Sunday , 16 June 2024

These 5 Factors Are a Major Threat to the Stock Market, the Economy & Our Financial Security IF…

If 1, 2 or even 3 of the factors identified below were set on the same disturbingrisk trajectory it might make no difference but if all 5 were to take to the road to perdition, the stock market, the economy, and our financial security will be the worse for wear. Let me explain.

So says Steve Mauzy in edited excerpts from his original article* entitled Top 5 Threats to Your Financial Security.

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Mauzy goes on to say in further edited excerpts:

More economic fallacies than I have ever seen in my investing career are being passed off (and accepted) as profound, and more misbehavior is being tolerated – if not encouraged. Though I don’t believe an apocalypse is imminent, below are a few extenuating factors that could lead to one if they [were all to] continue along the same ominous trajectory.

1. A Reckless Federal Reserve

No organization has more impact on financial markets than the Federal Reserve and at no time has the Fed had more impact than it has today. Through endless money pumping (given the concealing euphemism “quantitative easing”) at $85 billion per month indefinitely, the Fed has filled the economy with trillions of dollars of new monetary units.

Much of that money has found its way into the asset markets:

  • bond markets are at all-time highs (the average yield of junk bonds is below 5% for the first time ever),
  • interest rates are at all-time lows,
  • the collectibles market is booming (many cable-television outlets have multiple shows dedicated to collecting),
  • farmland prices are soaring.
  • Stocks, too, are at an all-time [high and] this is reason for concern, because the stock market is the only legitimate game in town for income and yield investors. Unfortunately, it has also become an increasingly dangerous game. Thanks to the Fed’s promiscuous monetary ways, stock values are today driven as much by anticipating the Fed’s monetary policy as they are by company fundamentals, thus making the stock market a riskier market.

2. Piling Up of Debt

The Fed and the Treasury Department have a unique symbiotic relationship. The Fed is able to inject new money into the economy by purchasing the Treasury Department’s debt. In turn, the Fed’s demand for this debt lowers the borrowing cost for the Treasury. At the same time (and this goes under-reported), the Fed monetizes the Treasury’s debt. I say that because at the end of the year the Fed remits all its profits (which include interest payments on Treasury debt) to the Treasury Department, thus further lowering the Treasury’s borrowing cost. This incestuous alliance between Fed and Treasury undermines the economy in a more inconspicuous, more sinister way.

High levels of government debt weaken individual property rights, because debt must be paid from productive sources – your and my property and labor. Government debt also retards capital accumulation (the source of wealth creation), because government debt is  spent mostly on current consumption. What is spent can’t be invested. In short, the debt is a big deal, and a potentially dangerous one to the well-being of our economy.

3. Belief in the “Free Lunch”

The height of naivety is to believe in the free lunch – something for nothing. Naivety was exemplified by the believers in Obamacare, who thought this bureaucratic monstrosity would lead to lower cost, better service and universal coverage. [Read: Obamacare is Coming: Here Are Some of the NEW Taxes You’ll Be Paying for It]

It didn’t take long to discover the opposite is true.

  • Single adults age 21 to 29 and earning 300% to 400% of the federal poverty level can expect a 46% premium increase according to management consulting firm Oliver Wyman.
  • WellPoint projects small-group premiums will increase 13% to 23% on average.
  • Larger employers who are subject to a tax penalty if the healthcare policies they provide are insufficiently generous are reacting…by lowering wages and by reducing hours, because the penalty doesn’t apply to employees who work fewer than 30 hours per week.

I can’t say I was surprised to read that U-6 employment, which includes people employed part time for economic reasons, ticked up for the first time since July 2012.

4. Meaningless Job Growth Statistics

Speaking of employment, we were told by the Bureau of Labor Statistic that the unemployment rate edged down to 7.5%, thanks to 165,000 new jobs being created in April. It seems intuitive: more jobs, lower unemployment but if we dig a little deeper we find things aren’t quite as intuitive as they appear. [Read: Here Are THE Facts: Less Gov’t = Less Gov’t Spending = Less Taxes + Less Unemployment & a Stronger Economy and U.S. Gov’t Unemployment Deception Masking the Coming Economic Horror Show]

  • The unemployment rate factors in only those actively seeking work. If you’ve thrown up your arms in frustration and taken to playing Grand Theft Auto full time, you’re no longer considered unemployed.

The sad truth is the labor force participation rate remains at a decades-low 63.3%. If participation had held constant since December 2007, when the recession started, the unemployment rate would be 11%. [Read: Unemployment is NOT Declining – Don’t Be Hoodwinked!]

5. Dependency Rising

This is the most subtle and troubling indicator of the five, because government dependency rots the very foundation of economic prosperity – a productive, self-sufficient labor force. Sadly, our society is becoming less productive and less self sufficient.

  • The latest USDA report shows the number of Americans on food stamps hit an all-time high last month. According to the bureaucrats at the USDA, 47.8 million Americans – that’s 15% of the population – are subsidizing their food intake at taxpayer expense. [Read: Food Stamps Mania – State By State]
  • Concurrently, the number of Americans receiving federal disability benefits hit a record 10.96 million in April – marking the 195th consecutive monthly increase.

Dependency and idleness are hardly the mettle of a great society.


1, 2 or even 3 of the above factors set on the same disturbing trajectory might make no difference but if all 5 take to the road to perdition, the stock market, the economy, and our financial security will be the worse for wear.

(Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)

* (©2013 Wyatt Investment Research & Business Financial Publishing LLC)

Related Articles:

1. Food Stamps Mania – State By State

US Flag

In 1975, 8% of all Americans were on the federal Supplemental Nutrition Assistance Program (SNAP). That percentage is 15% today. Enrollment soared to 47.8 million participants in recent months, an increase of 70%. Below is an interactive graphic showing the number of SNAP recipients in each of the 50 U.S. states. Read More »

2. Unemployment is NOT Declining – Don’t Be Hoodwinked!


The mainstream media is absolutely giddy that the U.S. unemployment rate has hit a “four-year low” of 7.7% but is unemployment in the United States actually going down?…Headlines all over the nation boldly declared that “236,000 jobs” were added to the economy in February, but what they didn’t tell you was that the number of Americans “not in the labor force” rose by 296,000.  That is how they are getting the unemployment rate to go down – by pretending that huge numbers of unemployed Americans don’t want jobs.  Words: 596; Chart: 1; Table: 1 Read More »

3. Here Are THE Facts: Less Gov’t = Less Gov’t Spending = Less Taxes + Less Unemployment & a Stronger Economy


The mainstream media wants us to believe that government spending is good for employment [but my analysis shows exactly the opposite. As outlined below, it clearly demonstrates that]….countries with higher government involvement have higher government spending, higher personal income taxes, higher unemployment and a weaker economy as a consequence. [Below are the facts to back up those claims.] Words: 525; Charts: 4 Read More »

4. U.S. Gov’t Unemployment Deception Masking the Coming Economic Horror Show


How bad do things have to get before people realize that we are living through a nightmare? Sadly, most Americans still have faith in the system. They are still convinced that our politicians will somehow find a way to turn things around. Most Americans…[don’t realize that] America is literally falling apart all around them. We have been living in the biggest debt bubble in the history of the world, and it is only a matter of time until it bursts. 2008 was just a “hiccup” compared to what is coming.  I hope you’re getting prepared  to survive the economic horror show that is rapidly approaching. Words: 1310 Read More »

 5. Obamacare is Coming: Here Are Some of the NEW Taxes You’ll Be Paying for It

Now that President Obama has been  re-elected, Obamacare will become reality and that means that a lot more people in the United States will have health  insurance and, if the program works as it is supposed to, it also means that the growth of  healthcare spending overall will eventually slow. Both of those are good but, in the near term, Obamacare also means a lot of people will be paying  more taxes and higher insurance premiums. (You didn’t think Obamacare was free, did you?) Below are some of the new taxes you’re going to have to pay to pay for  Obamacare. Words:  565 Read More »