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Thursday, July 30, 2009

State of the Economy: Where Are We At? (VIDEO)

"The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy." - Milton Friedman

When you talk about arriving at a conclusion based on a differential mathematical subset (economics) - you are dealing with variables that you can't control.

What is one of those variables? Well, we already discussed that the mainstream media (and to some extent, new media) can affect the psychological aspect of consumer confidence. Want to see an example of that? Look at the 'wonderful unemployment' numbers that were released.

Wonderful numbers? It was nothing more than a display that those who are no longer qualify for unemployment, are on the rolls to be counted.

But where exactly are we at?

Well, grab some popcorn, because this is a long one ...

(Video Included. If you're seeing this entry elsewhere and cannot see the Video? Click here to view the entry ...)

So briefly put ...

  • We have a deflationary trap that has grabbed a hold of asset values, and the supply is trying to force real prices down.
  • We have a liquidity trap.
  • The Fed Prime Fund rate is at 0%.
  • We have asset inflation (stagflation) expectations displaying themselves.
  • The stock market is rallying like crazy, with zero volume, while future food prices are plummeting.
  • We have high unemployment (stagflation) rate with higher and higher jobless pool numbers.
It's like living in bizzaro economy world. Everything out there right now is upside down.

Regardless, you can still glean some interesting facts. Most producers are stating that they expect weak sales in the 3rd quarter, and that they are cutting production. Some by 15%, some by 20%, some as high as 30% and 40%.

That's GDP.

Now ... don't be surprised if GDP is not reported as bad as it really is. We have to face the facts objectively. They are obviously spinning the numbers. It's the Ministry of Truth. But perhaps, at some point ...

.... well, I'll get into those comments in a future entry

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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