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David Stockman: The Undrainable Swamp & The Inevitable Recession
David Stockman: The Undrainable Swamp & The Inevitable Recession
What the future of the post “Peak Trump” era holds.
Love it or hate it, the potency of the Trump Administration is on the wane, soon to be stuck in the mire of the Swamp it has deepend instead of drained, while the economy falls into one hell of a recession — so claims former Regan-era Cabinet member and Congressman David Stockman.
In his new book Peak Trump, Stockman notes how the wide divergence between Trump the campaigner and Trump the president appears to be proving to be his undoing.
Rather than fight to dismantle the institutions he railed against as a candidate — most notably the Deep State and the Federal Reserve — Trump has embraced them.
Now, when this latest asset bubble bursts (and Stockman believes the markets saw their peak back in Fall 2018), Trump will ‘own’ that. Having chosen to tie his administration’s success to the rising price of the S&P 500 since taking office, he won’t be able to foist the blame of a market crash on his predecessors.
Similarly, the Deep State — especially the military industrial complex — is experiencing a bonanza under the Trump administration. As a result, the Swamp is deeper than it has ever been:
I learned a long time ago as Budget Director and even before that as a member of Congress that the real deep end of the Washington swamp is on the Pentagon side of the Potomac. What Trump has done is basically taking a defense budget at $600 billion that was already swollen with waste and extending it far beyond anything you need for a homeland defense.
I have a whole section in the book about how a homeland of defense wouldn’t cost $600 billion that he inherited or now the $700 billion that we have. $720 billion actually, that after two huge Trump increases.
…click on the above link to read the rest of the article…
A Survival Guide For 2019
A Survival Guide For 2019
How to safely navigate the ‘Year Of Instability’
As the first month of the year concludes, it’s becoming clear that 2019 will be a very different kind of year.
The near-decade of ‘recovery’ following the Great Financial Crisis enjoyed a stability and tranquility that suddenly evaporated at the end of 2018.
Here in 2019, instability reigns.
The world’s central banks are absolutely panicking. After last year’s bursting of the Everything Bubble, their coordinated plans for Quantitative Tightening have been summarily thrown out the window. Suddenly, no chairman can prove himself too dovish.
Jerome Powell, the supposed hardliner among them, completely capitulated in the wake of the recent -15% tantrum in stocks, which, as Sven Henrich colorfully quipped, proved what we suspected all along:
The global tsunami of liquidity (i.e. thin-air money printing) released by the central banking cartel has been the defining trend of the past decade. It has driven, directly or indirectly, more world events than any other factor.
And one of its more notorious legacies is the massive disparity and wealth and income resulting from its favoring of the top 0.1% over everyone else. The mega-rich have seen their assets skyrocket in value, while the masses have been mercilessly squeezed between similarly rising costs of living and stagnant wages.
How have the tone-deaf politicians responded? With tax breaks for their Establishment masters and new taxes imposed on the public. As a result, populist ire is catching fire in an accelerating number of countries, which the authorities are anxious to suppress by all means to prevent it from conflagrating further — most visibly demonstrated right now by the French government’s increasingly jack-booted attempts to quash the Yellow Vest protests:
Meanwhile, two other principal drivers of the past decade’s ‘prosperity’ are also suddenly in jeopardy.
…click on the above link to read the rest of the article…
Art Berman: Exposing The False Promise Of Shale Oil
Art Berman: Exposing The False Promise Of Shale Oil
Because the US is pinning huge hopes on its shale oil “revolution”, so much depends on that story being right. Here’s the narrative right now:
- The US, is the new Saudi Arabia
- It’s the swing producer when it comes to influencing the price of oil
- The US will be able to increase oil production for decades to come
- New technology is unlocking more oil shale supply all the time
But what if there’s evidence that runs counter to all of that?
We’re going to be taking a little victory lap on this week’s podcast because The Wall Street Journal has finally admitted that shale oil wells are not producing as much as the companies operating them touted they would produce — which is what we’ve been saying for years here at PeakProsperity.com, largely because we closely follow Art’s work:
The Wall Street Journal did some research and they got the general point that the wells are not as good as advertised.
But what they missed is just how much farther off many of these reserves are than even the discounted reserves that they’ve reported.
Bottom line: if the understatement is only 10%, that’s a rounding error and it’s not that much of an issue to the average person. But I’ve been trying for a decade to get the number that I independently develop to get anywhere close to the published numbers. In most cases, I can only get near 60% or 70% of them. So, the gap, I think is much more substantial.
…click on the above link to read the rest of the article…
Singing Frogs Farm: The Science Of Healthy Soil
Singing Frogs Farm: The Science Of Healthy Soil
Three years ago, I interviewed Paul and Elizabeth Kaiser about the remarkably effective model being pioneered at their farm, Singing Frogs Farm, a small micro-farm in northern California. It quickly became one of Peak Prosperity’s most popular podcasts of all-time.
Developed over years of combining bio-intensive land/forestry management theory with empirical trial & error, the farming practices at Singing Frogs have produced astounding results.
First off and most important, no tilling of any kind is done to the soil. No pesticide/herbicide/fungicide sprays (organic or otherwise) are used. And the only fertilizer used is natural compost.
These practices result in a build-up of nutrient-dense, highly bio-rich topsoil. Where most farms have less than 12 inches of ‘alive’ topsoil in which they can grow things, Singing Frogs’ extends to a depth over 4 feet(!).
This high-carbon layer of soil retains much more water than conventional topsoil, requiring much less irrigation than used at most farms (a very important factor given the historic drought the West is suffering).
All these advantages combine to enable Singing Frogs Farm to produce 5-7 harvests per year on their land, vs the 1-2 harvest average of other farms. And since the annual crop yield is so much higher, so is the revenue. Most other farms in northern California average $14,000 in gross revenue per acre. Singing Frogs grosses nearly $100,000 per acre — a stunning 5x more.
This week, I sit back down with Paul and Elizabeth to discuss the science behind their latest farming practices & techiniques, the importance of biology over chemistry when it comes to gardening, and the hands-on workshops they offer, and what they think it takes to make a ‘resilient farmer’.
…click on the above link to read the rest of the article…
2019: The Beginning Of The End (Free Premium Report)
2019: The Beginning Of The End (Free Premium Report)
Welcome to our new readers and a very Happy New Year to everyone!
Now that it’s 2019, we’re going to start the new year here at Peak Prosperity by responding to the wishes of our premium subscribers and making our most recent premium report free to everyone.
For those unfamiliar with our work, it’s based on the idea that humanity is hurtling towards a disaster of our own making. Several powerful and unsustainable trends are all converging towards an ever-narrowing gap in the future.
Because of this, the individual and collective choices we make today take on ever-increasing importance. Our collective choices — around such issues as rampant money-printing by central banks, the failure to wean ourselves off of fossil fuels, and tossing an entire younger generation under the bus because that’s most convenient for an older generation afraid of living within its actual means — are all pointing to a diminshed and disappointing future. We need to make better choices that align ourselves with these (and many other) looming realities.
This is our work here at Peak Prosperity.
For ten years now, we’ve been pointing out the many predicaments society faces. And we will continue our vigilance. No because we enjoy crisis, or that we relish delivering hard messages, but because these are the times in which we live — and those, like you, who are awake to reality, need unvarnished facts and data to make informed decisions.
So we offer to you, today, a peek behind our premium subscription curtain. The people who subscribe to our work do so to make themselves more resilient, as well as to support Peak Prosperity financially as we carry on our mission of “Creating a world worth inheriting”, which invoves bringing difficult messages to reluctant audiences.
…click on the above link to read the rest of the article…
David Collum: Everything That Mattered In 2018
Strap in, grab some eggnog, and listen to this year’s recap:
Everyone thinks the markets are now correcting. But compared to the size of the correction I think both you and I expect, this is just a drop in the bucket. This is merely the vibrating puddle in Jurassic Park. This is not the big one.
What’s amazing is this recent romp, which has lasted now almost 10 years, is the only gigantic bubble that I’m aware of in which the storyline behind it is just complete garbage.
Every other bubble, like the Tech bubble — well, tech is amazing. The 1920’s bubble — wow, we just invented electric power and cars and planes. There’s always a great, great story.
This particular bubble in which we have had for 10 years is central banks are going to print money to cover our backs.
That’s the stupidest Goddam plotline I can ever imagine.
Click the play button below to listen to Chris’ interview with David Collum (87m:25s).
Chris Martenson: Welcome, ,everyone to this Peak Prosperity podcast. I am your host, Chris Martenson. It is December 19th, 2018. Hey, listen, we are here today talking with Dave Collum about his year in review and is continuing our annual tradition. Listen, it’s the best year in review in the business. And it’s, listen, in order to know where we’re going, we’ve got to figure out what just happened. What better than a gigantic romp through where we have just been?
…click on the above link to read the rest of the article…
Charles Hugh Smith: Preventing The Final Fall Of Our Democratic Republic
Charles Hugh Smith: Preventing The Final Fall Of Our Democratic Republic
There’s mounting evidence that the Age of American Exceptionalism is grinding to an end.
Demographically, in the U.S. (as well as many other developed nations), the prospects of the younger generations are substantially less than those of the Baby Boomers. The same is true socioeconomically as well; the wealth gap between the 1% and everyone else continues to accelerate.
What’s been the root cause of this slide towards greater and greater inequity? And can anything be done to reverse it?
Economist analyst and author Charles Hugh Smith addresses these core questions in his new book Pathfinding Our Destiny: Preventing The Final Fall Of Our Democratic Republic. Charles concludes that we are the terminal end of a multi-century process of centralization that is no longer working for society’s benefit:
We have a political system which is becoming increasingly tied into money. Now, people have always said, like from 100 years ago, “money is the mother’s milk of politics”. Money and power have always coalesced around political power. But in the last, say, 70 years, post-World War II, the central governments and central banks of the world have grown immensely in their centralized power.
And one of the theses I’m proposing in my book is that centralization itself in now the problem. We’ve been told for 400 years that it’s been the solution. Just centralize power and wealth into tighter and tighter control and then that will somehow solve whatever problems we have.
The intense concentration of power is becoming blatantly visible these days. Six media companies control most of the media in the U.S. It used to be six banks, but now I think it’s down to only three or four, who control most of the financial system.
Dealing With Disagreement
Dealing With Disagreement
If you’re reading this, chances are very good you’re concerend about where the world is headed.
The over-leverged economy. Asset price bubbles across the stock, bond and real estate markets just waiting to pop. Declining world net energy per capita. Escalating geopolitical tensions. Unprecedented die-offs among foundational species in our ecosystems. These are probably just a few of the concerning trends that have your attention.
But if you’re like many of our readers, you’re perplexed that the people around you aren’t as fixated on these issues. In fact, most people prefer to avoid thinking about them. They just want to live their lives, without adding to their worries.
This vast difference in outlook can be incredibly frustrating. Both for you as well as for the other person just trying to get through the day. And it often results in dysfunction that can be toxic to the relationships you care about.
Many of our readers report feeling isolated by their concerns. No one in their immediate circle of family or friends wants to engage on these topics, and oftentimes respond critically when conversation is attempted (Hey, try looking at the bright side for a change. Why do you have to be such a gloom & doomer, anyways?).
That dynamic often leads to bitterness, confusion and anger, which often spills into other areas of those relationships. Suddenly other small forms of rejection can feel like part of a co-ordinated affront. (You don’t want to hear why I think the market may crash and you’re chosing to go to your sister’s tonight rather than to the movies with me?)
The danger is this can morph into a larger “You don’t understand me!” or “You don’t care about me!” mindset that, once taken root, colors future interactions with suspicion and cynicism.
…click on the above link to read the rest of the article…
Scott Tinker: Can The World Energy Supply Become Fully Sustainable?
Scott Tinker: Can The World Energy Supply Become Fully Sustainable?
As we claim often here at PeakProsperity.com: Energy is everything.
Will our global society be able to transtiton off of its extreme dependence on fossil fuels? And if so, can we do so without too much pain?
Scott Tinker is the Director of the Bureau of Economic Geology at the University of Texas at Austin, and founder of the non-profit Switch Energy Alliance, which is dedicated to helping humanity address these key questions.
Tinker remains confident a much better future energy-wise is possible; but will require a tremendous shift in behavoir, investment and technological innovation.
In his eyes, society can make the transition. But will it? That’s a lot less certain…
The transition I care about is not simply from one kind of energy to another. It’s to where everybody has affordable, available, reliable, and environmentally sustainable, secure energy. That’s a good transition.
That introduces things into the world that allows for the empowerment of women, education, and all the basic things that the modern world enjoys and a third of the world doesn’t. That’s an important transition to me.
The kinds of energy that are put in place to do that are going to vary by what the world has access to. Every place in the world has different energy resources. Some are blessed with great oil and gas. Some have uranium, thorium, and nuclear that they can do. Some have wonderful wind. Some have terrific solar. There are places with wonderful tides and waves if they can capture that energy economically. There’s geothermal in Iceland, Southeast Asia, and other places. We’ll use what we have where we have it to accomplish the transition to a world where everyone has access to secure energy.
…click on the above link to read the rest of the article…
The Primacy Of Income
The Primacy Of Income
Ever since the central banks became serial bubble blowers twenty years ago, household wealth has mostly been driven by asset price inflation:
But this has been a quixotic pursuit. Created by pulling tomorrow’s prosperity into today, these asset price bubbles are unsustainable, and invariably suffer violent corrections at their end.
So far, the central banks have responded to these corrections by simply doing more of the same, just at greater and greater intensity. To keep the current Everything Bubble going, the world’s central banks have not only had to more than quintuple their collective balance sheets, but have recently had to resort to the extreme (desperate?) measure of injecting the greatest amount of liquidity ever in 2016 and 2017.
History has shown us that the height an asset bubble reaches is proportional to the damage it wreaks when it bursts. Applying this logic, the coming pop of the Everything Bubble will be devastating.
So devastating that analysts like John Hussman forecast a 0% (or worse) total market return over the next twelve years:
Moreover, the primary driver and supporter of asset price appreciation over the past seven years, central bank easing, is now gone. For the first time since the GFC, the collective central bank liquidity injection rate (the solid black line in the below chart) is now net zero.
And plans to tighten much further from here have been clearly committed and communicated to the world:
As a consequence, we fully expect yesterday’s capital gains to become tomorrow’s capital losses. What goes up on thin-air money comes down with its removal.
And while this is going on, interest rates are suddenly exploding higher around the world after spending a decade at all-time historic lows:
…click on the above link to read the rest of the article…
A Financial Professional’s Perspective
ShedConnect.com
A Financial Professional’s Perspective
Given the recent volatile gyrations of the markets, we thought it an opportune time ask a full-time financial advisory firm whom we respect for their take on the current environment.
As most PeakProsperity.com readers are aware, we highly advise investors to work in concert with a professional financial advisor whose strategy takes into account the “Three E” macro risks highlighted in our foundational series, The Crash Course.
If folks experience difficulty finding such a professional, we refer them to Peak Prosperity’s endorsed financial advisor: New Harbor Financial. The folks at New Harbor have been mindful of our analysis — as well as that of other experts we admire, such as John Hussman — for over a decade now.
We aked them for their latest evaluation of the current situation in the markets, how they’re positioned right now, and what guidance they’re offering to their clients.
Here’s what they have to say:
Environment
Risk in global stock markets is exceedingly high at the present time in our opinion. Much of the work that we do in evaluating risk levels in the stock market at any given time is derived from valuations, and other key market metrics like stock market breadth, sentiment, and technicals. Valuations, measured the way that we think they should be, have never been higher. Both the cyclically adjusted price earnings (CAPE) ratio developed by Robert Shiller, and the margin-adjusted CAPE, as developed by John Hussman, are at or near historic extremes. Valuations cannot be used to precisely time the short-term movements of stock indices, but over the long-term of 5 to 10 years or more, valuations have a very high correlation to actual realized returns over those timeframes.
…click on the above link to read the rest of the article…
Steen Jakobsen: The Four Horsemen Portend A Painful Reckoning
Steen Jakobsen: The Four Horsemen Portend A Painful Reckoning
Steen Jacobsen, Chief Economist and Chief Investment Officer of Saxo Bank sees economic slowdown ahead.
Specifically, his “Four Horseman” indicators: the drivers of economic growth, are all flashing red.
Jacobsen believes that the central banks will continue their liquidity tightening efforts for as long as they can get away with (i.e., until the financial markets start toppling over). In his opinion, they eased way too much for way too long; and the malinvestment and zombification that resulted needs to clear the system — and it will likely do so more violently and painful than the central banks will like:
I like to make things simple. Right now we have the Four Horsemen: the four drivers of the global economy. They are the quantity of money, which is falling; the price of money, which is rising; the price of energy,which is a tax on consumers and is rising; and globalization/productivity, which is falling.
So, if you look at the economy as a black box, I really don’t know what happens inside of it. But I can observe what goes into the black box: it’s these four things.
Globalization / productivity, we know that’s all about Trump, trade war and the likes. It’s not exactly improving; it’s actually worsening.
As for the quantity of money, a lot of people argue with me that the Central Banks are still expanding their balance sheets, but the fact of the matter is that the QT in terms of the U.S has been reducing the Federal Reserve balance sheet. And we have a stealth reduction of the balance sheet in terms of the Bank of Japan. The EBC would love to cut and is publicly committed to doing so. The Bank of England is doing its first hike. So the quantity of money is falling.
…click on the above link to read the rest of the article…
Mike Maloney: “One Hell Of A Crisis”
Mike Maloney: “One Hell Of A Crisis”
Mike Maloney, monetary historian and founder of GoldSilver.com, has just released two new chapters of his excellent Hidden Secrets Of Money video series.
In producing the series, Maloney has reviewed several thousand years of monetary history and has observed that government intervention and mismanagement — such as is now rampant across the world — has alwaysresulted in the diminishment and eventual failure of currency systems.
As for the world’s current fiat currency regimes, Mike sees a reckoning approaching. One that will be preceded by massive losses rippling across nearly all asset classes, destroying the phantom wealth created during the latest central bank-induced Everything Bubble, and grinding the global economy to a halt:
Gold and silver are tremendously undervalued right now, and I dare you to try to find another asset that is tremendously undervalued. There just is not. By all measures, everything is just in these hyper-bubbles. OK, real estate is not quite a hyper-bubble; it’s not quite as big as 2005 and 2006, but by all measures, it’s back into a bubble. But now, we’ve got the bond bubble, the biggest debt bubble in the world. These are all going to pop.
We had a stock market crash in the year 2000, and then in 2008, we had a crash in stocks and real estate. The next crash is going to be in stocks, real estate and bonds — including a lot of sovereign debt, corporate bonds and a whole lot of other bonds that will be crashing at the same time. So, it will be all of the standard financial asset classes, including the traditional ‘safe haven’ of bonds that are going to be crashing at the same time that the world monetary system is falling apart.
…click on the above link to read the rest of the article…
Will Your Retirement Efforts Achieve Escape Velocity?
Will Your Retirement Efforts Achieve Escape Velocity?
The concept of ‘retirement’, of enjoying decades of work-free leisure in your golden years, is a relatively new construct. It’s only been around for a few generations.
In fact, the current version of the relaxed, golfing/RV-touring/country club retirement lifestyle only came into being in the post-WW2 boom era — as Social Security, corporate & government pensions, cheap and plentiful energy, and extended lifespans made it possible for the masses.
But increasingly, it looks like the dream of retiring is fast falling out of reach for many of today’s Baby Boomers. Most will outlive their savings (if they have any at all).
And the retirement prospects look even worse for Generations X, the Millennials, and Gen Z.
A Bad Squeeze
While the US enjoyed a wave of unprecedented prosperity throughout the 20th century, the data clearly shows that halcyon era is ending.
Real wages (i.e., nominal $ earned divided by the inflation rate) for the average American worker have hardly budged since the mid-1960s:
Yet the cost of living has changed dramatically over the same time period. Note how the rate of increase in the Consumer Price Index (CPI) started accelerating in the late ’60s and never looked back:
Squeezed between stagnant wages and a rising living costs, perhaps it should be little surprise that so many Americans are having difficulty finding anything left over to save for retirement.
We’ve written about this extensively in our past reports, such as Let’s Stop Fooling Ourselves: Americans Can’t Afford The Future and The Great Retirement Con. But as a way of driving the point home, here are some quick sobering stats from the National Institute On Retirement Security:
- The median retirement account balance among all working US adults is $0. This is true even for the cohort closest to retirement age, those 55-64 years old.
…click on the above link to read the rest of the article…
The Weighted Average Cost Of Capital
ittybiz.com
The Weighted Average Cost Of Capital
This is a revisitation of a report I wrote back in late 2016, predicting the imminent end of zero-bound interest rates and warning of the downward pressure that rising rates, mathematically, must place on today’s elevated asset prices.
Since the publication of that report, interest rates have indeed vaulted higher. Look at how the 3-month US Treasury yield has exploded since the start of 2017:
A Little Background
When I was fresh out of college in the mid-90s, I landed a job at Merrill Lynch. I was an “investment banking analyst”, which meant I had no life outside of the office and hardly ever slept. I pretty much spoke, thought, and dreamed in Excel during those years.
Much of my time there was spent building valuation models. These complicated spreadsheets were used to provide an air of quantitative validation to the answers the senior bankers otherwise pulled out of their derrieres to questions like: Is the market under- or over-valuing this company? Can we defend the acquisition price we’re recommending for this M&A deal? What should we price this IPO at?
Back then, Wall Street still (mostly) believed that fundamentals mattered. And one of the most widely-accepted methods for fundamentally valuing a company is the Discounted Cash Flow (or “DCF”) method. I built a *lot* of DCF models back in those days.
I promise not to get too wonky here, but in a nutshell, the DCF approach projects out the future cash flows a company is expected to generate given its growth prospects, profit margins, capital expenditures, etc. And because a dollar today is worth more than a dollar tomorrow, it discounts the further-out projected cash flows more than the nearer-in ones. Add everything up, and the total you get is your answer to what the fair market value of the company is.
…click on the above link to read the rest of the article…
