I’m talking here about uncertainty because of gross government interference in the economy and in the business cycle, not uncertainty normally connected with any new business investment. Business people are used to dealing with uncertainty in they daily lives.

When the government changes the rules at their whim, or creates huge national debt and massive spending along with potentially large increases in tax there are just too many unknowns on which to plan a new investment.

This is made worse when governments do these things throughout the period of a business investment. Any one of the government changes could make an investment unviable after a business has committed significant resource to it.

Add to that banks are not lending to small business because they have no confidence either and because their money (much of it taxpayers money) is safer in their hands speculating on the stock market or deposited at the FED where they can get paid interest.

One last problem is many business may be waiting for “their turn for a government handout” so they may not invest in a new venture until/unless the government subsidises it and them.

The basis of our financial system is flawed  and so nothing will be fixed until governments have the guts to change the system. It is inherently unstable to begin with.

• Booms and Busts will continue until the world bans the fractional reserve banking system, and creates a free banking system.
• Booms and Busts will continue until central banks are removed and private banking made accountable for bad investments and over-leveraging and are allowed to fail. At the very least they should be forced to allow interest rates to float and find their “natural level” for the economic climate at the time.
• Booms and Busts will continue whilst ever governments believe there are votes in forcing banks to make below market interest rate loans to people who cannot afford them.
• Booms and Busts will continue until governments stop believing that printing money is actually protecting their nation from the downside of a boom and accept business that do bad things or make mistakes have to fail so the capital can be freed up to go where it can do the most good.
• Booms and Busts will become bigger, faster and more frequent due to technology. We have just seen how massive liquidity from printed money (doubling the money supply) has fuelled a stock market rebound that no one predicted. Even though it may be short lived savvy speculators have made a fortune including the banks saved by the tax payers.

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I’m beginning to put the pieces together now how governments have destroyed most retirement nest eggs of the people who trusted them.

Doing what they advocate is almost guaranteed to destroy your nest egg. They cannot help themselves. Whilst ever governments control the money supply of a country, nest eggs will continue to be destroyed unless you take control.

You are told you should invest for the long term but every year most governments find they need to tweak the tax system, or the retirement system, or the investment regulations. Unfortunately they think short term - the next election. The reason - they have increased spending which they believe they need to do to keep themselves in power and the only way to do that is to take your money.

That’s the first problem you have with this great big self funding retirement experiment.

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I came across this excellent video on the Dprogram.net “Countering Propaganda” website. Take a look at the excellent 41 minute video, “Film: Money, Banking and the Federal Reserve.

I have not had time to review the whole site because there is so much information on it. At first look there seem to be a whole bunch of “conspiracy theory videos and articles. But this film makes good sense and is informative….

As always it is a matter of cutting through the mass of information and evaluating what can help you understand what is happening and is likely to happen to your Nest Egg based on the Monetary Systems controlled by governments around the world today.

Simply put I am fast coming to the view that until governments put firewalls between themselves and the financial industry and stop the the incestuous relationship of job swapping, we the people will continue to have our nest egg put at enormous risk as a cash coffer for risky investments by the big banks.

Banks should not be in the Fund Management business or the broking business either. In 2007 Westpac an Australian Bank reported that it’s Wealth Management Division (Mostly Nest Eggs of Australian workers forced by government decree to hand over 9% of their income) was it’s most profitable division and made more money than its traditional banking division.

If that did not ring alarm bells in the regulators I don’t know what will.

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So 27 of 45 Economists claim the Recession is over based on the GDP for the last few months, according to an article in the Wall Street Journal, “Economists Call for Bernanke to Stay, Say Recession Is Over“.

“After months of uncertainty, economists are finally seeing a break in the clouds. Forecasts were revised upward for every period, with 27 economists saying the recession had ended and 11 seeing a trough this month or next. Gross domestic product in the third quarter is now expected to show 2.4% growth at a seasonally adjusted annual rate amid signs of life in the manufacturing sector, partly spurred by inventory adjustments and strong demand for the “cash for clunkers” car-rebate program.”

Aren’t these the same economists that could not see the sub prime melt-down or the credit crunch, or the deep recession we just had? Have they been away attending an economic gulag where they had mind-altering drugs or something?

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In Australia there are rumours that our Superannuation is yet again going to be tampered with. The latest idea suggested by the private sector is that we be forced to put 30% of our retirement nest egg money into an annuity on retirement to ensure we will not rely totally or partly on a government pension if we lose the rest of our nest egg due to poor investments.

Once again lizard brains are at work in governments and financial intuitions all around the world. They move in unison from one extreme to the other. So this post applies to everyone, not just Australia. In the US they are talking about government takeover of 401K) and IRA’s. In Argentina they have already done it.

The Australian government review appears to be keen on a slightly different idea. Their suggestion is that for people with relatively small nest eggs. Those people have no real hope of generating enough income from the nest egg to provide an income to live on. An annuity may actually help them by topping up their government pension.

Such a scheme may be run by the government and has the fund managers opposed to it for obvious reasons. Where is their cut? They want privately provided lifetime annuities, managed and controlled by them.

Interestingly the chief executive of Challenger’s Financial Services “life business” said,

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As you know Fund Manager’s tell you to give them your money and leave it with them for the long term. Yet they take that money and trade it. A managed fund can churn its stock portfolio up to 125% in a year.

That means they are NOT investing. They are trading, trying to make a few cents on a trade using huge volume and hopefully booking a few million in profits.

You end up paying the transaction costs, any research fees or recommendations that justify this trading and of course taxes on any profits.

So don’t be fooled into thinking your retirement nest egg is being wisely invested for long term growth and steady returns. Its a trading war out there and now ultra high speed trading platforms are being installed in investment banks, hedge funds and managed funds offices to implement algorithmic trading.

Algorithmic trading has been going on for some time and most of the investment banks and hedge funds used it well before the stock market melt-down. So what is it?

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It seems the Bull train has left the station without me. Before I went on holidays for 6 weeks the gurus were almost to a man saying the market had to test the lows before any real bull market rally can take place.

Wrong again!

Well the market did pull back but it has now made new highs. If you are a perennial bear you might be hoping for a double top charting pattern to take the market down once again.

That will give you another chance to get on the Bull Train.

I’ve no idea where the markets are going, but this is what I see.

The major economies of the world are still in the dumps, many with negative GDP figures.

China is supposedly growing at 7%. But much of that is them pumping money into their economy. And according to John Mauldin’s recent newsletter even if they grow at 8% they only represent 7% of the world economy. You can’t close 70,000 factories, lay off 20 million people and say there is not a problem, not even in China.

“…. is it likely China will pull the world out of its current slump? Not for a while. China is just 7% of global GDP. Even if they grow at 8%, that only adds 0.5% to global growth, and it is likely that we will see global GDP shrink by 2.7% in 2009.”

Not only that, can you believe them? Read the rest of this entry »

It is a concern that the White House is riding rough-shod over the Chrysler Bankruptcy and appear to be aided and abetted by the bankruptcy process. In this article, “Supreme Court ruling won’t block Chrysler merger” the two court decisions made yesterday are;

“In a late ruling, the Supreme Court ended two days of suspense by turning down a request for a stay of the automaker’s sale filed by a trio of Indiana pension funds and several consumer groups. The decision eliminates any further barrier to the sale, which now could happen as soon as today.

And

“Earlier in the day, the federal judge overseeing Chrysler’s bankruptcy case in New York ruled that Chrysler could proceed with plans to terminate the franchises of 789 of its dealers, effective immediately.”

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