As investing on margin hits an all time high on Wall Street, and housing foreclosures hit record highs ~ all the ingredients for the perfect storm are rapidly falling into place . In 1999, total outstanding household debt was $6.4 trillion. As of the end of the second quarter of 2006 total outstanding household debt was $12.3 trillion ~ the day of reckoning has arrived and the stock market is just beginning to take note : Allen L Roland
The amount of margin debt hit a record 285 billion on January on the New York Stock Exchange. The last time margin debt hit this level was at the height of the dot-com boom in March 2000 ~ just ahead of a two year decline in stock prices.
We are at the top of this four year easy money housing inflated Bull market and debt is increasing as the Dow begins to crumble in face of mounting consumer debt and severe poverty.
" Debt is only a problem on the way down " said Alexander Paris, economist and market analyst for Chicago-based Barrington Research." There's alot of margin debt out there, and with the S&P shooting for its ninth-consecutive month up ~ you havn't seen this kind of run since 1926. It's a warning flag "
Against this grim backdrop of wishful thinking, The U.S. stock market plunged today, wiping out about $600 billion in market value and erasing all of 2007's gains, after a selloff in China spread globally and sparked the biggest rout in four years.
The Dow Jones Industrial Average fell 416.02, or 3.3 percent, to 12,216.24. The S&P 500 retreated 50.33, or 3.5 percent, to 1399.04. The Nasdaq Composite Index dropped 96.66, or 3.9 percent, to 2407.86.
With margin and personal debt so high ~ there is really no foundation to keep this market from free falling to new lows especially with a more than soft housing market, rising foreclosures and durable orders in a marked decline.
All the ingredients of the perfect storm are here but many are already hurting such as 200,000 U.S. veterans who are homeless, including approximately 500-1,000 who have served in Iraq and Afghanistan.
On top of all this, the percentage of poor Americans in severe poverty just reached a 32 year high. The aftermath of this perfect storm ( like New Orleans ) will be a poorer and disenfranchised America ~ the true legacy of the Cheney/Bush administration's reign of economic hubris and military terror where the rich got richer and the poor, frail and elderly got screwed.
TONY PUGH, MCCLATCHY - The percentage of poor Americans who are living in severe poverty has reached a 32-year high, millions of working Americans are falling closer to the poverty line and the gulf between the nation's "haves" and "have-nots" continues to widen. A McClatchy Newspapers analysis of 2005 census figures, the latest available, found that nearly 16 million Americans are living in deep or severe poverty.
A family of four with two children and an annual income of less than $9,903 - half the federal poverty line - was considered severely poor in 2005. So were individuals who made less than $5,080 a year.
The McClatchy analysis found that the number of severely poor Americans grew by 26 percent from 2000 to 2005. That's 56 percent faster than the overall poverty population grew in the same period.
McClatchy's review also found statistically significant increases in the percentage of the population in severe poverty in 65 of 215 large U.S. counties, and similar increases in 28 states. The review also suggested that the rise in severely poor residents isn't confined to large urban counties but extends to suburban and rural areas. . .
Allen L Roland is a practicing psychotherapist, author and lecturer who also shares a daily political and social commentary on his weblog and website allenroland.com He also guest hosts a monthly national radio show TRUTHTALK on Conscious talk radio www.conscioustalk.net
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