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Off the Cuff: The Age Of Limits

Our choice: how hard do we want to slam into them?
Thursday, August 14, 2014, 5:47 PM

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

  • Limits To Growth
    • Our current system is acting as if they don't exist
  • Financial Chicanery
    • All the smoke & mirrors can't hide the fact it's a zero sum game
  • False Stability
    • The current calm will end when the central banks fail
  • Energy, Energy, Energy
    • In the end, ownership/access to energy is all that matters
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The End of Dollar Dominance?

Loss of reserve currency no longer an idle threat
Monday, August 11, 2014, 6:24 PM

Dollar Daze

One thing that is absolutely crystal clear at this point is that Putin and Russia consider the US and its dollar hegemony to be a parasitic anachronism that no longer serves anybody besides the US.  Putin has made many direct comments to that effect and then followed them up with concrete deals struck in ways that bypass the dollar entirely.

Here's what he said back in 2011, well before any of the recent action started: » Read more

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Off the Cuff: Jittery Markets

Things are looking more & more "toppy"
Thursday, August 7, 2014, 12:18 PM

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

  • Russian Retaliation
    • Putin announces sanctions against food from the West
  • Jittery Markets
    • Have we seen the top?
  • The Danger In Bonds
    • That's where the real carnage will come
  • The Age Of Bubbles
    • We live in it, though it may be ending
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Prepare For The Bear

The data make a clear case the long Bull run is ending
Wednesday, August 6, 2014, 9:35 AM

Executive Summary

  • The underappreciated impact of the Fed's current tapering
  • Get ready for corporate profits to start rolling over
  • Why record margin debt is such a big danger
  • The myth of de-leveraging
  • Why the data make a clear case the long Bull market is ending

If you have not yet read Is Part 1: Is This Decline The Real Deal? available free to all readers, please click here to read it first.

In Part 1, we looked extremes in valuations, sentiment, leverage and complacency, and how these make the Bull case for further advances in stock prices difficult to make without drawing this time it’s different parallels with previous asset bubble tops.

In this Part 2, we’ll look at how the fundamentals of the Bull case have been weakened or threatened, and determine whether indeed we are witnessing a key moment of direction-reversal in the markets.

The Federal Reserve’s Tapering of Quantitative Easing

Everyone who follows the financial news is aware that the Federal Reserve has tapered its unprecedented Quantitative Easing bond and mortgage buying program from $85 billion a month to $25 billion a month, and has made noises about ending the program entirely by October of this year.

Observers see two primary consequences of the end of QE:

1.  Interest rates, no longer suppressed by Fed bond and mortgage buying, will likely tick higher from historic lows.

2.  The support for stocks and other risk assets provided by QE will end, removing a key prop under stocks.

It’s clear that interest rates—shown here by a commonly used proxy for interest rates, the 10-year Treasury bond yield—have hit bottom, and while they might bounce along the bottom for some time, they don’t have much room to decline even if “risk-off” buying of Treasuries pushes the T-bill yield lower.

In other words, even if Treasury yields fall as investors flee ‘risk-on” assets such as stocks for the safety of Treasuries, this doesn’t necessarily translate into... » Read more

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Meanwhile In Iraq, The Situation Grows More Dangerous

World oil prices & regional stability at high risk now
Monday, August 4, 2014, 6:29 PM

As if there wasn't enough to concentrate on given all that's happening in Ukraine between Russia and the West, and in Gaza between the Israelis and the Palestinians, the situation in Iraq has been taking some decidedly worrisome turns of late.

As ever, we keep our eye on this hot spot because of its special importance to the world supply of oil, any loss of which will rapidly lead to much higher prices. » Read more

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Off the Cuff: A European Perspective On The Conflict With Russia

Playing with fire
Friday, August 1, 2014, 9:55 AM

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

  • Europe's Quizzical Acquiescence
    • Acting like the junior partner to the US agenda
  • The Significance of Russian Energy
    • Europe has no real Plan B if Putin turns off the gas
  • The Role of Gold
    • Russia has been dramatically increasing its gold reserves. To what end?
  • The Vulnerability of the Global Economy To Russian Hardball
    • Russian defaults would ripple through the banking system
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How The Coming Confrontation Will Unfold

How bad could things get?
Thursday, July 31, 2014, 9:52 AM

Executive Summary

  • The 4 most likely scenarios of Russian response
  • Europe is more vulnerable, and will feel more pain sooner than the US (though the US is still at risk)
  • The risk to the world economy and financial markets
  • What you should be doing now, in case things worsen

If you have not yet read Part I: The West's Reckless Rush Towards War with Russia available free to all readers, please click here to read it first.

Europe Will Pay the Price First

Europe is already on the edge of slipping back into outright economic contraction and can ill afford any sort of protracted sanction warfare with Russia, a major trading partner in both directions.

While the sanctions levied by Europe were very carefully crafted to cause the least amount of pain for itself as a fist order of business, while imposing maximum pressure on Russia second, they will still bite.

‘EU sanctions on Russia will hit UK economy’ – Foreign Secretary

Jul 30, 2014

EU sanctions aimed at ‘imposing economic pain’ on Russia following the MH17 crash will hit the UK economy, Foreign Secretary Philip Hammond has warned, saying ‘you can't make an omelette without breaking eggs’.

Hammond said the measures had been “designed to maximize the impact on Russia and minimize the impact on EU economies.”

“It will affect our economy... but you can't make an omelet without breaking eggs, and if we want to impose economic pain on Russia in order to try to encourage it to behave properly in eastern Ukraine and to give access to the crash site, then we have to be prepared to take these measures,” he told Sky.

On Wednesday, The Russian Foreign Ministry criticized the new package of EU sanctions, saying it was disappointed Europe was unable to act independently from Washington in the International arena. 

“We feel ashamed for the European Union who, after long searching for a unified voice is now speaking with Washington’s voice, having practically abandoned basic European values, including the presumption of innocence,” the Foreign Ministry said in a statement.

(Source)

Indeed, it's easy to imagine how disappointed Russia might be to have so many unresolved questions about MH-17 lingering yet having Europe rush forward with punishment despite a long and warming history of economic ties.

Of course, the main consideration for Europe now that autumn is just a couple of months away is... » Read more

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Darkening Skies

Market threats are multiplying
Wednesday, July 30, 2014, 6:31 PM

Chris is busy finishing up a meaty report on the accelerating friction between the West and Russia, so I'm stepping in to make some quick notes on today's meaningful developments.

As PP.com readers know, we've been cautioning about a serious market correction for a long time. Valuations have been so far divorced from fundamentals for so long that we are frighteningly overdue for a drop -- likely a large one -- in asset prices. » Read more

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Something's Fishy With The US 'Data' on Ukraine, Russia

The 'evidence' is surprisingly weak
Monday, July 28, 2014, 10:51 AM

For weeks now I've been patiently waiting for the US to release some (any!) definitive data about the Ukraine situation, including the MH17 shoot-down.  After all, as everybody knows, the US has intensive satellite and electronic scanning technologies in place around the globe, and therefore should be able to provide some serious intelligence to make its case.

Frankly, the US needs to provide much harder evidence for its current claims to be credible. » Read more

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Off the Cuff: Do Geopolitics Matter Anymore?

Because the markets sure don't seem to care
Thursday, July 24, 2014, 3:37 PM

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

  • Do Geopolitics Matter Anymore?
    • No conflict is seemingly too great for the markets to ignore
  • The Marginal Value of A Barrel of Oil
    • Even the loss of a few % of total supply could vastly impact the US
  • Zombie Markets
    • No weapon seems to be able to stop this bull market
  • Bass-Ackward Foreign Policy
    • The West is pursuing a strategy that makes no sense