Insider http://www.peakprosperity.com/insider/newest?title=&uid=&created= en Off the Cuff: A Look Across the Pond http://www.peakprosperity.com/insider/87452/cuff-look-across-pond ]]><p>In this week&#39;s&nbsp;<em>Off the Cuff&nbsp;</em>podcast, Chris and&nbsp;Alasdair&nbsp;Macleod discuss:</p> <ul> <li style="line-height: 19.5px;">Independence For Scotland <ul> <li style="line-height: 19.5px;">The implications of this week&#39;s historic vote</li> </ul> </li> <li style="line-height: 19.5px;">Gold&#39;s Depressed Price <ul> <li style="line-height: 19.5px;">The establishment benefits from a low price</li> </ul> </li> <li style="line-height: 19.5px;">Europe vs Russia <ul> <li style="line-height: 19.5px;">Why the EU holds a losing hand</li> </ul> </li> <li style="line-height: 19.5px;">The Evils of Central Banking <ul> <li style="line-height: 19.5px;">Creating worse problems than they&#39;re supposed to solve</li> </ul> </li> </ul> <p><a href="http://www.peakprosperity.com/insider/87452/cuff-look-across-pond" target="_blank">read more</a></p> http://www.peakprosperity.com/insider/87452/cuff-look-across-pond#comments Insider Alasdair Macleod EU Europe Off The Cuff Russia Scotland Ukraine http://www.peakprosperity.com/crss/node/87452 Thu, 18 Sep 2014 15:46:09 +0000 Adam Taggart 87452 at http://www.peakprosperity.com Why the Dollar Could Strengthen - A Lot - From Here http://www.peakprosperity.com/insider/86924/why-dollar-could-strengthen-lot-here ]]><h1>Executive Summary</h1> <ul> <li style="line-height: 19.5px;">The critical role of interest rates and carry trades</li> <li style="line-height: 19.5px;">How capital flows across borders</li> <li style="line-height: 19.5px;">The growth in supply of dollars is slowing</li> <li style="line-height: 19.5px;">The rationale for the dollar strengthening from here by 50-100%</li> </ul> <blockquote><p><em>If you have not yet read Is <a href="http://www.peakprosperity.com/blog/86923/dollar-may-remain-strong-longer-we-think" target="_blank">Part 1: The Dollar May Remain Strong For Longer Than We Think</a> </em><em>available free to all readers, please <a href="http://www.peakprosperity.com/blog/86923/dollar-may-remain-strong-longer-we-think" target="_blank"><strong>click here</strong></a> to read it first.</em></p> </blockquote> <p>In <a href="http://www.peakprosperity.com/blog/86923/dollar-may-remain-strong-longer-we-think" target="_blank">Part 1</a>, we reviewed the key concepts that drive supply/demand (and thus the price/relative value) of the U.S. dollar. In Part 2, we&rsquo;ll cover the dynamics that could push the value of the USD vis-&agrave;-vis other currencies much higher in the years ahead.</p> <h2>Interest Rates, Bonds and Carry Trades</h2> <p>To understand the price of any currency&mdash;measured in other currencies, gold, oil, etc.&mdash;we look at a currency as a special kind of commodity, one that greases transactional trade of goods and services and also serves as a store of value. Like any commodity, its price relative to other commodities is determined by supply and demand.</p> <p>If demand is strong and supply is tight, the value will increase. This is the same for dollars, gold, oil, grain, bat guano, etc. The reverse is equally true: if demand slackens and supply balloons, the value will decline.</p> <p>To understand the supply and demand for currencies, we need to understand the role of interest rates, sovereign bonds and carry trades.</p> <p>The connection between interest rates and demand is self-explanatory: if interest rates paid at home are near-zero, and another nation&rsquo;s bonds are paying a higher yield, it makes sense to sell (or borrow) one&rsquo;s own currency and buy a bond denominated in another currency.</p> <p>This is the foundation of currency carry trades.&nbsp; PP.com&rsquo;s own Davefairtex recently offered an excellent explanation of how carry trades work on the Gold &amp; Silver Group forum:</p> <blockquote><p><em>I believe that QE causes inflation in other countries by dropping rates to 0% which encourages </em><strong><em>carry trades</em></strong><em>, whereby traders borrow USD for extremely low rates here in the US, and then send it overseas to find a yield.&nbsp; Cheap money in the US causes money to flow elsewhere, where rates are higher.</em></p> <p><em>Carry Trade For Dummies:</em></p> <p><em>Step 1) Borrow $1 billion US at LIBOR-1M rate; cost 0.16%.</em></p> <p><em>Step 2) Trade $1 billion US for 1.075 billion AUD.</em></p> <p><em>Step 3) Buy 1.075 billion 2-year AUD govt bonds; yield 2.52%</em></p> <p><em>Step 4) Collect $23 million USD/year for doing no work at all</em>.</p> </blockquote> <p>Carry trades work in both directions for the dollar...</p> <p><a href="http://www.peakprosperity.com/insider/86924/why-dollar-could-strengthen-lot-here" target="_blank">read more</a></p> http://www.peakprosperity.com/insider/86924/why-dollar-could-strengthen-lot-here#comments Insider bonds capital carry trades Charles Hugh Smith currency dollar money http://www.peakprosperity.com/crss/node/86924 Wed, 17 Sep 2014 02:50:33 +0000 charleshughsmith 86924 at http://www.peakprosperity.com Russian Energy Sanctions Will Bite Europe http://www.peakprosperity.com/insider/87366/russian-energy-sanctions-will-bite-europe ]]><p>For several months now, we&#39;ve been running with the hypothesis that Russia would wait until fall arrived and then begin to crimp off EU gas, possibly even just cutting it off.</p> <p>Well, even though fall is still officially a few days away, Russia has begun to retaliate, subtly, by diminishing the flows of gas to several European countries.</p> <p><a href="http://www.peakprosperity.com/insider/87366/russian-energy-sanctions-will-bite-europe" target="_blank">read more</a></p> http://www.peakprosperity.com/insider/87366/russian-energy-sanctions-will-bite-europe#comments Insider Chris Martenson Natural Gas Russia Sanctions http://www.peakprosperity.com/crss/node/87366 Tue, 16 Sep 2014 06:44:24 +0000 cmartenson 87366 at http://www.peakprosperity.com Off the Cuff: The Many Reasons To Fear A Market Correction http://www.peakprosperity.com/insider/87280/cuff-many-reasons-fear-market-correction ]]><p>In this week&#39;s&nbsp;<em>Off the Cuff&nbsp;</em>podcast, Chris and Charles Hugh Smith discuss:</p> <ul> <li style="line-height: 19.5px;">The Irrational Altitude of Asset Prices <ul> <li style="line-height: 19.5px;">Too high, for all the wrong reasons</li> </ul> </li> <li style="line-height: 19.5px;">Dollar Strength <ul> <li style="line-height: 19.5px;">The dollar&#39;s rise is impacting all assets, some not rationally</li> </ul> </li> <li style="line-height: 19.5px;">The Cost of Our Failing Policies <ul> <li style="line-height: 19.5px;">We&#39;re diminishing the prosperity of future generations</li> </ul> </li> <li style="line-height: 19.5px;">Signs A Market Correction Is Beginning <ul> <li style="line-height: 19.5px;">Which asset classes to watch closely</li> </ul> </li> </ul> <p><a href="http://www.peakprosperity.com/insider/87280/cuff-many-reasons-fear-market-correction" target="_blank">read more</a></p> http://www.peakprosperity.com/insider/87280/cuff-many-reasons-fear-market-correction#comments Insider Off The Cuff http://www.peakprosperity.com/crss/node/87280 Thu, 11 Sep 2014 22:02:50 +0000 Adam Taggart 87280 at http://www.peakprosperity.com How to Hedge Against A Market Correction http://www.peakprosperity.com/insider/87196/how-hedge-against-market-correction ]]><h1>Executive Summary</h1> <ul> <li style="line-height: 19.5px;">What you need to know about hedging with <ul> <li style="line-height: 19.5px;">Stops</li> <li style="line-height: 19.5px;">Inverse and leveraged ETFs</li> <li style="line-height: 19.5px;">Shorts</li> <li style="line-height: 19.5px;">Options</li> <li style="line-height: 19.5px;">Futures</li> </ul> </li> <li style="line-height: 19.5px;">Deciding which hedging instruments are appropriate for your portfolio</li> </ul> <blockquote><p><em>If you have not yet read&nbsp;<a href="http://www.peakprosperity.com/blog/87192/defying-gravity" target="_blank">Part 1: Defying Gravity</a> </em><em>available free to all readers, please <a href="http://www.peakprosperity.com/blog/87192/defying-gravity" target="_blank"><strong>click here</strong></a> to read it first.</em></p> </blockquote> <p>OK - hedging sounds prudent. But how do you do it?</p> <p>Our focus here in Part 2 of this report is to cover the most common vehicles used in hedging strategies. Each one merits its own dedicated report (a series we&#39;ll likely create in the future) to truly understand how and when to best deploy, so this report will focus on providing you with a good introduction to each, with guidance on how to further explore the ones that strike you as appropriate for your needs and personal risk tolerance.</p> <h2 style="line-height: 25.2999992370605px;">Stops</h2> <p>An easy way to limit your downside on large positions in your portfolio is to set stops.</p> <p>(Stops can be used on positions of any size, but you&#39;ll typically want to employ them on your largest ones first, where your exposure is greater.)</p> <p>A&nbsp;<strong>stop order</strong>&nbsp;(also referred to as a &quot;<strong>stop-loss</strong>&quot; order) is used to trigger the sale or purchase of a stock once its price reaches a predetermined value, known as the stop price.</p> <p>As an example, let&#39;s say you bought a stock for $50. You may decide you want to limit your maximum loss on the stock to 10%, so you enter a stop order for $45. Then, if the price of the stock subsequently drops below $45, your stop activates an order to sell the stock at market.</p> <p>If instead of falling, the stock you buy climbs higher, your stop is not triggered and you continue owning the security.</p> <p>As the name &quot;stop-loss&quot; implies, stops are intended to help you...</p> <p><a href="http://www.peakprosperity.com/insider/87196/how-hedge-against-market-correction" target="_blank">read more</a></p> http://www.peakprosperity.com/insider/87196/how-hedge-against-market-correction#comments Insider futures hedge hedging margin options shorting stop-loss stops http://www.peakprosperity.com/crss/node/87196 Wed, 10 Sep 2014 04:04:48 +0000 Adam Taggart 87196 at http://www.peakprosperity.com Why The Dollar Is Gaining Strength http://www.peakprosperity.com/insider/87194/why-dollar-gaining-strength ]]><p>Recently, the US dollar has gained at lot of territory compared to the yen, pound, euro, ruble, and pretty much every other currency you can think of. The dollar is now at a 14-month high and has been on a real tear.</p> <p>The reasons why are not that hard to understand, and it&#39;s important that we do.</p> <p><a href="http://www.peakprosperity.com/insider/87194/why-dollar-gaining-strength" target="_blank">read more</a></p> http://www.peakprosperity.com/insider/87194/why-dollar-gaining-strength#comments Insider dollar Euro Insider pound Yen http://www.peakprosperity.com/crss/node/87194 Tue, 09 Sep 2014 00:30:00 +0000 cmartenson 87194 at http://www.peakprosperity.com Off the Cuff: Demand Has Disappeared http://www.peakprosperity.com/insider/87100/cuff-demand-has-disappeared ]]><p>In this week&#39;s&nbsp;<em>Off the Cuff&nbsp;</em>podcast, Chris and Brian&nbsp;Pretti&nbsp;discuss:</p> <ul> <li style="line-height: 19.5px;">Demand Is Drying Up <ul> <li style="line-height: 19.5px;">There&#39;s just no market pull to create economic growth</li> </ul> </li> <li style="line-height: 19.5px;">Phantom Profits <ul> <li style="line-height: 19.5px;">Todays corporate earnings are accounting mirages</li> </ul> </li> <li style="line-height: 19.5px;">The End Of The Debt&nbsp;Supercycle <ul> <li style="line-height: 19.5px;">We&#39;ve grown the economy through debt, and it can&#39;t handle more</li> </ul> </li> <li style="line-height: 19.5px;">Blame The Central Banks! <ul> <li style="line-height: 19.5px;">They&#39;re responsible for today&#39;s zombie economy</li> </ul> </li> </ul> <p><a href="http://www.peakprosperity.com/insider/87100/cuff-demand-has-disappeared" target="_blank">read more</a></p> http://www.peakprosperity.com/insider/87100/cuff-demand-has-disappeared#comments Insider Brian Pretti central banks debt demand economy Off The Cuff http://www.peakprosperity.com/crss/node/87100 Fri, 05 Sep 2014 02:24:26 +0000 Adam Taggart 87100 at http://www.peakprosperity.com The Bad & The Ugly http://www.peakprosperity.com/insider/87020/bad-ugly ]]><h1>Executive Summary</h1> <ul> <li style="line-height: 19.5px;">Lack of demand is the key drag on economic growth. And there&#39;s no end in sight.</li> <li style="line-height: 19.5px;">Private sector credit expansion just isn&#39;t happening fast enough</li> <li style="line-height: 19.5px;">Why the central banks&#39; &quot;wealth effect&quot; policies have been a total bust</li> <li style="line-height: 19.5px;">Capital flows are simply chasing yield, precious little economic productivity is being created</li> </ul> <blockquote><p><em>If you have not yet read&nbsp;<a href="http://www.peakprosperity.com/blog/87019/where-here" target="_blank">Part 1: Where To From Here</a> </em><em>available free to all readers, please <a href="http://www.peakprosperity.com/blog/87019/where-here" target="_blank"><strong>click here</strong></a> to read it first.</em></p> </blockquote> <h2>The Bad&nbsp;</h2> <blockquote><p>Who wrote this tired sea song set on this peaceful shore?&nbsp; I think you&rsquo;ve heard this one before&hellip;</p> <p>~ <a href="https://www.youtube.com/watch?v=sea3lnVgyrY">Steely Dan</a></p> </blockquote> <p>As mentioned, at least for the small business community, availability of credit has not been a key fundamental issue in the current cycle. In fact, their number one issue of concern for years has been <strong>lack of final demand</strong>.</p> <p>Personally, I believe the experience of the small business community is simply a microcosm of the larger domestic and global macro. Subdued final demand IS the key macro. Is this why we see a growing gap between small business perceptions of credit availability and actual capital spending? Probably. The credit is there, but actual final demand that would support credit expansion is not. Hence the current cycle divergence in what has been a very tight data series correlation between credit and cap spending historically.</p> <p>Of course this is a segue into a broader dark cloud of the current cycle that is private sector credit expansion, or more correctly, lack thereof relative to historical experience.&nbsp; When we listen to pundits speak of the economy potentially reaching &ldquo;escape velocity&rdquo;, they are of course referencing prior economic cycle growth results, aided and abetted by prior credit expansion that is now lacking. This is perhaps most dramatically seen in the rhythm of banking system credit, in the change in actual loans and leases outstanding.</p> <p>As is clear in the chart below, never in any expansion cycle of the last four decades at least has banking system credit not grown in double-digit territory until...</p> <p><a href="http://www.peakprosperity.com/insider/87020/bad-ugly" target="_blank">read more</a></p> http://www.peakprosperity.com/insider/87020/bad-ugly#comments Insider Brian Pretti demand economy http://www.peakprosperity.com/crss/node/87020 Wed, 03 Sep 2014 05:02:18 +0000 Brian Pretti 87020 at http://www.peakprosperity.com Off the Cuff: Warming Up The Helicopters http://www.peakprosperity.com/insider/86921/cuff-warming-helicopters ]]><p>In this week&#39;s&nbsp;<em>Off the Cuff&nbsp;</em>podcast, Chris and Mish discuss:</p> <ul> <li style="line-height: 19.5px;">Winter Is Coming <ul> <li style="line-height: 19.5px;">Russia&#39;s trump card</li> </ul> </li> <li style="line-height: 19.5px;">Europe Back In Recession <ul> <li style="line-height: 19.5px;">The EU&#39;s structural weaknesses are re-emerging</li> </ul> </li> <li style="line-height: 19.5px;">Bond Market Madness <ul> <li style="line-height: 19.5px;">Risk is terribly&nbsp;underpriced&nbsp;right now</li> </ul> </li> <li style="line-height: 19.5px;">Helicopter Drop Trial Balloon <ul> <li style="line-height: 19.5px;">Yes, they&#39;re now talking about giving cash to citizens</li> </ul> </li> </ul> <p><a href="http://www.peakprosperity.com/insider/86921/cuff-warming-helicopters" target="_blank">read more</a></p> http://www.peakprosperity.com/insider/86921/cuff-warming-helicopters#comments Insider Europe Gas Markets Mish Shedlock Off The Cuff Putin Russia Ukraine http://www.peakprosperity.com/crss/node/86921 Tue, 02 Sep 2014 13:58:04 +0000 Adam Taggart 86921 at http://www.peakprosperity.com Something Very Wicked This Way Comes http://www.peakprosperity.com/insider/86891/something-very-wicked-way-comes ]]><h1>Executive Summary</h1> <ul> <li style="line-height: 19.5px;">How sovereign debt is becoming larger and more mis-priced each year</li> <li style="line-height: 19.5px;">Why corporate borrowing is accelerating, but only being used for non-productive means</li> <li style="line-height: 19.5px;">Junk bonds have never been priced so low (ever), indicating a complete denial of risk</li> <li style="line-height: 19.5px;">Today&#39;s record bond prices are supported by near-historic low (i.e. extremely tenuous)&nbsp;levels of volume</li> <li style="line-height: 19.5px;">Why, mathematically, nearly no-one will be able to exit unscathed when this overinflated market rolls over</li> </ul> <blockquote><p><em>If you have not yet read Is <a href="http://www.peakprosperity.com/blog/86887/blame-central-banks" target="_blank">Part 1: I Blame The Central Banks</a> </em><em>available free to all readers, please <a href="http://www.peakprosperity.com/blog/86887/blame-central-banks" target="_blank"><strong>click here</strong></a> to read it first.</em></p> </blockquote> <h2>Italy: Insanity On Display</h2> <p>Let&rsquo;s look at one of the sovereign entities that has piled on the debt to staggering levels. In this case: Italy.</p> <p>This can serve as a template for understanding the rest of the insanity that exists in the global sovereign bond market.</p> <p>The rules for lending to a nation should be roughly the same as lending to an individual. You&rsquo;ve got some measure of the country&#39;s credit-worthiness that needs to be taken into account, plus an assessment of its income.</p> <p>After all, the future principal and interest payments have to come from future income. If there&rsquo;s too much debt compared to income, then there&rsquo;s an increasing risk that the debt servicing payments not only will not be made, but <em>cannot</em> be made.</p> <p>Italy&rsquo;s sovereign debt has been expanding enormously as the government borrows and spends. Its national debt finally cleared more than $2 trillion euros early in 2014:</p> <blockquote><p><strong>Italy&#39;s public debt hits record 2.1072 trillion euros</strong></p> <p>Apr 14, 2014</p> <p>(ANSAmed) - ROME, APRIL 14 - Italy&#39;s massive public debt hit a record 2.1072 trillion euros in February, the central bank reported Monday. The amount was up 17.5 billion euros since January, the Bank of Italy said.</p> <p> The European Commission has criticized Italy&#39;s 2014 budget for not doing enough to bring down debt, around 132% of gross domestic product (GDP).</p> <p> As a result it has put Italy under &quot;specific monitoring&quot; over its &quot;excessive macroeconomic imbalances&quot;, which include high debt and poor competitiveness, as part of an in-depth review.</p> <p>(<a href="http://www.ansamed.info/ansamed/en/news/sections/economics/2014/04/14/italys-public-debt-hits-record-2.1072-trillion-euros_a21cde2c-2ef8-4812-b7b4-436f64489437.html" target="_blank">Source</a>)</p> </blockquote> <p>Italy raked up significant debt at a far faster rate than its underlying economy was growing, leading to a steadily rising debt-to-GDP ratio as seen in this next chart...</p> <p><a href="http://www.peakprosperity.com/insider/86891/something-very-wicked-way-comes" target="_blank">read more</a></p> http://www.peakprosperity.com/insider/86891/something-very-wicked-way-comes#comments Insider bonds bubble central banks Federal Reserve junk bonds http://www.peakprosperity.com/crss/node/86891 Thu, 28 Aug 2014 00:17:13 +0000 cmartenson 86891 at http://www.peakprosperity.com