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The War On Cash Intensifies

Negative interest rates. A ban on cash. Pick your poison.
Monday, September 21, 2015, 9:45 PM

The central planners are setting the stage for the next round of officially sanctioned theft and this time they mean to assure that you have no way(s) of escaping.

They’re coming for your cash. This is a risk that Charles Hughes Smith explored for us back in June in a very well-received analysis.

Once a fringe idea, this concept is now being openly discussed and debated at the highest levels publicly. Which means it is being hotly discussed behind closed doors, and likely has been for a long time. » Read more

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Off The Cuff: The Future Of The Fed

QE to the people? Negative interest rates? Just maybe...
Friday, September 18, 2015, 9:18 PM

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

  • The Future Of The Fed
    • Further easing seems assured for 2016
  • The Worlds Central Banks Are Cornered
    • They have no good options if crisis hits
  • The Debt Time-Bomb
    • No matter what the Fed engineers, our debt will kill the economy in the end
  • Politics As The Newest Black Swan
    • The populace is becoming unrestful
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Forbes

When Nothing Means A Lot

Why the Fed’s failure to act is a bad sign
Friday, September 18, 2015, 12:12 AM

Today, Thursday September 17, 2015, the most anticipated decision in all of financial history was made.

Or not made, as it turned out. » Read more

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Off The Cuff: Follow The Money!

Currencies are underappreciated market indicators
Thursday, September 10, 2015, 5:47 PM

In this week's Off The Cuff podcast, Chris and Axel Merk discuss:

  • Follow The Money!
    • Why watching currencies yields predictive insights
  • China's Yuan Devaluation
    • What will the implications be?
  • Buckle Up!
    • Volatility in currencies & stocks is just getting started
  • Why It's Time To Go Short
    • No matter whether the Fed raises rates or not this year
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Off The Cuff: Beware The Misbehavior Of Markets

They aren't as predictable as we think
Monday, September 7, 2015, 11:31 AM

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

  • Manipulated Markets
    • How the Fed uses stocks as a signaling device
  • House Of Cards
    • Why the system is more vulnerable than ever
  • The Machines Are In Control
    • Which works well until it doesn't
  • Beware The Misbehavior Of Markets
    • They are not as predictable as we think
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Share America

The Criticality Of Monitoring Margin Debt Closely From Here

An very accurate canary in the coal mine
Friday, September 4, 2015, 9:00 PM

Executive Summary

  • Declining margin debt will signal an impending major market decline 
  • This signal will be even more telling for non-US countries
  • Evidence indicates we are passing the peak margin debt cycle right now
  • There is time to act, but time is running out

If you have not yet read Part 1: The Margin Debt Time-Bomb available free to all readers, please click here to read it first.

In the meantime, monitoring trends in levels of margin debt is one of a necessary number of risk management tools.  Meaningfully declining monthly levels of margin debt ahead will be an important red flag.  The key is knowing it will come and being able to act unemotionally and rationally when it occurs.  For now, in the clarity of hindsight, we have the very short term divergence in place between price (SPX) and margin debt levels as of month end July.  Now it’s a matter of continuing to monitor margin debt levels ahead as one of a number of important risk management tools. 

I think it is important to note that in the two prior market cycles, margin debt declined noticeably after the year over year change in S&P 500 sales (revenues) fell into negative territory, as we are now seeing in 2015.  As you can see from the chart below, the year over year change in S&P 500 sales from 2014 to 2015 has crossed into... » Read more

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Buckle Up, The Ride Is Going To Get Wilder

High probability of greater market turmoil ahead
Tuesday, September 1, 2015, 5:01 PM

The recent stock market and financial turbulence is going to get worse -- possibly a lot worse. This will be true even in the 'core' countries (US, Europe, Japan), while peripheral countries are suffering unusual levels of turmoil.

It’s nothing personal. This is simply how things were always destined to end. » Read more

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What Happens Next Will Be Determined By One Thing: Capital Flows

Follow the money
Friday, August 28, 2015, 2:28 PM

Executive Summary

  • Why global capital flows will determine everything
  • What impact euphoria and fear wil have on liquidation and valuation
  • The importance of debt denominated in other currencies
  • What's likely as capital shifts from Risk-On to Risk-Off assets

If you have not yet read Part 1: Here's Why The Markets Have Suddenly Become So Turbulent available free to all readers, please click here to read it first.

In Part 1, 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 “borrow and spend” its way out of recession.

In Part 2, we’ll examine the single most important dynamic in any asset value: capital flows.

The Tidal Forces of Capital

Let’s start with the most basic building blocks of supply and demand.

Capital flowing into an assets class (buying) in excess of capital flowing out (selling) increases demand and pushes prices up.

If supply increases even faster than demand, prices may decline despite rising demand.

If capital flows out (selling) in excess of inflows (buying), prices will decline.

Prices are set on the margin.  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%.

Risk on = seeking asset appreciation and taking on more risk in exchange for higher yields.

Risk off = seeking capital preservation and accepting lower yields in exchange for reduced risk.

Assets have two ways to appreciate/depreciate: the nominal price, and the underlying currency the asset is priced in.

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.

The consequences of capital flows can be counter-intuitive.

For example, if the Federal Reserve creates $1 trillion out of thin air, our initial expectation would be... » Read more

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Off The Cuff: A Financial Adviser's View Of The Recent Market Turbulence

New Harbor weighs in
Friday, August 28, 2015, 2:26 AM

In this week's Off The Cuff podcast, Chris and New Harbor Financial discuss the recent gyrations of the market.

  • Are we witnessing a secular trend reversal?
  • What's likely to happen next?
  • How can prudent investors position themselves now?
  • Where can shelter best be taken?
  • Is it time for risk-seekers to place bets?

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.  » Read more

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Is Mexico The Next Greece?

The risk factors investors should watch most closely
Thursday, August 27, 2015, 12:02 AM

Executive Summary

  • The biggest Mexico risk factors investors need to watch
    • Remittance risk
    • Currency risk
    • Capital flight risk
    • Oil price risk
    • Debt risk
  • What Mexico must prioritize going forward to secure its future

If you have not yet read Part 1: Trouble South Of The Border available free to all readers, please click here to read it first.

Republican presidential candidate, Donald Trump has nabbed many a headline with his disparaging remarks on how Mexico is sending ‘bad’ Mexicans over the border to ostensibly steal US jobs and sell drugs. He has called US leaders ‘stupid’ for letting this happen. The truth of the US-Mexico economic relationship is entirely different.

According to Pew Research, between 2005 and 2010, 1.4 million immigrants moved back to Mexico from the US, 90 percent of them voluntarily.  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 from Mexico. 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. (Source)

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... » Read more