Bankrate Says: If the Ship Is Sinking, Rent More Deck Chairs

Tonight on the local news I saw a BankRate authored piece about how you shouldn't panic in the face of the current market 'volatility' and that you should instead use this time as a way to "dollar cost average". This has been the standard response to jittery investors: If the price is dropping and the stock is fundamentally sound, it's a great time to buy more!

But the devil is in the details. Nothing in this current market is fundamentally sound. They even trotted out the old "If you'd invested all your money in 1950, even with all the ups and downs you would have made this huge sum of money!" They of course, never mention what would have happened if you'd invested all your money on Monday October 28, 1929.

And sadly, that is the type of unusual event we're looking at. It's not as if there's been some huge price shock to our economy. The 70's oil embargo explained the economic downturn then. What explains this one? Alan Greenspan's "JUST GIVE IT AWAY!!!" monetary policy clearly shares a large part of the blame. He kept interest rates so low for so long it was inevitable there would be a bubble of some sort (in this case, a real estate bubble). I have to chuckle every time I see him on TV saying that this is a once in a lifetime event while making it appear he had nothing to do with it.

The fundamental problem that is haunting our economy (and by extension, the world's economy) is that the US is broke. It's hard to imagine, but we're borrowing money left and right from other countries like China. All the wars, all the bailouts mean that the taxpayer, the engine of the economy, is being saddled with more and more debt when they can't pay back what they already owe. China and Arab nations, now flush with dollars which are loosing value every day, are looking to purchase more and more of the US's remaining assets. Although, for the life of me I can't understand why anyone would buy a failing, poisoned bank and not, say, a milk production company or perhaps some of our coal mines/natural gas fields.

Peter Schiff, who has consistently been correct in his predictions of the US economy (despite being called a "prophet of doom" and just an overall 'buzzkill') thinks that foreign stocks priced in foreign currencies (he recommends Asian securities...no surprise) are a good place to stick your money. Maybe. But if banks fail because their borrowers don't pay back, our lenders (China principally) are going to be in trouble too.

In short, there's nothing normal about the current economic climate. And in spite of all the bad news, the market was actually up today. Why? Because the government has floated the idea that it will create an 'entity' that will take their bad loans off of their hands. How incredibly ridiculous is that??? So the government takes on bad debt. Then what? They will be paying the banks dollars in exchange, which will then spread the illness further to our already declining currency. The ridiculousness of these ideas should be enough to demonstrate just how desperate the situation has become.

And in the tradition of the Grand Master, I predict the next big shoe to drop will be the sudden confessions of multiple companies and government agencies that their retirement/pension plans are catastrophically underfunded. And the 401(k) lawsuits are just starting too. Fun.