Surviving the market turmoil

I have been a student of the markets since the late 80’s and I am having a difficult time trying to comprehend the trends taking place. The stock markets have been juiced to a large extent and the sovereign debt market has been supported by immense central bank intervention. This has created all sorts of market distortions that have benefited risk takers at the expense of those who seek risk aversion. How long this can maintain itself is up to the elites who own the central banks.

kakistocracy- A system of government which is run by the worst, least qualified, or most unscrupulous citizens.

To make matters worse, the G20 group of nations are being governed by a group of individuals that seem unsuitable for governing. There is a term for this; kakistocracy.  It is a system of government which is run by the worst, least qualified, or most unscrupulous citizens. The elites of these secret societies need to convince us that the nation-state is an anachronism and that only a global government will solve these problem. Throw in a future war and the elites of these secret societies will have the perfect solution for us.

There is some good news; there are a few observations we can make that can greatly assist us as things continue to come unglued. We know for a fact that this asset cycle is very long in the tooth. Central bank intervention may be propping up the financial system by keeping the sovereign debt markets intact, but it cannot last as this investor confidence will continue to wane.

Get out of as much debt as possible

If you are a student of conspiracy then you know that debt ensnares people into a life of servitude. The boom/bust cycles are created by the central banks to consolidate the world’s wealth at the expense of you and me. However, if you are reading this you have a leg up on the rest of the population. You understand this process and perhaps have a better understanding of this process of impoverishment.

The time to take on debt is at market bottoms. The time to get out of debt is near market peaks. We borrow and buy when prices are cheap. We sell and pay down debt when prices are high.

Let’s put this into perspective. I came across an article titled, America Has a Financial Literacy Problem. It explains why the average American cannot grasp even the most basic personal financial matters. There is a vested interest by the powers-that-be to keep us in the dark; we become the unwitting victims of the boom/bust cycles. We transfer our net worth and our future earnings potential to the elites. Now, if you are reading this I am sure you are already savvy enough to comprehend this financial and economic system and how it is rigged against us. This is the first step in overcoming.

My advice at this point is to pare down as much debt as possible, including mortgage debt. The less debt we carry, the better we can handle the down markets and take advantage of any opportunities that will present themselves in the future.  Do not be too concerned that we may miss out of that extra 10% of market return. The downside can be fierce.

A few market observations

Stock markets

Never underestimate the governors of our kakistocracy to undermine the markets, but the longer the US stock indexes remain at this level and stagnate the better chance we have of another leg-up in the markets. Let’s take a look at the market report technicals and the bearish sentiment.

Speculative shorts on index futures are at cyclical highs. Look at the large short position on the commitment of traders report for the S&P 500 e-mini futures and I think you get the picture. Granted, many go short as a hedge for long positions, but we can never discount the chances of a sharp rally. Thus the longer stock prices stay here the better chance we have of a sharp short-covering rally as these shorts will have to cover eventually. The bad news can only work for so long.

Sovereign debt

The long-end of the US Treasury yield curve has topped out temporarily and it remains to be seen where interest rates will head next. With this said, I can look at the probabilities to see that if the US Fed continues to raise the Fed funds rate and unwind its balance sheet odds are in the favor of yield increases in mortgages and borrowing costs for you and me.

The yield curve is coming closer to an inversion, where longer-dated yields are lower than short-term rates, but there is still room to go. Regardless, as the US Fed raises rates, borrowing costs will continue to increase.  Thus, it is never an auspicious time to take on debt in a regime of rising rates. If longer-dated yields stabilize here we can see further upside with the equity markets. But, even if the Dow goes to 30,000, is the heightened volatility worth the extra 20% of return? This is a question only you can answer.

I came across a blog post from Martin Armstrong titled, Draghi Confirms ECB Will not End QE. I agree with Armstrong that the European Central Bank can never stop its QE program; the PIIGS nations are on permanent life support. However, I disagree that it is Mario Draghi’s fault. This system is being propped up until the force majeure of war. Draghi is just a puppet carrying out orders.

Real estate

The speculation is reaching a crescendo. As a Realtor I receive a lot of real estate related junk mail. As an investor I receive a lot of phone calls and letters from other investors looking to buy my properties. This is an example of the garbage I get in the mail. It goes to show you that the reckless speculation has reached a fever pitch and that the average person is in on it. When everyone is doing it who will be left standing when the music stops playing?

As a 20-year real estate investor I observe that the increased letter and phone call campaigns trying to rip off other home owners is another indication of a market top.

If we are sensible in our investments and leverage is low to moderate we can withstand the growing storm in front of us. For real estate investors it makes little sense to sell a profitable portfolio of properties when the taxes and closing costs can easily be greater than any potential unrealized losses on prices. Plus, it takes a lot of work to procure and establish a rental.  However, if an investor is overly stretched here with leverage and is concentrating in speculative areas the writing is on the wall. I have attached links to some articles that illustrate this point.

Pick a New York City Borough: Rents are Falling There, and Fast (Bloomberg April 12th)

What It Was Like to Get Caught in Toronto’s Housing Slump (Bloomberg April 12th)

The whole irony with leverage and borrowing is that it is always the best time to borrow at the bottom of any cycle as prices and deals will always be the most abundant. Now is time to unwind debt burdens. So, the best time to borrow to buy real estate was in 2011-2012. The worst time to borrow is now. If you are buying an owner-occupied house now that is another matter as long as we are sensible with our purchases.

For investors in working class areas these properties should hold up well as demographic and market fundamentals support rents.

Gold and silver

If you have been following my blog and podcasts, you know my observation that if gold is to surge higher it is important that gold retakes $1,362 on a closing basis. We came close a couple days ago as gold was almost touching $1,370. However, the powers-that-be do not want gold rising above this importance threshold and made certain that gold faded below that important number going into Wednesday’s close.

The elites own gold, maybe we should, too. But, own it for the right reasons. We need to view the precious metals as the only effective avenue for getting money outside the system.

I came across this Gold Anti-Trust Action Committee’s blog post titled, Craig Hemke: A lesson in suppression. It illustrates the point that I am sure most reading are already aware of; the prices of gold and silver are manipulated and suppressed.

Complaining about it will do no good. It will release our frustration, but we need to come to terms that all the markets are managed, including the gold and silver markets. We should not hold gold and silver (even platinum as it is very cheap compared to the other metals) for speculative purposes. We need to view the precious metals as the only effective avenue for getting money outside the system. But understand that once we get our money outside the system it cannot be used for investment and leverage. We should park profits of investment and labor into gold and silver and it should never really be more than 10-15% of a portfolio.

The risk of confiscation is low. Why would the governments want to confiscate it when so few people even own it? I bet you the elites own a lot of gold; they know how important it is.

Conclusion

We need to be ready for anything that the elites of these secret societies throw at us and if we are running with a debt millstone we will be the latest victim. We need to be prepared for tight monetary policy and the ramblings and flip-flop tweet storms from the puppets of our kakistocracy. We need to remain liquid and agile for the next bust. The causes of this accelerating bust cycle may differ from all the other ones preceding it, but the result will be the same. Those who do what everyone else is doing will end up on the losing end.