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Dow Jones Opens At All-Time Highs And Economic Optimism Hits 15-Month Low!! JIM CRAMER: ‘We all know it’s going to end badly’
March 5th, 2013

Dow Jones Opens At All-Time Highs

On October 11th 2007, the ‘old’ Dow Jones Industrial Average reached its previous all-time high of 14,198.10 (with the all-time closing high of 14,164.5 on October 9th) as plans for the MLEC were rumored to save the world from the intensification of stress in the interbank funding markets. A week later, the Dow had dropped 5.5%; a month later it had dropped 8.5%; three months later it had slumped 18%. But, this time the ‘wealth effect’ will be different-er.

“Mission Accomplished” - With CNBC now lost for countdown-able targets (though 20,000 is so close), we leave it to none other than Jim Cramer to sum up where we stand (oh and the following list of remarkable then-and-now macro, micro, and market variables):  “we all know it’s going to end badly, but in the meantime we can make some money” - ZH translation: “just make sure to sell ahead of everyone else.”


THEN(2007) AND NOW(2013)

Dow Jones Industrial Average: Then 14164.5; Now 14164.5
Regular Gas Price: Then $2.75; Now $3.73
GDP Growth: Then +2.5%; Now +1.6%
Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
Americans On Food Stamps: Then 26.9 million; Now 47.69 million
Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
US Deficit (LTM): Then $97 billion; Now $975.6 billion
Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion
US Household Debt: Then $13.5 trillion; Now 12.87 trillion
Labor Force Particpation Rate: Then 65.8%; Now 63.6%
Consumer Confidence: Then 99.5; Now 69.6
S&P Rating of the US: Then AAA; Now AA+
VIX: Then 17.5%; Now 14%
10 Year Treasury Yield: Then 4.64%; Now 1.89%
EURUSD: Then 1.4145; Now 1.3050
Gold: Then $748; Now $1583
NYSE Average LTM Volume (per day): Then 1.3 billion shares; Now 545 million shares

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The economy before and after 9/11
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You can't blame all the economic hurdles we've faced over the past decade on the attacks, but there are many connections. Here's where we stood then and now on the deficit, jobs and more.
By RPrichard Sep 7, 2011 2:47PM
By John Miley, Kiplinger's Personal Finance

Much has transpired on the economic front since terrorists attacked the U.S. on Sept. 11, 2001. The nation weathered two recessions; homeowners suffered record foreclosures; workers faced double-digit unemployment; and investors trudged through a lost decade -- stock markets aren’t much better off today than they were ten years ago.

Not all of the problems that have plagued the U.S. economy can be tied to 9/11, though there are arguments to be made that some can. Judge for yourself. Here’s a look at where the economy was a decade ago, on the eve of the terrorist attacks; where it is today; and what happened in between.

The deficit

Then: $128 billion budget surplus in 2001. After 28 years of deficits, the federal government finally managed to produce a surplus for four straight years starting in 1998, including $236 billion in 2000 and $128 billion in 2001. Long-term prospects were rosy. “The outlook for the federal budget over the next decade continues to be bright,” the Congressional Budget Office said in January 2001, forecasting an $889 billion surplus in 2011. Of course, the CBO’s projection at the time assumed that revenue and spending policies would be maintained.

Now: Projected $1.3 trillion budget deficit in 2011. Sweeping tax cuts passed in June 2001 came at a time when the economy was already in recession on the heels of the dot-com bust. Then came 9/11. Subsequent wars in Iraq and Afghanistan have a price tag in excess of $1 trillion and counting. While the deficit actually shrank between 2004 and 2007, the Great Recession necessitated costly government intervention, including the Troubled Asset Relief Program of 2008 ($700 billion) and the economic stimulus package of 2009 ($800 billion). The federal deficit was $1.3 trillion in 2010. CBO projections put the deficit again at $1.3 trillion for 2011.

The stock market

Then: The Dow closed at 9605.51 on Sept. 10, 2001. The Dow Jones Industrial Average ($INDU) climbed mightily in the 1990s, more than quadrupling in value during the decade as individual investors poured into the stock market. The 10,000 barrier was breached in 1999, and the sky seemed the limit. But the events of 9/11 dampened an already weakening economy. When trading resumed after the terrorist attacks, on Sept. 17, the Dow sank 684 points, or 7.1%. Lingering effects of a recession that officially ended in November 2001 kept the Dow from finding firm footing above 10,000 for another two years.

Now: The Dow closed at 11,493.57 on Sept. 1, 2011. The Dow topped 14,000 by October 2007, an all-time high. But the 18-month Great Recession, which began officially in December 2007, took a toll on the average -- especially its financial components. Shares of American Express (AXP) fell 63% during 2008; Bank of America (BAC) dropped 60%. In September 2008, Kraft Foods (KFT) replaced American International Group (AIG) in the Dow. In June 2009, Citigroup (C) was bumped in favor of Cisco Systems (CSCO). The Dow has climbed 76% since its bear-market low of 6547 on March 9, 2009. Trading ahead of the tenth anniversary of 9/11 has been extremely volatile.

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Unemployment

Then: 4.9% (August 2001). The unemployment rate was 4.2% at the start of 2001, but the unfolding recession lifted joblessness to 5.7% by year’s end. The economic drag of 9/11 contributed to the labor pains. An estimated 600,000 jobs were lost as a direct consequence of the terrorist attacks. Of those lost jobs, 226,000 were in travel and tourism. At the World Trade Center, 1,100 businesses were disrupted. It took four years before the unemployment rate returned to its pre-9/11 level.

Now: 9.1% (August 2011). After stabilizing at a healthy 5% or below in the mid 2000s, unemployment began to accelerate in 2008 as the Great Recession went into full swing. The U.S. ended up losing 2.6 million jobs that year. The jobless rate peaked in October 2009 at 10.1%, a level not seen since 1983. Today, about 14 million Americans are out of work, and there are few signs of rapid improvement on the labor front. Long-term unemployment remains a stubborn problem, with 6.0 million workers unemployed for at least 27 weeks.

Housing

Then: $156,600 (median home price in 2001). The median price of an existing home in the U.S. in 2001 was $156,600. The homeownership rate at the start of that year was 67.5%. The Federal Reserve had a tight monetary policy in place going into 2001, with the target on the federal funds rate at 6.5%. (The fed funds rate, the interest that banks charge each other for short-term loans, influences rates on other loans, such as mortgages.) As the recession unfolded, the Fed began to lower rates to stimulate economic growth. Four rate cuts were made in rapid succession after 9/11. The fed funds rate ended 2001 at 1.75%. By 2003 it was at a 50-year low of 1%.

Now: $173,100 (median home price in 2010). A good case can be made that the Fed’s super-low rate targets, which were prompted by the 2001 recession and exacerbated by the 9/11 attacks, played a key role in the housing bubble. From 2000 to 2005, housing prices rose at an 8.26% annualized rate, vs. 4.22% annualized during the 1990s. The median home price peaked at $221,900 in 2006. Then the bubble burst. The median price fell 2% in 2007, 10% in 2008 and 13% in 2009. It ticked up 0.6% in 2010, but at $173,100 it was well below peak prices. Homeownership, which hit a high point of 69.2% at the end of 2004, has since retreated to 65.9%, the lowest level in 13 years.

Air travel

Then: U.S. airlines flew 34.9 million passengers. In August 2001, U.S. airlines carried 63.8 million passengers and employed more than 520,000 workers, but the 9/11 terrorist attacks had an immediate and profound effect on the industry. The number of passengers was nearly halved in September 2001, to 34.9 million. The federal government quickly intervened. The Air Transportation Safety and System Stabilization Act, signed into law Sept. 22, 2001, gave airlines $5 billion in immediate assistance and $10 billion in loan guarantees to prop up the industry.

Now: U.S. airlines flew 63.8 million passengers. U.S. airlines flew 63.8 million passengers in May 2011 (the latest data available), the same number that took flight in August 2001. But flying isn’t the same as it was ten years ago. Among the travel-related legacies of the terrorist attacks are tighter carry-on restrictions and longer security lines at airports. Creation of the Transportation Security Administration, now part of the Department of Homeland Security, itself a direct result of 9/11, was approved on Nov. 19, 2001. The TSA currently has 50,000 employees and a budget of $8 billion. Due in large part to consolidation, the number of workers in the U.S. employed by airlines has fallen 26% since 9/11 to 383,000.

Gold

Then: $271.50 an ounce (Sept. 10, 2001). It’s no secret that some investors scurry to gold in times of uncertainty. Gold is considered a hedge against inflation and a weakening dollar, among other things. The week after 9/11 was no exception. Gold prices jumped a quick 8% on the heels of the terrorist attacks. The precious metal continued to rise steadily after 9/11, doubling in value by the end of 2005.

Now: $1821.00 an ounce (Sept. 1, 2011). Gold shot into the $600s per ounce in 2006, a range where it bounced around until the second half of 2007. That’s when signs of trouble at financial institutions, especially mortgage lenders, began to emerge. Gold first breached $1,000 in March 2008, but it wasn’t until the fall of 2009 that prices stayed in the quadruple digits. Gold has exploded recently amid recession fears and stock-market volatility, surging past $1,800 an ounce. Since 9/11, the price of gold has gone up more than 600%. In contrast, the U.S. dollar has lost about one-third of its value since 9/11.

Oil and gas

Then: $1.53 per gallon gasoline/$27.66 per barrel oil (Sept. 10, 2001). Oil is a commodity with a volatile history. Prices are often driven by global demand, the stability of producing nations and the whims of speculators. In the days after 9/11, the price of West Texas Intermediate crude rose 7% to $29.59 a barrel. However, oil quickly retreated as fears of economic slowdown trumped worries about scarce supply from the Middle East. Oil prices were little changed on the first anniversary of the terrorist attacks. As for gasoline, the national average weekly price for a gallon was $1.51 as of Sept. 10, 2001.

Now: $3.65 per gallon gasoline/$88.93 per barrel oil (Sept. 1, 2011). Oil began to climb appreciably in 2004, and by 2008 it had been bid up to nearly $150 per barrel, largely due to concerns that global demand could outpace supply. Gasoline topped $4 per gallon in the summer of 2008. More recently, oil has fallen to $88.93 a barrel on a weaker outlook for worldwide demand. Gasoline is now at $3.55 per gallon, about $2 more than it went for on 9/11. Still, oil and gasoline are diminishing resources. According to the International Energy Agency, oil’s share of total global energy will shrink from 33% in 2008 to 28% in 2035.

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Economic Fascism and the Power Elite
Mises Daily: Tuesday, March 05, 2013 by David S. D'Amato

ArticleComments Also by David S. D'Amato
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The state—the organization of the political means—is the institution that allows an idle, unproductive class of parasites to live at the expense of ordinary, working people, whose means are industrious activity and consensual exchange in the marketplace. We ought not assume, however, that the indigent segment of society, those who receive social welfare aid from the state, are necessarily foremost among the parasites of the political means. Rather, free-market libertarians from Albert Jay Nock to Murray Rothbard and Butler Shaffer have demonstrated that in the statist economy of theft and wealth redistribution, it is the elite—powerful, entrenched commercial players—who most benefit. Historically and empirically, this phenomenon of elite command of the apparatuses of government is readily apparent and unmistakable in its expression, particularly as regards the twentieth-century American economy. Economic historian Robert Higgs has argued that the American economy developed into a variant of corporatism or “tripartism,” an economic fascism defined by formal collusion between certain key interests and various arms of the state. “Corporatism,” writes Higgs, “faces the problem of factions directly; in effect, it resolves the problem of the people versus the interests by forthrightly declaring that the interests, when properly organized and channeled, are the people” (emphasis added).[1] Like every permutation of the authoritarian idea, the corporatism described by Higgs attempts to submerge the individual within the anatomy of the leviathan state—of which we must now regard many nominally “private” actors as a part.

     
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These firms, in their partnership with the state, are “granted a deliberate, representational monopoly”[2] as payment for a level of control exercised by government. The iron triangles that form the fascist tripartism detailed by Higgs recall the thesis of C. Wright Mills’s groundbreaking sociological study, The Power Elite. In his masterwork, published first in 1956, Mills gives an account of an intermeshed elite made up of a “political directorate,” the “warlords” of the military establishment, and “corporate chieftains” at the helm of Big Business bureaucracies.[3] Hardly resulting from the legitimate free market defended by libertarians, the social and economic problems and crises we see all around us are in fact the moldering fruits of elite statism. And war, as both the engine of an entire economic paradigm and its attendant psychological and sociological substructure, has been the American state’s most preferred expedient, burdening peaceful, productive society with class rule. The permanent war economy, the unremitting exercise in plunder that now makes up a terrifyingly large portion of the economy at large, must necessarily poise itself upon antisocial state-worship. As Vicesimus Knox wrote, “Fear is the principle of all despotic government, and therefore despots make war their first study and delight.”[4] The existence of a corporate command-and-control economy, whose configuration grows out of layered state interventions, depends crucially on popular attitudes regarding the state. Only a public trusting of elite judgment and expertise would abide a system built on just the kinds of subjugation that the American ruling elite hypocritically claimed to defy in two world wars.

     
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Fundamentally related to these insights into the practical relationships between Big Business and Big Government, is the proposal of Rothbard’s short-lived journal, Left and Right. Presenting the journal, Rothbard said that the title “highlights our conviction that the present-day categories of ‘left’ and ‘right’ have become misleading and obsolete.”[5] Left and right designations become particularly troublesome when we consider modern American conservatism as a “barren defense of the status quo.”[6] The concord of war statism reached by the political elite during the twentieth century certainly wasn’t liberal in any coherent or meaningful sense—a near antithesis of the liberalism of which Mises and Hayek regarded themselves as the legatees.

     
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Mises and Hayek inherited that consistent, comprehensive liberalism from, among many others, Charles Comte and Charles Dunoyer, French political thinkers writing in the early nineteenth century. During Comte and Dunoyer’s time, many very different and contradictory ideas all claimed liberalism; theirs was an “industrialist” rendering that placed the state firmly and unambiguously in opposition to nonviolent, economic society, the principles of which were not coercive, governmental machinations, but harmonious trade. The “industrialisme” of Comte and Dunoyer, then, was very much an antecedent to Oppenheimer’s famous distinction between the political and economic means to wealth. Industry and exchange were to be venerated as the defining hallmarks of a free and just social and economic system, one loosed from the old privileges of ruling classes extending back through history. As Rothbard put it, in contrast to the productive classes (comprising “workers, entrepreneurs, producers of all kinds”), the nonproductive classes used “the state to levy tribute upon the producers.”[7] Very much a rebuke of the established order, the free market ideas of Comte and Dunoyer’s industrialist journal Le Censeur européen had radical and thus very unconservative implications: a hope to completely replace government with “the administration of things”[8] (a phrase coined by Comte and only later used by Saint-Simon). Just as did Rothbard hundreds of years later, Comte and Dunoyer folded economic analyses—inherited primarily from Jean-Baptiste Say—in with historical and philosophical narratives, fashioning a unique and libertarian notion of class. Their economic propositions emerged from a holistic, methodological approach, tracing a historical divide between “the devouring” (“the hornets”) and “the industrious” (“the bees”).[9] Indeed, Comte and Dunoyer championed a classless society, though not in the sense of absolute equality or the end of private property. If the free market truly was the means of “dissolving the ruling classes,”[10] then it was privilege and monopoly, upheld by the coercive power of the state, and not legitimate property and trade, that were to be opposed.

     
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The political means may not be as plain to see, as glaring or as straightforward as they were in Comte and Dunoyer’s time. Central banking under the Federal Reserve System, today’s government subsidies, and regulatory barriers to entry are perhaps not as easily ascertainable to the layman as were affronts against the free market as they existed in Comte and Dunoyer’s day. But these interconnected instruments for binding and exploiting the society that is their host are just as menacing, if not more so. Where those living under the tyranny of old monarchical systems could be expected to understand full well the class nature of the statist rule around them, most today are misdirected by the democratic rhetoric that clothes the American state. Rothbard’s Wall Street, Banks, and American Foreign Policy would prove an instructive read for those in, for example, the Occupy crowd who misguidedly ascribe our current economic predicament to the free market. The ties between the war economy, the Federal Reserve’s central banking system, and the powerful Wall Street banks are, as demonstrated in Rothbard’s monograph, a defining feature of the state monopoly capitalism that has prevailed.

In the present day, following the maturation of the connections identified by Mills, Rothbard, Higgs and others, the economy has been “centralized . . . into a highly structured bureaucracy under the effective direction and control of leading business interests.”[11] We can in no way be said to have a free market, as the ties between powerful interests and the federal government are as strong as ever. Politics is an expensive, high-stakes game of favors and bribery, a fact that libertarians like Comte and Dunoyer saw clearly hundreds of years ago.

Quoted from CICERO

People planning to retire didn't.  If what happened in 07 happens now, it wii affect even more boomers expecting to retire.  Losing 30% value  isn't good for a 65-70 year olds.

Quoted from Shadow

What goes up must come down sooner or later.

Quoted from Shadow

The poor taxpayer will eventually run out of money to feed the enormous government and that's when the SHTF.

Quoted from Shadow

What goes up must come down sooner or later.

Quoted from Shadow

If you have retirement 401k[no tax paid] mutual funds/investments you can't just pull your investments out like you can stock.