Exciting 2018 for Gold/Silver; Rickards: Next Financial Panic Will Be the Biggest of All, Part 1

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

Coming up we’ll hear another amazing interview with Jim Rickards. Jim examines what the next financial crisis will look like and how it will be different from previous panics, gives us his outlook for gold and the key drivers for the yellow metal in part one of a tremendous two-part interview. Don’t miss my conversation with Jim Rickards, coming up after this week’s market update.

As the White House and Congressional leaders scramble to avert a government shutdown, investors are bracing for possible market gyrations. Historically, government shutdowns have tended to produce only minor selling in the stock market – in part because no essential functions of government ever actually shut down.

It’s a wonder more taxpayers don’t question why non-essential government programs exist in the first place. In any event, there’s no serious talk in Congress of cutting spending. The political theater currently playing out is all about which side will get more of the funding they’re demanding for their respective programs.

Well, at least taxpayers can enjoy a little more take-home pay this year as tax cuts go into effect and many large corporations pay bonuses and hike wages and salaries to employees. This week Apple announced it would repatriate tens of billions of overseas dollars back to the U.S. in response to more favorable tax treatment here.

For the first time in many years, stimulus that had been mainly inflating equity values is hitting the real economy. Also for the first time in many years, wage inflation and broader inflationary pressures are hitting the real economy. Cash infusions into the hands of consumers are great while prices for food, energy, and consumer goods remain cheap. But more dollars in consumers hands chasing limited quantities of stuff will translate into higher prices down the road.

Crude oil and other key commodities have been quietly marching higher over the last few months. Precious metals markets have yet to break out of their 2017 trading ranges, but recent strength in gold has prices approaching a potential breakout level at $ 1,350 per ounce although, it did pull back some on Thursday.

Gold currently checks in at $ 1,327 after slight decline of 0.9% as of this Thursday evening recording. Gold entered 2018 with some stealth buying momentum. Gold exchange traded fund holdings rose 8.4% in 2017, their best showing since 2009.

Turning to silver, prices are down 1.8% for the week as of Thursday’s close to trade at $ 16.97 an ounce.

Bitcoin prices swung wildly this week on fears over new European Union regulations and hard questions being raised about whether its bubble is bursting. The crypto-currency plummeted from above $ 14,000 to below $ 10,000 mid week before recovering

You won’t see this kind of volatility in gold – except possibly toward the end of a mania phase. The last true gold mania took place nearly four decades ago. In fact, gold prices reached their peak of $ 850 an ounce on January 21, 1980 – almost exactly 38 years ago to this day.

Of course, the yellow metal posted a more recent high of over $ 1,900 back in 2011. But that move never reached manic levels. Yes, prices greatly exceeded the 1980 peak in nominal terms. But in real terms by various measures, gold never got back to 1980 levels.

Certainly not when measured against the Dow Jones Industrials. At the 1980 peak, gold reached a 1 to 1 ratio with the Dow. In 2011, it only got up to one-sixth of the level the Dow was trading at. Today gold trades at just one-nineteenth of the Dow, which sits at a whopping 26,000.

The potential of gold to trade at $ 26,000 an ounce may seem remote…or even far-fetched. But in the next financial crisis, it’s quite likely that gold prices will dramatically close their existing gap with the stock market. Many top analysts, including our special guest this week Jim Rickards, see $ 10,000 gold as plausible…or even likely. A significant retreat in the Dow from its current heights is also likely at some point in the future.

In a true mania phase for precious metals, gold and silver will be all over the news much like Bitcoin is today. Trend chasing speculators will drive huge daily price moves in metals. Demand for coins will be so hot that we will probably have difficulty keeping any products in stock. We will probably have to pass along the much higher premiums throughout the supply chain to our customers.

As a business, we’re happy to buy OR sell bullion regardless of price, as long as there’s a market to be made. Whatever kind of metals transaction you do with Money Metals Exchange, you benefit from our deep sources in the industry, our high volume, and our pricing power.

But as fellow precious metals investors, we’d strongly encourage listeners to be buyers now – while product is plentiful, premiums are low, and spot prices are relatively low too. That’s especially true when you look at the lofty prices of most other assets – whether it be stocks, real estate, or crypto currencies.

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

Jim Rickards

Mike Gleason: It is my great privilege now to be joined by James Rickards. Mr. Rickards is Editor of Strategic Intelligence, a monthly newsletter and Director of the James Rickards Project, an inquiry into the complex dynamics of geopolitics and global capital. He’s also the author of several bestselling books including The Death of Money, Currency Wars, The New Case for Gold and The Road to Ruin. In addition to his achievements as a writer and author, Jim is also a portfolio manager, lawyer and renowned economic commentator, having been interviewed by CNBC, the BBC, Bloomberg, Fox News and CNN, just to name a few. And we’re happy to have him back on the Money Metals Podcast.

Jim, thanks for coming on with us again today. We really appreciate your time as always and how are you?

Jim Rickards: I’m doing great Mike, great to be with you. Thank you.

Mike Gleason: Well Jim, I figure a good place to start here is with one of your most recent books. We want to get your take on the state of the world economy. In your book titled The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis, you make some very interesting comments. Now while the financial media is talking about booming stock markets and accelerating GDP growth, you aren’t quite as optimistic. We both know that most of the growth we’ve seen in recent years has been built with huge amounts of central bank stimulus and the fundamental problems that drove the last financial crisis have hardly been resolved. In fact, you think the next financial catastrophe isn’t too far away and many among the elite are getting ready for it. If you can, briefly lay out some of what you’ve been seeing.

Jim Rickards: Sure Mike, you touched on two different threads. One is, let’s call it the short to intermediate term, which is how’s the economy doing? What would the forecast be for the year ahead? What do I think about stocks and so forth? That’s one part of the analysis, but the other one is a little bigger and a little deeper, which is what about another major financial crisis, a liquidity crisis, global financial panic and what would the response function be to that.

Let me separate. They’re related because, I mean the point I always make is that there’s a difference between a business cycle recession and a financial panic. They’re two different things. They can go together, but they don’t have to. For example, October 29, 1987, the Stock Market fell 22% in one day. In today’s Dow terms that would be the equivalent of 5,000 Dow points, so we’re at 26,000 or whatever, as we speak, a 22% drop would take it down about 5,000 points. You and I both know that if the Dow Jones fell 500 points that would be all anybody would hear about or talk about. Well, imagine 5,000 points. Well, that actually happened in percentage terms in October 1987. So, that’s a financial panic, but there was no recession. The economy was fine and we pulled out of that in a couple of days. Actually after the panic, it wasn’t such a bad time to buy and stocks rallied back. Then, for example in 1990, you had a normal business cycle recession. Unemployment went up. There were some defaults and all that, but there was no financial panic.

In 2008, you had both. You had a recession that began in 2007 and lasted until 2009 and you had a financial panic that reached a peak in September-October 2008 with Lehman and AIG, so they’re separate things. They can run together. Let’s separate them and talk about the business cycle. I’m not as optimistic on the economy right now. I know there’s a lot of hoopla. We just had the big Trump Tax Bill and the Stock Market’s reaching all time highs. I mean, I read the tape. I get all that, but there are a lot headwinds in this economy. There’s good evidence that the Fed is over-tightening.

Remember the Fed is doing two things at once that they’ve never done before. They’re raising rates. I mean, they’ve done that many times, but they’re raising rates, but at the same time, they’re reducing their balance sheet. This is the opposite of QE. I’m sure a lot of listeners are familiar with QE, Quantatative Easing, which is money printing. That’s all it is. And they do it by buying bonds. Then when they pay for the bonds from the dealers, they do it with money that comes out of thin air. That’s how they expand the money supply. Well, they did that starting in 2008 all the way through until 2013, and then they tapered it off and the taper was over by the end of 2014, but they were still buying bonds. So, that was six years of bond buying. They expanded their balance sheet from $ 800 billion to $ 4.4 trillion.

Well, now they’re putting that in reverse. They grabbed the gear and they shifted it into reverse and they’re actually not dumping bonds. They’re not going to sell a single bond, but what happens is, when bonds mature, the Treasury just sends you the money, so if you bought a five-year bond five years ago and it matures today, the Treasury just sends you the money. Well, when you send money to the Fed, the money disappears. It’s the opposite of money printing. So, the Fed’s are actually destroying money, actually reducing the money supply, so they’re raising rates and destroying money at the same time. It’s a double whammy of tightening and I don’t believe the U.S. economy’s nearly as strong as the Fed believes. They rely on what’s called the “Phillips Curve,” which says unemployment’s low, that’s a constraint and wages are going to go up and inflation is right around the corner. And that’s part of the reason they’re tightening, but there are a lot of flaws in that theory.

First of all, the basic Phillips Curve theory is junk. It’s just not true. We saw that in the late ’70s when we had sky high unemployment and sky high inflation at the same time. We’ve also seen it recently when we’ve had low unemployment and disinflation at the same time. So, you start by saying the Phillips Curve is junk, but even if you thought there was something to it, there’s so many problems with it in terms of labor force participation demographics, debt deleveraging, technology, et cetera, that it just doesn’t apply under the current circumstances.

So, the Fed’s are tightening for the wrong reason. They are tightening at the wrong time and there’s a lot of evidence that a lot of the growth in the fourth quarter was consumption driven, but that was debt driven. People charged up their credit cards, consumer debt spiked. The savings rate is near a very long-term low. It doesn’t look sustainable, so lots of reasons to think that the Fed’s going to overdo it, get it wrong, tighten, throw the economy either into a recession or very low growth with disinflation, so I’m just not buying the inflation “happy days are here again” story.

There’s also good reason to believe that the Tax Bill will not be as stimulative as people expect. All that’s truly going on is the running up the deficit by another trillion dollars and we’re already way into the danger zone and then that’s actually a drag on growth. So, there’s a good reason to think the economy is going to slow, that by itself would take the wind out of the Stock Market and close it at the potentially very serious Stock Market correction, at least 10%, maybe as much as 20%. We’re talking about going down as I say 5,000 or 6,000 points on the Dow before the end of the year, so that’s one scenario.

The scenario I talk about in my book really involves a financial panic. Now, the thing there is that these are not that rare. I already mentioned the one, really two-day panic in 1987, but in 1994 you had the Mexico Tequila Crisis. In 1997, you had the Asian Peninsula Crisis. In 1998, you had the Russia Long-Term Capital Management Crisis. In 2000, you had the dot.com meltdown. In 2007, the mortgage meltdown. In 2008, the financial panic. These things happen every five, six, seven years, not like clockwork, but that’s a typical tempo for these kinds of meltdowns and it’s been nine years since the last one. So, nobody should be surprised if it happens tomorrow. I’m not predicting it will happen tomorrow. I’m just saying nobody should be surprised if it does, whether it’s tomorrow, or next month or next year, or even a year and a half from now, don’t think for one minute that we’re living in a world free of financial panics.

By the way, these two things could happen together. You could have a slowdown that leads to a financial crisis, a replay of 2008. But here’s the difference and this is really the point of your question, Mike. In 1998, we had a financial panic and Wall Street got together and bailed out the Hedge Fund Long Term Capital Management. In 2008, we had a financial panic and the Central Banks got together and bailed out Wall Street, so each bailout gets bigger than the one before it. In the next panic, whether it’s this year or next year, who’s going to bail out the Central Banks. In other words, each panic’s bigger than the one before. Each response is bigger than the one before going down this chronological sequence.

The next one is going to be the biggest of all. It’s going to be bigger than the Central Banks and you’re only going to have one place to turn. If you had to get global liquidity right now, the Fed’s at that one and half percent in terms of the target Fed funds rate, so they most they could cut is one and a half percent to get back to zero. There’s good evidence that to get the U.S. economy out of a recession, you have to cut interest rates three or four percent. Well, how can you cut them three percent when you’re only at one and a quarter, one and a half percent. Well, the answer is you can’t, so then what’d you do? Well, then you go to QE, but they already did that.

They haven’t unwound the QE. They started to and that’s what I mentioned, but they haven’t unwound it. The balance sheet is still around four trillion dollars, so what’d going to go to eight trillion, twelve trillion? I mean, some people would say, “Yeah, what’s the problem.” Those are the modern, monetary theorists, Stephanie Calvin, Paul McCulley, Warren Mosler. There’re a bunch of them that think that there’s no limit in the amount of money the Fed can print, but there is a limit. It’s not a legal limit. Legally the Fed could do it, but there’s a psychological limit. There’s an invisible competence boundary that you cross when people just say “You know what, I’m out of here. Get me out of dollars. Get me into gold, silver, fine art, land. Whatever. Crypto-currencies, if you like. Whatever it might be, but get me into something other than dollars because I’ve lost confidence in the dollar.” And we’ve seen that before also.

So, putting that all together, in the next financial panic and nobody should be surprised if it happens tomorrow, it’s going to be bigger than the Central Banks. They’re going to have to turn to the IMF for liquidity. The IMF has a printing press also, that’s the International Monetary Fund. They can print this world money called the Special Drawing Right of the SDR, so yeah, they can pull trillions of SDRs worth trillions of dollars. One SDR is worth about $ 1.50. They could pull trillions of SDRs out of thin air and pass them around, but here’s the point and I spoke to Tim Geithner about this, former Secretary of the Treasury. It takes time.

The last time they did this … and by the way, it went completely unnoticed, the panic was in ’08 and in August and September of 2009, the IMF did issue SDRs to help with global liquidity, but that was almost a year after the panic. The point is, the IMF is slow and clunky. It’s not the fire department. I mean, they might be like a construction crew that can come in and put in a new foundation, but they’re not the fire department that can help you when the building’s burning down.

So, what they’re going to have to do is what I call Ice 9.They’re going to have to freeze the system. First, starting with money market funds, then bank accounts, then stock exchanges, they might reprogram the ATMs to let you have $ 300 a day for gas and groceries. They’ll say, “well, why do you need more than $ 300 a day to get some food and gas in your car? Why do you need more than that? We can’t let you take all your money out of the bank. We can’t let you take your money out of the money market funds. We can let you sell your stocks.” And I describe all this in the book in detail with a lot of endnotes. You don’t have to read the endnotes unless you want to, but this is all documented. It’s all publicly available. It’s not some science fiction scenario. This plan is actually in place and I describe how.

Just to wrap up, I expect a weaker economy than the mainstream in 2018. Perhaps, a stock market crashing based on that alone. I also expect another financial panic. It’s impossible to say when, but eight years on, nine years on, I would say sooner than later. And this response function is going to be something that people haven’t seen since the 1930s.

Mike Gleason: Now, let’s talk specifically about gold, safe haven assets, including metals are way of vogue these days, at least among the mainstream public. Now, most investors likely will be flatfooted and probably won’t see the next financial crisis coming just like the one in 2008, until it’s too late. Confidence in the U.S. dollar and the financial system is hard to shake without plenty of good evidence that both are in trouble. We’re even seeing some gold bugs beginning to lose faith. They know that there is plenty of risk out there that you just laid out, but they are growing tired of watching just about everything outperform precious metals. What are you saying these days to people who might be thinking about selling gold and say, joining the party in the stock markets?

Jim Rickards: Well, let me spend some time on that, but just to say a kind word about the people you’re describing. Look, gold just finished a four-year plus bear market. It lasted from August 2011 to December 2015. In that bear market, gold went down about 45% peak to trough, and if you use the about $ 240 price from 1999 and just scale that up to $ 1,900 and then back down again to $ 1,050, which is where it was in December 2015, that was a 50% retracement. And by the way, my friend Jim Rogers, one of the greatest commodities traders in history, co-founder of the Quantum Fund with George Soros, a legendary commodities trader, he said to me … and he has a lot of gold. He expects gold to go much higher, as do I, but he said, Jim, “Nothing goes from here to there.” Meaning, he’s reaching way up to the sky up into outer space. He says, “Nothing goes from here to there without a 50% retracement along the way.”

And I think that was very good advice. Well, okay, but we’ve had the 50% retracement. That’s behind us. We’re in a new bull market now. There was a bull market from August 1971 to January 1980 and gold went up over 2,000%. From January 1980 to August 1999, there was a very long, 20-year grind it down bear market, and gold went down about 70%. Then you had a new bull market that lasted from August 1999 to August 2011 and in that 12-year bull market, gold went up over 700%. Then you had another bear market from August 2011 to December 2015 and as I said, gold went down 45%. We’re in a new bull market. It started in December 2015.

Now, here are the facts, gold goes up and down. Lead’s volatile and we know there’s manipulation. People get discouraged and they buy gold and then some hedge fund or China comes along in the gold futures market and slams the price down. “Oh, gee, why did I buy it?” I get all that. I understand the discouragement. I understand how difficult it is to watch stocks go up and Bitcoin go up and I’m sitting here with gold and it just seems to be going sideways, but it’s not true. In 2016, gold went up over 8%. In 2017, gold went up over 13%. So far in 2018, gold is up 3%. You take the entire period from the bottom of the last bear market to the beginning of the bull market, December 2015 to today, gold is up over 25%. It’s been one of the best performing asset classes of all the major asset classes. It’s not crazy like Bitcoin, but Bitcoin’s collapsing, which I also predicted some time ago.

So, the truth of the matter is 2016-2017 are the first back-to-back years of gold gaining since 2011-2012, although at that point, it was already off the top. It’s more a statistical anomaly that gold went up in the year 2011. Yeah, it did, but it was way down, way off the peak in September of that year. But now we have two back-to-back years of gold going up very significantly. We’re in year three, 2018, is year three of this bull market. It’s off to a very nice start. The fundamentals are good. Their technicals are good. The supply and demand situation is good. We haven’t even gotten into other potential catalysts, including War with North Korea, loss of confidence in the dollar, financial panic. Even a normal business cycle recession or if inflation gets out of control, there’s just a whole list of things that are going to drive gold higher.

And the last point I want to make, Mike, is that gold is doing this performance against headwinds. The Fed has been raising rates. When you raise nominal rates and you tighten real rates, that’s normally a very difficult environment for gold and yet, gold’s going up anyway. Can you imagine what’s going to happen when the Fed has to back off… because right now, as I said, they’re over-tightening. When this economy slows, and that data starts rolling in later in the first quarter and early second quarter of 2018, the Fed’s going to do what they call “pause.” It doesn’t mean they’re going cut rates. That’s somewhere down the road, but they pause, which means that they …

Right now, they’re like clockwork. They’re going to raise every March, June, September, December – 25 basis points each time, boom, boom, boom, boom like clockwork. But, every now and then they don’t. They skip. They pause. Well, if your expectation is they’re going to raise and then they don’t, they pause, that’s a form of ease. It’s ease relative to expectations. That’s what’s going to happen later this year. All of a sudden, this headwind’s going to turn into a tailwind and gold’s going to get an even bigger boost. I see it going to $ 1,400 over the course of this year, perhaps higher. My long-term forecast for gold, of course, is $ 10,000 an ounce, but that’s … and I’m not backing away from that. That’s just simple math. That’s the implied noninflationary price of gold if you need to use gold to restore confidence in a monetary system in a financial panic or liquidity crisis where people have lost confidence. That’s not some made up number. That number is actually fairly easy to calculate, but you don’t go there overnight. You got to get to $ 2,000 and $ 5,000 before you get to $ 10,000.

I think right now, we’re in a new bull market. It’s going to run for years. We’ve got that momentum. We’re off the bottom, but people are always most discouraged at the bottom, right? Well, that’s the time you should buy. It’s just human nature. I’m not faulting anyone. I’m not criticizing anyone, it’s just human nature to say, “Oh man, I’m so beaten down. I’m so sick of this. I’m so tired of this.” Well, that’s usually the time to buy and guess what, it is.

Well I hope you enjoyed the first half of my interview with Jim Rickards. Be sure to check back next week for the explosive conclusion. Well that will do it for this week, thanks for listening. Until next time this has been Mike Gleason with Money Metals Exchange and have a great weekend everybody.

Precious Metals News & Analysis – Gold News, Silver News




Can We Make Sound Financial Decisions Anymore?

I.

Hate.

Central.

Banks.

Loathe them.

They’ve hijacked our economy and the markets and taken away all our power to make sound financial, investment, and business decisions.

Sure, you’ve got to hand it to them: they pulled us away from a depression, thanks to their trillions in stimulus. I mean, QE has had a huge impact on the economy. Two percent growth isn’t great, but it’s a hell of a lot better than a depression.

But in the process, they’ve separated the economy and markets from any fundamentals.

There’s no rhyme or reason why the markets should be as high as they are, yet we are, Dow breaking 26,000…

Demographically, the economy should be slowing down – with the exception of the blip in births that recently hit on a 46-year lag, yet here we are…

Companies aren’t making productive investments in their businesses. Rather, they’re buying back shares, and so prices go up…

Worst of all, there’s no precedent here. There’s nothing to look back on and say, “well this is what happened before, so here’s what we can expect!”

Essentially, there’s no way to make sound financial, investment, or business decisions anymore because the tools we could once use are now useless.

So, in my latest video, I talk about this and explore what kind of world we face ahead. Do demographics matter anymore? What about other fundamentals? Watch now.

The post Can We Make Sound Financial Decisions Anymore? appeared first on Economy and Markets.

Harry Dent – Economy and Markets ()




A Return to Financial Sanity?

Financial sanity and stability may not return, but we can protect our assets and learn from the discussion.

The DOW, S&P500, NASDAQ and other markets sell at all-time highs. However, many imbalances exist within our financial world.

This is not new – things have been crazy before, are now, and will be again. But to regain financial sanity we need:

From “Doug Casey on the New Fed Chair

“In an ideal world there would be some radical changes. The best thing for the US in the (famous) long run is to go “cold turkey.” To abolish the Federal Reserve, fire its thousands of employees with their worthless PhDs. Return to 100% reserve banking with a strict separation of demand and time deposits. Depoliticize money by using gold, not Federal Reserve Notes. And default on the national debt, which is rewarding crony capitalists, and will turn future generations of Americans into serfs. And massively deregulate. And abolish the income tax, while cutting spending 90%. Etc. Etc.

The chances of that happening are exactly zero.”

It’s easy to see there is no chance for a return to financial sanity as defined by Casey.

Doug Casey is not alone in his assessment of the self-created problems in our current financial system. Alasdair Macleod in “Deflation Must Be Embraced” defines what he calls the minimum policy changes required to escape from the credit-fueled merry-go-round that will end up destroying us all.”

CHOICES AND CHANGES

The choices are: continue the insanity and hope to survive the next election/crash/war/disaster, or contemplate the abyss. Macleod’s eleven point plan for change is:

  • “Accept that another nation’s business is not your affair. Cease all military spending, other than required for purely defensive purposes. The resources and technologies released by this move would be redirected by entrepreneurs for the service and benefit of consumers.
  • Stop colluding at the supra-national level to follow common monetary and economic policies. G20, G8 meetings only promote interventionist groupthink, to the exclusion of a proper understanding of policy errors.
  • Embrace the benefits of free trade, removing all tariff barriers. If a foreign manufacturer wishes to dump excess capacity into your economy, let your consumers reap the benefit.
  • Deregulate, making it clear that individuals must look out for themselves. The state is useless at protecting the consumer. Companies that plan to prosper will realize their reputations for fairness and honesty are paramount, instead of hiding behind regulations.
  • Encourage family cohesion, instead of automatically expecting the state to look after your elderly, your handicapped and your children. Socializing family values is not the business of the state, which cannot deliver welfare services effectively.
  • Reduce the state’s role in the economy with a long-term objective of absorbing less than 20% of GDP.
  • The state should be banned from running deficits. Tax must match state spending. Capital loaned to the state will no longer be drained away from productive use in the private sector.
  • Re-introduce sound money, by means of a currency-board arrangement tied to physical gold, which is deliverable on demand to all-comers.
  • Make it clear to the banks and their customers there is no lender of last resort, and no deposit guarantees. Deregulation of financial services and the removal of this safety net will force banks to stop speculating in financial markets and be conservative in their financial gearing, to protect their reputations. Interbank loan rates will penalize financial aggression.
  • Sack all government economists, and close all government statistical offices. At best, they serve no constructive purpose, and at worst they are repositories for bad advice, as growing economic and financial instability attest.
  • Close the central bank, and replace it with a currency board with one purpose: to regulate the issuance of the currency convertible into the national stock of gold.”

Yup, he’s not expecting a return to financial sanity.

“We criticize Venezuela and Zimbabwe, because their mistakes are obvious to us. But we fail to realize the only difference between them and us is the speed of their failure compared with ours.”

Macleod sees “money printing” and inflation in our future – with Zimbabwe and Venezuela leading the way.Oops!

The process and direction are clear. The uncertainty revolves around the timing and degree of the inflationary disaster.

Consumer price inflation is here to stay. Consider prices from 1970 to show how consumer price inflation is “hard-wired” into our financial system.

From Casey on choices:

“It will be a deflationary collapse if the Fed doesn’t continue buying debt and creating new dollars. And a hyperinflation if they do.” … “the government and the Fed will definitely veer towards more inflation.”

Choice: Collapse or hyperinflation!

Debt increases exponentially – as shown from the St. Louis Federal Reserve:

Date        Total Debt Securities              S&P 500 Index

1/1/1971                $ 0.77 trillion                          92

1/1/2009               $ 31.6 trillion                         902

11/30/17               $ 44.1 trillion                       2,646

The U.S. increased debt securities by $ 12.5 trillion in the last nine years and levitated the S&P by 1,700+ points. The consequences of that debt creation will manifest in coming years.

Total debt securities have increased at a compounded rate of 6% per year for over two decades. At that rate current debt of $ 44 trillion will grow to over $ 66 trillion in 2025. That massive increase in debt (currency in circulation) will create the price inflation that Casey and Macleod foresee in our future.

But, add a teaspoon of panic to the inevitable debt increases, mix with a double-handful of fear, stir in several cups of counter-party risk, add five heaping tablespoons of central bank and government intervention, and bake this toxic cake in the central banker oven for a few years. The result will be a huge boost in consumer price inflation and large increases in gold and silver prices.

Expect inflation, possibly hyperinflation, asset price crashes, and reflation of equity bubbles. Central bankers will be prodded by politicians to “do something,” and they will, to the detriment of most people.

The result is predictable since the world will choose not to act on the suggestions from Casey and Macleod. Governments and central banks will choose inflation and continued currency devaluations.

However, we can protect our savings and retirement. Consider the long-term correlation between total debt securities and gold prices.

Panic, fear and “out of control” debt increases will drive gold prices higher. This will accelerate when central bankers and governments lose remaining credibility. Expect the gold to S&P 500 Index ratio to move much higher in coming years.

Expect a rise in volatility, consumer price inflation, massive central bank printing, and more debt … lots more debt.

Gold and silver prices will rise!

CONCLUSIONS:

  • Casey and Macleod have defined what is necessary to correct our self-created fiscal and monetary insanity.
  • It won’t happen.

  • Expect massive “money printing,” stock and bond crashes, asset price levitations, inflation, and possibly hyperinflation.
  • Timing: Coming soon to our world, probably in 2018.
  • Debt increases exponentially. Gold prices follow, occasionally zooming ahead of debt and then collapsing, but always tracking the inevitably increasing debt and devaluation of fiat currencies. Gold will rise compared to the S&P 500 Index in coming years.
  • Gold and silver will help protect your savings, retirement, and purchasing power. Their prices will fly much higher when the coming category five crises devastate our financial system.

Gary Christenson

Republished with permission by The Deviant Investor.




Our All-Important Financial Deadline Is In 15 Days, And Our Campaign Is Counting On A Major Miracle

Tonight, I am writing this from my little office where I have spent more time than anywhere else over the past six years.  During the day, I can look out the window and see snow-capped mountain peaks all the way on the other side of the valley.  Life is so simple and so beautiful here, and in my wildest dreams I never imagined that our nice, quiet life would be interrupted by a run for Congress.  But then that fateful day in May arrived, and life hasn’t been the same for Meranda and I ever since.

Whoever ultimately wins this race is not just going to be making decisions that affect Idaho.  The decisions that members of Congress make affect every man, woman and child in the entire country, and that means that whoever wins this race is going to be making decisions that have a direct impact on your life no matter where you live.

Unfortunately, if I don’t win this race someone really bad will almost certainly take this seat.  For example, one of the leading candidates is currently a member of the state legislature, and he has a voting record that is so bad that it was once given an “F-“ grade by the Idaho Freedom Foundation.

Yes, you read that correctly.

I didn’t even know that you could get below an “F” grade.  For the most recent session, his vote index score was 42.3 out of 100.  This was the lowest score for any Republican, and there were actually only four Democrats that had a voting record that was as bad or worse than his.

The other member of the state legislature that has entered this race is almost nearly as bad. Her vote index score for the most recent session was 54.3, and she is widely known to be an extremely liberal Republican.

I once wondered why the Lord would lead me to enter this race, but now it is becoming crystal clear.  If I don’t win, this seat will almost certainly be won by one of these RINOs, and we cannot allow that to happen.

December 31st is the most important financial deadline that our campaign is facing so far.  Last week I explained that we desperately need to raise $ 30,000 by the end of December, and only a couple thousand dollars has come in so far.  I know that most people are entirely focused on the holidays this time of the year, but I cannot stress hard enough how much we need your help right now.  During the first three months of 2018, Republican organizations all over the country will decide who they are going to back in this race, and it is absolutely imperative that we have good numbers to report to them.  If you would like to make a donation to the campaign, you can do so at this link

https://www.michaelsnyderforcongress.com/contribute.html

Of the six candidates in this race, at this point we are projecting that we will come in either fourth or fifth in fundraising this quarter at our current pace.

That would be a disaster.

According to virtually every other measurement, we are absolutely crushing our competition in this race.  We are reaching the most voters, we have more campaign website traffic than anyone else, we are destroying our opponents on social media, and we received more votes in the most recent online poll than all of the other candidates combined.

But if we don’t finish in the top three in fundraising this quarter, top Republicans on the national level aren’t going to care about any of that.

In fact, I know exactly what they are going to say to me when I talk to them.

They are going to say that I had a nice start, but that I wasn’t able to raise enough money to take it across the finish line.

This is literally our last chance to impress Republicans on the national level.  The next report after this one won’t come out until just over a month before the election, and that will be way too late.

I need everyone that believes in this campaign to stand with us now.  There are literally hundreds upon hundreds of people that have volunteered or donated so far, and we cannot let them down.  If you would like to become a part of the team, you can donate online right here

https://www.michaelsnyderforcongress.com/contribute.html

Earlier this evening, Meranda and I attended a celebration in town.  Everyone there was so excited about our race for Congress, and that was very encouraging to see.  At one point someone asked me for a yard sign, but I had to admit that we don’t have one to give him right now.  Demand for campaign materials has been crazy, and we are starting to run out of just about everything.

So we need to print up more signs, more brochures and more mailers.  More than 800,000 people live in this district, and we need to get our message to every single one of them if we hope to win.

Can you imagine how much it costs to reach 800,000 people?

Without your help, we are not going to be able to do that.  Would you help us print the campaign materials that we desperately need?  The donation limit per campaign cycle is $ 2,700 per person.  That means that a husband and a wife can collectively donate $ 5,400.  If just one couple was willing to help us at that level, we would be able to print up all of the materials that we currently need

https://www.michaelsnyderforcongress.com/contribute.html

Right now we are actually offering a free bumper sticker to any voter in our district that wants one.  It is a great way to spread the word about the campaign, and it doesn’t cost a lot to print them up.  We are able to get things done much cheaper than other campaigns are able to, and I am blessed to be working with people that can stretch one dollar into four or five.

Even though a couple of the other campaigns have raised more money than us so far, nobody else can match what we are doing, and we want to take things to the next level.  But we need resources in order to do that, and this is such a critical time.

Over the next few weeks, this race is really going to take shape.  It is absolutely imperative that we are considered one of the leading contenders, and with your help we can get there.

I have been told that the only way that we can lose this race is if someone else raises much more money than us.  So far, nobody in this race has been able to raise much money, and that has given us time to get our act together.

Fundraising is new to me, and I am sure that if I was willing to be dishonest that I could do so much better.  All I know how to do is to tell you the truth and hope that you will support what we are trying to do.

This is our campaign, and we literally have people from coast to coast that are praying for us.  Please pray for blessing, protection and that God’s will would be done.  And if you would like to bless our campaign financially, we would greatly, greatly appreciate the help

https://www.michaelsnyderforcongress.com/contribute.html

I wish that I could sit down with you in your living room and show you how close to victory we are.  Things are looking so much brighter for our campaign than they were a couple of months ago, and we now have a campaign team that literally stretches from the very top county in the state to the very bottom county in the state.

But this is still very much a wide open race.  Since Raul Labrador is running for governor, there is no incumbent, and there are six of us that are running to replace him.  The numbers tell us that name recognition and voter support for the other five candidates is very low, and most voters are still in the “undecided” category.

We need to reach those undecided voters before the other guys are able to.  We know exactly how to do that, and we just need the fuel in our tanks to be able to get that done.  If you were ever going to give to the campaign, now is the time

https://www.michaelsnyderforcongress.com/contribute.html

If we are able to raise the rest of the $ 30,000 that we desperately need by the end of December, I will be absolutely floored.

My team is counting on a major miracle, and I don’t want to let them down.

We have only 15 days until our most important deadline so far, and we feel like we are way out on a limb.

But God can make a way where there seems to be no way, and we know that with God all things are possible.

So we will just share the fact that we really need your help to meet our deadline, and we will trust that God will move in the hearts of those that are supposed to support us.

I would like to thank everyone that has gotten involved in the campaign so far.  Together, we have already done what others said was impossible, and next May we are going to absolutely shock the world.

The Economic Collapse




Written Financial Plans are Invaluable

Stop what you’re doing right now.

Grab a piece of paper and a pen. (No smartphones! Pen and paper.)

Now, write the following words at the top of your blank page, centered: “2018 Comprehensive Financial Plan”

Am I making you uncomfortable yet?

Don’t worry… you’re in the same boat as a lot of folks I know. You may even be allergic to the task of financial planning.

But with January just around the corner, now’s a great time to take stock of what went well for you in 2017 and, more importantly, precisely how you’ll chart your course in 2018.

You see, you should stop thinking of yourself as an “investor.” Investing is only part of what you do… if you’re doing it right, that is.

Rather, start thinking of yourself as the captain of your financial future

Investing is the sexy part of that role.

But according to one financial firm’s recent commercial, there are two other parts to the all-encompassing role of Financial Captain – planning and protecting.

Those are the not-so-sexy parts. In fact, I personally find them downright boring. Absolutely necessary, but still, very… very… boring!

Raise your hand if you’ve ever found yourself getting childishly excited while talking through the riders on your long-term care policy.

Yeah, me either!

Raise your hand if you spend Friday nights calculating the differences in retirement withdrawal rates under varying inflation scenarios.

I’m willing to bet not many hands are up right now.

Most people I know enjoy spending time on investments – finding the best ones, buying and selling them, and tallying their returns. But far fewer appreciate the value of time spent on financial planning.

Yet, a successful captain must be well-rounded and equally focused on all major components of his role.

Think of investing as sailing. You must plan your route, which includes choosing a specific destination, charting a course, and making alternate plans for when things go wrong.

You must sail the ship, of course. That’s the fun, sexy, part.

And you must protect your ship – against anything, from mechanical failure to natural disasters to pirates.

Plan.

Invest.

Protect.

Think about it this way…

If you’re a silk merchant in England, expecting a shipment of goods you’ve ordered to arrive by sea on December 1… and by January 1 there’s no sign of it and no word from the ship’s captain…

Can you assume definitively that the captain doesn’t know how to sail?

Of course not!

His failure to arrive at port may be due to poor sailing skill, sure, but the failure might just as easily be attributed to poor planning, or his failure to protect the ship from pirates.

The captain’s sailing skills may have nothing to do with the failure to deliver.

The same goes for the “captaining” of your financial future, I think.

How much of a kick in the teeth would it be to be successful at investing, but still live a subpar financial life just because you failed plan and protect?

Would you believe that most people in America don’t have a written financial plan that accounts for each of these important areas?

According to a survey the Certified Financial Planner (CFP) Board of Standards commissioned:

  • 38% of Americans have a financial plan aimed at addressing one or two major goals (i.e. retirement or college savings), but “no comprehensive plan to put it all together.”
  • 33% of Americans have an even more limited financial plan, accounting for either one major savings goal, or a household budget, but not both. Further, they had no plans to develop a comprehensive financial plan within a year.
  • 10% of Americans have done “virtually no financial planning of any kind.”

That leaves just 19% of Americans who have a comprehensive, written financial plan.

The CFP Board’s study concluded that those with a comprehensive financial plan enjoy a number of benefits, including increased confidence in their financial decision-making abilities, increased success in saving money and meeting major savings goals, and higher incomes.

The study found that comprehensive planners reported higher confidence and satisfaction, regardless of their income bracket… proving that written financial plans are not merely luxuries of the ultra-wealthy.

The bottom line is… everyone should have a written, comprehensive financial plan!

Standard financial planning generally covers the following topics:

Goal setting, budget creation, establishment of emergency fund, debt payoff planning, retirement planning, planning for other major goals (i.e. college savings), insurance coverage and, finally, estate planning.

And while each of those is important, they’re somewhat outside the Dent wheelhouse, since we focus on unique, value-add investment research and services.

Services like my own 10X Profits, which we first launched this time last year.

10X Profits is all about trading volatility booms and busts… for BIG profits!

But, while my model has proven to be uniquely powerful, I still encourage 10X’ers to develop a comprehensive trading plan, which outlines precisely how they’ll implement it.

This exercise has transformed them from shoot-from-the-hip “investors,” to true “Captains” of their financial futures.

To learn more about 10X Profits and how to develop your own 10X Plan, click here.

It’s time for you to transform your financial future.

Adam O’Dell
Editor, 10x Profits

P.S. You heard everyone’s darling FAANG stocks lost some $ 78 billion on Wednesday?! Well, coincidentally, I included analysis on the FAANG stocks in the Special Report I just released to my 10X’ers. Guess what? My 10X Profits model generated annual returns more than 3-times stronger than the best “FAANG” portfolio. And the 10X model requires just two ETFs!

The post Written Financial Plans are Invaluable appeared first on Economy and Markets.

Adam O’Dell – Economy and Markets ()




The Last Time These 3 Ominous Signals Appeared Simultaneously Was Just Before The Last Financial Crisis

We have not seen a “leadership reversal”, a “Hindenburg Omen” and a “Titanic Syndrome signal” all appear simultaneously since just before the last financial crisis.  Does this mean that a stock market crash is imminent?  Not necessarily, but as I have been writing about quite a bit recently, the markets are certainly primed for one.  On Wednesday, the Dow fell another 138 points, and that represented the largest single day decline that we have seen since September.  Much more importantly, the downward trend that has been developing over the past week appears to be accelerating.  Just take a look at this chart.  Could we be right on the precipice of a major move to the downside?

John Hussman certainly seems to think so.  He is the one that pointed out that we have not seen this sort of a threefold sell signal since just before the last financial crisis.  The following comes from Business Insider

On Tuesday, the number of New York Stock Exchange companies setting new 52-week lows climbed above the number hitting new highs, representing a “leadership reversal” that Hussman says highlights the deterioration of market internals. Stocks also received confirmation of two bearish market-breadth readings known as the Hindenburg Omen and the Titanic Syndrome.

Hussman says these three readings haven’t occurred simultaneously since 2007, when the financial crisis was getting underway. It happened before that in 1999, right before the dot-com crash. That’s not very welcome company.

In fact, every time we have seen these three signals appear all at once there has been a market crash.

Will things be different this time?

We shall see.

If you are not familiar with a “Hindenburg Omen” or “the Titanic Syndrome”, here are a couple of pretty good concise definitions

  • Hindenburg Omen: A sell signal that occurs when NYSE new highs and new lows each exceed 2.8% of advances plus declines on the same day. On Tuesday, they totaled more than 3%.
  • Titanic Syndrome: A sell signal triggered when NYSE 52-week lows outnumber 52-week highs within seven days of an all-time high in equities. Stocks most recently hit a record on November 8.

You can see the other times in recent decades when these three signals have appeared simultaneously on this chart right here.

Once again, past patterns do not guarantee that the same thing will happen in the future, but if the market does crash it should not surprise anyone.

10 days ago, I published an article entitled “The Federal Reserve Has Just Given Financial Markets The Greatest Sell Signal In Modern American History”.  I pointed out that this stock market bubble was created by unprecedented central bank intervention, and now global central banks are reversing the process that created the bubble in unison.  There is no possible way that stock prices can stay at these absolutely absurd levels without central bank help, and if global central banks stay on the sidelines a market decline would seem to be virtually inevitable.

Meanwhile, we are also witnessing a very alarming flattening of the yield curve

Hogan said the market is nervous about the “flattening” difference between the 2-year yield and the 10-year Treasury yield, which have been moving closer together. The curve dipped to 68 basis points Tuesday, a 10-year low. Hogan said 70 has become a line in the sand, and when it falls below that traders get nervous.

A flattening curve can signal that the curve will invert, which historically means a recession is on the horizon.

If the yield curve does end up inverting, that will be a major red flag.

But the experts assure us that we have nothing to worry about.

For example, just check out what Karyn Cavanaugh of Voya Financial is saying

“Now that the earnings season is wrapped up, markets are more beholden to macro data. Weakness in oil prices and skepticism about the passing of the tax bill are also weighing on sentiment,” said Karyn Cavanaugh, senior market strategist at Voya Financial.

Despite the drop on the day, major indexes remain within 1.5 percentage points of record levels.

Any pullback at this stage should be viewed as an opportunity to buy, however. Earnings outlook for U.S. stocks, especially with the synchronized global growth environment is still good,” Cavanaugh said.

And U.S. consumers continue to pile on more debt as if there is no tomorrow.  This week we learned that U.S. household debt has almost reached the 13 trillion dollar threshold

Americans’ debt level rose during the third quarter, driven by an increase in mortgage loans, according to a Federal Reserve Bank of New York report published on Tuesday.

Total U.S. household debt was $ 12.96 trillion in the three months to September, up $ 116 billion from the prior three months. Debt levels were $ 605 billion higher than during the third quarter of 2016.

The fundamentals do not support this kind of irrational optimism.

What the fundamentals have been telling us is that in the absence of central bank support we should see the markets start to decline, and that it is quite likely that a painful recession is on the horizon.

As the next crisis erupts, the mainstream media is going to respond with shock and horror.  But the only real surprise is that this ridiculous bubble lasted for as long as it did.

The truth is that a market decline is way overdue.  If central banks had not pumped trillions upon trillions of dollars into the global financial system, there is no possible way that stock prices would have ever gotten so high, and now that the central banks are removing the artificial life support we shall see how the markets do on their own.

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




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 Federal Reserve Has Just Given Financial Markets The Greatest Sell Signal In Modern American History

Why have stock prices risen so dramatically since the last financial crisis?  There are certainly many factors involved, but the primary one is the fact that the Federal Reserve has been creating trillions of dollars out of thin air and has been injecting all of that hot money into the financial markets.  But now the Federal Reserve is starting to reverse course, and this has got to be the greatest sell signal for financial markets in modern American history.  Without the artificial support of the Federal Reserve and other global central banks, there is no possible way that the massively inflated asset prices that we are witnessing right now can continue.

The chart below comes from Sven Henrich, and it does a great job of demonstrating the relationship between the Fed’s quantitative easing program and the rise in stock prices.  During the last financial crisis the Fed began to dramatically increase the size of our money supply, and they kept on doing it all the way through the end of October 2017…

Unfortunately for stock traders, the Federal Reserve has now decided to change course, and that means that the process that has created these ridiculous stock prices is beginning to go in reverse.  In fact, according to Wolf Richter this reversal just started to go into motion within the past few days…

On October 31, $ 8.5 billion of Treasuries that the Fed had been holding matured. If the Fed stuck to its announcement, it would have reinvested $ 2.5 billion and let $ 6 billion (the cap for the month of October) “roll off.” The amount of Treasuries on the balance sheet should then have decreased by $ 6 billion.

And that’s what happened. This chart of the Fed’s Treasury holdings shows that the balance dropped by $ 5.9 billion, from an all-time record 2,465.7 billion on October 25 to $ 2,459.8 billion on November 1, the lowest since April 15, 2015

Does anyone out there actually believe that the immensely bloated balance sheet that the Fed has accumulated can be unwound without having an enormous negative impact on Wall Street?

And even more frightening is the fact that central banks all over the planet appear to be acting in coordinated fashion.  I really like how Brandon Smith made this point…

An observant person, however, might have noticed that central banks around the world seem to be acting in a coordinated fashion to remove stimulus support from markets and raise interest rates, cutting off supply lines of easy money that have long been a crutch for our crippled economy.  The Bank of England raised rates this past week, as the Federal Reserve indicated yet another rate hike in December.  The Europeans Central Bank continues to prep the public for coming rate hikes, while the Bank of Japan has assured the public that “inflation” expectations have been met and no new stimulus is necessary.  If all of this appears coordinated, that is because it is.

When interest rates are low and central banks are injecting money directly into the financial system, that tends to promote economic activity.

But when they raise interest rates and pull money out of the financial system, the exact opposite is true.

At this point Americans are more optimistic about the stock market than they have ever been before, and it is at this exact moment that the Fed is pulling the financial markets off of life support.

And it isn’t as if the “real economy” ever recovered in any meaningful way.  Most American families are still living paycheck to paycheck, and a new economic crisis would push millions more out of the middle class.

For a long time I have been warning that the only reason why stock prices ever got this high was because of the central banks, and I have also been warning that they could crash the markets if they wanted to do so.

Hopefully there is nothing nefarious going on, but I do find it very strange that all of the major global central banks are moving toward tightening at the exact same time.

If things go south for the global economy in the months ahead, we will know exactly where to point the blame…

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




Top Financial Expert Warns Stocks Need To Drop ‘Between 30 And 40 Percent’ As Bankruptcy Looms For Toys R Us

Will there be a major stock market crash before the end of 2017?  To many of us, it seems like we have been waiting for this ridiculous stock market bubble to burst for a very long time.  The experts have been warning us over and over again that stocks cannot keep going up like this indefinitely, and yet this market has seemed absolutely determined to defy the laws of economics.  But most people don’t remember that we went through a similar thing before the financial crisis of 2008 as well.  I recently spoke to an investor that shorted the market three years ahead of that crash.  In the end his long-term analysis was right on the money, but his timing was just a bit off, and the same thing will be true with many of the experts this time around.

On Monday, I was quite stunned to learn what Brad McMillan had just said about the market.  He is considered to be one of the brightest minds in the financial world, and he told CNBC that stocks would need to fall “somewhere between 30 and 40 percent just to get to fair value”…

Brad McMillan — who counsels independent financial advisors representing $ 114 billion in assets under management — told CNBC on Monday that the stock market is way overvalued.

The market probably would have to drop somewhere between 30 and 40 percent to get to fair value, based on historical standards,” said McMillan, chief investment officer at Massachusetts-based Commonwealth Financial Network.

McMillan’s analysis is very similar to mine.  For a long time I have been warning that valuations would need to decline by at least 40 or 50 percent just to get back to the long-term averages.

And stock valuations always return to the long-term averages eventually.  Only this time the bubble has been artificially inflated so greatly that a return to the long-term averages will be absolutely catastrophic for our system.

Meanwhile, trouble signs for the real economy continue to erupt.  As noted in the headline, it appears that Toys R Us is on the brink of bankruptcy

Toys R Us has hired restructuring lawyers at Kirkland & Ellis to help address looming $ 400 million in debt due in 2018, CNBC had previously reported, noting that bankruptcy was one potential outcome.

Kirkland declined to comment.

Earlier Monday, Reorg Research, a news service focused on bankruptcy and distressed debt, reported Toys R Us could file for bankruptcy as soon as Monday.

This is yet another sign that 2017 is going to be the worst year for retail store closings in U.S. history.  I don’t know how anyone can look at what is happening to the retail industry (or the auto industry for that matter) and argue that the U.S. economy is in good shape.

But most Americans seem to base their opinions on how the economy is doing by how well the stock market is performing, and thanks to relentless central bank intervention, stock prices have just kept going up and up and up.

In so many ways, what we are watching today is a replay of the dotcom bubble of the late 1990s, and this is something that McMillan also commented on during his discussion with CNBC…

Part of McMillan’s thesis is rooted in his belief that the lofty levels of the so-called FANG stocks — Facebook, Amazon, Netflix and Google-parent Alphabet — seem reminiscent of the dot-com bubble in the late 1990s.

“I’ve been saying for about the past year, this year looks a lot like 1999 to me,” McMillan said on “Squawk Box.” “If you look at the underlying economics [and] if look at the stock market, the similarities are remarkable.”

I am amazed that so many big names continue to issue extremely ominous warnings about the financial markets, and yet most Americans seem completely unconcerned.

It is almost as if 2008 never happened.  None of our long-term problems were fixed after that crisis, and the current bubble that we are facing is far larger than the bubble that burst back then.

I don’t know why more people can’t see these things.  It has gotten to a point where “even Goldman Sachs is getting worried”

The stock market bubble is now so massive that even Goldman Sachs is getting worried.

Let’s be clear here: Wall Street does best and makes the most money when stocks are roaring higher. So in order for a major Wall Street firm like Goldman to start openly worrying about whether or not the markets are going to crash, there has to be truly MASSIVE trouble brewing.

On that note, Goldman’s Bear Market indicator just hit levels that triggered JUST BEFORE THE LAST TWO MARKET CRASHES.

When things fall apart this time, it is going to be even worse than what we went through in 2008.  In the aftermath, we are going to need people that understand that we need to fundamentally redesign how our system works, and that is something that I hope to help with.  We cannot base our financial system on a pyramid of debt, and we cannot allow Wall Street to operate like a giant casino.  Our entire economy has essentially become a colossal Ponzi scheme, and it is inevitable that it is going to come horribly crashing down at some point.

But for now, the blind continue to lead the blind, and most Americans are not going to wake up until we have gone over the edge.

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




Bitcoin and Blockchain: Hype or Fundamental Financial Revolution?

Jamie Dimon, JPMorgan CEO, says Bitcoin is a fraud – likening it to the 17th century tulip bubble – that will eventually blow up. He said he’d fire any trader who traded it.

Ron Insana, CNBC contributor, says Bitcoin is in a bubble, with investor enthusiasm driving it to a new fever pitch. He’s cited several reasons why it will fail.

Are they right?

Is Bitcoin a modern-day tulip bubble leading greedy investors to the slaughter?

Well… yes AND no.

It’s complicated (which is why I’ve invited Bitcoin expert, Michael Terpin, to speak at our Irrational Economic Summit this October in Nashville).

I agree with both men that it’s a dangerous speculative trade right now. It is in a bubble, but we’re likely not near the top yet.

And, as a currency, Bitcoin is a fraud – it’s absolutely NOT a currency currently – but the underlying technology (blockchains et al.) will revolutionize the way we protect our personal information and the way we transact.

It’s the foundation for the bottom-up economy we’re becoming!

Let’s tackle each point in turn…

Bitcoin breached $ 4,000 per unit recently. And it’s gone up and down like a yo-yo! Just look at this chart, which contains both Bitcoin and Ethereum.

The most recent run in both is clearly a bubble. But, apply Elliott Wave Theory to it and it looks like only a third wave up. This means there’s now a fourth wave crash already in motion and then another steep fifth wave up ahead.

And this should be just the first stage of a very long-term boom in the underlying technologies.

The thing to understand here is that these digital coins are trading more like the stocks of these early-stage companies than a credible currency substitute. They are not behaving like currencies… they’re not currencies yet… and they’re certainly not a stable store of value.

But with decades of high growth, scale, efficiency, and consolidation, digital currencies could supplant central banks with bottom-up creation and much more stable values!

I hope I see that in my lifetime. Stick it to the Central Banks! Man alive, I hate them!

That said, in the near term, like Jamie Dimon, I wouldn’t touch any Bitcoin speculation with a 10-foot pole. If it drops back to around $ 2,000, and if Ethereum gets near $ 150, then it could be worth a play, but only as a high-risk speculative one for a small part of your portfolio.

Beyond Bitcoin

Cryptocurrencies are one thing. The technologies they’re built on are another thing entirely. And it’s the latter that has really captured my imagination…

For years now I’ve entertained growing concerns about the safety and security of the internet. In 2015, my computer and email was hacked twice in six weeks. My credit cards still get hacked regularly and I’m forced to change them every three or four months.

The internet is great for googling information and communicating through email and Facebook and other social platforms, but hackers are in control like the Russian mob. Online financial transactions, and online personal details, are simply not safe or secure. Equifax recently offered a brutal reminder of this fact.

Blockchain technologies could be the answer here. They could become a new platform for transactions, providing greater transparency, practically unbreachable security, faster speeds and lower costs!

Don Tapscott, a Canadian business executive, author, consultant, and speaker calls it “the Internet of Value or Money.” I discovered his latest great book, Blockchain Revolution, after listening to his 18-minute Ted talk.

To people like Don and me, and even Steve Jobs, information technologies, and now blockchain, are all about bringing power to the people and eliminating centralized intermediaries.

Put the information, the transaction power, the control over our own identity in our own hands and let us deal directly, peer-to-peer. This will allow our economy and businesses to organize around customers and operate from the bottom-up, not the top-down.

Based on the venture capitalists clamoring to back blockchain technologies – $ 1.1 billion has been invested since 2013 – this is a serious new technology and not some flash in the pan. Yet to compare, internet companies got much more during their early days.

My 45-Year Innovation Cycle sheds some light on this…

There’s a big difference between new technologies in their early stages in niche markets and their later stages moving into the mainstream.

The last such mainstream cycle around personal computing and the internet ran from 1988 into 2010. Before that it was electricity, phones, cars, radios, and TV from 1942 to 1965.

It’s during that move into the mainstream that whole new major industries and leading-edge companies are created and growth and productivity soars.

I see blockchain technology as the next step in the “maturing” internet revolution. It’s not yet a major new industry and job creator. But it could be, one day, as the next mainstream revolution is set for 2032 to 2055.

The internet made information radically more accessible and affordable (if not free).

That’s what blockchain technologies propose to do for financial transactions!

And like Uber and Airbnb, this technology will initially be deflationary. It will lower costs and destroy more jobs than it creates. It will disrupt the centralized, and often corrupt, financial services industry.

But like Wal-Mart and other companies that followed maturing trends with lower costs, this will paradoxically free up spending power for the everyday person and create easier access to the economy and the financial system.

This is part of how we recreate the middle class again, just like we did after World War II.

This is a big and eventually lifechanging deal.

Just don’t speculate on Bitcoin. It’s in a bubble. Not of the tulip bubble proportions, but bubbly enough to burn you.

Harry
Follow me on Twitter @harrydentjr

P.S. Don’t miss Michael Terpin at our Irrational Economic Summit in Nashville. There’s a reason why we scheduled him to speak on the first day of the conference!

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Harry Dent – Economy and Markets ()