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Monthly Archives: June 2014

Is a Financial Crash of the World’s Monetary System Inevitable ?

“In an excellent video presentation, Claudio Grass, Managing Director at Global Gold Switzerland, explains why a crash of the financial and monetary system seems inevitable. The presentation covers all actual issues like currency wars, rigged markets, central bankers’ interventions, statistics manipulation, monetary mismanagement and financial repression. Claudio Grass does a great job “connecting these dots” but in a factual way. In this article, we collect several quotes and graphs. The full video presentation is 22 minutes long. Readers are highly recommended to watch the full presentation and subscribe to receive three exclusive reports for free on http://welcome.globalgold.ch.

Claudio Grass explains that what we learn from history is that money doesn’t come into existence by force or legislation. It is in essence a market process; where participants decide freely which medium they want to use. It has to be easily recognizable and transportable. It has to be rare so it can’t be easily reproduced and so it can act as a store of value. Gold and silver fulfill these criteria, have an intrinsic value and are free of any counterparty risks. Therefore, it is clear why historically they were the most wide spread medium of exchange used over a time period of over 5000 years.

Even the USD became the world currency reserve because it used to be a property title for a certain amount of gold , now it is just a debt security. The Dollar as well as all other currencies worldwide have transformed from an “I-own-something” to an “I-owe-you”. Because we believe that history rhymes we are certain that the Dollar and all the other paper-money systems are going to collapse eventually.

The chart on the left hand side below comes from Ray Dalio from Bridgewater Associates. He believes that we are close to a collapse of the current long term debt cycle. He also believe that we are at the top of a long-term debt cycle, therefore it is likely that we will see some deflationary shocks in the future. However, it is our understanding that central banks will try everything to avoid this by printing money to cover up the current problems which will lead to hyperinflation in the coming years. A deflationary collapse would be a “Black Swan Event” which become more probable the more the system is centralized.

The chart on the right shows that the debt and the financial system have been completely decoupled from the real economy. It also shows that our current credit based paper monetary system induces excessive credit, which can be seen from the fact that credit has increased exponentially since the gold window was closed.

Debt cycles and debt vs the real economy

Despite the gigantic monetary injection, it appears that the “newly created money” is not going where it should flow. The following slide shows that liquidity is definitely not going into the private sector. As you can see the monetary base spiked tremendously since the outbreak of our current crisis. Only in Europe it is visible that since last year the monetary base is contracting on a relatively high level.

monetary base vs bank lending

The picture becomes worse when takes into account the interventions of central planners in the markets. In a recent Federal Reserve study it was acknowledged that the historic correlation between the balance sheet of the FED and the S&P 500 prior to the beginning of QE1 stood at 20%. Since 2009, this correlation has increased to 86%. The FED study argued that without the intervention by the central bank, the S&P 500 would be 50% lower. The chart on the left shows how our markets are rigged by the FED! If you exclude the days prior, during and after the FOMC meetings of the FED you see that the performance of the S&P would be considerably lower: 440% vs 170% without FOMC. The chart on the right shows that the velocity of money is sinking so we are not yet seeing any considerable inflation. However it is visible that money is flowing into financial assets, such as stocks, and is creating inflation there.

Central bank interventions on the stock market and velocity of money

Then there is the manipulation of economic and financial statistics to hide the true state of things. The unemployment figures are one of the striking cases. In the US, the U-3 unemployment rate is the monthly headline number. The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment. Shadow Stats calculated the unemployment rate using the old US methodology, these figures are nearly 4 times higher than the U3 figures. Data manipulation anyone? With an unemployment rate of nearly 25% I think it is clear that we are far from any form of recovery.

the unemployment rate and manipulation of statistics

The truth of the matter is that central bank intervention and manipulation is only “kicking the proverbial can down the road.” In reality, the stimulus is not producing real growth….”

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Investor Sentiment Among the 1% is Becoming Squeamish

“The bull market of the last five years has resulted in extraordinary gains for the wealthy, but some in the 1% aren’t sure how much longer the good times can roll.

A comprehensive study of wealthy families by private bank U.S. Trust found that only 40% of high net worth investors feel “bullishly optimistic” about the market. At the same time, 10% said they felt downright pessimistic and 12% described themselves as fearful of losing money.

im Quinlan, Chief Market Strategist for U.S. Trust, says a lot of rich people continue to worry about regulation, Washington gridlock, and the lingering effects of the Federal Reserve’s unprecedented stimulus program, which has propped up stocks and the housing market but hasn’t done much for the rest of the economy.

Related: America’s middle class: Poorer than you think

“There’s a lot of things keeping them from jumping in with both feet,” Quinlan claims. He says many investors are more focused on the headlines, as opposed to the true earnings potential of American companies.

At the same time, Quinlan is encouraged by the statistics. He thinks they show that stocks still have room to run once more wealthy investors finally do get back into the market.

In that regard, 42% of those surveyed are pursuing higher returns despite the increased risk they see in the stock market. That’s up from just 30% who said the same thing in 2012. Many in the upper class are focused on the long game, with an overwhelming number saying that funding future financial needs takes precedence over short-term financial needs.

But Quinlan says the rich may also be playing catch-up after sitting on the sidelines for the last few years. The study revealed that wealthy investors who currently hold more than 10% of their portfolio in cash were three times as likely to say they missed out on the market rally.

“These investors have been whipsawed. Five years ago their big nest egg was shrinking dramatically,” he says. “Some of these folks may have been lagging behind, now they’re coming back.”

That puts the ultra-wealthy in a similar category to the rest. Many individual investors sat on the sidelines as the stock market experienced tremendous gains…..”

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Options and Arbitrage Funds Become the New Hedge for Investors

“Investors are seeking new defenses against possible falls in European stocks as indexes plateau near multi-year highs and traditional hedges prove ineffective in a market anesthetized by near-zero interest rates.

These alternative tools range from option strategies aimed at minimizing the cost of holding a hedge to investing in funds which aim to generate some returns irrespective of the stock market’s direction, such as arbitrage hedge funds.

A 50 percent rally in European shares over the past two years has left investors fretting about high valuations and seeking to protect their gains against a possible selloff.

However, hedging tactics which worked during the jittery days of 2008 and 2011, such as straight bets on rising volatility, have proved inadequate in the current, becalmed market conditions, leading fund managers to look for alternatives.

“A direct exposure to volatility may hurt investors because volatility can still fall or stay at a low level for a long period of time,” said Bruno Pannetier, chief investment officer of London-based hedge fund Old Park Capital. “Investors have to find new ways of hedging.”

Hedging equity positions via futures on the Euro STOXX Volatility index, which gauges the prices of options on eurozone blue-chips and tends to move inversely to cash equities, has cost investors dearly over the past two years.

Firstly, the VSTOXX has fallen roughly 65 percent since the Federal Reserve and the European Central Bank made plain in 2012 that they were prepared to pursue radical measures. The index has shown no sign of revival because the magnitude of swings in the Euro STOXX 50 index has been even lower than option prices imply.

Furthermore, since futures with longer-dated maturities tend to be more expensive than shorter-dated ones at times of low volatility, investors would often have to stump up when selling an expiring contract to buy a new one.

To reduce this cost…..”

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The Mortgage Bankers Association Lowers Expectations on New Home Sales

“The two-year-old U.S. housing recovery is faltering.

The Mortgage Bankers Association lowered its new and existing home sales forecast for 2014 to 5.28 million — a decrease of 4.1 percent that would be the first annual drop in four years. The industry group also cut its prediction on mortgage lending volume for purchases to $751 billion, an 8.7 percent decline and the first retreat in three years.

Bullish forecasts in early 2014 from MBA, Fannie Mae and Freddie Mac have been sideswiped by rising home prices and an economy that isn’t producing higher paying jobs.

The share of Americans who said they planned to buy a home in the next six months plunged to 4.9 percent last month from 7.4 percent at the end of 2013, the highest in records going back to 1964, according to the Conference Board, a research firm in New York.

“The big housing rally wiped itself out because prices increased too quickly for buyers to keep up,” said Richard Hastings, a consumer strategist at Global Hunter Securities LLC in Charlotte, North Carolina, who predicted the slowdown eight months ago. “The pool of eligible new buyers is collapsing” because of stagnant incomes and lack of credit, he said.

The best-qualified homebuyers jumped into the market last year to grab near-record low mortgage rates that averaged about 3.5 percent after delaying their moving plans during the housing slump, said Nariman Behravesh, chief economist of IHS Inc., a research firm based in Englewood, Colorado.

Stagnant Wages

The median price of an existing home gained 11.5 percent last year, second only to 2005’s 12 percent increase, the highest on record, according to the National Association of Realtors. This year, price appreciation probably will slow to 5.6 percent, NAR said.

As prices climb, the ability of Americans with stagnant wages to buy homes wanes.

The median U.S. household income rose less than 1 percent in 2013, according to data from Sentier Research LLC in Annapolis, Maryland. In April, the median income was $52,959. When adjusted for inflation, that’s almost 6 percent lower than in June 2009, which marked the beginning of the economic recovery, said Gordon Green, a Sentier partner who formerly directed the Census Bureau office that compiles wage statistics.

“Even though we’re technically in a recovery, household income is lower now than it was in the recession,” Green said. “It makes it a lot harder to buy a house.”

Changing Forecasts

Three major housing forecasters — MBA and government-run mortgage financiers Freddie Mac and Fannie Mae — began the year projecting an average home-sale gain of 10 percent in 2014.

In May, after monthly reductions in their estimates, Fannie Mae and MBA for the first time projected an annual decline, amounting to less than one percent.

Freddie Mac this week lowered its home sales 2014 forecast 1.8 percent to 5.4 million — which would be the first annual drop in four years. The company also cut its prediction on mortgage lending volume for purchases 1 percent to $751 billion, the first annual reduction in three years.

While home purchase applications have picked up recently…..”

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Great Fucking Job Yuse (sic) Guys are Doin’

“Public Faith in Congress Falls Again, Hits Historic Low
Of major U.S. institutions, Americans most confident in the military
by Rebecca Riffkin
WASHINGTON, D.C. — Americans’ confidence in Congress has sunk to a new low. Seven percent of Americans say they have “a great deal” or “quite a lot” of confidence in Congress as an American institution, down from the previous low of 10% in 2013. This confidence is starkly different from the 42% in 1973, the first year Gallup began asking the question.

Confidence in Congress since 1973

These results come from a June 5-8 Gallup poll that updated Americans’ confidence in 17 U.S. institutions that Americans either read about or interact with in government, business, and society.

Americans’ current confidence in Congress is not only the lowest on record, but also the lowest Gallup has recorded for any institution in the 41-year trend. This is also the first time Gallup has ever measured confidence in a major U.S. institution in the single digits. Currently, 4% of Americans say they have a great deal of confidence in Congress, and 3% have quite a lot of confidence. About one-third of Americans report having “some” confidence, while half have “very little,” and another 7% volunteer that they have “none.”

Confidence in Congress has varied over the years, with the highest levels in the low 40% range recorded in the 1970s and again in the mid-1980s. Confidence rose in the late 1990s and early 2000s, but has declined since 2004, culminating in this year’s historic low.

Three in Four Americans Have High Confidence in the Military

The military continues to rank at the top of this year’s list, with 74% of Americans having either a great deal or quite a lot of confidence in the institution. Another 20% of Americans have “some” confidence in the military. Seven percent have very little or no confidence. The military has ranked at the top of the list all but one year since 1989. Prior to that, the church or organized religion, now with 45% confidence, typically finished first.

Confidence in Institutions

As is the case with confidence in Congress, Americans’ confidence in many of these institutions has changed over time. The current 74% of Americans who have high levels of confidence in the military is actually lower than it has been in the past. Confidence in the military spiked in March 1991 to 85%, just after the first Persian Gulf War, but fell back through the 1990s. It also spiked in 2002 and 2003, after 9/11, and again in 2009, just before U.S. troops began withdrawing from Iraq.

Still, the current 74% confidence level is significantly higher than the average 67% rating given…”

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It’s Like this Kid

[youtube://http://www.youtube.com/watch?v=VkzNglaH8mA&feature=youtu.be 450 300]

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Yale’s Robert Shiller: ‘We Should Be Worried About Steep Decline’ in Stocks

“Many investors are nervous that the stock market may soon plunge, and that concern is understandable, says Nobel laureate economist Robert Shiller of Yale University.

“We should already be worried about a steep decline,” he tells Forbes. “The market is highly priced, but by my standards not quite as highly priced as it was in 2007.”

Shiller is referring to his cyclically adjusted price-earnings ratio, which is based on the last 10 years of earnings. The ratio reached 27 in 2007, when the stock market peaked, and stands at 26.1 now.

“That’s close, and that is a cause for concern,” Shiller argues. “So it might be a time to tilt one’s investments away from the U.S. Don’t get greedy.”

The S&P 500 hasn’t seen a 10 percent correction in 32 months….”

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BMO’s Ablin: Liquidity From Fed, Others Will Likely Push Stocks Higher

“While worries about the U.S. economy and the Iraq conflict may have weighed on stocks in recent sessions, Jack Ablin, chief investment officer at BMO Private Bank, believes the market can resume its ascent.

“Up ’til now, most geopolitical developments, namely Crimea and Ukraine, have had very little impact on the U.S., but now because Iraq and oil are involved — oil prices rising with the potential for higher pump prices crimping demand — that is starting to spill over into the markets,” Ablin told Yahoo.

“Even though we have these issues and the market is relatively expensive, we have an enormous amount of liquidity flowing into the market,” he stated….”

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Study: Top Pay Equals Worst Performance

“Wave goodbye to the theory that top pay guarantees top performance. The highest-paid CEOs are also the worst performers, according to academic research cited by Forbes.

The study shows that CEOs who get paid huge amounts become overconfident and tend to think less critically about their decisions.

“They ignore dis-confirming information and just think that they’re right,” says one of the authors of the study, Michael Cooper of the University of Utah’s David Eccles School of Business.

Editor’s Note:
 5 Signs Stock Market Will Collapse in 2013

“The more CEOs are paid, the worse the firm does over the next three years, as far as stock performance and even accounting performance,” he tells Forbes.

Cooper and two professors, one at Purdue Universtity and the other at the University of Cambridge, studied data from 1,500 companies with the biggest market caps. They were surprised to find that the more CEOs got paid, the worse their companies did.

At the very top, the 5 percent of CEOs who were the highest paid turned in the worst company performance — 15 percent worse than the average. Broadening the view a bit, the top 10 percent of highest-paid CEOS turned in company performance’s that were 10 percent worse than the average.

The highest-paid CEOs apparently tend to think they can do no wrong, or they would not be entrusted with their position and their pay.

“That tends to result in over-investing — investing too much and investing in bad projects that don’t yield positive returns for investors,” Cooper explains.

The study finds that among the top-paid CEOs, 19 percent did mergers and those deals resulted in a negative performance of 1.38 percent during the following three years.

“The returns are almost three times lower for the high-paying firms than the low-paying firms,” Cooper argues. “This wasteful spending destroys shareholder value.”

The study also reveals….”

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Interest Rates Remain Unch, FOMC Leave Markets with No Real Direction

“The Federal Reserve has released its latest monetary policy decision. Mostly it was a non event, as the Fed is not indicating a quicker pace of rate hikes, despite improving unemployment and inflation data.

The Fed kept interest rates between 0% and 0.25%, and took another $10 billion off its monthly asset purchases.

The Fed also released its latest Summary of Economic Projections, which includes an updated version of its “Dot Plot,” and it looks like the FOMC has no idea where interest rates are going.

The Dot Plot shows what various members of the FOMC are predicting for the path of future rate hikes. It’s a forecast.

The latest version of its Dot Plot shows an even wider dispersion among where FOMC members believe interest rates will be, both at the end of the next three years and over the longer run. In other words, there’s no consensus about what’s going to happen with interest rates. It’s anyone’s guess.

Here’s the latest Dot Plot, followed by the previous Dot Plot from March…..”

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More commentary on the economy

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State of the Union: What It’s Like

[youtube://http://www.youtube.com/watch?v=hmyqdxBKvH4 450 300]

We’ve all seen a man at the liquor store beggin’ for your change
The hair on his face is dirty, dread-locked, and full of mange
He asks a man for what he could spare, with shame in his eyes
“Get a job, you fucking slob,” is all he replies
God forbid, you ever had to walk a mile in his shoes
‘Cause then you really might know what it’s like to sing the blues

Then you really might know what it’s like
Then you really might know what it’s like
Then you really might know what it’s like
Then you really might know what it’s like

Mary got pregnant from a kid named Tom that said he was in love
He said, “Don’t worry about a thing, baby doll
I’m the man you’ve been dreaming of”
But 3 months later, he say he won’t date her or return her calls
And she swear, “Goddamn, if I find that man, I’m cuttin’ off his balls”

And then she heads for the clinic
And she gets some static walking through the door
They call her a killer, and they call her a sinner
And they call her a whore
God forbid, you ever had to walk a mile in her shoes
‘Cause then you really might know what it’s like to have to choose

Then you really might know what it’s like
Then you really might know what it’s like
Then you really might know what it’s like
Then you really might know what it’s like

I’ve seen a rich man beg, I’ve seen a good man sin
I’ve seen a tough man cry, I’ve seen a loser win
And a sad man grin, I heard an honest man lie
I’ve seen the good side of bad and the downside of up
And everything between

I licked the silver spoon, drank from the golden cup
And smoked the finest green
I stroked the fattest dimes at least a couple of times
Before I broke their heart
You know where it ends, yo, it usually depends on where you start

I knew this kid named Max
Who used to get fat stacks out on the corner with drugs
He liked to hang out late
He liked to get shit-faced and keep the pace with thugs

Until late one night, there was a big old fight and Max lost his head
He pulled out his chrome .45, talked some shit, and wound up dead
Now his wife and his kids are caught in the midst of all of this pain
You know it comes that way
At least that’s what they say when you play the game
God forbid, you ever had to wake up to hear the news
‘Cause then you really might know what it’s like to have to lose

Then you really might know what it’s like
Then you really might know what it’s like
Then you really might know what it’s like to have to lose


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No Change is Expected From the FOMC, Inflation Could Change Outcome in the NEar Fututre

“The Federal Reserve received some further cause for discussion at its policy meeting this week with a report of a surprising jump in consumer inflation.

Yet most economists aren’t altering their view that the Fed’s first interest rate increase is at least a year away. Analysts cautioned that that time frame could change if inflation were to accelerate. The consumer price index rose 0.4 percent in May, the government said, and has risen 2.1 percent over the past 12 months — roughly at the level of the Fed’s target rate for inflation.

It’s why the Fed might actually welcome the news of slightly higher inflation: It will help ease long-standing concerns that inflation might be too low. For the past two years, inflation by one key measure has remained under the Fed’s 2 percent target.

“I don’t think the Fed is going to express concern about the May price increase,” said Joel Naroff, chief economist at Naroff Economic Advisors.

When the Fed issues a statement Wednesday after its meeting ends and updates its economic forecasts, and then Chair Janet Yellen holds a news conference, investors will be seeking clues about when short-term rates will finally rise. They will also be looking for hints about how and when the Fed will start unloading its vast investment holdings…..”

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A Minuscule Rise in Mortgage Rates Slams Applications by 9.2%

“It didn’t take much to keep potential borrowers away from their mortgage lenders last week—a minimal rise in rates sent volume tumbling 9.2 percent on week, seasonally adjusted, according to the Mortgage Bankers Association (MBA).

Applications to refinance a loan fell 13 percent on week, while applications to purchase a home fell 5 percent on week and are now 15 percent below the volume seen a year ago.

“Interest rates increased relative to the previous week, as incoming economic data continues to suggest a pickup in the pace of growth,” said Mike Fratantoni, MBA’s Chief Economist….”

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The Military Industrial Complex Wins Again

“Recall a week ago we wrote “US Begins Delivering F-16s To Iraq This Week, A Decade After It Wiped Out Iraq’s Air Force” in which we said:

… the US will deliver the first of 36 F-16 fighter jets to Iraq in what Baghdad’s envoy to the United States called a “new chapter” in his country’s ability to defend its vast borders with Iran and other neighbors.

….the US earlier in March provided Iraq with some 100 Hellfire missiles as well as assault rifles and other ammunition. Then in April the US sent more arms, providing Iraq with 11 million rounds of ammunition and other supplies.

It is unknown how many of these have fallen into Al Qaeda/ISIS hands (we do know that at least one Iraqi Black Hawk chopper was captured during the rush for Mosul). What is known is that as PBS Frontline reported two weeks ago, while the administration has denied arming Syrian “rebels”, i.e. the same ISIS militants that have crossed the border and are now fighting in Iraq…

… the reality is that it has. From: “Obama Says Not Arming Syrian Rebels, Syrian Rebels Say He Is

… the Syrian rebels themselves say they are already armed and trained by US in the use of sophisticated weapons and fighting techniques, including, one rebel said, “how to finish off soldiers still alive after an ambush.” The interviews are the latest evidence that after more than three years of warfare, the United States has stepped up the provision of lethal aid to the rebels, as PBS notes “it appears the Obama administration is allowing select groups of rebels to receive US-made anti-tank missiles.”

The commander of the unit also told Ali that their American contacts had asked him to bring 80 to 90 members of his unit to Ankara for training.

One of the fighters said they received three weeks of training in how to conduct ambushes, conduct raids and use their weapons. They also said they received new uniforms and boots.

“They trained us to ambush regime or enemy vehicles and cut off the road,” said the fighter, who is identified only as “Hussein.” “They also trained us on how to attack a vehicle, raid it, retrieve information or weapons and munitions, and how to finish off soldiers still alive after an ambush.”

To summarize: the US was arming and training the same Al Qaeda/ISIS groups of Jihadists, that it concurrently gave Iraq weapons to fight…..”

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State of the Union: I Get By

[youtube://http://www.youtube.com/watch?v=rXLmt6i-hBY 450 300]

Government man keep calling my house
Talking ‘bout I owe, harassing my spouse
Gotta park my truck on another block
Cause the sub-prime loan got my ass in hockGotta couple good friends with helping hands
I need a brand new job with a health care plan
They closed the plant, they stole my job
Told me crime don’t pay unless you ask the mob

So I smoke a little grass, drink a little wine
Watch a little tube, try to kill a little time
And every single day I fall a little more behind
But I’m paying it no mind, it’ll all be fine

I get by (got it good, got it good)
I barely get by (got it good, got it good)
I barely get by
I laugh not to cry
I stay a little high
I ain’t gonna lie
I barely get by
I laugh not to cry
I stay a little high
I ain’t gonna lie (got it good)

Party people in the place to be
Put your hands in the sky if you barely getting by
It’s on and on till the brake of dawn
Got to keep the rent paid and the power on

Yes yes y’all and it never stops
I don’t trust the government, I don’t trust no cops
We dip and we dive and we socialize
We struggle and we strive just to stay alive

I get by (got it good, got it good)
I barely get by (got it good, got it good)

When I finally get home I can’t relax
Cause I’ve been over worked and I’ve been over taxed
My bank accounts empty, all my cards are maxed
And I ain’t looking for no pity, I’m just stating the facts

I voted for some change and it’s kinda strange
“No” it’s all I got in my pocket
I bought a few led’s, now I’m growing some trees
And it’s a sweet fucking hustle don’t knock it

I told y’all before I would break the law
To put some food in my baby girl’s belly
Cause the senator man took a bribe in hand
And went and shipped my job to New Delhi

I get by (got it good, got it good)
I barely get by (got it good, got it good)
I barely get by
I laugh not to cry
I stay a little high
I ain’t gonna lie
I barely get by
I laugh not to cry
I stay a little high
I ain’t gonna lie (got it good)

Party people in the place to be
Put your hands in the sky if you barely getting by
It’s on and on till the brake of dawn
Got to keep the rent paid and the power on
Yes yes y’all and it never stops
I don’t trust the government
I don’t trust no cops
I dip and I dive and I socialize
I struggle and I strive just to stay alive

I get by (got it good, got it good)
I barely get by (got it good, got it good)
I barely get by
I laugh not to cry
I stay a little high
I ain’t gonna lie
I barely get by
I laugh not to cry
I stay a little high
I ain’t gonna lie (got it good)

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Five Gauges That Could Signal a Stock-Market Correction

“Stocks have scored decent gains this year, with the S&P 500 minting 19 records to date. That has prompted some market participants to call for the S&P SPX  to hit 2,000 in 2014.

But it’s just when investors start to feel complacent that they should turn around and consider the chance of a correction, according to Jim Paulsen, chief investment strategist at Wells Capital Management.

“Throughout this year, our best guess has been to expect the S&P 500 to reach as high as the 2000ish level sometime this year, but for the stock market to also experience a correction at some point perhaps ending the year about where it began,” he wrote in a note. “Since the stock market is closing in on the 2000ish level, it’s time to consider whether it will simply continue higher throughout this year, or if in the second half, the stock market finally struggles with a more difficult environment?”

Of course, there’s no immediate risk of a correction, he says. But that could all change quickly. He lays out five gauges to watch for that could signal correction pressures in the market:

1. More aggressive stock-market gains: The S&P has traded mostly in a 100 to 125 point range around its uptrend since the beginning of 2013. That’s a “controlled and methodical” upward move, Paulsen said. These gains need to accelerate to a more unsustainable pace in order for the risk of a correction to increase, he said.

Wells Capital Management

2.  Decline in correction calls: Even as stocks have gained this year, stock-market bears have continued to broadcast their views about the likelihood of a correction. While that has slowed somewhat — investors are more comfortable than at any time in this recovery, Paulsen said — there isn’t a broad feeling of euphoria. “For correction risk to truly become elevated, most have to believe a correction is not likely,” he wrote….”

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Related article: Is the Bull Market Topping 

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