08.01.07
Using your 401K statements as toilet paper
By John Galt
You might as well.
The news last night that BSC was blocking redemptions on one of the hedge funds should be a wake up call to the average person out there but of course it will not be. The banksters are in trouble and their creative accounting and financing is finally coming home to roost. If you or I had managed our affairs in the manner that they did, we would be spending time in Leavenworth right now. It pays though to own the politicians when you are stealing the public’s hard earned money.
This disaster is just beginning to unwind with the news that two more Australian funds went into the swirling porcelain throne last night. When Joe Six-Pack starts to open their 401K and brokerage statements at the end of August the sea of red will cause them to start looking at “getting safe” and bailing out of a lot of the creative fund options that the brokers conned them into. This will exacerbate the night mare even worse in September but the next big wave, the threat no one wants to talk about hits that month also.
When the ARM’s reset on the trillions in loans outstanding, mutual funds are going to see a wave of redemption requests. Since they are huge players in the derivative’s casino and have been discreetly using the MBS markets to increase their yields, they will be forced to sell into a diving market. This means that there will be few assets worth holding other than government bonds, gold or silver. Of course I like the NZD and Swiss Franc also, but that’s for another discussion. Today’s crash in the dollar versus the yen should be a wake up call also, but the average soul thinks this means more Japanese tourists. Wake up sparky. It means everything you buy in the superstores just got more expensive. Inflation is real, is hurting and will continue to spike up.
My last comments on today’s markets are to watch the insurance companies. Not just those like MGIC which offer re-insurance and mortgage insurance to the hedgies and their risky MBS ventures. Watch the property and casualty insurers, life insurance companies, etc; they all invested in the MBS markets to increase their yields and now are being discovered to hold some rather large positions in some of these hedge funds. If a major natural disaster were to hit and they were blocked from redemptions to raise cash, you’re talking a huge crisis which could unfold over night.
Needless to say, today’s markets will not be dull. My advice: No, not just “never try to catch a falling knife”, that’s the old adage.
For today’s markets, especially today’s markets my advice is:
“Never stick your hand in a garbage disposal looking for diamonds”
You never know when BSC or Merrill might hit the on switch…….
Irene Orsborn said,
August 1, 2007 at 2:21 pm
I listen to you on Shortwave, and I thank you for your honesty. Tom and I are 78 and 79 years old and live on a farm. All paid for. But our baby boomer kids are up to there eye balls in debt, God help us as they will all move back to the farm when they lose the 401 K’s and there homes. I can’t even amagine what this is going to be like. Tom said he would move into the barn, I think I will join him. Sometime you should talk about is the poor old parents who are going to be up to there rump in kids and there kids, and all so very modern, and never had to do without. They would have to work here, cut and bale hay, grow a garden, can food, raise livestock, clean out chicken coops etc. All with there pretty long fingernails. Gotta love it. Irene
LW in ME said,
August 1, 2007 at 4:21 pm
Maybe we will see an increase in Japanese tourists as a result of the falling dollar. If I were there I would want to see what the country was like before the civil war.
Kind of like my grandparents vacationing in Cuba before 1959.
M. Oleman said,
August 2, 2007 at 4:17 pm
Had a chance to listen to you for the first time last night. You have a very good radio voice. What you have to say makes so much sense, yet the vast majority of people will never listen. I have an aquaintance who rode his inheritance down to the bottom during the dot com bust. Each month his statement would show less money. He would ask me for advice and I always told him the same thing: pull your money out and pay off all your debts, buy some precious metals, put the rest in a safe bank,.stop spending so much.He didn’t listen. The big screen tv and video systmes rolled in weekly. Of course he lost all his money and then the house. The whole country is full of people like him.
M. Oleman