New Years Update – Make the most of 2019 and embrace the opportunities; Commentary of Network (movie, 1976)

I have uploaded a New Years UpdateClick here to go to the show archives page to listen or you can listen on the link below.

To download the podcast – Right mouse click here

-People have been talking about collapse since I was a child. For those who are the unwitting victims of the new world order, it may seem like one.
-Society has been transforming for a long time and it is a society that most people find acceptable. It has become Sodom and Egypt. The few (you and I) who do not need to adjust and move forward. We need to carry the goodness in our hearts and help others who will listen.
-Our adversary enjoys the collapse fear-mongering. The people who are addicted to the collapse talk never plan for the future.
-The battle is mental. Look around and see the degeneracy. The vast percentage of humanity have already succumbed.
-2019 will present so many opportunities to succeed. We can defeat the NWO, but not in the way most imagine.
Network (I am mad as hell….)
-We have been told where the world is moving. Why did Jesus come to this planet?
-My one reservation about an upcoming stock market/economic collapse; how can there be one when half the investors have already planned for one? By definition, that is the self-correcting mechanism.
-Stay liquid and pay down debt.

Some credit market and US dollar observations; IMF data released today

Let’s keep things in perspective

I wanted to pass along some charts to show that while much of the mainstream and alt-financial media are proclaiming impending calamity and US Federal Reserve mismanagement (or worse), we need to keep things in perspective. If the world falls apart, the US Federal Reserve will have to shoulder much of the blame. Since the world is not yet ready for a global currency, the dollar-based system will need to suffice for the indefinite future.

Moreover, despite what many are saying, I still have to conclude that the domestic economy is functionally fine as the economic data continue to point to an economic environment that is moving forward. It seems the US Fed is hoping to unwind as much of its stimulus while it can, so that it has ammunition for the next downturn.

Let’s take a look at a couple bond market yield spreads.  While spreads could definitely continue to widen, when viewed through a longer-term lens, the gaps are more tame. Let’s take a look at junk bonds first.

This chart shows the spread between the High Yield Master II OAS index of bonds that are below investment grade (those rated BB or below) and a spot Treasury curve.
The same as above, but only through a five-year horizon

Let’s take a look at investment-grade yield spreads.

This chart shows the spread between the Corporate Master OAS index of bonds that are considered investment grade (those rated BBB or better) and a spot Treasury curve. Five year horizon.

As we can see, the spreads on corporate bonds and US Treasurys have widened, but have not deviated too far from historic ranges. We must consider that there is rot in the bond market and this is to be expected as the world enjoyed seven years of free money. The central banks are now attempting to rein in their easy money.

Traders and investors are bullish the US dollar. Is this the right strategy?

There are a number of issues going on with the US dollar. While there is still no replacement for the greenback, this doesn’t mean that it cannot fall in value.

The US dollar remains elevated, but will it remain that way? The dollar fell last decade as the Fed raised rates.

Nonetheless, the dollar can continue to hold up, especially if the economies of the other developed nations falter. The US is further along the monetary tightening timeline than the other nations and this is testament to the dollar’s importance in global trade. Let’s take a look at the IMF’s own data, updated today, that shows the US dollar’s role as a currency reserve.

 

The US dollar’s share of global reserves has fallen over the past few quarters, but when taken over a longer time frame, the changes seems more subtle.

The percentage has fallen, but the US dollar still is by far the most important currency. But given all the recent turbulence that seems specific to the US monetary system, I will continue to closely monitor these trends to make certain that they do not accelerate against the dollar. The manufactured crisis between President Trump and the Fed, the higher probability of an uneven credit market unwind, the Fed’s tightening policy in the face of asset price weakness, the recent drop in dollar-denominated asset prices, and the tariff situation can all weigh on the dollar going forward.

Are the planets aligning against the US dollar?

I am growing concerned that the dollar may have some issues
Could there be problems for the US dollar in the future?

Note: I am not saying the US dollar will collapse, but we need to reassess our perma-bull strategy.

I just wanted to send out a note to my followers regarding the US dollar.

In light of recent events that I have been analyzing, I am beginning to grow concerned about the integrity of the US dollar going forward. I am taking note that we may see a timeline similar to the dollar’s action during the 2007-2008 economic swoon – even if the fed funds rate stays at an elevated level.

Let’s take a look at the trade-weighted US dollar index since 2000.

Despite the US Fed raising short-term rates last decade, its misguided policy caused the dollar to fall. Investors anticipated problems, disregarded the higher Fed funds rate, and sold the dollar

Let’s take a look at the Fed funds rate over the same timeline.

The value of the US dollar index is traditionally closely related to the Fed funds rate, but there are new concerns that may sever this direct relationship
Four troubling and growing issues that concern me

What I am concerned about here is four fold;

One; Federal Reserve policy seems to be irrational in some respects. While most people are getting caught up with the increase in the interest rates, I’m more concerned about the autopilot reduction in the asset balance sheet. The Fed is not pausing to assess what they have done so far. It seems anxious to unwind quickly.

The Fed balance sheet unwind – A long way down

The extra market supply of US treasuries and mortgages from the autopilot balance sheet unwind are only compounding the potential problems caused by the higher rates. This could adversely impact the other credit markets. While US treasuries may hold up in value they are going to continue crowding out efficient private funding.

Two; Political problems seem to be growing here domestically and the political friction between the executive branch and the Federal Reserve itself is totally unprecedented. President Trump is painting himself into a corner and the showdown may grow more heated.

Three; The third item is that the Federal Reserve does not really seem to care about what is going on. It is being willfully ignorant to problems such as:

  • the manufactured trade problems,
  • distortions in the other credit markets caused by the quick tightening of monetary policy after seven years of free money,
  • Asset price volatility. It has not even begun to address the stock market swoon. Unless the trends turn around we are now entering a bear market in equities.

Four; Moreover the ex-fed Chiefs continue to comment on the financial markets and their price levels.

Conclusion

Foreigners are noting these issues and I submit that we may begin to see foreign money run to the exits. If asset values here in the United States continue to fade you’re going to see pressure on the dollar as many foreigners will take their dollars and convert them and get out of here.

At this point, I am not yet saying the US dollar is toast. It may seem like a rather elaborate investment thesis and I may be only paranoid, but I think it is rather straightforward at this point. This is something that we need to consider.

In aggregate, global investors have been bullish on the dollar for some time. In a linear environment, higher rates support the dollar. But, if policy moves too far away from what would be considered prudent under current circumstances, we could have problems. For those in the United States I do not think this will be an issue, but to those foreigners with an overexposure to the US dollar-based asset market, it could become a problem.

Every financial crisis is planned in advance. The US Fed chiefs warned us early this year to prepare

Profit from market collapses; they are all planned in advance

Note to reader: I know many will find it difficult to accept, but the agenda for the one-world financial dictatorship must move forward. The secret cabal that runs this planet must achieve certain goals, so that mankind can be forever enslaved under their god. Never doubt that these elite banking families that I refer to as the Synagogue of Satan are losing control.

 Never waste the opportunity offered by a good crisis.

-Niccolo Machiavelli

This ostensible loss of power is just an illusion to mollify those who wake up to its evil. Their ancestors developed this current system and have instituted their private central banking cartel worldwide to facilitate and grow their power and control over the populace. If they are to succeed in the future, it is imperative that they consolidate their supremacy, so that they can control the process and achieve their desired objectives. A world that is a hybrid of 1984 and Brave New World comes to mind. By the time it fully comes into view, most won’t even care.

The elite banking families manufacture all financial crises for gain
This fire was set on purpose

It is clear that the elites want to promulgate more quantitative-easing programs. From the view of the elites, the previous rounds of global QE have been wildly successful and they are now eager to expand the size and magnitude of their future plans. The great unwashed masses accepted QE as a necessary tool for economic and financial stability, while the alt-financial media views them as a series of desperate failures.

Indeed, the money printed will be used to prop up this system, but it also will be used by the elites to surreptitiously buy up the planet. I can imagine a world where the central banks acquire stocks, corporate bonds, our mortgages, real estate, mining and production interests, skyscrapers, bridges, shipping infrastructure, and toll roads. There is no need for this system to collapse; just the fear of collapse will allow these elites to conjure up a series of seemingly ad-hoc programs that will get their desired black horse of Revelation in place. All the while, the alt-financial media will look to the central banks as being run by a bunch of idiots.

In order to implement their unconventional monetary programs, these elites need to manufacture one crisis after another. I look at the economic dislocations, credit market implosion, manufactured geopolitical friction, and popping asset bubbles as part of the plan. Since this plan is so grand in scale it needs to be pronounced to the conspiracy’s initiates beforehand. Here is where the Federal Reserve chiefs come in useful.

Pay attention to what the US Fed chief alumni telegraph in advance
These two are not our friends

The global banking elite control all the MSM, the alt-media macro-agenda, social media, as well as government and central bank policy. They essentially control much of the patriot movement, because they control the top patriot personalities and guide the itinerary. Thus, if the elites want to establish an economic downturn, they can condition the populace to accept one. It becomes a self-fulfilling prophecy.

Look for yourself; the former and current US Federal Reserve chiefs seem to have a knack for telegraphing events and crises in advance. What these policy makers say and do takes precedence over everything else.

Let’s take a look at this year’s unfolding manufactured economic crisis. It all starts with the US Fed. Here are some of my observations:

-The heads of the US Fed kicked off the process in late January. Back then, the current and ex-Fed chiefs redirected their conversation and began to talk down the markets. Janet Yellen, Alan Greenspan, and Ben Bernanke, who all decade long, were loath to identify asset bubbles, began to trash talk market valuations. At the same time, the Fed was demonstrating an arbitrarily hawkish policy. The Fed seems intent on watching many of the credit market sectors unwind.

These Fed chiefs are still at it today. They bash market valuations whenever they are interviewed. I feel sorry for Jerome Powell, but I figure he’s a member of the secret societies, so he is just carrying out orders.

In January, President Trump began to arbitrarily impose restrictive tariffs on US trading partners. Indeed, there has always been a case for the US to impose tariffs for what it saw as other countries possessing unfair competitive advantages, but the timing was very peculiar.

It doesn’t happen overnight, but it was set in stone back in January

-On February 2nd, the Dow closed down 666 points, its steepest point decline since the 2008 financial crisis. Numbers are very important to the elites. I look at the numerology in the markets to see the globalist calling cards. The March 2009 (3/6/09) low in the S&P 500 was 666. February 2nd was Yellen’s last business day on the job.

-In the last several months, I have observed a tremendous increase in the amount of pre-programmed gloomy talk coming from the MSM. I include Bloomberg and CNBC in the mix. Keep in mind that the economic numbers coming out of the US this year have actually been fairly well balanced, in aggregate. The media cannot normally be relied on for its accuracy, so the rise in the predictions of economic recession caught my attention.

Most people have no idea why they think the way they do

-These elites control the MSM, most of the patriot movement, and social media. They are clearly steering the hive-mind consensus of the population into accepting a protracted economic downturn.

-The psychological techniques of Edward Bernays have been perfected and the Synagogue of Satan is selling us economic catastrophe the same way they sell us cars.

-The ongoing manufactured confrontation between Trump and Fed chief, Jerome Powell, continues to occupy the minds of many, but I have to conclude that on some level that Jerome Powell is following a script and has little room to deviate. Powell was an influential partner at the Carlyle Group.

It all starts and ends with the US Fed. The Fed is the architect and engineer of global monetary policy. If we can read the tea leaves presented by the Fed we can usually end up on the right side of the market. So drop your deep-seated hatred of the Fed and accept its role in the new world order.

There is little we can do to stop this conspiracy, but we can warn others… and profit from knowing

I have to conclude that there is little we can do to change the direction of the planet. Despite us all knowing, look how far the new world order’s agenda has progressed. The battle is spiritual in nature; most of society has embraced its tenets, and soon its dissenters will be viewed as the evil. The only option left to us; take it to the streets where other like-minded people will listen. This is why I have my blog.

Indeed, these nascent economic and financial market catastrophes are manufactured, but their end results will feel all too real to the average person. The primary goal of the elites is to impoverish you and me, so that we pose no resistance to the new world order. It works well.

We need to remain objective, sober, and independent minded. Learn to identify what’s important and look for the elite’s calling cards. We can make money in any market and the elites will make a fortune when things finally bottom out. If we are vigilant we can move forward financially and spiritually.

Know your adversary….

December 22nd Market/Investing Update – Behavioral psychology and economics; Making the right decisions; Market updates with predictions

I have uploaded a Market/Investing Update for December 22, 2018. Click here to go to the show archives page to listen or you can listen on the link below. You can also right mouse click here to download the podcast.

-In the last few months, I have observed a tremendous increase in the amount of pre-programmed gloomy talk coming from the MSM. I include Bloomberg and CNBC. The Alt-financial media is irrelevant as it has been recommending shorting the stock market since the May 2010 “flash-crash.” I tune out the alt-financial press.
-the Same owners of the MSM who own the alt-media as well as social media also control central bank policy. They are clearly steering the hive-mind consensus of the population into accepting a protracted economic downturn.
-The psychological techniques of Edward Bernays have been perfected and the Synagogue of Satan is selling us economic catastrophe the same way they sell us cars.
-Manufactured instability with Trump and Powell leading the way.
-The USDX remains of concern. It is currently well supported, but if Fed policy deviates too far from one which supports economic stability we could see the dollar fall like in 2007/2008.
-Imagine the wholesale raping of society that will take place as the central banks appear as our saviors.
-Why I recommended cash in late January. I look at how the ex-Fed chiefs all began to talk down the markets. The Fed chiefs who all decade were loathe to identify asset bubbles, began to trash talk market valuations. All at the same time, the Fed has demonstrated an arbitrarily hawkish policy.
-I have to conclude on some level that Jerome Powell is following a script and has little room to deviate.
-The level of the Fed funds rate and the amount of balance sheet unwind is less important than the rate and speed of change. The Fed seems intent on a fast tightening in the face of accelerating credit market deterioration. It kept rates at 0% for at least seven years and now it is raising without regard to impending disasters, especially in the various credit markets.
-Psychological analysis into the market behavior of a typical boom/bust cycle.
-How to spot opportunity in a bear market
-In the bottom of a bear market, there is little competition. In asset manias, competition is fierce.
-Market demand is based on the number of participants who intend to buy. There really is little demand in real estate as many people who want to buy are incapable of owning. They either don’t have enough savings, can’t make enough money, are not responsible enough, or cannot psychologically own. They rely on social proof to make large purchase decisions and will always lose money. This is why the elites have developed social media – enhance the hive-mind.
-It’s easy to financially rape the hive-mind society
-Gold looks very good. The auspicious COT report looks to lend support. A test of 1,300?
-Oil drop is so swift. I am concerned that we still have downside. Fed policy is destroying the drillers.  Short-term stock objectives prevail over the long-term.
-A technical analysis of all three domestic stock averages. Where I think we are testing first. It seems like a fait accompli.
-Bond market commentary and analysis in light of willfully ignorant Fed policy.

December 20th Market Update – Commentary of Stanley Druckenmiller interview and his discussion of the chronically misguided US Fed policy

I have uploaded a market update for December 20, 2018. Click here to go to the show archives page to listen or you can listen on the link below. You can also right mouse click here to download the podcast.

Note: Druckenmiller does not understand the conspiracy like we do. He sees the US Fed policy as seriously misguided, but we see it as intentional. He does know that the Fed always gets it wrong and waits to benefit from the resulting asset busts. Interview date; December 18th.

-Analysis and commentary of the in-depth Stanley Druckenmiller interview on Bloomberg.com
-From beginning of interview to about the 5:00 mark; Something’s not right with the economy and the Fed is tightening into weakness
-Eight years of free money and the Fed encourages the reach for yield. Pulling back late in the cycle.
-Around the 12:00 minute mark; If the Fed continues to act hawkish and raise rates without pausing, financial rot may not have time to surface. If and when it does the Fed will have to act in a much more drastic fashion. Druckenmiller says 5x or 10x as much.
-Imagine the types of programs the Fed will conjure up after things really fall apart again. The Fed is setting the stage for more unconventional monetary policy as the answer to the crisis it caused.
-Druckenmiller marvels and wonders what the Fed is looking at in their analysis as they always get it wrong.
-Powell is the white goyum. He will get the blame.
-I tell you it is done by design. Druckenmiller says he looks to the bear market busts as opportunities to increase his wealth and we should, too. The eiltes engineer these boom/bust cycles to consolidate their wealth.
-Fed looks at inflation and unemployment (both considered lagging indicators) to formulate policy.
-The level of the Fed funds rate is less important than the rate of change. He says that the Fed should have started raising rates much sooner.
-The balance sheet unwind is the most troubling as the Fed is executing it on auto-pilot.
-He says that Powell is setting us up for a deflationary bust. When things fall apart we need to stand ready and act.

The US Fed chiefs were warning the elites in late January and early February to prepare

2005 and 2018 have similarities; Pay attention to the Fed Chiefs
These two were not looking out for us

Understanding the conspiracy for world government can be profitable.

Over the decades of trading and investing I have learned to stay focused on what matters in the markets. The mainstream and alt-financial business media both inundate with information overload; most of which are just red herrings. We need to face reality; there’s just too much information and half-truths out there and the daily news stories keep us dazed and confused. If we focus on the wrong items we will end up not making any money. This, of course, is done by intent. A confused investor is a broke investor. We need to see past the clutter.

One observation I made over the course of previous asset cycles; former and current US Federal Reserve Chairpersons seem to have a knack for telegraphing events and crises in advance. I have learned to pay close attention to them over just about everything else.

I recall in the Summer and Autumn of 2005; Alan Greenspan and Ben Bernanke relentlessly raised rates to deflate the housing bubble.  They both openly discussed how they were going to keep raising rates until they achieved their desired objective.

He [Greenspan] and Bernanke have both said it is unrealistic to expect the Fed to identify a bubble in stock or real estate prices as it is inflating, or to be able to pop it without hurting the economy. Instead, the Fed should stand ready to mop up the economic aftermath of a bubble.

Bernanke: There’s No Housing Bubble to Go Bust – Washington Post (October 27, 2005)

In the course of two years the Fed raised the Fed funds rate from 1% to 5.25%. We were all warned that the Fed was going to raise until real estate prices deflated

Personally, I knew what the continual increase in short-term rates meant to me. In 2005, I owned six residential properties that were financed with no-doc, adjustable-rate mortgages.  Based on short-term interest rate increases my mortgage rates would have reset about 400-500 bps higher than the prevailing LIBOR rate. LIBOR rose in step with the increases in the Fed funds rate. That’s right, my mortgage rates would have been at least 10% upon reset. I knew the end was near and sold all six of these properties by the end of 2005. I contemplated all those investors who financed with the same types of loans.

In 2005, I came to terms with the fact that the elites running the US Fed were working to destroy the real estate market. It pays to know about the conspiracy for world government. They told us in advance.

What about 2018? Remember Greenspan’s warnings within minutes of the FOMC meeting?

I recall the well-scripted Alan Greenspan interview on January 31, that aired moments after the January FOMC meeting concluded.

“There are two bubbles: We have a stock market bubble, and we have a bond market bubble,” Alan Greenspan, 91, said Wednesday on Bloomberg Television with Tom Keene and Scarlet Fu. Greenspan, who led the Federal Reserve from 1987 until 2006, memorably used the phrase to describe asset values during the 1990’s dot-com bubble.

Greenspan’s comments come as stock indexes remain near record highs, despite selling off in recent days, and as the yields on government notes and bonds hover not far from historic lows. Interest rates are expected to move up in coming years as the Fed continues with a campaign to gradually tighten monetary policy.

“At the end of the day, the bond market bubble will eventually be the critical issue, but for the short term it’s not too bad,” Greenspan said. “But we’re working, obviously, toward a major increase in long-term interest rates, and that has a very important impact, as you know, on the whole structure of the economy.”

Former Fed Chair Alan Greenspan Sees Bubbles in Stocks and Bonds – Bloomberg.com (January 31, 2018)

We need to be patient when we look for the results. Last decade’s warnings took over two years to manifest. We are only about a year into this unfolding fiasco.

This process takes time. While the US Treasury yields have not risen dramatically, look at all the volatility and loss of liquidity in the corporate, mortgage, and high yield (leveraged) loan markets. Look at the problems that have arisen this year in the emerging markets. The global bond markets have taken a turn for the worse since early this year.

How about Janet Yellen’s well-scripted exit interview?

As for whether Yellen’s view that the stock market (which plummeted on Friday) has been too high in recent months:

“Well, I don’t want to say too high. But I do want to say high. Price-earnings ratios are near the high end of their historical ranges. If you look at commercial real estate prices, they are quite high relative to rents. Now, is that a bubble or is too high? And there it’s very hard to tell. But it is a source of some concern that asset valuations are so high.

Janet Yellen: The exit interview (CBS News, February 4, 2018)

Keep in mind that Janet Yellen was still the head of the Fed when she gave that interview.

I tend to focus less on other monetary authorities around the world and more on the officials at the US Fed. Why did I pay particular attention to these interviews and events? Because all through the asset price boom of this decade the Fed chiefs were reluctant to say anything adverse. It all started this year and seemed peculiarly timed.

[Rita] Braver [CBS interviewer at the Federal Reserve] said, “This is arguably the most important economic conference room in the entire world.”

“I think that’s actually a fair assessment,” Yellen replied. “The policymakers and senior staff sit around this table, and we sometimes disagree, but we’re not disagreeable.”

Janet Yellen: The exit interview (CBS News, February 4, 2018)

Indeed, I agree. The elites formulate global monetary policy and use the US Fed as its primary architect and engineer.

Remember when the Dow Jones fell 666 points on February 2nd?

The Dow closed down 666 points, or 2.5%, its biggest percentage decline since the Brexit turmoil in June 2016 and steepest point decline since the 2008 financial crisis.

A strong jobs report showed wage growth is finally starting to pick up. That’s great news for workers, but it reinforced investors’ concern about inflation and the bond market.

Dow plunges 666 points (CNN Money February 2, 2018)

Numbers are very important to the elites. I look at the numerology in the markets to see the globalist calling cards. The March 2009 (3/6/2009) low in the S&P 500 was 666. February 2nd’s drop in the Dow Jones was 666. That was Yellen’s last business day on the job.

Recall on January 26th, after it was reported that Steve Mnuchin was speaking to reporters about his desire to see a weaker dollar, I told my listeners I sold all my non-real estate holdings and moved to cash.

There were just too many clues being dished out in too short a time. Look at what is happening now. Will the next couple years be tough for investors? I think it will and I remain in cash.

It pays to understand the conspiracy for world government.

December 16th Update – Stocks, bonds, interest rates, oil, XOP, gold, silver, USD, bitcoin; What will the US Fed say on Wednesday? Some predictions

I have uploaded a market update for December 16, 2018. Click here to go to the show archives page to listen and look at the relevant links or you can listen on the link below. You can also right mouse click here to download the podcast.

-I have been using the weekly charts for most of my asset market analysis. The daily charts are not showing the complete pictures
-Some price predictions
-The charts could all be repainted with a hawkish US Fed announcement and press conference
-I anticipate a slightly soft tone out of the Fed. All the charts (S&P, Nasdaq, DJIA, oil, USD, US Treasuries) are at precarious positions and anything lending to a stronger dollar and much higher Fed funds rates in 2019 could put asset prices in jeopardy. The Fed sees what we see and will be careful.
-I don’t short the markets like last decade. They are all well-managed now and official intervention can destroy our trading accounts.
-My liquid net worth is still in cash. As a percent of my net worth, I don’t own all that much gold and silver anymore (3-4%). Gold and silver has suffered at the expense of everything else. I haven’t added.
-Technical analysis for stocks, oil, and metals. XOP hit 29 support way too quickly. If the the USD rises further, the drillers (who desperately need a weaker dollar) could fall hard as their balance sheets are called into question.
-Bitcoin thoughts. The futures market changed everything. People forget that miners were mining bitcoin below $1,000. If bitcoin continues to fall more miners drop out and the remaining ones can more easily mine. There is no support below $3,000 until we get to $1,500. The altcoins seem to be moving to irrelevance.

The bubble’s losing air; get ready for a crisis and negative interest rates

Step outside the box when adjusting to the new reality

Imagine a world  with a regime of systemic negative interest rates. The low and negative interest rates we see in some areas of the world are just the beginning. When I discuss negative interest rates, I mean it in the context of institutionalization. There will come a time when we will have to adjust to a world where governments may borrow at little to no cost. Perhaps the promulgation of a permanent program of negative rates could be employed for governments to effectively write off debt. At the same time, wage earners could see their buying power continually getting smaller over time.

The national governments and their central banks will exploit a world of permanent negative rates to consolidate their power and wealth as well as their control over the populace. Those with the ability to access credit could do well, while those who are cut off could continue to suffer. The economic divides will only grow and expand as the wage class becomes more hopelessly dependent on government programs to keep them afloat. The inefficient borrowing by the government will ostensibly be painless and would only crowd out prudent borrowers with sustainable business ideas.

Large corporations would consolidate their market share and crowd out the smaller firms who would no longer be able to compete. The world would effectively become one large oligopoly.

For those who anticipate the changes and are prepared, these crises present opportunity.

Investors need to start focusing on how best to respond to a new crisis. The choices are more limited than many realize. Historically, central banks have needed to slash official rates as much as 4-5 percent in order to offset the effects of a financial crisis or an economic slowdown. That’s why former U.S. Federal Reserve Chair Janet Yellen talked about the need to raise rates in good times — to provide room to cut when necessary.

Yet, even after recent U.S. interest rate hikes, the Fed has nowhere near enough room to cut rates that much without going negative. In Europe and Japan, where rates are already less than zero, easing would require substantially negative levels, which would likely be politically impossible. Even current levels are controversial. Negative rates are a disguised way of writing down debt; they penalize savers and weaken the banking system.

The Bubble’s Losing Air. Get Ready for a Crisis (Bloomberg, Dec. 14th)
Crisis presents opportunity for you and me

It is becoming clearer on a daily basis that the world’s economy and financial markets are reaching their denouement. For almost a decade we have experienced unprecedented asset value expansion and with the regime of historically low interest rates, valuations on most assets like real estate, stocks, bonds, businesses, sports teams, and art have been stretched to historic ranges. 

The talk of crisis is all over the place. The alt-financial media have been proclaiming catastrophe for the past 25 years, but recently, the mainstream has been chiming in as well, and rightly so. We are standing on the precipice, and how you and I prepare for the upcoming storm will be the difference between future success and failure. Indeed, the future presents a lot of opportunities for those who are prepared.

I submit that most people have become very dependent on government in one form or another, so that any crisis in confidence will be mitigated by the overriding fact that hardly anyone alive wants to see the governments fail. Thus, most investors and citizens will willingly accept any solution the governments proffer. There will be very little uprising. The population is now a very docile bunch.

Here’s what we can expect when things really roll over

In theory, central banks could aggressively expand the asset classes they buy to include corporate and bank debt, or real estate trusts and shares. The ECB, BOJ and the Swiss National Bank have already implemented such programs.

Ultimately, central banks might have to resort to QE variations such as “helicopter money.” Originally a thought experiment of Milton Friedman, the government would print money and distribute it to the public to stimulate the economy. To make it palatable, the measure could be packaged as a way to rationalize welfare systems by reducing frictions and administration costs.

Helicopter money would at least deflect criticism of QE programs as favoring the wealthy and exacerbating inequality, as benefits would accrue to a wider spectrum of the population. Direct intervention, such as lending to or investing in businesses, or taking over banks and large parts of the economy to restart activity, are also possible.

The Bubble’s Losing Air. Get Ready for a Crisis (Bloomberg, Dec. 14th)
Cash is king for now

There will come a time when the US Fed begins to experiment with negative rates. How the global asset markets respond is up for debate and the situation is fluid. But, this much is true; those with cash who are under-leveraged will come out ahead when the downturn presents buyers with cheaper asset prices. There will be plenty of opportunities over the next few years, thus it is incumbent on all of us to be prepared when they present themselves.

For the first time in decades, every major type of investment has fared poorly, as the outlook for economic growth and corporate profits is dampened by rising trade tensions and interest rates. Stocks around the world are getting pummeled, while commodities and bonds are tumbling — all of which have left investors with few places to put their money.

If this persists, or grows worse, it could create a damaging feedback loop, with doubts about the economy hurting the markets, and trouble in the markets undermining growth.

Pessimism emanating from the stock market could leave consumers and businesses scared to spend. The rout in junk bonds makes it more expensive for financially fragile businesses to borrow. The collapse in crude oil prices discourages new investment and hiring in the oil patch, which has been a source of job growth.

Investors Have Nowhere to Hide as Stocks, Bonds and Commodities All Tumble (New York Times, December 15th)

It may look like the end is near, but in a few years maybe oil driller junk bonds will be yielding less than 5% while the US government will be borrowing at -1%. Never underestimate the ability of the central banks to work together and come up with their solution. Of course, we won’t be the beneficiaries, and the governments will eviscerate all our freedoms in the process. All in the guise of saving us from catastrophe.

December 13, 2018 Update – Armstrong fumbles, the alt-media stumbles, and Trump mumbles

-Martin Armstrong covers his tracks. Calls the drop in sovereign yields a loss of confidence, but his big bang theory called for a rise in yields instead.
-My views on current global politics, including the jailing of the Huawei CFO.
All major 10-year sovereign yields have fallen since the US Fed’s change in policy stance. Can’t be a total coincidence.
-My response to yesterday’s Henry Makow article. I received a couple emails asking me to comment.
-I have no hard-wired bias to see a strong dollar. If circumstances change and I anticipate a dollar collapse I will let you know.
-What would the globalists gain from a collapsing dollar?
-Blockchain not ready to replace money for at least a decade.
-Negative rates discussed.
-Draghi and ECB working with Dovish Fed to coordinate global monetary policy. These private central banks all work together
-Wage earners in the US suffer under the Trump fiscal policies. 60% had not pay raise or lost wages.