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A Tough Winter

Strange, hard times are here
Tuesday, March 31, 2015, 12:25 AM

Last year we had the ‘polar vortex’ which delivered some of the absolute coldest air to our region, so the back-to-back experience is one of relentless cold, snowy winters and short summers.

Similarly, there seem to be a bunch of new economic rules that we have to adjust our thinking around. » Read more

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Off the Cuff: Pinball Markets

Expect more volatility & price riccochets
Thursday, March 26, 2015, 2:41 PM

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

  • Pinball Markets
    • Volatility & unpredictability is on the rise
  • Lack Of Liquidity
    • Becoming a top market concern
  • Capital Flows
    • May keep US markets better than the rest, but not forever
  • Watch The Bond Markets
    • When they fail, it will be ugly
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Off the Cuff: Losing Legitimacy

Welcome to the era of State vs citizen
Thursday, March 19, 2015, 5:11 PM

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

  • Lies, Damn Lies & Politics
    • When it gets serious, they lie to us
  • The Age Of Confiscation
    • Get ready for the government to claw more of your wealth
  • The Desperation Of TINA Legislation
    • We'll be told "there's no other choice"
  • The Security Of Non-Participation
    • The safest place for your wealth is out of the system
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The Coming Age Of Confiscation

Why more taxation is heading your way
Wednesday, March 18, 2015, 1:36 PM

Executive Summary

  • Crisis intervention as policy = bad decision-making
  • Why politics will defer dealing with the big problems, even though that will make them even bigger
  • Why more taxes are in your future
  • The criticality of increasing our alternatives -- without our agitation, the government will appropriate from us while claiming "there's no other option"

If you have not yet read Part 1: Things Are Unraveling At An Accelerating Rate available free to all readers, please click here to read it first.

In Part 1, we examined how the dynamic of lowering interest rates to boost debt-based consumption inevitably leads to debt saturation and lower consumption. It also generates instability and rising systemic risks.  As the returns on the central bank tricks of lowering interest rates and encouraging borrowing diminish, the resulting unraveling is speeding up.

There is another core dynamic at work: TINA, there is no alternative.

When There Is No Choice, Bad Policies Abound

In this week’s podcast with Chris (What To Expect From The Fourth Turning We're Now In), guest Neil Howe noted that crisis intervention is the result of authorities “feeling they had no other choice,” a.k.a. TINA.  In this frame of mind, the eventual consequences of crisis intervention policies are ignored in the pressing desperation to make the financial and political pain of crisis go away.

As policymakers around the world soon discovered, TINA policies are habit-forming. Since they had no choice but to bail out the parasitic, dysfunctional banking sector, and goose debt-based consumption with cash for clunkers, mass purchases of mortgages, etc., they also had no choice but to continue these interventions, lest the desired result—expanding consumption and a rising stock market—falter.

Substituting crisis intervention for long-term constructive policies leads to bad policies, for the simple reason that... » Read more

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Off the Cuff: Time To Sell

Too much risk for too little upside
Friday, March 13, 2015, 12:25 PM

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

  • The Downside Of The Strong Dollar
    • Why the US is losing the currency war
  • The Endgame Approaches
    • What to expect when every country is handing out free money
  • Time To Sell
    • Dumb money is buying while smart money exits
  • The Wisdom Of Gold
    • Will likely end up being the only sane option left
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How To Prepare For War

Sounds steps today will actually make a big difference
Thursday, March 12, 2015, 3:35 PM

Executive Summary

  • There's much you can do to reduce your risk in advance of the arrival of a:
    • Trade war
    • Energy war
    • Financial war
    • Cyber war
    • Grid-down sabotage
    • Shooting war
    • Nuclear war
  • The steps you should prioritze the most right now

If you have not yet read Part 1: Is It Time To Prepare For War? available free to all readers, please click here to read it first.

As a preamble, I need to note that I do not enjoy or derive any satisfaction from writing about or spending time on figuring out how to dodge the worst impacts of human behavior.  War sits right at the top of my ‘This is stupid’  list, as war represents the idea that all other attempts at being smart or diplomatic have already failed.  I'm sorry that I have to spend time writing this report, and I am sorry that you have to spend time considering it.  With that said, I feel I have no choice, and somebody has to take on this task.  With a heavy heart…

If the West (meaning the US and Europe) decides to further goad Russia, war may be inevitable. Sooner or later, Russia will have to switch from 'response' mode to 'reaction' mode.  I’ve previous detailed the reasons for this in previous reports here, here and here.

As (sadly) expected, things have only escalated over the past year, not de-escalated. The West has a serious bone to pick with Russia, yet nobody can really explain what it is or why the conflict exists. (As an aside, I think it’s just bruised neo-con egos over Syria, but it really doesn’t matter what the explanation is at this point.) So, here we are in la-la land.

The consequences of an escalated conflict between Russia and the US/West could range from a very minor skirmish fought over some relatively meaningless items of trade, to an attack on financial markets, all the way to an all-out nuclear exchange.

The question becomes: What, if anything, can we do to prepare?

Lots, as it turns out.

No matter where... » Read more

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Is It Time To Prepare For War?

A serious question, given the escalating geopolitical risk
Tuesday, March 10, 2015, 12:48 AM

I am seriously entertaining preparing for war, and as I’ve written before, the nature of this next war could involve everything from trade battles, to cyber attacks, to financial system assaults,  a downing of the US electrical grid, to an actual shooting war  -- perhaps one that escalates to a nuclear exchange.

When things are this obviously crazy, anything is possible. » Read more

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Off the Cuff: The Importance of Anti-Fragility

Something our systems & our culture are dearly lacking
Thursday, March 5, 2015, 9:29 PM

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

  • Why It's Still All About Net Energy Flows
    • Don't be misguided by today's low oil prices
  • Anti-fragility & The Singularity
    • Why the siren song of new technology is so dangerous 
  • The Limits Of Financial Markets
    • They can't price long-term risk well
  • The Value Of Culture
    • Sets priorities the market doesn't/can't
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Why Oil Is Going To Double In Price

ETA? About a year from now
Tuesday, March 3, 2015, 11:01 AM

We’ve got an oil emergency brewing right now. I know that this idea runs utterly counter to the mainstream narrative of a shale oil bonanza that has us swimming in oil; but that’s why this site exists.

Within a year, possibly a little longer but not much, I think the price of oil is going to double from its current per barrel price of $50 US/$60 Brent. » Read more

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Investing In The Age Of Anomalies

More important than ever to follow the flows of capital
Wednesday, February 25, 2015, 10:06 AM

Executive Summary

  • Will global capital continue to push US stocks higher, despite their stretched valuations?
  • Global capital is becoming more cautious
  • S&P outperforming as capital seeks the safety of "blue chip" companies
  • Investing in the age of anomalies

If you have not yet read Part 1: Time To Toss The Playbook available free to all readers, please click here to read it first.

This leads us to equities and, again, this very important concept of being flexible in thinking and behavior. Historically, valuation metrics have been very important in stock investing. Not just levels of earnings and cash flow growth, but the “multiple” of earnings and cash flow growth investors have been willing to pay to own individual stocks. This has been expressed in valuation metrics such as price-to-earnings, price relative to book value, cash flow, etc. To the point, in the current market environment, common stock valuation metrics are stretched relative to historical context.

In the past we have looked at indicators like total stock market capitalization relative to GDP. The market capitalization of a stock is nothing more than its shares outstanding multiplied by its current price. The indicator essentially shows us the value of stock market assets relative to the real economy. Warren Buffet has called this his favorite stock market indicator.

The message is clear. By this valuation metric, only the... » Read more