The Crisis Will Sink Stocks

By Egon von Greyerz – Re-Blogged From Gold Eagle

There are no safe assets. In 2002 we recommended our investors to hold up to 50% of their financial assets in physical gold. Today in 2020, I consider that up to 100% is the right figure since there are no safe assets except for physical precious metals.

We are now at the end of the only truly global asset bubble in history, fuelled by a debt explosion of epic proportions. Never before have all major economies peaked together, powered by quadrillions of credit creation, money printing and derivatives.

UBER-OPTIMISTIC INVESTORS WILL BE SHOCKED

Although the magnitude of this bull market is greater than anything seen before, the psychology of the current market is similar to previous speculative bubbles whether we take 1929, 1973, 1987, 1999 or 2007. At the stock market peak of these periods, psychology reached uber-optimism. In 1929 for example, the Yale economist Irving Fisher stated in the New York Times: “Stock prices have reached what looks like a permanently high plateau”. Three years later the Dow had lost 90%.

Continue reading

Coronavirus And Credit…A Perfect Storm

This article posits that the spread of the coronavirus coincides with the downturn in the global credit cycle, with potentially catastrophic results. At the time of writing, analysts are still trying to get to grips with the virus’s economic impact and they commonly express the hope that after a month or two everything will return to normal. This seems too optimistic.

The credit crisis was already likely to be severe, given the combination of the end of a prolonged expansionary phase of the credit cycle and trade protectionism. These were the conditions that led to the Wall Street crash of 1929-32. Given similar credit cycle and trade dynamics today, the question to be resolved is how an overvaluation of bonds and equities coupled with escalating monetary inflation will play out.

Continue reading

Estimating The Shape Of The Coming Crisis

With a recession become increasingly certain and the end of the expansionary phase of the credit cycle in sight, we can expect a periodic systemic crisis to be upon us soon. The question arises as to how serious it will be, given that despite the massive injections of extra base money since the Lehman crisis, signs of liquidity shortages are already re-emerging in financial markets.

We don’t know what will trigger the crisis, but a likely candidate is foreign selling of US dollars combining with a collapse in the US government’s finances. Perhaps the coronavirus will turn out to be a black swan event, but the underlying conditions for an economic and monetary crisis already exist.

This article looks at alternative outcomes. It concludes that the current situation bears a worrying resemblance to the collapse of John Law’s Mississippi scheme exactly 300 years ago. The key to understanding why this is so is because of the link forged between asset prices and fiat currencies. One fails, and they both fail, more rapidly than the most bearish bear might expect.

Continue reading

A Wormhole on Wall Street

Intense sunshine beamed down upon the canyons of Wall Street, illuminating potholes, dark alleys, secrets and mass delusions. Most people paid no attention because phones, the impeachment circus, Facebook posts, stock prices, and money worries distracted them.

It was a normal day. I took a random walk down Wall Street, checked my phone for useless news and accidentally stepped into a cosmic wormhole or time-warp.

Perhaps it was only a deep hole in the sidewalk. Like Alice, I fell head over heels, and dropped my precious phone. My New York financial world faded, and blackness enveloped me.

To my surprise, I landed softly on my feet in a huge underground cavern with marble floors and dim glowing lights. Stunned by the silence instead of New York street noise and pollution, I stared in awe at the blemished walls of the cavern. It smelled like ancient mold and burnt toast.

Continue reading

Playing Taps For The Middle Class

It is not at all a mystery as to the cause of the wealth gap that exists between the very rich and the poor. Central bankers are the primary cause of this chasm that is eroding the foundation of the global middle class. The world’s poor are falling deeper into penury and at a faster pace, while the world’s richest are accelerating further ahead. To this point, the 500 wealthiest billionaires on Earth added $1.2 trillion to their fortunes in 2019, boosting their collective net worth by 25%, to $5.9 trillion.

In fact, Jamie Dimon, CEO of JP Morgan, made a quarter of a billion dollars in stock-based compensation in 2019. As a reminder, shares of JPM were plunging at the end of 2018; that is before the Fed stepped in with a promise to stop normalizing interest rates. And then, soon after, began cutting them and launching a bank-saving QE 4 program and REPO facility on top of it in order to make sure Mr. Dimon’s stock price would soar. Slashing interest rates hurts savers and retirees that rely on an income stream to exist, just as the Fed’s QE pushes up the prices for the things which the middle class relies on the most to exist (food, energy, clothing, shelter, medical and educational expenses).

Continue reading

Inflation: Dead Or Alive?

By GE Christenson – Re-Blogged From Gold Eagle

Breaking news: Silver briefly reached $18.00 and closed at $17.85. The DOW rose again to 28,645.

Inflation, Deflation, Stagflation, and Hyperinflation? So What?

Inflation: The banking cartel demands inflation of the currency supply. The cartel encourages massive debt and collects the interest and fees. They want inflation because it increases debt and repayment is easier. With global debt at $250 trillion, the cartel is successful.

Governments account for a large percentage of global debt. They spend more, buy votes, feed currency units to cronies, and borrow to cover the revenue shortfall. Inflation makes the debt load easier to tolerate.

Corporations want mild inflation to boost revenues, profits and stock prices.

Continue reading

Fed’s Fake Stock Markets

By Adam Hamilton – Re-Blogged From Gold Eagle

The US stock markets soared in 2019, blasting to dozens of new all-time-record highs.  Euphoric traders attributed these massive gains to strong corporate fundamentals and US-China trade-war progress.  But the real driver of stocks’ astounding ascent was the Federal Reserve’s epic extreme easing.  A panicking Fed pulled out all the stops to goose and levitate stocks, leaving fake artificially-inflated markets in its wake.

This year’s huge stock-market rally delighted nearly everyone, generating widespread euphoria.  That made Americans feel wealthier, leading them to spend more freely.  That pushed corporate sales and profits higher than they otherwise would’ve been.  Speculators and investors loved the easy largely-one-sided gains.  And stocks’ biggest fan, Trump, reveled in what lofty record stock markets implied about his policies.

Continue reading