The System Is Rigged To Blow

• The System Is Rigged To Blow
  by Dave Kranzler, http://investmentresearchdynamics.com/ 
  There’s nobody looking for value out here [in the stock market] – there is none. It’s obvious the Fed is holding up the stock market. This is one of the reasons the Fed will never be audited. – Friend and colleague of Investment Research Dynamics.
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  The money printing by the Fed has created the most overvalued stock and bond market in history.  The stock market overvaluation is even worse if you use real accounting. But it’s not just outright money printing. The supply of money includes credit creation.   This is a fact that surprisingly is overlooked by most, even those I consider highly intelligent:   debt behaves like money until that point in time when the debt is extinguished by repayment – not “restructuring.”    Take a look at this: (top of post)
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  The auto debt used to finance car purchases since 2010 hits an all-time every month.  The debt issuance behaves like printed money until it’s repaid.  But I would bet at least half of that $1 trillion debt will default.  That’s how much has been issue to sub-prime and deep sub-prime and comatose borrowers. That debt created an inordinate amount  of artificial economic activity.  “Artificial” because it would not have occurred otherwise and was created by printed money that will have no value when the debtor defaults.
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  We’re seeing that same dynamic in all sectors of the economy:  housing, commercial real estate, education, healthcare, general corporate purposes (primarily stock-buybacks).  According to the Fed,  as of March 25, total credit market debt outstanding was $63.4 trillion.  This is up about 20% from its low-point after the Great Financial Collapse Crisis. To put this in context, this number was $30 trillion at beginning of 2000.  It represents 350% of GDP – a staggering fact.  Even more horrifying when you consider that the GDP metric is highly inflated with the application of a  potpourri of statistical manipulation techniques.
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  NOT included in that number, but should be, is the degree to which the nation’s public and private pension funds are underfunded.  A conservative estimate would be 50%.  I know of some studies which suggest it’s a lot higher when you take into account the use of proper mark to market pricing for illiquid assets, like private equity investments.  Some pension funds have as much as 20% of their asset base in private equity.  The mark to market on this investment class will be somewhere between zero and 20 cents on the dollar when the next big stock market accident is set in motion.  Pension funds will wiped out completely. But the underfunded portion is technically debt.  It’s money owed to the pension fund beneficiaries.  At this point, its a massive transfer of wealth from current contributors to current receivers.
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  read more.

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