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alstry (35.13)

ALSTRY'S FINAL BLOG!!!!

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October 18, 2009 – Comments (28)

Just like the unemployment rate is under 10% when practically every company, city, county, and state is laying off and few are hiring.

“I don’t think it’s a bad thing that the bad loans occurred. It was an effort to keep prices from falling too fast. That’s a policy.” - Barney Frank,

Let's see where that policy got us......

In 1980 our GDP was about $3 Trillion and Total Debt was about $5 Trillion.

In 2000 our GDP was about $10 Trillion and Total Debt was about $25 Trillion.

In 2008 our GDP was about $14 Trillion and Total Debt was OVER $50 Trillion.

In 1980 America's Total Debt was about 1.7X our GDP....by 2000 it was 2.5X and in 2008 it was over 3.7X a very large GDP...a very very large GDP built primarily on a ponzi scheme of growing debt.

Between 2000 and 2008....America and Americans borrowed more money in eight years than it did in its entire prior history since the founding of our nation.  That borrowing was the fuel which drove most of our economy and tax receipts to government.  That borrowing is what caused asset prices to skyrocket, salaries in incomes to grow, and tax receipts to explode.

The $50 Trillion was money lent to mortgages, home equity loans, credit cards, auto loans, municipal loans, corporate loans, private equity loans, commercial real estate loans etc....that $50 Trillion is the PRIMARY asset of America and it performing is the income to fund our banks, pension funds, retirees, and mutual funds.

The problem is after about 2003, the primary reason the debt was peforming was because the banks were lending more and more money so the borrower could keep making payments.  Some call this extend and pretend.  People were borrowing on their "low interest" credit cards to pay off auto loans.....then borrowing on their homes to pay off their credit cards......and same with corporations and municipalities.....and even the Federal Government.

Debt was the driver of America and it was the policy of our government to keep it flowing.....until the policy changed and somebody forgot to tell the people or many of our politicians.  Interest rates were raised 17X and credit was cut off or tightened to much of the population.  Since people and businesses couldn't roll over loans, debt started defaulting and asset prices crashed.

Revenues also evaporated as much of the revenues in our country was simply derived from massive lending and spending.  As revenues evaporated...jobs were cut.....as jobs were cut, tax receipts contracted causing even more cuts.

Between 2000 and 2008...it was the borrowers of America that drove much of our economy and much of the world's as well..ESPECIALLY IF YOU FACTOR THE MULITIPLIER EFFECT.....you could say that the American borrower saved the world from economic disaster....only to make whatever future crash that much larger once credit was cut.

Since raising rates and cutting credit,  the only thing the Fed has done is bail out the banks for infecting our country with $50 Trillion dollars of debt.  Normally, when the parties that banks lend money to suffer.....the bankers suffer too!!!!  It incentivizes the banks to make reasonable loans.  BUT NOT THIS TIME.....bankers are actually profiting from their bad loans through credit default swaps and othe derivitives.  As a matter of fact, there really is no money in banking anymore since most lending is not profitable due to high default rates and few projects worthy of financing.  Who needs to lend to the private sector when you can make billions betting on it crashing and get money for free from the Federal Reserve and loan it back to the government at much higher rates???

In the mean time, NOTHING has been done to deal with this massive EXISTING debt load that simply can't be paid back if credit is not being extended to service it.

$50 Trillion dollars of debt requires about $3 Trillion dollars per year to service it assuming an average 6% interest.  Right now government consumes about $6.5 Trillion to pay social security, medicare, welfare, defense, food stamps, unemployment, etc......

In other words, based on the current debt level and government requirments....America must generate almost $10 trillion dollars simply to maintain current structure....IIMPOSSIBLE WITHOUT MASSIVE CREDIT BEING EXTENDED....and that number is growing as more and more depend on government assistance, war is heating up, and stimulous after stimulous is being extended.

NOW debt is defaulting at record rates and our private sector GDP is evaporting due to spending cutting back.   If we continue with current policies, it is likely to contract somewhere close to 1980 levels....or less than $3 Trillion dollars per year as more and more continue to default.

NO WHERE CLOSE ENOUGH TO FUND GOVERNMENT AND CURRENT DEBT OBLIGATIONS....without massive counterfeiting from government.

The funny part..... recently we allowed many public companies to roll over hundreds of billions of dollars of junk debt with additional loans from pension funds.....in other words, we are using our own pension system to infect ourselves with even more toxic debt....while Wall Street gets rich in the process.....AND THIS IS THE POLICY OF GOVENRMENT!!!!!!!  at least some in government anyway who understand what is going on.

So here we are, as a result of this policy, we have $50 Trillion of debt against a shrinking private sector GDP.   Consequently, private sector revenues are evaporating, jobs slashed,  wages cut, tax receipts imploding....simply because it is impossible to buy goods and services and cover the massive debt obligation at current rates and declining revenues.

If we allow the debt to default....our pensions, insurance companies and banking system will be insolvent....if we try to print our way out of it.....nobody will accept our currency and our money will be worthless...the effect could be social chaos where we will all be broke holding a pile of worthless paper as we are so rudely finding out as more and more nations are moving away from the dollar.

Hmmm. What is Obama to do?....he inherited the biggest Ponzi scheme in history and it was the policy of the govenment he was part of and the bankers that facilitated and profited from the plan.  Now the bankers have cut us off and the private sector economy is crashing as the debt is suffocating the cashflow as more and more are beginning to Feel.  Time is running out before society will simply not accept the current policy as conditions continue to deteriorate.....you simply can't bail out the bankers and let the private sector collapse without the population getting upset...really upset.

Obama can be honest with his citizens and tell them the nation is broke and we must restructure and start over to build a durable foundation for the future.....or he can simply print money and cause the world to abandon the dollar...driving interest rates to unsustainable levels crashing the economy likely resulting in chaos....or he can distract his population and start a war and hope to pay off the debt by taking the assets of other nations....

the problem with the third option is the world is already well aware of this option....and sides have already been chosen.....my guess is most would not look too kindly to it even though we carry a pretty good punch.

Interesting times indeed.....with $50 trillion in debt and revenues evaporating....America is broke.  And when America is broke, Americans are broke too as we are passengers on this ship.

The following graph does a nice job visualizing the percentage of debt to GDP and just how quickly it has grown since 1980....and how it has exploded since 2000.  Remember, in 1980 our GDP was less than $3 Trillion....in 2008 it was over $14 Trillion with a much higher multiple of debt......

http://1.bp.blogspot.com/_Of35CqTl9wY/Ss-lEQPWfbI/AAAAAAAAACc/FgOGFHpft0M/s1600-h/Picture3.jpg

How do you restructure $50 Trillion dollars of debt without bankrupting every city, county and state in the nation?????  How do you tell your citizens that their pension/retirement plan is broke....or there is not enough money to fund most of government and the obligations it owes you?????  Very tough questions...but we are resillient people.

All interesting problems....and the world is well aware of them as the world is meeting to figure out how to run from the dollar as fast as they can.....

Expect massive troop build ups to be announced very very soon.  Let's hope the right decisions are made....it may be the last ones for many of us.

 

28 Comments – Post Your Own

#1) On October 18, 2009 at 2:36 PM, Sozurmama (22.31) wrote:

I'm willing to place a wager that this is not Alstry's last blog....any takers?

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#2) On October 18, 2009 at 2:48 PM, cthomas1017 (95.00) wrote:

Soz,
I was the one who predicted that he'd be back within a day the last time he promised to go away.  alstry's word is worthless and a man is only as good as his word.

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#3) On October 18, 2009 at 2:49 PM, jddubya (32.96) wrote:

I'll take that bet!  But I need some odds, like 1,000,000 to 1

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#4) On October 18, 2009 at 2:52 PM, cthomas1017 (95.00) wrote:

It just dawned on me.  alstry is a nymphomanicap.  He'll be back capsterbating within the day.

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#5) On October 18, 2009 at 2:53 PM, dare1182 (< 20) wrote:

Alstry

       How do you explain that China bought more of our treasuries in 2009 than it ever did before in its history.. how do you explain that all OPEC countries, specially the Saudies announced that they will not deleverage from the dollar anytime soon if ever. how do you explain that the increase in consumer confidence and what would be a great holiday shopping season.. if things are as dark as you're saying, then we would have never servived since the 1980s. Countries dont buy our dollar holdings because they love us or they are scared of us, NO. They do so because they know it has a value to it.They are not stupid.. It is ok to admit that you were wrong about your economic collapse calls since march. when the Dow hits 100,000 you would still be crying about economic collapse about to happen.. Its not a bad thing to make a mistake and then correct yourself, whats troubling is to insist its not a mistake.

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#6) On October 18, 2009 at 3:17 PM, mtf00l (45.04) wrote:

Playing devil's advocate, if China and the Suadi's own all US assets...does a shot need to be fired? Really?

The US corporations used to own the governement in this country.  The government owns the military.  a = b and b = c...

Just a thought.

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#7) On October 18, 2009 at 4:30 PM, Sozurmama (22.31) wrote:

cthomas

didnt he say last time that it would be his last blog....about the market? you have to read the fine print, i dont see any exuses in this one.

jddubya

i'll give you 1,000,000 to 1 as long as we both agree that we are not betting on the handle "alstry" but the individual behind it. I have a feeling "alstrydomus" is on the way.

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#8) On October 18, 2009 at 4:49 PM, prose976 (< 20) wrote:

One thing greatly overlooked by most:

Perhaps the "crash" was bull scat, and the consolidation of business and the cutting of fat from payrolls and government is actually very good for the economy.  Hence, the "recovery" is being justified, but is actually just a return to reality.

The market is about where it should be, perhaps.

Maybe we're exactly where we should really be...even with the unemployment levels as high as they are.  While many may wish this wasn't true, and that we should really be at Dow 6000 or less, with the dollar going down in value, interest rates in the toilet and gold bubbling, a much better place to put your "money" is into something - a real asset that actually does something for you personally or for other people in your state, country or across the globe.

The market does not reflect the economy, but instead it reflect economics of the market ecosystem.  Efficient companies are worth more than inefficient companies inherently.

Here's an example of how people have looked at the market in the past.

The market was lean an mean for many years.  Then it became bloated, as did spending by the companies that composed the market.  But that bloating was recognized as valuable, because those companies were displaying "prosperous" window dressing in the form of buying more than was needed, hiring more than were needed, stocking more than was needed, paying more dividends than made sense, etc.

Smart companies have taken the opportunity to "get fit" over the last year or two.  This has made them more valuable, especially because they are still able to meet demand, innovate and also because the world is not shrinking, which gives them even more opportunity.  Conversely, current business competition IS shrinking, thus giving greater market share to the standing, more efficient companies who made it out alive.

The market companies are leveraging the long tail (read about it in Wikipedia).  There is a lower common denominator.  If you can't sell a $100 item to 100 people then sell a $10 item to 1,000 people.  With technology, it can be done, and is being done.  That's why Tech has led this thing.

I think we're fairly valued and may spend a long while between Dow 9000 and 12000, but it is very likely we could even push past our beginning 14000 because of the new value companies are bringing, not in jobs but in solid, upward trending revenues that has been enabled by the global technology revolution.

Fool on! 

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#9) On October 18, 2009 at 4:58 PM, jddubya (32.96) wrote:

"i'll give you 1,000,000 to 1 as long as we both agree that we are not betting on the handle "alstry" but the individual behind it. I have a feeling "alstrydomus" is on the way."

Understood, and agreed.  LOL.... put me down for 1 large...lol, a buck,... well worth the entertainment value.

If you have a paypal account I can send you your winnings.   I mean, not that I'm saying that I lost already... but... well, you know...

lol

 

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#10) On October 18, 2009 at 6:03 PM, caterpillar10 wrote:

bet? hmmmm well, uh, how's mah credit?:)

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#11) On October 18, 2009 at 7:19 PM, Sozurmama (22.31) wrote:

jddubya

agreed! if he doesn't blog again, may he live long enough for inflation to eat away some of that million :)

cat

sorry brother, a man cant go around giving out million to one odds to everyone and expect to make good.....

hopefully alstry is in good health. involuntary blogging isnt a symptom of any life-threatening illness is it?

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#12) On October 18, 2009 at 8:39 PM, Nosignal100 (< 20) wrote:

I think this is it. Alstry has warned and it is now up to Capsville to see the truth. Thanks for all your hard work Alstry and GOOD LUCK. Let's remember "Clouds that thunder, do not always rain"

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#13) On October 18, 2009 at 8:57 PM, jddubya (32.96) wrote:

#12 lol - that's some funny s%$^...

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#14) On October 18, 2009 at 10:14 PM, ChrisGraley (29.72) wrote:

This is about Alstry's 12th final blog and he wasn't even supposed to blog after 09-09-09 without TMFdeej's permission, but he does it anyway because morons keep reccing his posts.

Look I agree with the guy that the market is going to hell, but I'm tired of seeing his posts. Stop reccing the guy and he'll go away.

He has issues, and the people reccing aren't helping him.

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#15) On October 18, 2009 at 10:34 PM, robstuck (< 20) wrote:

chris graley, 

if you don't like reading his posts then don't read them. enough said. 

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#16) On October 18, 2009 at 11:00 PM, ChrisGraley (29.72) wrote:

I'm tired of his wading through his headlines! He posts like 12 times a day bumping down posts that have more to offer. He keeps posting this crap because he gets recced over and over again by posting things like he'll never blog again.

Anybody want to bet he'll be blogging tomorrow?

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#17) On October 18, 2009 at 11:16 PM, themanwon (< 20) wrote:

Oh why to you tease us so.  I promised you, you will be blogging the sky is falling pretty soon.

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#18) On October 18, 2009 at 11:51 PM, davejh23 (< 20) wrote:

Did nobody ready this?

"Just like the unemployment rate is under 10% when practically every company, city, county, and state is laying off and few are hiring."

The headline was to draw people in...he's saying that this won't be his final blog...just like he doesn't believe real unemployment is under 10%.

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#19) On October 19, 2009 at 12:13 AM, lquadland10 (< 20) wrote:

Alstry

This can not be your last blog. The reason. You like Abit are people I go to for the truth. Also to keep my sanity and sense of humor in this crazy world. So stop the last post blogs. My nerves don't like it. 

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#20) On October 19, 2009 at 10:03 AM, leohaas (32.01) wrote:

Maybe this time alstry sticks to his promise. Usually, at least 7 out of the first 10 comments are from Mr Zombulation himself. Now we are almost a day later, with 20 comments, and none of them from alstry...

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#21) On October 19, 2009 at 10:04 AM, tomatoflu (< 20) wrote:

 

 

I don't blame Alstry for taking a break short, long or forever.

He seems to me to be a voice of reason, though sometimes agitated which is perfectly understandable.

'Fractional reserve' has infiltrated the very fabric of our tiny, tiny world, and we are now at a critical moment in history.

Keep your sense of humour, play the game, don't say a word, forget that it exists, take a pill, (If you can find one.) and play with your charts.

All this will seem like an etheral distance memory.

Even though it is obviously a fraud, your short term complicit gain, wil be your long term agonising pain.

it is happening in a slow and controlled way, so the increasing roadkill will make each day seem the same to you all .

There will be no difference between one and a trillion,then 100 trillion.

Like conditioned automatons you will be de-senisitzed into a compfortable ectoplasm so you to can be eaten raw without putting up so much as a whimper.

Who will you complain to then especailly when there is no-one left to make sense of it.

 

Your Children??

 

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#22) On October 19, 2009 at 10:09 AM, outoffocus (22.80) wrote:

Lol he only posts these titles to get recs because all his other blogs have not been getting as many recs.  So he's banking on the people who really do want Alstry to stop blogging to rec the blog so that it makes it to the top 5 of the day.  Its all a game people. Looks like you've been played.

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#23) On October 19, 2009 at 10:19 AM, tomatoflu (< 20) wrote:

 

"First of all it must be realized that the sleep in which man exists is not normal but hypnotic sleep. Man is hypnotized and this hypnotic state is continually maintained and strengthened in him. One would think that there are forces for whom it is useful and profitable to keep man in a hypnotic state and prevent him from seeing the truth and understanding his position.

 

"There is an Eastern tale which speaks about a very rich magician who had a great many sheep. But at the same time this magician was very mean. He did not want to hire shepherds, nor did he want to erect a fence about the pasture where his sheep were grazing. The sheep consequently often wandered into the forest, fell into ravines, and so on, and above all they ran away, for they knew that the magician wanted their flesh and skins and this they did not like.

 

"At last the magician found a remedy. He hypnotized his sheep and suggested to them first of all that they were immortal and that no harm was being done to them when they were skinned, that, on the contrary, it would be very good for them and even pleasant; secondly he suggested that the magician was a good master who loved his flock so much that he was ready to do anything in the world for them; and in the third place he suggested to them that if anything at all were going to happen to them it was not going to happen just then, at any rate not that day, and therefore they had no need to think about it. Further the magician suggested to his sheep that they were not sheep at all; to some of them he suggested that they were lions, to others that they were eagles, to others that they were men, and to others that they were magicians.

 

"And after this all his cares and worries about the sheep came to an end. They never ran away again but quietly awaited the time when the magician would require their flesh and skins.

"This tale is a very good illustration of man's position


 

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#24) On October 19, 2009 at 11:13 AM, ocsurf (< 20) wrote:

outoffocus hit the nail in the head.

Another pathetic attempt for attention to satisify his sad life.

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#25) On October 19, 2009 at 1:03 PM, davejh23 (< 20) wrote:

Still, nobody has read the first line of the blog?  While he may have made promises to quit blogging in the past, this is not a promise to quit.  I'm getting more fed up with "prose" than anybody...quit posting the same thing on every single blog!

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#26) On October 19, 2009 at 1:21 PM, mawnck (< 20) wrote:

+1 rec. Because like Alstry, I enjoy reading all the posts of the self-appointed Internet Police having a hissy.

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#27) On October 19, 2009 at 1:44 PM, booyahh (< 20) wrote:

Did the market go up again today ?

Oh, it did !!!  How nice.

Yes, yes, of course the market will crash again, I know. Just like the sun will set, ultimately. But waiting for the market to crash is not a very good investing strategy: you miss all the profits on the way up !!!

A safer strategy is to put stop losses so that you get out safely.

Anyway, even though I disagree with alstry, he is a lot of fun. Mostly because he ends up scaring a lot of people, which I find amusing :)

 

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#28) On October 19, 2009 at 2:22 PM, cudakhan (< 20) wrote:

I think it's safe to say that ALSTRY ends up scaring himself, he appears defeated.  There are people making a killing in these economic times.

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