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Off the Cuff: The Shift From Paper Assets To Real Ones Is On

At least, among the top 1%
Thursday, November 20, 2014, 9:29 PM

In this week's Off the Cuff podcast, Chris and John Rubino discuss:

  • Mass-delusional Markets
    • Investors are mistaking the destruction of our fiat system as prosperity
  • The Shift From Paper To Real Assets Is On
    • At least, among the top 1%
  • Generational War
    • Coming to a stagnating economy near you
  • It All Comes Back To Energy
    • And there's still no magic bullet in sight
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Keep Your Eyes On The Prize

It’s always and ever about energy
Wednesday, November 19, 2014, 10:53 PM

At the essential center of the framework of the Crash Course is the almost insultingly simple idea that endless growth on a finite planet is an impossibility.

It is so simple it could be worked out by a clever 4 year-old and yet it must not be so simple because the main narrative of every economy in every corner of the globe rests on the idea of endless, infinite growth. » Read more

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Farmland LP

Special Farmland Update

Archived webinar available soon
Monday, November 17, 2014, 9:34 PM

Chris recently hosted a webinar for investing in sustainable farmland. An archived footage of the webinar is provided here. » Read more

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Off the Cuff: 2015 Will See A Return To Global Recession

The unsustainable sugar-high of the past 5 years is ending
Thursday, November 13, 2014, 9:14 PM

In this week's Off the Cuff podcast, Chris and Charles Hugh Smith discuss:

  • Bankers Behaving Badly
    • Fraud should be expected when there's no punishment for it
  • Rudderless Leadership
    • It's no wonder voters are 'throwing the bums out'
  • The Japan Time-Bomb
    • Guaranteed to blow up the global economy. But when?
  • 2015: The Year Of Return To Global Recession
    • Charles and Chris make the call
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Why The Strengthening Dollar Is A Sign Of The Next Global Crisis

It causes the weaker parts of the system to fail faster
Wednesday, November 12, 2014, 10:21 AM

Executive Summary

  • Understanding the two different ways money flows into the US dollar
  • How currency crises elsewhere can send the dollar skyrocketing
  • Why yen, yuan and euro printing are not the same as dollar printing
  • How these accelerating money flows are creating the next global crisis

If you have not yet read The Consequences of a Strengthening US Dollar available free to all readers, please click here to read it first.

In Part 1, we surveyed the key dynamic that is playing out across the globe: the problems revealed by the Global Financial Meltdown of 2008-2009 were not addressed; they were in effect shifted into the foreign exchange (FX) market. Now the risk bubble is in the FX market.

The complexity of the feedbacks into the FX market is nothing short of mind-boggling, and rather than attempt a comprehensive survey, I’m highlighting the dynamics that hold the greatest risks of triggering instability, not just in finance but in geopolitics, trade and commodities.

Two Kinds of Dollar Flows

Let’s start by differentiating between the two kinds of money flows into the dollar:

  1. Money converted from periphery currencies into dollars to pay back loans denominated in dollars
     
  2. Money flowing out of periphery economies and into dollar-denominated assets such as stocks, bonds, real estate and dollar-denominated bank accounts.

Broadly speaking, both of these capital flows are “risk-off,” but they have different effects.

In the first case, money borrowed on the cheap in dollars and invested in high-yield periphery bonds earned a tidy profit as the dollar weakened. The trader picked up a double profit: the arbitrage on the interest rates (borrow at .25% and earn 4+%) and the FX profit from the rise of the periphery currency and the decline of the dollar.

This currency-arbitrage profit reverses when the dollar starts rising, and it quickly wipes out the entire interest-rate profit as it leaps higher.

The carry trade is “risk-on” because money is being borrowed to speculate in interest-rate arbitrage. Deleveraging this trade is “risk-off” because the only way to stem the potential losses as the dollar strengthens is to... » Read more

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Europe's Next Energy Crisis Is Now Assured

China takes more & more of the gas that once went to Europe
Monday, November 10, 2014, 11:25 PM

Today, Russia inked a second blockbuster deal with China that will starve Europe for natural gas in just a few short years. It's now increasingly clear that 2018 will mark the beginning of the end for any hopes Europe had of returning to robust economic growth.

It was by far the biggest news of the day. While it did make headlines, you might have missed it because not much was made of the affair beyond the announcement.  The story came and went as if Russia has oodles of natural gas (NG) to send to China.

It doesn't. And the supplies it has now contracted to send to China will be pulled from supplies that currently go to Europe. » Read more

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John Hussman Podcast - Part 2

Market bubbles, gold & oil
Saturday, November 8, 2014, 4:03 PM

The second part of our interview with John Hussman is available here for Peak Prosperity's enrolled members.

If you've not yet listened to Part 1, click here to do so.

In Part 2 of the interview, John provides more specificity around his valuation methodology, and how he sees things playing out from here in the financial markets. 

To access Part 2 of this podcast, simply click the yellow button to enroll. » Read more

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Off the Cuff: The Importance Of Global Capital Flows

More responsible for prices than any other current factor
Thursday, November 6, 2014, 9:56 PM

In this week's Off the Cuff podcast, Chris and Brian Pretti discuss:

  • Japan's Halloween Massacre
    • The most glaring sign yet that the central banks are desperate
  • Capital Flows Are King Right Now
    • The reason we have record-high markets despite crummy fundamentals
  • Musical Chairs
    • Every (market) player has fun until the music stops
  • Throwing The Bums Out
    • As our lifestyles contract, we vote out the incumbents
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What Will Happen When Japan Breaks

Mapping the contagion risk to world markets
Thursday, November 6, 2014, 8:36 AM

Executive Summary

  • The data that proves Japan is a ticking time bomb
  • Why the yen may still fall a lot further from here
  • How Japan's contagion can threaten world markets (and yes, the US)
  • Why the contagion is now underway, and what you should do about it

If you have not yet read Central Planners Are In A State of Panic available free to all readers, please click here to read it first.

Japan, By The Numbers

I completely understand why the Japanese authorities are freaking out and taking enormous risks.  It's because they have no good choices left.  More fundamentally (and worse) they are in charge of a system that is destined to fail.

Exponential money systems have to eventually fail because all paper money is just a marker for real wealth, it is not real wealth itself, and therefore ever-increasing exponential paper claims being stacked up  against a world of real wealth that is growing much less quickly (and someday reversing entirely) is a mathematical formula for a monetary accident.

But it's quite bizarre that Japan, of all places, cannot see through to this math predicament given their very publicly and often discussed demographic decline.

Having peaked at 128 million in 2005, Japan now has 127 million inhabitants and is on its way to 90 million by 2050, and 45 million by ~2100.

(Source)

This means that.. » Read more

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The Turn May Be At Hand

Possibly within the next 2 months
Monday, November 3, 2014, 11:35 PM

What this world desperately needs is a long term plan to deal with its shrinking net-energy-per-capita ratio. This metric will someday turn into a complete sinking negative that will, in turn, utterly ruin all of our capital markets. » Read more