03.23.18- Hyperinflation Speculation
“There are no signs of recession. Employment growth is strong. Jobless claims are low and the stock market is up.”
This is heard almost daily from the media mainstream pablum.
The problem with a majority of the “analysis” done today is that it is primarily short-sighted and lazy, produced more for driving views and selling advertising rather than actually helping investors.
“The economy is currently growing at more than 2% annualized with current estimates near 2% as well.” Read More
03.21.18- US Stock Market – The Flight to Fantasy
Divergences Continue to Send Warning Signals
The chart formation built in the course of the early February sell-off and subsequent rebound continues to look ominous, so we are closely watching the proceedings. There are now numerous new divergences in place that clearly represent a major warning signal for the stock market. For example, here is a chart comparing the SPX to the NDX (Nasdaq 100 Index) and the broad-based NYA (NYSE Composite Index). Read More
Luis Elizondo, former head of a secret Pentagon program studying UFOs, is now extending his recent remarks about craft witnessed in our skies…
In an interview with the UK Daily Star (2/8), Elizondo made the following boggling comments:
03.19.18- Nobody Thinks It Would Happen Again
WSJ: "Ten Years After the Bear Stearns Bailout, Nobody Thinks It Would Happen Again."
Myriad changes to the financial structure have seemingly safeguarded the financial system from another 2008-style crisis. The big Wall Street financial institutions are these days better capitalized than a decade ago. There are "living wills," along with various regulatory constraints that have limited the most egregious lending and leveraging mistakes that brought down Bear Stearns, Lehman and others. There are central bank swap lines and such, the type of financial structures that breed optimism. Read More
Humankind has conducted this experiment before. Many times. We know it doesn’t work. And yet, because it hasn’t happened to us, here, in very recent history, we somehow think it will.
Anytime you hear someone say ‘But this time is different’, take your physical silver and gold and run. Fiat currency dilution always, always, always ends in systemic collapse.
Don’t be one of the majority who will be left wondering how they didn’t understand it was nothing more than ink on paper all along. Read More
03.16.18- Derivatives - A Recipe For Disaster & Systemic Collapse
Gambling is according to Wikipedia the wagering of money (or something of value) on an event with an uncertain outcome. Three elements are required for gambling, consideration, chance, and prize. Thus, you make a bet and if you are lucky you win a prize but you can also lose it all. Gambling has been around for thousands of years and maybe longer. The first 6-sided dice dates back 3000 years. Eventually gambling became more organised as casinos were established. The first well known casino was set up in Venice in the early 1600s. Read More
03.15.18- How New Tariffs and A Trade War Could Affect You
Last week, President Trump announced his plan to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports. These tariffs would be applied to all foreign countries equally, although Trump has suggested exemptions for Canada and Mexico if they come to agreement on a new NAFTA deal.
It’s been a few years since the U.S. had any significant tariffs in place. What could be the potential impacts of this new move?
Tariffs on steel and aluminum will cause increased costs for products made with those imported materials such as cars and cans. Read More
03.14.18- Are The Bears About To Fumble?
Do you think we will ever see a week of market moves associated with news events for which you will not shake your head?
Week after week I think analysts say something so stupid that I just want to scream. As I have pointed out so many times over the years, I keep hoping that some form of sanity will grip pundits one day. I keep hoping that they may wake up and recognize the error of their ways. But, alas, I continue to long for that day.
So, whenever the market moves, everyone goes through the exact same thinking process: “Hey, look. The market just saw a big move. Let’s go see what news caused this move.” Read More
03.13.18- Is The Dot.Com Bubble Back?
Let me start out by saying I hate market comparisons.
While history certainly does “rhyme,” they are never the same. This is especially the case when it comes to the financial markets. Chart patterns may align from time to time, but such is more a function of pattern-fitting than anything else.
There are things that matter, and there are things that you can control. There are few things that matter and that you can control. Focus on these.
For instance, preventing global nuclear war matters. But you cannot control it.
You can control what color car you drive. But this doesn’t really matter.
But eating healthy matters, and you can control it. Read More
03.10.18- Dow 12,000, Then Bitcoin $30,000
You may find this shocking, but I believe the Dow could drop to 12,000. And, as a consequence, bitcoin could rally to $30,000.
You read that right. How?
The writing is on the proverbial wall and the panic is setting in on Wall Street. And in markets around the world, for that matter. Don’t think for a minute that the one- or two-day rallies we’re seeing are a sign of things to come for the stock markets…
Because they aren’t. Read More
“All are being built at a time when financial markets are near all-time highs…it’s possible that these historical examples are just wild coincidences.”
On April 15, 1185, over eight centuries ago, a powerful earthquake struck the East Midlands region of England near the town of Lincoln.
Modern scientists estimate the magnitude of the earthquake at 5.0 on today’s Richter scale… which was a pretty big deal back then.
Medieval England didn’t have any earthquake-proof construction methods, and much of the region was leveled to the ground. Read More
03.08.17- The Truth About Inflation and Gold
Here is a little dose of reality for all of those inflation naysayers out there:
Together, these three depressing facts mean a vast majority of Americans have seen their wealth and income crushed by inflation.
Your wealth needs to have grown 220% over the last 30 years to have outpaced inflation. Read More
03.07.18- China’s Coming Financial Meltdown
Anbang Insurance Group is one of China’s largest and most aggressive financial institutions. It is known for its huge customer base, high leverage, and fast-paced deal making.
At least it was until the Friday before last.
That’s when Anbang was taken over by the Communist Chinese government. You can call that takeover, “a bailout with Chinese characteristics.” Read More
03.06.18- The Arithmetic of Risk
The collapse of major bubbles is often preceded by the collapse of smaller bubbles representing ‘fringe’ speculations. Those early wipeouts are canaries in the coalmine. Once investor preferences shift from speculation toward risk-aversion, extreme valuations should not be ignored, and can suddenly matter to their full extent.
A month ago, I noted that prevailing valuation extremes implied negative total returns for the S&P 500 on 10-12 year horizon, and losses on the order of two-thirds of the market’s value over the completion of the current market cycle. With our measures of market internals constructive, on balance, we had maintained a rather neutral near-term outlook for months, despite the most extreme “overvalued, overbought, overbullish” syndromes in U.S. history. Read More
03.05.18- Make Your Choice:
It's time to make the decision. Choose wisely.
Most experienced investors know the four most dangerous words are: This time is different.
It never is.
And yet one of my key predictions here at Peak Prosperity is that The next twenty years will be completely unlike the last twenty years.
So am I saying that things really will be different this time? Read More
03.03.18- The warning shots of 2007
For a market analyst there is an irresistible temptation to seek out one or more historical parallels to the current situation. The idea is that clues about what’s going to happen in the future can be found by looking at what happened following similar price action in the past. Sometimes this method works, sometimes it doesn’t.
Assuming that the decline from the January-2018 peak is a short-term correction that will run its course before the end March (my assumption since the correction’s beginning in late-January), the recent price action probably is akin to what happened in February-March of 2007. In late-February of 2007 the SPX had been grinding its way upward in relentless fashion for many months. Read More
In Part 1 we postulated that the chart below embodies nothing less than the nightmare that will be coming to Wall Street right soon. It means, in effect, that you can climb the financial tiger's back for an extended time, but when you reach the mane its generally impossible to get off alive.
Needless to say, we have reached the mane. What drove the US economy for the past three decades was debt expansion----private and public--- at rates far faster than GDP growth. But that entailed a steady ratcheting up of the national leverage ratio until we hit what amounts to the top of the tiger's back---that is, Peak Debt at 3.5X national income. Read More
This is getting pretty ridiculous. For old times sake, we recently checked on the Federal debt level during the month we arrived in the Imperial City as a 24-year old eager beaver. That was June 1970 and the Federal debt held by the public was $275 billion.
Mind you, while that number wasn't exactly diminutive, it had taken all of 188 years to accumulate. That is to say, Uncle Sam had borrowed an average of $28,000 per week during the 9,776 weeks since George Washington was sworn in as the nation's first president. Read More
Markets were up again big today and volatility was down. But we haven’t seen the last of rising volatility, nor of the central banks’ attempts to thwart it.
This week, new Fed Chair Jerome Powell will be giving his first congressional testimony, and you can be sure that markets are waiting on his words with bated breath.
Before his testimony, the Fed will be releasing its Monetary Policy Report, which will also give an indication to the direction of Fed policy.
Because these will be his first official comments as Fed chair, Powell will want to both make a personal mark and make sure markets don’t panic over his remarks. Read More
02.27.18- 2018: The Year Of The Margin Call
Analysts disagree about which indicator is best for calling market tops, but the easiest to understand — and the most tragic — is probably margin debt.
This is money borrowed by (usually individual or “retail”) investors against their existing stocks to buy more stocks. Investors tend to do this when markets are rising and using leverage seems like an effortless way turbocharge their gains. But eventually the market turns down, leaving stock portfolios insufficient to cover related margin debt and generating “margin calls” in which brokers demand more money and/or start liquidating customer portfolios. This sends the market down sharply and indiscriminately, as fairly-valued babies are dumped along with overvalued bathwater. The result: a quick, brutal bear market. Read More
The DOW suffered a net-drop of 1,175 points on February 5. By many standards, a drop like that would be considered the worst single drop during a given market cycle.
But in this case, it might only be a hint of a much bigger market crash to come later this year. Analysts at Morgan Stanley said it best…
“The market doesn’t know what to do with negative inputs today… much less some really bad news.”
On October 19, 1987, the Dow experienced its biggest one-day percentage loss in history – plunging 22.6%.
It was “Black Monday.” The selloff was so fast and so severe, nothing else even comes close.
The second worst percentage loss for the Dow was October 28, 1929 (also Black Monday) when the exchange fell 12.82%. It fell another 11.73% the next day (you guessed it… “Black Tuesday”). Then the Great Depression hit. Read More
The Federal Reserve (Fed) has increased the Fed Funds rate by 125 basis points or 1.25% since 2015, which had little effect on bonds until recently. Of late, however, yields on longer-maturity bonds have begun to rise, contributing to anxiety in the equity markets.
The current narrative from Wall Street and the media is that higher wages, better economic growth and a weaker dollar are stoking inflation. These forces are producing higher interest rates, which negatively affects corporate earnings and economic growth and thus causes concern for equity investors. We think there is a thick irony that, in our over-leveraged economy, economic growth is harming economic growth. Read More
02.22.18- Calm Before The Inflationary Storm
The economy has been showing great gains, and that positive trend is fueling fears of a surge in inflation. The Consumer Price Index, the key predictor of inflationary trends, rose .05 percent in January, which greatly exceeded the anticipated rise of 0.2 percent. The market reacted as expected as stocks fell, and government bond yield rose.
The Fed is keeping a close eye on these developments, and that could fuel the inflation fears. The fear of rising prices includes most economic sectors, from gasoline, housing, food, healthcare, to clothing.
Predictably, the market reacted immediately to the CPI rise with a 100-point loss after opening, even though the decline was quickly reversed. Investors are anticipating that the Federal Reserve could raise their interest rates three or more times by year-end. Read More
Mnuchin Gets It
United States Secretary of Treasury Steven Mnuchin has a sweet gig. He writes rubber checks to pay the nation’s bills. Yet, somehow, the rubber checks don’t bounce. Instead, like magic, they clear. How this all works, considering the nation’s technically insolvent, we don’t quite understand. But Mnuchin gets it. He knows exactly how full faith and credit works – and he knows plenty more. Read More
The secret battle for the planet earth is entering a critical phase over the coming weeks, especially in the realm of finance, where an epic three-way battle is raging, multiple sources agree. In this battle, cryptocurrencies and the Chinese yuan are fighting each other, as well as fighting to replace the current privately-owned Western central bank petrodollar, Euro, and Japanese yen-based system.
In the biggest move, the gauntlet has been cast by the Chinese as they challenge the U.S. petrodollar, with the formal announcement of a March 26th start for gold-backed-yuan oil futures trading. Asian secret society sources say the Year of the Dog, which is just starting, usually brings volatility (in this case presumably in the financial markets) before things settle down into a new normal as the year progresses. Read More
I’m liking what I see from the crypto markets lately.
It may sound foolish or dangerous to say this, but hear me out.
If you look at the myriad attacks on crypto over the last month, the return to November 2017 pricing and the recent settling and smoothing of the market, I can understand your skepticism.
Look, I get it. Recently, there have been a lot of negative forces beating down the crypto market: Read More
There are other technical reasons out there but while most on Main Sreet and some on Wall Street have been scratching their heads as to why the dollar has been in a precipitous decline when the Fed has been jacking rates and yields have been rising, an FX strategist George Saravelos at Deutsche Bank has come up with an answer.
Bellow are his key points. Read More
02.16.18- XIV Implosion & the Implications for Gold
This week we saw the beginning of the implosion of one of the most crowded trades in the world. We’re talking, of course, about the short VIX trade. I say “the beginning” because the short VIX trade is multi-faceted and has deep roots in the business cycle that we’re in. Like most stories in the market, you need to back up from the tree-line in order to get a view of the forest rather than the trees.
First, think "implosion" is too strong of a word?
What is VIX, and what is being “Short VIX”? Read More
02.15.18- Gold, U.S. Dollar, And Inflation
Gold is all the rage right now. And some apparently think that if you aren’t outright ‘bullish’ you are unaware or unintelligent.
Those who ply the trade for a living (i.e. advisors, investors, traders, writers) all seem to be on the same page. Even fundamentalists and technical analysts are teammates. Sort of.
The U.S. dollar is in the headlines, so naturally, most of the explanations and expectations for gold’s ‘big move’ center on U.S. dollar weakness. And they should. But some additional explanation is necessary. Read More
02.14.18- What Just Changed?
The illusion that risk can be limited delivered three asset bubbles in less than 20 years.
Has anything actually changed in the past two weeks? The conventional bullish answer is no, nothing's changed; the global economy is growing virtually everywhere, inflation is near-zero, credit is abundant, commodities will remain cheap for the foreseeable future, assets are not in bubbles, and the global financial system is in a state of sustainable wonderfulness.
As for that spot of bother, the recent 10% decline in stocks: ho-hum, nothing to see here, just a typical "healthy correction" in a never-ending bull market, the result of flawed volatility instruments and too many punters picking up dimes in front of the steamroller. Read More
The markets have changed and many are going to get “taken to the cleaners.”
Last year, 2017, was a not a normal year for stocks. Stocks as an asset class are not meant to go straight up without even a 1% pullback. But that is precisely what happened for nearly an entire year.
Now that massive market rig is over. And anyone who continues to invest as though it’s 2017 is going to get annihilated in the coming weeks. The only thing that stop an all out crash in stocks was clear and obvious intervention in the markets by Central Banks. Read More
We’ve been using the market like a casino. Except, “this casino is on steroids” according to billionaire investor Carl Icahn.
Icahn thinks the stock market is getting dangerous for the average person. His reasoning? Over-leveraged ETFs (exchange traded funds).
It looks like the stock market “casino” will be calling your bets in 2018. In fact, Mr. Icahn says this is just the beginning, and the market equivalent of an earthquake is looming right around the corner… Read More
02.10.18- When will the next credit crisis occur?
The timing of any credit crisis is set by the rate at which the credit cycle progresses. People don’t think in terms of the credit cycle, wrongly believing it is a business cycle. The distinction is important, because a business cycle by its name suggests it emanates from business. In other words, the cycle of growth and recessions is due to instability in the private sector and this is generally believed by state planners and central bankers.
02.09.18- End of Fake Recovery
It took sixteen months to build the exceptionally steep Trump Rally, and just one week to eliminate a quarter of it. While I wouldn’t call that jolting reversal a stock-market crash in the ordinary sense, the largest one-day point fall in the history of the market (by far) certainly marks a massive change in market conditions. From this point forward, it won’t be the same market it was.
Those who are critical of my belief that the US stock market would crash by January 2018, may try to dodge the significance of these tumbling days by saying that eleven-hundred-plus points aint what it used to be. Read More
02.08.18- Here’s the big secret to know about the stock market’s next move
I’ve been asked to comment on the most recent market decline. My initial reaction was, markets go up and they go down. America is a great country but the US Constitution doesn’t guarantee always-rising markets. I sat down and I wanted to write a reassuring message. I wanted to express my empathy. Somehow, I found that my reservoir of empathy was empty: After recent decline the market is still up twenty-something percent from the beginning of 2017.
And then I stumbled on Dalio and Wilson predicting what the market will do next, and I have to confess, I started writing and could not stop. (I apologize ahead of time for the rantiness of this message.) Read More
02.07.18- Is The 9-Year-Long Dead-Cat-Bounce Finally Ending?
Ignoring or downplaying these fundamental forces has greatly increased the fragility of the status quo.
The term dead cat bounce is market lingo for a "recovery" after markets decline due to fundamental reversals. Markets tend to bounce back after sharp declines as participants (human and digital) who have been trained to "buy the dips" once again buy the decline, and the financial media rushes to reassure everyone that nothing has actually changed, everything is still peachy-keen wonderfulness.
I submit that the past 9 years of market "recovery" is nothing but an oversized dead cat bounce that is finally ending. Here is a chart that depicts the final blow-off top phase of the dead cat bounce: Read More
It’s just a question of how disruptive the adjustment will be, whether it will be just a painful sell-off or junk-bond mayhem.
Treasury securities have been selling off and Treasury yields have been rising, with the two-year yield at 2.15% on Friday, the highest since September 2008, and the 10-year yield at 2.84%, the highest since April 2014. Rising yields mean that bond prices are falling, and this selloff has been an uncomfortable experience for holders of Treasury securities.
But corporate bonds have been in their own la-la-land, and even Tesla, despite its cash-burn rate that should scare the bejesus out of investors, was able to sell $546 million in bonds last week – bonds collateralized by lease payments it receives from customers. Read More
With the Dow Jones Index falling 665 points today, the risk of a large market correction has just increased significantly. Ironically, I discussed the very indicators that were setting up for a huge market correction in my newest video which I recorded on Tuesday. Unfortunately, I wasn’t able to get the video posted on my Youtube channel on Friday morning and now on my website until late in the evening.
Regardless, the 665 point decline is just the beginning. Oh sure, we could see a continued selloff and then a move towards 27,000 or even higher. But, for the stock market to move up to 27,000 or 30,000 means absolutely nothing. Well, maybe it provided investors with a brief feeling of higher wealth until the markets really crashed. Read More
Gregory says it’s a bloodbath in the bond & stock markets, and when the stock market crashes, it’s not getting back up in our lifetimes. Here’s why…
Gregory Mannarino provides a timely update as the stock market may be finally bursting. This is because of the hard sell-off in the bond market. Gregory says if the bond market sell-off continues, this is it for the stock market.
If the debt bubble is in fact bursting, Gregory says we’re in a lot of trouble. Gregory says “this is the third and final bubble”. This is it. The bubble of all bubbles. Read More
Société Générale's bearish strategist Albert Edwards has told Investment Week he believes US 10-year Treasury yields will fall to as low as -1%, as he warned of "double bubble trouble" in US markets.
Edwards previously forecast that US 10-year yields will fall below zero but told Investment Week these could go as low as -1% in "the depth of the next recession" as they converge "totally" with Japan and Germany.
"Sound ridiculous? German 10-year yields were -0.2% last July," he added. Read More
Major international comparisons have long concluded that Americans’ ability to effectively utilize mathematics is inadequate. Such conclusions divide students, parents, teachers and administrators into camps that share little more than blaming others for the problems. However, it is unclear whether all the finger-pointing indicates a real desire to overcome our innumeracy. In fact, we systematically misuse numbers to distort reality because we want to fool ourselves, making our ineptitude no surprise.
One of today’s most obvious misleading number games is grade inflation. Teachers have accommodated student desires for higher grades to the point that the median GPA of graduating college seniors has risen around a full grade point since it was about 2.2 in 1965. Read More
It isn’t going to be a surprise when U.S. stock prices fall 50, 60 or 70 percent from where they are today. The only real surprise is that it took this long for it to happen. Even after falling 362 points on Tuesday, the Dow Jones industrial average is still ridiculously high. In fact, the only two times in our entire history when stocks have been this overvalued were right before the stock market crash of 1929 and right before the dotcom bubble burst. Not even before the financial crisis of 2008 were stock valuations as absurd as they are right now. Read More
01.30.18- What Will End the Bull Market?
One of the most commonly asked questions among market participants and non-participants alike is, “What will cause the stock market to stop rising?” Normally, investors would be thrilled at the prospect of a perpetual rise in equity prices. Yet, with so few direct participants nowadays compared to former years, there is a growing desire among many for a major decline which will allow non-participants to buy stocks at a much lower price. As we’ll discuss in this commentary, that scenario will likely remain a pipe dream for an extended period before it ever becomes a reality. Read More
Peter Schiff isn’t known for mincing words or sugarcoating the evidence. The financial broker and economist said in an interview “the economy is going to blow up like a bomb,” and when that happens, Donald Trump will take all of the blame.
Not even a full minute into an interview with Alex Jones of Info Wars, Schiff says “it’s not a good thing” that the economy is going to crash and burn. “Unfortunately, that’s what Trump has inherited from Obama. But it’s not even really just Obama, it’s the federal reserve. It’s the monetary policy that has been passed like a baton from Clinton to Bush to Obama and now to Trump. And we’re near the end of the game and unfortunately, Trump’s gonna be the fall guy. This thing is all gonna collapse while he’s president.” Read More
01.27.18- Russia and China Are Dead Serious About Ditching the Dollar
While $1 billion may not sound like much when compared with the Peoples’ Bank of China total holdings of US Government debt of more than $1 trillion or to the US Federal debt today of over $20 trillion, it’s significance lies beyond the nominal amount. It’s a test run by both governments of the potential for state financing of infrastructure and other projects independent of dollar risk from such events as US Treasury financial sanctions. Read More
Nine years of scorched-earth monetary policies come home to roost.
There are always cycles. The current cycle started at the bottom of the Great Recession and will last “until central banks put on the brakes,” said Ray Dalio, founder of Bridgewater Associates, in an interview with Bloomberg. “We’re in a perfect situation, inflation is not a problem, growth is good, but we have to keep in mind the part of the cycle we’re in.”
We’re “in the late stage of the cycle, a period that might last two years,” he said without specifying how far we’re already into that late stage. We do know that the Fed is gingerly taking the foot off the gas though it hasn’t yet slammed on the brakes. Read More
Today, I want to give you the single best place to invest in the stock market.
But don’t give me all the credit.
Because I’m stealing this directly from an investing legend.
His name is Joel Greenblatt. And in his classic 1997 book, You Too Can Be A Stock Market Genius, he made one thing perfectly clear…
“The facts are overwhelming… stocks of spinoff companies significantly and consistently outperform the market averages. Read More
01.24.18- The Bubble That Could Break the World
The key to bubble analysis is to look at what’s causing the bubble. If you get the hidden dynamics right, your ability to collect huge profits or avoid losses is greatly improved.
Based on data going back to the 1929 crash, this current bubble looks like a particular kind that can produce large, sudden losses for investors.
The market right now is especially susceptible to a sharp correction, or worse.
Before diving into the best way to play the current bubble dynamics to your advantage, let’s look at the evidence for whether a bubble exists in the first place…Read More
The first chart comes from my friend, John Hussman, and shows his margin-adjusted version of the cyclically-adjusted price-to-earnings ratio. This improved version of the CAPE ratio (improved because it has a greater negative correlation with future 12-year returns) shows equity valuations have now surpassed both the dotcom mania peak in 2000 and the 1929 mania peak. Read More
These poseurs of fiscal responsibility are about to drive up debt to its highest levels since World War II.
The United States is effectively bankrupt, but that doesn’t matter to the GOP. Once evangelists of fiscal responsibility and scourges of deficit spending, Republicans today glory in spilling red ink. The national debt is now $20.6 trillion, greater than the annual GDP of about $19.5 trillion. Alas, with Republicans at the helm, deficits are set to continue racing upwards, apparently without end. Read More
The “Trump bump” seems to be turning into a light tap for the U.S. Dollar. It has lost all of its post-election gain, and is starting 2018 off on the wrong foot.
The dollar is trading at the lowest level in 3 years, and that follows a whopping 10% decline in 2017. Additionally, a heightened amount of turmoil that has recently surrounded Trump has contributed to what seems like a cloudy future for the dollar.
But political turmoil is just the beginning of what has been ailing the dollar… Read More
01.19.18- 7 Reasons To Avoid The S&P 500 In 2018
We are barely out of the gates in 2018 and the S&P 500 is up over 4%. From just looking around me it is clear entrepreneurs and consumers are optimistic about the future. For much of the last decade the general public wouldn't touch equities with a ten foot pole. Now people are taking on debt to buy as much cryptoassets as possible. I don't share this optimism and primarily look for investments outside of the U.S. and in special situations and investments that may have low or negative correlation to the general direction of the market. Seven reasons why I want to be very careful going into 2018: Read More
In a recent speech at the Securities Industry and Financial Markets Association in New York City, William Dudley, the New York Fed President, voiced his economic concerns for the coming year and beyond.
Though inflation is low, Dudley warned the economy is growing at an “above-trend pace” while the labor market is tightening, and will be boosted further by the recently enacted tax legislation.
All this is happening despite the Fed hiking rates by 125 basis points over the last two years, which suggests the three further planned hikes for this year may not make much of a difference either. Read More
When the financial media continuously repeat an opinion as fact, it spawns a mainstream narrative, which produces a powerful effect on investor psychology. One mainstream narrative, repeated with certainty, is low interest rates cause high stock market valuations, which is supported by the public statements of investment luminaries such as Warren Buffett.
A related mainstream truth is rising rates will cause high stock market valuations to fall. In fact, recently, both Bill Gross and Jeffrey Gundlach have commented on the level of 10-year Treasury rates and why they are destined to go higher. Gundlach even went further, suggesting that if 10-year rates were to rise above 2.63% (currently 2.55%), stock prices would begin to fall. Read More
01.16.18- The Great Reset
The "Everything Bubble" is bursting. This is going to get ugly.
I suspect it began with the top in Bitcon and the other 1300-1400 related pseudo currencies back in December. I did an interview in the first week of December where I said Bitcon was in a bubble. I believed it would do the same thing every other bubble in history did. It was going to crash and take all the money of most of the investors. The piece was posted on the 10 th of December. When I did the interview, Bitcon had been going virtually straight up for months and was about $16,858, a new high. Read More
01.15.18- More Colliding Ships...
In my News and Views from the Nefarium last Thursday (Jan 11th), I prefaced my remarks about the Franco-Chinese summit by pointing out that these past two weeks have seen some strange stories, stories suggesting that while the war between the great powers for hegemony may not have gone hot, it's at least much warmer than before. For example, in the space of a few days, we've seen (1) the US launch, and as quickly lose, a classified space satellite; (2) ships colliding in the Aegean Sea and in the Persian Gulf, and (3) Russia shoot down over a dozen drones which it claims "Syrian militants" shot at Russian bases. Read More
01.13.18- My Financial Road Map for 2018
In last year’s roadmap, I forecast that 2017 would end with gold prices up and the dollar index down, both of which happened. I underestimated the number of Fed hikes by one hike, but globally, average short term rates have remained around zero. That will be a core pattern throughout 2018.
Central banks may tweak a few rates here and there, announce some tapering due to “economic growth”, or deflect attention to fiscal policy, but the entire financial and capital markets system rests on the strategies, co-dependencies and cheap money policies of central banks. The bond markets will feel the heat of any tightening shift or fears of one, while the stock market will continue to rush ahead on the reality of cheap money supply until debt problems tug at the equity markets and take them down.Read More
01.12.18- Nasty Dark Clouds Are Forming On The Financial Horizon
Some nasty dark clouds are forming on the financial horizon as total world debt is increasing nearly three times as fast as total global wealth. But, that’s okay because no one cares about the debt, only the assets matter nowadays. You see, as long as debts are someone else’s problem, we can add as much debt as we like… or so the market believes.
Now, you don’t have to take my word for it that the market only focuses on the assets, this comes straight from the top echelons of the financial world. According to Credit Suisse Global Wealth Report 2017, total global wealth increased to a new record of $280 trillion in 2017. Here is Credit Suisse’s summary of the Global Wealth 2017: Read More
91.11.18- 2018: The Year of Living Dangerously
I’m calling 2018 “The Year of Living Dangerously.”
That description might seem odd to lot of observers. Major U.S. stock indexes keep hitting new all-time highs. 2017 went down as the first calendar year in which the Dow Jones industrial average was up for all 12 months.
Even in strong bull market years there are usually one or two down months as stocks take a breather on the way higher. Not last year. There’s been no rest for the bull; it’s up, up and away. Read More
Last week, I was offered an opportunity to write an opinion piece for The Hill. I took advantage of the offer and put something together addressing the whole “is Bitcoin a bubble” debate, and I’m pleased to say it was published earlier this morning.
It’s important to me that I don’t just preach to the choir when it comes to my unconventional views, and I hope this will help me reach a wider and more mainstream audience.
The brewing pension crisis has been well-documented by a number of platforms and pundits over the past few years. But there are two charts that put it into perspective for investors who find themselves in the same boat as pension managers looking for returns in a world nearly devoid of them.
The average pension fund assumes it can achieve a 7.6% rate of return on its assets in the future. As noted in Monday’s Wall Street Journal, the majority of these assets are invested in the stock market. The rest are invested in bonds, real estate and alternatives. An aggregate bond index fund yields 2.5% today. Real estate investment trusts, as a group, yield nearly 4%. Read More
Russiagate originated in a conspiracy between the military/security complex, the Clinton-controlled Democratic National Committee, and the liberal/progressive/left. The goal of the military/security complex is to protect its out-sized budget and power by preventing President Trump from normalizing relations with Russia. Hillary and the DNC want to explain away their election loss by blaming a Trump/Putin conspiracy to steal the election. The liberal/progressive/left want Trump driven from office.
As the presstitutes are aligned with the military/security complex, Hillary and the DNC, and the liberal/progressive/left, the Russiagate orchestration is a powerful conspiracy against the president of the United States and the “deplorables” who elected him. Nevertheless, the Russiagate Conspiracy has fallen apart and has now been turned against its originators. Read More
01.06.18- The Value Of Bitcoin
So... in the past week, I’ve been asked for advice on Bitcoin by my brother-in-law, my local realtor, and close friends from as far away as Texas.
None of them cared to learn what it actually is. Or how it works. They just wanted to understand why suddenly so many folks they know are trying to buy Bitcoin hand over fist. And, of course, should they buy in now, too?
If you (or people you care about) have similar questions, this report is for you. Read More
01.05.18- Leveraged Economy Blows Up In 2018
Enjoy the good times while you can because when the economy BLOWS UP this next time, there is no plan B. Sure, we could see massive monetary printing by Central Banks to continue the madness a bit longer after the market crashes, but this won’t be a long-term solution. Rather, the U.S. and global economies will contract to a level we have never experienced before. We are most certainly in unchartered territory.
Before I get into my analysis and the reasons we are heading towards the Seneca Cliff, I wanted to share the following information. I haven’t posted much material over the past week because I decided to spend a bit of quality time with family. Furthermore, a good friend of mine past away which put me in a state of reflection. This close friend was also very knowledgeable about our current economic predicament and was a big believer in owning gold and silver. So, it was a quite a shame to lose someone close by who I could chat with about these issues. Read More
01.04.18- A Return to Financial Sanity?
Financial sanity and stability may not return, but we can protect our assets and learn from the discussion.
The DOW, S&P500, NASDAQ and other markets sell at all-time highs. However, many imbalances exist within our financial world.
This is not new – things have been crazy before, are now, and will be again. But to regain financial sanity we need:
01.03.18- How the Fake Boom Ends
Americans are richer than ever
U.S. household assets stand at $97 trillion.
All over the world, “wealth” is surging, too… with the value of global stocks near a record high of $100 trillion.
But there’s a hitch: We allege that this wealth was built on fake money. If we’re right, is the wealth fake, too?
Cometh the Grim Reaper
The Fed’s ultra-low interest rates over the past eight years have created the biggest pile of debt in history. Read More
01.02.18- The Inescapable Reason Why the Financial System Will Fail
Credit cannot expand faster than fundamentals forever
Modern finance has many complex moving parts, and this complexity masks its inner simplicity.
Let’s break down the core dynamics of the current financial system.
The Core Dynamic of the “Recovery” and Asset Bubbles: Credit Read More
01.01.18- A Bedtime Story
We are explaining our money system to our grandson, James, now 14 months old…
His mother tries to get him to go to bed at 9 p.m. But the little boy’s internal clock is still on Baltimore time; it tells him it is much too early to go to sleep.
Grandpa takes over, drawing out the monetary system like a general spreading a map on a field table. “Here is the enemy,” he says gravely. “They have us completely surrounded. We’re doomed.”
James grumbles. He squirms. He has a sunny, optimistic temperament. But we think our explanations are sinking in.
He seems to understand… Read More
Ron Paul does not believe the U.S. will break into separate countries, like the Soviet Union did, but expects changes in the U.S. monetary policy, as well as the crumbling of the country's "overseas empire."
The godfather of the Tea Party movement and perhaps the most prominent right-leaning libertarian in America, Ron Paul, believes the economic boom the United States experienced under President Trump could be a “bit of an illusion.” Mr. Paul sees inequality, inflation, and debt as real threats that could potentially cause a turmoil. Read More
12.29.17- Investment prospects for 2018
Predicting the future is a mug’s game, and in financial markets we simply cannot know tomorrow’s prices. All we can do is make assessments of the factors that can be expected to influence them.
Economists’ forecasts today, with very few exceptions, are a waste of time and downright misleading. In 2016, we saw this spectacularly illustrated with Brexit, when the IMF, OECD, the Bank of England and the UK Treasury all forecast a slump in the British economy in the event the referendum voted to leave the EU. While there are reasonable suspicions there was an element of disinformation in the forecasts, the fact they were so wrong is the important point. Yet, we still persist in paying economists to fail us. Read More
The single most important chart for understanding the current state of the US financial system is the following:
In simple terms, the above chart reveals that once the US abandoned the Gold Standard completely in 1971, the amount of debt in the US financial system skyrocketed relative to the real economy.
As a result of this, by the time the mid-1990s rolled around, debt levels in the US financial system had become a systemic risk: with this much leverage in the system, even a brief bout of debt deflation (when debt markets deflate) would induce a systemic crisis. Read More
We are nearly a year into Donald Trump’s presidency, and the economic numbers continue to look quite good. On Monday, we learned that U.S. retail sales during the holiday season are projected to be way up compared to 2016. Yes, there are all sorts of economic red flags popping up all over the place, and I write about them regularly. And without a doubt, 2017 has been one of the worst years for brick and mortar retail stores in a very long time. But when something good happens we should acknowledge that too, and many are giving President Trump credit for the fact that retail sales are projected to be up 4.9 percent this holiday season compared to last year... Read More
12.26.17- And Now, for Something Entirely Different: "Why I'm Hopeful"
Readers often ask me to post something hopeful, and I understand why: doom-and-gloom gets tiresome. Human beings need hope just as they need oxygen, and the destruction of the Status Quo via over-reach and internal contradictions doesn't leave much to be happy about.
The most hopeful thing in my mind is that the Status Quo is devolving from its internal contradictions and excesses. It is a perverse, intensely destructive system with horrific incentives for predation, exploitation, fraud and complicity and few disincentives. Read More
12.25.17- Epic Stimulus Overload
Ten-year Treasury yields jumped 13 bps this week to 2.48%, the high going back to March. German bund yields rose 12 bps to 0.42%. U.S. equities have been reveling in tax reform exuberance. Bonds not so much. With unemployment at an almost 17-year low 4.1%, bond investors have so far retained incredible faith in global central bankers and the disinflation thesis.
2017 has not been a good year for the dollar. Despite traders brimming with optimism after Trump got elected, and the Fed’s best efforts, the dollar is at its lowest in ten years.
As the year comes to an end, it’s down more than 7% compared to other key currencies.
Weak inflation and doubts over Trump’s ability to deliver on his legislative promises have contributed to the greenbacks’ decline. This, together with strong economic growth and strict monetary policies in the global economy, have played a pivotal role in the dollar’s weakness. Read More
As DataTrek's Nicholas Colas reminds us, recreational marijuana sales become legal in California starting on New Year’s Day 2018. Given that one in eight Americans live in the state, this move will have major implications for the entire US legal cannabis industry.
So, to address any pent up investor questions, Colas has put together a list of 7 major points about the rollout in terms of regulations, taxes, revenue estimates, potential banking solutions, and employment consequences. Read More
“Your loving give me such a thrill
Ten long years after the crisis, volatility and fear seem to have disappeared from financial markets. A synchronous global expansion coupled with persistently loose monetary policy has produced a goldilocks environment for all assets. Will it work for another year? Read More
The current tax legislation isn’t some thoughtful reform to benefit Americans. It’s a quickly planned looting through a broken window in our nation’s character. – John Hussman
John Hussman wrote a must-read essay titled: “Three Delusions: Paper Wealth, A Booming Economy and Bitcoin (link).” The crypto/blockchain delusion has exceeded the absurdity of the dot.com and housing bubble eras. I was shorting fraud stocks happily in both eras. I’m short a company now called Riot Blockchain. If you look at its description in Yahoo Finance, it bills itself as a developer of technologies applied to animal (“non-human”) medicine. It recently changed its name to Riot Blockchain from Bioptix Inc. Prior to calling itself Bioptic Inc, it called itself Venaxis. Read More
12.19.17- “Dark Money” Runs the World
Few people know financial markets’ biggest secret…
For the last 40 years, most people believed the stock market always goes up. Simply buy and hold long enough, the theory went, and you could sit back and watch the money accumulate in your account. No thought or hard work needed.
It was a nifty strategy — until the idea burned most investors in 2008. Almost a decade later, the scar tissue is still fresh for many investors.
Even today, after the U.S. stock market has rallied by 271% since the bottom on March 6, 2009 — nearly tripling investors’ money — only about half of Americans are invested in the stock market, according to NPR. That’s down from two-thirds compared to a decade ago.Read More
12.16.17- Stop Treating Bitcoin Like A Stock
I don’t know about you, but I’ve never felt so compelled to drink in my life than the past week watching Bitcoin. It’s like watching apaper airplane bounce in the wind that could either nosedive any moment or catch another swift gust upward.
I get it. It looks like a really volatile stock ripe for quick profit or financial demise at the roll of some dice, and if we keep treating it this way, that’s exactly how it will remain.
Investing in stock drives the production of better goods and services, but currency isn’t a commodity which will depreciate due to the nature of its own decay. It’s not a service which could lose its public appeal in a few years. Intellectual property is a closer metaphor, but a dollar will still never hold intrinsic value, ironically, unless it is one day viewed as an antique. Read More
12.15.17- Inflation Can Return Much Faster
Consumer price inflation has remained persistently low, despite the Fed’s best efforts. This has led many people to ask where the inflation is, because the Fed has created trillions of dollars since the financial crisis.
But there has been inflation. It’s just been in assets like stocks, bonds, real estate, etc. How about bitcoin? Bitcoin increased about $2,000 yesterday alone! It’s trading at about $16,000 as I write. We’ve never seen anything like it.
The bottom line is, we’ve seen asset price inflation, and lots of it, too. Read More
A painting recently sold for a record $450 million, a blanket recently sold for $1.5 million, Bitcoin has gone ballistic, and Cramer thinks there are ‘bubbles’ everywhere except stocks. Are these the types of signals that bears have been waiting for? In a word, maybe.
The problem with calling for an end to the good times is that there has been so many false contrarian signals in recent years it is as if the very idea of “risk/reward” has been temporarily laid to waste.
To use a quick example, in early 2016 alarm bells were ringing as junk bonds were imploding, confidence was sliding, and technical market levels were being struck. At the time it looked like the bull was done. Read More
12.13.17- A Question for Every Investor
Recently we received the following question from a subscriber:
Questions like Ron’s that suggest the decay of capitalism and free markets should raise concerns for anyone’s market thesis, bullish, bearish or agnostic. What stops a central bank from manipulating asset prices? When do they cross a line from marginal manipulation to absolute price control? Unfortunately, there are no concrete answers to these questions, but there are clues. Read More
John Rubino says “It’s always shocking to see the numbers we’re dealing with, but even more so lately…”
Each quarter, Credit Bubble Bulletin’s Doug Noland posts a “flow of funds” report that analyzes the debt and securities markets data released by the Fed in its Z.1 Report. It’s always shocking to see the numbers we’re dealing with, but even more so lately as history’s biggest financial bubble starts to dwarf its predecessors.
Here’s some of the scarier data in chart form, with Noland’s commentary: Read More
12.11.17- Investment Potpourri
1. Prior market tops (1987, 2000, 2007, etc.) allowed asset managers to partially “insure” their risk assets by purchasing Treasuries that could appreciate in price as the Fed lowered policy rates. Today, that “insurance” is limited with interest rates so low. Risk assets, therefore, have a less “insurable” left tail that should be priced into higher risk premiums. Should a crisis arise because of policy mistakes, geopolitical crises, or other currently unforeseen risks, the ability to protect principal will be impaired relative to history. That in turn argues for a more cautious and easier Fed than otherwise assumed.
Economists prior to Keynes viewed “modeled” as well as “real time” economies as self-balancing, but subject to imbalances from external shocks like oil prices. Rarely did theory incorporate finance and credit as one of those potential earthquakes. Read More
12.09.17- Bitcoin Doesn’t Exist – 4
Dr. D: Well, all parts of the system rely on accurate record-keeping. Look at voting rights: we had a security company where 20% more people voted than there were shares. Think you could direct corporate, even national power that way? Without records of transfer, how do you know you own it? Morgan transferred a stock to Schwab but forgot to clear it. Doesn’t that mean it’s listed in both Morgan and Schwab? In fact, didn’t you just double-count and double-value that share? Suppose you fail to clear just a few each day. Before long, compounding the double ownership leads to pension funds owning 2% fake shares, then 5%, then 10%, until stock market and the national value itself becomes unreal. And how would you unwind it? Read More
12.08.17- Bitcoin Doesn’t Exist – 3
Dr. D: The money, the unaccountable, uninhibited release of tokens can do more than just buy centuries of hard labor in seconds, it‘s also a method of control. Banks, our present issuers of money, can approve or destroy businesses by denying loans. They can do this to individuals, like denying loans to unpopular figures, or to whole sectors, like gun shops. They can also offer money for free to Amazon, Facebook, and Tesla, which have no profitable business model or any hope of getting one, and deny loans to power plants, railroads, farms, and bridges as they fall into the Mississippi.
The result is banks and their attending insiders are a de facto Committee of Central Planners in the great Soviet style. What is fashionable and exciting to them can happen, and what they dislike or disapprove of for any reason can never happen. And once on a completely fiat system, this is how capital is allocated through our entire system: badly. Read More
12.07.17- Bitcoin Doesn’t Exist – 2
Dr. D: You have to understand what exchanges are and are not. An exchange is a central point where owners post collateral and thereby join and trade on the exchange. The exchange backs the trades with their solvency and reputation, but it’s not a barter system, and it’s not free: the exchange has to make money too. Look at the Comex, which reaches back to the early history of commodities exchange which was founded to match buyers of say, wheat, like General Mills, with producers, the farmers. But why not just have the farmer drive to the local silo and sell there? Two reasons: one, unlike manufacturing, harvests are lumpy. To have everyone buy or sell at one time of the year would cripple the demand for money in that season. This may be why market crashes happen historically at harvest when the demand for money (i.e. Deflation) was highest. Secondly, however, suppose the weather turned bad: all farmers would be ruined simultaneously. Read More
12.06.17- Bitcoin Doesn’t Exist – 1
A while ago, I asked a regular commenter at the Automatic Earth, who goes by the moniker Dr. D, to try and write an article for us. Not long after, I received no less than 31 pages, and an even 12345 words. Way too long for today’s digital attention spans. We decided to split it into 5 chapters. After we work through those 5, we’ll post it as one piece as well. Dr. D, who insists on sticking with his nom de plume, picked his own topic, and it’s -fittingly- bitcoin. A topic about which one can cover a lot of ground in 12345 words.
Now, I wouldn’t be me if I didn’t throw in my own two Satoshis: Dr. D claims that “..everyone has an equal opportunity to solve the next calculation..”, but while that may perhaps have been sort of true at the very start, it isn’t now. It’s not true for the computerless or computer-illiterate, for those too poor to afford the electricity required by bitcoin mining, and for various other -very large- groups of people. Read More
According to Stefan Molyneux, a highly regarded Canadian podcast host, it is more important to recognize the free fall of fiat currencies, more so than to acknowledge the exponential growth rate of Bitcoin.
The decline of fiat currencies
For many decades, governments have had absolute control over the global finance sector and monetary policy through the fiat currency system. Read More
12.04.17- Plunder Capitalism
I deplore the tax cut that has passed Congress. It is not an economic policy tax cut, and it has nothing whatsoever to do with supply-side economics. The entire purpose is to raise equity prices by providing equity owners with more capital gains and dividends. In other words, it is legislation that makes equity owners richer, thus further polarizing society into a vast arena of poverty and near-poverty and the One Percent, or more precisely a fraction of the One Percent wallowing in billions of dollars. Unless our rulers can continue to control the explanations, the tax cut edges us closer to revolution resulting from complete distrust of government. Read More
12.02.17- Carmageddon for Tesla
This is where Hype Goes to Die.
Today was the monthly moment of truth for automakers in the US. They reported the number of new vehicles that their dealers delivered to their customers and that the automakers delivered directly to large fleet customers. These are unit sales, not dollar sales, and they’re religiously followed by the industry.
Total sales in November rose 0.9% from a year ago to 1,393,010 new vehicles, according to Autodata, which tracks these sales as they’re reported by the automakers. Sales of cars dropped 8.2%. Sales of trucks – which include SUVs, crossovers, pickups, and vans – rose 6.6%. Strong replacement demand from the hurricane-affected areas in Texas papered over weaknesses elsewhere. As always, there were winners and losers. Read More
Bitcoin is back over $10,000 after the the CFTC confirmed what had been previously reported, namely that it would allow bitcoin futures to trade on two exchanges, the CME and CBOE Futures Exchange, also granting the Cantor Exchange permission to trade a contract for bitcoin binary options.
The CFTC announced that through a process known as "self-certification," CME and Cboe stated that their contracts comply with U.S. law and CFTC regulations. The US commodity regulator also said that the it held “rigorous discussions” with the exchanges that resulted in improvements to the contracts’ designs and settlement. Read More
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