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In 2019, gold had its best year since 2010. Peter Schiff appeared on the RT Dec. 31 and said he thinks the yellow metal should have done even better. And given the current economic conditions, he believes the 20’s will be an explosive decade for gold.

You know, the reason the US stock market went up this year is because the Fed surprised everybody by doing exactly what I had been predicting they would do. They aborted their feigned attempt to normalize their interest rates and shrink their balance sheet. They went back to rate cuts and quantitative easing. This is extremely bullish for gold.”

Peter emphasized that gold should have been up a lot more in 2019, but he thinks it will catch up over the next several years — probably next year in particular.

Gold is going to be one of the best-performing assets classes, if not the best-performing asset class on the planet.”

Peter noted that gold made significant gains in 2019 despite a dollar that was relatively flat.

But the dollar is going to fall through the floor. That means gold prices are going to go through the roof.”

Peter said we are about to enter a new decade of stagflation – low economic growth and increasing inflation. He said it’s going to be even worse than the stagflation we saw in the 1970s.

This is going to be more like an inflationary depression. So, this century, the depression is going to come a decade early. It’s not going to be the roaring 20s. It’s going to be a decade of inflationary depression in the United States.”

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

The Fed’s Answer to the Ghastly Monster of its Creation

November 30, 2019

The Fed’s Answer to the Ghastly Monster of its Creation

The launch angle of the U.S. stock market over the past decade has been steep and relentless. The S&P 500, after bottoming out at 666 on March 6, 2009, has rocketed up over 370 percent. New highs continue to be reached practically every day.

Over this stretch, many investors have been conditioned to believe the stock market only goes up. That blindly pumping money into an S&P 500 ETF is the key to investment riches. In good time, this conditioning will be recalibrated with a rude awakening. You can count on it.

In the interim, the bull market may continue a bit longer…or it may not. But, to be clear, after a 370 percent run-up, buying the S&P 500 represents a speculation on price. A gamble that the launch angle furthers its steep trajectory. Here’s why…

Over the past decade, the U.S. economy, as measured by nominal gross domestic product (GDP), has increased about 50 percent. This plots a GDP launch angle that is underwhelming when compared to the S&P 500. Corporate earnings have fallen far short of share prices.

Hence, the bull market in stocks is not a function of a booming economy. Rather, it’s a function of Fed madness. And its existence becomes ever more perilous with each passing day.

Central planners at the Fed – like other major central banks – have taken monetary policy to a state of madness. Zero interest rate policy, negative interest rate policy, quantitative easing, operation twist, quantitative tightening, reserve management, repo market intervention, not-QE, mass-asset purchases, and more.

These schemes have fostered massive growth in public and private debt with nothing but lackluster economic growth to show. What’s more, these schemes have produced massive asset bubbles that have skyrocketed wealth inequality and inflamed countless variants of new populism.

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

U.S. Stock Market Hits a New Record High, but What’s Really Going On?

July 4, 2019

U.S. Stock Market Hits a New Record High, but What’s Really Going On?

As Americans head off to Independence Day celebrations, they’ll be greeted with a plethora of headlines about record highs in the U.S. stock market. What I find most interesting about the latest bout of exuberance is the fact that priced in gold, stocks remain far below last fall’s peak.

From my perspective, a real equity bull market is one where the stock market, in this case the S&P500, consistently hits new highs relative to what’s historically been the world’s politically-neutral monetary asset, gold; and the U.S. stock market did exactly that from August 2011 until September 2018. Though equities in nominal terms bottomed in March 2009, we didn’t really get the all clear in my view until equities started rallying versus gold in late summer 2011.

U.S. stocks continued to hit new highs via this ratio until the most recent high in September 2018. This represented a seven year equity bull market of historic proportions, but since last fall the ratio has consistently lagged nominal highs in stocks as you can see in the chart below.

What I find so interesting about the above chart is that both of 2019’s new record highs in the U.S. equity market came at considerably lower levels in the SPY/GLD ratio compared to last fall’s high. In fact, today’s SPY/GLD ratio is not just 14% below where the ratio was during last September’s stock market high, it’s also 3% below the prior equity market high in May.

So what does all of this mean? It’s too early to tell for sure, but what the chart tells me is there’s a high probability the economic cycle ended and started to turn down last September, and 2019’s nominal highs in equities (May and July) are sending false signals about what’s really going on. Combine this with the fact that gold recently broke out of a multi-year downtrend and the argument becomes stronger.

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

Bubbles and Zombies

October 2, 2018

Bubbles and Zombies

They say nobody rings a bell at the top of the market. But whether this is the top or not, two prominent market observers and historians, Robert Shiller and Edward Chancellor, are expressing concern.

First, Shiller warns readers not to take big increases in earnings too seriously because earnings are volatile.

Everyone knows that stock prices have risen dramatically since 2009. A $100 investment in the S&P 500 in 2009 has grown to nearly $400 at the end of August 2018. But Shiller reminds us that earnings have grown dramatically too. In fact, “real quarterly S&P 500 reported earnings per share rose 3.8-fold over essentially the same period, from the first quarter of 2009 to the second quarter of 2018,” according to Shiller. Prices, in fact grew a bit more slowly than earnings since the end of the crisis.

So should we think stocks are reasonably priced since earnings have grown at the same pace as prices? Not so fast, Shiller says. Earnings, the difference between two other data sets — revenues and expenses, are volatile, and cyclical. Rapid rises in earning are often followed by a return to long term trends or subpar levels. Such episodes have occurred more than a dozen times in U.S. stock market history.

Earnings can grow dramatically from things like “panicky demand” for U.S. goods from Europeans at the beginning of World War I. This led to political calls for “wealth conscription” or a heavy taxation on war-related profits. At that time stock prices didn’t follow profit advances as investors seemed to realize those gains would be short-lived.

In the “Roaring ‘20s,” however, emergence from a “war to end all wars” and a spirit of freedom and individual fulfillment spurred stock prices by Shiller’s lights. And this, of course, led to a crash at the end of the decade.

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

When The U.S. Stock Market Crashes, Buy Gold – David Brady

September 15, 2018

When The U.S. Stock Market Crashes, Buy Gold – David Brady

While we wait for news on the 25% tariffs on $200bln or 40% of Chinese exports to the U.S.—and with the threat of the same on the remaining ~$300bln to follow—I want to outline the endgame for the dollar and the likely beginning of the explosive rally for Gold.

Simply put: When the U.S. stock market crashes, buy Gold.

To be more specific: when the S&P 500 has fallen 20-30%, buy Gold, in my opinion, because the ‘Fed Put’ will soon be exercised at that point. The Fed will reverse policy to stimulus on steroids. The dollar rallied from April 2008 and peaked in March 2009, when stocks bottomed out—the same time the Fed announced QE, or QE1 as we now know it. Then the dollar fell. It is not unreasonable to expect the same to happen this time around. Gold bottomed out in October 2008, as stocks plummeted and then soared 280% to greater than 1900 over the next three years, as QE1 and QE2 were underway.

The coming crash in the U.S. stock market is the catalyst for the Fed’s reversal in policy, so why do I expect a crash?

Quantitative Tightening and Budget Deficits

Lee Adler pointed out several weeks ago that as the budget deficit soars, Treasury bond issuance is increasing by around $100bln per month. At the same time, the Fed is increasing its balance sheet reduction, or “QT” program, to $50bln a month in October, a run-rate of $600bln per year. That means $150bln of additional demand for U.S. Treasuries is required every month.

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

Thirteen Reckonings Hanging in the Balance

September 8, 2018

Thirteen Reckonings Hanging in the Balance

A Fake Money World

The NASDAQ slipped below 8,000 this week. But you can table your reservations. The record bull market in U.S. stocks is still on. With a little imagination, and the assistance of crude chart projections, DOW 40,000 could be eclipsed by the end of the decade. Remember, anything and everything’s possible with enough fake money.

Driven by a handful of big cap tech companies, the Nasdaq Composite has made new highs – but the broad market (here shown in the form of the NYSE Index) has not even made it back to the January blow-off peak. It is a good bet the return of the average investor’s portfolio mirrors that of the latter. Such divergences are typically a sign of steadily weakening market internals which are seen near major trend changes. When such a glaring divergence in performance persistently fails to be invalidated and keeps dragging on for many months, it tends to be particularly concerning for the longer term outlook, Note that even more glaring divergences exist now between US stocks vs. European and EM stocks. Despite the fact that US economic indicators remain strong and no obvious recession warnings are evident, we have yet to see such large divergences resolve without a hiccup. Usually the hiccup turns out to be quite a doozy. [PT]

Still, we consider DOW 40,000 to be about as probable as having a dinosaur step on our car as we drive to work today. More than likely, a return to DOW 10,000 will first grace the front page of the Wall Street Journal.

In the interim, while still in the delight of this “permanently high plateau,” we’ll turn our attention to another equally suspect record that’s presently unfolding with imperfect precision.

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

When The US’s Stock Market Bubble Bursts, Inevitable Disaster Will Follow

September 7, 2018

When The US’s Stock Market Bubble Bursts, Inevitable Disaster Will Follow

Complete and utter disaster will be inevitable and unavoidable when the United States’ stock market bubble bursts. Unfortunately, too many think the high stock market is evidence of a stable economy, but it’s actually an artificial bubble that will end in a disastrous crisis.

This unusual market strength is not evidence of a strong, organic economy, but of an extremely unhealthy, artificial bubble economy that will end in a crisis that will be even worse than we experienced in 2008, reported Forbes. The current market is highly unstable due to an artificially low interest rate.

Forbes writer Jesse Colombo explained it well. Ultra-low interest rates help to create bubbles in the following ways:

Investors can borrow cheaply to speculate in assets (ex: cheap mortgages for property speculation and low margin costs for trading stocks)
By making it cheaper to borrow to conduct share buybacks, dividend increases, and mergers & acquisitions
By discouraging the holding of cash in the bank versus speculating in riskier asset markets
By encouraging higher rates of inflation, which helps to support assets like stocks and real estate
By encouraging more borrowing by consumers, businesses, and governments

Another Federal Reserve policy (aside from the ultra-low Fed Funds Rate) that has helped to inflate the U.S. stock market bubble since 2009 is quantitative easing or QE. Many have warned about the negative effects of QE only to be told by leftists that it was “necessary.” When executing QE policy, the Federal Reserve creates new money “out of thin air” in digital form and uses it to buy Treasury bonds or other assets. That action pumps liquidity into the financial system. QE helps to push bond prices higher and bond yields/interest rates lower throughout the economy. QE has another indirect effect as well. It causes stock prices to surge because low rates boost stocks, wrote Colombo.

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

America Is Overdue for Another Economic Disaster

August 21, 2018

America Is Overdue for Another Economic Disaster

A trader monitors screens on the New York Stock Exchange. (Lucas Jackson/Reuters)

Underneath the current economic boom, there are some truly worrying signs.Eric Sevareid (1912–1992), the author and broadcaster, said he was a pessimist about tomorrow but an optimist about the day after tomorrow. Regarding America’s economy, prudent people should reverse that.

This Wednesday, according to the Financial Times‘ Robin Wigglesworth and Nicole Bullock, “the U.S. stock market will officially have enjoyed its longest-ever bull run” — one that rises 20 percent from its low, until it drops 20 percent from its peak. And September 15 will be the tenth anniversary of the collapse of Lehman Bros., the fourth-largest U.S. investment bank. History’s largest bankruptcy filing presaged the October 2008 evaporation of almost $10 trillion in global market capitalization.

The durable market rise that began March 6, 2009, is as intoxicating as the Lehman anniversary should be sobering: Nothing lasts. Those who see no Lehman-like episode on the horizon did not see the last one.

Economists debate, inconclusively, this question: Do economic expansions die of old age (the current one began in June 2009) or are they slain by big events or bad policies? What is known is that all expansions end. God, a wit has warned, is going to come down and pull civilization over for speeding. When He, or something, decides that today’s expansion, currently in its 111th month (approaching twice the 58-month average length of post-1945 expansions), has gone on long enough, the contraction probably will begin with the annual budget deficit exceeding $1 trillion.

The president’s Office of Management and Budget — not that there really is a meaningful budget getting actual management — projects that the deficit for fiscal year 2019, which begins in six weeks, will be $1.085 trillion. This is while the economy is, according to the economic historian in the Oval Office, “as good as it’s ever been, ever.

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

Epocalypse Ahead on Highway to Hell for Global Economy and US Stock Market

June 30, 2018

Epocalypse Ahead on Highway to Hell for Global Economy and US Stock Market

First I said I believed the US stock market would plunge in January, but I also said that January would not be the biggest drop, but just the first plunge that begins a global economic collapse: the big trouble for the economy and the stock market, I said, would show up in “early summer.” That’s when the stock market crash that began in January would take its second big leg down, and global economic cracks would become big enough that few could deny them.

(Now I’ll add a prediction — that even worse will unfold in the fall and early winter … unless summer becomes so bad that central banks rapidly reverse course on unwinding their balance sheets and raising interest; but I think they will stay their promised courses into the fall and winter and headlong into a global economic crisis.)

The stock market did plunge in January and on into February, with the Dow eventually taking its largest single-day point drop in its long history. That drop busted the Trump Rally, and the market never recovered, leaving US stocks (and stocks all over the world) shattered in “correction territory” for half a year. With a half a year for perspective now, here is a look back what that event did:

Global Stocks (except US), US stocks, and too-big-to-fail bank stocks. Where did the market trend abruptly change for all?

I’ve waited patiently through the first half of the year to talk in depth about how my January prediction faired because I felt we need many months in order to discern whether a trend has really been broken.

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

Eric Peters: “China’s Best Play Is To Let The US Stock Market Crash”

April 23, 2018

Eric Peters: “China’s Best Play Is To Let The US Stock Market Crash”

As excerpted from the latest Weekend Notes from One River CIO, Eric Peters.

“China’s best play is to let the US stock market crash,” said the CIO. “Trump is right, they can’t win a trade war.” So they won’t try. “But Xi can consolidate if things get rough in terms of markets, but for Trump it is the opposite.” The US is far more exposed to a bear market.

“And just like US debt ceiling standoffs or just about any political standoff for that matter, the game is that things always have to get worse before they get better.” And he sighed, deeply. “But I truly hate having to trade by playing game theory. It’s just an awful way to live your life.”

“I like to do the kind of analysis that involves looking at one group of companies that are starting to make money,” continued the same CIO. “And then from that observation, I can make reasoned forecasts about how their improving fortunes will impact others, and so on and so forth.” The same process works in reverse of course. Economies have a way of spiraling up and down, like corkscrews. “I like the kind of analysis that captures the actions of tens of thousands, or millions of people.” And he sighed, again. “But now, we’re just trading late night tweets.”

And a bonus anecdote from Peters’ note

“The polls say I won the debate,” said the candidate, “but you and I know all about polls.” Perry Parker’s a good friend, we worked together for a decade, buying low, selling high. And having won in finance, he headed home to give back to Mississippi. When the 3rd congressional district seat opened up he made a bid.

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

US Stock Market: Conspicuous Similarities with 1929, 1987 and Japan in 1990

March 4, 2018

US Stock Market: Conspicuous Similarities with 1929, 1987 and Japan in 1990

Stretched to the Limit

There are good reasons to suspect that the bull market in US equities has been stretched to the limit. These include inter alia: high fundamental valuation levels, as e.g. illustrated by the Shiller P/E ratio (a.k.a. “CAPE”/ cyclically adjusted P/E); rising interest rates; and the maturity of the advance.The end of an era – a little review of the mother of modern crash patterns, the 1929 debacle. In hindsight it is both a bit scary and sad, in light of the important caesura it represented. In many ways the roaring 20s were the last hurrah of a world in its death throes, a world that never managed to make a comeback. The massive expansion of the State that had begun in the years just before WW1 resumed in full force as soon as the post-war party on Wall Street ended. The worried crowd that formed in the streets around the NYSE in the week of the crash may well have suspected that the starting gun to profound change had just been fired. [PT]

Near the end of a bull market cycle there is always the question of when a decline will begin, and above all, how large will it be. I believe it possible that the retreat in prices will begin soon and that it could possibly even start out with a crash. I will explain in the following what led me to draw this conclusion.

2015 – 2018: the S&P 500 Index Moves Up Along a Well-Defined Trend Line

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

The Myth of Sound Fundamentals

February 26, 2018

The Myth of Sound Fundamentals

The recent correction in the US stock market is now being characterized as a fleeting aberration – a volatility shock – in what is still deemed to be a very accommodating investment climate. In fact, for a US economy that has a razor-thin cushion of saving, dependence on rising asset prices has never been more obvious.

NEW HAVEN – The spin is all too predictable. With the US stock market clawing its way back from the sharp correction of early February, the mindless mantra of the great bull market has returned. The recent correction is now being characterized as a fleeting aberration – a volatility shock – in what is still deemed to be a very accommodating investment climate. After all, the argument goes, economic fundamentals – not just in the United States, but worldwide – haven’t been this good in a long, long time.

But are the fundamentals really that sound? For a US economy that has a razor-thin cushion of saving, nothing could be further from the truth. America’s net national saving rate – the sum of saving by businesses, households, and the government sector – stood at just 2.1% of national income in the third quarter of 2017. That is only one-third the 6.3% average that prevailed in the final three decades of the twentieth century.

It is important to think about saving in “net” terms, which excludes the depreciation of obsolete or worn-out capacity in order to assess how much the economy is putting aside to fund the expansion of productive capacity. Net saving represents today’s investment in the future, and the bottom line for America is that it is saving next to nothing.

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

Don’t Trust the “Trump Boom”

February 22, 2018

Don’t Trust the “Trump Boom”

Call me a bad conservative.

I don’t cheer this past year’s stock market gains. I don’t enthusiastically crow and pump my fist every time the Standard and Poor’s breaks a new record. I don’t breathlessly watch CNBC to see the day’s gains, listening mindlessly to commentators in custom-tailored suits with shiny gelled hair pontificating about what a rise in the futures market of Chinese copper means.

Oh, sure, the few times I check my 401k balance, I’m pleased. But when the closing bell rings and the champagne corks pop and the Financial District bursts into song and dance, I’m more or less indifferent–perhaps less. Perhaps I’m even pessimistic.

It’s because we’ve seen this movie more than a few times before. The wildcat banking of the mid-19th century, the frequent panics of the fin-de-siècle, the Roaring Twenties, Jimmy Carter’s cardigan-covered stagflation, Alan Greenspan’s handiwork in suppressing interest rates to fuel a housing bubble that popped in the fateful autumn of 2008–we live in a cinema where the feature show is never different. America, its economy and its workers, its labor and capital, are stuck in an involuntary pas de deux with some guy named Dow Jones.

The so-called “Trump boom” that’s sending stocks ever skyward was suspect from the beginning, but not for anything the President’s done. Trump’s tax-cut act, his most significant economic policy so far, has no doubt loosened some restriction on the market, freeing up money that would otherwise float down the river of Acheron into D.C.’s dead coffers. That’s certainly been a boon to traders whose job consists of playing god with other people’s dreams of retirement.

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

Weekly Commentary: Permanent Market Support Operations

February 17, 2018

Weekly Commentary: Permanent Market Support Operations

U.S. stocks posted the strongest week of gains since 2013 (would have been 2011 if not for late-day selling). The S&P500 surged 4.3%, and the Nasdaq Composite jumped 5.3%. The small cap Russell 2000 rallied 4.4%. After closing last Friday at 29.06, the VIX settled back down to a still elevated 19.46. Foreign markets recovered as well. Germany’s DAX rose 2.8%, and France’s CAC 40 gained 4.0%. The Shanghai Composite was closed for the lunar new year. The dollar index was back under pressure this week, sinking 1.5%, giving a boost to commodities prices. Price instability abounds.

While stocks rather quickly recovered a chunk of recent losses, the same cannot be said for corporate bonds. Notably, investment-grade bonds (LQD) rallied little after recent declines.

February 16 – Bloomberg (Cecile Gutscher and Cormac Mullen): “Corporate bond funds succumbed to rate fears that have gripped stocks to Treasuries. Investors pulled $14.1 billion from debt funds, the fifth-largest stretch of redemptions in the week through Feb. 14, according to a Bank of America Merrill Lynch report, citing EPFR data. High-yield bonds lost $10.9 billion alone, the second highest outflow on record. As benchmark Treasury yields traded at a four-year high, it shook the foundations of a key support for risk assets — low rates. ‘Investors don’t sell their cash bonds in a big way until they are forced to, which happens when the outflows start picking up more sustainably,’ Morgan Stanley strategists led by Adam Richmond wrote…”

U.S. junk bond funds suffered outflows of $6.3 billion (from Lipper), the second highest ever. IShares’ high-yield ETF saw outflows of $760 million. U.S. investment-grade bond funds had outflows of $790 million (Lipper), the first outflows since September. This was a big reversal from last week’s $4.73 billion inflow. The iShares investment-grade ETF had outflows of $921 million, the “largest outflow in its 15-year history.” Even muni funds posted outflows ($443 million), along with mortgage and loan funds.
…click on the above link to read the rest of the article…

City of London financiers contemplate “imminent” 2018 US stock market crash of up to “50%”

February 14, 2018

City of London financiers contemplate “imminent” 2018 US stock market crash of up to “50%”

Coming dramatic decline of US stock prices would trigger global recession, finds grim forecast to be explored at roundtable hosted by British financial services think-tank

A new analysis published on the website of a London-based think-tank, funded by the world’s biggest banking and financial services institutions, warns that the US stock market is on the brink of an imminent crash that could trigger another global recession.

The document by a senior US economist and former Houblon-Norman Fellow at the Bank of England is published on the website of the Centre for the Study of Financial Innovation (CSFI), which runs around 100 roundtable events a year involving financial services insiders from the UK and beyond.

The document forecasts that in 2018, US stock prices are likely to plummet by as much as “forty to fifty percent” — compared to the less than five percent plunge in early February. The document was published weeks before the recent stock market volatility.

The warning of a forty to fifty percent drop points to the prospect of a global financial crash worse than the 2008 banking collapse.

It comes at a time when the Federal Reserve, Bank of England and other authorities are looking to tighten up their cheap money policies, as economic growth is at its highest levels since the 2008 slump.

The new analysis is an ‘open letter’ by US economist Robert Aliber, Professor Emeritus at the University of Chicago Booth School of Business, a world renowned authority in identifying the source of shocks behind over forty banking crises that have occurred since the 1970s.

The ‘open letter’, dated January 21st 2018, is published on CSFI’s website at this link http://www.csfi.org/s/QUARTERLYJAN12018.docx, and mentioned in an announcement of a forthcoming breakfast conversation with Professor Aliber in late February.

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

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