Insider en What Happens Next Will Be Determined By One Thing: Capital Flows ]]><h1>Executive Summary</h1> <ul> <li style="line-height: 19.5px;">Why global capital flows will determine everything</li> <li style="line-height: 19.5px;">What impact euphoria and fear wil have on liquidation and valuation</li> <li style="line-height: 19.5px;">The importance of debt denominated in other currencies</li> <li style="line-height: 19.5px;">What&#39;s likely as capital shifts from Risk-On to Risk-Off assets</li> </ul> <blockquote><p><em>If you have not yet read <a href="" target="_blank">Part 1: Here&#39;s Why The Markets Have Suddenly Become So Turbulent </a>available free to all readers, please <a href="" target="_blank"><strong>click here</strong></a> to read it first.</em></p> </blockquote> <p>In <a href="" target="_blank">Part 1</a>, we listed five interlocking trends that will severely limit the scale and effectiveness of official responses to the next recession. In effect, the world will not be able to &ldquo;borrow and spend&rdquo; its way out of recession.</p> <p>In Part 2, we&rsquo;ll examine the single most important dynamic in any asset value: capital flows.</p> <h2>The Tidal Forces of Capital</h2> <p>Let&rsquo;s start with the most basic building blocks of supply and demand.</p> <p>Capital flowing into an assets class (buying) in excess of capital flowing out (selling) increases demand and pushes prices up.</p> <p>If supply increases even faster than demand, prices may decline despite rising demand.</p> <p>If capital flows out (selling) in excess of inflows (buying), prices will decline.</p> <p class="rteindent1"><strong><em>Prices are set on the margin.</em></strong>&nbsp; If 5 homes out of a neighborhood of 100 homes sell for 25% below the previous price level, the valuation of the other 95 homes also drops 25%.</p> <p class="rteindent1"><em><strong>Risk on = </strong>seeking asset appreciation</em> and taking on more risk in exchange for higher yields.</p> <p class="rteindent1"><em><strong>Risk off =</strong> seeking capital preservation</em> and accepting lower yields in exchange for reduced risk.</p> <p>Assets have two ways to appreciate/depreciate: the nominal price, and the underlying currency the asset is priced in.</p> <p>If a Mongolian bond yields 7%, the owner earned a nominal 7% on the capital. But if the currency the bond is denominated in dropped 20%, the owner suffered a 13% loss when the investment is priced in other currencies.</p> <p>The consequences of capital flows can be counter-intuitive.</p> <p>For example, if the Federal Reserve creates $1 trillion out of thin air, our initial expectation would be...</p> <p><a href="" target="_blank">read more</a></p> Insider capital cash debt stocks volatility Fri, 28 Aug 2015 18:28:38 +0000 charleshughsmith 94161 at Off The Cuff: A Financial Adviser's View Of The Recent Market Turbulence ]]><p>In this week&#39;s Off The Cuff podcast, Chris and New Harbor Financial discuss the recent gyrations of the market.</p> <ul> <li style="line-height: 19.5px;">Are we witnessing a secular trend reversal?</li> <li style="line-height: 19.5px;">What&#39;s likely to happen next?</li> <li style="line-height: 19.5px;">How can prudent investors position themselves now?</li> <li style="line-height: 19.5px;">Where can shelter best be taken?</li> <li style="line-height: 19.5px;">Is it time for risk-seekers to place bets?</li> </ul> <p>All these questions and more are addressed in this podcast. Needless to say, this is one of the most challenging times to protect capital in living memory.&nbsp;</p> <p><a href="" target="_blank">read more</a></p> Insider cash hedging Markets New Harbor Financial Off The Cuff options stocks volatility Fri, 28 Aug 2015 06:26:33 +0000 Adam Taggart 94145 at Is Mexico The Next Greece? ]]><h1>Executive Summary</h1> <ul> <li style="line-height: 19.5px;">The biggest Mexico risk factors investors need to watch <ul> <li style="line-height: 19.5px;">Remittance risk</li> <li style="line-height: 19.5px;">Currency risk</li> <li style="line-height: 19.5px;">Capital flight risk</li> <li style="line-height: 19.5px;">Oil price risk</li> <li style="line-height: 19.5px;">Debt risk</li> </ul> </li> <li style="line-height: 19.5px;">What Mexico must prioritize going forward to secure its future</li> </ul> <blockquote><p><em>If you have not yet read <a href="" target="_blank">Part 1: Trouble South Of The Border </a>available free to all readers, please <a href="" target="_blank"><strong>click here</strong></a> to read it first.</em></p> </blockquote> <p>Republican presidential candidate, Donald Trump has nabbed many a headline with his disparaging remarks on how Mexico is sending &lsquo;bad&rsquo; Mexicans over the border to ostensibly steal US jobs and sell drugs. He has called US leaders &lsquo;stupid&rsquo; for letting this happen. The truth of the US-Mexico economic relationship is entirely different.</p> <p>According to Pew Research, between 2005 and 2010, 1.4 million immigrants moved <strong><em>back</em></strong> to Mexico from the US, 90 percent of them voluntarily. &nbsp;The total amount of 11.3 million unauthorized immigrants to the US has remained stable, not increased, over the past five years, having risen from about 3.5 million in 1990 to a peak of 12.2 million in 2007. The figure dropped between 2007-09, mainly due to a decrease in immigration <strong><em>from Mexico</em></strong>. Since 2009, an average of about 350,000 new unauthorized immigrants have entered the US annually, of which less than a third are from Mexico, compared to one half before the financial crisis of 2008. (<a href="" target="_blank">Source</a>)</p> <p>There are other misunderstandings about the economic and financial relationship between the US and Mexico that transcend raising constituent anger about faux population movements. There is the matter of...</p> <p><a href="" target="_blank">read more</a></p> Insider debt mexico Nomi Prins Thu, 27 Aug 2015 04:02:07 +0000 Nomi Prins 94049 at What The Heck Just Happened?!? ]]><p>Okay... time to take a deep breath.</p> <p>Today was an historic market day.&nbsp; First for the computer driven plunge that was seemingly unstoppable, and then for the heroic rescue that at one point brought the whole mess back to green (Nasdaq) or close to it (S&amp;P and Dow).</p> <p><a href="" target="_blank">read more</a></p> Insider banking system Chris Martenson crash financial sector Markets stock market stocks Tue, 25 Aug 2015 04:37:42 +0000 cmartenson 94101 at Prepare Now! ]]><h1>Executive Summary</h1> <ul> <li style="line-height: 19.5px;">The 8 defensive actions I&#39;ve taken in the past 6 weeks</li> <li style="line-height: 19.5px;">The 2 lists you should have prepared in case things unravel from here</li> <li style="line-height: 19.5px;">How to hedge against a market correction</li> <li style="line-height: 19.5px;">In terms of preparations, it&#39;s much better to be a month or two early than a day late</li> </ul> <blockquote><p><em>If you have not yet read <a href="" target="_blank">Part 1: Making Sense Of The Sudden Market Plunge&nbsp;</a>available free to all readers, please <a href="" target="_blank"><strong>click here</strong></a> to read it first.</em></p> </blockquote> <blockquote><p class="rtecenter" style="margin-left: 0.5in;"><strong>Nothing forces us to know<br /> What we do not want to know<br /> Except pain.</strong></p> <p class="rtecenter" style="margin-left: 0.5in;"><em>~&nbsp; Aeschylus</em></p> </blockquote> <p>My personal standard of issuing an <strong>Alert</strong> is that I have to come across a piece of information that causes me to personally take some sort of action.&nbsp; While I don&rsquo;t have any particular piece of news &ndash; rather I have the assortment of data points listed in Part 1 of this report plus some that did not make it in &ndash; I am finding myself increasing my personal preparations.&nbsp;</p> <p>I am being extra cautious these days, weary of sending out yet another report to &lsquo;be cautious, and prepared&rsquo; only to have the &ldquo;&rdquo;markets&rdquo;&rdquo; rocket back up &nbsp;a few days later for no reason and on no news.</p> <p>Further, I take no joy in...</p> <p><a href="" target="_blank">read more</a></p> Insider resilience Sat, 22 Aug 2015 02:09:59 +0000 cmartenson 94052 at Mauldin Makes A Very Basic Error on Shale Oil ]]><p>There&rsquo;s really nothing much more important than knowing where we are in the oil story&hellip;but if you follow the&nbsp;hypesters&nbsp;from Wall Street or the technology lovers, you&#39;re likely to be misled.&nbsp; A particularly wrong piece of analysis was recently released by John Mauldin, who has both bought into the hype and loves technology.</p> <p>He even singled out our friend James Howard&nbsp;Kunstler&nbsp;for being wrong, yet then goes on to be spectacularly wrong himself.</p> <p><a href="" target="_blank">read more</a></p> Insider energy John Mauldin oil shale oil Mon, 17 Aug 2015 19:58:38 +0000 cmartenson 93987 at Off The Cuff: Currency Turmoil ]]><p>In this week&#39;s Off The Cuff podcast, Chris and John&nbsp;Rubino&nbsp;discuss:</p> <ul> <li style="line-height: 19.5px;">Currency Turmoil <ul> <li style="line-height: 19.5px;">What a&nbsp;yuan&nbsp;devaluation means</li> </ul> </li> <li style="line-height: 19.5px;">China&#39;s Credit Crisis <ul> <li style="line-height: 19.5px;">Why the growth of the past decade is over</li> </ul> </li> <li style="line-height: 19.5px;">Deflation Everywhere <ul> <li style="line-height: 19.5px;">The whole world economy is slowing</li> </ul> </li> <li style="line-height: 19.5px;">Lower prices ahead! <ul> <li style="line-height: 19.5px;">&quot;All that&#39;s missing is a stock market crash&quot;</li> </ul> </li> </ul> <p><a href="" target="_blank">read more</a></p> Insider China cuff John Rubino yuan Fri, 14 Aug 2015 04:17:46 +0000 Adam Taggart 93954 at Why China Is Extremely Vulnerable Now ]]><h1>Executive Summary</h1> <ul> <li style="line-height: 19.5px;">Too much of China&#39;s wealth is tied up in housing</li> <li style="line-height: 19.5px;">The Obvious Risk: Declines in demand will crush prices</li> <li style="line-height: 19.5px;">The Less Obvious Risk: housing in China is very illiquid</li> <li style="line-height: 19.5px;">China&#39;s extraordinary vulnerability</li> </ul> <blockquote><p><em>If you have not yet read <a href="" target="_blank">Part 1: Is China&rsquo;s &ldquo;Black Box&rdquo; Economy About to Come Apart?&nbsp;</a>available free to all readers, please <a href="" target="_blank"><strong>click here</strong></a> to read it first.</em></p> </blockquote> <p>In <a href="" target="_blank">Part 1</a>, we looked at the factors that render China&rsquo;s economy a black box: the inputs and outputs are visible, but the internal workings are often opaque. Though there is an abundance of data on China&rsquo;s housing market, it too is opaque in critical ways.</p> <p>Let&rsquo;s dig into what makes China&rsquo;s housing bubble so risky.</p> <h2>Chinese Household Wealth Is Mostly In Housing</h2> <p style="margin-left:.25in;">The percentage of household assets in real estate varies from source to source, but however it&rsquo;s sliced, China&rsquo;s household wealth is extraordinarily concentrated in housing.</p> <p class="rtecenter"><img alt="" src="" /></p> <p>This means any reduction in housing values will have an outsized impact on household wealth and the perception of wealth, i.e. <em>the wealth effect</em>: people who own assets that are rising feel wealthier and tend to spend more freely as a result. Those with assets that are declining in value tend to feel poorer, even if their day-to-day life in unaffected by the drop in wealth. This is the <em>negative wealth effect</em>.</p> <p>While middle-class households&rsquo; wealth is in their primary residence, upper-middle class households tend to put the family wealth in additional homes as investment properties. Anecdotally, it is not uncommon for middle-aged people with secure employment to own three flats: one for their residence and two as nest eggs. The practice of buying third homes was subject to restrictions a few years ago, but the resulting drop in housing demand scared authorities into...</p> <p><a href="" target="_blank">read more</a></p> Insider China housing wealth Fri, 07 Aug 2015 16:36:49 +0000 charleshughsmith 93862 at That Roaring Sound You Hear… ]]><p>Ok folks, the deflation we&rsquo;ve been tracking is gathering steam. We&#39;re now seeing new signs on a daily basis.</p> <p><a href="" target="_blank">read more</a></p> Insider China Chris Martenson copper deflation Insider oil Tue, 04 Aug 2015 01:05:59 +0000 cmartenson 93812 at Off The Cuff: The Fault-Ridden Fed ]]><p>In this week&#39;s Off The Cuff podcast, Chris and Mike &quot;Mish&quot;&nbsp;Shedlock&nbsp;discuss:</p> <ul> <li style="line-height: 19.5px;">The Fed&#39;s Faulty Fears <ul> <li style="line-height: 19.5px;">The people running it are concerned about the wrong things</li> </ul> </li> <li style="line-height: 19.5px;">Are We At A Market Top? <ul> <li style="line-height: 19.5px;">Hard to call it, but it sure feel so</li> </ul> </li> <li style="line-height: 19.5px;">Europe&#39;s Woes Are Worsening <ul> <li style="line-height: 19.5px;">Capital is fleeing, while debts grow</li> </ul> </li> <li style="line-height: 19.5px;">Our &quot;&quot;Markets&quot; <ul> <li style="line-height: 19.5px;">Nobody but central banks and bots buying these days</li> </ul> </li> </ul> <p><a href="" target="_blank">read more</a></p> Insider Europe Fed Greece Markets Mish Shedlock Off The Cuff savers Thu, 30 Jul 2015 22:25:05 +0000 Adam Taggart 93763 at