11 Facts that are Hard to Ignore

Written By Brian Hicks

Posted May 8, 2011

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.


Facts and opinions are what make the world go round.

With that in mind, here’s what I’m thinking these days as I read the headlines…

FACT: There are now 6 million fewer jobs in America than there were when the recession began. Of the 8.8 million jobs lost, only 1.8 million have returned. At this rate, it will take until 2018 to get back to full employment.

OPINION: This is the “giant sucking sound’ we were warned about 20 years ago. Those “cheap goods” have actually come at a great cost; the lack of a strong manufacturing base makes for a much slower recovery. You can’t grow what you don’t have.

A jobless recovery is no recovery at all.


jobsFACT: China’s real estate boom has sent housing prices up by 140% nationwide since 2007, and by as much as 800% in Beijing over the past eight years. Residential housing investment as a share of China’s GDP has tripled from 2% in 2000 to 6% in 2011 — the same mark the U.S. housing market hit before imploding.

OPINION: East, West, North, South, the human condition is the same… The Chinese won’t be able to land this plane any better than Ben Bernanke. Remember when subprime was “contained”? China won’t fare any better.



FACT:
At least 14 workers at Foxconn factories in China have killed themselves in the last 16 months as a result of the horrendous working conditions they endure manufacturing Apple iProducts. Things have gotten so bad that netting has been put up outside the dormitories, and workers are being made to sign “anti-suicide” pledges as a result.

OPINION: The wage-slavery put upon the world through globalism is as shameful as the real thing. Economic miracle? Not quite… We would never accept such a thing here, so why is it okay if happens to human beings overseas?

Think about that next time you power up your iPad.

applenet
Netting put up outside worker dormitories at Foxconn

 FACT: The portion of PIMCO’s $236 billion Total Return Fund held in long-term U.S. government debt, including U.S. Treasuries, declined to “minus 3” percent in March from zero in February and 12% in January.

OPINION: When a guy like Bill Gross pitches government debt overboard, you should sit up and take notice. It’s like Charlie Sheen giving up hookers and dope. In his April newsletter, Gross said the U.S. government was “out-Greeking the Greeks.” Ouch.

SECOND OPINION: You will know the gig is up when 10-year Notes jump 200 basis points in a week.

FACT: Americans now owe more than $903 billion on student loans.

OPINION: The availability of student loans actually drives up the cost of higher education. In this case, it’s a matter of simple economics — an unlimited pool of money chasing a “must have” item results in higher costs, year after year. As a result, some students end up mired in debt slavery long before they have ever earned their first paycheck. The education bubble is real.

FACT: Incomes for 90% of Americans have been stuck in neutral, while the wealthiest tier has surged ahead… In 1988, the income of an average American taxpayer was $33,400 (adjusted for inflation). Fast-forward 20 years and not much had changed: The average income was still just $33,000 in 2008, according to IRS data.

OPINION: America is on a path leading to two distinct classes: the haves and the have-nots. When you hollow out the middle class, the very fabric of the country changes forever. It is happening as I type.wealth FACT: Of the six United States recessions since 1970, all but the “9-11 recession” have been triggered when energy costs as a percentage of personal consumption crossed the 6% mark. That level was reached a few weeks ago, as the cost of oil continues to skyrocket.

OPINION: With gasoline up 91 cents since December, the annualized cost to consumers is a staggering $125 billion in lost discretionary income on fuel alone. Add in its effect in the food chain, and you get a double-whammy that will kill the recovery.

FACT: According to the Case-Shiller Index, property values in 20 cities fell 3.3% from February 2010. That is the biggest year-over-year decrease since November 2009. Meanwhile, 11 million U.S. homes were underwater at the end of 2010, while an additional 2.4 million borrowers were teetering on the brink, with less than 5% equity.

OPINION: The housing downturn goes on despite “the recovery”, making a double-dip in this sector inevitable… especially as rates begin to rise.

doubledipchart

FACT: One in seven Americans (or 14.3% of the population) now rely on food stamps to help make ends meet. Meanwhile, wages and salaries have fallen to 51% of personal income in 2010, while government transfers have risen to a high 18.4%.

OPINION: The only difference between us and Egypt is food stamps. Absent these handouts, there would be riots and soup lines.

FACT: According to IHS CERA research study, the U.S. has enough natural gas to meet current demand levels for more than 100 years. On top of that, the U.S. Energy Information Agency’s 2011 outlook now projects technically recoverable unproven shale gas reserves of 827 trillion cubic feet — 474 trillion cubic feet larger than the previous year’s outlook.

OPINION: The bull market in American natural gas companies will run on for years. I especially like the service companies connected to the horizontal drilling techniques that make it all possible. If you’re looking for a path to energy independence, natural gas is one of the ways forward.

FACT: The Treasury has told lawmakers a ~$2 trillion rise in the legal limit on federal debt would be needed to ensure the government can keep borrowing through the 2012 presidential election.

OPINION: You don’t need to be a genius to figure out that within our gigantic national debt are the seeds of our own destruction. That’s not hyperbole; that’s a fact. And it’s the reason you can expect the price of gold and silver to continue reaching new highs.

Of course, I could stretch this list on for another 2,000 words if I wanted to. But I’m in too good of a mood with the weekend on my doorstep.

Besides, it’s like Dirty Harry once said: “Opinions are like elbows… everybody’s got one.” (Only he didn’t say ‘elbows’.)

As for the facts, they are a lot harder to ignore.

For ways to build your wealth with and in the face of these truths, our editors have put together a few of their best investment ideas for the years to come in this week’s top-read articles from Wealth Daily and Energy & Capital, below.

Have a great weekend.

Your bargain-hunting analyst,

 steve sig

Steve Christ
Editor, Wealth Daily


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