Under The Covers – Vol. 6

Posted by on Mar 20, 2012 in Under The Covers | 0 comments

Who would have thought the world of central banks would print their way into hope and prosperity? Perhaps politicians, but even they can see the future ramifications.

Without a doubt the world of consumers do not want to go through austerity in any form. The umbrella of austerity is ugly and grim to say the least: less pay, fewer jobs, reduced benefits, fewer services including policeman, fireman, parks and recreation, higher taxes and fees, longer lines with fewer people doing two plus times their normal work, the overall diminishing of attitudes, opportunities and success. The downtrodden of a society, a community or even a standard of life.

Why are we pointing out the obvious? The truth is too many politicians and citizens have turned a blind eye towards our future in exchange for the pleasures of today. How do you pay back more than you have? Ask Greece! Or unfortunately several other nations: Japan, U.K., Italy, Portugal, Ireland, Spain, Russia, Argentina, most of Africa and Asia, and let’s not leave out the United States of America.

We could be too critical and require more patience and understand of our current circumstances, after all capitalism moved us into these dyer conditions. Or was it greed, power, and a lack of ethics? Whatever you decide will suffice.

The facts remain startling! The European Central Bank’s (ECB) balance sheet is currently over 36 times leveraged. The United States Federal Reserve’s balance sheet is only 55 times leveraged. Bank of Japan is 52 times leveraged and the Bank of England is 52 times leveraged to name a few of the largest economies in the world. Are you in awe yet? Bear Sterns collapsed with 35.5 times leverage, Lehman Brothers was at 30.7 times, and AIG in 2007 was only at 11 times, Citigroup was at 32 times, Bank of America was at 27 times and both were at 18 times back in 2000. Leverage is a frightening proposition when things move the wrong way, and as we saw in 2008 it can place its teeth to a fatal or debilitating ending.

What will the catalyst be this time? There are too many scenarios to even begin. What we can tell you is being prepared with a strategy and discipline to prosper on both an upward or downward trending market place is essential to anyone’s long-term success. Being safe will not be enough, the next time around!

Until the next time we look under the covers.

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