And remember… This is the Federal Reserve! This is a lousy private bank operating irresponsibly, at the behest of the Congress, and whose shadowy owners include, to one degree or another, foreigners and foreign central banks that are operating by the grace of their own governments which are just as corrupt and desperate as our own, but it was the Fed that created enough money to buy a trillion dollar’s worth of US government bonds for itself! A trillion!

It’s called “monetizing the debt”, which Ben Bernanke said, in response to a direct question about it recently, that the Fed would “never” do! “Never” has now been re-defined to mean “continually?” Hahaha! Too much!

As an astute observer, you figure this must be pretty bad, gauging by the way I make a Very Loud Mogambo Fuss (VLMF) about it and droplets of spittle are flying from my flapping lips at supersonic speed as a throbbing vein is bulging out on my forehead.

And since a lot of this money was spent to buy government debt, how big was the federal budget deficit? You will be sorry you asked, and if you want to know the actual size of the actual federal deficit for the actual last year because you are pretty sure that the government is lying to you about the real size of their deficit-spending, then you have also come to the right place, because Treasury Public Debt is, as of last Friday, $11.797 trillion, whereas 12 lousy months ago it was $9.667 trillion, meaning that even if you are not sober enough to get this damned calculator to work or see those tiny little numbers, you can do the subtraction in your head!

The actual, in-your-face federal deficit was $2.130 trillion in the last 12 months! The deficit-spending by Congress is a whopping 15.2% of GDP, for crying out loud!

And if you are collecting unemployment, then you will be interested to know that the federal contribution to your check could have been painlessly almost doubled, as, according to Wikipedia, the 2009 federal budget had $360 billion for “Unemployment/Welfare/Other”, while the budget also had another $260 billion that could be used to help you out, but had to be spent for “Interest on National Debt.”

In short, if the damned government did not borrow and spend us into the poorhouse, causing your unemployment and impoverishment, the government would have had another $260 billion to help you and the other unemployed instead of only being able to budget $350 billion!

And this brings up the interesting point that since the national debt is $11,790 billion and this “interest on the national debt” is $260 billion, this means that the government is paying an average of 2.2% interest! Wow!

And remember that this $2.130 trillion increase in the national debt is just the deficit in Congressional spending, which doesn’t even include the $2.6 trillion in the budget that was “paid for” by offsetting revenues!

So, being the cantankerous sort that I am, suspecting treachery at every turn and disaster at the hands of the corrupt, the ignorant and the stupid that we lovingly call “Congress”, let me note that the morons of Congress have spent $2.6 trillion, plus $2.1 trillion equals $4.7 trillion, which they spent in a $14 trillion economy! The government is spending the equivalent of 34% of GDP! Gaaahh!

And it is going to get worse and worse because the Fed is doing the more and more of the same thing that created the economic problem in the first place! Gaaahhh! We’re freaking doomed!

But this time, instead of over-reacting, I sigh in relief – aaaaaahhhhhh! – as I remember the last 4,500 years of history when governments acted monetarily and fiscally irresponsible, and how owners of gold, silver and energy did very, very well, which is the whole point of this investing stuff!

And the fact that it is so easy makes you say, “Whee!”

Source: Never Say Never to Monetization

There was more money available to buy shares than at any time in almost two decades. The $8.85 trillion held in cash, bank deposits and money market funds was equal to 74% of the market value of U.S. companies, the highest ratio since 1990, according to the Federal Reserve.

What happened in the past when cash reached these levels?

• In September 1974, cash on hand reached $604.5 billion, representing a record 1.21 times the U.S. stock market’s capitalization. That preceded a 31% gain in equities between October 1974 and March 1975.
• In July 1982, just as a 20-month bear market was ending, cash as a percentage of the U.S. stock market’s value rose to 95%. The S&P 500 began a six-month, 36% advance. According to Bloomberg, the eight previous times that cash peaked compared with the market’s capitalization, the S&P 500 rose an average 24% in six months.

This time, of course, it didn’t take nearly as long for the market to rally.

Still, the greatest appreciation so far has been in smaller stocks. That’s normal in an early bull market. But if the bull market continues, the big, blue-chip stocks are likely to lead the market higher for two key reasons:

• First, there is still over $8 trillion on the sidelines earning next to nothing in short-term deposits. Investors tip-toeing back into the market are likely to gravitate here since these stocks are the safest.
• And then there is the growing influence of cash-rich sovereign wealth funds…

Sovereign Wealth Funds – The Financial Assets of a Country

Sovereign wealth funds are the financial assets of a country – usually part of the national savings – that are owned and organized into a state-controlled fund and put to work to earn a higher return on investment.

(Sovereign wealth funds are not the same entities as foreign exchange reserves, which are often used for short-term currency stabilization and liquidity.)

In the past, most countries put their liquid assets to work in foreign currency deposits, government bonds or gold. (The hard-working Japanese and Chinese, for example, have kept our interest rates low by maintaining a steady appetite for U.S. Treasury obligations.)

But with the dollar relatively weak and interest rates on Treasuries near record lows, U.S. government bonds are not generating the kind of returns you write home about.

So world governments are slowly moving money into global equity markets. And the sums involved are fairly staggering.

Sovereign Wealth Funds Control More Than $7 Trillion…

According to The Economist, sovereign wealth funds already control more than $7 trillion today. The exact amount is impossible to ascertain due to lack of transparency.

But China, Saudi Arabia, Singapore and the United Arab Emirates alone are known to control more than $2 trillion. And more money is being allocated to these funds all the time.

What does this mean for you as an investor?

Expect to see cash coming off the sidelines to accumulate shares of the largest, most liquid firms around the globe. Quite frankly, they are the only companies that can easily absorb buying on this scale.

For example, take a look at the Dow Jones Global Titans Fund (NYSE: DGT). It holds the world’s 50 largest publicly traded companies.

World-Class Diversification in a Blue-Chip Portfolio

When you buy this cheaply valued blue-chip portfolio, you’re getting world-class diversification.

Companies like:

• Exxon Mobile (NYSE:XOM),
• IBM,
• Proctor & Gamble (NYSE:PG),
• Wal-Mart (NYSE:WMT),
• Coca-Cola (NYSE:KO),
• Nestlé,
• Toyota Motor (NYSE:TM),
• Roche Holdings,
• Samsung Electronics

… Are just a few of the names that are major holdings of the DGT fund.

These firms will almost certainly be an early stop for U.S. investors who get frustrated with low yields and start venturing back into the game.

These same companies are a natural home for sovereign wealth funds – and the growing trillions they control.

History shows that cash on the sidelines always grows itchy with time. The Dow Jones Global Titans (NYSE: DGT) is a good way to take advantage of it – ahead of the crowd.

Good investing,

Alexander Green

Source: Sovereign Wealth Funds: $7 Trillion Reasons to Stay Invested