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This is a Recipe for Hot Inflation in 2021

January 1, 2021

This is a Recipe for Hot Inflation in 2021

Get ready for a tsunami of liquidity to hit the financial system.

President Trump has already signed a COVID-19 stimulus bill that will give $600 to most Americans. The House of Representatives has since passed a bill to increase the amount to $2,000.

So that’s a massive wave of money flowing into the economy.

On top of this, the Fed has just pumped $162 BILLION into the financial system in the last two weeks.

Chart, line chart Description automatically generated

To provide some perspective here.

During the apex of its monetary policy response to the Great Financial Crisis of 2008, the Fed was printing $80 billion in new money per month.

It just printed $162 billion in 14 days

Again, a tsunami of liquidity is going to hit the financial system in 2021.And unlike in 2008, this time it’s going to unleash hot inflation.

One of the most baffling aspects of policymakers’ response to the Great Financial Crisis of 2008 was the total lack of inflation appearing in the broader economy.

After all, in 2008 central banks embarked on the most aggressive monetary easing in history (up until that point). Between 2008 and 2016, central banks:

Cut interest rates over 650 times.
Printed over $12 TRILLION in new money.
And pushed over $10 trillion bond yields into NEGATIVE territory.

And yet, for the most part, inflation was nowhere to be found. Yes, the cost of the living for most Americans continued to rise, but it didn’t rise any faster than it had in the preceding 30 years. Indeed, on a year over year basis, inflation never managed to stay above 2% for very long.

So where was the inflation?

It was in stocks, housing prices, and other assets. All of the money central banks printed never got into the real economy. It went to the banks. And the banks either used it to speculate in the stock market (investment banks) or they sat on it.

…click on the above link to read the rest of the article…

The #1 Question I am Receiving From Readers

June 29, 2020

The #1 Question I am Receiving From Readers

Could the markets crash again?

This is the #1 question I’m receiving from subscribers. When I ask them why they’re concerned, the #1 explanation is that the economy is in a recession/depression and yet stocks are close to or have already hit new all-time highs.

Let’s dissect this way of thinking…

First and foremost, we need to dispel the myth that the stock market and the economy are closely related.

As Puru Saxena has noted, between 1972 and 1982, the US economy nearly tripled in size from $1.2 trillion to $3.2 trillion. And yet, throughout that entire period the stock market traded sideways for ZERO GAINS!

In contrast, from 1982 to 2000, the US economy again nearly tripled in size from $3.2 trillion to $10 trillion. But during this particular time, the stock market exploded higher rising nearly 1,500%!

So, we have two time periods in which the economy nearly tripled in size. During one of them, the stock market went nowhere, while during the other, the stock market rose nearly 1,500%.

Again, stocks have little if any correlation to the economy. There are times when stocks will care a lot about the economy, but those time periods are usually short and due to an unexpected surprise (like the surprise of the economy being shut down to deal with the COVID-19 pandemic).

So, what do stocks care about?

Liquidity.

Historically, whenever central banks start printing money at a rapid clip, stocks do well. A great example of this is the time period from 2008 to 2016 when the economy was weak at best and flatlining at worst. But because the Fed printed over $3.5 trillion during this time period, socks soared, rising over 100%.

Which brings us to today… stocks are rallying hard yet again, despite the economy being extremely weak.

The reason for this is because of the TSUNAMI of liquidity policymakers are throwing at the financial system.

…click on the above link to read the rest of the article…

The Fed’s Couldn’t Even Stomach a 10% Drop in Stocks… It’s Officially in the Bubble Business

June 18, 2020

The Fed’s Couldn’t Even Stomach a 10% Drop in Stocks… It’s Officially in the Bubble Business

The Fed will soon be buying stocks.

Earlier this week, the Fed announced that it will begin buying corporate bonds from individual companies. Before this announcement, the Fed was already involved in the:

The Treasury markets (US sovereign debt)
The municipal bond markets (debt issued by states and cities)
The corporate bond markets by index (debt issued by corporations)
The commercial paper markets (short-term corporate debt market)
And the asset-backed security markets (everything from student loans to certificates of deposit and more).

With the introduction of individual corporate bonds, the Fed is now one step closer to buying stocks outright.

Indeed, the Fed has made ZERO references to stopping its monetary madness. Just yesterday Fed Chair Jerome Powell emphasized to Congress that the Fed is “years away from halting its assets monetization scheme.”

Again, the Fed is explicitly telling us that it plans on buying assets (Treasuries, municipal bonds, corporate bonds, etc.) for years to come.

The next step will be for the Fed to buy stocks.

It won’t be the first central bank to do so…

The central bank of Switzerland, called the Swiss National Bank has been buying stocks for years. Yes. It literally prints money and buys stocks in the U.S. stock markets.

Then there’s Japan’s central bank, called the Bank of Japan. It also prints money and buys stocks outright. As of March 2019, it owned 80% of Japan’s ETFs.

Yes, 80%.

The BoJ is also a top-10 shareholder in over 50% of the companies that trade on the Japanese stock market.

If you think this can’t happen in the US, think again. The Fed told us in 2019 that it would be forced to engage in EXTREME monetary policies during the next downturn.

…click on the above link to read the rest of the article…

The Fed Just Admitted It Won’t Stop Printing Money For YEARS… Here’s How to Profit From This

June 17, 2020

The Fed Just Admitted It Won’t Stop Printing Money For YEARS… Here’s How to Profit From This

The Fed will soon be buying stocks.

Earlier this week, the Fed announced that it will begin buying corporate bonds from individual companies. Before this announcement, the Fed was already involved in the:

The Treasury markets (US sovereign debt)
The municipal bond markets (debt issued by states and cities)
The corporate bond markets by index (debt issued by corporations)
The commercial paper markets (short-term corporate debt market)
And the asset-backed security markets (everything from student loans to certificates of deposit and more).

With the introduction of individual corporate bonds, the Fed is now one step closer to buying stocks outright.

Again, the Fed is explicitly telling us that it plans on buying assets (Treasuries, municipal bonds, corporate bonds, etc.) for years to come.

The next step will be for the Fed to buy stocks.

It won’t be the first central bank to do so…

The central bank of Switzerland, called the Swiss National Bank has been buying stocks for years. Yes. It literally prints money and buys stocks in the U.S. stock markets.

Then there’s Japan’s central bank, called the Bank of Japan. It also prints money and buys stocks outright. As of March 2019, it owned 80% of Japan’s ETFs.

Yes, 80%.

The BoJ is also a top-10 shareholder in over 50% of the companies that trade on the Japanese stock market.

If you think this can’t happen in the US, think again. The Fed told us in 2019 that it would be forced to engage in EXTREME monetary policies during the next downturn.

…click on the above link to read the rest of the article…

If Stocks Don’t Hold Here We Could See Another Crash of Sorts

June 15, 2020

If Stocks Don’t Hold Here We Could See Another Crash of Sorts

Stocks have fallen hard over the weekend again. The media is pinning this drop on the potential for another COVID-19 pandemic, but the facts don’t support that theory.

At times like these, it’s essential to ignore narratives, and focus on price. With that in mind, the S&P 500 remains in an uptrend, barely (blue lines in the chart below). Stocks need to hold here for the bull market case to remain intact.

If stocks break down from here, there are two items in play. One is support at 2,940 (lower green line in the chart below). The other is the gap established by the open on May 18^th (blue rectangle in the chart below).

When we plot the S&P 500 against the VIX (inverted), it looks like there’s more downside to go here.

However, both breadth and credit suggest the downside is limited here.

My point with all of this is that today the market is literally a crap shoot. The easy money from the rally has been made, and the next trend is not clear yet. So now is NOT the time to be putting a load of capital to work.

However, if stocks don’t hold here, we could potentially see a crash down to 2,700.

That is a high reward type move. And one we need to consider.

The $USD is Warning Us That Something Big is Coming

June 10, 2020

The $USD is Warning Us That Something Big is Coming

Things are beginning to get out of control in currency land.

The $USD is collapsing. Astute chart readers will note that the $USD has already experienced two sharp drops in the last few months (blue rectangles in the chart below). They occurred in late February before the COVID-19 shutdown and late March after the COVID-19 market meltdown subsided.

So why is this current drop (green rectangle in the chart above) so important?

Because this collapse is happening outside of a crisis.

The other two sharp drops were triggered by true Black Swan events (an economic shutdown and viral pandemic). This one is happening while things are actually returning to normal.

Put another way, the $USD is telling us that:

1) Either another Black Swan event is underway already.

2) The world is losing faith in the $USD based on the Fed’s’/ Federal Government’s money printing and stimulus.

For a better perspective on what I am talking about take a look at the next chart. The $USD is breaking its bull market trendline at a rapid clip. The only other time it did this was right before the COVID-19 black swan event.

Something BAD is brewing in the financial system. And it’s going to catch 99% of investors by surprise.

Are Bonds and Gold Telling Us Inflation Is Coming?

June 7, 2020

Are Bonds and Gold Telling Us Inflation Is Coming?

Stocks continue to ignore 40 million unemployed, an economic depression, and societal collapse/ riots.

The S&P 500 rallied yesterday to test major resistance at 3,100. The market is nearing the point of its rising wedge. A big move is coming.

The VIX is also warning us that a big move is coming. It too is at the point of its wedge formation.

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Meanwhile, the 5-year, 30-year yield curve has steepened to levels not seen since 2017. Is this predicting an economic boom or raging inflation?

Gold suggests it’s the latter. The precious metal is going vertical against every major currency: dollars, euros, yen and francs.

Just What Is Warren Buffet and the Fed Seeing To Make Them Do This?

May 25, 2020

Just What Is Warren Buffet and the Fed Seeing To Make Them Do This?

The US is lurching towards an economic catastrophe.

If you’ve been paying attention, over the last few weeks there have been several LARGE “tells.” Those tells were two of the BIGGEST cheerleaders for stocks in history, Warren Buffett and the Fed, getting EXTREMELY bearish.

First and foremost, Warren Buffett, the man who famously stated that he likes to own companies for a long-time, ideally “forever,” has begun dumping huge quantities of stocks.

All told, Buffett sold 21 stocks worth over the last four months. He’s unloaded large portions of his holdings in Goldman Sachs, JP Morgan, and other large banks, as well as multiple airline stocks, pharmaceuticals, and energy stocks.

The media claims Buffett is doing this because he wants to make sure he owns less than 10% of these companies, but when do you remember Buffett ever unloading so many stocks worth billions of dollars in such a short period?

On top of this Buffett didn’t use the March meltdown to load up on investments.

Put another way, during the largest market collapse in years, at a time when many businesses were on sale, Buffett didn’t buy anything (he sold the airlines stocks he tried to buy) but rather chose to start unloading several of his largest positions?

Whatever Buffett is seeing in the economy that is making him do this… it’s NOT good.

Then there’s the Fed.

For decades now, the Fed has been a cheerleader for the economy and stocks.

Indeed, it is extremely rare to find the Fed ever issue a gloomy view of the economy or markets. Which is why it’s astonishing to see the Fed making statements that you would expect from a raging bear.

During the last week, Fed Chair Jerome Powell has publicly stated:

…click on the above link to read the rest of the article…

How to Prepare For the Coming Wealth Grab

May 17, 2020

How to Prepare For the Coming Wealth Grab

And here comes the next round of stimulus.

As long as large portions of the economy remain on lockdown, the government will be forced to perform massive stimulus programs/ social spending. As I write this Friday morning, the House is preparing to vote on a $3 trillion stimulus bill later today.

While the particular bill in question is chock full of Democrats’ legislation (more abortion funding, banning voter IDs, etc.), and likely won’t make it through the Senate in this particular form, the White House and the GOP are both in favor of providing additional stimulus checks to Americans in the near future.

Put simply, regardless of specific political affiliations, the political class is currently in favor of spending vast amounts of money right now.

All of this money has to come from somewhere. Currently, it’s the debt markets (the Treasury will borrow $3 trillion between April and June alone). But at some point, the Powers That Be will begin looking for new sources of capital.

Indeed, if history has taught us anything it’s that once the government/ elites use a crisis to make a massive power grab, rarely if ever is that power given back to the people.

We saw this with the Patriot Act in 2001, the policy response to the 2008 crisis. And it’s happening again today with the economic shutdown. While individual states will all eventually reopen, the fact is that the US just took a massive jump towards outright socialism/ central planning. And the political class LOVES it.

This will result in a collapsing economy, which in turn will mean lower tax revenues, which in turn will mean a greater need for capital to finance social spending programs/ unemployment/ stimulus checks.

…click on the above link to read the rest of the article…

What Will Be the Unintended Consequences of Printing Trillions of Dollars to Backstop the Entire System?

March 30, 2020

What Will Be the Unintended Consequences of Printing Trillions of Dollars to Backstop the Entire System?

Stocks are up somewhat this morning.

This marks the second Monday stocks will open in the green (last Monday was a green open as well) following two horrifically bad weekend sessions that saw stocks open limit down or close to limit down (March 2^nd and 9^th).

In the simplest of terms, the panic in the markets appears to be abating. It is clear stocks have broken the downtrend from the panic (blue lines). What is not clear is whether this rally will continue or not.

Stocks stalled out under resistance (red line) last week. A break above that line would open the door to a run to 3,000.

At the end of the day, stocks are actually a minor player in this mess. The BIG story is what happens with the bond markets.

Going into last week, it was clear the financial system was facing a debt crisis. Across the board everything from corporate bonds to municipal bonds were breaking down in a catastrophic fashion.

The Fed managed to stop this massacre by announcing it would backstop everything.

The question now is whether that will be enough. Bonds have staged a major bounce in the last five days, but what happens if they turn down again?

Will the Fed’s announcement that it intends to buy corporate bonds be enough to stop the $10 trillion corporate bond bubble from imploding?

What about the $16-$19 trillion commercial real estate market? Will the shutdown, which has closed so many restaurants and retailers, result in a crisis in this market as businesses begin skipping monthly payments or breaking contracts outright?

And what about the $23 trillion U.S. treasury bubble? Will the $2 trillion in stimulus, which both the President and the Democrats have suggested will be the first of several, be what finally pushes the U.S.’s debt loads into a crisis?

…click on the above link to read the rest of the article…

The Fed is Going to Cut Rates to Negative 3% If Not 5%

April 23, 2019

The Fed is Going to Cut Rates to Negative 3% If Not 5%

As I warned last week, while most of the investment world has been glued to their trading screens watching the stock market rally.. something nefarious has been unfolding behind the scenes.

That “something” is the Fed and other regulators implementing plans that will begin allow for large-scale cash grabs when the next downturn hits.

While stocks roared higher, Fed officials began openly calling for more extreme monetary policies including NEGATIVE Interest Rate Policy or NIRP.

NIRP is when a bank charges YOU for the right to keep your money there.

If you think this is conspiracy theory, consider that on February 5^th 2019, the IMF published a report outlining how Central Banks could cut rates into DEEPLY negative territory.

We’re not talking negative 0.5%… we’re talking negative 3% or even 5%.

Many central banks reduced policy interest rates to zero during the global financial crisis to boost growth. Ten years later, interest rates remain low in most countries. While the global economy has been recovering, future downturns are inevitable. Severe recessions have historically required 3–6 percentage points cut in policy rates. If another crisis happens, few countries would have that kind of room for monetary policy to respond.

To get around this problem, a recent IMF staff study shows how central banks can set up a system that would make deeply negative interest rates a feasible option.

Source: IMF

Any time the elites want to implement a new policy, the IMF is the “go-to” organization to introduce the idea.

It was the IMF that signed off on the disastrous Greek bail-out deals in 2010-2012.

It was also the IMF that “signed off” on the “bail-ins” in Cyprus, in which savings deposits lost as much as 50% in 2013.

Now the IMF is promoting the idea that Central Banks should cut rates into “deeply” negative territory during the next downturn.

…click on the above link to read the rest of the article…

Central Banks have created the single most dangerous environment possible…

April 4, 2019

Central Banks have created the single most dangerous environment possible…

That is the environment in which the economy is weakening, but investors are pouring into risk assets based on hopes that Central Banks will engage in more stimulus.

This is precisely what happened in the late ‘90s as well as in late 2007-early 2008.

Will the outcome be different this time?

In the near-term, traders will gun the market to new all-time highs. We’re too close for them not to. And until institutions start selling in droves again, we’re in a “trader’s games” market.

This means north of 3,000 on the S&P 500.

This doesn’t make sense… but markets never make sense during bubbles.

The bigger issue is what comes after that breakout to new all-time highs.

And THAT is where you need to be worried.

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The bond market typically predicts disaster long before stocks “get it.” We saw this in 2008 where bond yields rolled over to new lows while stocks continued to rally… right up until the CRASH…

…And they are doing it now too.

So enjoy the rally while it lasts, but don’t be fooled. What’s coming won’t be pretty. And if you’re interested in profiting from it, the time to prepare is now.

…click on the above link to read the rest of the article…

The Super Wealthy Are Already Preparing For NIRP and Worse

March 5, 2019

The Super Wealthy Are Already Preparing For NIRP and Worse

The Global Elite are preparing for Negative Interest Rate Policy (NIRP) and Wealth Grabs.

How do I know?

They’re moving their money into physical cash.

Physical cash represents one of the rare loopholes in our current financial system. When money is in actual physical cash it can’t be charged interest by a bank engaged in NIRP. It’s also much easier to hide from the Political Class intent of imposing wealth taxes and other capital grabs.

With that in mind, consider that the number of $100 bills in circulation has DOUBLED since 2008. In fact, there are now MORE $100 bills that $1 bills in the financial system.

The number of outstanding U.S. $100 bills has doubled since the financial crisis, with more than 12 billion of them across the world, according to the latest data from the Federal Reserve. C-notes have passed $1 bills in circulation, Deutsche Bank chief international economist Torsten Slok said in a note to clients this week.

Source: CNBC

Let’s be blunt here, the folks who have a lot of money to hide are usually the ones with the best connections to the elites.

As a result, they typically know what is coming down the pike before the rest of us. Which is why it’s critical to pay attention to what these people DO rather than just say.

Consider the following:

The IMF has already called for a wealth tax of 10% on NET WEALTH.
More than one Presidential candidate for the 2020 US Presidential Race has already openly called for a wealth tax in the US.
Polls suggest that the majority of Americans support a wealth tax.

And if you think this will stop with the super wealthy, you’re mistaken. You could tax 100% of the wealth of the top 1% and it would finance the US deficit for less than six months.

Which means…

…click on the above link to read the rest of the article…

For the First Time Since 2007, Central Banks Are Net DRAINING Liquidity

February 8, 2019

For the First Time Since 2007, Central Banks Are Net DRAINING Liquidity

Yesterday was a wake up call for the bulls.

Unfortunately it’s only going to get worse. The fact is that no matter what verbal interventions Central Banks or the political elite issue, liquidity is now rapidly leaving the financial system.

The Fed continues to drain $50 billion in liquidity via its QT program every month. The ECB is no longer engaged in QE, which means it too is now draining liquidity as bonds on its balance sheet come due.

This leaves the Bank of Japan, which is running out of assets to buy, resulting in it not being able to expand its QE program (the one that has been running since 2013). Finally, China is attempting to launch its own version of a QE program, though given the insane leverage in its financial system (the country is issuing $25 in new debt for every $1 in GDP growth) this will have little effect.

Bottomline: for the first time since 2007, Central Banks are NET draining liquidity rather than adding it.

No matter how you spin this, it means stocks are on borrowed time.

And the markets KNOW it.

Indeed, we’ve broken the bull market trendline from the 2009 lows. The ultimate downside for this collapse is at best 2,000, and more likely than not we’ll go to the high 1,000s (think 1,750-1,800).

A Crash is coming…

NIRP, Cash Bans and Wealth Taxes Are Coming to the US

February 1, 2019

NIRP, Cash Bans and Wealth Taxes Are Coming to the US

If you’re looking for a template for what’s coming to the US during the next crisis, Europe is the place to start.

Europe has already imposed cash grabs via Negative Interest Rate Policy (NIRP). That’s where banks CHARGE you for the right to keep your money.

Europe is also where ATMs and banks have limited cash withdrawals, so people who try to avoid paying the interest caused by NIRP face obstacle after obstacle as they try to get their money out.

Europe is also where regulators seized over 50% of deposits over a certain amount in order to prop up a failing bank. It’s called a “Bail-In” but it was abject theft.

If you think these things aren’t coming to the US, you’re mistaken. As I detail out in my best-selling book The Everything Bubble: The Endgame For Central Bank Policy the political elite have already been looking into ways to implement ALL of these strategies.

And if you think this will only be targeted at the very wealthy, consider that the IMF has already proposed a 10% wealth tax on NET wealth for everyone.

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