Friday, December 26, 2014

Next... Merry Crash?

"...Since 2009, we’ve had the Fed and central banks from around the world deliver decent to better Christmas seasons… but this should be the last one for now.

The economy is the best it’s been since late 2007. Car sales are higher than ever. The affluent, which comprises many of our subscribers, are doing better than ever.

But clouds are gathering on the horizon and there are thunderstorms ahead.

Since 2000, the average household has seen a decline in real wages and going back even further to 1983, there has been little in the way of progress throughout this entire boom. How can the wealthy keep getting wealthier and leave the average person behind without an outright revolt?

Oil and commodity prices are collapsing, as we forecast years ago, along with the most solid of commodities like gold and silver.

Emerging countries are underperforming because they depend on these commodity exports, while the populations of the developed and wealthy nations get older every year. Demographic trends continue to point downward as they have for years and in many cases, it’s been for decades.

By looking at the numbers in the U.S., both the affluent and car sales are projecting down for the coming years. And as for Europe, it’ll see the brunt of its demographic cliff as we did after 2007 and Japan when it fell off in 1989 and in 1996.

Even countries like South Korea will follow after 2018.

Everyone knows I am a lover of history; it’s in my nature to go back and dig around for facts and figures that most don’t even see. So when I look back at all of the things I’ve learned from my research and from reviewing my own life, I’ve come to a conclusion that stands out… you don’t get something for nothing.

That’s what we’ve gotten for several years now: $14 trillion in global money printed out of thin air to offset the greatest debt crisis, deflation and depression, and the most global, since the 1930s.

I wish I could bring more tidings of good cheer this year… but I can’t.

The more we go into denial and kick the proverbial can down the road, the harder we’ll land when the chickens come home to roost. This is proven by all addictions, including every debt and financial asset bubble in history.

So, if you want to have merry Christmas seasons for all the years to come, you need to do the opposite of what all the experts, economists and politicians are recommending: protect your assets and hunker down for the greatest financial crisis and stock market crash we’ll see in our lifetimes.

Yes, I know that stocks keep defying gravity.

But that’s what happens as every bubble has done throughout history… it keeps expanding, overtaking everything in its path until it bursts so violently that it destroys debt, wealth, businesses and jobs faster than ever.

Yes, with the recent strong showings in the markets against increasingly risky factors like the junk bond debacle in the fracking industries: How could stocks be so ignorant after a subprime crisis in just four states in the U.S. triggered the last global financial crisis?

The markets are on crack and they will end like every crack addict in history — in detox!"

Harry S. Dent JR.
Senior Editor,
Economy & Markets

Friday, December 19, 2014

What is Going On? Current Economic Fundamentals & FedSpeak Explained. Danger Ahead! Outstanding Commentary.

"The Fed is Absolutely Terrified Of This...

As we keep emphasizing, the Fed’s real concern is the bond bubbleNOT stocks.

We get more evidence of this from Janet Yellen’s press conference after the Fed’s Wednesday FOMC meeting.

During the conference, Yellen repeatedly stated that lower oil prices were “positive” for the US economy. This is simply astounding because the Fed has repeatedly told us time and again that it was IN-flation NOT DE-flation that was great for the economy.

And yet, on Wednesday, the head of the Fed admitted, in public, that deflation can in fact be positive.

How can deflation be both positive for the economy at the same time that the economy needs MORE inflation?

The answer is easy… Yellen doesn’t care about the economy. She cares about the US’s massive debt load AKA the BOND BUBBLE.

Yellen knows deflation is actually very good for consumers. Who doesn’t want cheaper housing or cheaper goods and services? In fact, deflation is actually the general order of things for the world: human innovation and creativity naturally works to increase productivity, which makes goods and services cheaper.

However, DEBT DEFLATION is a nightmare for the Fed because it would almost immediately bankrupt both the US and the Too Big To Fail Wall Street Banks. With the US sporting a Debt to GDP ratio of over 100%... and the Wall Street banks sitting on over $191 TRILLION worth of derivatives trades based on interest rates (bonds), the very last thing the Fed wants is even a WHIFF of debt deflation to hit the bond markets.

This is why the Fed is so obsessed with creating inflation: because it renders these gargantuan debt loads more serviceable. In simplest terms, the Fed must “inflate or die.” It will willingly sacrifice the economy, and Americans’ quality of life in order to stop the bond bubble from popping.

This is also why the Fed happily talks about stocks all the time; it’s a great distraction from the real story: the fact that the bond bubble is the single largest bubble in history and that when it bursts entire countries will go bust.

This is why the Fed NEEDS interest rates to be as low as possible… any slight jump in rates means that the US will rapidly spiral towards bankruptcy. Indeed, every 1% increase in interest rates means between $150-$175 billion more in interest payments on US debt per year.

If you’ve ever wondered how the Fed can claim inflation is a good thing… now you know. Inflation is bad for all of us… but it allows the US Government to spend money it doesn’t have without going bankrupt… YET.

However, this won’t last. All bubbles end. And when the global bond bubble bursts (currently standing at $100 trillion and counting) the entire system will implode.

I fully expect that 2015 will be the year when the second round of the Great Crisis really hits. And when it does, entire countries will go bust... ."

From: Graham Summers, Phoenix Capital Research.

Wednesday, December 3, 2014

Still Riding the Wave? Fed Official Warns Of a Potential Collapse. The Fed’s reputation is on borrowed time.

December 03, 2014

"Fed Official Warns Of a Potential Collapse

The Fed’s reputation is on borrowed time.

Much of the so called “economic recovery” that began in 2009 has been based on the Fed’s credibility as a Central Bank to rein in the collapse.

However, at this point even the financial media has begun to realize that the Fed has elevated asset prices (stocks, homes, etc.) and nothing else. Incomes have not moved in line with stocks nor has GDP growth nor has the employment picture.

Put another way, everyone now realizes that the Fed has boosted stocks and don’t little else. This has lead some to accuse the Fed of targeting the markets rather than boosting the economy (see the recent wave of legislation meant to increase Congressional oversight of the Fed being introduced in Congress).

The Fed isn’t doing itself any favors in terms of defending its track record.

Enter Bill Dudley: former Goldman Sachs bank turned NY Fed President.

Dudley made a speech yesterday regarding the Fed’s policies. Early on he states that when the Fed starts raising rates, it will gauge the market’s reaction closely to see how the financial system adjusts:

First, when lift-off occurs, the pace of monetary policy normalization will depend, in part, on how financial market conditions react to the initial and subsequent tightening moves.  If the reaction is relatively large—think of the response of financial market conditions during the so-called “taper tantrum” during the spring and summer of 2013—then this would likely prompt a slower and more cautious approach….

A few minutes later, he claims the Fed doesn’t care about stocks or bond yields or other items… the very same “conditions” he claimed the Fed will pay close attention to just a few moments before…

Let me be clear, there is no Fed equity market put.  To put it another way, we do not care about the level of equity prices, or bond yields or credit spreads per se.  Instead, we focus on how financial market conditions influence the transmission of monetary policy to the real economy

Suffice to say, Dudley is aware that the Fed is now considered to be a stock market prop and nothing else. The fact he is trying to explicitly dissuade the markets of this belief says a lot about the Fed’s thinking on this topic (read: we need to distance ourselves from the markets).

Between this and Fed #2 Stanley Fischer’s statement that the Fed’s primary concern is on when and how to raise interest rates, stocks are on borrowed time. Not only will rates be rising in the next 12 months, but even the biggest stock cheerleader at the Fed (Dudley) is now trying to break the belief that the Fed is an “equity market put”

Stocks are on borrowed time. The next round of the Financial Crisis is approaching."

Graham Summers, Phoenix Capital Research