'Because It's All Our Turf'

Remember the film The Warriors when Cyrus, a visionary gang leader, spoke in front of all the New York City gangs saying that they can rule the city "because it's all our turf."

That was then, this is now.

In today's financial climate, that may as well be Ben Bernanke standing in front of international banking CEOs, their companies and central banks saying that they can control the entire global economy "because it's all our turf."

That's true. The world does belong to the people who have money. But, don't expect investors to necessarily follow a rigged game. Ken Denninger's article, Find the Difference: Why Ponzi Finance Fails, in Market Ticker, paints a disturbing picture of today's economy and the future outcome unless the Fed and U.S., as a whole, reigns in decades of debt.

Denninger backs up his comments with charts, mostly Fed data from the FRB Z1 release. According to Denninger, the U.S. has pushed debt to the limits without the money available to pay for it. He also makes the assumption that the Fed and Goldman Sachs manipulates the stock and bond markets with Fed-printed money and asks the question: "How long will this last?"

I recently spoke with a Wall Street insider who said the true test of the market--whether it crashes or not--will be when the economy returns to full throttle and Bernanke needs to ween the U.S. off of this "printed-cash" to prevent inflation. However, doing it too soon will prevent the proper recovery.

For Denninger, it's not a matter of "if" but "when" the economy collapses. The insider I spoke with said that very few people are able to perform the balancing act Ben Bernanke and Timothy Geithner proposed--a very small percentage.

Again, the deflation-inflation debate comes to light. Some say the problem will never even get to inflation because the country has entered a long stretch of deflation. In either case, the prospects are not necessarily good in the near term.

For anyone with a 401k not ready to retire in the next 30 years, it might not be that bad. However, without a job, how long will money be going into that 401k?

When I asked my inside Wall Street source about when I might want to go conservative on investment and when might I be more aggressive, he told me not to worry about it because there is no way to predict when the market will fall and when it will rise. That's true.

Assuming Denninger is right, there is stll no way to predict a falling market from a rising one. The best guess would be if you start to see unemployment remaining at high levels--above 10 percent--into the second half of 2010 and into 2011, or if the 10-year Treasury bond begins to rise at an extraordinary pace. In any case, it will be on some kind of "shock" or "surprise," because only an unexpected event can truly trigger a market crash.

As in The Warriors, Cyrus' vision never did come to fruition, and most members of the gang called The Warriors returned home to their own turf--Coney Island.

After a night of running--because the gang was unfairly accused of assassinating Cyrus by a complete nut-job when that nut-job actually did it--they were tired and rundown.

The leader of The Warriors looks up at their home, a rundown boardwalk on an empty beach and a broken down amusement park. He says, "We fought all that way to get back to this?"

Will bankers say that when they find consumers want to deleverage rather than spend because they can't spend anymore? Will CEOs look at their own financial institutions still filled with toxic assets that don't add up in value and say that? Will we say that to ourselves in the future, looking at vacant homes, condos, industrial buildings and retail establishments? Or, will it be a little of both? Let's hope not.