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Deflation Is Still Winning!

OK, folks: this is it
Monday, December 15, 2014, 9:20 PM

As we've written on and warned about before, deflation is winning.  We're starting to see very serious cracks in the façade, beginning with oil, then various peripheral currencies -- especially from emerging market oil exporters -- and now equities. » Read more

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Oil Armageddon Arrives

It's beginning to look at lot like 2008 all over again
Friday, December 12, 2014, 5:08 PM

Yesterday, WTIC -- that's US oil -- just broke under $60 a barrel on very heavy volume. Canada heavy crude is at $42 a barrel, and Brent is at $61.73.

All of these are multi-year lows not seen since the great oil crash of 2008 that preceded the even greater financial crash that came just a few months later. » Read more

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Off the Cuff: The Buck Stops Nowhere

Market manipulation to torture. Where's the accountability?
Thursday, December 11, 2014, 3:27 PM

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

  • Zig-Zag Markets
    • More evidence the long term trend is reversing
  • When Will Oil Find A Floor?
    • And where will the collateral damage of the current drop be most felt?
  • US Admits To Torture
    • Are we going to hold anyone accountable?
  • Gold Shows A Slight Glitter Again
    • Dare we begin to hope?
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What Deflation Means For Investors

Beware: we're used to investing in an inflationary regime
Wednesday, December 10, 2014, 11:21 AM

Executive Summary

  • The 3 reasons why deflation will continue to haunt the global economy
  • The importance of cash flows in a deflationary environment
  • Understanding the deflationary reasons behind the recent drop in oil prices and the material implications this will have going forward

If you have not yet read Part 1: Deflation Is Winning available free to all readers, please click here to read it first.

So an very important question remains despite the trillions in new currency printed around the world in the past few years: Why are deflationary pressures still present?

  1. The debt overhang from the prior cycle has not vanished by a long shot. In fact today there is significantly more debt outstanding globally than was the case at the highs of 2007, primarily driven by global government borrowings.  The following chart is total US credit market debt relative to GDP.  You can see that very little has been reconciled since the peak.  By the way,

Data Source:  US Federal Reserve       

Additional global debt assumption means additional interest cost burdens, even under an environment of interest rate suppression.  And that means... » Read more

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The Oil Shock Has Arrived

Why today's price collapse will lead to a future price spike
Monday, December 8, 2014, 10:59 PM

The absolutely stunning drop in oil prices, which hit a new recent low, is really important to both track and understand.

There are two issues here, one near term and one long. » Read more

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Off the Cuff: Bankers On Edge

An insane high wire act nears the end
Thursday, December 4, 2014, 8:22 PM

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

  • Gold is being driven by speculators in lock-step with the yen
  • So is the S&P 500
  • Why labor pricing power is broken and will stay that way
  • The shale oil Ponzi scheme breaks...and defaults are sure to follow
  • China's economic miracle is about to become a mirage

Charles: And it certainly seems that oil is being used as a weapon. But you know, let's also I would like your view on the idea that the world economy is going into recession. It seems sort of obvious to me. Europe is already either in recession or so stagnant that it is the same as recession. The US is stumbling along with fake growth in terms of households. And then China is rolling over. Japan is going down the sinkhole.

So what will that do to oil if demand really craters like we get another 2008 situation where the financing dries up and people stop borrowing because they are afraid and they stop spending and the whole thing that causes recession. I think that is going to have a potentially huge impact on oil and it would hurt everybody that is producing oil the Saudis included. They may be talking bravely, but I believe that their production costs have risen considerably because they have had to run hundreds of miles of pipe and they are injecting carbon dioxide and sea water and stuff into their wells to keep their production up.

Chris Martenson: The old days of Saudi Arabia sticking a straw in the ground and pulling oil out at a dollar or two a barrel those are long gone because if you have ever seen they have a rack of four pipes that stretch, I forget, 100 miles or something going from the ocean to one of their fields. And each one of those pipes is about the diameter of a large room. They are like 14 feet in diameter they are extraordinarily huge. There is four of them and they are just pumping seawater and they are injecting that down into the field at a variety of points. So yea, that's expensive. And worse the rate of inflation in the mining business has been roughly around 10% for the last 10 years. That means that your costs are going to completely double every seven years when you've got 10% inflation. So that is what the mining industry and particularly the petroleum has been putting up with.

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The Central Banks Have Lost

Deflation is here
Wednesday, December 3, 2014, 8:09 PM

Executive Summary

  • What is 'deflation?'
  • Why do central banks fear it so much?
  • What falling prices really mean.
  • Commodities are telling us that a global slowdown is already here.
  • China's economic miracle is over.
  • What happens next (please keep your preparations on track!)

If you have not yet read Oil And The Global Slowdown available free to all readers, please click here to read it first.

The title of this part says it all. So let's begin with an important definition. What is 'deflation'?

To hear the media and central banks tell it, it is something fearful and that must be avoided at all costs. Confusingly they then point to falling prices as evidence of the horror of which they speak.

The only problem is that you and I like falling prices. If my health insurance cost 10% less next year I’d be thrilled. But the central banks would be horrified.

The difference between these two positions lies in the definition of deflation. While the media always blindly regurgitates the central bank line that falling prices are an indication of deflation they really shouldn't. » Read more

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Now That's A Nice Bottom

Keeping an eye on gold, silver, oil, and copper prices
Monday, December 1, 2014, 10:07 PM

~ Gold and silver race up off the lows

The failure of the Swiss referendum to repatriate gold was somehow used as the catalyst to hammer gold, silver, oil, and copper...each of them a signature bell-weather for economic activity.

I was ready to write this piece titled "Deflation Wins!"  but that would have been the on-line equivalent of "Dewey Wins!"  because just as Dewey actually lost to Truman, each of the four substances listed bounced back hard after their initial pummeling. » Read more

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Off the Cuff: Gold Wars

Europeans increasingly want their gold back
Thursday, November 27, 2014, 10:47 AM

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

  • The Swiss gold referendum and the extraordinary lengths to which the Swiss National Bank is going to prevent its passage.
  • The World Gold Council's bizarre under-reporting of Chinese gold demand
  • Fuzzy numbers:  GDP is both distorted and not representative of actual economic progress
  • Russia moving toward putting the ruble under a gold standard?
  • Provoking Russia.  The aims of the west are not clear, probably because there's no real strategy in place.

There are very big movements happening in the world of physical gold, with the dutch somehow getting their 120+ tonnes of gold back from the US Federal Reserve over just three months while Germany continues to insist 5 tonnes over an entire year was reasonable.  A major political figure in France has written a letter to the French central bank demanding that all French gold be repatriated while Russia's central bank continues to accumulate gold in preference for dollars.

Yet the price for physical gold remains stuck in a tight band between $1190 and $1200.  

But what if Russia is moving towards a gold standard?  This would make sense for them on a lot of levels and would be a true game changer for a world that currently revolves around the petrodollar.  Alasdair and Chris discuss the hows and the whys. » Read more

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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, 10:29 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