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Wednesday’s Worrying Time Bomb – Global Debt Past $200Tn

Posted on the 15 April 2015 by Phil's Stock World @philstockworld

Wednesday’s Worrying Time Bomb – Global Debt Past $200TnHow much does prosperity cost?  

In 2008, the global GDP was $62.86 TRILLION and now, 6 years later, it's $75.59Tn – up $12.73Tn (20%).  To some extent, that's to be expected, as we also added 600M more people (10%) to the World's population (I know, scary) – so there's half the growth accounted for right there but the other $6.4Tn a year was growth

I'm sorry if it doesn't feel like growth to you because that means you must be poor because we in the top 1% and especially those of us in the top 0.01% have had a FABULOUS 6 years since the crash.  While earnings actually fell 1.7% for the bottom 80%, equities held by the top 20% (and especially the top 1%) have jumped from $6Tn to $25Tn in the US alone – that's a gain of $19Tn for us!  Of course, those stock gains come, in part, because we're paying our workers less and making more money so – thanks little guys – we couldn't have done it without you (but we're sure going to try!).  

Wednesday’s Worrying Time Bomb – Global Debt Past $200TnAs you can see from the chart above, we all borrowed $57Tn to get those 6 years of $6.4Tn gains, which is only $38.4Tn so I'll grant you it's not the most efficient way to force an economy higher but hey, we're all in this together, right?  Well, by we I mean you, of course as WE (in the top 1%) have been able to refinance our debt at incredibly low rates so it's mostly YOU who are struggling and in debt that are financing our incredible gains in wealth and, on behalf of the entire top 1%, I just want to say to you – don't forget your next payment is due on the 15th.  cheeky

Hey, remember that time Bush was President and we passed the, ROFL!, "Consumer Protection Act of 2005" and we made Credit Card debt non-dischargable in Bankruptcy?  We did it for Student Loans too because we (the Banksters) knew that we had lent you WAY too much money and we wanted to make sure we got it back.  

Wednesday’s Worrying Time Bomb – Global Debt Past $200TnSure, it was sold to you by the Bush administration as a way to stop the "Welfare Cheats," but now it makes sure YOU pay YOUR mounting bills and your kids pay their student loans, FOREVER.  After all, if you don't pay your bills then I make less money on the money I lent you and I don't like making less money – you wouldn't want me to suffer, would you?  That's why Bankruptcy "protections" were bad and had to be eliminated.  Thanks Bush!  

What I find really amazing is the way people are ready to vote for it all again.  I guess there were no lessons learned the last time Bush and Company screwed you over (kind of like the time his father screwed you over with the S&L Crisis) so let's vote GOP again so we can pass some more laws that keep you under our thumb for another generation or two.  Remember – it's not technically slavery if we pay you – the fact that you come out of school in debt and spend your life in debt and HAVE to work until you die is all just good Capitalism!  

You don't mind going another $57Tn into debt for us do you?  Just go out there and have another 600M babies we can sell stuff to and everything will be OK.  In fact, we'll pass some laws to make sure you keep having those babies because LORD KNOWS we need more consumers, right?  If you want to know the whole game plan, here's a fantastic report by Paul Mylchreest of ADM on how the Central Banksters have done nothing but buy a bit of time before the next major crisis:

As noted by ADM, there have been signs that time horizons were shortening for the past few months, notably in the Financial Engineering on the part of publically traded companies who have been borrowing at record levels to buy back their own stocks and paying out dividends while cutting back on long-term capital spending which, historically, is what we do need to stimulate to truly grow our way out of a Recession.  

Wednesday’s Worrying Time Bomb – Global Debt Past $200TnEvidence of this was all too apparent in China this morning (yes, we are short FXI) as their GDP made a 6-year low – and even that (7%) was probably faked to hit the Government's target.  In fact, Q/Q GDP Growth was just 1.3% vs 1.4% expected and 4x 1.3% does not get you to 7%.  

As you can see from this chart, Fixed Asset Investments in China are falling off the cliff that is at the bottom of the previous cliff they already fell off and what do you think happens when 1.2M children born between 2008 and 2024 begin to enter the workforce only to find no companies have invested in anything for them to do?  

Well, it's good news for the top 1% (what isn't) as flooding the labor markets with new workers when we aren't expanding the places where they might work of buying equipment for them to work on means more workers competing for fewer jobs and down go the labor costs once again.  Isn't Capitalism wonderful?  

Don't worry – it's not time to kill the poor, yet – we're still waiting on more data.  The ECB is having a press conference this morning and, for the moment, they think more QE (more Government borrowing to boost the economy) is appropriate BUT, since there is no concrete expansion of the current program, the markets have pulled back off their highs.  

We're still in "wait and see" mode on earnings, mainly in cash (see yesterday's Live Webinar Replay for a review of our positions) and watching how the early earnings reports play out.  Before INTC's earnings, in yesterday's Live Member Chat Room, I did put up this trade idea:

With INTC, as we have our LTP and STP, since we would like to own INTC, we can sell 5 of the 2017 $28 puts for $2.80 and that's free money as we REALLY want to own INTC for $28.  Meanwhile, since we just got $1,400 in the LTP, we can risk $2,800 in the STP and the July $30/33 bull call spread is just $1.55, so we can buy 10 of those as a bullish bet and see how it goes.

Wednesday’s Worrying Time Bomb – Global Debt Past $200Tn

 If INTC goes up, we have a double win, if INTC goes down, we'll sell 5 or 10 of the 2017 $25 puts in the LTP and roll the short $28s lower and all we will have done is transfer some cash from the STP to the LTP.

That should go well this morning as INTC is up 3% pre-market at $32.50 and we're right on track for a potential $2,850 gain on our net $150 cash outlay (1,900%) if INTC is at our $33 target into July.  Not bad for a day's work for the top 1%, right?  

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