Tapping 401K's to make ends meet.

Discussion in 'Wall St. News' started by Comanche, Oct 15, 2007.

  1. Go Ahead, Make My Day Aunt Millie, Give Me a Bid!!
    Monday, October 15th, 2007 at 6:28 AM
    The evaporation of the home as ATM is causing more individuals to dip into 401K plans. I suspect that debt payments and inflationary pressures are a major cause of this, and there is no reason to see any let up in sight. As this practice broadens, it will serve to remove one more source of funds for propping fictitious capital.

    The number of calls asking about withdrawals to prevent a potential foreclosure or eviction doubled in August over July, said Janet Fossell, director of individual investor services for Principal. There were fewer calls in September than August, but still more than in July.

    One of the prevailing financial myths of the present era is that a weak economy will bring about lower interest rates, apparently manufactured by the Fed. Regular readers already know where I weigh in on the later, the Fed is largely impotent. The correct theory should hold that a slumping US economy will cause several influences that will bring about much higher interest rates. One variable influencing this will be a general erosion of credit quality. The other contributing cause will be the evaporation of tax receipts for governments. Up to now tax receipts have been boosted by robust corporate taxes and by One Trick Pony capital gains on inflated assets and fictitious capital. There are now clear signs that this is now down-shifting.

    Net borrowing during the last three months of the fiscal year totaled about $116 billion, compared with the Treasury Department’s July 30 forecast of $73 billion. Companies paid $92.7 billion in income tax during the third quarter, 11.3 percent less than in the same quarter of 2006, when they had a temporary incentive to declare overseas profits, according to Charlotte, North Carolina-based Bank of America.

    More confirmation of the weakening tax trends comes from California. Calculated Risk put together a chart on retail sales and use taxes illustrating this.

    At last a mainstream media source, Fortune magazine gets around to questioning the “blow out quarter” that Goldman Sachs pulled out of their black boxes. What continues to shock me is how market participants are still inclined to accept “earnings” like this at face value, skyrocketing the stock price.New York Post article discusses some of the seedy machinations between various mucky mucks. The big player in supporting fictitious capital operations is the US Treasury, and for the reasons mentioned above. Again where I’m confused is how exactly these “talks with market participants” engenders confidence in the system, let alone big rallies. Wouldn’t the rats be even more inclined to abandon ship instead?

    It is at least encouraging that MSM financial sources like the WSJ are asking the right questions , but it just seems nobody really cares. Which brings me to the conclusion that markets are being synthetically rigged by the usual suspects. Just sickening to watch, but I for one can’t believe a big player or two or three won’t head for the exits undoing this whole tawdry affair. Lee Adler offers a more detailed discussion of what’s transpired.

    At its most simple, the superconduit is a means by which a large collection of banks can keep “reasonable” pricing on some of their affiliated securities. And it is this pricing that is the key to the whole operation. It’s obvious they won’t be priced at market rates because there’s not much of a market to begin with (and why the superconduit exists in the first place). But where exactly do they get priced? To whose benefit? And by which standard?

    Go Ahead Make My Day Aunt Millie, Give Me a Bid!!