Profunds index and sector trading

[nuclearpayload]

mjfdl, (Sorry, this got really verbose)Don't worry about offending me. First of all, I know that tone does not always come across as intended in these text messages, but beyond that, I don't take anything personally, especially in a forum such as this where no one knows me anyway. Only one person that I know personally participates in these discussions. I like exchanging views here because it makes me think from different angles.

What I think about the debt issue is that Visa et al. have not abused anyone, but have given people the opportunity to abuse themselves. There is nothing wrong with that. Blaming banks for the current levels of debt is like blaming gun manufacturers for gun violence or blaming McDonald's for obesity. The individuals are making the choices. I just believe that their choices are uninformed and undereducated. I don't think that the majority of Americans really have any financial education. See some of my other posts on this if you haven't already. As far as the baby-boomers are concerned, I suspect (don't know) that they are some of the ones in the most danger of losing everything when the rates start heading back up toward double digits. They are the generation that spent all they had and left it up to Socialist Security to take care of them in their old age without planning for it themselves. Sure certain individuals have planned for their own retirement, but not the masses. Many of the boomers have gone into debt just trying to help their children, which is a hangover of their parents who lived through the Depression trying to make sure that their children, the boomers, didn't experience anything like that. For example, my father is 71 years old, born during the Depression, retired drawing Socialist Security and has been drawing Air Force retirement since he was 38. He currently has a negative net worth because he has allowed my sister to run up debt in his name because she can't get any of her own as a result of a bankruptcy she filed several years ago. This is not a hard luck story, it is a poor decision, lack of education story that is not the exception, but the norm.

This current economic recovery has been funded by the FED and member banks granting low interest, variable rate credit to people of all ages. Many people who were undisciplined with their spending habits used this opportunity to "get out of debt" primarily by taking low rate interest only home equity lines of credit. That credit was used to pay off the credit cards, but at what point did these people change their undisciplined spending habits? They didn't. Now their house is in hock and they are running up the credit cards again. It was this second round of credit spending that has given our companies more earnings and driven the markets up. That is why I say that this recovery is not real. When the credit dries up, what then? And if rates go up, these people will not be able to make all of their payments. Many are making minimum payments as it is, so when the rates go up, they won't be able to make all of their payments. Up until now, these people could just declare bankruptcy and get to keep their homes. Now, the default will be on the HELOC and the home goes too. In the meantime, as the global economy continues to expand, I think the standard of living in this country is going to stagnate while other countries catch up with us. Sure you can outsource some code writing to an Indian for peanuts now, but in a few years, he will want two cars and 2.5 kids and a dog and a chicken in every pot, too, just like what we have. So will the Chinese, the Malaysians, the Mexicans, and many others. This is not a rosy picture for our future. Equilibrium has to be reached, though.

You don't have to agree with me, just be aware of these possibilities as events unfold and prepare yourself for them when you get confirmation.