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Money Matters Financial Newsletter Update Free February 13, 2014
Welcome New Money Matters Update members and thanks for supporting KVMR FM and Money Matters. You will now receive this email in your inbox from time to time as I write about the economy and the markets. Enjoy the material!
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On our Swiss annuities from Forces Vives, we got another letter from them worded a bit oddly so I got clarification for you if you hold a Annuity from Forces Vives. If you hold an annuity from PAX or another company there are no changes. As for Force Vives, there is not much to report but here is the latest which really does not affect my annuity decisions. As for you, if anything here makes you nervous, and if your tax situation permits it, you can always consider cashing it in.
“Forces Vives has decided to stop new business as it is not profitable for them anymore. The main reasons are that (1) they cannot make profits by guaranteeing a fixed rate of return while in the market they can barely make it considering the low interest rate environment. This would endanger the reserves in the program, and (2) the increased cost related to regulation especially in regards to US investors.
For that reason they are not taking any new investments and are open to sell the business if they were to find a buyer. Nevertheless, as the letter also explains, they are committed to keep and administer the policies that stay at Forces Vives and they will continue honoring the guaranteed rate of return as contractually agreed. They will however not pay profit sharing which by the way they have not paid on the major currencies for the past three years and as reflected in the statements that have been sent to clients. Again, this has been linked to the low interest rate environment.
Policyholders that are content with the program may keep their policies in place”.
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On to the markets:
The correction ended as predicted in my last few newsletters. I stated we would probably not see a major decline and up was the overall direction and so it comes to pass. That is not to say we have no risk of a correction of magnitude of course. These bubble markets will fall hard one day but that day is most likely still far away as the Federal Reserve will come to our rescue if markets fall hard. (The “Bernanke Put” is now the Yellen Backstop).
Always watching out for you, I still think only the biggest and baddest dividend payers are worth buying as I have said for over 2 years now and they have performed nicely. The only changes I have made to our holdings lately is to dump RCS.
Natural Gas is finally rising but we took a bath on this being 3 years early on its rise. I recommend playing this only thru big oil like Exxon or some Canadian Oil Trusts like what is on our Super Dividend Payers List.
The budget ceiling issue is strangely silent although we approach that deadline in just a few days. Its odd there is no talk about what is going on in the media concerning what was such drama so many times before.
The Federal Reserve is tapering to the tune of 20 billion. This means instead of 85 billion a month in new money they will only print up 65 billion a month. This reduction is meaningless as you can see. They are still printing a hell of a lot of money. The markets reacted to the news but the ECONOMY will react to the taper months from now.
Once it does, I have forecast and continue to forecast the Feds will stop tapering and may even increase the QE again. You just wait and you will see an about face from the Fed once the economy slows even more. The taper itself has yet to hit the real markets however. It will be a delayer reaction.
Just out from Washington, the lowest inflation since 1955.
Who are they kidding? Everything I buy is skyrocketing in price and companies are down sizing packages and charging the same amount. They are GOOD at disguising this downsizing as you may have noticed. Meat is especially expensive and I noticed a $10 or $12 burger or breakfast at your local restaurant is becoming common place. How fast we forget what we spent just a few short years ago.
The sad part is the low income earners/ poor are the ones who suffer the most as they are not able to make up the few dollars it takes to buy their food and necessities. This is always the case in inflationary economies. The poor suffer the worst. Also affected is class mobility as classes move downward. Inflation benefits only the wealthy. The wealthier you are the more you benefit. You could say inflation HURTS the poor yet enriches the rich. Opposite effects from the same policy and don’t be confused. Inflation is POLICY. The Federal Reserve has stated such. They believe falling prices is bad. (Deflation). They believe deflation makes people hold off on purchases waiting for lower prices so the economy grinds to a halt.
How ludicrous is that? Firstly, economic theory says as prices drop people buy MORE. That’s why stores put things on sale!
Consider also if lower prices causes people to buy less (which is obviously FALSE) why then, when computer prices were falling during the onset of the PC did people buy MORE computers?
Why did people buy more CALCULATORS when prices continually fell in the 80’s?
Why as the price of cell phones dropped in the 2000’s did people buy more cell phones?
Their logic fails in the face of reality AND basic logic. Drop the price of something and people will BUY MORE not LESS.
It’s this kind of wrong headed thinking that drives our monetary policy. It’s no wonder we have reoccurring imploding bubbles, a stagnant economy and people getting poorer and poorer!
Add in increased government spending, increasing deficits and squandering billions and higher incentives to NOT work (social safety nets, paid healthcare, removing the stigma from government assistance, minimum wages etc) and you can see why it is that more and more people are on public assistance and why our country is bleeding red ink from all orifices.
I wish I could say things will get better but the policies they are undertaking are the exact opposite of what they should be doing.
If you still don’t believe me, you will have to wait once again to have them proven wrong by the results. I guarantee with these policies the issues we face will NOT be solved and actually made worse. It reminds me of a show I did stating the moves that the Federal Reserve makes are the exact OPPOSITE of what should be done. This holds true to this day and holds true of almost every central bank on the globe. How we got to this point is baffling.
For now, follow the plan, keep tuned in and expect the following as stated in previous editions of Money Matters Update.
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Gold and silver may make a new low in the $900 or $1,000.00 (gold) and $15.00 (Silver) range before blasting off once again.
War may break out in the Middle East driving oil into the stratosphere.
Drought may make certain stocks take off so keep tuned as to which ones to buy.
Social media and 3 D stocks may have their final blow off before crashing.
Government deficits will go ballistic and exceed Washington’s predictions only to meet Money Matter predictions reaching 20 trillion in a few short years or less.
More intrusive government and higher taxes.
More wranglings around Obamacare.
Stock markets get volatile as Feds try and taper only to back off as markets start hard down.
Eventual new market highs as money printing continues into overdrive.
The rich will get even richer (only the 1 %) while the middle class and upper middle class will be bled like pigs. The ranks of the poor will swell ever larger as higher food and energy prices drive more and more people to government assistance.
Small businesses buckle under higher and higher costs.
New jobs will only center around service, medical and part time work. Full time workers will continue to decrease.
Propaganda stating how things are getting better will not translate to your street or town.
More of the same from governments, local and otherwise on creating jobs, the biggest myth since Santa Claus.
Interest rates will stay low for a while longer only to eventually rise crushing housing and bonds.
More economic news that will wow and amaze you, but mostly make you shake your head in disbelief and disgust.
Get ready America, you heard it here first.
Marc
