Buy The News – If You Can Afford It

I don’t go digging up these little facts and figures on the U.S Economy myself, as the following “quote” was cute/paste/borrowed from our dear friend Dr Paul Roberts:

“””According to the official wage statistics for 2012, forty percent of the US work force earned less than $20,000, fifty-three percent earned less than $30,000, and seventy-three percent earned less than $50,000. The median wage or salary was $27,519. The amounts are in current dollars and they are compensation amounts subject to state and federal income taxes and to Social Security and Medicare payroll taxes. In other words, the take home pay is less.

To put these incomes into some perspective, the poverty threshold for a family of four in 2013 was $23,550.

In recent years, the only incomes that have been growing in real terms are those few at the top of the income distribution. Those at the top have benefitted from “performance bonuses,” often acquired by laying off workers or by replacing US workers with cheaper foreign labor, and from the rise in stock and bond prices caused by the Federal Reserve’s policy of quantitative easing. Everyone else has experienced a decline in real income and wealth.

As only slightly more than one percent of Americans make more than $200,000 annually and less than four-tenths of one percent make $1,000,000 or more annually, there are not enough people with discretionary income to drive the economy with consumer spending.”””

The question begs to be asked: With this many Americans, making so little money – how can you honestly believe they can buy stocks? Let alone support a “consumer recovery”?

The U.S stock/bond market is nothing more than a Fed manipulated/fabricated “scam” put forth in attempt to mask the true state of affairs, and to bolster global confidence for as long as possible before this thing goes off the rails completely.

24 Responses

  1. JSkogs January 7, 2014 / 1:07 pm

    Very interesting post, Kong. Thank you. Yen correction still taking shape….In a very boring fashion of course. ..big suprise

    • Forex Kong January 7, 2014 / 1:49 pm

      Bored stiff man…..

      Absolutely bored stiff.

      And ya the post………well – I had been in conversation with a couple people recently that I don’t think “really believed me” as I raised the question of as to “Who is buying then? I’t can’be the general populus ( as buying stocks isn’t exactly top of the list with wife and two screaming kids right? )

      For me those stats just drive home the point even further – how completely fabricated the entire notion of “recovery” is.

  2. David January 8, 2014 / 1:50 am

    Speaking about the “Recovery” in America, I just got a little post-card like flyer in the mail that lists the wages that the USPS will be paying for positions that they are “immediately hiring” for. Must be for all the new package deliveries on Sundays now, thanks to Amazon.

    Long story short, the mail carrier (both rural and city) assistants can expect up to 15.87 an hour (woohoo!) and the “real jobs” on the list “with benefits” start at 38,000-55,000 salary. But those are full automotive mechanics who I’m sure will be working more than 8 hours a day since they are on salary. To put that in perspective, this is for SoCal. In another state, say Indiana, that might be a decent “living wage”, as you can get a decent apartment for 600. But here, for a decent apartment it’s 1400 a month, and that’s a one-bedroom with “questionable” neighbors.

    The funny thing is, as bad as things are here, I’m sure there will be some people who will be “momentarily ecstatic” to take one of these “Higher paying than retail” jobs. Sad indeed. At least they’ll be able to split rent with a roommate I guess.

    When/If my own company ever completely crumbles (there are several “call-off” days a month and forget about a raise, you’re actually lucky if you don’t get a pay cut every year; I count my blessings I’ve been spared thus far), I sure hope I’ll be trading “full-time for a living” so I won’t ever have to work for a company that puts profits over people (aka, pretty much “every company”).

    • Andre January 9, 2014 / 2:42 am

      Do you intend to do some sort of compassionate, socialist, charitable trading when you are on your own, or put profits over people?

  3. Andre January 8, 2014 / 2:15 am

    There is no such thing as a consumer-driven recovery. All real recoveries are driven by increases in production and trade, while some fake recoveries are driven by erosion of capital resources. Attempting a consumer-driven recovery is a sure way to cause economic decline.

    • Andre January 8, 2014 / 2:24 am

      That being said, it is not necessary for the poor to rise in order for a recovery to take place, all that is necessary is for profits to rise (in a broad sense, not just within subsidized industries).

  4. JSkogs January 8, 2014 / 9:00 am

    Looking close to go time

    • Forex Kong January 8, 2014 / 11:37 am

      Completely bizzarrooo movements in all asset classes going on some 8 days now.

      The “new year re balancing” continues…..a mine field as such, and a fantastic time to “not” be involved.

      I’m on a hair trigger here – but in making a couple tweaks – patience reigns supreme.

      • JSkogs January 8, 2014 / 11:50 am

        Ya I’m still content with my small positions. Hopefully later today or overnight things will get more serious

        • Forex Kong January 8, 2014 / 12:00 pm

          Hang tight.

          A final stab at new highs as suggested.

          And that “will” be that.

  5. John January 8, 2014 / 10:39 am

    The working class doesn’t have to directly purchase stock, their 401k/pension does that for them.

    • Forex Kong January 8, 2014 / 11:27 am

      I’m not American so can’t really comment / say but……

      Everyone has a pension plan? and (please say it isn’t so)….these plans are coordinated/serviced/managed by?? Bankers? Brokers?

      Please – tell me it isn’t so?

  6. David January 8, 2014 / 12:09 pm

    I can tell you for a fact in America most people in my age group (30) do not have a “retirement” plan. Very few work jobs/careers that will pay a pension upon retirement (most people work 5 or less years in a job anyway), plus the so-called “pensions” aren’t even guaranteed anymore as companies and even cities go bankrupt.

    The 401k system is no better, at least in my age group, since most companies stopped contributing and most people live paycheck to paycheck anyway, so they don’t even put anything away to begin with. With that said, I am of course speaking in general, as I’m sure there are some (myself included) still “semi-young people” who are planning for their eventual retirements.

    But I will say this, “The only thing that’ll give my generation a fighting chance is the fact that we’ll at least be able to inherit our parent’s houses”. Though we’ll still be paying property tax (which I call “life-time rent”).

    The thing that really bothers me though is that the homes for sale that are listed are easily going for 20%+ above asking price to investor’s paying with cash and then renting them out to people who actually want to own the homes. This is one reason why rent is so high here, b/c of the whole supply and demand issue. Fewer people that would otherwise be able to afford a home can no longer and instead must resort to renting, which leaves less rentals on the market, thus driving the price up. Seriously, rents have been going up 10% a year for 4 years in a row now.

    Anyway, in case anyone’s interested, that’s a little taste of life in SoCal. I know at least Kong is interested in what’s going on around the world with people who actually live in the places they write about.

    • Forex Kong January 8, 2014 / 1:26 pm

      Thanks a TON David!

      Damn rights I care, as no one knows better than those with “boots on the ground”! It’s invaluable information. Thank you.

    • JSkogs January 8, 2014 / 3:15 pm

      Thanks for sharing that. Very interesting. I love your state. I fly there somewhat regularly now because we have direct flights to LA from my town

    • John January 8, 2014 / 11:38 pm

      From what I understand, most government employees have pensions. That’s a large chunk right there. Those pensions are coming under fire, mainly new employees will likely not get as sweet of a deal as in the past. But if Detroit employees can keep them I’d think existing pensions elsewhere should be safe for now.

      As for 401k goes, obviously the gal working at mcdonalds isn’t getting a 401k. My view is likely skewed as all my employers have offered 401ks with a typical 3% match. I’m 29, graduated just in time to lock in a job before the recession. Went through three acquisitions four rounds of layoffs, 401k match dropped for two years then put back, vacation pulled. My new employer just raised the match from 3% to 4. But yeah, these 401k’s have limited investment options which have a fund management fee of about 1.5% or higher. So unless you are getting a decent match it doesn’t pay to contribute to it,IMO.

      Rent in Minneapolis and small town Wisconsin is the same as you said above. Rising rent kills disposable income so not many are able to afford the (now rising) house prices.

      The baby boomer generation is the huge wildcard in all of this IMO. Those tax burdens will go away, hopefully we can hang on until then.

  7. Graham Herbert (@mistergmh) January 8, 2014 / 6:46 pm

    Kong those payroll figures are alarming … Australia has traditionally had a huge auto manufacturing industry … Nissan and Mitsubishi left some years ago Ford and Holden are leaving in a few more years time which leaves Toyota for the time being … Now when you look at OZI wages for just a line worker @ $30 per hour for a 36 hour week equates to $56,1600.00 pa annual wage.
    The cost to the employer has extra’s of 9.25% super contribution, 17.5% holiday loading for four weeks annual leave, 4.95% payroll Tax and say at least 2% workcover Insurance that brings the figure to around $ 72,000 pa … Then overtime and a further two weeks in public Holidays … These are basically unskilled workers and robots are cheaper to buy to do the same work …
    Now with those US Wages you mention and Detroit being an employment disaster area what hope does Australia have for future competitiveness in any manufacturing operation … The majority of vehicles manufacturers are Korea, Malaysia, Thailand and now China flexing their mussels … even traditional Japanese manufacturers are having their vehicles produced there … AUD must get back to less than $0.80 asap or end up like Greece, Italy, Portugal and many other problem EUR countries and JPY / USD must eventually fall as well …

    • Andre January 9, 2014 / 2:39 am

      It’s called mining. It’s silly to pin your hopes of high wages on manufacturing when manufacturing can benefit so easily from global wage arbitraging and yes, automation. It doesn’t work that way, with a lower AUD improving competitiveness. A lower AUD will simply lower the standard of living, and it is that which improves competitiveness. If that is what you want, just start accepting lower wages.

    • Andre January 9, 2014 / 2:59 am

      And really, have you been to Portugal? The main problem in the periphery is a bloated government/pensions and the fact that socialists hold the country hostage and cuts/changes are not possible. Add to that the fact that bankers are keeping their interest rates low enough for them to hang themselves, and you can see how absurd their situation is. It has nothing to do with the inability to devalue the currency and there is no comparison between them and Australia. Brazil is going to look like Greece much sooner than Australia. Brazil, Italy, Portugal and Greece will need to burn to the ground before they reform; Brazil’s only benefit is that it has enough natural resources to float up on the China tide. Greece is a nightmare country in which to do any sort of business. It is a socialist hellhole. Italy and Portugal are not much better. Italy has an immense demographic crisis very similar to that of Japan. If australians hadn’t removed the Labour Party from government, I would have a hard time not seeing the country spin out of control. However, they have. This is huge. Australians are not willing to happily march into 100% debt to gdp ratios.

      • Graham Herbert (@mistergmh) January 9, 2014 / 5:34 am

        Hey Andre … No need to get agro .. I have obviously stated some facts that have ruffled you a little … I could sit and discuss your points as I agree with most of it but this is not the place to do so without writing copious notes … The reason we need a lower rate is that manufacturing is being depleted towards non existence … now mining is keeping us liquid but 95% of their infrastructure is being accessed from China … How do I know this … I have just retired as a CFO of a large Australian owned Engineering company … China delivers product at a price we could not buy the steel for … over the last three years we have had deals quoted bear bone being halved by China … Most large constructions have been given to overseas concerns which insist capital equipment be also purchased by them including government contracts … Are you aware there has been huge redundancies in the Mining industry and Trucks are just sitting idle with very little expansion … gas exploration is the exception …

        I am loath to discuss politics with you and I don’t know if you live in Australia or how old you are but let me give you some facts that if you look it up are quite truthful … Ever since the Whitlam Government came to power in the 1970’s (which was thrown out of power by the voters less than 2 Years later) every Labour Government has virtually bankrupted the country and the latest one was the worst of them all and the Liberal party takes years to fix the problem… Now I was once a part of the labour party and actually contested selection … the problem with them is that they have many factions that battle between themselves for position and power and this effects their ability to govern the country … the unions over the years have used their influence and the last Labour Government was full of them … with that said I believe the Keating Government has been the best one in my lifetime … and quite frankly Australia could do with a bit of a drop in living standards as we have too much expectation from our youth which make them lazier than past generations … we need them hungry and willing to work hard for what they want and not expect to just be given an easy life … I am a guilty one I spoiled my two far too much … Dont forget we do not have a large population … And don’t knock looking after our senior citizens as they got Australia where it is today and now it is time for the younger ones to do their bit …

        • Forex Kong January 9, 2014 / 8:39 am

          Golden information Graham Herbert – I very much appreciate you taking the time to share your knowledge and experience here.

          Thank you.

      • Andre January 10, 2014 / 1:05 am

        If manufacturing is in decline, it is because it is not competitive. Meaning there are better things for australians to focus on as they are being paid better to do other things. If you are married, your wife stays at home and you have a highly paid job, it’s just stupid to do the dishes and clean the bathroom. You focus where you are most productive and let either your wife or someone you hire for a fraction of what you earn do the things that are just not worth your time. The reasons why manufacturing is in decline could be many, and likely are. The partnership between unions and government is often a very big part of problems like this. Maybe there is legislation that needs to change, maybe the tax system needs reform, I don’t know. But it could simply be a matter of it not being appropriate, that is, not being economically logical, for australians to focus on manufacturing as a consequence of natural logistical issues. This cannot be changed by lowering the exchange rate; in fact, there is no benefit at all to artificially lowering an exchange rate. The exchange rate reflects international competitiveness, it does not determine it. The only positive I can even imagine is using a currency devaluation to get around legal restraints on cost-cutting. But really, it’s not worth it.

        As far as entitled youth is concerned, there is a difference between not giving people unearned wealth and deliberately making life harder than it needs to be. And as far as elders are concerned, if you didn’t save for your retirement society doesn’t really owe you anything. The whole old age pension system was not invented to provide everyone with a comfortable old age. I find it insulting when old people who own their own home expect young people who don’t to work in order to pay for both their expensive healthcare and daily living expenses. That is a far worse entitlement problem than that of youth. But, I believe Australia is much saner and restrained than most countries. Here, an 80 year old retired public sector worker can marry a young 20 year old, die, and have the young 20 year old receive a fat pension because of him for the next 70 years of her life, when all he ever did, if he did anything at all at work, was make life harder for people. This is what an out of control, bloated pension system looks like. Australia is certainly not perfect but I think it’s still very far from Greece.

      • Andre January 10, 2014 / 2:39 am

        Don’t really mean to sound aggressive, I just find it very annoying when people talk of “lowering the exchange rate” as a means to create prosperity. It doesn’t work like that. Currency interventions are all essentially hidden taxes. It’s just a tax you don’t have to file paperwork to pay. Tinkering with the price of the currency is by definition central planning and never leads anywhere. The price of a currency will naturally be whatever it needs to be in order for trade to flow smoothly. And I find it especially weird that australians think lowering the exchange rate will make manufacturing more productive. All it will do is boost nominal revenues for miners, increase inflation and make real estate more attractive to foreign investors. Germany has a pretty strong currency and a strong manufacturing sector as well.

  8. Graham Herbert (@mistergmh) January 10, 2014 / 7:54 pm

    Hey Andre … I feel you have expanded from one topic into other areas … of course lowering the the AUD is not the be all and end all … This blog of Kongs is about trading and thats the area of discussion and I am only expressing a point of view from my own experiences … its far more complicated than that and I agree again with much of what you are saying and no I do not feel Australia will be a Greece like problem any time soon … you took me too literally I was just pushing home the point I was trying to convey … But your comment “The partnership between unions and government is often a very big part of problems like this.” is absolutely spot on …

    If everyone can bear with me and if anyone feels I am boring the hell out of you just let me know … I’ve been in management positions too long and used to conveying reasons behind decisions being presenting to board members and shareholders.

    In the late 70’s and early 80’s it became apparent that how Aust valued its currency was not working and as Keating once stated Aust was seriously heading to becoming a banana republic. So the Hawke / Keating government on 12 December 1983 floated the Australian Dollar against strong resistance from the unions. The first day it settled at $0.92 and through the remaining 80’s and 90’s (our most successful times since the end of WW11) it fluctuated in the $0.70 area and at times into the $0.80 areas for short periods. Today it is the fifth most traded currency at just short of 9%. Quite remarkable for such a small country (Population wise) …

    Now why did our dollar go so high. With the rest of the world going into melt down Australia was seen as a safer harbour due to our strong Banking Laws ( they did suffer a bit though on the sub prime problem), We had huge reserves that the previous treasurer Costello grew knowing that the economic cycle was nearing a recession period. He had previously guided us through the previous major recession as if it was not happening. Our mining was flying mainly due to the association with china and their remarkable run of growth and our government was mostly stable and with The USA on the brink once again it was no wonder everyone wanted the AUD … Our interest Rates were and still are the highest of the major currencies even though they have now been halved … $1.11 though was ridiculously overvalued and since that high in July 2011 its now around $0.90 … Its now being supported more by the uncertain and weaker USD than on its own merits … In other words it is my view that if the AUD can get back to around $0.80 it would mean the world would be in balance and harmony once more …

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