Tuesday, January 10, 2006

The 'survivability of mankind' is at stake: are you ready?

Every day, I make an attempt to help people I know (friends, acquaintances, coworkers, family, etc) try to understand some of the major issues/imbalances effecting our economy, and the fact that we will probably experience some very difficult corrections in the near future... A futile attempt I guess, as many of them look at me with a dumbfounded look, and think that I’m completely off my rocker. But how can I blame them… Why should they listen to me anyway? I’m not an economist, nor do I hold a Ph.D… I’m just an average Joe—an insignificant organizational manager talking about rotten economic policies, deficits, debt, housing bubble, foreign Central Banks, the dollar, etc--topics very few of them understand or much less even care about anyway. I’m sure they are wondering how in the world I can think that I could possibly know more than the talking head analysts on TV, or the author of that glowing economic article they read in this morning’s paper.

How can I be so confident as to go against the trend (the “deceived perception” as I see it)? Tomorrow will be just fine they say… never in the history of the US… our debt is lower than it was during WWII… the dollar will never collapse, we’ll just nuke em… on and on… they continue to state reasons why my scenario is so out of whack with reality.

Oh well, I’m quickly coming to the realization that there is no way possible to convince someone who doesn’t want to see logic staring them in the face. Regardless, at least I know that I'll be ready when the economic $hit hits the fan... Stocking up on the Gold/Silver and liquid assets that I know will serve me well in the future.

Hope you enjoy the Marketwatch article below--it discusses numerous economic problems, the survival of mankind, and is followed by a poll:

By Paul B. Farrell, MarketWatch Last Update: 7:46 PM ET Jan. 9, 2006
ARROYO GRANDE, Calif. (MarketWatch) -- "This is the first scenario I've seen where I question the survivability of mankind," said RichardRainwater in a recent Fortune interview. He's No. 112 on the Forbes400 list of America's richest, worth $2.3 billion made in oil and realestate: "Most people invest and then sit around worrying what the nextblowup will be. I do the opposite. I wait for the blowup, then invest.

"The "survivability of mankind?" No wonder his wife Darla, a formerbankruptcy financier, calls him "Dr. Doom." He's a combination Noah building the Arc and Darth Vader building the Death Star, with a half-billion war-chest ready to pounce, bargain hunt, bottom-fish, buy distressed properties, prey on crises, again.

He reads books like "The Long Emergency: Surviving the End of the Oil Age, Climate Change and Other Converging Catastrophes of the 21st Century." He regularly checks blogs like LifeAfterTheOilCrash.net, a clearinghouse for commentaries by "the best paid, most widely respected geologists, physicists, and investment bankers in the world." Unfortunately, most people are blind and deaf to their warnings.

Oil is the biggest economic weapon of mass destruction on his radar. And when it reaches critical mass and the flash point, its impact will ripple across the planet and bring about "the end of life as we know it." That's the "Rainwater Doomsday Scenario." And compared to that,I'm a cockeyed optimist.

OK, so the collapse is coming, that's a given in his scenario. But still, two crucial uncertainties remain: When will it start? And what will trigger it?

My prediction: There's an 86% probability that America will collapse into a major economic recession and a sustained bear market in 2006, far worse than the dark days of 2000-2002 with its $8 trillion loss of market cap. And as the FEMA/Katrina disaster proved, Congress, the White House and Homeland Security are in denial, lost in their self-serving narcissistic egotistic happy-talk, incapable of seeing, let alone anticipating, the perfect storm on the horizon.

Ergo, their response will likely add fuel to the spreading contagion rather than solve it. So if Rainwater's right and oil is at the centerof the economic WMD, it looks like just about anything could trigger aworldwide meltdown. And today the world is full of triggers.

So, what event(s) will trigger the conflagration? You tell me! Seriously. Last summer we conducted a "Mega-Bubble Meltdown Poll" and were overwhelmed by the responses. We received over three times more than any other single column in nine years. And we summarized the results in a follow-up piece on strategies.

So give us your honest opinion. We believe you know better than the clueless spinmeisters on Wall Street and in Washington: Tell us which of the following triggers are likely to push us over the edge, into another recession and bear market. Pick more than one if you like. But help us by focusing on your best picks. And feel free to pass this onto a friend, ask them to vote in the poll:

20 triggers for the coming collapse

1. Oil & energy as the trigger. Warnings: Crude at new records. Gas-guzzlers still feeding big egos. GM, Ford troubles. New politicaldangers: Venezuela, Bolivia, Russia's natural gas threats to Ukraine.

2. Foreign trade deficit as a trigger. Warnings: Recent monthly deficits top $65 billion. This year's deficit will beat 2004's $617 billion. Foreigners now own $2.5 trillion of America.

3. Federal budget deficits. Warnings: Federal debt now $7.8 trillion. Add another $400 federal deficit this year. By 2010, interest on debt will equal our defense budget.

4. Corporate pension defaults. Warnings: Congress lets pensions use absurd estimates of future returns, adding problems on top of problems. Airlines, auto, others heavily burdened, default to taxpayers.

5. Government pensions deficits. Warning: A near $400 billion mess draining local taxpayer resources.

6. Weak U.S. dollar as trigger. Warnings: Foreign nations may replace dollar reserves. Even Warren Buffett is now making foreign currency hedging bets of $20 billion.

7. Social Security deficit. Warnings: We have no choice, cut benefits or raise taxes; but politicians hate both in an election year, so it'll just get worse.

8. Health-care insurance costs. Warnings: Employees' costs increasing. Costs feed inflation. 43 million uninsured.

9. Medicare as a trigger. Warnings: Going broke faster than Social Security. Prescription drug benefit adding an unfunded $8 trillion. Long-term estimates of $36.6 trillion.

10. War and military defense deficit. Warnings: Iraq and Afghanistan wars cost over $200 billion a year. And lately we hear of new plans to invade Iran next.

11. Homeland Insecurity triggers. Warnings: Minimal legislation to protect ports and chemical plants. Federal budget cut border patrol 90%. Vigilantes patrolling. FEMA an under-funded disaster.

12. Class gap widening. Warnings: CEOs and the rich get increasing share of wealth, ownership and tax cuts, while labor's income is reduced and latest budget cuts mainly hurt lower economic classes.

13. Congressional pork-barrel. Warnings: Pork, tax cuts and out-of-control spending. And with no veto threats, Congress runs amuck like teenage addict with stolen credit cards.

14. International credibility. Warnings: Image problems: Wiretapping, Abu Ghraib, Gitmo, secret prisons, and more.

15. Real estate as a trigger. Warnings: Speculation. Cheap money. Home-equity loans used to fund current expenses.

16. Personal-savings shortfall. Warnings: National savings rate now below zero, down from 8% in early 80s. We're now obsessed consumers,blind to saving for tomorrow.

17. Consumer-debt bubble. Warnings: Americans are living beyond their means. Consumer debt is $2 trillion, an all-time high. Personal bankruptcies rising.

18. Political scandals and trials. Warnings: Libby, DeLay, Rove, Scanlon, Abramoff, Frist, Ney; the list is growing.

19. Hedge fund risks. Warning: Doubled since 2000 to over $1 trillion as pension funds, discouraged with the stock market, are taking bigger risks, further endangering retirement funds.

20. Excessive P/E ratios. Warnings: Not just Google at 50 times; the stock market is about 30% overvalued. In last summer's poll 86% of our readers said there was a better than 50-50 chance of America's economic bubble exploding. With multipletrigger points, we have the makings of a perfect storm. In this new poll we want you to tell us when you think it will happenand which of these trigger points will push us into a recession and another bear market. Send us your thoughts about these two crucialissues. Later we'll summarize the results and offer strategies. http://www.marketwatch.com/

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