Some Predictions For 2019

By Michael Pento – Re-Blogged From Pento Portfolio Strategies

Bond Yields Continue to Fall in First Half of Year

The epoch bond bubble continues to build and become a dagger over the worldwide economy and markets. Wall Street Shills are fond of claiming that global bond yields remain at historically low levels due to central bank manipulations, but this argument is no longer tenable. It was once true, but QE on a net global basis has now gone negative. And the data shows the amount of U.S. publicly traded debt relative to GDP is much greater today than it was prior to the start of the Great Recession—even after adjusted for the size of the Fed’s balance sheet–in other words, taking into account all the debt the Fed has purchased and is still rolling over.

The amount of publicly traded debt in the U.S. has soared to 58% of GDP. This is up from 29% in 2007 when the U.S. 10-year Note was yielding 5%. The Fed is now selling $50b of bonds each month, with an extra $7.8T in publicly traded debt that it doesn’t own; and that equates to nearly 2x the amount of debt compared to GDP than what existed just prior to the Great Recession. This debt must now be absorbed by the private market and at a fair market price, instead of just purchased mindlessly by the Fed…and yet yields are still falling. This means investors are piling into sovereign debt for safety ahead of the global economic crisis even though they understand that debt is, for the most part, insolvent.

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Markets Are All About Flows

By Alasdair Macleod – Re-Blogged From GoldMoney

This article looks at prospective supply and demand factors for financial assets in the New Year and beyond. Investors should take into account money flowing into and out of financial assets as well as stock flows, particularly escalating government bond issuance, which looks likely to accelerate significantly in the coming years. It adds up to the fundamental case for physical gold and silver.

At this time of year, the thoughtful soul considers prospects for markets. Pundits are laying out their forecasts, and they fall into two broad camps. There are brokers and fund managers who talk of value. Their income and assets under management depend on continually inflating prices. Then there are the pessimists, a ragbag of doom-mongers who sweepingly point to risks on a grand scale. The collapse of Italy, Deutsche Bank, China, Brexit… take your pick. Very few engage on the subject that really matters, and that is the underlying monetary flows into and out of financial markets.

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How We Went from Fake Recovery to Freefall

By David Haggith – Re-Blogged From Gold Eagle

Until you got to this tax and spending deal a year ago, it was one of the most hated bull markets. The markets steadily climbed one wall of worry after another, and the problem was that the economic data did not confirm it.

Bloomberg

That’s right. The market was not rising for the past ten years due to a healthy underlying economy. On the contrary, the market was rising due to the Federal Reserve pumping out stratospheric amounts of thin-air money, all of which needed somewhere to land.

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Transition Into Economic Night

By Gary Christenson – Re-Blogged From Gold Eagle

The economic world is always changing, but the 2018-2019 period will mark an important transition. Consider credit market debt, interest rates, stock indices, individual stocks, and several ratios.

TOTAL CREDIT MARKET DEBT per the St. Louis Fed.

That measure of U.S. debt increased exponentially from 1951 to 2007 at a rate of 8.8% per year. However, the rate from 2008 to 2017 has been only 2.6% per year. A sixty-year trend changed during the 2007-08 financial crisis. As suggested by others the U.S. reached debt saturation. The economy has not recovered since the crisis. The graph of credit market debt supports that thesis.

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Are Stocks Overvalued?

By Keith Weiner – Re-Blogged From Silver Phoenix

We could also have entitled this essay How to Measure Your Own Capital Destruction. But this headline would not have set expectations correctly. As always, when looking at the phenomenon of a credit-fueled boom, the destruction does not occur when prices crash. It occurs while they’re rising. But people don’t realize it, then, because rising prices are a lot of fun. They don’t realize their losses until the crash. So we want to look at stocks when they’re high, before people realize what’s happened to them.

How do you value a stock? The classic methodology, proposed by Benjamin Graham and Warren Buffet, is to discount future free cash flows. Let’s leave aside the problem of how to predict future revenues much less cash flows in our crazy resonant system with positive feedback. For purposes of this discussion, we will just assume that a stock generates a known and constant cash flow of, say, $1 per year, in perpetuity.

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Does Wall Street Now Have A Powell Put

By Michael Pento – Re-Blogged From Pento Portfolio Strategies

First let’s explain exactly what a “Fed Put” is. A Fed put is defined as: The confidence of Wall Street that the Fed will lower interest rates and print money to support the market until economic strength will be strong enough to carry stocks higher. The term “Put” is ascribed to this because a put option is basically a contract that offers a buyer protection from falling asset prices. It was first coined under the Chairmanship of Alan Greenspan when he lowered interest rates and printed money to rescue Wall Street from its 22% Black Monday crash back in 1987. The practice of bailing out stocks was institutionalized by Ben Bernanke; and then became a bonafide tradition perpetuated by Janet Yellen.

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Why China Should Remove All Trade Tariffs

By Alasdair Macleod – Re-Blogged From Silver Phoenix

I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in tariffs. MAKE AMERICA RICH AGAIN

@realDonaldTrump  tweet 10:04EST, 4 December 2018

It is widely understood by economists of most theoretical persuasions that trade tariffs are a bad idea, but President Trump has laid out his stall. The political class, prodded usually by the vested interests of crony capitalists, always fall for trade protectionism. President Trump’s tariff war is just the latest example that coincidently stretches back to the introduction of central banks. I shall address this coincidence later in this article.

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