a big tank of cash or investments. Most never ripple or ever see a wave; they wax and wane up and down slightly (long view investments) depending on market conditions and performance. If the market gets jittery and suddenly bolts, the tank has sprung a leak, computer programs will kick in to gobble up those falling shares at good prices. Once the owners of those computers see it is not a glitch, and begin to sell off in mass, the cascade has begun. Saving your investments from this is likened to catching a falling knife barehanded and blindfolded. It is far too late for you and your money. But you don’t have money; you have paper chits or shares.
When do I sell?
Last week is always my answer, and you are not selling. This is an investment readjustment to a safer haven. Stay in stocks while stocks are going up, when they are losing, cash goes up in value so go to cash, park it. Cash can buy things, paper stock chits or bonds can’t buy anything. They only have a value judged by the next buyer in the asset food chain. That food chain is ‘buy low and sell high.’ I coined an investment rule, “buy when everyone is selling, sell when everyone is buying!” Sounds better than buy low - sell high and makes a lot more sense. Sell when demand is high, buy when demand is low. Basically, this is gravity of demand in a free market economy.
Black market Friday: Three days of loss leading into an uncertain and unstable futures market. The futures market is unstable! A sudden increase rush into actuals (real things) and cash (dollars). We are no longer waxing and waning, the asset tank has a leak and may break open and deluge your assets into the open sewer for decades to come. Do I trust this divided government to cure this nightmare? That is the question to ask yourself? I say “Park it”. If you don’t understand that, read my book.
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