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The Markets Are Breaking Down

Last week's rescue rally failed & things are weakening fast
Monday, November 12, 2018, 1:12 PM

The recent bounce in the US equity markets looks like it may have just been a brief pause before they head a lot lower.

I'm becoming more convinced that “the big one” is finally at our doorstep.

There are so many breakdowns across so many different regions and market segments that I’m unclear how this can be rescued short of the announcement of a major new QE effort. » Read more

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Prudent Steps For Becoming Safer, More Secure & More Mobile

Increase your odds of a favorable outcome
Friday, November 9, 2018, 6:39 PM

Executive Summary

  • My recommended steps for greater home security
  • My recommended steps for greater personal security
  • My (new) recommendations on emergency batteries & charges
  • The benefits of being mobile during a crisis: a new model worth considering

If you have not yet read Part 1: How Prepared Are You? Let’s Find Out., available free to all readers, please click here to read it first.

Perhaps the biggest and hardest question of planning for an uncertain future is “Where should I do that?” For 99% of all scenarios that I can envision as being likely, I think that sheltering in place is the absolute right answer.

But having a second place to fall back to should be in everyone’s plans. Just in the past few years, we’ve seen PP members have to decamp and hustle out of town because of fires (in California) and hurricanes (in Texas, Puerto Rico, Florida and North Carolina).

As I mentioned in an earlier report, I'm actively working on a second site that will be near enough to my current location to afford easy back-and-forth trips and be a pleasant escape with enough natural beauty to draw me to visit it on a regular basis while the status quo still reigns.

My criteria for this place is that it be relatively rural, near good water (such as a small year-round stream), have a southerly orientation or otherwise good solar exposure, be within an hour's drive from my main residence, have good soil and at least ¼ of an acre to garden on, and have a site for a small structure/camper.

But even this Plan B retreat may not work for certain scenarios such as an earthquake, flooding, or a nearby nuclear reactor failure. Hey, stuff happens. What if war breaks out between major powers at some point? The amount of chatter on that front is very high right now among US, Chinese and Russian military officials. Who knows?

What’s unpredictable in many of these circumstances is... » Read more

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Off The Cuff: Running Out Of Time (And Energy)

An energy crunch will end the status quo within 3-10 years
Thursday, November 8, 2018, 4:43 PM

In this week's Off The Cuff podcast, Chris speaks on:

  • Winning The Battle, Losing The War
    • The reckoning approaches for the central banking cartel
  • Running Out Of Time
    • Our economic status quo has less than a decade left
  • More Growth Is Not The Answer
    • Our pursuit of it is literally killing us
  • When This Breaks, All Hell Will Break Loose
    • We've propped the system up too much for too long

Halloween was just last week. In this week's Off The Cuff, Chris talks about the frights that keep him up at night: most notably, the complete lack of preparedness our society has for the coming energy crunch. We simply do not have enough economically-extractable BTUs to power our current lifestyle for much longer given the pae of global demand.

Something is going to have to give. Likely a lot of things will. And one of the first casualties will be global economic growth.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com's other premium content. » Read more

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Bulletin of Atomic Scientists (Doomsday clock)

How Close?

Close enough to merit taking action today
Friday, October 26, 2018, 5:45 PM

Executive Summary

  • What the key crash indicators are telling us
  • The timeline to the next recession
  • How far will the fall be?
  • Time for action

If you have not yet read Part 1: Is The Long-Anticipated Crash Now Upon Us?, available free to all readers, please click here to read it first.

How Close Are We To A Full-Blown Crash?

We’re always looking at the current market data for a reason to send out an ALERT. We send them out extremely rarely, so it takes a preponderance of evidence to convince us to issue one. 

At the end of Part 1, I walked through the tepid signals that junk bonds, US Treasurys, and gold are currently giving. There's no sign of panic (yet) in those bellwhether markets.

On the other hand, a rising dollar is what you’d expect to see if there’s some sort of a crisis going on. First because of the “flight to safety” aspect, and second because it represents speculator money fleeing foreign hands and coming home:

Given this, it’s somewhat encouraging that gold has not tanked over the past few weeks, because it has pretty much been trading as the "anti-dollar" up until now. But over the past two weeks, that correlation has broken, and both gold and the dollar have risen together.

Of interest to those of us holding gold is that there finally has been (...) » Read more

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Get Ready For "QE For The People"

A solution even worse than the problem
Thursday, October 25, 2018, 6:12 PM

Executive Summary

  • What to expect when "QE for the people" (highly inflationary) is implemented next
  • Why stagnating productivity will exacerbate the impact of higher inflation
  • How energy constraints will make the situation even worse
  • Why "QE for the people" will ultimately result in less prosperity for all

If you have not yet read Part 1: The Coming Inflation Threat, available free to all readers, please click here to read it first.

Having received precious little of the $45 trillion in asset wealth generated since the launch of the Federal Reserve’s QE for the Rich in 2009, the bottom 90% of households are less than enthused about another round of saving the super-wealthy from their speculative excesses in the next recession, which is due in 2019 or possibly 2020.

This time around, the political zeitgeist favors QE for the People, that is, direct transfers of newly created cash to households rather than to banks.  QE for the People includes a spectrum of policy options, including Universal Basic Income (UBI), generally defined as a no-strings-attached stipend to every adult of $1,000 per month (the precise sum varies with every proposal); debt jubilees, for example, forgiving most or all of the $1.5 trillion in student loans, and tax credits for low-income workers.

Large-scale federal spending on infrastructure such as repairing bridges, building high-speed rail lines, upgrading the national electrical grid, constructing affordable housing, etc., are generally viewed as indirect QE for the People, as massive federal spending benefits the populace (as opposed to the top .1%) via improved infrastructure and it creates jobs for the bottom 95% rather than bigger bonuses for the .1% of financiers and bankers.

The political appeal of QE for the People is understandable, and it cuts across the usual ideological lines: both sides of the aisle can support higher infrastructure spending, as some of the new funds will flow into every congressional district.

So what’s not to like? 

As we'll show below, QE for the People is highly inflationary. None of these programs increase productivity to any significant degree while they put trillions of dollars into a stagnant economy to chase the existing supply of goods and services which is constrained by declining productivity, cartels that can impose artificial scarcities and government regulations that add costs and delays without adding effectiveness, efficiency or productivity.

Let's begin with (...)

 
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Off The Cuff: The Market Just Dropped 3% Today. Why?

What's driving the plunge? What's next?
Wednesday, October 24, 2018, 6:55 PM

In this week's Off The Cuff podcast, Chris and Axel Merk discuss today's monster drop across the S&P 500, the Dow and the NASDAQ.

The weakness in the financial markets that started two weeks ago continues, and the rescue efforts that investors have become so conditioned to are suddenly less frequent and less successful.

It's certainly feels like the structural tenor of these markets has changed: What's driving the plunge? And what's most likely to happen next?

We're rushing the release of this special Off The Cuff discussion, recorded just 3 hours ago, so that you have the swiftest access possivble to Chris and Axel's thoughts. The written transcript of the discussion will be made available within the next 24 hours.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com's other premium content. » Read more

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CNNMoney

Off The Cuff: Selling Pressure Everywhere

Stocks, bonds, real estate -- all are weakening together
Monday, October 22, 2018, 7:37 PM

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

  • This Smells A Lot Like 2000
    • Valuations are running purely on hype & wishful thining
  • Netflix & Tesla
    • Case studies that prove the point
  • Sell Everything!
    • Stocks, bonds, real estate -- it's all getting sold right now
  • The Manipulators Are Getting Desperate
    • From overnight futures to cryptos, the hands of the manipulators are increasingly visible

It's feeling a lot like 2000 these days agree Chris and Mish. Valuations are based on a wing and prayer, with huge leaps of faith required to believe in the 'story stocks' left propping up the markets. It smacks of the dot-com bubble's insistence that profitability doesn't matter as long as you have "eyeballs".

They also agree it's worth noting that the sudden market weakness appears across all major asset classes, something rarely seen outside of a prelude to a market correction and/or entry into recession.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com's other premium content. » Read more

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Preparing For The 'Big One'

The damage of the next true market crash will be staggering
Friday, October 12, 2018, 5:54 PM

Executive Summary

  • Long-suppressed market forces are suddenly coming unleashed
  • Why the status quo of the past decade is ending fast
  • What's most likely to come next
  • How much damage would a true "market crash" wreak?

If you have not yet read Has “It” Finally Arrived?, available free to all readers, please click here to read it first.

What A “Market Crash” Really Means

The risk that comes from the bursting of a credit cycle is financial market disruption that causes prices to dislocate.  In 2008 that meant the utter inability to move certain credit and derivative products within the banking ecosystem which led to the downfall of Bear Stearns and Lehman Brothers. 

In turn those failures helped to nearly precipitate the systemic collapse of the banking system.  It got so bad that even high level bank CEOs were taking cash out of ATMs because they simply didn’t know if their won banks would be open in the morning.

Lots of changes were made to try and prevent such a thing from happening again, but many of these are counterproductive. 

In talking about Trump’s criticism of Powell, Chris Whalen of The Institutional Risk Analyst wrote several scathing critiques of the ways the Fed has indeed destroyed the markets, but it was his third point that really caught my attention:

Third is the real issuing bothering President Trump, even if he cannot find the precise words, namely liquidity.  We have the illusion of liquidity in the financial markets today.

Sell Side firms are prohibited by Dodd-Frank and the Volcker Rule from deploying capital in the cash equity and debt markets.  All bank portfolios are now passive.  No trading, no market making.  There is nobody to catch the falling knife.

The only credit being extended today in the short-term markets is with collateral.  There is no longer any unsecured lending between banks and, especially, non-banks.

As we noted in The Institutional Risk Analyst earlier this week, there are scores of nonbank lenders in mortgages, autos and consumer unsecured lending that are ready to go belly up.  Half of the non-bank mortgage lenders in the US are in default on their bank credit lines.  As in 2007, the model builders at the Fed in Washington have no idea nor do they care to hear outside opinions.

(Source)

There’s nobody to catch a falling knife.  Everybody has abdicated to the idea of an untested ecosystem of computer algorithms being first, last and only line of defense.  It’s kind of binary; it either works or it doesn’t.

It’s also untested. 

So the risk here, which is impossible to quantify, is that someday things go a bit haywire, something (or a whole lot of somethings) go out of parameter and the computers go dark.

What happens then?

First, we'll see.........(Enroll to continue reading the full report) » Read more

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Off The Cuff: Making Sense Of The Recent Market Gyrations

Which triggers are driving the action? What's next?
Friday, October 12, 2018, 10:29 AM

In this week's Off The Cuff podcast, Chris and Wolf Richter discuss:

  • Impact Of Fed Tightening
    • Likely still underestimated by the market
  • Funds Are Trying To Protect Stock Prices
    • A futile (in the long run) attempt to prevent losses
  • Why Bond Funds Are So Risky
    • Much more dangerous than owning bonds outright
  • 6% Mortage Rates Will Act As Housing's Kryptonite
    • We're not there yet, but getting closer...

Recorded Wed as the market was in full melt-down mode, Chris and Wolf Richter decode the underlying drivers of the sudden reversal, and peer into the future to predict what is most likely to happen next. Both agree that, whether stocks are briefly 'rescued' in the ensuing days, the long-awaited downward re-pricing of the 'Everything Bubble' is nigh.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com's other premium content. » Read more

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Dreamstime

WARNING: The Markets Are Suddenly Looking Very Sick

Why this may be the long-awaited turning point downwards
Friday, October 5, 2018, 11:59 AM

As you probably know, our model here for tracking and staying ahead of the next financial crisis is to watch for trouble to move from “the outside in.”  This means that the weaker elements in the system always fail first.

Therefore, we prioritize watching junk debt more than investment grade debt, investment grade debt more then US Treasurys (the supposedly safest bonds in the world).  We watch Italy closer than Germany, and Turkey closer than Italy.

The weakest elements always go first.

And when the central bank created credit-liquidity cycles come to an end, this is especially true.

And when the weakest players topple, the contagion up the quality chain usually starts happening fast.

Very fast.

This is why we've long been advising a prudent and careful strategy of money management over these past several years, as painful as that’s been while the party has been raging higher. 

And while we’re not anxious to be vindicated (because there will be a lot of misery in the world when these credit bubbles finally burst), we’re confident that we will be.

Has that time begun? Is it finally time to call it, and pronounce this long-lived credit cycle dead?

Well... we’ve thought so before and been wrong, so let us be the first to temper our remarks here. If the extraordinary efforts of the central authorities have taught us anything over the years, it’s to be cautious and humble when it comes to marking “market calls.”

Since we don’t have a crystal ball, let's share the data that’s been accumulating on our desktop these past few months that has us thinking that the long-awaited market correction may have indeed arrived this week. This evidence suggests that the crumbling decay in the markets has just recently passed several critical marks, and that a major breakdown to the downside may be unfolding before our eyes.

And while we’ve not (yet) ready to issue an official “Alert” to all of our readers, this is for sure a serious warning.

Let's start by looking at these critical charts... » Read more