“To keep our debt/GDP ratio below the metaphorical combustion point of 212 degrees Fahrenheit, these studies {IMF (International Monetary Fund), the CBO (Congressional Budget Office) and the BIS (Bank of International Settlements.} (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years.
An 11%
“fiscal gap” in terms of today’s economy speaks to a combination of spending
cuts and taxes of $1.6 trillion per year! To put that into perspective, CBO has
calculated that the expiration of the Bush tax cuts and other provisions would
only reduce the deficit by a little more than $200 billion. As well, the failed
attempt at a budget compromise by Congress and the President – the so-called
Super Committee “Grand Bargain”– was a $4 trillion battle plan over 10 years
worth $400 billion a year. These studies, and the updated chart “Ring of Fire –
Part 2!” suggests close to four times that amount in order to douse the
inferno.” - William H. Gross, Managing Director, PIMCO. Fascinating and frightening read at...
http://www.pimco.com/EN/Insights/Pages/Damages.aspx
(Chart from
PIMCO)
In his commentary, Bill points out that the real deficit in terms of present value including entitlements (Social Security, Medicare, etc.) is 500% of GDP.
Will one of our Politicos
save us from what may be Depression headed our way? Do the elections matter?
THE ELECTIONS DON’T MATTER
MarketWatch (San Luis Obispo, CA) by Paul Ferrell (Blog
excerpt) — “Like an earthquake rocking a house, the 2008 global financial
crisis exposed a shaky new foundation underpinning Western economies,” warns
Pimco’s CEO Mohamed El-Erian, in the latest Foreign Policy journal.
“...more
political dysfunction and greater sluggishness in economic growth, unacceptably
high youth unemployment and long-term joblessness, redoubled debt and deficit
concerns, and worsening inequalities between rich and poor.’
...Can we stop the hemorrhaging before another Great
Depression? El-Erian says that the solution depends on what happens after the
elections. But that seems unlikely because,
“sadly, neither Obama nor Romney has yet offered a meaningful, forward-looking
economic reform program to address problems such as a malfunctioning labor
market, unsustainable public finances, a broken credit system, inadequate
infrastructure, and a lagging education system.”
Why? Because both Obama and Romney “lack vision and
political courage.” And no matter who’s elected their failure of leadership
will result in “even greater economic disappointment and financial
instability.” Read Paul Ferrell’s full blog at http://www.marketwatch.com/story/romney-obama-both-stock-market-killers-2012-10-02?link=home_carousel
In spite of all the doom
and gloom, there are some who feel now is the time to buy...
BUY RECOMMENDATION FROM
CONTRARY INVESTOR
“The new QE III is once
again all about asset reflation, as have been the prior two Fed balance sheet
expansion stimulus programs. Make
absolutely no mistake about it and act accordingly.” Commentary at...http://www.contraryinvestor.com/mo.htm
ISM REPORT – SERVICES
SECTOR FOR SEPTEMBER – GOOD NEWS
(Reuters) – “The pace of growth in the vast U.S. services
sector picked up in September as new orders accelerated, though employment
cooled...The Institute for Supply Management said its services index rose to 55.1 from 53.7...surpassing economists' forecasts for a slight decrease to 53.2, according to a Reuters survey. A reading above 50 indicates expansion in the sector.” Full story at...
http://www.reuters.com/article/2012/10/03/us-usa-economy-services-idUSBRE8920QD20121003
The ISM number is good,
and the stock market responded positively to the ISM news.
MARKET
RECAP
Wednesday the S&P 500
finished UP 0.36% to 1451 (rounded). VIX
fell about 2% to 15.43.
NTSM
The
NTSM analysis remained HOLD Wednesday.
MY INVESTED POSITION
Based on the BUY signal, 6
July, I moved back into the market on 9 July (after the weekend) at S&P 500
1352.
I currently have a 50%
stock allocation overall. For my age,
that is what many advisors recommend as a fully invested position, however, I
am normally much more aggressive. I have
less invested in stocks now because there’s a lot of risk.
