I see Dow 10,000 in the future but don’t go betting your money on it just yet since the Fed seems to be poised to go QE3 and I just got a balance check transfer from a credit card company offering 0% for 12 months and a 1% transfer fee.   These are generous terms and banks are clearly wanting to hook people on easy money again.    I may take up the credit card company on the offer and pull $20,000.   At 1% fee, that’s a $200 fee but I’ll probably use the money to pay off my student loans and convert undischargeable debt into unsecured debt which can be discharged in a worst case bankruptcy scenario!

The best thing to do is continue to pay down secured debt and sit tight on cash.   My reserves are currently in the 60k range with additional emergency reserves stashed here and there and credit lines of another 100k.

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It is perfectly easy to me to see how people get 100k in debt going to school because although my tuition is generally a couple of grand each semester, the finance department sees fit to allocate well over 10k per semester to me.  I take the money and use it wisely while I get a tax write off and hedge.   Of course, idiots go and spend the money on crap which is why they can’t get out of the black hole.

I have to admit, I’m still not convinced the MBA is worth anything and my only reason to continue on now is to get the student loan money.    Hell I may even get into buying rental houses as it’s the last undiscovered fountain of subsidized money.   If this keeps up, perhaps I’ll stay in school forever and use the money to put my kids through college…lol that would really be a good way to stick it to the man!

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The ONLY thing supporting this stock market is essentially free money the fed is pumping into the economy which gets recycled back into the financial markets to support more paper.   It’s all totally worthless or at the very least worth less than it should be now.   I consider the market recovery from when the Dow crashed down to 6000 a blessing but the recent recovery is not sustainable by any measure.    I have been slowly cashing out at every opportunity while continuing to sell short the market.

Yes, the Dow may rise and even hit 12k or above again and it may as the Fed continues to pump money but at some point, it is going to get real, very real for everyone and those that aren’t preparing are going to hurt the most.    Quite a few people I know have cashed out and I plan on using my next employer bonus to pay off remaining debt and shoring up savings and emergency funds.   I remain mostly in cash with a few exceptions such as commodities to hedge against inflation or a hard crash.

If you recall from December 2008, the Fed was injecting money into the “system” back then and by March the Dow had crashed down to 6k.   We’re in December 2010 and the Fed continues to pump money into the “system” yet again.  I won’t go so far as to say March is when the next crash will hit because QE3 may be right around the corner but rest assured I think there are greater odds of the Mayan end of the world prophecy to come true than for a miraculous economic recovery.   Oh well the Mayans end date was December 2012 so we’re only two years away!

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So the only obvious question that is begged here is when to get out?    Dow 12k or 13k  or maybe tempt fate and try to ride it all the way to Dow 14k?   This will be my last ride up and I suspect it may be a ride through December 2012 but I have no plans on “investing for the long term” in the Wall Street Casino.    There are just too many baby boomers that are starved for cash and whatever money they have in the “market” will simply be pulled out over the next decade.   Generation Y and below is saddled with poor job prospects and trying to get by TODAY much less planning for 40 years into the future.   Generation X is a bit disillusioned and trying to find their footing as the crash of 87, 2001, 2007 have left a bitter taste in their mouth.

So there you have it from Boomers to Millenials, the stock market is dead.   You’re all getting one last ride; Enjoy it; Profit from it; Cash out before the fall.

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Oh sure, it’ll start off slowly, just 1% here or 3% there then it’ll get to 10% or 20% then the government will fiddle it all away like social security.  If this rule is enacted I think I will be done with ever investing in the 401k.  What about the free match you ask?   Well there’s nothing for free and especially if the government is going to take it.   We’ll see what happens in a couple of weeks…

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So I click on the link and read, “FDIC Chairman Sheila Bair said, “It’s necessary to extend the TAG program because the lingering effects of the financial crisis that emerged in 2008 in large systemically important banks have now spread to institutions of all sizes, particularly in regions suffering from ongoing economic weakness. Allowing the TAG program to expire in this environment could cause a number of community banks—already under stress—to experience deposit withdrawals from their large transaction accounts and would risk needless liquidity failures. This reflects the continuing legacy of too big to fail and the different liquidity pressures our community banks experience as a result.”

But wait, I thought the banking crisis was over?  I thought the economy was in full recovery since it is an election year it MUST be true!   Lingering effects?  Community banks insolvent?  I doubled checked to make sure this wasn’t an April Fools joke (although belated) but it wasn’t.   Could there still be the possibility of bank failures through 2011?  My oh my I am dismayed….

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Scenario 1:  Assume the economy picks up steam, oil rises from $85 to $120 which quickly begins to take the steam out of any recovery and plunges us back into recession.

Scenario 2: Assume the economy remains stagnant, oil rises from $85 to $110 because of the Fed’s $2 trillion dollar inflationary pumping into the economy.

Scenario 3: Assume the economy dips back into recession, oil rises from $85 to $115 because the US will incur more deficit spending and the US dollar loses value against other currencies thus raising the price of oil.

Scenario 4: Assume Greece defaults and sends cascading domino shocks across Europe, oil rises from $85 to $100 because Opec cuts production in their October 2010 meeting.

There are more scenarios but you get the picture and I find very little scenarios in which oil will drop but ironically the biggest scenario that will drop oil is the mass adaptation of electric vehicles like the Nissan Leaf or Chevy Volt and the push toward natural gas for power generation.

I’ve positioned myself with natural gas ETFs and energy ETF plays because its the only thing that makes sense in this current economic climate.  I hope my bets pay off!

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I’m not sure if that’s true or not but it did bring up a couple of interesting scenarios.   According to this Asia Times article, by 2014 all of the G7 countries will have a debt to gross domestic product of 100% of above.

By 2014, International Monetary Fund official John Lipsky remarked March 21, the debt-to-gross domestic product (GDP) ratio of the Group of Seven countries will reach 100%, and the governments of the industrial world will carry the highest debt burden since shortly after the end of World War II.

So while perhaps many people are cheering that only rich “evil” people are being taxed because the large tax bite comes from people earning 200k to 250k or more then it may be that a large portion of the population will be earning above the 200k mark in 4 years.   Does that sound implausible?   If the median salary today is around 53k then it would only take four consecutive raises of 30% to get that up to 150k by 2014.   I know everyone’s thinking that a 30% raise for the next four years is pretty silly but don’t forget that the Federal Reserve has pumped trillions of dollars into the economy and they’re floating out there.  I’ve written about spotting 20% energy inflation priced into markets a few times already just into 2012 and energy inflation always seems to grow exponentially too!

In another scenario and discussion, we discussed that perhaps the delay till 2014 is to make sure a few thousand sick boomers die off before this thing goes into effect to save money.   It seems that insurance companies are perfectly within their rights to deny or limit coverage now till 2014 so that will definitely kill some people that have serious medical problems.

Speaking of boomers, it seems that every day 10,000 new boomers hit the retirement dole so since there are 1,380 days till January 1, 2014 then I guess 13.8 million boomers won’t pull the trigger early and retire early knowing that they won’t have health care until 2014 now.

No matter which way you look at it, there is huge critical mass building toward the 2012-2015 years and something is going to make a huge “crunch” sound when it happens and it’s beginning to sound a lot like hyperinflation

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Actually this is the first year I didn’t exercise options, cash out stock, or rake in huge bonuses during the past year.   The only “earned income” I had was unemployment insurance from the state.    What really helped were all the freaking tax deductions:  my entire MBA tuition saved me a cool $2200,  student loan interest saved me some money, etc.   The only regret is that I didn’t wait a little longer to buy a car.  I purchased a new car in 2008 and if I had waited another year, I could have saved another a few k in taxes.  Wow, what a great tax return that would have been!   If I had bought a new house that might have been another 8k.  Sometimes, timing is everything!

Oh well, I’m expecting to be back in the higher tax bracket this year so I’m sure I’ll owe Uncle Sam a few thousand this time next year but at least I can buy a new LCD TV finally

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If you’re not familiar with careening, here’s a quick primer:

As is well known, as ships cruise the ocean, their bottoms quickly become covered with barnacles. These barnacles affected the ships speed and mobility. These two characteristics were highly respected among pirate captains, for they knew above everything else that if they were to be pursued in would be speed and mobility that would save them above any amount of firepower they might possess.

Barnacles posed another problem. If they were not removed, periodically, they would also cause irreparable damage to the hull by eating away the wood or weakening the seems between planks. This meant that if the ship were at sea, far from land, it could go down. The threat of barnacles was taken very seriously.

Often ships are dry docked after a long ocean voyage, in order that the hull can be scraped free of barnacles and repaired.

Pirate rarely had the opportunity to dry dock. When a ship could not be dry docked, sailors had to devise other ways to clean the bottom. It was practically impossible to clean the bottom of a ship while in the water. The best alternative was careening.

Careening involved finding a suitable shallow bay where the ship could safely be run aground, thus exposing as much of the hull above the water line as possible. Then the ship would be unloaded as much as possible. The crew would then need to careen or turn the ship over on one side using block and tackle, and manpower.

The crew would try to pull the ship over enough to expose the keel or bottom of the ship. Then they would commence scraping that side of the ship, free of any barnacles. Then any damaged planks would be replaced or repaired. Following this step, if possible the bottom of the ship would be covered with paint, pitch or some kind of proctectant.

Once the one side was done, the crew would careen the ship to the other side and repeat the process.

The task was labor intensive and time consuming. Pirates were sitting ducks while careening their ship. They were often not armed well enough to stand a major ground assault and with their ship run aground they could not take on another ship.

So Barnacle Ben is careening the Federal Reserve (a.k.a Titanic) and this pirate is going to make himself vulnerable on multiple fronts:  the economy, banks, Goldman Sachs traders, grand standing politicians, and perhaps the world.    In the meantime, I’m hoping to cash in on my UUP call options

Aarrrrrr matees!

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