An Epocalypse Upon Us

By David Haggith – Re-Blogged From Gold Eagle

I’ve missed a few predictions along the way, but usually only in part. When I missed, it was because I took the bad too far. The bad has almost always happened exactly when I said it would but hasn’t always been as bad as I said it would be. Now, it has all arrived and is turning out to be fully as bad as I said it would be.

It took the kick of a virus to set everything in place, but all the parts are now falling where I said they would once the next recession began.

Powell Sends A Message With Love For Gold

By Arkadiusz Sieroń – Re-Blogged From Gold Eagle

Powell gave a much-awaited speech yesterday, in which he sent one bearish and two bullish messages for gold. What exactly did he say and what does it mean for the yellow metal?

Powell Sends One Bearish and Two Bullish Messages for Gold

Jerome Powell gave a speech yesterday at the Peterson Institute for International Economics. The Fed Chair acknowledged the unprecedented depth of the coronavirus crisis, and its disastrous impact for the US labor market, something we also noted many times:

The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II. We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased. Since the pandemic arrived in force just two months ago, more than 20 million people have lost their jobs.

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Money Printing Is The New Mother’s Milk Of Stocks

By Michael Pento – Re-Blogged From Silver Phoenix

My friend Larry Kudlow always says that Profits are the mother’s milk of stocks. That used to be true when we had a real economy. But sadly, that is no longer factual because we now have a global equity market that is totally controlled by central banks. To prove this point, let’s look at the last few years of earnings. During the year 2018, the EPS growth for the S&P 500 was 20%; yet the S&P 500 Index was down 7% over that same time-frame.

Conversely, during 2019, the S&P 500 EPS growth was a dismal 1%; yet the Index surged by nearly 30%. What could possibly account for such a huge divergence between EPS growth and market performance? We need only to view Fed actions for the simple answer: it was the degree to which our central bank was willing to falsify asset prices.

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Permanently Addicted to Zero

In Fed Chair Jerome Powell’s appearance before Congress on February 11th, formerly known as The Humphrey-Hawkins testimony, he asserted that the U.S. economy was, “In a very good place” and “There’s nothing about this expansion that is unstable or unsustainable.” But compare Powell’s sophomoric declaration to what Charlie Munger, Vice-Chairman of Berkshire Hathaway and Warren Buffett’s longtime right-hand-man, had to say about the market and the economy, “I think there are lots of troubles coming…there’s too much-wretched excess.”

Mr. Powell’s comments rival in ignorance with that of former Fed Chair Bernanke’s claim that the sub-prime mort crisis was contained. That is until the Great Recession wiped out 50% of stock valuations and over 30% of the real estate market. And of course, don’t forget about Fed Chairs Yellen and Powell’s contention that their Quantitative Tightening program would be like watching paint dry and run harmlessly in the background on autopilot. At least that was their belief until the junk bond market disintegrated and stocks went into freefall in the fall of 2018. Therefore, it should not be a surprise at all that the Fed doesn’t recognize the greatest financial bubble in history: the worldwide bond market mania. Perhaps this is because central banks created it in the first place and therefore didn’t want to take ownership of it.

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Stocks Rise As Zombie Companies Proliferate

By Michael Pento – Re-Blogged From Silver Phoenix

Share prices on the major US exchanges are hitting all-time highs at the same time that both the number and percentage of companies that do not make any money at all are rising.

According to the Wall Street Journal, the percentage of publicly-traded companies in the U.S. that have lost money over the past 12 months has jumped close to 40% of all listed corporations–its highest level since the NASDAQ bubble and outside of post-recession periods.

In fact, 74% of Initial Public Offerings in 2019 didn’t make any money as opposed to just 25% in 1990—matching the total of money-losing ventures that IPOED at the height of the 2000 Dotcom mania. The percentage of all listed companies that have lost money for the past three years in a row has surged close to 30%; this compares with just over 10% for the trailing three years in the late 1990s.

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Deflation Or Inflation: Gold Doesn’t Care

In our view, gold investors should settle back with some popcorn and enjoy the coming fireworks, which will include the best gold bull market ever, with all the volatility that implies. We see new all-time highs just around the corner. The challenge is to take a position and stay the course. Central banks are about to pay for decades of bad policy and gold will reap the dividends.

Let’s be clear about one thing: the global economy is falling into a deep recession but it is NOT due to the U.S.-China trade war, and a resolution of that war, no matter what it is, will not avoid the inevitable. Inverted yield curves and an historic collapse in bond yields are the clearest message that markets can send on the economic outlook. The trade war does not explain why Europe and Japan have been on the brink of recession for more than a year. Nor will central bank easing prevent a recession when monetary conditions are already the loosest in 25 years. Central bank monetary policy is part of the problem, not the solution. In our view, the economy and the stock market are not going to be saved by trade deals and monetary policy.

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Fed’s Final Bullet Hits ‘Em in the Foot

By David Haggith – Re-Blogged From The Great Recession Blog

The Fed’s missteps and flip-flops this week tripped up multiple markets. After accidentally announcing their ammo is down to one last bullet against recession, can they be trusted to handle powerful weapons?

Given how the stock market is now trading on nothing but the Fed, it’s no surprise that its heart leaped instantly in the middle of the week when New York Fed President John Williams (a voting FOMC member) said the Fed should respond quickly to recessionary headwinds with its own rate cuts.

Will The 35th Recession Bring A Swift Return To Zero Percent Interest Rates?

By Dan Amerman – Re-Blogged From Gold Eagle

Many people view the seven years of zero percent interest rates experienced in the United States between 2008 and 2015 as being safely in the past, with normal times having returned.

As explored in this analysis, so long as the business cycle of expansions and recessions has not been repealed – then we are highly likely to see a swift return to a potentially protracted bout of zero percent interest rates with the next major downturn in the economy.

Indeed, even the staff of the Federal Reserve itself expects more frequent episodes of zero percent interest rates in the future, and for those episodes to be on a more protracted basis.

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Empty Words Are Failing. A Timeline For What Comes Next

By John Rubino – Re-Blogged From Dollar Collapse

A quick recap of the past couple of months:

Stocks plunge.

The politicians, bureaucrats and bankers who depend on artificially-elevated financial asset prices start to panic.

The Fed announces that maybe it won’t have to raise interest rates any more, and the president announces a truce in the trade war with China.

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The Approaching Storm

By Gary Christenson -Re-Blogged From Gold Eagle

Peter Schiff explained “What Happens Next.” This article takes his “likely sequence of events” and expands the discussion.

His sequence:

  1. Bear Market
  2. Recession
  3. Deficits explode
  4. Return of ZIRP and QE
  5. Dollar tanks
  6. Gold [and silver] soars
  7. CPI spikes
  8. Long-term rates rise
  9. Federal Reserve is forced to hike rates during a recession
  10. A financial crisis without stimulus or bailouts.

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Bond Bubble Conundrum

By Michael Pento – Re-Blogged From Silver Phoenix

Wall Street shills are in near perfect agreement that the bond market is not in a bubble. And, even if there are a few on the fringes who will admit that one does exist, they claim it will burst harmlessly because the Fed is merely gradually letting the air out from inside. However, the fact that we are in a bond bubble is beyond a doubt—and given the magnitude of the yield distortions that exist today, the effects of its unwinding will be epoch.

Due to the risks associated with inflation and solvency concerns, it should be a prima facie case that sovereign bond yields should never venture anywhere near zero percent—and in some cases, shockingly, below zero percent. Even if a nation were to have an annual budget surplus with no inflation, it should still provide investors with a real, after-tax return on government debt. But in the context of today’s inflation-seeking and debt-disabled governments, negative nominal interest rates are equivalent to investment heresy.

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Money That “Rots And Rusts”

By John Rubino – Re-Blogged From Dollar Collapse

In the next downturn (which may have started last week, yee-haw), the world’s central banks will face a bit of poetic justice: To keep their previous policy mistakes from blowing up the world in 2008, they cut interest rates to historically – some would say unnaturally — low levels, which doesn’t leave the usual amount of room for further cuts.

Now they’re faced with an even bigger threat but are armed with even fewer effective weapons. What will they do? The responsible choice would be to simply let the overgrown forest of bad paper burn, setting the stage for real (that is, sustainable) growth going forward. But that’s unthinkable for today’s monetary authorities because they’ll be blamed for the short-term pain while getting zero credit for the long-term gain.

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Bernanke’s Confetti Courage

By Michael Pento – Re-Blogged From http://www.gold-eagle.com

Former Fed Chairman Ben Bernanke’s book titled “The Courage to Act” is now available in paperback. This isn’t a surprise because, after all, his proclivity to print paper encompasses the totality of what his courage to act was all about. The errors in logic made in his book are too numerous to tackle in this commentary; so I’ll just debunk a few of the worst.

Bernanke claimed on one of his book tour stints that the economy can no longer grow above a 3% rate due to systemic productivity and demographic limitations. But his misdiagnosis stems from a refusal to ignore the millions of fallow workers outside of the labor force that would like to work if given the opportunity to earn a living wage. Mr. Bernanke also fails to recognize the surge of productivity from the American private sector that would emerge after the economy was allowed to undergo a healthy and natural deleveraging cycle.

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2017’s Real Milestone (Or Why Interest Rates Can Never Go Back To Normal)

By John Rubino – Re-Blogged From Dollar Collapse

Forget about NAFTA or OPEC or TPP or crowd size or hand size or any other acronym or stat or concept that obsesses the financial press these days. Only two numbers actually matter.

The first is $20 trillion, which is the level the US federal debt will exceed sometime around June of this year. Here’s the current total as measured by the US Debt Clock:

To put $20 trillion into perspective, it’s about $160,000 per US taxpayer, and exists in addition to the mortgage, credit card, auto, and student debt that our hypothetical taxpayer probably carries. It is in short, way too much for the average wage slave to manage without some kind of existential crisis.

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Next Recession Looms Large

By Peter Schiff – Re-Blogged From http://www.Gold-Eagle.com

Currently economists and market watchers roughly fall into two camps: Those who believe that the Federal Reserve must begin raising interest rates now so that it will have enough rate cutting firepower to fight the next recession, and those who believe that raising rates now will simply precipitate an immediate recession and force the Fed into battle without the tools it has traditionally used to stimulate growth. Both camps are delusional, but for different reasons.

Most mainstream analysts believe that the current economy can survive with more normalized rates and that the Fed’s timidity is unwarranted. These people just haven’t been paying attention. The “recovery” of the past eight years hasn’t been just “helped along” by deeply negative real interest rates, it is a singular creation of those policies. Since June 2009, when the current recovery began, traditional economic metrics, such as GDP growth, productivity, business investment, labor force participation, and wage growth, have all been significantly below trend. The only strong positives have been gains in the stock, bond and real estate markets. We have had an “asset price” recovery rather than a bona fide economic recovery. This presents unique risks.

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Free Market Always Prevails

By Michael Pento – Re-Blogged From http://www.PentoPort.com

The global securities market got a surprise recently when US core consumer price inflation crept up to 2.3% year over year in the month of August. This closely followed core measure, which strips out the more volatile food and energy costs, increased 0.3%; this was the biggest rise in core CPI since February.

According to the government, while the costs associated with food and energy decreased, price increases came primarily from medical care commodities and medical care services. According to the Bureau of Labor Statistics (BLS), the prices for medicine, doctor appointments, and health insurance rose the most since 1984.

Unfortunately, it doesn’t appear that consumers will have any relief from the rising cost of health care. According to Freedom Partners the average state increase for health insurance premiums under the Affordable Care Act was 15.1% from 2015, as the promised premium reductions from Obamacare circles the drain.

The rise in health care costs stands as another glaring example of the negative consequence of supplanting free-markets with government control. Demonstrating once again how flawed Keynesian economic policies inevitably lead to stagflation.

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Jackson Hole Saturday, When the Real Hyperinflationary Fireworks Occurred

By Andrew Hoffman – Re-Blogged From http://www.milesfranklin.com/

Pardon me if this article starts out a bit disjointed, as I accidentally erased the notes I took last night, amidst the 155th “Sunday Night Sentiment” attack of the past 161 weekends.  And afterwards, the 689th “2:15 AM” raid of the past 793 trading days, which I was able to document in real-time because someone called me at 3:00 AM, acting surprised that I wasn’t on “European time.”  I mean, do I have a French, German, or British accent?

Thankfully, the amount of notes was minimal, as amidst the “summer doldrums,” trading volumes are exceptionally low – with “volatility” at 20-year lows, care of the most maniacal, relentless market manipulation in global history.  Which, of course, is occurring because the global political, economic, and monetary situation has never been uglier.  Not to mention, the powers that be MUST maintain the status quo to enable a Hillary Clinton victory – as if Trump wins, their ability to staunch the bleeding, and control the future, will be dramatically weakened.  For what it’s worth, I strongly believe Trump will win – as like the “surprise” Brexit result, I believe Americans’ actual political leaning is far different than the propagandized “strong Clinton lead.”  Frankly, it strains credibility that anyone would believe this to be true, given the historically horrible economy, the e-mail server scandal, and all out criminality of the Clinton Foundation.

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The Ugliest Economic Data I’ve Ever Seen (Part 2)

By Andrew Hoffman – Re-Blogged From http://www.Gold-Eagle.com

It’s Thursday morning – and there are nearly a dozen “PM bullish, everything-else-bearish” headlines worthy of distinct articles.  Such as…

1. This shocking, and hilarious, segment of the John Oliver show, depicting how subprime auto lending has officially reached the destructive lunacy of the 2007-08 subprime mortgage market. Not to mention, subprime student lending, as a whopping 37% of the $1+ trillion, government-underwritten student loan “market” is now delinquent.

2. Obamacare is literally on the brink of collapse, with insurers losing $2 billion in 2015 alone, and pulling out of the program en masse

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The Inexorable Result Of Modern Central Banking

By David Stockmn – Re-Blogged From Stockman’s Contra Corner

The inexorable effect of contemporary central banking is serial financial booms and busts. With that comes increasing levels of systemic financial instability and a growing dissipation of real economic resources in misallocations and malinvestment. At length, the world becomes poorer.

Why? Because gains in real output and wealth depend upon efficient pricing of capital and savings, but the modus operandi of today’s central banking is to deliberately distort and relentlessly falsify financial prices.

After all, the essence of ZIRP and NIRP is to drive interest rates below their natural market clearing levels so as to induce more borrowing and spending by business and consumers.

It’s also the inherent result of massive QE bond-buying where central banks finance their purchases with credits conjured from thin air. The central banks’ big fat thumb on the bond market’s supply/demand scale results in far lower yields than real savers would accept in an honest free market.

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Negative Interest Rates Aren’t Working Because They Haven’t Been Tried

By David Haggith – Re-Blogged From Great Recession Blog

The economics world is all a-chatter about how central banks and their member banks have moved interest rates beyond the zero bound to charging negative interest rates. There is just as much brainless talk about why this is accomplishing nothing. No one seems to notice that negative interest rates never actually happened!

Sounds preposterous? Think about it:

Think about it in terms of the central banks’ stated objective, which is lowering the rate at which banks loan out money. As the recession went on, central banks tried to drive interest on loans like mortgages lower and lower in order to entice people to buy things with loans in order to stimulate the economy. Because that didn’t stimulate the economy enough, central banks started saying they might have to go from lowering interest (for banks) to the zero bound (zero interest rate policy — ZIRP) to taking interest all the way negative (negative interest rate policy  — NIRP). Nope. Never happened anywhere.

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How They Fool Us, China Edition

By John Rubino – Re-Blogged From Dollar Collapse

So it seems that China’s economy, caught in the grip of a credit crisis just a few months ago, is all better. And so, by extension, is everyone else. As the Wall Street Journal explains it:

China Calms Anxiety With Economic Fixes

WASHINGTON—The world’s financial leaders started the year worried about China’s decelerating economy dragging the world into another major crisis. Now, they are breathing a small sigh of relief.Finance ministers, central bankers and other top officials gathering here in recent days said Beijing’s moves to stabilize its economy have temporarily eased global fears tied to the world’s No. 2 economy.

“There was not the same level of anxiety,” said International Monetary Fund Managing Director Christine Lagarde.

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Time to Invest for Stagflation

By Michael Pento – Re-Blogged From http://www.PentoPort.com

Whether you call it a 1970’s style stagflation or, as we call it, a recessflation, investors need to prepare their portfolios to profit from a protracted period of rising prices in the context of zero growth. Here are some facts: Growth in the U.S. has averaged just 2% since 2010. However, Q4 2015 GDP growth grew at a 1.4% annualized rate and the Atlanta Fed model has Q1 GDP growth slowing to just 0.4%. The simple truth is that the rate of growth is slowing towards 0%, just as asset prices continue to rise to record levels due to vast intervention from central banks.

The U.S. is now in the process of moving away from an environment of disinflation and slow growth, to one of inflation and recession. Indeed, the entire global economy is careening towards an epic recessflation crisis.

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Gold Experiences First “Golden Cross” In Two Years

By Frank Holmes – Re-Blogged From http://www.Gold-Eagle.com

Last Friday, gold experienced a “golden cross,” a technical indicator that occurs when an asset’s 50-day moving average crosses above its 200-day moving average. It’s the first such movement in nearly two years and is a sign that gold might have further to climb.

'Golden Cross' for Gold

Strengths

  • The best performing precious metal for the week was gold, by a significant margin. Gold experienced its first “golden cross” in two years, as the 50-day moving average moved above the 200-day. This week Georgette Boele from ABN Amro, who switched her gold outlook from bearish to bullish, noted that investors are now buying the metal on dips, rather than selling on rallies as they’ve done previously.

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What We Need From the Candidates

cropped-bob-shapiro.jpg   By Bob Shapiro

The US is 5 months into Fiscal Year 2016, and the 2016 Presidential nomination process is moving along quickly. It looks like we may know who the two Big Party candidates will be within just a few months.

Even so, it appears that the candidates, and the “question asking” media have been ignoring one of the economic elephants in the room. I’m referring to the eternal US Budget Deficit, and the National Debt it causes, which are destroying our once great country.

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Marc Faber On Cashless Society Insanity And Why Wall Street Hates Gold

By Mike Gleason – Re-Blogged From http://www.Silver-Phoenix500.com

Mike Gleason: It is my privilege now to be joined by a man who needs little introduction, Marc Faber; editor and publisher of The Gloom, Boom & Doom Report. Dr. Faber has frequently appeared on financial shows across the globe and he’s a well-known Austrian school economist, and an investment adviser. It’s a real honor to have him on with us today. Dr. Faber, thank you so much for joining us.

Marc Faber: It’s my pleasure, thank you very much.

Mike Gleason: Well, I want to start out by asking you about the current state of the financial world here in the early part of 2016. We’ve got the global equities markets continuing to roll over. Meanwhile, the metals are doing quite well and acting as a bit of a safe haven. What do you make of the market action here, so far this year?

Marc Faber: Well, basically, the financial markets have been sick for quite some time. Emerging markets either never made a new high above the 2006, 2007 highs, or they peaked out in 2011, or some even later in 2014. Basically after about February/March 2015, they started to drift. And in the U.S., the indices were strong, but the average stock was down substantially in 2015. This is called weakness beneath the surface of the indices because an index, theoretically, could have 500 stocks and 499 decline, but one stock goes up a lot and drives up the index. So this happened last year, to some extent, in the U.S… you have the strong stocks, Facebook, Amazon, Netflix, Google, and maybe another 20 stocks that were going up. And at the same time, you have thousands of stocks that were acting badly and going down, which accounts for actually a horrible performance for most investors. Now in January, reality set in with the strong stocks, they’re all down 20, 30, and sometimes even more percentages.

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Gold Outlook Improves

By Alasdair Macleod – Re-Blogged From GoldMoney

There is a conflation of three related events that materially alter the prospects in favour of a higher gold price. The change in the outlook for US interest rates has probably put an end to the dollar’s four-year bull run, it is clear that there is a growing likelihood of negative interest rates in the future, and the global banking system is no fit state to manage the potential challenges of 2016. This article walks the reader through the likely economic effects relevant to the future purchasing power of the dollar, and therefore prospects for the gold price.

On the 5th February, the price action in gold was significant. At about 9.40AM New York time, a seller dumped 10,000 contracts on the Comex market, worth about $1.2bn. The price fell from $1162 to $1145, a fall of $17. Having risen over the course of the week, it was vulnerable to profit-taking, so in principal it was a good time to take the price down in order to take the steam out of the market. However, from that $1145 level, gold quickly and unexpectedly rose strongly, gaining nearly $30 into the close. Furthermore, the gold price has continued to rise this week.

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Entering The Belly Of The Epocalypse

By David Haggith – Re-Blogged From Gold-Eagle

Only a couple of weeks ago, I said we were entering the jaws of the Epocalypse….

Mexican retail billionaire Hugo Salinas Price has looked long into the stomach of this mammoth, and this is what he has seen:

“[Global] debt [as a percentage of GDP] peaked in August of 2014. I’ve been watching this for 20 years, and I have never seen anything like it. It was always growing, and now something has changed. A big change of this sort is an enormous event. I think it portends a new trend, and that trend will be to get out of debt. Deleverage and pay down debt. That is, of course, a contraction. Contraction means depression. The world is going into a depression. It’s going to get very nasty. (USAWatchdog)”

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Death Throes Of The Bull

By David Stockman – Re-Blogged From http://davidstockmanscontracorner.com

The fast money and robo-machines keep trying to ignite stock rallies, but they all fizzle because bad karma is beginning to infect the casino. That is, apprehension is growing among whatever adults are left on Wall Street that 84 months of ZIRP and $3.5 trillion of Fed balance sheet expansion, aka money printing, didn’t do the trick.

Not only is the specter of recession growing more visible, but it is also attached to a truth that cannot be gainsaid. Namely, having stranded itself at the zero bound for an entire business cycle, the Fed is bereft of dry powder. Its only available tools are a massive new round of QE and negative interest rates.

But these are absolutely non-starters. The former would provoke riots in the financial markets because it would be an admission of total failure; and the latter would provoke a riot in the American body politic because the Fed’s seven year war on savers and retirees has already generated electoral revulsion. Bernie and The Donald are not expressions of public confidence in the economic status quo.

So the dip buying brigades have been reduced to reading the tea leaves for signs that the Fed’s four in store for 2016 are no more. Yet even if the prospect of delayed rate hikes is good for a 50-handle face ripping rally on the S&P 500 index from time to time, here’s what it can’t do. The Fed’s last card—-deferring one or more of the tiny interest rate increases scheduled for this year——cannot stop the on-coming recession.

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Stock Topping Valuations

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

The prevailing valuations in the lofty US stock markets are increasingly becoming a bone of contention.  Wall Street calmly asserts stocks are reasonably valued, since it has a huge vested interest in keeping people fully-invested.  But with valuations soaring following a massive rally and weak third-quarter earnings season, they are dangerously high and portend great downside risk.  Stock topping valuations abound.

Since investing is all about buying low then selling high, the price paid for any investment is everything.  Buy good companies at cheap prices, and you’ll multiply your wealth over time.  But buying those very same good companies at expensive prices radically stunts future gains.  While cheap investments have great potential to soar as traders recognize their inherent value, expensive ones have already exhausted their upside.

And it’s valuations, not absolute stock prices, that define cheap and expensive.  Valuations are where stock prices are trading relative to their underlying corporate earnings streams.  The less investors pay in terms of stock price for each dollar of profits, the greater their ultimate returns.  Valuations are most often expressed in price-to-earnings-ratio terms, with stock prices divided by underlying corporate earnings per share.

This concept is so easy to understand, yet the vast majority of investors ignore it.  Imagine purchasing a house for a rental property that has expected annual rental income of $30k.  How much would you be willing to pay for it?  If you can get it for $210k, 7x earnings, it will pay for itself in just 7 years.  That’s a great deal.  But if that same house is priced at $630k, 21x, it will take far too long just to recoup the initial cost.

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Hang Onto Your Wallets

By Ellen Brown – Re-Blogged From http://www.Silver-Phoenix500.com

In uncertain times, “cash is king,” but central bankers are systematically moving to eliminate that option. Is it really about stimulating the economy? Or is there some deeper, darker threat afoot?

Remember those old ads showing a senior couple lounging on a warm beach, captioned “Let your money work for you”? Or the scene in Mary Poppins where young Michael is being advised to put his tuppence in the bank, so that it can compound into “all manner of private enterprise,” including “bonds, chattels, dividends, shares, shipyards, amalgamations . . . ”?

That may still work if you’re a Wall Street banker, but if you’re an ordinary saver with your money in the bank, you may soon be paying the bank to hold your funds rather than the reverse.

Four European central banks – the European Central Bank, the Swiss National Bank, Sweden’s Riksbank, and Denmark’s Nationalbank – have now imposed negative interest rates on the reserves they hold for commercial banks; and discussion has turned to whether it’s time to pass those costs on to consumers. The Bank of Japan and the Federal Reserve are still at ZIRP (Zero Interest Rate Policy), but several Fed officials have also begun calling for NIRP (negative rates).

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How the Great Depression 2.0 Will Soon Unfold

By Michael Pento – Re-Blogged From http://www.PentoPort.com

Those who place their faith in a sustainable economic recovery emanating through government fiat will soon be shocked. Colossal central bank counterfeiting and gargantuan government deficit spending has caused the major averages to climb back towards unchanged on the year. Zero interest rate and negative interest rate policies, along with unprecedented interest rate manipulations, have levitated global stock markets. But still, sustainable and robust GDP growth has been remarkably absent for the past 8 years.

Equity prices have now become massively disconnected from underlying economic activity, and the recession in corporate revenue and earnings growth is exacerbating this overvalued condition. Throw in the fact that earnings have been manipulated higher by Wall Street’s recent prowess in the art of financial engineering, and you get an extremely combustible cocktail.

I have been on record saying this will end in chaos and here is how I think it will unfold: Continue reading

How Do People Destroy Their Capital?

By Keith Weiner – Re-Blogged From http://www.Silver-Phoenix500.com

I have written previously about the interest rate, which is falling under the planning of the Federal Reserve. The flip side of falling interest rates is the rising price of bonds. Bonds are in an endless, ferocious bull market. Why do I call it ferocious? Perhaps voracious is a better word, as it is gobbling up capital like the Cookie Monster jamming tollhouses into his maw. There are several mechanisms by which this occurs, let’s look at one here.

Artificially low interest makes it necessary to seek other ways to make money. Deprived of a decent yield, people are encouraged (pushed, really) to go speculating. And so the juice in bonds spills over into other markets. When rates fall, people find other assets more attractive. As they adjust their portfolios and go questing for yield, they buy equities and real estate.

Dirt cheap credit is also the fuel for rising asset prices. People can use leverage to buy assets, and further enhance their gains.

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One Step Back From The Ledge

By Michael Pento – Re-Blogged From http://www.PentoPort.com

I started Pento Portfolio Strategies three years ago with the knowledge that the unprecedented level of fiat credit creation had rendered the globe debt disabled and would result in mass global sovereign default. As a consequence, there would be wild swings between inflation and deflation dependent upon the government provisions of fiscal stimulus, Quantitative Easing and Zero Interest Rate Policies…

For much of the third quarter the US Federal Reserve has avowed to raise rates. This in turn caused a sharp stock market correction on a worldwide basis. The flattening of the Treasury yield curve and the strengthening of the US dollar were the primary culprits. But then the September Non-Farm Payroll Report came in with a net increase of just 142k jobs, which was well below Wall Street’s expectation. The unemployment rate held steady at 5.1% but the labor force participation rate dropped to the October 1977 low of 62.4%. Average hourly earnings fell 0.04% and the workweek slipped to 34.5 hours. There were also significant downward revisions of 22k and 37k jobs for the July and August reports respectively.

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Potato Sack Economics

By MN Gordon – Re-Blogged From David Stockman’s Contra Corner

Fiscal policy, as opposed to monetary policy, is more readily understood by the general populace. Income taxes, budget deficits, the national debt.  These are all tangible things the average working stiff can grasp a hold of, if they care to.

The consequences of ZIRP or QE, however, are less obvious to the casual observer.  They experience the wild booms and busts of central bank caused price distortions yet never connect the dots back to the Fed.  They may falsely condemn capitalism, and never scratch below the surface where the Fed’s money and credit games are lurking.

The industrious wage earner may also find that, despite working harder and harder, their lot in life never improves.  In fact, it may even regress.  Still, many won’t recognize heavy handed monetary policy as factors for their disappointment.

The recent college graduate, making a subsistence wage at a franchise coffee shop, buried under $50,000 in student loan debt, may be keenly aware that something is radically wrong.  How come the cost of school is at such disparity with the value it provides, they may ask?

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Numbers Lousy – FED Scared Witless

cropped-bob-shapiro.jpg   By Bob Shapiro

Several statistics were reported this week, and in large measure, they disappointed analysts. Personal Income was up, but Personal Spending was up even more. This means that Americans were adding even more debt to their balance sheets. Since Saving is where the Capital comes from to help grow our Capitalist system, this means negative growth down the road.

PCE Prices were up only 0.1% in August (same as July), but these numbers generally are in the fairy tale category. Looking instead at the CPI, the way it used to be calculated in 1980 (via http://www.ShadowStats.com), inflation is running at around 7½%.

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What Two Risks From Rising Interest-Rates Could Each Trigger A New Global Crisis?

By Daniel R Amerman – Re-Blogged From http://www.Gold-Eagle.com

Why are interest rates at historic lows in the United States and around the world?

The widely-accepted answer is that very low interest rates exist for the purpose of stimulating economic growth and corporate profits, and are thereby helping the United States and other nations that are struggling with persistent and deep-rooted economic and unemployment problems.

However, if we accept this answer, then another question arises. If the US economy is booming while unemployment purportedly nears a mere 5% – then why do interest rates remain so low? Why the continuous drama about whether the Federal Reserve will slightly increase interest rates?

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The Fed’s Alice In Wonderland Economy – What Happens Next?

By Nick Giambruno – Re-Blogged From http://www.Gold-Eagle.com

After the President of the United States, the most powerful person on the planet is the Chairman of the Federal Reserve.

Ask almost anyone on the street for the name of the US president, and you’ll get a quick answer. But if you ask the same person what the Federal Reserve is, you’ll likely get a blank stare.

They don’t know – partly due to the institutions deliberately obscure name – that the Fed is really the third iteration of the country’s central bank. Or that the Fed manipulates the nation’s economic destiny by controlling the money supply.

And that’s just how the Fed likes it. They’d prefer Boobus americanus not understand the king-like power they wield.

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Groundhog Day At The Fed

By Peter Schiff – Re-Blogged From EuroPacific Capital

Every dictator knows that a continuous state of emergency is the best means to justify tyrannical policies. The trick is to keep the fictitious emergency from breeding so much paranoia that routine activities come to a halt. Many have discovered that it’s best to make the threat external, intangible and ultimately, unverifiable. In Orwell’s 1984 the preferred mantra was “We’ve always been at war with Eurasia,” even though everyone knew it wasn’t true. In its rate decision this week the Federal Reserve, adopted a similar approach and conjured up an external threat to maintain a policy that is becoming increasingly absurd.

In blaming its continued inaction on “uncertainties abroad” (an excuse never before invoked by the Fed in the current period of zero interest rates), the Fed was able to maintain the pretense of a strong domestic economy, and its desire to lift rates at the earliest appropriate moment while continuing the economic life support of zero percent rates. Unbelievably, the media swallowed the propaganda hook, line, and sinker.

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Fed’s Vast Gold/SPX Impact

By Adam Hamilton – Re-Blogged From Zeal LLC

Yesterday’s Fed decision was one of the most anticipated ever, with much potential to really change the global financial-market dynamics going forward.  But thanks to the Fed’s incredible market distortions of recent years, Fed meetings spawning exceptional volatility is nothing new.  Fed decisions’ impacts on gold and stocks have been vast.  And this next tightening cycle should reverse their Fed-imparted directionality.

Before we get started, a big caveat is necessary.  While this essay was published the morning after that Fed decision, I had no choice but to research and write this draft before yesterday’s momentous 2pm event!  Producing one of these weekly essays takes a lot of time and effort, and even after writing 670 of them there was no possible way to start this process after the Fed and still make the publishing deadline.

That presented a challenging quandary, as the Fed’s decision and surrounding posture is all anyone is interested in this weekend.  I’ll discuss the specifics of everything the Fed did and said in great depth, as well as the resulting market impact and outlook, in Tuesday’s Zeal Speculator weekly newsletter.  But leading into that hyper-anticipated event, I wanted to do some background research on the Fed’s market impact.

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Fed ‘One and Done’ is a Wall Street Fantasy

By Michael Pento – Re-Blogged From CNBC

One of the current myths promulgated by Wall Street is that the Federal Reserve will raise rates once this year, breathe a sigh of relief, and be done until the “12th of never.” But those who are familiar with our central bank’s history are aware that the Federal Open Market Committee has never tightened the federal-funds rate just once. A quarter-point hiking cycle has no historical basis and is just wishful Wall Street thinking.

In the spring of 1988, fearing a rise in core inflation, the Fed went on a tightening cycle that lasted from April 1988 to March 1989. During that time, the fed-funds rate increased more than 300 basis points (3 percentage points). This episode was followed by a recession beginning in 1990, suggesting that the corrective policy actions may have intensified a weakening economy, and that the Fed is prone to being economically tone deaf.

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REAL Yield Purchasing Power

cropped-bob-shapiro.jpg   By Bob Shapiro

I read an article by Keith Weiner, which highlighted the evil that is interest rate suppression – sometimes called financial repression. He points out that, after a lifetime of saving, a senior earning near zero interest return on his money would be forced to liquidate his savings to live.

He’s absolutely right, but he gives a false impression when he starts comparing today’s “Yield Purchasing Power” with the experience from 1979. Keith dismisses the importance of rising prices as he concentrates on yield, but it’s the REAL yield which matters.

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Law vs Legislation

cropped-bob-shapiro.jpg   By Bob Shapiro

In our society, and every society, there are rules. Ideally, all the rules are applied equally, and nobody feels put out by having to abide by them.

Some rules evolved naturally, as a consequence of some activity which people engaged in. That’s why in the US, and in many countries, we drive on the right. We decided, when we still were using horses and buggies, that keeping to the right – even when walking on the sidewalk – facilitated movement.

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Fed’s Full Normalization

By Adam Hamilton – Re-Bloged From http://www.Gold-Eagle.com

The US Federal Reserve has been universally lauded for the apparent success of its extreme monetary policy of recent years.  With key world stock markets near record highs, traders universally love the Fed’s zero-interest-rate and quantitative-easing campaigns.  But this celebration is terribly premature.  The full impact of these wildly-unprecedented policies won’t become apparent until they are fully normalized.

Back in late 2008, the US stock markets suffered their first full-blown panic in 101 years.  Technically a panic is a 20% stock-market selloff in a couple weeks, far faster than the normal bear-market pace.  In just 10 trading days climaxing in early October 2008, the US’s flagship S&P 500 stock index plummeted a gut-wrenching 25.9%!  It felt apocalyptic, the most extreme stock-market event we’ll witness in our lifetimes.

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Bubbles Never Pop Painlessly

By Michael Pento – Re-Bloged From http://www.Goldd-Eagle.com

Investors are obsessed over predicting the timing of the Fed’s first interest rate hike. Will it raise the Fed Funds rate in September, or wait until next year? But it is far more important to get a grasp on the pace of rate hikes. Will it be a one and done move, or does this mark the beginning of an incremental tightening cycle?  Those of us who are not in the inner circle are forced to only speculate.

But one thing is certain: If history is any guide, whatever they do the Fed will get it wrong.  Most market commentators place unfounded belief in the Fed’s acumen. But the truth is: I wouldn’t trust the Fed to tell me what the weather is going to do in the next 30 seconds–even if they were looking out the window.

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Suicidal Credit-Based Money System

Bill Bonner wrote a hypothetical college graduation speech which he did not present.  What he would have said included:

“You are heirs to claptrap, nonsense, bogus theories, and trillions of dollars in debt. 

The systems, programs, and institutions your parents set up are mostly worthless scams. Worse, they produce outcomes contrary to their stated goals.

Welfare programs do not help people escape poverty; they keep them mired in it.

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Ben Bernanke Blogs

By Keith Weiner – Re-Blogged From http://www.Gold-Eagle.com

Ben Bernanke presided over the Federal Reserve for two terms, from 2006 through 2014. A year and half into his first term, he began driving the Federal Funds Rate down. By the end of his frantic interest episode, this key overnight lending benchmark had been crushed. It hit bottom, and it hasn’t sprung back in over 6 years since.

Everyone is harmed by zero interest policy. Who suffers the most is open to debate, but one obvious candidate is the retiree who lives on a fixed income. These are people who worked and saved their whole lives, and now they depend on interest to buy groceries and heat their homes. For them, zero interest is like breathing air without oxygen. They suffer a slow death by suffocation.

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Talk is Cheap

By Bill Holter – Re-Blogged From http://www.Gold-Eagle.com

Wednesday the Fed made their announcement and deleted the famous word “patient”.  I have never seen such a nonsensical frenzy over anything, never mind a single word.  The reaction was everything …except the dollar was bid.  Sadly, reality has also been deleted as the Fed cannot “go there”, if they did and when they do (are forced to), life as we knew it will be history.  Reality is the global economy has stalled.  Most of Europe is in recession, China’s growth has stalled and the U.S., even with fudged numbers will not be able to show any growth.

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The CPI and The Dollar

cropped-bob-shapiro.jpg   By Bob Shapiro

The Year-Over-Year rise in the official CPI has turned negative, while the ShadowStats versions, using the BLS calculation methodologies used in 1990 and 1980, still show positive if lowered price increase rates. The 1990 methodology shows prices 3 1/2 % higher than a year earlier, down from a 5 1/2 % rise last year from the previous 12 months. The 1980 methodology shows a slowing of consumer price hikes to about 5% (YOY) compared to the previous year’s 10% (YOY) rate.

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Fed Statement: Not Dovish, Not Hawkish—-Just Gibberish

David Stockman   By David Stockman – Re-Blogged From http://davidstockmanscontracorner.com

Call it 529 words of gibberish and be done!

All of the FOMC’s platitudes about the economy “expanding at a solid pace”, labor market conditions which have “improved further”, household spending which is “rising moderately” and business fixed investment which is “expanding” are not simply untruthful nonsense; they are a smokescreen for the Fed’s actual intention. Namely, to keep the Wall Street gamblers in free money in the delusional hope that ever rising stock prices will generate a trickle down of “wealth effects” in the main street economy.

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Bail-Ins and the Next Crisis

cropped-bob-shapiro.jpg   By Bob Shapiro

In 2007, a Financial Crisis, initially largely involving Sub-Prime Mortgages, hit the US. Many large banks and other financial institutions were on the brink of bankruptcy, and a few slightly smaller ones did fail.

We’re told that the FDIC exists to protect depositors, but the FDIC’s fund is so small, at $25 Billion, compared to depositor’s money at risk, at $9,283 Billion, that it’s considered a joke within the industry.

FDIC Deposits & Derivatives
Sub-Prime Loans, then also called Liar Loans, were packaged, using Fannie & Freddie guarantees, into Collateralized Debt/Mortgage Securities, and sweetheart deal ratings were extorted out of the three major ratings agencies. These, together with other derivatives, totaled almost $300 Trillion of bets made by the various financial institutions.

These derivatives were marketed widely in the US, and also in Europe. When the underlying Sub-Prime mortgages started defaulting, the prices on CMSs plunged – this is what almost crashed Europe!

To try to prevent the “End of the Financial World as We Know It,” the US Government embarked on massive bailouts of the stupidly run, “Too Big To Fail” institutions, at taxpayer expense. These bailouts have never ended, and the US FED added ZIRP (Zero Interest Rate Policy), QE1, Operation Twist, QE2, and QE3 on top of the bailouts  .

There has been something of a public uproar over the bailouts, so the idea of a “Bail-In” was tried out in Cyprus a few years ago. A Bail-In is where the law allows depositors to lose their money before others. Deposits are “converted” into stock of the institution so that it can continue mismanaging its affairs without interruption. That stock loses value very quickly.

Since the Bail-Ins “worked” well in Cyprus, the practice has been adopted by most Western governments, including here in the US. So, if you have money in an account with one of the Too Big To Fail banks, and there’s another financial crisis, you’re going to lose part or all of your money! Here’s a list of the 29 banks in this category worldwide:

Too Big To Fail Banks

The Sub-Prime loans fell from about $125 Billion in 2007 to $60 Billion by 2009, so everything is under control now, right? No, not right!

The FED’s ZIRP has caused yet another bubble to be blown, this time for Sub-Prime auto loans. These loans have rates around 20%, with loan amounts as high as 115% of the car price. With these, Sub-Prime loans are back up to $120 Billion.

And now, Fannie & Freddie are starting to rev up their loans again, with down payments as low as 3% of equity. Sub-Prime is likely to be a problem again soon.

And all those derivatives, in the 100s of Trillions, are still weighing on the liability side of the Big Banks. With Bail-Ins protecting these financial institutions with your money, you may want to look at that list again and make sure your accounts are elsewhere.

But, you still aren’t in the clear. If you have a pension, there’s a good chance that all your money in the pension fund may be invested in debt of these banks. It’s your money so it’s up to you to find out and tell your pension to stop.

Action Item: Bail-Ins violate the fiduciary responsibility of the financial institutions which benefit at depositors expense.

  • Congress should pass a law, and the President should sign it, outlawing the practice known as Bail-In, returning to the use of bankruptcy proceedings. Bankruptcy should disqualify the managers from continuing at the helm of the institution.
  • Depositors should be returned to the head of the line of who gets their money first in case of a bankruptcy.
  • Managers of financial institutions which use high leverage or risky investments should be held personally liable if those investments go bad.
  • No business should be considered Too Big To Fail. If incompetent managers are allowed to stay in charge as they run the business into the ground, the business should be allowed to go into bankruptcy, an the owners should bear the loss.