Friday, 18 August 2017

Charles Hugh Smith Breaks Down Exactly Why We’re Doomed

Anyone who thinks our toxic financial system is stable is delusional.

Why are we doomed? Those consuming over-amped “news” feeds may be tempted to answer the culture wars, nuclear war with North Korea or the Trump Presidency.

The one guaranteed source of doom is our broken financial system, which is visible in this chart of income inequality from the New York Times: Our Broken Economy, in One Simple Chart.


While the essay’s title is our broken economy, the source of this toxic concentration of income, wealth and power in the top 1/10th of 1% is more specifically our broken financial system.

What few observers understand is rapidly accelerating inequality is the only possible output of a fully financialized economy. Various do-gooders on the left and right propose schemes to cap this extraordinary rise in the concentration of income, wealth and power, for example, increasing taxes on the super-rich and lowering taxes on the working poor and middle class, but these are band-aids applied to a metastasizing tumor:financialization, which commoditizes labor, goods, services and financial instruments and funnels the income and wealth to the very apex of the wealth-power pyramid.

Take a moment to ponder what this chart is telling us about our financial system and economy.35+ years ago, lower income households enjoyed the highest rates of income growth; the higher the income, the lower the rate of income growth.

This trend hasn’t just reversed; virtually all the income gains are now concentrated in the top 1/100th of 1%, which has pulled away from the top 1%, the top 5% and the top 10%, as well as from the bottom 90%.

The fundamental driver of this profoundly destabilizing dynamic is the disconnect of finance from the real-world economy.

The roots of this disconnect are debt: when we borrow from future earnings and energy production to fund consumption today, we are using finance to ramp up our consumption of real-world goods and services.

In small doses, this use of finance to increase consumption of real-world goods and services is beneficial: economies with access to credit can rapidly boost expansion in ways that economies with little credit cannot.

But the process of financialization is not benign. Financialization turns evertything into a commodity that can be traded and leveraged as a financial entity that is no longer firmly connected to the real world.

The process of financialization requires expertise in the financial game, and it places a premium on immense flows of capital and opaque processes: for example, the bundling of debt such as mortgages or student loans into instruments that can be sold and traded.

These instruments can then become the foundation of an entirely new layer of instruments that can be sold and traded. This pyramiding of debt-based “assets” spreads risk throughout the economy while aggregating the gains into the hands of the very few with access to the capital and expertise needed to pass the risk and assets off onto others while keeping the gains.

Profit flows to what’s scarce, and in a financialized economy, goods and services have become commodities, i.e. they are rarely scarce, because somewhere in the global economy new supplies can be brought online.

What’s scarce in a financialized economy is specialized knowledge of financial games such as tax avoidance, arbitrage, packaging collateralized debt obligations and so on.

Though the billionaires who have actually launched real-world businesses get the media attention–Bill Gates, Jeff Bezos, Steve Jobs, et al.–relatively few of the top 1/10th of 1% actually created a real-world business; most are owners of capital with annual incomes of $10 million to $100 million that are finance-generated.

This is only possible in a financialized economy in which finance has become increasingly detached from the real-world economy.

Those with the capital and skills to reap billions in profits from servicing and packaging student loan debt have no interest in whether the education being purchased with the loans has any utility to the indebted students, as their profits flow not from the real world but from the debt itself.

This is how we’ve ended up with an economy characterized by profound dysfunction in the real world of higher education, healthcare, etc., and immense fortunes being earned by a few at the top of the pyramid from the financialized games that have little to no connection to the real-world economy.

Anyone who thinks our toxic financial system is stable is delusional. If history is any guide (and recall that Human Nature hasn’t changed in the 5,000 uears of recorded history), this sort of accelerating income/wealth/ power inequality is profoundly destabilizing–economically, politically and socially.

All the domestic headline crises–culture wars, opioid epidemic, etc.–are not causes of discord: they are symptoms of the inevitable consequences of a toxic financial system that has broken our economy, our system of governance and our society.

- Source, Two Minds

Wednesday, 16 August 2017

Jim Willie: Bond Carry Trade Fractured And Now In Climax Mode!


Americans have been living under the illusion consumption produces jobs. And the financial sector has been artificially inflated. Dr. Jim Willie reveals the United States is seeing the climax of collapse of the financial sector and consumer economy. 

Also in this interview, Willie reveals the Chinese are working on a major deal to pay for crude oil in Yuan. Other countries are moving away from the Dollar. He predicts the Dollar won't collapse. Instead, it will rise, then simply vanish.


Monday, 14 August 2017

Geopolitics & Cryptocurrencies


In this episode of the Keiser Report, Max and Stacy discuss the electric car boom driving a resource boom in Australia... and the biggest mines are now being acquired by Chinese companies. In the second half, Max interviews Gerald Celente of TrendsResearch.com about paradigm shifts: from cryptocurrencies to electric cars.

- Source, Max Keiser

Sunday, 13 August 2017

Dr. Ron Paul: Central Banks Pulling the Levers of Manipulation Daily


Join Jason and Dr. Paul as they discuss Alan Greenspan's recent comments warning about worsening stagflation and a bond market collapse, and whether organizations like the Plunge Protection Team (PPT) and Exchange Stabilization Fund (ESF) manipulate stocks up and gold prices down? Are these manipulations coordinated by central bankers in the US, Europe and Japan?


Friday, 11 August 2017

Ray Dalio: With Two Potential Crises, Buy Gold In Case "Things Go Badly"

It's been a while, years in fact, but suddenly it's gold's time to shine again.

The yellow metal - insurance against systemic collapse, hyperinflation and infinite political stupidity - which in recent years has seen its popularity fade as the younger generation has gravitated toward the far faster moving crypto currencies - is once again back in the spotlight.

As UBS' strategist Joni Teves, who has been recommending the precious metal for a long time despite the BOJ's relentless suppression, writes "gold bounces from recent lows in line with other safe havens amid risk-off sentiment across markets following geopolitical headlines over the past 24 hours." Below are the key considerations from today's UBS note:

"Key technical levels come into focus for gold, triggering some decent market activity in the middle of this typically quieter summer period. Geopolitical risks tend to have quite a volatile influence on prices and the immediate risk here is that $20 move from yesterday is quickly faded. Gold is holding well so far. We think the risks are somewhat skewed to the upside here, with a break of $1280 likely to attract further attention. Although speculative positions on Comex have increased in the past couple of weeks, overall levels remain lean. 

Subdued participation this year and lean positioning suggests that market participants would have to play catch-up on a break higher. On the flip side, this also suggests that a pullback is likely to be relatively contained. Additionally, we had previously argued that uncertainty on Fed policy expectations is likely to keep gold broadly supported, especially given downside risks to inflation. US CPI data on Friday should offer some insights; the next important signpost would be the Fed's Economic Symposium at Jackson Hole, for further guidance on policy."

[4]

Separately, in an unexpected endorsement from the head of the world's biggest hedge fund (excluding apple), overnight Ray Dalio said that clients should move 5% to 10% of their capital to gold as a hedge to the two biggest risk events unfolding today: the rapidly escalating North Korea crisis, and the seemingly intractible debt ceiling crisis, which as former CBO director Rudy Penner said yesterday, [5]would likely lead to a market crash this fall. Here are the highlights which Dalio posted on his LInkedIn page [6]:

... People adapt to the circumstances they have experienced and are then surprised when the future is different than the past. In other words, most people are inclined to assume that the circumstances they have recently encountered will persist, which leads them to change what they are doing to be consistent with that recently experienced environment. For example, low-volatility periods in which credit is readily available tend to lead people to assume that it’s safe to borrow more, which leads them to lever up their positions, which contributes to greater volatility and hurts them when things change.

That appears to be the case now—i.e., prospective risks are now rising and do not appear appropriately priced in because of a) a backward looking at risk and b) corporate leveraging up has been high because interest rates are low relative to many companies’ projected ROEs and because past risks have been low. The emerging risks appear more political than economic, which makes them especially challenging to price in. Most immediately, during the calm of the August vacation season, we are seeing 1) two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war, and 2) the odds of Congress failing to raise the debt ceiling (leading to a technical default, a temporary government shutdown, and increased loss of faith in the effectiveness of our political system) rising. It’s hard to bet on such things, one way or another, so the best that one can do is be neutral to such possibilities.

When it comes to assessing political matters (especially global geopolitics like the North Korea matter), we are very humble. We know that we don't have a unique insight that we'd choose to bet on. We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen and treasuries) would benefit, so if you don't have 5-10% of your assets in gold as a hedge, we'd suggest you relook at this. Don't let traditional biases, rather than an excellent analysis, stand in the way of you doing this.

And in a surprisingly humble conclusion, Dalio then says the following: "if you do have an excellent analysis of why you shouldn't have such an allocation to gold, we'd appreciate you sharing it with us."

- Source, ZeroHedge

Thursday, 10 August 2017

Precious Metals Stocks Alert: Powerful Upleg Believed Imminent

The significant increase in Large Spec long positions this past week in gold and silver from a very low level might be cause of concern to some, since it of course increases the risk of a reaction in these metals, but there is another much more positive way of looking at it, which is that, in the face of a continued albeit incremental rise in the prices of gold and silver, the Large Specs have suddenly realized their mistake in bailing out over the past couple of months, and are scrambling to get back on board.

On gold’s 1-year chart we can see that it actually made an important breakout last week, from the Dome pattern shown. So far the breakout is marginal, and there is still no confirmation by momentum, which has not broken out of its downtrend, but that is not the case with silver, which as we will see HAS broken out above a similar Dome pattern. Gold is approaching a zone of considerable resistance approaching its April and June highs at the top of the Dome, and once it breaks out above this it should really get moving.


While there was a considerable increase in Commercial short and Large Spec long positions in gold last week, they are still at modest levels that permit a big rally by gold from here. Certainly they are a long way from being bearish.


Silver, meanwhile has made a more decisive breakout from its Dome pattern, after putting in a capitulative low a few weeks ago, and is in position to push on past its moving averages towards resistance in the $18.50 near to its February and April highs. Like gold there is still no momentum breakout (MACD) but it is close to it.


After falling to extremely bullish levels a week ago, there was an uptick in Commercial short and Large Spec long positions in silver last week, shown on the latest COT chart below, which is taken the mark the dawn of the realization of their mistake by Large Specs in dumping all of their long positions over the past couple of months, and such an uptick often occurs at the start of a major uptrend.


It is enlightening and useful to observe the long-term silver to gold ratio chart at this juncture, as it shows that the ratio is still close to levels that typically mark an important sector bottom. This chart by itself clearly says there is plenty of room for a major bull market to develop from here.


Lastly we will look at the important gold stocks to gold ratio, with stocks being represented by GDX. This ratio is at its lowest at bear market bottoms, because that is when fear is at its peak, and when investors are fearful they choose bullion over stocks, as they regard it as a more solid investment. At the end of 2015 we saw an extreme low in this ratio which marked the final bottom, and what has been happening since as far back as mid-2013 is that a giant relative Head-and-Shoulders bottom has been forming, and right now we appear to be at a great entry point for stocks, because the ratio is very close to the Right Shoulder low of this relative Head-and-Shoulders bottom. The huge surge by the ratio out of the Head of this pattern that occurred during the 1st half of last year was a game changing move, which showed that the tide was turning and that a new bull market was being birthed. Note that the ratio has to get to 0.26 before it even breaks out of the H&S bottom, which is quite a way above its current level, and once it does break out of the base pattern it is likely to push on quickly to the resistance level shown in the 0.36 – 0.38 zone, which will mean BIG gains for stocks.


We will now look at the GDX to gold ratio in more detail on its 2-year chart, for important guidance re timing. The 2-year chart is quite dramatic as it shows the massive advance in the ratio during the first half of last year, and remember that gold was rising at the same time, so this chart is showing the outperformance by gold stocks during that period, which was certainly very impressive and marked the birthing of a new bull market. After such a huge outperformance, stocks were certainly in need of a rest and that’s why the ratio bedded down into a big consolidation Triangle, but as we can see this Triangle is now fast closing up, which is why we have been buying the sector aggressively in recent weeks, because breakout should be to the upside and lead to a big uptrend, an outcome which is made much more probable by the now strongly bullish gold and silver COTs following the Large Specs giving up and bailing out at the worst possible time in recent months as they are always prone to do.


Conclusion: it couldn’t look better for the sector, which suits us, because we are bullish and now heavily long.


Wednesday, 9 August 2017

Danielle DiMartino Booth: The Economy is Weakening


Former Fed Analyst and Advisor Danielle DiMartino Booth to Federal Reserve Bank of Dallas President Richard W. Fisher, breaks down the current weakening economy through the jobs market.

- Source, Boom Bust

Tuesday, 8 August 2017

Jay Taylor & Michael Oliver Discuss The Bullishness of Precious Metals


Jay introduces the guests and sponsors for the day’s show, Michael Oliver returns this week to provide his usual guidance on the precious metals and related markets.

- Source, Jay Taylor Media

Monday, 7 August 2017

Robert Shiller: The Big Burning Issue, An Unregulated Free Market


Nobel Laureate Prof. Robert J. Shiller was awarded the Nobel Prize in Economic Sciences in 2013 together with Eugene F. Fama and Lars Peter Hansen 'for their empirical analysis of asset prices.' 

In this video, he takes a look at the future of economics and suggests that economists should work on designing systems that protect people against the possibility of rising inequality.


Friday, 4 August 2017

Greenspan Warns Again Today: Bond Market Is on the Cusp of Collapse


Former Federal Reserve Chairman Alan Greenspan issued a bold warning Friday that the bond market is on the cusp of a collapse that also will threaten stock prices.

In a CNBC interview, the longtime central bank chief said the prolonged period of low interest rates is about to end and, with it, a bull market in fixed income that has lasted more than three decades.

"The current level of interest rates is abnormally low and there's only one direction in which they can go, and when they start they will be rather rapid," Greenspan said on "Squawk Box."

That low interest rate environment has been the product of current monetary policy at the institution he helmed from 1987-2006. The Fed took its benchmark rate to near zero during the financial crisis and kept it there for seven years after.

Since December 2015, the Fed has approved four rate hikes, but government bond yields remained mired near record lows.

Greenspan did not criticize the policies of the current Fed. But he warned that the low rate environment can't last forever and will have severe consequences once it ends.

"I have no time frame on the forecast," he said. "I have a chart which goes back to the 1800s and I can tell you that this particular period sticks out. But you have no way of knowing in advance when it will actually trigger."

One point he did make about timing is it likely will be quick and take the market by surprise.

"It looks stronger just before it isn't stronger," he said. Anyone who thinks they can forecast when the bubble will break is "in for a disastrous" experience."

In addition to his general work at the Fed, which also featured an extended period of low rates though nowhere near their current position, Greenspan is widely known for the "irrational exuberance" speech he gave at the American Enterprise Institute in 1996. The speech warned about asset prices and said it is difficult to tell when a bubble is about to burst.

Those remarks foreshadowed the popping of the dot-com bubble, and the phrase has found a permanent place in the Wall Street lexicon.

"You can never be quite sure when irrational exuberance arises," he told CNBC. "I was doing it as part of a much broader speech and talking about the analysis of the markets and the like, and I wasn't trying to focus short term. But the press loved that term."


- Source, CNBC

Tuesday, 1 August 2017

Keiser Report: Wall Street’s Dean of Valuation


In this episode of the Keiser Report from Freedom Fest in Las Vegas Max and Stacy talk about Wall Street’s ‘dean of valuation’ declaring that bitcoin is replacing gold as the ‘go to’ trade in a time when investors don’t trust governments. 

In the second half Max interviews legendary investor, Jim Rogers, about China and Germany stepping up to lead the world as the U.S. retreats. They also discuss China’s One Belt, One Road policy and bitcoin as disruptors to U.S. hegemonic power.

- Source, Max Keiser

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