Market Snapshot
Podcasts

SEM Podcasts:  


Best of the Blog, 6/15/13 -- Is the Fed losing control of rates?

Best of the Blog, 6/8/13 -- Employment & the Fed

Best of the Blog, 6/1/13 -- Winning the retirement game

Best of the Blog, 5/25/13 -- Why we should be watching Asia

Best of the Blog, 5/18/13 -- Is the Fed really going to taper off QE?

Best of the Blog, 5/11/13 -- How long can the Fed keep this up?

Best of the Blog, 5/4/13 -- Should we sell in May?

Best of the Blog, 4/27/13 -- Our dysfunctional government

Best of the Blog, 4/20/13 -- Market vs. the Economy

Best of the Blog, 4/13/13 -- Is it sundown in America?

Best of the Blog, 4/6/13 -- Did the sequester cause the slowdown?

Debt, Leverage, & Addiction -- Part 1  Part 2   Part 3  

Best of the Blog, 3/23/13 -- Consequences of Perpetual Bailouts

Best of the Blog, 3/16/13 -- Is the Dow's streak a buy signal?

Best of the Blog, 3/9/13 -- Does Goldilocks have any blemishes?

Best of the Blog, 3/2/13 -- What does Sequestration mean?

Best of the Blog, 2/23/13 -- Recency Bias

Best of the Blog, 2/16/13 -- The REAL State of the Union

Best of the Blog, 2/9/13 -- Is the economy causing the outbreak in violence?

Best of the Blog, 2/2/13 -- What are we getting from all this debt?

Best of the Blog, 1/26/13 -- Are we in another bubble?

Sunshine Week, 1/24/13 -- Stuck in your retirement plan

Sunshine Week, 1/23/13 -- The time to buy & hold

Sunshine Week, 1/22/13 -- Keeping things in perspective

Sunshine Week, 1/21/13 -- The Pending Forest Fire

Best of the Blog, 1/19/13 -- What did we learn from our client seminars?

Best of the Blog, 1/12/13 -- Short-term vs. Long-term investing

Best of the Blog, 1/5/13 -- What does the fiscal cliff deal mean for the economy?

Sunshine Week, 9/20/12 - Is America going Backward?

Sunshine Week, 9/19/12 - Opportunities in a tough economy

Sunshine Week, 9/18/12 - Is your 401k safe?

Sunshine Week, 9/17/12 - The stealth depression

History of the Fed, 6/19/12


SEM Presentations:

4th Quarter Economic Update- December 11, 2012

Can the Fed Save the Economy? - September 27, 2012

3rd Quarter Economic Outlook - July 10, 2012

What can we expect the rest of 2012? - April 19, 2012

What will 2012 look like? - January 9, 2012

Are we headed towards recession? - October 7, 2011

What is happening with the economy? - September 26, 2011


Podcast Archive  

 


Time for a Little Truth Print
Written by Jeff Hybiak   
Thursday, 11 August 2011 04:58

As the Hurricane of 2011 continues, something occurred to me yesterday -- why are we so afraid of the truth?

Gut feelings are difficult to explain (and certainly nothing that we can use to trade client money), but yesterday I had this uneasy feeling in my stomach.  As we watched a parade of bank CEOs appear on CNBC to tell us that everything was great inside their bank I had flashbacks to 2008.

In 2008 we saw the same thing, not only from the bank CEOs, but from market analysts, Congress, and even the regulators.  Before Bear Stearns failed in March we were assured that everything was fine.  After the Federal Reserve arranged a bailout, everyone told us that everything was fine.  All throughout the summer, we were assured that the problems were contained.

I often wonder how things would have turned out if people had worried more about telling the TRUTH rather than their stock price, their bonuses, their revenue, or their prospects at getting reappointed or reelected.  Had the problems been acknowledged in 2007 when the first cracks in the mortgage market appeared, something could have been done to stop it.

Maybe things are not as bad as 2008, but we just cannot know.  Thanks to pressure from the Federal Reserve, the Financial Accounting Standards Board backed away from their requirement that banks tell the TRUTH about the value of their assets.  The "mark to market" rule has been suspended since 2008 because the Fed argued that the market was at "extreme" levels.  So rather than carrying assets at the real market value, they are still allowed to carry them at the FACE value (the amount they were originally worth.)  [Funny, I don't think the bank will allow homeowners to use the "face" value of their home when they try to refinance.]

One of my friends pointed out that if things were so great, then the banks would be loaning money and not sitting on $1.5 Trillion of reserves.

Until banks acknowledge the TRUTH, how are they supposed to fix their problems?

Throughout the debt ceiling circus, the Obama Administration flat out lied to the American people by saying that America would default on their debt if the debt ceiling wasn't raised.  They said they weren't sure if all the Social Security checks could be sent.  Why were they so afraid of telling the TRUTH?  Had both sides acknowledged the TRUTH in January -- that America has a debt problem that needs to be solved soon -- they could have worked on a real solution and not waited until the last minute.

And what happens when somebody dares to tell the TRUTH?  Look no further than the reaction to the S&P downgrade.  (Please check out our article, "The Reason America Was Downgraded" for more information.)

Rather than addressing the TRUTH inside of the downgrade -- shoot the messenger was the first thing everyone thought of.  After that the finger pointing started.  Very few of our leaders have acknowledged the TRUTH behind the downgrade.  Until they acknowledge the TRUTH, how are we supposed to fix it? 


Probably the worst offender of telling the TRUTH is the Federal Reserve Chairman.  I wrote yesterday:

As the market sold off on Monday I began hearing investors say that they were looking to Ben Bernanke to save the market.   Besides the fact that the Fed is not supposed to control the stock market -- they control the monetary system, all I could think of is how bad things must be if our only hope is Ben Bernanke.

Consider his resume:

The more I watch his words and his actions, the more I believe he is either a liar or is incompetent.  He refuses to acknowledge the TRUTH -- his policies have done nothing to help the overall economy. 


Todd Harrison of Minyaniville added this yesterday in his column:

As investors anxiously awaited something -- anything -- from Ben Bernanke yesterday, I leaned back in my chair and mused to nobody in particular, "So it's come to this, eh?" Am I the only one who laments about our formerly free market, the agendas in play, and the fact that Wall Street is literally looking to Washington to save the day? 

I don't claim to have a crystal ball -- if I did, I may have eaten it by now -- but the rally off the 2009 lows was just that, a rally (and a synthetic one at that). It wasn't an economic recovery, unless we call it a jobless, homeless recovery. Using that math, I could argue that I'm 190 pounds without the carbs and calories -- and I don't have to go to the gym anymore! 

That's pretty much the sense of entitlement these days, a rally at any cost. And if it doesn't work, let's throw someone under the bus, sue them, or call them nasty names in public. And you question whether we're in an intertwined, finance-based, global economy? If there was a TILT -- or if China could TILT us without TILTING themselves -- we would have started over long ago. 

Many years ago I wrote that profiting is a privilege rather than a right. I was referring to the Internet bubble at the time, but it’s just as apt today. 


The TRUTH may not be comfortable, but it is the only way we can ever get out of this mess.  The reason the market is acting like 2008 is because nobody every acknowledged the TRUTH of what happened in 2008.  By refusing to acknowledge the TRUTH the real issues could not be addressed.

Yes the TRUTH could cause some short-term pain as addressing the real problems will take some sacrifices from all Americans.  Are we really that afraid of sacrifice that we have decided to not tell the TRUTH?

Living Beyond the "Now"

The title of today's article actually came from a song we played last weekend in our band.  It is based on a story in the Bible when Jesus appeared before Pilate.  I've often seen comparisons of the Roman Empire to the United States.  One thing that stood out was their arrogance.  The Roman people thought they could do no wrong and they could make their own TRUTH.  The exchange between Jesus and Pilate really paints the picture of the attitude at the time.

"Therefore Pilate said to Him, 'So You are a king?'  Jesus answered, 'You say correctly that I am a king.  For this I have been born, and for this I have come into the world, to testify to the TRUTH.  Everyone who is of the TRUTH hears My voice.'  Pilate said to Him, 'What is TRUTH?'" - John 18:37-38

We know how that ended. 

It's not always easy to tell the TRUTH, but it's something that our country and our world needs right now.  In order to fix our problems we have to first acknowledge our problems.  Ignoring the TRUTH only makes things worse.

For those of you that are interested, here is a link to our song, "Time for a Little Truth."


 

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