3/20 Market Update; Keeping our perspective in a changing world; My one real worry

To download the podcast – Right mouse click here (duration 21:58)

Keeping perspective on bond yields and interest rates. The latest moves are well within the preexisting long-term channels.

-A top down view of the equity markets and some thoughts of what may come.
-Viewing the changes in bond yields, and interest and mortgage rates. I observed that over the past 60 years, the 10s/2s spread narrows to near zero or below leading up to all recessions. My thoughts on why that is the case.
-Trading and investing based on outliers.
-A discussion on the ongoing legislation in the developed world regarding rent and mortgage moratoriums.
-A discussion of the pitfalls in investing based on the dire pronouncements of futurists and those who are covered in the media. Even if you knew of COVID beforehand, you would have been on the wrong side anyway.
-My one growing worry regarding current monetary policy. It has more to do with investor and trader psychology and less to do with quantitative measures and obscure indexes.
-When the entire pool of traders, investors, and MSM and alt-media outlets report on QE effectiveness as a given, perhaps it’s finally time to contemplate taking the contra, since this means that risk taking will have been finally taken to the extreme.
-QE works when there is a lot of doubt in its integrity. Since late 2012, I stopped doubting it, and was able to successfully invest based on its viability.
-This doubt in QEs viability was good; for the first 11 years of QEs lifetime, fiscal policymaking reflected this doubt and investor risk was better managed. This is no longer the case as governments and investors have lost all restraint. If these people think that QE can solve humanity’s woes, perhaps it’s time to begin to reassess.
-Does this mean that perhaps QE’s demise is one misstep away?

A reader asks about “willful ignorance”

Dear Chris,

It’s taken me time and experience to understand the subject line [regarding willful ignorance]. I can respond to events and change my mind, but most others just fail to do so. If you have the time/interest, could you tell me a little about your experience? Did you develop a thick skin against the usual “crazy” or “internet addict”, or was that always a part of you?

Yesterday, my brother-in-law rebuffed my simple and verifiable observations by pointing to something on the internet. This man is simply “impervious” to anything contrary to the mainstream. In finance and computer science, he can learn and change his mind, but his community and family life depend on him remaining ignorant. I still find it difficult seeing someone who should be good, yet surrendering to evil.

I am trying to learn to let go like you have, but that’s why I asked if you had to learn it. I want to believe people can change, but my life experience goes against that hope. Very rarely does anyone change his or her mind, and I suppose [that’s why you asked me in a prior email regarding why I changed and how did I get to this point.]

Hoping for the best outcomes in your endeavors.

God bless,

Andrew

Most have a vested interest to maintain the status quo

First, I think you already answered your question in your email. Second, since the subjects pertaining to my blog can be overwhelming and depressing to the unwashed, we should not be shocked when others around us refuse to want to listen to what we freely discuss. This is especially true when we contemplate the spirituality of it all.

When discussing these matters with newcomers, I try to get a feel for how far along the learning curve they have come. Thus, I prefer to ask some open-ended questions. What happened to you in your life? Why are you interested in these subjects? Don’t you know that once you embrace these matters, you cannot go back to being “normal?” We cannot put toothpaste back in the tube.

The worst part is this; I have observed a number of people who have previously embraced these matters, but attempted to go back to the normal world. the problem is that they cannot ever really fit back in again. They either suffer from cognitive dissonance, or even worse, use their knowledge to exploit the naive masses around them. Either way, I have never seen anyone go back to being normal after drinking from these waters.

I have to believe that on many levels, your brother-in-law knows that at least some what you say is true, but he needs to suppress it for his desire to continue functioning in this profoundly sick world.

It’s easier to deny than to question, especially over the internet

I strive to remain objective in all my personal and professional matters, which means I must employ logic to the decision process whenever possible. Here is a brief list of some of the logic errors of your brother-in-law in which you must overcome.

  • The a priori fallacy – This occurs when someone decides ahead of time what the conclusion to an argument is, then only considers evidence that supports that conclusion, or twists what evidence there is to support the predetermined conclusion.
  • Selective Attention – Improperly focusing attention on certain things and ignoring others.
  • Suppressed Evidence – A person who intentionally fails to use information suspected of being relevant and significant is committing the fallacy of suppressed evidence. This fallacy usually occurs when the information counts against one’s own conclusion.
  • Willed ignorance – This occurs when someone does not wish to entertain the facts to a preconceived notion. “I’ve got my mind made up, so don’t confuse me with the facts.”
  • Wishful Thinking – A reasoner who suggests that a claim is true, or false, merely because he or she strongly hopes it is, is using the fallacy of wishful thinking. Wishing something is true is not a relevant reason for claiming that it is actually true.

That’s a lot of mental baggage to carry around, so your brother-in-law does not want to hear anything you have to say. Even worse, when you challenge his biases and beliefs, he will get angry and look to you as the enemy. This behaviour is referred to as the backfire effect. This type of psychological phenomenon is prevalent in the realm of our false left/right partisan political world. The backfire effect  is also observable in chat rooms and social media. You will never be able to win an argument on social media, so avoid it at all costs. This is especially true if you fail to employ the necessary logic to support your message.

Most people resist social change and harbor vested interests (financial or otherwise) in maintaining the status quo. These people lose something in response to social change. In your brother-in-law’s case, his whole way of life is threatened by what you say, so unless he expresses any interest in what we talk about, you need to leave him alone. If you continue to pepper him, he will avoid you altogether.

Our learning curve

When you are as far along the learning curve as I am, developing a thick skin is a necessity. I did tell my audience that I struggle with anger issues, and they still persist. But over time and with age, I realize why I have them. I still struggle with the concept of how much of my life is in the hands of our adversary, which is why I have developed ways to free myself from this system.

Of course, building our spiritual house is the most important, but developing our financial freedom is also vital. How did I overcome many of my character defects? I developed a skill set in which I didn’t have to rely on others for money. If I had to work for a living or run a business full of unwashed customers, I am most certain my life would have already fallen apart and I would be drinking again. I would probably be arguing with unwashed fellow employees and grinding my teeth at night.

I have come across countless personal instances in my life that resemble the one that you have with your brother-in-law. Since you and I face the uphill battle of trying to prove ourselves correct, we need to be on fire for the truth, and have our facts readily accessible to be presented in an air-tight, objective, and concise manner.

I have been a student of Economics and Behavioral Psychology for decades, and have strived to advance my debating capabilities. Thus, I am equipped with some formidable armour that I use to deliver my arguments in a way that others cannot dispute. This means we need to be able to develop, construct, and deliver logical arguments, while remaining detached and objective. We need to remain long on facts and short on opinions. For some, developing this skill set may be a challenge; but if we hope to affect change in the world, we need to build it regardless. All I can say is that it takes a lot of work and decades of experience.

To be honest with you, the most common reaction I now face when delivering the sobering news of our adversary to the unwashed is one of anguished silence. As I point out in my prior analysis of the Delphi technique, my views are rarely accepted into the group think, since they deviate so greatly from the group. But as a contrarian investor and trader, I use this to my advantage. If I were making decisions based on the herd, I know I would be wrong. So, being different here is a noble trait.

Of course, developing my financial skill set has proven beneficial to me when arguing my unique views and overcoming the inertia of societal group think. They see my financial accuracy and success over the longer-term as something of a validation to my theories. In order to be an effective steward of the truth, we have to work that much harder to overcome the skeptics.

But Jesus said unto them, A prophet is not without honour, but in his own country, and among his own kin, and in his own house.”

Mark 6:4 KJV

If Jesus could not convince those from around his childhood home, it’s safe to say you will not succeed with your brother-in-law. Leave him alone and plant your seeds in fertile ground.

A reader asks; Are retirement plans safe from confiscation?

Hello, Chris.

Continuing to enjoy your content. Couple of questions for you.

Would you recommend those already contributing to their 401K-iRAs (U.S.)/ RRSPs (Canada) continue to do so or should they pocket that money for other uses? What will happen to those government retirement savings plan in the future as the system becomes more socialistic?

Also, seeing that World Economic Forum Klaus Schwab has warned of a cyber attack that would dwarf COVID, could it mean a false-flag cyber attack that would loot Bitcoin and be blamed on whatever convenient bogeyman? It seems like we are all being culled into Bitcoin, but for what?

Thanks, as always. 😉

Tim

Social Security will never go away

Hi Tim,

Those who contribute to tax-deferred retirement plans are generally making a wise decision if they can save money on their income taxes, and they don’t have better uses for the funds.

It all comes down to opportunity costs. If you can parlay this money into procuring a good rental dwelling or producing a viable business opportunity, then I would not contribute. But for most people, I still recommend contributing to tax-deferred plans. I often suggest contributing the minimum amount to get the maximum employee match.

Public pension schemes will never go away; they will effectively die by attrition. Here is the thing with pensions and defined benefit (DB) plans (different than the defined contribution (DC) plans you ask about). Those who save for pension and DB plan payouts generally suffer terrible opportunity costs, since the cost-of-living adjustments (COLAs) are lower than the true inflation rates. Thus, these payouts in a few decades are effectively reduced to the point of becoming a real fraction of their original value.

Young people worry about S.S. and other government schemes going away, but they should never worry about that. They should understand that by the time they retire, their benefit amount will render the real value of that payment a shadow of what it once was many decades prior. So, the real government burden is reduced over the years and this underreporting of the CPI data solves the government’s dilemma of rising pension costs. S.S. and gov’t pensions will always be around, they will just be worth less.

As long as we have QE, retirement plan assets are safe

I would give you the green light if you decided to contribute to a DC plan, since I still think these assets are safe from government confiscation.  We  cannot obsess over theoretical government intervention now, because the central banks have successfully used QE to ostensibly solve the fiscal deficit problems. Thus, I doubt any government would be willing to touch any retirement plan assets at this time.

During the nadir of the 2008 collapse, there was plenty of talk in Washington and elsewhere regarding the confiscation of retirement plan assets to help bridge the fiscal deficit gaps. Most of it actually pertained to the confiscation of DB plan and S.S. assets, but some DC plan action was proffered. Keep in mind that many government pension plans are considered pay-as-you-go schemes, and as such, there are not true assets held that are based on actuarial assumptions and future plan liabilities.

As long as QE is in force (and it will be for some time), retirement plan confiscations are off the table. There will be no need to raid any assets for now.

We can’t plan for the future based on scare tactics and outlier events. Even COVID ended up helping asset owners. If the elites confiscated our retirement money for fiscal spending, the asset markets would collapse as this money would be diverted from the asset markets and into spending.

3/08 Update – Stocks, interest rates, and housing; Ravi Zacharias and the last days; Alan Watt passes away

To download the podcast – Right mouse click here (duration 29:38; 11:00am)

Financial markets and housing

-My observations on the latest moves in bond yields and why I think they may be acting the way they are.
-Observations on the latest fiscal spending initiatives.
-Housing markets in focus.

Why the Canadian Housing Market Is Soaring in the Pandemic
Housing is a luxury? Here’s what the K-shaped recovery means for real estate
‘This Is Unprecedented’: Why America’s Housing Market Has Never Been Weirder

-The stocks that will benefit and why any retracement will be minimal.
-Ask yourself this question… How does ZeroHedge get all this proprietary broker/dealer client research and why is it allowed to post it? Any other website would probably be forced to remove it, but not ZeroHedge….

Ravi Zacharias

-Ravi Zacharias and his misleading doctrine.
-Whether the elites intentionally promoted Ravi Zacharias to deceive and demoralize the Laodicean Christians is a subject of speculation, but I knew his doctrine was misguided and let many of my readers know over the years.
-Even if Zacharias didn’t realize it, he was a useful idiot to the elites and performed the functions of an effective change agent.
-He lied on his resume with the intent to expand his audience, he stole foundation money to live an indulgent lifestyle, he was an adulterer and fornicator, he professed false doctrine to his couple hundred million worldwide listeners, used the legal system to shut up his enemies, etc.
-Maybe Zacharias actually believed his “once saved always saved” doctrine, which is why he behaved like an unrepentant sinner. I think he was in shock after his death.

Alan Watt

-Mr. Watt passed away on March 4th. I found out while trading overnight. I usually visit his website to download his weekly podcast, but read the note of his passing.
-I listened to his research since 2004, when he was more active in the patriot community, as he helped me get my start in understanding the underpinnings of the new world order.
-He helped me to gauge how far the patriot movement had slid, because Mr. Watt’s clear and unwavering message countered that of the patriot movement’s sad slide. It especially countered the devolution of Infowars and its cadre of charlatans. As far back as 10-15 years ago, Alex Jones often referred to Mr. Watt’s work and had him appear on the Infowars show.
-If anyone knows why he passed, please let me know.

A reader asks; Are my sources of information varied enough to overcome my biases?

What sources do you read that help you make decisions ? And do you make them varied enough to help avoid confirmation bias ? I have found your incites very helpful.

PW

Here was my response;

I look to everywhere to determine if what I am saying makes sense. I have no predetermined source that guides me.

We initially develop our theories, then we confirm them with reality

As an observer of the financial markets since 1985, I know certain realities in how these markets function. For instance, a few weeks ago, I called you all to get out of the growth and SPAC plays we traded and held overnight for easy gains. Why? Once the 10-year UST rose above the 100-120 bps level, and the Fed was not concerned about it, I warned all to listen and take cover. I didn’t read an article that decided that for me. I said this because I never saw an instance going back 35 years where those stocks didn’t fall in a rising interest rate environment. Now, I can make that 36 years.

In the immediate term, I am concerned about rising bond yields here. In the pre-2008 world, it played less of an immediate role. In the post-2008 world, low rates are vital. We now have 12 years of observations to figure this out.  All this stimulus demand is generated with debt that will have to be serviced in the future, and it will always be on the aggregate balance sheet for future generations. If we saw true everlasting inflation, then the velocity of money would be rising.

What I am trying to say here is simple; I can comprehend the laws and theories of Economics and Mass Psychology to know the most likely outcomes. I don’t read the news of the day to determine my theories. I am guided by my theories and look to see how the governments and monetary authorities are acting, and how they are guiding the people’s minds.

Today’s recipients of social largess are the suckers at the poker table

This is where my Economics, Finance, and Mathematics background serves me well. Also, My study of the Bible helps in this regards as it reveals to me how humans really act. The knowledge I gain from reading the Bible also helps me to clear out the noise and clutter of political correctness that has permeated the last 40 years of mankind’s existence.

The mindset of the people is even worse than in Jesus’s time, because humans today have been conditioned to believe they are better, more virtuous, and more open minded. Unfortunately, humanity today is even worse than the Pharisees and Sadducees that crucified Jesus and killed the early Christians. This is easily verifiable. The people today are so full of themselves that they become the easiest suckers at the poker table. As the people get dumber with money, the elites have developed a whole new genre of behavioral economics and psychology studies to help them fleece the public. It operates like a clock. These experts win the Nobel prizes now.

Guided by my broad framework of theories, I have developed a set of principles that I use to analyze the markets. For instance, in the post-2008 world, a set of ever-lower interest rates is needed to keep this system going. I am concluding here that eventually, rates will have to fall again. How they get there is yet to be determined. I warned the readers all throughout 2018 that the Fed needed to stop its tightening policies lest the USD and bond market derail the entire global system. I warned in 2019 about the overnight market meltdown and that the Fed would have to start QE again. It relented on both occasions and the meltdowns were averted. It eventually relents whenever the markets began to tank in earnest, while ZeroHedge warns of continual collapse.

Look back 2.5 years at the Fed action. I recall it vividly. We are being set up again for another showdown. This time, with my comprehension of how this works, the Fed will have to tighten and the government will have to stop its massive fiscal spending (the opposite) because bond yields must not rise to previous levels.

The asset markets will become unglued if the Fed doesn’t respond properly, but real estate should hold up better as mortgage rates were not allowed to drop to the levels that the UST yields sank, and inflation will help rents, etc. Even at a 3% 10-year UST, mortgage rates are still low by historical standards, and if inflation rises (I doubt it longer term, because of the overwhelming offsetting debt burdens generated) it will be temporary. Recall my theories on social spending. It all gets sucked into the Financial and RE shell by the top 10% who fleece the bottom 90%. This money is more effectively sterilized.

I am not concerned about inflation. Rather, I am concerned about what the bond market is saying about Fed policy. I stay focused on what matters here. if I was constantly looking for inflation and calling the Fed stupid, I would be redirecting my energies into a false dilemma. I only care how the bond markets are reacting. I don’t want to emphasize a problem that may never arise. The ZeroHedge readers can obsess over inflation data. I instead wonder why the Fed is acting the way it is.

Earlier, I referred my readers to a CNN article discussing the former Fed’s Bill Dudley’s comments, because it was the only outlet that reported on it at the time.  Mr. Dudley’s views are important to me in this instance, because he was the President of the New York Fed branch from 2009-2018, and in his role, he was responsible for executing Fed policy in the open markets.  This in no way means that I am a CNN supporter. CNN just happened to report on something I deemed to be worthy of note.

My conclusion is stark; the Fed needs to respect the bond market in this centrally-managed post-2008 world. The Fed didn’t respect it in 2018, nor in 2019, until it started cracking, and they are acting the same way three years later. They are pretending we are operating in the PRE-2008 world, but that system is long gone. I just take note on this, and focus on what matters. I actually think the Fed acts like this, so they can pretend that the world is still operating under the old set of assumptions.

My concern here with the Biden regime has nothing to do with politics. I am concerned with how it’s spending and where the money is going. All this domestic spending will render the United States economy on par with any other socialist nation. You may like that, but the propagandized MSM are already warning us that higher housing and living costs are coming soon; but that it’s good for you.

I don’t need to read all the stories out there to determine this stuff. To me, this is all just common sense, and this practicality and pragmatism has served me well. Over the years, I have been jettisoning anything that alludes to the formation of a subjective confirmation bias. In the economic and financial markets it’s much easier to measure my success in this endeavor; I ask myself, did the markets respond the way I thought they would? If they don’t, I figure out why I was wrong. It’s a process that takes a lifetime, but it’s worth the effort.