Is Sub-Prime Auto Loan Armageddon Coming?

I experienced a real eye-opener this past week. The lease on my fiance’s Audi A3 terminates soon. I was scanning the “pre-owned” inventory at the two largest Audi dealers in Denver expecting to see some good deals on 2013/2014 Audi A4’s that had come off lease. Instead, I was shocked to see at both dealers a large selection of 2016/2017 A4s with less then 20k miles. Some under 10k miles. I even saw a 2018 with something like 6k miles on it.

Why was I shocked? Because most of these vehicles had to have been repossessed. If there were only a couple almost brand new Audi A4s with very low mileage on them, it’s plausible that the buyers/lessee’s traded them in because they didn’t like them. The bigger dealer of the two had six 2017’s, all of them with 11k or less miles. Most if not all of these cars had to have been repo’d because of lease/loan default. We plan on waiting a couple more months because her lease expires in March and I suspect that the inventory of near-new Audis will be even larger and the prices will be even lower.

My theory was confirmed when I came across a blog post from a blogger (Cold War Relic) who is a car salesman (What’s Going On?): “People are buying cars they can’t afford or shouldn’t even have been able to buy.” He goes on to explain that: “I went to my buddy Paris’ repo lot. He called me to check out a 2016 BMW 435i he jacked for BMW Financial Services…as we walked through [the lot] I noticed all of the cars seemed to be nearly new. Paris confirmed my fears when he told my about nine-out-of-ten vehicles he’s repossessed in the last few months were model year 2016 or newer” (emphasis is mine).

Here’s the coup de grace: “To make matters worse Paris only does work for prime and a few captive lenders, meaning a majority of these cars went out to consumers with good credit.” In a past Short Seller’s Journal issue in which I discussed the rising delinquency and default rates on auto loans, I suggested that, in addition to the already soaring default rates on subprime auto loans, I believed the default rate on “prime” auto loans would soon accelerate. This is in part because a lot of prime-rated borrowers would have been considered subprime a decade ago. But it’s also in part due to the fact that the average household’s disposable income is getting squeezed and what might seem affordable in the present – e.g. an brand new Audi or BMW lease/loan payment – can quickly become unaffordable.

A recent article from Bloomberg discussed “soaring” subprime auto loan defaults in connection with the fact that several Private Equity firms bought out subprime auto lending companies starting about six years ago. The investment rationale was based on expanding the loan portfolios and cashing out the “value” created in the IPO market. One company, Flagship, was bought out by Perella Weinberg in 2010. It took the loan portfolio from $ 89 million 2011 to nearly $ 3 billion. Bad loan write-offs have soared. PW tried to IPO the company in 2015. It’s still trying. Based on the two anecdotes of new car repossessions described above, it’s a good bet that the investments in most subprime auto lenders will eventually have to be written-off entirely.

The total amount of subprime auto loans outstanding is nearly $ 300 billion. This number is from the NY Fed. I would argue that, in reality, it’s well over $ 300 billion. If you add to that the amount of subprime credit card debt outstanding, the total amount of “consumer” subprime debt is in excess of the amount of subprime mortgage debt ($ 650 billion) at the peak of the mid-2000’s credit bubble. This is not going to end well. In fact, I suspect the eventual credit implosion will be much worse than what occurred in 2008.

Investment Research Dynamics




Alternative Money Mania Coming with New Inflationary Cycle; David Smith: Cryptos Bringing Broad Attention to All Dollar Alternatives

Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up we’ll hear another terrific interview with David Smith of The Morgan Report and MoneyMetals.com columnist. David weighs in whether crypto-currencies and precious metals can coexist and talks about what we can glean from the current mania in the cyrptos as it relates to the upcoming mania in precious metals. Be sure to stick around for my conversation with David Smith, coming up after this weeks’ market update.

Now that Republicans have passed their tax cut package, investors are trying to position themselves in what they think will be the big winners as the new law takes effect next year.

Broadly speaking, the new law is a big win for U.S. corporations. Their tax rate will drop from 35% down to 21%. President Trump believes lower taxes on businesses will lead to more factories being built, more jobs being created, and stronger economic growth. He’s probably right – at least to some extent.

On Thursday, the Commerce Department announced GDP growth for the third quarter coming in at a robust 3.2%. Economists are now projecting close to 4% growth next year as the tax cut stimulus kicks in. Of course, with our government’s serial under-reporting of true inflation rates, these economic growth numbers are overstated in real terms.

But the conventional wisdom is that U.S. stocks will continue to charge ahead. This week saw some notable divergences develop in markets, however, and that could be foretelling major trend changes. Bonds, along with interest-rate-sensitive sectors such as real estate and utilities, sold off. Meanwhile, oil and natural resource stocks rallied strongly.

Investors appear to be reacting to the potential inflationary side effects of stronger economic growth that’s fueled by deficit-financed tax cuts. Yes, the tax cut package is expected to grow the deficits by as much as $ 1.5 trillion over the next decade.

Metals markets responded this week by moving higher. Copper prices rose 3% to near a 3-year high. Palladium ticked up to a 16-year high, while its sister metal platinum gained over 3% this week to pull out of its recent slump.

As for gold and silver, they are posting modest advances. Gold prices are up by 1.4% this week to trade at $ 1,273 and spot silver trades higher by 1.6% to come in at $ 16.36 an ounce as of this Friday morning recording.

If metals markets continue to show strength into 2018, they may well be signaling a larger inflationary trend set to take hold. Any significant increase in consumer price levels would be disastrous for the bond market – and spell trouble for some or even most sectors of the stock market.

Higher rates of inflation are bad news for most financial assets… but good news for most hard assets. Precious metals markets tend to thrive when the inflation rate is rising faster than interest rates – in other words, when interest rates are trending negative in real terms.

There is the potential threat of Federal Reserve rate hikes pushing rates positive in real terms. But you can bet President Trump’s incoming handpicked Fed chairman will back off at the first sign of serious trouble for the stock market. Trump is on record favoring higher asset values and a weaker dollar – which effectively means he favors higher rates of inflation.

The government itself has powerful incentives to promote price inflation. The IRS gets to tax the nominal gains on assets artificially boosted by inflation. And the Treasury Department gets to see the real value of its massive debt obligations steadily eroded.

But the biggest inflation trick the government employs is understating it. Using manipulated inflation gauges such as the Consumer Price Index enables the government to artificially hold down cost of living adjustments for Social Security. Understated inflation also generates stealth tax increases.

One “inflation tax” hazard for investors is winding up in higher tax brackets due to nominal increases in income. Wages or investment income that rise merely at pace with inflation can push taxpayers into higher rates of taxation.

The problem of “bracket creep” is supposed to be offset by annual increases in the bracket cut-off levels based on the Consumer Price Index. But a provision buried in the GOP tax bill passed by Congress this week changes the inflation gauge to “chained CPI.”

The difference between chained and unchained CPI is small in any given year. But according to the Joint Committee on Taxation, the obscure little change to “chained” will generate $ 30 billion in additional tax revenue through 2026. That’s because chained CPI usually comes in lower than regular CPI.

Inflation is an insidious threat to investors in more ways than one. And while gold and silver markets aren’t guaranteed to keep pace with inflation every single calendar year, the precious metals often massively outperform official inflation rates during periods when they flare up.

Well now, without further delay, let’s get right to this week’s exclusive interview.

David Smith

Mike Gleason: It is my privilege now to welcome back David Smith, Senior Analyst at The Morgan Report and regular contributor to MoneyMetals.com. David, Merry Christmas, and thanks for joining us again. How are you?

David Smith: Very good Mike, and thank you and the very same to you and yours.

Mike Gleason: Well, as we start out here, David, let’s talk first about the setup as we finish up 2017 and move into the new year. There are a lot of similarities to last year, maybe the year before. We’ve had the Fed just announce a rate hike. The move was well telegraphed and all the selling in the metals happened prior to last week’s FOMC meeting. Open interest in the futures got pretty extended about a month ago, and as often happens in that scenario, the speculative long buyers were taken out to the wood shed and punished as the bullion banks cashed in on their shorts. Now we’re seeing a bit of a rally in the metals, so the situation in these regards is very similar to a year ago. What are you expecting from the metals markets in the weeks and months ahead? Are you looking for a rally to match last year’s?

David Smith: I really think that we could be looking at a very similar set up to 2016 where the metals actually bottomed in December, and the mining stocks tried to put a lower low in in mid-January. And I’ll never forget it, January 19th, and on an inter-day basis, they turned around, and then it was up and away for the metals and the miners for the next six months.

Then between then and now they gave back about 50% of it, which is what you’d expect on a retracement, and nobody can predict the future exactly, but I really feel pretty strongly that we’re going to see a very strong, right out of the box, in January, on the metals and miners, and it may even turn before the new year, but there’s so many technical indicators themselves, that when you add them all up, they become something larger, and so I think if a person is waiting to purchase their metal, they shouldn’t be waiting too much longer if they had the same view I do.

And not only that, as you know, when the demand starts ramping up pretty quickly, the premiums go up too, so you would have a double whammy against you, buying at a higher price and paying a higher premium if you wait until a lot of other people kind of get the same idea.

Mike Gleason: Yeah, certainly a buyers’ market right now, both in terms of low spot prices, and also the premiums, as you mentioned. And the last couple years, we have had pretty strong, right of the gate, moves there in the metals and the miners, and maybe 2018 is going to have the same thing.

Now in your most recent article that we published this week in MoneyMetals.com, you make the case for physical metals and cryptocurrencies to coexist. Now we think that is a vitally important idea right now as people are working through questions about what the advent of Bitcoin and other cryptocurrencies will mean for gold and silver. It would be pretty easy for people to look at price charts and leap to the conclusion that metals are quickly becoming irrelevant. The reality is that the times we live in are desperately calling for honest money and that both cryptocurrency and metals both have important roles to play. They have very different strengths and weaknesses, however, so talk for a minute, David, about how these two asset classes are likely to coexist.

David Smith: Well, the majority of the buying right now worldwide in gold and silver is in the Far East, and it’s been that way for a while… probably 65-70% of the volume. Things have tailed off a little bit in the United States, but elsewhere in the world, that’s not the case. In fact, Germany came out of nowhere to be, I think one of the, if not the largest country buyer of the last few months of gold. And a year ago, their volume was almost nothing, so Turkey is I think number 3 in the world now.

So these areas are all becoming more and more important demand pieces for gold, even as gold and silver look to be tailing off in terms of production. It’s getting more expensive to do it… the grades continue to drop in both gold and silver in many of these mines. So, we’re going to be seeing more demand and relatively less supply and that’s going to put upward pressure on the prices. And as you’ve mentioned before, we’re talking about gold and silver having been money for thousands of years.

They’re going to continue to occupy that stage, and not only that, a lot of the people that are in Bitcoin are actually buying metals with the Bitcoin, so the price has gone up and they get to buy more gold, and they get to buy more silver, before it drops again. And we’ve been seeing these huge, huge swings. It’s nothing to see bitcoin drop $ 5,000 in a couple days, and so far it’s been able to recoup most of those, but I mean, that’s a tremendous amount of volatility. It makes mining stocks look like they’re designed for widows and orphans compared to the cryptocurrencies right now.

Mike Gleason: Yeah, you are one of many gold bugs who has become interested in Bitcoin and cryptocurrencies, and it isn’t just about the price appreciation, though the action in those markets is definitely a spectacle, as you mentioned. You, like many of us, can see the potential for crypto to change the world. People are starting to imagine something like Bitcoin becoming a major world currency, and a very real threat to banks, including central banks. There are even some who think the current price explosion is signaling that this sea change is already upon us.

Now we happen to think that is a bit premature, Bitcoin for example, is not ready yet for prime time. The network is horrendously backlogged with transactions, taking hours to confirm. Fees have risen dramatically. It is nowhere near being able to serve as a major world currency. The network would need to handle tens of thousands of transactions a second, not the current limit of less than 20.

Now, there are solutions being proposed to these scaling problems, but it will be some time before anyone can say with confidence they will work. So, in the light of that, we’re wondering if price hasn’t already moved ahead of capability for Bitcoin. What are your thoughts there?

David Smith: It’s really possible, and the thing is, as you mentioned, the issues that Bitcoin has about the state of execution and scalability, but there are a number of other altcoins, you might say, that are trying to do something similar, and even Bitcoin Cash, which is a spinoff fork – since August of this year it has really been trading because it moves transactions much more quickly. And then of course, there is Monero and Litecoin and Dash, and so, there are a number of other similar coins that are doing similar things and there’s no way to know which one will end up becoming top dog. It might be something other than Bitcoin, but right now it has the first mover advantage.

But one of the things that I think that is very positive for gold and silver and people who believe in it, is that, Doug Casey made this argument, and I think it’s a very powerful one. He said, “The interest in Bitcoin is stimulating people to ask, ‘what is money?'” They hadn’t really been talking about that so much anymore, I mean, the hardcore gold bugs and silver bugs have always felt that way, but the average person on the street never asks themselves, “what is money, and what does it mean to have it deteriorate in value?” And so, the money in their pocket buys about 3 cents from what it did, say, as far back as 1960. So, this is going to, when people really ask that question, and they say, “what has been considered money for centuries and millennia?” They’re going to go “Oh, you know, it’s been gold and silver.” And so, I think it’s going to introduce a lot of new people to the precious metals that maybe hadn’t ever held it, so that is a salutary advantage of what’s going on with all the chaos that’s going on in Crypto Space, in my view.

Mike Gleason: We’ve had a huge influx of folks buying metals with Bitcoin this year, and especially over the last 2 or 3 months. And aside from being an outlet for people to spend their crypto profits, we are one of the only national dealers out there who also has the ability to pay people in crypto, whether it be Bitcoin, Litecoin, Etherium, etc, when customers are selling to us. So, we’re seeing a lot of coexistence between these two asset classes for sure, at least from our perspective as somewhat of a leader in terms of doing metals for crypto transactions both ways.

Now, another aspect that I wanted to touch on between the amazing developments that have taken place, and are currently taking place in the Crypto Space, and comparing it the potential for precious metals, is this incredible volatility that can accompany a mania phase for an asset class. Now that mania is in full force for the crypto world right now, but perhaps that day will be coming soon for metals as well. Talk about that for a minute because we could see a foreshadowing here of what might happen in gold and silver markets once people start to pile into physical ownership of the metals. Talk about what we might be able to glean from this crazy situation in Bitcoin that we’re in the midst of. How might a mania in the metals look similar and how might it look different?

David Smith: I think that we will see in a few years a mania in the metals, and it’ll be similar in terms of the velocity of money moving around and the spikes up and down, and the price of the metals. And the reason for that is because communication is so quick nowadays, it’s instantaneous, and that’s the reason people all over the world … This is the first time in world history where people all over the world are invested in an asset class at the same time, for many different reasons actually, but that’s why I think the people that were calling for a Bitcoin mania in January, when it was $ 900 and then all the way through the year, then when it was $ 2,000 or $ 3,000, $ 4,000, and they’ve been spectacularly wrong, and nobody knows. Maybe the top was registered a couple days ago, but it wouldn’t surprise me to see it go much higher, with big swings up and down at the same time.

But when people move into the metals in a big way, which they inevitably will, you’re going to see the same type of a thing when the supply/demand ratio gets out of kilter. And people are going to be striving to find metal at any price, at some point. And they’re going to be able to have that same level of communication around the globe and trying to do that, that people are doing now with their cryptocurrency. So, it does share that one element in common, plus human nature never really changes, does it?

Mike Gleason: No, certainly not, and obviously one of the issues that we’re dealing with right now is that with these low prices, the producers, especially the primary silver producers are not terribly profitable at these types of prices, so there’s not a lot of new exploration. Thus, supply is going to continue to dwindle. If we go with the data that tells us that maybe 1-2% of Americans actually own an ounce of precious metal.

If, all of a sudden, that doubles during a mania phase. It takes a while for that supply to come online, as you well know, studying these miners. It’s not a switch that you can just flip, and automatically have a bunch of new ounces being pulled out of the ground. It takes years in many situations to get a mine up and running… go after those exploration projects and so forth. So that really could potentially drive that mania and make it go even quicker than we were expecting if you truly can’t get your hands on the metals. Speak to that.

David Smith: That’s really true because they’re not making any really large discoveries anymore. The article I wrote last month, quoting Pierre Lassonde. He just said, “We’re not finding anymore 15 million ounce gold discoveries and we’re finding just a few 3 million ouncers.” And so all the companies that are producing today, regardless of the metal they’re producing, they are wasting assets. Unless they find ways to bring in more ore on stream, they are producing ounces that aren’t going to be replaced and then that means the value of their company goes down, and what they can produce. And so, this is going to be something that’s going to weigh on the whole industry big time going forward. It’s just not very likely that you’re going to see any more mega-discoveries, like were fairly common 30 years ago.

Mike Gleason: Sticking with the mining industry here for a moment, what is your intel showing in terms of the state of the industry? How are they doing? Are you expecting more consolidation as the prices remain suppressed here? What’s the situation with the mining industry?

David Smith: A number of the better run companies are doing reasonably well. They’re producing at a reasonably good profit. There’s going to be more consolidation in the industry because the medium-sized ones are going to get swallowed up by the larger ones. It’s a lot cheaper for a big company to go out and buy a project that’s already been permitted and maybe even having production going on, than to go through the permitting process. I visited a company in BC this year that took almost 20 years to get through all the environmental permits and the agreements with First Nations, and, not to mention, to keep delineated enough of a resource to turn it into reserves.

And so, it’s just a whole lot cheaper to buy a company that’s already figured it rather than to go out and find it on your own. And as that happens of course, that’s not adding anything new to the total amount of gold and silver that’s available to be produced. It’s just shuffling the card deck, so to speak. So, it isn’t like they’re buying a new project that’s never been put into production before. Some of that’s going on, but a lot of it’s already buying companies that are already in the pipeline and then they just add that mill or that mine to what they’re already doing.

Mike Gleason: Getting back to your article, you lay out all the reasons why it’s important to stay the course and not let the noise get in the way of your investment plan. Recap that a bit here for our listeners and talk about the dangers that the average investor faces these days given the over saturation of information that’s constantly bombarding us with the 24/7 news cycles and all the talking heads constantly giving their opinions on anything and everything in the investment world.

I mean, in terms of precious metals, the fundamentals that made it a wise investment a few years ago, and the very things that probably peaked our interest about owning it as a hedge and as insurance against financial turmoil, is still just as relevant today as ever despite the price kind of languishing, so you have to just phase out all of that noise and resist getting tempted by alternatives or swayed by this opinion or that opinion, don’t you David?

David Smith: You really do because it’s hard for all of us to maintain our bearings when all this information’s coming in, and we have to look at each piece of it and try to determine if that is valid or if that changes our thesis. And the thing is, as you said, all the reasons for holding the metals are as valid as they ever were, in fact if not more so. And the fact that the metals haven’t gone up sharply as we’re talking doesn’t mean that they’re invalid, it just means that it’s taken a little longer than we expected.

I look at the uranium market as a classic example. This thing went on, people said, a year and a half ago, “Well, we’ve never seen a market that’s been in the bear markets for six years, the odds that it’s going to turn around very quickly.” Well, it took another 18 months, and even now it’s still just getting started. But the thing is, once it makes that turn, and once the smart money is starting to position itself, and once a certain amount of the public get on to the idea, you can have a very, very fast move upward, just like we had in 2016. And it’s very difficult to get on, and on that move, it caught so many people by surprise, both in the physical space and also the mining shares space, that the vast majority not only didn’t get on – because they were waiting for a retracement that never really came – but they also sometimes got out too quickly. They thought “Oh, well, this’ll be a couple months and it’ll be over, just like it has been the last four years.” Well, it didn’t turn out that way. It went for seven months with hardly any kind of a correction.

And these prices today, the better companies and, of course, the metals themselves, are still above where they were when that turn was made, so if you wait a little longer, you’re going to find yourself buying at prices higher than they were when they were in 2016. So, if a person believes in it, they should start accumulating in tranches, or buying into weakness, or buying on a dollar-cost averaging, or whenever they have the extra money to budget for, rather than trying to pick the exact low. Try to buy 30 cents lower and then end up paying a 40 cent premium, that you wouldn’t have had to pay then, plus maybe 40 cents higher… the old “penny wise, pound foolish” theorem.

Mike Gleason: Yeah, certainly letting the emotions get the best of us in the investment world has taken down many people over time. Well finally, David, as we begin to wrap up here, maybe talk about some of the key support or resistance levels you’re watching here in the metals, in terms of the charts and so forth. And then anything else that you’re focused on in the metals or financial world that we maybe haven’t hit on yet as we wrap up the year and look forward to 2018.

David Smith: Well, I think in silver, we want to see silver get above $ 17 and of course, it would be very, very positive psychologically and chart-wise to get above $ 20. And then you have a real solid base start to be built there. That would be very important.

In terms of gold, getting well above $ 1,300 and staying there, $ 1,325, $ 1,350. There are a lot of respected economists and analysts that feel that we’ll see $ 1,450 to $ 1,500 gold this (next) year, even without some major issues.

So, I think that the risk/reward is really turning in the favor of a cautious investor who decides on how much to put in, and then does it, rather than trying to wait for even more ducks to line up because Mr. Market seldom waits until everybody understands the story before it moves. And by the time you feel comfortable about it, it’s going to probably be moved quite a bit a ways away from where we are talking about it today.

Mike Gleason: Yeah, very well put, obviously we’re seeing a lot of this type of situation play out in the crypto world. A lot of people I’m sure are kicking themselves for not having gotten into Bitcoin $ 10,000-$ 15,000 ago on the price charts, but we could be looking at something very similar in metals. If you’ve got a conviction and you know that precious metals are the place that you need to be long-term to protect yourself, by all means, go by that conviction and make your moves.

Well, David, thanks so much for your time today and for enlightening us with your wonderful insights once again. I’ve certainly enjoyed having you on this past year, and wish you and your family a very Merry Christmas, and I look forward to catching up with you in the new year. Take care, my friend.

David Smith: Okay, take care, Mike, and I’ve enjoyed speaking with you too.

Mike Gleason: Well, that will do it for this week, thanks again to David Smith, Senior Analyst at The Morgan Report and regular columnist for MoneyMetals.com, and the co-author, along with David Morgan of the book, “Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave”, which is available at MoneyMetals.com and Amazon. Pick up a copy today.

And check back next Friday for our next Market Wrap Podcast. Until then, this has been Mike Gleason, with Money Metals Exchange. Thanks for listening and Merry Christmas everyone.

Precious Metals News & Analysis – Gold News, Silver News




The Coming Bull Market In Oil

To be a smart contrarian you need to have the confidence to dive into unloved areas of the market and sort through the rummage in search of asymmetric opportunities.

Our team at Macro Ops has been digging deep and has finally “struck oil” in the energy market.  

The popular narrative driving oil’s bear market over the last 3 years has consisted of two core ideas:

  1. Fracking has caused the supply of oil to explode.
  2. The adoption of electric vehicles is killing a huge source of oil demand.  

Combine increased supply with decreased demand and of course you’re going to get a drop in prices.

Though this remains the popular narrative, the latest underlying data is telling a different story. And as always investors are slow to react, creating an opportunity for us.

First off, the market is overstating oil’s supply growth.

OPEC’s recent decision to extend their current output agreement means production will hold steady into the end of 2018.

And production outside OPEC, Russia, and the US and Canada has been shrinking. Over the last year aggregate production as fallen by 0.3 mb/d. It’s expected this number will fall by another 0.1 mb/d in 2018 as well.

This puts pressure on US frackers to pick up the slack. For them to fill the gap they’ll need to grow their output by 20% in 2018.

But what we’re finding is that shale productivity growth is slowing at an alarming rate. This is because frackers have already pulled the easy oil from their tier 1 properties they’re now having to move on to less productive fields.

In addition, oil companies in the US and the rest of the world have significantly cut their CAPEX over the last 3 years.

Global oil and gas investment, as a percentage of GDP, has collapsed from a cycle high of 0.9% in 2014 to just 0.4% today.

That means CAPEX into future capacity is now less than half of what it was just a few years ago. This makes it one of the largest capex reductions in the global oil and gas space, in history.

At the same time, global oil demand is increasing.

And this will only accelerate as we progress further into the “Overheat” phase of the business cycle where commodity prices shoot higher.

You can see how well energy performs in the final years of a bull market in the chart below:

The result of this mismatch in supply and demand has caused inventories to fall drastically.

So what we have here is a market that believes there’s an ever-growing supply of oil faced with shrinking demand, when in reality, the opposite is true. Demand is growing and supply is shrinking which will cause prices rise.

As traders we’re rarely given scenarios where the market is so wrongly positioned. This is one of them.

The argument we’ve made here is just scratching the surface of our full oil thesis. In this month’s Macro Intelligence Report (MIR), we layout the evidence we’ve gathered that shows just how off the market is.

We’ll also show you exactly how we plan to play this oil reversal. We’ve got a basket of oil stocks that are primed to take off along with an options play on the commodity itself.    

And we’re not just covering oil either… we also have some key information about the financial and industrial sectors of the market that you’ll want to hear.

If you’re interested in riding these macro trends with us, then subscribe to the MIR by clicking the link below and scrolling to the bottom of the page:

Click Here To Learn More About The MIR!

There’s no risk to check it out. There’s a 60-day money-back guarantee. If you don’t like what you see, and aren’t able to profit from it, then just shoot us an email and we’ll return your money right away.

Like I said, blatant contrarian opportunities like this are rare. Don’t miss your chance to take advantage.

Click Here To Learn More About The MIR!

 

 

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Macro Ops




The War on Gold Intensifies: It Betrays The Elitists’ Panic And Coming Defeat – Part 2

Here is Part 2 of Stewart Dougherty’s “War on Gold” essay.  Here’s Part 1

Magicians use distraction, deflection and misdirection to conduct their tricks. They get their audiences to look to the left while they perform their magic undetected on the right. So do con artists and swindlers.

George H. W. Bush, in a speech delivered to a joint session of Congress on 11 September 1990 entitled “Toward a New World Order,” headlined a geopolitical theme that has garnered a great deal of attention ever since. And while Bush was not the first person to use the term, it struck a global nerve when he invoked it.

Bush’s speech about the New World Order deflected and misdirected the people’s attention to the left, and prevented them from seeing the real action that was taking place to the right: the imposition of a New World Central Banking Order throughout the west. This multi-country, supranational, autonomous, all-powerful, privately-controlled, for profit, non-auditable, monopolized, collusive, monetary leviathan has become what we call the Western Central Banking Dictatorship (WCBD).

This dictatorship, and we are not being pejorative, we are simply applying the standard definition of the word to what central banking actually is, operates throughout the broadly defined “west,” which includes: the United States, Canada, Mexico, the European Union, the United Kingdom, Japan, India, New Zealand and Australia. Certain African, Asian and South American countries also play lesser parts in the regime. Dictatorially ruled by this private monetary system are the hundreds of millions of citizens who must use Euros, Yen, Rupees, and United States, Canadian, Australian and New Zealand dollars to function in their daily lives, as these fiat currencies are all 100% controlled by the regime, and are subject to whatever actions, no matter how experimental or extreme (such as Quantitative Easing and negative interest rates), the controllers, in their sole discretion, decide to take.

One of the seven core principles of Inferential Analytics, the forecasting method we have developed and use, is that all phenomena represent Life Forces, and that all Life Forces ceaselessly work to expand, evolve, empower themselves, and conquer new terrain.

Some of the most powerful Life Forces on earth are the “isms.” One of today’s most rapidly evolving “isms’ is crony communism, the national operating system now metastasizing throughout western nations to replace its dying predecessor, crony capitalism. In this expanding system of crony communism, the cronies loot the capital that was produced by the dying capitalistic system, while the masses descend into communistic impoverishment, entrapment and despair. Crony communism is a system in which the forces of diabolism, greed and evil usurp and exploit state power for their own enrichment, empowerment and dominance, at the direct expense of the communized masses.

Relentlessly increasing wealth concentration combined with spreading impoverishment and paycheck to paycheck living are two glaring signs among many others that the Life Force of crony communism has entrenched itself throughout the west, and that it is evolving and advancing.

The enabling institution for the spread of crony communism is the WCBD, which is owned and operated by the Deep State crony elite, both of which are Life Forces of plunder and human exploitation.

To those who pay attention to fiscal, monetary, economic and financial realities, it is becoming clear, despite the current frenzy of propaganda to the contrary, that the existing system is failing. In the United States, to focus on one national example, massively underfunded pensions will collapse without equally massive bailouts; every government entitlement program is bankrupt, a fact publicly admitted by the programs’ respective government overseers; structural deficits are uncontrollable under current law and can only be contained if government promises are broken at extreme expense to the economy and people; debt at all levels is exploding and structurally, must continue to explode; mass financial stress is directly observable in such forms as street-level, in one’s face homelessness, fast-spreading tent cities, and teeming under-bridge communities; paycheck to paycheck and government welfare payment to government welfare payment living is now the norm for the vast majority of the population (for example, 78% of full time workers in the United States now live paycheck to paycheck; the financial condition of part time and unemployed persons is even more dire); the savings rate has plunged as people struggle to make ends meet or engage in financially disastrous “Eat, Drink and Be Merry” binge spending programmed into their brains by the MSM, which repeatedly tells them that things have never been better and they should go shopping; overall savings are non-existent or meaningless for the vast majority of the population; among many other signs of fiscal and financial decline.

The WCBD, which includes all western central banks, the World Bank, the IMF, the ESF and their consolidating organization, the intensely secretive, predatory, and frigid BIS, is fully aware that the system is failing. The United States Federal Reserve System alone employs hundreds of Ph. D. economists and statisticians, and it is literally impossible they do not comprehend that trillions more fiat currency units must be created out of nothing to keep the monetary system functioning. Further, it is impossible that these Ph. D.s and their management do not realize that ultimately, the very design of the fiat monetary edifice means that it must erupt into a hyperinflationary bonfire, exactly as it has repeatedly done throughout history. Every “fix” now being implemented, most particularly the new, frenzied fixation on GDP growth, is an urgent attempt deflect attention away from the structural impossibilities of the monetary system, and to buy time.

For years, people have realized that certain vital government statistics, such as employment, inflation, retail sales and GDP are manipulated to tell a comforting narrative that all is well in the land. Confidence is everything in debt-dependent, fiat currency-based, consumer-expenditure-addicted economies. But for some strange reason, very few people question the most important statistic of all: money supply. This is remarkable in light of the fact that long after the emergency measures taken to re-start the system during the Great Financial Crisis (GFC), we learned that the Fed had created, in total secrecy, trillions of dollars’ worth of currency swaps that were extended to foreign central banks in order to bail out the financial system. This was so far outside the Fed’s “Dual Mandate” that it beggared belief they had actually done it, let alone without any public or even intra-governmental disclosure whatsoever.

We believe that such secret GFC money creation is just the tip of the iceberg, and that the revelation of actual, as opposed to deliberately misstated money supply would dumbfound even the most sophisticated of financial observers and require a recalculation of virtually every financial and economic metric. All of which would massively deteriorate. We believe that this is one black swan among dozens that could ignite a broad-based flight into physical gold, as people rushed to monetary high ground for financial and personal safety.

On 27 June 2017, during the British Academy President’s Lecture Q&A Session in London, Janet Yellen made the following, now famous statement in answer to a question:

“Would I say there will never, ever be another financial crisis? You know,
that would probably be going too far, but I do think we are much safer, and
I hope that it will not be in our lifetimes, and I don’t believe it will be.”

Many observers chalked up this comment to central banker self-congratulation and boastfulness. Or, they assumed that Ms. Yellen was making a campaign statement to land a second term as Fed Chair. We viewed it differently.

We do not believe Yellen ever had any intention of serving a second term as Fed Chair, and that her “candidacy” was theater. Yellen, Fischer and Dudley, all of whom have gotten or are getting out, realize that the monetary and financial systems are rigged to the breaking point, and that when they fail, the fallout will be uncontrollable. They know the systems are rigged, because they rigged them, and don’t want to be anywhere near them when they blow apart. This helps explain the documented elitist fascinations with long range Gulfstream jets and New Zealand, among their numerous other escape vehicles.

If Yellen had said she was not interested in serving a second term, this would have indicated that something is seriously wrong, a message central bankers never send beforehand. Having admitted, as she has, that she and many of her colleagues no longer understand inflation, an appreciation of which is absolutely critical to the entire process of central banking, she also admitted that, like Fukushima, the monetary system is melting down and out of control. Therefore, she played the game of running for a second term, even though it was just an act.

In the second to last paragraph of her 20 November 2017 resignation letter, Yellen wrote:

“I am enormously proud to have worked alongside many dedicated and highly able
women and men, particularly my predecessor as Chair, Ben S. Bernanke, whose
leadership during the financial crisis and its aftermath was critical to restoring the
soundness of our financial system and prosperity of our country. I am also gratified
by the substantial improvement in the economy since the crisis. The economy has
produced 17 million jobs, on net, over the past 8 years and, by most metrics, is
close to achieving the Federal Reserve’s statutory objective of maximum employment
and price stability. Of course, sustaining this progress will require continued
monitoring of, and decisive responses to, newly emerging threats to financial and
economic stability.” [Our italics.]

This statement was an Inferential Analytics trigger, because we noted that she did not say, “if” there are “newly emerging threats to financial and economic stability.” [Cryptocurrencies/Bitcoin are seen as threat per Trump’s statement that Homeland Security was monitoring Thursday’s Bitcoin sell-off]

A second IA trigger was pulled when Jerome Powell, during his opening comments to the U.S. Senate Banking Committee reviewing his Fed Chair nomination, said the following on 28 November 2017:

“We must be prepared to respond decisively and with appropriate force to new and
unexpected threats to our nation’s financial stability and economic prosperity.”

Please note two things: 1) Like Yellen, he did not say “if” there are “new and unexpected threats to our nation’s financial stability and economic prosperity;” and, 2) the nearly identical language used by both.

To us, both Yellen and Powell are warning that “newly emerging financial threats to financial and economic stability” and “economic prosperity” are on the horizon. People might comfort themselves by saying, “That is always the case,” which is true. Endogenous and exogenous risks to complicated systems always exist. The problem is that when these threats manifest themselves, what can they do about them at this point, other than print massive quantities of new currency units, a so-called medicine that has become more toxic than the disease it attempts to cure.

Central bankers go to lengths to paint a rosy picture, because belief is everything when people are living in a fantasy, which an economy that is more than $ 200 trillion in debt all told, is. We therefore find it extraordinary that Yellen, on her way out, and Powell, on his way in are painting a dark picture by talking about “threats to financial and economic stability.” They would not be using these words if they did not know that something serious is on the horizon. They know, because the threats are of the WCBD’s direct making.

Regarding the specific comment Yellen made in London, we believe she was saying that the Fed in particular, and the WCBD in general, have now transferred the mechanisms perfected over the past 40 years to control precious metals prices, to western stock markets, in order to control their prices. The only difference being that while they have used sophisticated, computerized price manipulation techniques to push precious metals prices down, they are using the same techniques to push stock prices up.

Why? For four primary reasons: 1) To prevent the pension system from collapsing, which would bring down the entire economy and banking system with it; 2) To generate badly needed income and capital gains tax revenue; (Please keep in mind that most employee stock option gains are taxed as individual income, and result in top income tax rates being imposed; full, uncapped Medicare taxes being paid by both employee and employer; and, the Obamacare 0.9% Medicare surtax being collected. Therefore, such stock option gains represent a trifecta tax bonanza for the government. Additionally, capital gains over a minor threshold amount, which is not indexed to inflation, are now subject to the Obamacare 3.8% surtax, which the proposed “Repeal and Replace” House and Senate legislation never rescinded, evidence that the government is dependent upon the surtax revenue and will not let it go. As we can see, Republican legislators spoke with a forked tongue; while they said they hated Obamacare, they forgot to mention that they love its tax revenue and have no intention of parting with it); 3) To foster the “Wealth Effect,” and thereby stimulate consumer spending, which is critical to employment, corporate profits, corporate profit taxes and state sales taxes. In deliberately creating a consumer spending, as opposed to a production economy, the government and the citizens have become slaves to a low-to-zero savings, binge spending, consumer impoverishment economy, which is a Castle in the Air and a mirage that will fade; 4) To facilitate a high-intensity, big-dollar insider trading, front running and looting spree, via the dissemination of inside information to the elite regarding upcoming WCBD policy decisions and government economic reports, all of which move markets in predictable, sizable, and enormously profitable ways for those who can exploit them in advance. The surge in wealth inequality is not natural, and not an accident.

In addition to precious metals price controls and the legalization of bail-in banking, numerous other developments, such as the accelerated push to eliminate cash all suggest that the people are being elaborately set up for epic financial slaughter by the Deep State plunderers. The Deep Statists are intent on eliminating financial sanctuaries that are outside their bail-in dragnets. In past situations of this kind, gold has performed admirably in protecting wealth and, far more important, human lives.

We mentioned in Part 1 that there is a clue in the Financial Times article that demonstrates the statists’ fear that they cannot prevent broad scale interest in gold from developing among the people. The FT article argued that due to dealer commissions, physical gold is more expensive than its electronic counterpart. It also stated that physical coin dealers are dangerous because they are “exploitative” and “shady.” The conclusion the author reached for his dear readers to follow was this: “More gold will be traded electronically,” because if one is going to buy gold, electronic products are the better deal.

This is exactly what the increasingly concerned Deep Statists are trying to steer people into doing: buying electronic, not physical gold. They appear to realize that they might not be able to control the gold price for much longer, and that if the price gets away from them, the Cryptocurrency Effect will be activated in gold. If that happens, a price Vesuvius lies ahead. The volcano, they cannot stop. All they can do is misdirect the people’s money into their phony electronic gold products, to sterilize and control those funds. Then, when the price does explode, they will force customers to accept involuntary cash settlements and close out the electronic acounts. The customers will get fiat currency at the precise time when it is plunging in value, and the statists will keep any physical gold they might have purchased with customers’ funds.

As Sun Tzu said, in war, you must know the enemy and yourself if you intend to win. We hope that our article has helped readers know the enemy a bit better. The next task is to know yourself; to ask yourself, “Given what I know, what should I do?” In our opinion, and this is just our personal point of view, not an investment recommendation, which we are not licensed to provide, the fact that the Deep State elitists are stopping at nothing to discourage you from buying physical gold is the precise reason why you should buy it. And if this article has resonated with you, then you probably also believe, as we do, that the time to financially prepare yourself is getting short. The current intensity of price maneuvering and manipulation in a broad variety of markets implies that the center is losing hold, and that something wicked this way comes.

Stewart Dougherty is the creator of Inferential Analytics, a forecasting method that applies to events proprietary, time-tested principles of human instinct, desire and action. In his view, forecasting methods not fundamentally based upon principles of human action are unlikely to be reliable over time. He is a graduate of Tufts University (BA) and Harvard Business School (MBA). He developed expertise in strategic analysis and planning during a 35+ year business career, has traveled to and conducted research in over 25 countries and has refined Inferential Analytics into a reliable predictive instrument over a period of 17+ years

Investment Research Dynamics




The War on Gold Intensifies: It Betrays The Elitists’ Panic And Coming Defeat – Part 1

IRD is honored to present another guest post from Stewart Dougherty

Dictatorship (noun):  Definition #3:   absolute power or authority (Websters);
Def. #2:   absolute, imperious or overbearing power or control (Random House);
Def. #3:   Absolute or despotic control or power (American Heritage);
Def. #3:  Absolute or supreme power or authority (Collins English Dictionary);
Def. #1:  A type of government where absolute sovereignty is allotted
to an individual or small clique (Wikipedia).

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained, you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” Sun Tzu, The Art of War

In recent weeks, the War on Gold, which is a subset of the broader War on Human Freedom, has sharply intensified, with massive, multi-billion dollar naked short price raids now being launched on a weekly and even daily basis by the criminal, state-sponsored price manipulators. This escalation proves the supreme importance to the Deep State financial elite of the maintenance of their gold price dictatorship, which is a vital component of their long term, systemic campaign of financial plunder.

The elitists have no problems whatsoever with stratospheric stock and bond prices; 5,000 year low interest rates; $ 450 million Da Vinci’s; $ 250 million private homes; $ 50,000,000 annual salaries for circus masters, whose role in keeping the masses distracted and dumb is vital; $ 1.9 million Aston Martins; $ 100,000 Air Jordan sneakers, or any of the other prices that have now gone into outer space.

But there is one thing they will not accept: an honest, free market price for gold. Because while all debauchery under the sun is permitted and encouraged in the Castle of Fraud and Corruption they have constructed and in which they revel, one thing is strictly prohibited: the utterance of truth. Being monetary truth when free to speak, gold is their deadliest enemy. Therefore, it is silenced, in the same way truth tellers are silenced in all dictatorships.

The vast majority of people, aside from a small, enlightened minority who refuse to poison their minds by ingesting mainstream media (MSM) fake news, propaganda and brainwashing, do not yet realize what they are up against in the wars that have been declared against them, and are therefore at serious risk. For those who wish to survive the wars, there has never been a greater need to know the enemy and know yourself.

As the gold price war becomes manic, so has the MSM’s anti-gold propaganda campaign, with their attempts to smear gold now a clinical obsession.

In a prime example of their over-the-top anti-gold propaganda, on 10 November 2017, the Financial Times, a long-time Deep State bullhorn and puppet, ran an article entitled, “Gold is the new cocaine for money launderers.” In this screed, the author beat the dead horse of the NTR Metals gold import scheme. This operation, whose total dollar yield was an infinitesimal fraction of the massive sums stolen by the financial Deep Statists in their forty year gold price manipulation crime, was already the subject of an over-dramatized Bloomberg Businessweek propaganda piece published on 9 March 2017, entitled “How to Become an International Gold Smuggler.” Apparently, the MSM is running so short of new material with which to try to demonize gold, that it is now forced to recycle old, stale non-stories to keep the smear machine going.

In the article, the MSM propagandist states such things as: 2017 has seen, according to his one time Goldman Sachs source, a “dramatic crash in [physical gold coin] demand,” that interest in gold coins is linked to “political conservatism, or anarcho-libertarianism” and “end of the world right wing sentiments,” that gold has been implicated in a “conspiracy to commit money laundering,” that gold is “financed by people in the narcotics trade,” that it comes from “illegal mines and drug dealers in Peru, Bolivia and Ecuador,” that “the federal authorities assume the NTR Metals [case] represented only a fraction of illegally sourced and financed gold,” that therefore the US attorney is broadly investigating the gold industry, that gold is “produced by exploited workers,” that “crude [gold] extraction techniques create serious and lasting environmental damage,” that gold plays an important part in “tax evasion,” that it is related to American gun sales, which the author abhors; that “drug dealers [use] gold imports as a way of laundering their proceeds,” and that “they came to realize that illegal gold [is] an intrinsically better business” than drug dealing; to name but a few of the aspersions cast against gold in the short article. As we can see, when it comes to their smear jobs, the MSM flings at the wall all the mud it can fit in its hands, hoping that some of it might stick.

As is always the case with the MSM’s consistently negative, biased and dishonest reporting on gold, no mention was made in the article of the Deep State financial elite’s criminal gold price manipulation fraud that has been perpetrated non-stop for nearly forty years and that has resulted in a massive, $ 1,000,000,000,000.00+ theft from its victims. This is because the MSM is the Deep State’s in-house public relations agency, whose job is to whitewash the elitists’ crimes, no matter how egregious they are.

But buried in the article was an important clue that the Deep Statists are concerned they are losing the War on Gold, which we will further explore later in the article. It turns out that the Deep Statists’ paranoia about and rage toward gold might be entirely justified, because more than ever in the past 37 years, gold is poised to tell the world what it knows, and this will absolutely annihilate them.

Many people are completely baffled as to why, with so many serious fiscal, financial, monetary, economic, social, and geopolitical problems in the world, the Deep Statists remain so mono-maniacally fixated on demagogically denigrating gold and controlling its price.

The answer is that the Deep Statists cannot, under any circumstances, allow the price of gold to replicate the surging price of Bitcoin and other cryptocurrencies. If the gold price genie were to get out of the bottle, becoming international news in the process no matter how much the MSM might try to suppress it, it would spur a gold buying stampede that would cause a flood of money to pour out of bank accounts and into physical precious metals. $ 325+ billion worldwide now resides in cryptocurrencies, a highly specialized and complex product class. In the right set of circumstances, many multiples of that amount could incrementally flow into gold, a simple product that has been innately understood for millennia by human beings all over the globe.

Already fragile, the banking system cannot withstand a large scale withdrawal of funds. Being finite and in short supply, incremental demand for physical gold would result in immediate and sustained price gains, creating a positive feedback loop in the market place. As people watched the price go up, more and more of them would want to jump on the band wagon and participate in the gains, which is exactly what has happened in the cryptocurrency market.

If interest in gold goes mainstream, then basic supply fundamentals indicate the price would have to rise by thousands of dollars per ounce to even approach what might be considered overbought and/or bubble territory. Which is exactly what has happened to Bitcoin, whose price has exploded to over $ 10,500 as of today, 29 November 2017.

In the United States, the latest Federal Reserve Board tally of Household and Non-profit Organization (much of which is private) wealth totals $ 96.2 trillion. If a miniature, 1% sliver of this amount, $ 962 billion, attempted to find its way into the physical gold market, it would represent incremental demand, at $ 1,300 per ounce, of 740 million ounces. Not even a small fraction of this incremental demand would be available in the physical gold market at this time, given that it already operates at a supply / demand equilibrium. The gold price would have to surge in order to flush out supplies from current gold owners, whose hands have proven to be, and are likely to remain strong. We believe it would take years for incremental demand of this magnitude to be filled, even at much higher prices. Please keep in mind that this example relates to the United States, alone; there are additional, vast stores of private wealth all over the world, all of which would almost certainly be activated in unison by a run to gold.

With the right spark, the same viral, Social Media-enhanced demand that has come to cryptocurrencies could come to gold. The Deep Statists know it, and the ghostly whites of their eyes now glow eerily and blinkingly across the dark battlefield of Liberty, in the senseless war they provoked and are going to lose.

While there are now hundreds of cryptocurrencies, physical gold is physical gold, and cannot be replicated or conjured out of nothing. There will be no endless stream of new ICOs for genuine, physical gold, because gold is what it is and always will be. This means that funds flowing into gold will be forced into the one and only physical gold market that already exhibits tight, inflexible supply. This further means that the upward price pressure on gold could become volcanic if a run starts.

A steadily increasing number of people will want to get in on the “new Bitcoin,” a bizarre paradox given that gold is as old as time, and will soon realize that gold possesses virtues Bitcoin does not, given that it is real, not digital and abstract; that owners can personally possess and store it in physical form; that it will survive any kind of electric grid or Internet disruption that might occur; that it cannot ever be hacked; that it is the epitome of private, quiet wealth; that it is actually quite beautiful to behold; and that it was not and cannot be made by man, only by God, who does not appear to have any interest in making any more of it.

To date, in order to prevent a surge in physical gold demand from happening, the Deep Statists have created various forms of transparently fake gold, such as electronic gold futures, options and non-auditable ETFs and EFPs. These fake gold products have siphoned funds away from real, physical gold, which cannot be created out of the nothing the way the imposter electronic gold products can be. Increasingly, people are learning that there are no substitutes for physical gold.

More, we find it interesting that while there have been certain highly publicized condemnations of cryptocurrencies, such as J. P. Morgan Chase CEO Jamie Dimon’s comment that Bitcoin is a “fraud,” the financial authorities in the west have done little to nothing to shut down the crypto market. They seem to be just fine with $ 10,500 Bitcoin, but will stop at nothing to prevent $ 1,300 gold. Today’s (29 November) market action is a case in point.

The reason is that monetary elitists fully approve of cryptocurrencies, because this the new form of fiat currency the western banks intend to issue. Mass adoption of cryptocurrencies is the necessary forerunner to the elimination of cash, a well-known and important agenda for the financial elite. By issuing their own cryptocurrencies, and/or co-opting Bitcoin and other private cryptos via regulation and edict, central bankers can continue their tradition of controlling the money supply. A population that has learned the value of owning and become adept at trading physical gold would prevent central banks from continuing to use fiat currencies as economic, political and societal control mechanisms. It should be no surprise that they loathe gold so much; in its honesty and integrity, it is the exact antithesis of everything they stand for, are, and do.

Some people argue, “Even if people run to gold, their funds will still remain within the banking system, so the bankers aren’t worried about this happening.” In our opinion, this is wrong.

Fiat currency used to buy precious metals will move from personal and business bank accounts, to gold dealer accounts, to gold wholesaler accounts; and then to a variety of sovereign mint, gold precious metals refiner, gold miner and other gold supplier accounts, a large percentage of which are international.

A bank that hosts a deposit account used to purchase physical gold has no assurance whatsoever that the buyer’s funds will transfer into another personal or business account managed by it. In all likelihood, the funds will disappear from the host bank and not return. Ultimately, the likelihood is also high that a portion of the funds, potentially significant, will disappear from the country’s banking system altogether, given the global nature of gold mining, refining, minting and fabrication. Therefore, bankers regard a run to gold as a severe, direct threat to them, which is why they do everything in their power to discredit it and crush its price. They are attempting to prevent a run on their banks.

Over the past several years, the Deep Statists have gone to extraordinary lengths to internationally legalize bank “bail-ins.” They did not do this casually, by accident, or for fun; they did it because they know that when the system fails, a time-bomb guaranteed to detonate given the system’s very design, they will be able to make an unprecedented fortune by expropriating customers’ deposits via the elaborate bail-in mechanism they have engineered. They will use the phony pretext of “rescuing” and “resetting” the financial system for the public good to justify this action. If, before they spring the bail-in trap, depositors have already withdrawn their funds to purchase physical precious metals held outside the banking system, those funds will no longer be available for bail-in looting. The bankers cannot steal bank balances that have disappeared.

The cryptocurrency phenomenon, now an international sensation, has stunned them into the awareness that people all over the world have a deep, abiding, instinctive desire to own honest money of limited supply that will serve as a reliable store of value, and that cannot be hyper-inflated into oblivion for the private gain of plunderers and profiteers, the chief problem with corrupt, endlessly counterfeited fiat currencies controlled by self-interested, opportunistic, predatory central bankers and their controllers, the Deep State financial elite.

Due to the length of this article, we have divided it into two parts. This ends Part 1. In Part 2, which is already written and will be released in a few days, we will share with you important clues indicating the Deep State’s concerns about losing the War on Gold, despite the unprecedented intensification of their attacks. We will also discuss how the United States Federal Reserve is outright warning that new threats to financial and economic stability are on the horizon.

Stewart Dougherty is the creator of Inferential Analytics, a forecasting method that applies to events proprietary, time-tested principles of human instinct, desire and action. In his view, forecasting methods not fundamentally based upon principles of human action are unlikely to be reliable over time. He is a graduate of Tufts University (BA) and Harvard Business School (MBA). He developed expertise in strategic analysis and planning during a 35+ year business career, has traveled to and conducted research in over 25 countries and has refined Inferential Analytics into a reliable predictive instrument over a period of 17+ years

Investment Research Dynamics




The Size Of The Financial Avalanche Coming Grows Larger

Inflation vs deflation. The true economic definition of “inflation” is the rate of increase in the money supply in excess of the rate of increase in wealth output. Inflation is monetary in nature. Rising prices are the manifestation of inflation. Someone I follow on Twitter posted an ingenious example from which to conceptualize the true concept of inflation using the game of Monopoly:

The players all start out with reasonable amounts of money to speculate on real estate. As the game proceeds, players collect $ 200 by simply passing Go and use this money to speculate on real estate. By the end of the game, only $ 500 dollar bills are worth anything, the whole thing blows up, and most players end up destitute. In a twist of irony, an original game board sells for about $ 50,000.

A fixed amount of real estate and continuously increasing money supply, with “passing Go” functioning as the game’s monetary printing press. The monopoly analogy is readily applied to the current real estate market. The Fed tossed roughly $ 2 trillion into the mortgage market, which in turn has fueled the greatest U.S. housing bubble in history. The most absurd example I saw last week is a 264 sq ft studio in Los Angeles listed on 10/26 for $ 550,000. The seller bought it a year ago for $ 335,000. This is the degree to which Fed money printing and easy access Government guaranteed mortgages have distorted the system.

Here is monetary inflation as it is showing up in the stock market and housing markets:

The graphic above shows rampant credit-induced monetary inflation. On the left, home prices nationally are measured by the Case Shiller index going back the 1980’s. On the right is the S&P 500 going back to 1930. According to the Fed, real median household income has increased 5% between 2008 and the present. In contrast, based on Case Shiller, home prices nationally have soared 34% in the same time period.  Expressed as a ratio of average price to average household income, home prices are, at all-time highs in the U.S. This is the manifestation of rampant inflation in credit availability enabled by the mortgage “QE.” This growth rate in money and credit supply has far exceeded the tiny growth rate in average household income since 2008.

The stock market reflects the monetary inflation of the G3 Central Banks, primarily, plus global Central Bank balance sheet expansion. Please note that “balance sheet expansion” is the politically polite term for “money printing.” The meteoric rise in stock prices have never been more disconnected from the negligible rate of growth in nominal GDP since 2008. Real GDP has been, arguably, negative if a realistic inflation rate were used in the Government’s GDP deflator.

Inflation is not showing up in the Government CPI report because the Government does not measure inflation. The Government’s basket of goods is constantly juggled in order to de-emphasize the rising cost of goods and services considered to be necessities. In addition to the increasing cost of necessities like gasoline, health insurance and food, inflation is showing up in monetary assets. This is because a large portion of the money printed remains “inside” the banking system as “excess reserves” held at the Fed by banks. This capital is transmitted as de fact money supply via the creation credit mechanisms in the various forms of debt and derivatives. The eventual asset sale avalanche grows larger by the day.

Do not believe for one split-second that the U.S. has reached some sort of plateau of economic nirvana that will self-perpetuate. To begin with, it would require another round of even more money printing just to sustain the current bubble level. Read the inflation example above if that idea is still not clear. In 1927, John Maynard Keynes stated, “we will not have any more crashes in our time.” In the October 16, 1929 issue of The New York Times, famous economist and investor, Irving Fisher, stated that “stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.” Two weeks later the stock market crashed.

The above commentary is from last week’s Short Seller’s Journal. Speaking of the housing market, admittedly my homebuilder short positions are crawling up my pant-leg with fangs as the housing stocks have entered into the last stage of a parabolic “Roman candle” apex and burn-out. The homebuilders appear to be cheap relative to the SPX on a PE ratio basis – approximately an 18x average PE for homebuilders vs a 32x Case Shiller PE for the SPX.  However,  in relation to their underlying sales rate, earnings and balance sheet, the homebuilder stocks are more overvalued now than at the last peak in 2005.

While the homebuilders are are squeezing higher, I presented two “derivative” ideas in recent issues of the Short Seller’s Journal:  Zillow Group (ZG) at $ 50 in late June and Redfin (RDFN) at $ 28 in late September.  ZG just lost $ 40 today and RDFN is down to $ 21 (25% gain in 6 weeks). Both ZG and RDFN are “derivatives” to homebuilders because they derive most of their revenues from housing market-related ads, primarily real estate listings. Their revenues as such are “derived” from housing market sales activity. These stocks are overvalued outright. But as home sales volume declines, the revenue/income generating capability of the ZG/RDFN business model will evaporate quickly.  With home sales volume rolling over, the decline in the stock prices of ZG and RDFN relative to the “bubble squeeze” in homebuilder stocks validates my thesis.

If you want to learn more about opportunities to exploit this historically overvalued stock market and access fact-based market analysis, click here: Short Seller’s Journal info.

Investment Research Dynamics




The Mainstream Media Is Talking About A Coming Middle East War That Could Involve Saudi Arabia, Iran, The U.S. And Israel

People better start waking up and paying attention to what is happening in the Middle East, because the situation is becoming quite serious.  If things go badly, we could be facing a major regional war which would involve not only Saudi Arabia and Iran, but also potentially the United States and Israel.  Yesterday, I quoted an article in the New York Times that warned that tensions between the Saudis and the Iranians were raising “the threat of a direct military clash between the two regional heavyweights”.  And now Jake Novak of CNBC is saying that a “direct conflict between Saudi Arabia and Iran, as opposed to the proxy war they’re fighting in Yemen, looks inevitable.”

I put those last two words in bold so that there wouldn’t be any confusion.  In fact, Novak is warning that the Saudis “are marching ever closer towards a wider regional war”.  Novak understands the dynamics of the Middle East, and he realizes where things could be headed if cooler heads do not prevail.

Saudi Arabia and Iran have already been fighting proxy wars against one another in Syria and Iran for quite a while, but a direct military conflict between the two could literally be a nightmare scenario.

One of the primary characters in this ongoing drama is Saudi Arabia’s extremely hawkish crown prince Mohammed bin Salman.  He hates Iran with a passion, and he has already said that he believes that a peace dialogue with Iran is impossible.

And over the past several days, events in Saudi Arabia and Lebanon have moved talk of war to the front burner

First, the kingdom squarely blamed Iran for a missile attack on Riyadh from Yemen that was thwarted by the U.S.-made Patriot anti-missile system. The Saudis called that attack “direct military aggression by the Iranian regime and may be considered an act of war.”

Second, the Saudis accused Lebanon of — figuratively at least — declaring “war” against it because of aggression from Hezbollah. That statement spurred even Saudi ally and Egyptian President Abdel Fattah al-Sisi to publicly urge for calm.

In an article yesterday, I discussed the “purge” that is currently taking place in Saudi Arabia.  Many believe that this purge is all about removing any potential obstacles to a war with Iran.  Mohammed bin Salman and his father have made dealing with Iran their number one strategic priority, and they have even enlisted the Israelis as allies in their cause…

As is already well-known, the Saudi and Israeli common cause against perceived Iranian influence and expansion in places like Syria, Lebanon and Iraq of late has led the historic bitter enemies down a pragmatic path of unspoken cooperation as both seem to have placed the break up of the so-called “Shia crescent” as their primary policy goal in the region. For Israel, Hezbollah has long been its greatest foe, which Israeli leaders see as an extension of Iran’s territorial presence right up against the Jewish state’s northern border.

If Saudi Arabia and Iran go to war, it is probably inevitable that Hezbollah will strike Israel at the same time, thus getting the Israelis directly involved in the conflict.

Not only that, if a major regional war does erupt in the Middle East it would almost certainly mean that the U.S. would have to get involved as well.  Here is more from Jake Novak of CNBC

But if full blown war breaks out directly between the two countries, it’s hard to see the U.S. being able to sit it out without at least some form increased weapons support and other aid. Then it will be up to Iran’s possible allies, like Russia and China to make the next move.

If you are thinking that this sounds like the type of scenario that could cause World War III to erupt, you would be correct.

The Iranians and the Saudis both have weapons of mass destruction, and so a direct conflict between the two would seem to be unthinkable.

But rational thinking does not always prevail in the Middle East.  The conflict between Sunni Islam and Shia Islam has a long and bitter history, and the bad blood between the Saudis and the Iranians is never going to subside until one side or the other ultimately prevails.

Let us hope that a “hot war” between Saudi Arabia and Iran does not erupt any time soon, because such a war would not be good for the United States whatsoever.  Pretty much every scenario that you can imagine ends with enormous numbers of innocent people dead, and such a conflict could ultimately be the spark that sets off World War III.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Economic Collapse




Its Second Demographics D-Day Is Coming

D-Day.

Demographic death day.

Maybe not as bloody as the battlefield in Normandy but equally as devastating in the long term.

And Japan is facing its second one.

Japan’s Baby Boom started to slow down in 1942 coming into World War II and peaked – forever – in 1949 after soldiers came home from war and made a lot of babies.

It was the first major developed country to peak on a 47-year lag for spending in its economy. The effects of that first drop-off in births during WWII hit the country after 1989. The second, bigger hit arrived in 1997, and it has felt the negative effects ever since. Look at Japan’s Spending Wave below…Japan has been in an endless slowdown with ever-escalating QE ever since 1997.

Even when its millennial generation turned up mildly around 2003, and its stock market bottomed down 80%, it has only seen a rise back to 21,000 recently. That’s nowhere near its 39,000 peak in late 1989 (a peak we forecast, I’ll add, when we saw the first Demographic D-Day coming and warned of its massive stock and real estate bubbles bursting).

Well, Japan has a second D-Day coming after 2020, right after we likely endure a global market and economic collapse in the next two or three years.

Make no mistake about it: Japan is dying and its demographic decline will only get much worse again after 2020. So, any reprieve in its economy from endless stimulus and super-low interest rates will be short-lived.

Germany is the next to collapse demographically in Europe following Greece, Portugal, and Italy. Spain comes last, but with an equally bitter decline after 2025.

South Korea peaks the last for the East Asia “Tigers” in 2018.

When I lecture in South Korea, my summary statement is that “you are Japan on a 22-year lag.” That’s the difference between their Baby Boom peaks – 1949 and 1971.

Taiwan, in the chart below, also has already peaked and will see downtrends in consumer spending for decades. This started in 2008 already, but will accelerate after 2023.

The greater part of the developed world has peaked: Japan in late 1996, the U.S. in late 2007, most of Europe in late 2011… and now the rest of East Asia and Japan’s final demographic D-Day.

This is demographic destiny: The greatest global boom in history turns into the greatest bust. Yes! There are cycles in everything. Affluent, urban households have less kids and that reverses the very boom that they created.

If central bankers think they can offset these increasing demographic declines and unprecedented debt levels with “something for nothing” free money – they’re in for a nasty surprise!

Harry
Follow Me on Twitter @harrydentjr

The post Its Second Demographics D-Day Is Coming appeared first on Economy and Markets.

Harry Dent – Economy and Markets ()




The Retail Apocalypse We Saw Coming

It’s like a scene out of “Resident Evil.”

Sheets of newspaper scratch along the dusty linoleum floor as the wind beats them into the remnants of a bench… or through the open glass door and into the darkened, empty space beyond.

Escalators haven’t run in decades.

The air itself looks dusty.

Could this really be the future of the American mall?

Not unless we have a nuclear apocalypse!

As for this retail apocalypse you’ve been hearing so much about…

Well, it’s bad – yes! – and it’s going to get worse, but I’m writing today to tell you it was totally predictable!

In fact, just like we forecast that Harley Davidson would suffer, so too did we forecast that retail stores would take it in the nuts as the Baby Boomers moved along their predictable spending wave!

Yes, the retail, brick-and-mortar, industry is suffering because there are too many stores… because online shopping is growing exponentially… and because shoppers are “moving toward experience…”

Yes, Amazon stock price broke the $ 1,000 mark at the end of May.

Yes, the Dow is still just over 21,000 likely heading towards 22,000-plus after a near term correction. Investors still believe in the Trump magic wand of lower taxes and regulations that first, may not happen, and second will not be as big an impact as economists think because businesses are already over-expanded from the bubble boom and we are back at full employment with lower workforce growth ahead.

But there’s something so much bigger than all of these things going on, and everyone seems to be missing it!

For all the reports I’ve read on this issue… for all the analyses and insights… the mainstream media is missing what’s right in front of their noses!

The Atlantic came about as close to dammit as it could, yet still didn’t says it. The reporter wrote:

What’s up? Travel is booming. Hotel occupancy is booming. Domestic airlines have flown more passengers each year since 2010, and last year U.S. airlines set a record, with 823 million passengers. The rise of restaurants is even more dramatic. Since 2005, sales at “food services and drinking places” have grown twice as fast as all other retail spending. In 2016, for the first time ever, Americans spent more money in restaurants and bars than at grocery stores.

Yet retail stores across the country are dropping like flies.

I’ve got two words for this reporter and all the other knucklehead mainstream media:

Baby!

Boomers!

All these retail stores closing…

All these bankruptcies…

It was all baked into the cake when the massive Baby Boom generation peaked in its spending in late 2007.

First, they stopped spending so much on home furnishings (on a 48-year lag), and then they stopped spending as much on apparel in 2008, on a 47-year lag.

All predictable!

Here are three simple charts to prove it to you.

The first one is the overall consumer spending chart less housing to get a better fix on the retail sector, and that plateaus between age 40 when spending on housing peaks and age 51, when college tuition peaks.

We get this data from the annual Consumer Expenditures Survey.

Spending momentum starts to slow down after people peak in their house buying, at about 40 0n average. Into age 46, people spend more broadly and into 48 on cars, which they use to drive the kids before they leave the nest.

Affluent households spend a lot until they’re about 51 years old, pumping cash into their kids and college education.

The drop-off in overall spending is dramatic after age 51. The U.S. Baby Boomer generation started turning 51 in 2012, and in Europe they hit that age in 2016.

Knowing this is good, but knowing the finer details is better…

We know that spending on apparel and related services, like dry cleaning, peaks into age 47. That means that retailers would have begun feeling the pinch back in 2008.

And if you look back at the numbers, that’s exactly when they started to struggle!

Just look at this:

It’s no wonder that the major department stores, that focus on clothing, are declining!

Yes, online shopping has taken some of the pie, but for clothing retailers that’s not as much the case. Think about it: You can’t judge the quality of a fabric or design online. You can’t try the outfit on to see how it looks or our comfortable it is.

Returns are easier today than ever before, but clothes shopping online remains challenging… especially for the discerning, affluent female (and male) shopper. (I don’t by my clothes online!)

So, as the Baby Boomers continue on their march to old age, clothing retail stores like Macy’s and JCPenny will only suck more and more wind! I’d hate to be in that industry.

But then there’s the death knell for malls and department stores: The rise of Amazon and the e-commerce sector. In this case, not only demographics plays a role, but so does technology. Look at this chart!

When you take out auto sales (that will eventually move to the Internet, just not yet), e-commerce has grown to a whopping 28% in early 2017.

And Amazon is now looking at both going into groceries and prescription drugs!

Malls are dead! And the clothing and discretionary food purchases were the last stronghold.

What are we going to do with all these malls?

Let them go to ruin, like something out of a “Resident Evil” movie?

Turn them into amusement parks, like in China?

One things for sure, keep clothing retailers and malls out of your investment portfolios, unless you’re shorting them. In which case, John Del Vecchio, our resident short-seller, can help you.

 

Harry
Follow me on Twitter @harrydentjr

P.S. Do you buy clothes online or in the brick and mortar stores? How about your groceries? Write to me at economyandmarkets@dentresearch.com or visit our Facebook page and send us a message!

The post The Retail Apocalypse We Saw Coming appeared first on Economy and Markets.

Harry Dent – Economy and Markets ()




Legendary Investor Jim Rogers Warns That The Worst Stock Market Crash In Your Lifetime Is Coming ‘This Year Or Next’

If Jim Rogers is right, the worst stock market crash that any of us has ever seen is right around the corner.  For the past 15 years, Rogers has been a frequent guest analyst on CNBC, Fox News and elsewhere, and he is immensely respected for the depth of knowledge and experience that he brings to the table.  So the fact that he is warning that we are about to see the worst stock market crash in any of our lifetimes is making a lot of waves in the financial community.  And of course Rogers is far from alone.  Previously, I have written about several other prominent experts that are warning that a new financial crisis is imminent, and I have also discussed how a number of big investors are quietly positioning themselves to make an enormous amount of money when the markets crash.  Could it be possible that all of these incredibly sharp minds could be wrong?  Yes, but I wouldn’t bet on it.

I was actually quite stunned when I first learned what Jim Rogers had told Henry Blodget of Business Insider during a recent interview.  Rogers has built up a tremendous amount of credibility, but now he is putting that credibility on the line by warning that a great stock market crash will happen by the end of next year.  Here is the key portion of the interview

Blodget: Well, yeah, TV ratings do seem to go up during crashes, but then they completely disappear when everyone is obliterated, so no one is hoping for that. So when is this going to happen?

Rogers: Later this year or next.

Blodget: Later this year or next?

Rogers: Yeah, yeah, yeah. Write it down.

There is no backing out of a statement like that.

If Rogers is wrong, he will never hear the end of it.

Subsequently, Blodget and Rogers also discussed how severe the coming crisis would be…

Blodget: And how big a crash could we be looking at?

Rogers: It’s going to be the worst in your lifetime.

Blodget: I’ve had some pretty big ones in my lifetime.

Rogers: It’s going to be the biggest in my lifetime, and I’m older than you. No, it’s going to be serious stuff.

So that means that Rogers is convinced that the coming crisis is going to be even worse than what we went through in 2008.

Of course this is something that I have been warning about for quite a while, but for Jim Rogers to make a statement like this is a really, really big deal.

Later in the interview, Rogers shared more details about what he believes the coming crisis will look like…

You’re going to see governments fail. You’re going to see countries fail, this time around. Iceland failed last time. Other countries fail. You’re going to see more of that.

You’re going to see parties disappear. You’re going to see institutions that have been around for a long time — Lehman Brothers had been around over 150 years. Gone. Not even a memory for most people. You’re going to see a lot more of that next around, whether it’s museums or hospitals or universities or financial firms.

That definitely sounds like an “economic collapse” to me.  Of course the truth is that the U.S. economy is already in the midst of a slow-motion economic collapse that stretches back for decades, but this coming crisis that Rogers is talking about is going to great accelerate matters.

Let us hope that it is put off for as long as possible, but at some point we are simply going to run out of time.

And when markets do start falling, they can move very, very rapidly.  Just look at what happened on Friday.  Technology sector stocks were down 2.7 percent, and the FAANG stocks were some of the biggest movers

Facebook fell $ 5.11, or 3.3%, to $ 149.60.

Apple fell $ 6.01, or 3.9%, to $ 148.90.

Amazon fell $ 31.96, or 3.2%, to $ 978.31 now demoted from the elect group for 4-digit stocks back to the large group of 3-digit stocks.

Netflix plunged $ 7.85, or 4.7%, to $ 158.20.

Alphabet – the G in FAANG – fell $ 33.58, or 3.4%, to $ 952.23, moving further away from everyone’s dream of closing at $ 1,000.

If we are indeed moving toward a new crisis, one of the things that we will want to watch for is an inverting of the yield curve.

We saw this happen in 2000 and in 2006, and on both occasions it foreshadowed that a huge stock market crash was coming in the not too distant future.

Unfortunately, CNBC says that a new inversion of the yield curve could happen “by the end of this year”…

The bounce in Treasury yields witnessed after the election of Donald Trump is now decaying in the D.C. swamp. If the Federal Reserve continues to ignore this slow growth and deflationary signal from the bond market and continues along its current rate hiking path, the yield curve will invert by the end of this year and an equity market plunge and a recession is sure to follow.

An inverted yield curve, which has correctly predicted the last seven recessions going back to the late 1960’s, occurs when short-term interest rates yield more than longer-term rates. Why is an inverted yield curve so crucial in determining the direction of markets and the economy? Because when bank assets (longer-duration loans) generate less income than bank liabilities (short-term deposits), the incentive to make new loans dries up along with the money supply. And when asset bubbles are starved of that monetary fuel they burst. The severity of the recession depends on the intensity of the asset bubbles in existence prior to the inversion.

Another key indicator is the growth of commercial and industrial loans. According to Zero Hedge, this indicator has correctly foreshadowed every single recession since 1960…

While many “conventional” indicators of US economic vibrancy and strength have lost their informational and predictive value over the past decade (GDP fluctuates erratically especially in Q1, employment is the lowest this century yet real wage growth is non-existent, inflation remains under the Fed’s target despite its $ 4.5 trillion balance sheet and so on), one indicator has remained a stubbornly fail-safe marker of economic contraction: since the 1960, every time Commercial & Industrial loan balances have declined (or simply stopped growing), whether due to tighter loan supply or declining demand, a recession was already either in progress or would start soon.

So considering the fact that this indicator has been so accurate, it is extremely alarming that we could see our “first negative loan growth” since the last financial crisis “in roughly 4 to 6 weeks”

After growing at a 7% Y/Y pace at the start of the year, which declined to 3% at the end of March and 2.6% at the end of April, the latest bank loan update from the Fed showed that the annual rate of increase in C&A loans is now down to just 1.6%, – the lowest since 2011 – after slowing to 2.3% and 1.8% in the previous two weeks.

Should the current rate of loan growth deceleration persist – and there is nothing to suggest otherwise – the US will post its first negative loan growth, or rather loan contraction since the financial crisis, in roughly 4 to 6 weeks.

And when you throw in all of the other signs that the U.S. economy is slowing down, a very clear picture begins to emerge.

It has been said that those that do not learn from history are doomed to repeat it.  As a society, we certainly didn’t learn much from the horrible financial disaster of 2008, and now so many of the exact same patterns are repeating once again.

An unprecedented financial crisis is most definitely heading our way, and the only thing left to be answered is how soon it will get here.

The Economic Collapse