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It's Even Worse Than You Think

A massive price correction is both inevitable & overdue
Friday, February 16, 2018, 7:58 PM

Executive Summary

  • Just how rampant is the fraud in today's markets?
  • How last week's volatility spike nearly crashed the system
  • Why a massive price correction is both necessary, inevitable & overdue
  • Why the future of our democracy itself hangs in the balance

If you have not yet read Part 1: The Worst Threat We Face Is Right Here At Home, available free to all readers, please click here to read it first.

As I recently wrote, what broke in early February was volatility itself.  The volatility trade is one where tremendous firepower is concentrated because of a massive concentration of computer trading strategies that are all keyed off of volatility.

One of them is the so-called “risk-parity” trade, where computers are balancing and rebalancing a blended portfolio of stocks and bonds based entirely off of what the volatility index is doing.

So if volatility is falling, these algorithms are buying stocks.  Said another way, if you wanted to rig the cash market to go higher, you could either buy a huge amount of stocks directly, or you could buy a much smaller amount of index futures. Or you buy sell an even tinier amount of volatility.

If you sold volatility, you're be said to be “short volatility.” 

And who is “short volatility”, as revealed in their most recently released meeting notes? The Federal Reserve.

This is critically important because...




Off The Cuff: Will The Dollar Weakness Continue?

Current policy is not condusive to a strong currency
Friday, February 16, 2018, 5:44 PM

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

  • The Falling Dollar
    • Are we finally being punished for our spendthrift policies?
  • The Falling Bond Market
    • Expected with rising interest rates...
  • Volatile Stocks
    • They are still far too overvalued, so expect another big drop
  • Gold Finally Looking Good?
    • Gold's technicals (and fundamentals) are looking their best in years

The US dollar has fallen in price relative to other currencies quite dramatically over the past few months. This is an area of particular expertise for this week's guest, John Rubino, who points out that current policy being pursued by the US administration is not likely to help the dollar strengthen anytime soon.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.


Off The Cuff: How Much Farther Is The Market Likely To Fall From Here?

Spoiler alert: A lot
Friday, February 9, 2018, 11:07 AM

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

  • What The Heck Happened This Week?
    • The volatility trade blew up
  • How Much Farther Might The Market Fall?
    • It was so overbought, that there's a looong way to fall
  • Where Can Money Find Safety Right Now?
    • Only in a very few places, as nearly everything is still at an overvaluation extreme
  • What Should We Be Watching For Next?
    • Look for the key longstanding correlations begin to break down. That's when the big crash will happen.

This week's Off The Cuff is a must-listen podcast.

In it, Chris and Charles deconstruct the price action of the markets this week -- both agree that it (finally!) marks an end to the 7+ year "extend and pretend" unbroken rally in both stocks and bonds.

More importantly, they warn of the paucity of "safe" places for investment capital right now; as almost every asset class remains dangerously overvalued, and bank risk is on the rise. But they do identify the few areas where money is likely to flee -- it will be very important to be positioned in these *before* everyone else tries to enter.

As for how much farther the markets may drop -- whether or not there's another short-term rescue happens, both see prices ultimately falling much, much lower. As Charles observes:

I'm looking at a weekly chart of the Dow Industrial Average and I'm seeing we've hardly started a decline.

I mean, the MACD has just barely touched the first part of a negative cross. The Stochastic is only down from 100 to 86 -- oversold' on Stochastic would be 20. The RSI (the Relative Strength Index)has fallen 60 -- and again, oversold would be something like 30.

So the people who are thinking they're going to buy the dip and it's going to run up another couple thousand points... maybe. But the technical chart says this is ugly, and it's going to take a long time—at least a matter of weeks, if not a couple of months—to actually bottom out.

It's looking to be a really treacherous year for investors, because the trend has been broken. 

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.

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Volatility Goes On A Rampage

Explaining the recent chaos in the markets
Tuesday, February 6, 2018, 1:57 PM

World financial markets are suddenly in complete disarray. Volatility is exploding. Stock futures are losing and gaining hundreds of points in the blink of an eye. 

The Plunge Protection Team (PPT) is hard at work, we can see its rescue attempts quite clearly today -- but they're having to work hard to keep the markets green. The indices rise, then plunge, then rise again.

Of course, the PPT is knows it has to succeed today. There’s nothing more dangerous to these inflated markets than the loss of faith that “they” are in control.

And that perception is dangerously close to giving way. » Read more



Is This It?

Has the next Great Financial Crisis just started?
Friday, February 2, 2018, 8:58 PM

Executive Summary

  • The significance of the recent spike in interest rates
  • Is the US dollar weakness a sign of other countries walking away from the US?
  • Are rising oil prices serving to pop the market bubble (as predicted)? Where are they headed from here?
  • Is this it? Is the top in? And if so, what should concerned investors do right now?

If you have not yet read Part 1: The Central Bank’s Reign of Error, available free to all readers, please click here to read it first.

Is this it then?  Is the top in?  The last few days have been extremely turbulent in the markets with the Dow Jones declining nearly 1,000 points in just this week.

Given the smoke swirling around the global rise in interest rates, I’m certain there’s something afoot.  The real question is whether or not the central banks are going to step in here to rescue everything again.

Alas, I don’t have access to that information but a betting person would say “yes.”  Everything they’ve done over the past 10 years has communicated quite clearly that the central banks are terrified of the Franken-Markets they’ve created.  Specifically, they are terrified of them going down and revealing the extent of the fraud.

However, we have to remain alert to the idea that the markets are indeed larger than the central banks, at least when they begin to move in earnest, and that the central banks have not been able to alter the laws of reality.  Resources matter.  Debt levels matter.  Leverage matters.  Well, eventually they do, and maybe that time has come?

If so, we all need to be ready for a very rocky ride ahead because... » Read more


The Shining/Warer Bros

Off The Cuff: Remember Volatility? It's Baaack....

And a tremendous amount of losses may soon follow
Friday, February 2, 2018, 9:16 AM

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

  • Remember Volatility? It's Baack...
    • And a tremendous amount of losses may follow soon
  • Rising Interest Rates
    • The long party of cheap credit is ending fast
  • The Middle Class Is Becoming The Working Poor
    • Fewer and fewer are able to save for the future
  • Unpacking The State Of The Union
    • One key question: "Where's all that money going to come from?"

Suddenly, volatility is rearing it's snarling head everywhere. The US dollar has plunged. Interest rates are marching higher than they have in many years. Cryptocurrency prices have been more than cut in half from their early January highs. Now, even stocks are beginning to wobble...

For years now, one of the most crowded and "easy" trades for making profit has been to short volatility. Trillions are still in play on that bet. With volatility now rising, that bet increasingly risks suddenly becoming a bad one -- which would unleash a tremendous volume of losses across the financial markets.

As Mish warns...

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.


Social Unrest: The Boiling-Over Point

Understand the coming threat & position wisely in advance
Friday, January 26, 2018, 10:04 PM

Executive Summary

  • Understanding the anatomy of the "Winner Take Most" economy we now live
  • How technology is making labor obsolete faster than we can imagine
  • Our current models for driving social change are broken
  • The approaching future of Disunity & Disruption

If you have not yet read Part 1: The Pie Is Shrinking So Much The 99% Are Beginning To Starve, available free to all readers, please click here to read it first.

In Part 1, we reviewed the shift from the expanding economic pie of the second half of the 20th century that enabled a parallel expansion in universal rights and entitlements. 

But here in the 21st century, the pie is shrinking and the social movements that reduced asymmetries of wealth and power in the 20th century are no longer effective. 

In Part 2, we’ll go deeper into the structural changes of the economy, and explore why social movements have slipped into ineffectual symbolic gestures that fuel fragmentation and frustration -- and why that will lead to a dangerous boiling over of the 99% against the elites controlling the system.

The “Winner Take Most” Economy

An economy characterized by soaring wealth and income inequality is clearly a “winner take most” economy: Richest 1% Made 82% Of Global Wealth In 2017

Peak Prosperity has covered the structural changes that have created the WTM economy at length for many years, so we can quickly summarize the key dynamics:

Cartels, state-corporate governance. Structurally, large banks and corporations have aggregated wealth and political power to the degree that they can enforce cartels and quasi-monopolies with a combination of market heft and regulatory capture (a complicit state enforces monopoly under the guise of consumer protection or other cover). The owners/managers of the cartels skim enormous profits while providing poor-quality products and services to consumers who have little choice in a rigged market.

Systemic incentives favor speculation, debt and leverage: those closest to the cheap-credit spigots (corporations, banks and financiers) can outbid everyone else to buy up the productive assets of the economy—assets that generate income and capital gains. These perverse incentives fuel speculative asset bubbles, misallocation of national wealth and malinvestment in marginal projects that are originated solely to reap short-term profit by any means available, which in a rigged system includes fraud, embezzlement, misrepresentation of risk, etc.

This dependence on rising speculation, debt, leverage and opaque gaming of the system is financialization.  Where the entire financial sector once represented 5% of the economy, now it is over 20% of the economy once we include financialization that’s hidden inside firms such as Apple, GE, etc.

Together, these form what I call the Plantation Economy, an asymmetric structure in which(...) » Read more


Terrance Emerson/Shutterstock

Off The Cuff: The Most Overpriced Market In Our Lifetime

Too many charts all are giving the same warning
Friday, January 26, 2018, 4:34 PM

In this week's Off The Cuff podcast, Chris goes solo and discusses:

  • The Most Overpriced Market In Our Lifetime
    • Too many charts are all giving the same warning
  • The Dumping Of The Dollar
    • Why has it fallen so far, so fast?
  • Interest Rates On The Move
    • Higher rates will serve as kryptonite to today's super-charged markets
  • Dying Ecosystems
    • The data, sadly, keeps getting worse and worse

Freshly-returned from our 3-city strings of Summits on the West Coast, Chris surfaces some of the most hair-raising data discussed at those intensive gatherings. We're at a point with today's markets where investors have to believe that "this time is truly different" and macro & micro underlying fundamentals no longer matter, or that a wicked price correction is extremely overdue.

Chris is seeing more and more of the exact same signs of coming breakdown as he did in 2007.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.


How To Avoid The Pain Of The Coming Market Downturn

The 9 steps to increase your true wealth
Thursday, January 18, 2018, 8:35 PM

Executive Summary

  • Bubble markets short-circuit our assessment of risk
  • Bubble markets are hard to resist, and wear down your resolve
  • How to avoid the pain of the coming market downturn
  • The 9 steps to increase your true wealth

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

I truly despise the many bubbles the central bankers have blown. I consider them ill-advised and distracting at a critical moment of history.

Where we should be attending to serious matters -- like accelerating ecosystem destruction, reigning in the practice of borrowing more than can ever be paid back, and transitioning rapidly off of fossil fuels -- people instead cheer the latest new shiny Dow Jones price record. Folks are just too distracted to have any interest in acknowledging the sobering predicaments we face.

It’s all rather cartoonish. The thinking, if I can call it that, goes like this; “But if any of your concerns were indeed true, certainly we’d not all be getting rich in the stock markets?”

Rising prices seem to be all the comfort these folks need to conclude that everything is A-OK.

“Your arguments are invalid because I'm richer today than I was yesterday.” As if a few more printed-up claims on wealth were the same thing as a better future.

So the prime reason that I hate the central banker-created bubbles is that they short-circuit the important conversations we should be having.

Rising equity prices coupled with the endless cheerleading they receive on the TV and in the press blunt people’s sense that we maybe should be doing things differently. And there is so much we need to be doing differently right now -- in the long run to secure a prosperous future, and in the immediate term, to protect against the inevitable destruction when these bubble markets burst.

Specifically, we need to... » Read more


Off The Cuff: The Brain-Dead Fed

Its power is exceeded only by its cluelessness
Thursday, January 18, 2018, 11:51 AM

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

  • Brexit: An Update
    • Axel's observations from London
  • The Reason Behind The Weakening US Dollar
    • The coming ECB tapering is being factored in
  • Tax Cross-Currents
    • Reforms will disrupt more than folks realize
  • The Brain-Dead Fed
    • Can't admit it does it what it does

In this wide-ranging discussion -- covering taxes to Brexit to gold to the markets -- Axel shares with Chris his conclusions on the inner workings of the Federal Reserve from his interactions with many of the folks involved in running it. Despite being perhaps the single most influential entity in the global economy, like any institution, it is run by fallible people who, in this case, can't recognize and/or admit that their actions are in full violation with their promised policy.

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.