From James Harkin (Webmaster & Editor of LindseyWilliams.net). Here is a summary of articles of interest from around the world for this week. Please LIKE the Lindsey Williams Online Facebook Page to see stories posted daily regarding the current state of the economy around the world.
Latest News From July 29, 2016 to August 4, 2016:
- The Stock Market Has Predicted The Outcome Of Presidential Elections With 86 Percent Accuracy
If you want Donald Trump to win the election, then you should be rooting for a stock market crash between now and November. As you will see below, if stocks go up during the last three months before an election, the incumbent party almost always keeps the White House. But if stocks go down during the last three months before an election, the incumbent party almost always loses. Earlier today, Trump warned Americans to get out of the stock market, and if his warning turns out to be correct it will likely benefit him politically as well. When the general population believes that things are going well, Americans tend to stick with current leadership, but when the general population believes that we have hit rocky times they are usually ready for a change.
- Are Those Safe Haven Assets Safe Anymore?
Michael Sonnenfeldt doesn't mince words: “There is no safety in safety,” the founder of Tiger 21, a network of “ultra-high-net-worth” investors, said. “All of the historical places you could get safe income from—dividend-paying stocks, bonds—they've all been bid up because of quantitative easing to the point where it's just trash.” Assets that include Treasury notes, high-quality dividend stocks, and low-volatility mutual funds have all seen spooked investors rush into their supposedly safe embrace. Sonnenfeldt and others argue that has transformed them. “When you overpay for what used to be safe assets,” he said, “they now have a lot of risk in them.” Whether they're “trash” is debatable. But the concern that the prices of these assets may now be propped up more by fear than by economic fundamentals is legitimate. Here's a look at how some “safe” assets that investors have raced into over the past year or so are holding up. For a backdrop, take a look at how the S&P 500 has performed since last August's deep dive.
- Donald Trump Warns Americans To Get Out Of The Stock Market As The Dow Falls For A 7th Day In A Row
One thing that you have to appreciate about Donald Trump is that unlike most politicians, he actually says what is on his mind. On Tuesday, Trump told Fox Business that he had already gotten out of the stock market, and that he foresees “very scary scenarios” ahead for investors. And of course things have already started to get a bit ominous for those holding stocks over the last week and a half. The Dow Jones Industrial Average has now closed down for seven days in a row, and that is the longest losing streak that we have seen since the panic of last August. Over the past 12 months we have seen virtually every other major global stock market experience at least one major crash. Could the U.S. markets be next?
- The new political divide
AS POLITICAL theatre, America’s party conventions have no parallel. Activists from right and left converge to choose their nominees and celebrate conservatism (Republicans) and progressivism (Democrats). But this year was different, and not just because Hillary Clinton became the first woman to be nominated for president by a major party. The conventions highlighted a new political faultline: not between left and right, but between open and closed (see article). Donald Trump, the Republican nominee, summed up one side of this divide with his usual pithiness. “Americanism, not globalism, will be our credo,” he declared. His anti-trade tirades were echoed by the Bernie Sanders wing of the Democratic Party.
- The Price Of Oil Is Crashing Again, And That Is Very, Very Bad News For The U.S. Economy
This wasn’t supposed to happen. The price of oil was supposed to start going back up, and this would have brought much needed relief to economically-depressed areas of North America that are heavily dependent on the energy industry. Instead, the price of oil is crashing again, and that is really bad news for a U.S. economy that is already mired in the worst “recovery” since 1949. On Monday, U.S. oil was down almost four percent, and for a brief time it actually fell below 40 dollars a barrel. Overall, the price of oil has fallen a staggering 21 percent since June 8th. In less than two months, the “oil rally” that so many were pinning their hopes on has been totally wiped out, and if the price of oil continues to stay this low it is going to have very seriously implications for our economy moving forward.
- Insuring Against a Market Selloff Just Keeps Getting Cheaper
In a world of overpriced assets there's one thing that keeps going on sale: volatility. The cost of protecting against a fall in the S&P 500 has dipped to a one-year low, according to equity derivatives strategists at Credit Suisse Group AG. It couldn't be better timing given that analysts at Goldman Sachs Group Inc. are sounding the alarm bell of a drop in stocks over the next three months, laying out a laundry list of investor worries, including stretched valuations, that could knock the recent rally.
- Painful To Watch: This Is The Weakest U.S. Economic ‘Recovery’ Since 1949
Most of us have never witnessed an economic “recovery” this bad. As you will see below, the average rate of economic growth since the last recession has been the lowest for any “recovery” in at least 67 years. And unfortunately, the economy appears to be slowing down even more here in 2016. On Friday, I talked about how the U.S. economy grew at a painfully slow rate of just 1.2 percent in the second quarter after only growing 0.8 percent during the first quarter. And last week we also learned that the homeownership rate in the United States has dropped to the lowest level ever. This is not what a recovery looks like. Instead, it very much appears that a new economic downturn has already begun.
- Foreign Appetite For U.S. Securities Has Taken a Drubbing
It wasn't supposed to be this way. When the Federal Reserve hiked benchmark rates in December, the initial jump in the short-end of the nominal U.S. yield curve raised expectations that foreign buyers would snap up the country's assets, thanks to their yield relative to those of other developed markets ravaged by low policy rates. In fact, net foreign flows to the U.S. have been decidedly weak this year, thanks to an exodus by foreign central banks and sovereign wealth funds, who've been dumping U.S. securities in order to raise cash to put to work at home. In May, official institutions abroad raced out of U.S. stocks and bonds with $26 billion of outflows. Private buyers abroad were, by contrast, net buyers of U.S. securities, but that wasn't enough to keep the total positive: foreign flows out of U.S. securities totaled $11 billion, according to the most recently available data in May, sharply reversing April's $80.4 billion of inflows.
- The Democratic Party No Longer Exists
The Democratic Party that once was concerned with workers’ rights, the elderly, civil rights, and the constitutional protections of America liberty no longer exists. As the just completed Democratic presidential primaries and the Democratic presidential convention have clearly demonstrated, the United States now has two Republican parties in service to the One Percent. The organized Democrats–the Democratic National Committee–have shown themselves to be even more venal and corrupt than the Republicans. Leaked emails document that the Democratic National Committee conspired with the Hillary campaign in order to steal the nomination from Bernie Sanders. It is clear that Sanders was the choice of Democratic Party voters for president, but the nomination was stolen from him by vote fraud and dirty tricks. The DNC and the media whores have tried to discredit the incriminating emails by alleging that the leaked emails resulted from a plot by Russia’s President Vladimir Putin in behalf of “Putin’s American agent,” Donald Trump. “A vote for Trump is a vote for Putin,” as the presstitute scum put it.
- Bank of England cuts interest rates to 0.25% amid biggest ever GDP downgrade in modern history
Interest rates have been slashed to a new historic low of 0.25 per cent and the Bank of England has pushed the button on another £170 billion of monetary stimulus to stop the economy sliding back into recession in the wake of the UK’s Brexit vote. Unveiling its most drastic set of GDP growth forecast downgrades in its modern history, the Bank said the UK economy will virtually grind to a halt in the wake of the Brexit vote – coming perilously close to another recession. The Bank’s forecasts include the positive impact of today’s stimulus package, implying the UK economy would otherwise have returned to recession this year for the first time since the 2008-2009 financial crisis. Instead, the Bank is now expecting quarterly GDP growth to slump to just 0.1 per cent in the third quarter of the year – and to eke out roughly the same meagre output in the final quarter.
- America is Doomed Without Restoring the Rule of Law-Karl Denninger
Trader and entrepreneur Karl Denninger has a dire warning. He basically says if there is lawlessness at the top of society, there will be lawlessness at the bottom. Denninger, who is so distraught he has suspended writing on his popular website, explains, “It is illegal for any entity with market power or anybody else to price fix. It is illegal to price commodities of like, mind and quantity in the market place. That is a federal law, and violations of these laws are not civil affairs, they’re felonies. . . . The only deterrents for corporations against bad behavior is people go to jail or the firm has its charter revoked because it runs out of money. The reason that is the case is as long as I can pay a fine and shift the cost onto the customers or shareholders or both, there is not deterrent—at all. . . . When does a CEO ever get indicted? When do members of the board ever get indicted? The answer is never.”
- Buy Gold… Some More
I spent the entirety of last week in one of my favorite cities in the world: Vancouver, British Columbia. This jewel of the Pacific Northwest has long been the heart of the world’s junior mining industry. It’s not that any mines are actually located here, but the city boasts more mining head offices than any other. So with the big gold and silver rally of the last few months, Vancouver is abuzz once again. High-end restaurants are packed, Bentleys are the ride of choice and real estate prices are going crazy. The occasion for my trip to Vancouver was the annual Sprott Natural Resource Symposium. I was invited to speak at the conference by my good friend and uber mining analyst Rick Rule. I spoke amongst the giants of the resources world: Bob Friedland, Ross Beaty, Rob McEwen, Doug Casey and, of course, Rick himself. This year’s event was a lovefest for gold and gold-mining stocks… bordering on a Woodstock experience!
- The Dollar Will Be Removed From Int’l Trade,Which Will Send Shock Waves Throughout The US: Jim Willie
Neocons, CIA and the “deep state” in the U.S.. NATO in Europe. Who else is being aggressive in our world towards other nations? Who else is continually poking Russia and China to provoke a war? What actions have Russia or China demonstrated that makes a thinking person say “Why are they being aggressive?” Not one time is this the case. The U.S. has a military budget that is more than double the rest of the world combined! Who is the real aggressor?
- The £1 trillion pension crisis facing 11m (and they're the lucky ones)
Pressure is mounting on the Government to oversee a root-and-branch overhaul of Britain’s company pension schemes in which more than 11 million workers have savings. It comes as these “final salary” schemes are registering their biggest ever funding shortfall, now at almost £1 trillion (£1,000bn). This sum is the gap between the investments these pension schemes own and the likely eventual cost of the pensions they have already promised to pay.
- President Obama Signed This GMO Labeling Bill
Soon all food packages sold in the U.S. will have to have the proper labeling. On Friday President Obama signed bill S. 764 that puts into place a federal standard for foods that have been made with genetically modified organisms, ABC News reports. This move comes just about two weeks after Congress passed legislation to necessitate labeling on all food packages that indicates whether or not they contain GMO ingredients. “This measure will provide new opportunities for consumers to have access to information about their food,” Katie Hill, White House spokesperson, told the news outlet. This didn’t win over all food-labeling advocates, however. One criticism is that the bill allowed companies to use QR codes or 1-800 numbers as a form of GMO labeling, forcing consumers to scan the code or make a call to get more information. That’s why some opponents are calling the bill the DARK Act, short for “Denying Americans the Right to Know,” and argue these alternative labels discriminate against low-income consumers who lack the technology to access off-label info. Others have criticized the bill because it isn’t as stringent as a piece of Vermont legislation that will now be superseded by the federal law. Vermont Senator Bernie Sanders was among the federal bill’s critics, and urged his Twitter followers to contact their senators about the bill earlier this month.
- BREXIT BOOST Britain’s economy growing twice the speed of Eurozone as 27 countries seek to cut a trade deal with UK
BRITAIN’S economy is growing at twice the speed of the ailing Eurozone, Brexit-boosting figures revealed yesterday. The UK’s national output increased by 0.6 per cent between April and June, while 19-country single currency bloc grew by just 0.3 per cent. Eurozone growth halved from the 0.6 per cent growth it saw in the first three months of the year as France’s economy flatlined. Overall the EU grew by only 0.4 per cent between April and June, Eurostat figures showed. MPs hailed it as further proof that the UK is right to cut ties with Brussels.
- A “Terrorist” Strike on the US which will make 9-11 look like a Summer Picnic: Why a Nuclear Attack on the US Mainland is Inevitable, and probably Imminent.
I wondered long and hard about how to pitch this post (actually, whether to even write it!). It’s not exactly going to make me a lot of friends. But, fortunately, I don’t give two shits about that. I’m pretty sure US citizens waking up to the likelihood of, and reasons for, this event, is just a bit more important. An atomic bomb destroying central Manhattan. Or Washington DC. Or Los Angeles. Or wherever. It only happens in the movies, right? It will make 9-11 pale into relative insignificance (except of course, for later historians, interested in the context of how the well-planned over-reaction to 9-11, almost certainly led to the nuclear attack!).
- Central Banks Will Create A Historical Gold Rush
The central banks are leading the world into a black hole and have no idea what a disaster they have created. What initially seemed like a nice money spinner for the private bankers in 1913 when the Fed was set up has resulted in a $2 quadrillion (at least) monster that is now totally out of control. Banks and central banks are experts at forging money. During the last hundred years, the Ponzi scheme seemed to work beautifully under the guise of Keynesianism. So whenever there was a problem in any economy in the world, all that was needed was some stimulus in the form of credit or forged money creation. And there are so many ways to forge money.Through the unlimited flexibility of the fractional banking system, money printing became the most perfect perpetual motion system whereby the more credit that was created the more credit and paper money could be issued by the banks. There is absolutely no limit to how much money could be printed. So banks and central banks have been in collusion to print or forge paper money which has no value and no asset banking. Any private individual doing the same would spend the rest of his days in jail. But when the bankers do it, it creates massive wealth and respectability for them since they have the full backing of governments. What a rotten world!
- 12 Times Pope Francis Has Openly Promoted A One World Religion Or A New World Order
On Sunday, Pope Francis told hundreds of thousands of young people gathered for World Youth Day in Poland that they need to “believe in a new humanity” and that they should refuse “to see borders as barriers”. Every two or three years, Catholics from all over the planet converge for one of these giant conferences, and as you will see below the Pope has not been shy about using historic occasions to promote his agenda. Unfortunately, it has become exceedingly clear that his agenda includes moving humanity toward a one world religion and a new world order. Of course Pope Francis is not going to use those exact phrases, but at this point it is very obvious what he is trying to do. If you don’t believe me now, perhaps you will see things differently after you have viewed the evidence that I have compiled in the rest of this article.
- Six Major Events That Will Change History
Investors globally have never faced risk of the magnitude that the we are now exposed to. But sadly very few are aware of the unprecedented risks the world is facing. For the ones who understand risk and take the right decisions, it will “lead to fortune”. Only very few will choose that route. Instead most investors will continue to live in the hope that current trends will go on forever but sadly these people will end up “in shallows and in miseries”. Risk is now staring us all right in our face but very few people can actually see it. 1. No Sovereign state will ever repay their debt, 2. No bank will ever give depositors their money back, 3. Stock markets will fall 90% or more, 4. Property markets will collapse, 5. Currencies will go to ZERO, 6. Geopolitical risk, terrorism and social unrest.
- EU death knell: Eurozone growth HALVES as French economy grinds to a halt
EUROPE's economic growth plunged by half in the second quarter of 2016, raising fears the outlook for the bloc is worsening. Across the eurozone, gross domestic product (GDP) increased by just 0.3 per cent, falling from 0.6 per cent in the previous quarter, figures from Eurostat showed. Unemployment was also revealed to be standing at a worrying 10.1 per cent last month. France shocked onlookers as its economy ground to a complete halt in the three months between between April and June. Household spending in the eurozone's second largest economy plunged in the second quarter.
- Revealed: the High Street names that used benefits claimants as free labour
The names of major companies who used a benefits scheme to employ people without paying them have been revealed after the government lost a four-year legal battle to protect their identities. Nando's, Tesco, Morrisons, Asda, WH Smith, Poundstretcher, Cash Converters, Boots, DHL and Superdrug were among more than 500 companies, councils and charities found to have been using the free labour of benefit claimants, who were forced to take unpaid work under rules brought in by David Cameron's Coalition government. The Court of Appeal has overturned the Department for Work and Pension's attempt to keep the names a secret at an estimated cost of tens of thousands of pounds in legal fees. Debbie Abrahams, Labour's shadow Secretary of State for Work and Pensions, said the scheme demonstrated the Conservative government's “skewed view of the world”.
- Global Deflation Alert: World Trade Growth Has Ground To A Halt
Falling rates of global trade growth have attracted much comment by analysts and officials, giving rise to a literature on the ‘global trade slowdown’ (Hoekman 2015, Constantinescu et al. 2016). The term ‘slowdown’ gives the impression of world trade losing momentum, but growing nonetheless. The sense of the global pie getting larger has the soothing implication that one nation’s export gains don’t come at the expense of another’s. But are we right to be so sanguine?
- Over Past 50 Years This Big Of Earnings Recession Has Always Triggered A Bear Market
It’s earnings season once again and it looks as if, as a group, corporate America still can’t find the end of its earnings decline since profits peaked over a year ago. What’s more analysts, renowned for their Pollyannish expectations, can’t seem to find it, either. So I thought it might be interesting to look at what the stock market has done in the past during earnings recessions comparable to the current one. And it’s pretty eye-opening. Over the past half-century, we have never seen a decline in earnings of this magnitude without at least a 20% fall in stock prices, a hurdle many use to define a bear market.
- Weekend Reading: Global Instability is Now the Fed’s Perma-Excuse
This week, the headlines have been dominated by the Democratic National Convention pushing Janet Yellen’s latest FOMC non-action to “page 6.” Of course, it was not surprising to hear yesterday Janet Yellen has once again “flip-flopped” on hiking rates. This tweet from HedgEye sums it up nicely.
- Here’s What Happens When the World Overdoses on Debt
Bonds are no longer assets. They’re liabilities. You might find this hard to believe. After all, most folks think of bonds as a safe way to grow their money. For decades, you could make a decent return of 5% or more in government- and investment-grade bonds without risking big losses. Not anymore. These days, most bonds pay next to nothing. Some have negative interest rates, which means owners must pay interest on the bond instead of earning interest. If you own a bond that pays a negative interest rate, you’re guaranteed to lose money if you hold the bond to maturity. And yet, folks are lining up to buy these bonds.
- Bo Polny Predicts Historic Crash By Jubilee End-Day, October 2
I recently interviewed Bo Polny of Gold2020 Forecast. Polny is famous for his numerical dissection of investments and markets and we discussed Shemitah market cycles, the timing of Brexit, 9/11 and the Jubilee end-date in early October among other issues. Polny is blunt about what is about to take place: A tremendous market crash of historical proportions that will leave most investors stunned and broke. He believes the time to get out of the stock market is growing short and that one ought to take profits and place them in gold and silver while it is still possible. Here at TDV, Senior Analyst Ed Bugos, like myself, has long anticipated such moves and as a result, the TDV portfolio is up 200% in the last year. Polny has predicted that the Dow will eventually move down to the 5,000 level and not recover – and he makes similar points in this interview. Silver, he has predicted, is going over $50 per ounce while gold is going over $2,000 per ounce in the near term. In fact, if gold doubles in price, then silver could quadruple. This Jubilee Year of 2016 is what Polny calls the “year of judgement.” He’s in agreement with us on this, of course. And in past interviews, he has pointed out conditions begin to mimic the chaos of 1764, especially in the US where 250 years ago, society suffered from poverty, hunger, social chaos and finally war.
- If Everything Is So Great, Then Why Do Two-Thirds Of Americans Say The Country Is On The Wrong Track?
Americans appear to be increasingly pessimistic about the future of America. According to a Real Clear Politics average of recent polls, 68.9 percent of Americans believe that the country is on the wrong track, and only 23.1 percent of Americans believe that we are headed in the right direction. But if you have been listening to the endless parade of political speeches at the Democratic and Republican National conventions, you would be tempted to think that the greatest days for the United States are right around the corner. The politicians keep promising us that better times are coming if we will just make the “correct” choices on election day, but no matter who we send to Washington D.C. things just seem to keep getting worse and worse. Let’s take a look at just a few of the signs that indicate that our country is going in the wrong direction…
- Brexit post-mortem
It is a month after Britain’s surprise vote to leave the EU. A new Conservative Prime Minister and Chancellor are in place, both David Cameron and George Osborne having fallen on their swords. The third man in the losing triumvirate, Mark Carney, is still in office. Having taken a political stance in the pre-referendum debate, there can be little doubt the post-referendum fall in sterling was considerably greater than if he had kept on the side-lines. This article takes to task the Treasury’s estimates of the effect of Brexit on the British economy and Mr Carney’s role in the affair, then assesses the actual consequences.
- A Bull Market For The Ages As The Price Of Gold Heads To A Jaw-Dropping $20,000
After such a significant move in the gold, silver and mining share markets, today King World News thought it was a good idea to take a step back and look at the big picture of the war between gold and the Federal Reserve. This led to a remarkable question: Is the price of gold headed to nearly $20,000? MacroTrends: The chart shows the ratio of the gold price to the St. Louis Adjusted Monetary Base back to 1918. The monetary base roughly matches the size of the Federal Reserve balance sheet, which indicates the level of new money creation required to prevent debt deflation. Previous gold bull markets ended when this ratio crossed over the 4.8 level.
- Deutsche Bank to close almost 200 branches, axe 3000 jobs
Germany’s largest lender is set to shut over a quarter of its branches across the country as the company goes through a major restructuring process. The closures are set to take place over the next few months, with 188 of Deutsche Bank’s 723 branches nationwide due to close their doors. On Sunday, Deutsche Bank published a list of the affected branches. North Rhine-Westphalia is to be hit hardest, with 51 branches in Germany’s most populous state listed for the chopping board. In Bavaria eleven will close, eight of which are in Munich.
- FMC Axes 1,000 Jobs, Prepares for Merger
The Houston-based energy equipment manufacturer, FMC Technologies, has slashed 1,000 jobs from its workforce as it preps to merge with Technip, a French firm. Due to dropping revenue in U.S. shale production, FMC’s profit during the second quarter sank to $2.2 million, or 1 cent for each share. This number is a major dip from the $108 million amassed during the same period in 2015.
- U.S. Economy Runs At Stall Speed For Third Straight Quarter
The U.S. economy expanded at a 1.2% annual rate in the second quarter, barely improving from Q1's downwardly revised 0.8% advance, the Commerce Department said Friday. Wall Street had expected a 2.6% pace. Consumer spending was very strong — up 4.2% — but housing and business investment declined, the latter for a third straight quarter. It's also the third straight quarter of anemic overall growth. In addition to Q2's 1.2% and Q1's revised 0.8%, Q4 2015 GDP growth was cut to 0.9%. On a per capita basis, the U.S. economy is essentially flat.
- Top Advisor To Sovereign Wealth Funds Says Gold & Silver Headed Into The Stratosphere Along With The Shares
With the gold and silver mining shares on a tear as the XAU and HUI Indexes hit new highs, today a top advisor to the most prominent sovereign wealth funds, hedge funds, and institutional funds in the world, told King World News that gold and silver are headed into the stratosphere along with the mining shares.
- Here’s the key factor pushing oil prices to $35 a barrel
After enjoying a stellar run-up, crude futures are headed south again, treading into bear-market territory. However, the fundamentals of supply and demand may not be the key reason behind the recent bout of weakness in crude futures. U.S. benchmark oil, West Texas Intermediate trading on the New York Mercantile Exchange CLU6, -0.12% has lost nearly 15% of its value so far in July, as of Thursday. Back on June 8, WTI had nearly doubled its value closing at a 2016 high of $51.23 a barrel after reaching a low of $26.21 on Feb. 11. On Friday, crude slipped more than 20% below its June peak, below $41 a barrel, officially pushing it into a fresh bear market—defined as a decline of at least 20% from a recent high. What a difference seven weeks can make!
- Is Bank of Japan signaling that it’s running out of ammo
The Bank of Japan on Friday disappointed investors by offering up a much smaller-than-expected round of additional stimulus while also announcing a review of its current policy measures, leading some observers to wonder whether policy makers fear they are running out of tools to stoke the Japanese economy. “The message the BOJ is sending is not so much ‘whatever it takes’ as ‘monetary policy’s pretty much played out,’” said Kit Juckes, global macro strategist at Société Générale, in a note. The Bank of Japan under Gov. Haruhiko Kuroda has been an aggressive buyers of bonds and equities. Its decision to implement negative rates earlier this year caught investors off-guard, but the move was seen backfiring as the Japanese yen failed to weaken. The market’s reaction to those earlier moves began to prompt concern that aggressive easing efforts by global central banks were losing their effectiveness or potentially becoming counterproductive.
- Get ready for America’s new $29 trillion debt
Only when a crisis erupts does the society demand action. And of course, at that point, it’s too late. Such was the case of France in the late 1700s– a situation so desperate that the finance minister resorted to all-out lies in order to conceal their true condition. Most of the West is in this position today– summed up by Jean-Claude Junker’s (former President of the European Council) explanation of the Greek debt crisis in 2011: “When it gets serious, you have to lie.” Over in the United States, the Congressional Budget Office (CBO) recently published its own projections for America’s grim public finances. Bear in mind that US debt is already $19+ trillion and climbing. The CBO sees at least another $10 trillion in debt in the coming years, and projects that the US budget deficit will increase every single year. The evidence is already so clear. Military retirement spending rose by 8.7% last year. Medicare costs were up 10%. Certain government employee benefit programs rose by 17%. Overall mandatory outlays rose on average by 6.6%, three times faster than US GDP. So essentially the US government’s spending growth is far outpacing US economic growth. It doesn’t take a rocket scientist to see how dangerous this is.
- Peter Schiff: Expect An Economic Crisis Infinitely Worse Than 2008
Want to understand why people MUST begin to prepare for the worst economic crash in global history. Here it is as plainly as it can be put, with tons of supporting links at the bottom. In the following video, AMTV interviews Peter Schiff after yesterday's Fed meeting, and as an enormous fan of Peter’s for over a decade, as well as a client of his, I can’t help but laugh when only :18 into the interview Peter gives his first eye roll. Frankly, I don’t know how the man keeps his eyes in their sockets without them rolling right out. He’s always swimming upstream against the mainstream media outlets, and it has to be tiring.
- Hillary Won’t Win Presidency, DNC and Clinton Exposed for Rigging Democratic Primary, Economic Update and Global War Heating Up
It’s now been totally exposed the Democratic National Committee (DNC) rigged the primary in favor of Hillary Clinton. This is a turning point that says no way Clinton can be elected without nearly half the Democrat voters that supported Bernie Sanders. A WikiLeaks email dump at the beginning of the Democratic National Convention in Philadelphia showed clear evidence the DNC committed fraud and collusion against all candidates and rigged the Primary in favor of Hillary Clinton. Outraged and disenfranchised Sanders voters are protesting by the thousands, and yet, the mainstream media, by and large, will not cover the protests taking place outside the DNC convention. These are mostly young people who voted or worked diligently for the Sander’s campaign. Greg Hunter says Clinton will get only a small percentage of Sander’s voters, and the rest will vote for Donald Trump, another candidate or simply say home. Hillary is toast and will not become the President of the United States.
- Central Bankers are Driving Us All Into the Dirt – The Great Unwind has started.
One of the major triggers I’ve been warning about is already happening, even before we understand and/or admit that we are in a recession. Global corporate debt now sits at a record $51 trillion and is poised to hit $75 trillion by 2020 – just four years away. If interest rates rise and the economy slows, it will be very hard for companies to roll these bonds over – and then we get what S&P Global Ratings is calling “Crexit.” The bond markets dry up for corporate lending, especially higher-yield junk bonds. This would set off a chain of corporate defaults and bankruptcies that would cause central banks to start to lose control of the economy, as they did in 2008 forward.
- Another Retailer Leveraged Buyout Bites the Dust
Claire Stores – “the latest trends in jewelry & accessories for girls, teens, & tweens” with “must-have hair accessories, stylish beauty products, & more” as it says – has decided to start twisting the arms of its creditors, and has hired law firm Morgan, Lewis & Bockius to help in those endeavors, “sources” told Reuters. Creditors can see the big gun pointed at their heads: if they don’t agree to a debt restructuring deal entailing a big haircut for them, the company will file for bankruptcy, which might entail an even bigger haircut. To cut costs, the company already shuttered 150 stores over the past four quarters, and is now down to 2,831 stores in the US and Europe, as per its earnings report for the quarter ended April 30. Revenues dropped 6.4% to $300 million, generating a net loss of $38.8 million. It’s buckling under $2.35 billion in long-term debt. Interest expense amounted to $55.1 million, or 18.3% of revenues! As so often in these basket cases, there’s a private equity angle to it.
- The American Dream Plunges to Record Low – Consequence of turning “home” into a financialized “asset class.”
Something happened on the way when the concept of “home” transmogrified to a financialized “asset class” whose price the government, the Fed, and the industry conspire to inflate into the blue sky, no matter what the consequences. And here are the consequences. The Census Bureau, which has been tracking homeownership rates in its data series going back to 1965 on a non-seasonally adjusted basis, just reported that in the second quarter 2016, the homeownership rate dropped to 62.9%, the lowest point on record. It matches the low point in Q1 and Q2 of 1965 when the data series began. At no time in between did it ever fall this low. And it was down half a percentage point from 63.4% a year ago.
- US Government Mucks up Money-Laundering in Real Estate, Puts Luxury Housing Bubbles at Risk
Manhattan and Miami already get mauled. Now expanding to San Francisco, Silicon Valley, Southern California, even Texas! Cash sales of homes – mostly the domain of foreign and affluent buyers – fell to 32% of total home sales in April, down 2.8 percentage points from a year ago, according to a new report from CoreLogic. For the first four months, cash sales dropped to 34%, the lowest since 2008. In Florida, the number one destination for foreign homebuyers, cash sales accounted for 46% of sales, and in New York, for 44%, both decreasing as well. The “strong dollar” and “global uncertainty” were blamed. In Manhattan and Miami, the luxury condo markets are already getting mauled. For example, we reported that in Manhattan, condo prices plunged 14% in just three months.
- Bye Bye Middle Class: The Rate Of Homeownership In The United States Has Hit The Lowest Level Ever
The percentage of Americans that own a home has fallen to the lowest level ever recorded. During the second quarter of 2016, the non-seasonally adjusted homeownership rate fell to just 62.9 percent, which was exactly where it was at when the U.S. Census began publishing this measurement back in 1965. This is not what a “recovery” looks like. All throughout the Obama years, the percentage of Americans that own a home has gotten smaller and smaller and smaller. The reason for this, of course, is that the middle class in America is dying. Last year, we learned that middle class Americans now make up a minority of the population for the first time ever. In order to have a high rate of homeownership, you need a thriving middle class, and you can’t have a thriving middle class without good paying middle class jobs. This is why I write about the evisceration of the middle class so extensively, because the U.S. economy is systematically being hollowed out and most Americans don’t understand what is happening.
- ExxonMobil Tumbles To 2-Month Lows After Earnings Miss Worst Analyst Expectation
But, but, but the dividend yield, the oil recovery? ExxonMobil is down almost 3% in the pre-market to 2-month lows as it misses earnings expectations drastically (+41c vs 64c exp.. below the lowest expectation of +55c). Production levels also missed expectations as it appears the oil glut has trickled down to motor fuels, dragging refinery margins notably lower.
- Why Social Fragmentation Suits The Powers That Be
The Elites have successfully revolted against the political and economic constraints on their wealth and power. Ours is an Age of Fracture (the 2011 book by Daniel Rodgers) in which “earlier notions of history and society that stressed solidity, collective institutions, and social circumstances gave way to a more individualized human nature that emphasized choice, agency, performance, and desire.” A society that is fragmenting into cultural groups that are themselves fracturing into smaller units of temporary and highly contingent solidarity is ideal for Elites bent on maintaining political and financial control. A society that has fragmented into a media-fed cultural war of hot-button identity-gender-religious politics is a society that is incapable of resisting concentrations of power and wealth in the hands of the few at the expense of the many.
- Oil Surges After OPEC Production Hits Record High: Here's Why
Now that the narrative of rising gasoline demand and a “strong summer driving season” is finally over, courtesy of gasoline stocks that just refuse to drop and a glut in PADD1 that has never been greater defenders of the “bull” crude oil thesis are stumped. “Doubts are rife as to whether the oil supply imbalance is indeed slowly drawing to an end,” Stephen Brennock of oil brokerage PVM, said. So with no fallback “story” both WTI and Brent are down 20% since their last peak in June, as another bear market for oil has arrived.
- Peter Schiff Slams The Fed's ‘Loud Talk, No Stick' Policy
Theodore Roosevelt’s famous mantra “speak softly and carry a big stick” suggested that the United States should seek to avoid creating controversies and expectations through loose or rash pronouncements, but be prepared to act decisively, with the most powerful weaponry, when the time came. More than a century later, the Federal Reserve has stood Teddy’s maxim on its head. As far as Janet Yellen and her colleagues at the Fed are concerned, the Fed should speak as loudly, frequently, and as circularly as possible to conceal that they are holding no stick whatsoever. Roosevelt's “stick” was America’s military might, which in his day largely boiled down to the U.S. Navy, which he had enlarged and modernized. To demonstrate to a potential adversary that he was prepared to use these weapons, Roosevelt sent the fleet around the world in a massive show of force. However, he took care to couch the expedition in soothing rhetoric. He even ordered the battleships to be painted white to create the impression that they were angels of mercy rather than instruments of power. The combination proved effective. America’s global influence increased dramatically during his presidency even though few shots were fired.
- Trump Unloads On Hillary Speech Attacking His “Dark” Vision For America
In her climactic, nomination acceptance speech concluding the Democratic National Convention, as expected Hillary Clinton delivered remarks (which according to some were upstaged by previous speeches by Michelle Obama and the president) that focused on themes of “optimism” and “unity”, while ripping her challenger, Donald Trump, and emphasizing his “dark” vision of America. Much of Clinton’s address focused on the choice voters face between the former secretary of State and Trump, who Clinton said threatened to take the country from “morning in America to midnight in America.” “Bonds of trust and respect are fraying,” she said. “We have to decide whether we will all work together so we can all rise together.”
- The Fed Is Preparing For Negative Rates – Here's The Sign Everyone Missed
I think it’s possible that the Fed will push rates below zero when the next recession arrives. In that regard, something important happened recently. And not many people noticed. I’ll do a quick review to explain. In Congressional testimony last February, a member of Congress asked Janet Yellen if the Fed had legal authority to use negative interest rates. Her answer was this: “In the spirit of prudent planning we always try to look at what options we would have available to us, either if we needed to tighten policy more rapidly than we expect or the opposite. So we would take a look at [negative rates]. The legal issues I'm not prepared to tell you have been thoroughly examined at this point. I am not aware of anything that would prevent [the Fed from taking interest rates into negative territory]. But I am saying we have not fully investigated the legal issues.” So as of then, Yellen had no firm answer either way. A few weeks later, she sent a letter to Rep. Brad Sherman (D-CA). He had asked what the Fed intended to do in the next recession and whether it had authority to implement negative rates.
- Why the EU stress test is a farce and the Eurozone is set to IMPLODE, writes Paolo Barnard
“A horse! a horse! my kingdom for a horse!”. After the results of the European banks’ stress test I want to cry: “A Brexit passport! a Brexit passport! My house for a Brexit passport!” And I’m not joking. The much expected results of the 2016 EBA’s stress test of the main EU lenders is a farce, and it’s not funny, because the lives of millions could be jeopardised by it. The desperate EU regulators rigged the test to the point of ridicule: first it did not examine lenders from Greece or Portugal, where banks’ balance sheets are akin to a warzone. Second, the test lacked a pass/fail mark. Then EU regulators pretended that the catastrophic NIRP factor (negative interest rates set mainly by the ECB) didn’t exist.
- Monte Paschi Fails European “Stress Test” Meant To Restore Confidence In Europe's Struggling Banks
Moments ago, the European Banking Authority published the 2016 bank stress test results, whose purpose – as every other year – is to inspire confidence in Europe's struggling banks; it differs from a market-based assessment of bank stress – that particular “test” can be seen by observing the stock prices of such giant banks as Deutsche Bank and Credit Suisse, both of which recently hit all time lows. As previewed yesterday, Italy's 3rd largest, and most insolvent bank, Banca Monte di Siena was the worst performer in European regulators’ stress tests, and the only lender to have its capital wiped out in the exam. According to Bloomberg, Monte Paschi’s common equity tier 1 capital ratio, a key measure balance sheet strength, would to a negative 2.2% in an adverse economic scenario, the test revealed, which put lenders through a simulation of a severe recession over three years. Another Italian bank, UniCredit, would see its ratio fall to 7.1% , the second-worst result of the five Italian lenders being examined. Needless, to say, the test – as structured – was a farce from the beginning as it did not account for negative interest rates, something Europe has trillions of, nor did it test for Brexit. Finally, the test did not include any banks from Greece of Portugal, where virtually all banks are currently insolvent.
- Gundlach: “Sell Everything, Nothing Here Looks Good”
Two weeks ago, an already bearish Jeff Gundlach appeared to hit the “glass floor” of negative sentiment, and smash right through it. On July 13, the new bond king said that there is “big money” to be made on the “short side.” Gundlach added that he has been selectively betting against shares in the Standard & Poor's 500 index and continues to favor emerging market bonds over high-yield “junk” debt. Gundlach was just as skeptical about bonds, warning that the yield on the 10-year Treasury note at around 1.38% to 1.39% “is a terrible trade location. It is the worst trade location in the history of the 10-year Treasury.” His caution seemed prophetic: it was followed by the biggest two-day spike in 10Y yields in 5 years. However, just like Gross' infamous “Bund Spike” last May, the selling in TSYs now appears to be over, and following a series of lousy data reports yields are once again sliding.
- EU approves imports of genetically modified Monsanto soybeans
The European Commission has approved the import and processing of Monsanto’s Roundup Ready 2 Xtend soybeans, after debates over glyphosate herbicide’s safety delayed the introduction of genetically modified soybean variety for months. “Today the Commission authorized three GMOs for food/feed uses (soybean MON 87708 x MON 89788, soybean MON 87705 x MON 89788 and soybean FG 72), all of which have gone through a comprehensive authorization procedure, including a favorable scientific assessment by EFSA,” the European Commission said in a statement Friday.
- Chinese & Russian navies to hold drills in South China Sea in September
China and Russia will hold naval drills in the South China Sea in September, the Chinese Defense Ministry told a news conference on Thursday, adding they are designed to strengthen cooperation between the two countries and were not aimed at raising tensions. “This is a routine exercise between the two armed forces, aimed at strengthening the developing China-Russia strategic cooperative partnership,” China's Defense Ministry spokesman Yang Yujun told a news conference, as cited by Reuters. He also added that the exercise is “not directed against third parties.”
- IMF admits disastrous love affair with the euro, apologises for the immolation of Greece
The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. This is the lacerating verdict of the IMF’s top watchdog on the Fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions. It describes a “culture of complacency”, prone to “superficial and mechanistic” analysis, and traces a shocking break-down in the governance of the IMF, leaving it unclear who is ultimately in charge of this extremely powerful organisation.
- ‘Unprecedented': European govts sold $1.3bn in arms to Middle East, some ended up with ISIS – report
Governments of Central and Eastern European countries have been selling an “unprecedented” amount of weapons and ammunition to the Middle East in recent years, fueling armed conflicts in the troubled region, a new report claims. According to the findings by a team of reporters from the Balkan Investigative Reporting Network (BIRN) and the Organized Crime and Corruption Reporting Project (OCCRP), a group of European countries led by Croatia and the Czech Republic have been channeling their arms to the region since 2012. Since then, they have gained over US$1 billion from such sales, despite some of the weapons ending up in the hands of Islamic State (IS, formerly ISIS/ISIL) terrorists, according to the report, which was published earlier on Wednesday.
- Paul Craig Roberts – We Are About To Witness The End Of The World As We Know It
Former U.S. Treasury Secretary, Dr. Paul Craig Roberts, just warned that we are about to witness the end of the world as we know it. Dr. Paul Craig Roberts: “World War II resulted in Europe being conquered, not by Berlin but by Washington. The conquest was certain but not all at once. Washington’s conquest of Europe resulted from the Marshall Plan, from fears of Stalin’s Red Army that caused Europe to rely on Washington’s protection and to subordinate Europe’s militaries to Washington in NATO, from the replacement of the British pound as world reserve currency with the US dollar, and from the long process of the subordination of the sovereignty of individual European countries to the European Union, a CIA initiative implemented by Washington in order to control all of Europe by controlling only one unaccountable government. With few exceptions, principally the UK, membership in the EU also meant loss of financial independence. As only the European Central Bank, an EU institution, can create euros, those countries so foolish as to accept the euro as their currency no longer have the power to create their own money in order to finance budget deficits.
- Hemlock Moment Coming for Financial Markets-Gregory Mannarino
Trader/analyst Gregory Mannarino says don’t be fooled by a stock market near all-time highs. Mannarino explains, “The reason we took out the last all-time high is the speculation that the world central banks are going to continue to stimulate and suppress interest rates and go deeper into negative territory. This is what caused this recent run-up here, but what you are not going to hear on mainstream media, and this is huge, this run-up we have seen, record high, record high, record high is on no volume. What does that mean? There is no conviction to this. We have seen this before at every single market top. . . . This can only go on so long. These stock buyback programs, these stimulus programs, at some point the medicine is going to turn to poison. It can only go so far. . . . It’s going to be a hemlock moment. To put a timeline on this is almost impossible because world central banks have become very resourceful. Nobody would have ever imagined the central banks would have done what they have done for so long. They have flipped the system upside down. They are so desperate now to keep the market propped up.”
- BREXIT BOOM: UK business deals up by 800 PER CENT in month following EU Referendum
BRITISH companies have raked in tens of billions in new deals, with an eight-fold increase in the space of one month, in a business bonanza since the UK voted to leave the European Union. Some 60 deals have been done in the month since Brexit, worth £26.3billion. This is in contrast to deals done in the month before the EU referendum which were worth just £3.2bn in total. One of the biggest deals has been the acquisition of chip designer ARM Holdings by Japan’s SoftBank for £24.4bn – in a clear signal that major countries remain committed to doing business with Britain. The news has been welcomed by the government, with Prime Minister Theresa May declaring Britain “open for business.”
- Corrupt Or Just Stupid? Markets Hand Corporations An Unlimited Credit Card
In the sound money community it’s generally understood that abandoning the last vestige of the gold standard in 1971 gave major countries effectively-unlimited credit cards – which corrupted them irredeemably. Now – with government bonds yielding either next to or less than nothing – that corruption has begun to spread to corporations, whose bonds are being snapped up by yield-deprived investors.
- Still Waiting for a Precious Metals “Correction”? Get Off the Dime and Buy Some Silver Ones…
Over time, charts for a bull market tend to print higher highs and higher lows on the way to the primary top. Two steps forward, one step back, creating a visual stair-step effect. This chart “picture” has been in evidence for gold, silver, and the miners since January. So far, waiting hasn't been a good strategy. Yes, there were a couple of times in April, and a month later in late May where you might have been able to buy and save some money. But things can get in the way of that plan. And for a number of people I've talked to, things apparently did. The first obstacle is Timing: Away from your computer, on a trip, sick, or depressed? Whoops, you missed the “correction.”
- Why A “Dollar” Should Only Be A Name For A Unit Of Gold
Prior to 1933, the name “dollar” was used to refer to a unit of gold that had a weight of 23.22 grains. Since there are 480 grains in one ounce, this means that the name dollar also stood for 0.048 ounce of gold. This in turn, means that one ounce of gold referred to $20.67. Now, $20.67 is not the price of one ounce of gold in terms of dollars as popular thinking has it, for there is no such entity as a dollar. Dollar is just a name for 0.048 ounce of gold. On this Rothbard wrote: “No one prints dollars on the purely free market because there are, in fact, no dollars; there are only commodities, such as wheat, cars, and gold.” Likewise, the names of other currencies stood for a fixed amount of gold. The habit of regarding these names as a separate entity from gold emerged with the enforcement of the paper standard. Over time, as paper money assumed a life of its own, it became acceptable to set the price of gold in terms of dollars, francs, pounds, etc. (the absurdity of all this reached new heights with the introduction of the floating currency system). In a free market, currencies do not float against each other. They are exchanged in accordance with a fixed definition.
- Goldman Raises September Rate Hike Odds To 30%, Sees 70% Probability Of Another Hike in 2016
In the absence of Jon Hilsenrath, whose “post-Fed-Mortem” is strangely missing today from the WSJ (although we haven't checked the ultra exclusive WSJ Pro), here is Goldman's assessment, which considering who makes NY Fed policy, is even more appropriate. According to Goldman, after parsing the Fed statement, September odds have risen to 30% (from 25%), while December incremental rate odds are 40%, “implying a roughly 70% probability of at least one rate increase this year.”
- Oil Stocks Still Treading 30-Year “Line In The Sand”
A key index of oil stocks continues to hold above its reclaimed 30-year old Up trendline; however, it’s been unable to mount any bounce off of it. A lot of our very recent commentary has focused on the historically tight trading ranges in the major averages over the past few weeks. Whether they are digesting recent breakouts or merely reflecting the market’s “dog days of summer”, there has been precious little movement among the indices. One area that has taken that tight range to an extreme is the oil & gas sector. Since displaying a bit of a pop in mid-April, the sector has essentially gone nowhere for the past 3 months. Specifically, as measured by the NYSE ARCA Oil & Gas Index, or XOI, the sector has traded within a 9% range over the past 13 weeks (i.e., a full quarter). If that doesn’t seem that tight, consider that in the previous 3 quarters, the XOI averaged nearly a 7% range per week. Now besides the dearth of action in the XOI, the other interesting aspect of the recent range is in its location. We have pointed out a few times (most recently in April) that the index’s lifetime Up trendline, stemming back to the lows in 1986, was still seemingly being respected by prices. Furthermore, this 30-year old trendline (which connects the lows in 2003 and late 2015) has appeared to delineate the safe periods in the sector from the “risk off” ones during 2016.
- Durable Goods Orders Crash Most In 2 Years – Longest Non-Recessionary Streak Of Declines In US History
Despite the longest winning streak for US macro data in US history, Durable Goods Orders collapsed in June. The 4% MoM plunge (vs -1.4% exp) is the biggest drop since Aug 2014. This represents a 6.6% YoY crash – the biggest drop since July 2015.
- A Fully Automated Stock Market Blow-Off?
About one month ago we read that risk parity and volatility targeting funds had record exposure to US equities. It seems unlikely that this has changed – what is likely though is that the exposure of CTAs has in the meantime increased as well, as the recent breakout in the SPX and the Dow Jones Industrial Average to new highs should be delivering the required technical signals. All these strategies are more or less automated (they may be tweaked from time to time, but essentially they are simply quantitative and/or technical strategies relying on inter-market correlations, volatility measures, and/or momentum). Active fund managers by contrast are said to be skeptical of the market rally, but it should be stressed that the evidence for this is purely anecdotal. The vast bulk of trading is nowadays automated. We recently read that in 2015, 23% of the entire year’s equity trading volume was accounted for by the top 100 ETFs (h/t to Brent Johnson of Santiago Capital). These are passive investments – in other words, they are brainless.
- Unsound Money Has Destroyed the Middle Class
When you start thinking about what money is and how it works, you face isolation, shunning, and possible incarceration. The subject is so slippery – like a bead of mercury on a granite countertop – you become frustrated… and then… maniacal. You begin talking to yourself, because no one else will listen to you. If you are not careful, you may be locked up among the criminally insane. We’ve been thinking about money for the last couple of months. It has become our favorite subject. That is why people edge away from us at parties. Our family finds novel ways to change the subject. “Whoa… sorry to interrupt, Dad… but isn’t that a flying saucer?” Undaunted, we press on. We think we’re onto something important. We have come so far; we might as well go the whole way.
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