Tags: sean | hyman | economy | recovering

Don't Believe What You Hear: It's Not Getting Better

By    |   Monday, 01 Mar 2010 01:59 PM

If you turn on CNBC, they will tell you that the economy is recovering.

If you listen to the Federal Reserve, they will tell you the same.

Guess what? It’s not recovering. It’s a façade. It’s being masked over by the enormous government stimulus that has replaced the lack of demand from the consumer.

Just to show you how bad it is out there, let me cover a few things that happened within the past week alone and you will see what I mean.

Remember all of the money that Fannie Mae and Freddie Mac got from the government? Guess what? Now Fannie Mae says it’s not enough and that it needs another $15 billion, bringing its total to more than $75 billion.

This company is such “crap” that it’s had 10 consecutive quarterly losses. Its latest quarterly loss was $16.3 billion. So imagine if Fannie Mae gets the $15 billion that it requested. It will blow through that in just a quarter or two at most.

On top of this, Fannie Mae’s net worth is a negative $15.3 billion when you consider their assets versus their liabilities. So if your home has any equity in it at all, you’re doing better than Fannie Mae is … and they own 28 percent of the $11.8 trillion home-loan market.

Oh, but it gets better.

Remember AIG and their government bailout? AIG also said it will need another government lifeline again as well. AIG is still “bleeding capital” like a madman, too. AIG lost $8.87 billion in the fourth quarter.

If I owned a small business and it kept bleeding money like that, I’d put it to sleep and give it a nice funeral. I’d be an idiot to keep throwing “good money after bad.”

But wait. That’s right. The government isn’t throwing “their money” away. They are throwing your money away and my money away.

So you and I work so hard and pay a ton in taxes that goes to the government so they can turn it around and throw it into the bottomless pits of AIG and Fannie Mae (along with Freddie Mac, GM and many others).

OK, but that’s about as bad as it got last week right?

Wrong.

The FDIC has shut down more banks in Nevada and Washington. That makes 22 bank failures this year (and 140 banks last year and 25 the previous year).

We’ve not seen the end of this yet, folks.

Just wait until stocks nose-dive soon, too. We’ll be heading into a double-dip recession.

When that happens, you’re going to see more companies going bankrupt and more municipalities and counties going bankrupt, too.

Since this will happen, it will hinder the rise for real estate prices for at least another year or two.

Therefore, the biggest areas that Americans have their wealth tied to (stocks, 401(k)s, real estate, etc.) will sink once again. That will continue to kill the demand from the retail public and it will cause even more retailers to “close up shop.”

All of this will end up causing a snowball effect, spilling over to other areas of the economy and causing an avalanche.

Get your financial house in order now. Reduce your exposure to emerging-market stocks. In fact, currency traders that are shorting emerging/exotic currencies in those markets will do rather well once this all caves in.

So, just to sum things up: Stocks around the world will fall once again. Some have broken down quite severely already (like China’s stock market).

Real estate will be dead for at least another year or two. U.S. Treasuries aren’t the “go to” place anymore because no one trusts the “full faith” of the government anymore.

Therefore, gold and certain currencies like the yen will soar during these times.

So make the needed adjustments to your portfolios now before the sky starts to fall again and everyone runs for the exit doors.

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SeanHyman
If you turn on CNBC, they will tell you that the economy is recovering. If you listen to the Federal Reserve, they will tell you the same. Guess what? It s not recovering. It s a façade. It s being masked over by the enormous government stimulus that has replaced the...
sean,hyman,economy,recovering
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2010-59-01
Monday, 01 Mar 2010 01:59 PM
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