‘Stocks hit a new
high in the Dow yesterday. CNBC cheered and Fed economists everywhere patted
each other on the back.
The unfortunate
reality for this “success” is that it only works in nominal terms. A DOW at
14,296 vs. a DOW at 13,000 only means something if the rise in price occurs
against low inflation. If inflation was 10% during the time period that this
rise occurred, then you’ve not generated any actual wealth. At best
you’ve maintained your purchasing power.
On that note,
unfortunately for the Fed, real inflation in the US is nearly 10% today.
Indeed, if you look at the economy the primary costs for consumers (food,
energy, housing and healthcare) have been increasing dramatically.
FOOD-The severe drought that swept
through much of the U.S. last year is continuing into 2013, threatening to
cripple economic growth while forcing consumers to pay higher food prices.
“The drought will
have a significant impact on prices, especially beef, pork and chicken,” said
Ernie Gross, an economic professor at Creighton University and who studies
farming issues.
“Forecasts
are for a four percent (price) increase in food this year, but I think that’s
on the low side if the drought continues,” Gross said. “Food prices will likely
be going up much more than the forecast.”
http://www.cnbc.com/id/100372886/Drought_Still_Plagues_US_Food_Prices_039Going_Up039
ENERGY-After sending consumers into sticker
shock the past month, how much more can gasoline prices climb?
Another 20 to 50
cents a gallon — a level that could propel the cost of gasoline, now $3.77 a
gallon, to all-time highs, some experts say.
Gasoline prices
typically climb from February to Memorial Day on expectations of rising
consumption and costlier summer-blend gas. But so far this year, prices
are surging sooner and faster than ever before — up 47 cents since mid-January.
Consumers in
some metropolitan areas, such as Southern California, are already paying nearly
$5.20 a gallon, up more than 75 cents since December lows.
HOUSING-Home prices closed out 2012
with the biggest annual gain in more than six years while sales of new homes
spiked in January, the latest sign that the long-suffering housing market was
on the mend, data showed on Tuesday.
American consumers,
meanwhile, grew more optimistic in February even as payroll taxes rose and
about $85 billion worth of government spending cuts were due to take effect on
March 1.
“The numbers are all
pretty strong. It’s a significant rise in confidence and a strong rise in new
homes sales — there is not really much to argue in those numbers,” said David
Sloan, an economist at 4Cast Ltd in New York.
http://www.reuters.com/article/2013/02/26/us-usa-economy-newhomes-idUSBRE91P0JF20130226
HEALTHCARE-Rapidly rising health insurance
premiums and higher cost-sharing continue to strain the budgets of U.S. working
families and employers. Analysis of state trends in private
employer-based health insurance from 2003 to 2011 reveals that premiums for
family coverage increased 62 percent across states—rising far faster than
income for middle- and low-income families.
A secondary issue to
the rise in stock pries pertains to dividends. A little known fact is that
dividends account for 60% of stocks gains historically… going back to 1900.
U.S. equities
returned 6 percent a year on average since 1900, inflation-adjusted data compiled
by the London Business School and Credit Suisse Group AG show. Take
away dividends and the annual gain drops to 1.7 percent, compared with 2.1
percent for long-term Treasury bonds, according to the data.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0lVup_0DDwI
Take away dividends,
and stocks underperform even Treasuries. And inflation east away at dividends
too. If a company pays you $1.00 last year, and then pays you $1.05 this year
and inflation is over 5%, you’re not making more money. And if you use this new
dividend to buy more overpriced stock which is rallying on the back of a
falling Dollar… you’re not getting any richer… at all.
Checkmate, Fed.
You’re spending over $100 million per day to create a grand illusion. Stocks
are hitting new all time highs, but none of us are any richer for it.
This will end very badly.
The Fed has set the stage for another Crash. And this time around its hands
will be tied as it has used up all of its tools just creating this bubble.
History has shown us time and again how money printing ends. It NEVER turns out
well. There is not one example in history where it has.
So if you have not
already taken steps to prepare for systemic failure, you NEED to do so NOW.
We’re literally at most a few months, and very likely just a few weeks from the
economy taking a massive downturn, potentially taking down the financial system
with them. Think I’m joking? The Fed is pumping hundreds of BILLIONS of dollars
into financial system right now trying to stop this from happening.
I’ve already alerted
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Best Regards,
Graham Summers