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    China trade agreement

    Did Everything Just Change?

    How material are this week's QE & China deal announcements?
    by Adam Taggart

    Friday, October 11, 2019, 7:53 PM

It’s hard to imagine a more euphoric end to the week for bulls.

Two weeks ago I issued a report titled Realistically, What’s Left To Power Asset Prices Higher? which claimed the bulls’ only hope was for a near-term resumption of QE (quantitative easing, aka “money printing”) or a China trade deal.

Well, this week they got both.

Jerome Powell announced Wednesday that the U.S. Federal Reserve will resume expanding its balance sheet to the tune of $60 billion per month. And just a few hours ago, the Trump administration announced it had reached a partial trade agreement with its Chinese counterparts.

And to put a cherry on top of things, word from across the Pond is that somehow a Brexit deal just might happen by the end of the month.

When I began typing this article earlier today, the markets were fiercely building towards an orgiastic climax. They ended with a slight post-coital breather, closing modestly off the day’s highs.

In short, the bulls are suddenly having the time of their lives.

So, does this mean happy days have returned? Have we been rescued from the rising tide of data warning of an economic slowdown and lower asset prices? Does the Fed — and now China, too — have our back again?

Is it time for investors to become optimistic once more?

“”Markets”” No More

Before we answer that, though, let’s address the elephant in the room. We no longer have functioning financial markets.

The central banking cartel has killed price discovery. The $15+ TRILLION in liquidity injected by the Fed, EBC, BoJ, BoE and PBoC over the past decade has ‘risen all boats’ when it comes to asset prices.

Whether great, mediocre, or horrible, the price of nearly every company/property/investment has been on a one-way 45-degree ramp upwards since global co-ordinated quantitative easing began in 2009.

And Wednesday’s announcement by the Fed simply shows that this game will continue, despite years of broken promises that it would instead ‘normalize’ (i.e., undo much of its past QE).

As a result, we live in a world where traditional price signals have become meaningless. Management turmoil? Missed earnings expectations? Regulators cracking down on your industry? None of it matters in a world of perpetual QE. As long as stimulus keeps flowing, everything heads in the same direction: UP.

All that matters is guessing what the small coterie of central bankers plan to do next. Will they tighten from here? Or ease? By how much? And for how long?

As a result, ‘investing’ is a dead science. Instead, we’ve all been forced to become speculators.

Meanwhile, extremely manipulable high frequency trading (HFT) algorithms dominate the daily price action. Stock prices now hyper-react instantly to every tweet and leak, which the media and the Trump administration now exploit to maximum advantage.

Seriously — and this is a topic deserving future lengthy exploration — those in favor of removing President Trump may have a better case to make for market manipulation as his impeachable offense.  He’s been shoving market prices around on a daily basis for years now. And how are his tweets this week — one of which instantly sent the Dow skyrocketing 300 points on Thursday — not considered in flagrante delicto examples of painting the tape? (a prohibited form of manipulation in which the criminal ‘creates activity or rumors to drive up the price of a stock’):

Trump tweet timeline

Time To Pile Back Into The Market?

But making the (safe) assumption no one in power cares about our broken markets as long as they benefit from the status quo, where are prices more likely to go from here?

Two weeks ago, I argued that the only things that would save the bulls in the near term was new QE and a China deal. Now that the past 48 hours delivered on both counts, the outlook for the rest of 2019 is now substantially more complex to forecast.

Nearly all of the negative indicators we’ve been warning about still remain. The macro outlook still screams recession risk, corporate earnings are still forecast to disappoint, geopolitical strains remain unresolved, and the world’s oil supply chain looks even more vulnerable given today’s news that an Iranian oil tanker was struck by missiles in the Red Sea.

That said, Powell’s new $60 billion per month QE program (which he swears isn’t really QE) will surely have a stimulative impact on the system. Even if those funds don’t make it out into the economy directly, they will keep both good and bad banks solvent and thus keep credit flowing. That will help in keeping today’s zombie companies/jobs/buyback programs alive for the foreseeable future.

As for the China trade deal, honestly, who knows at the moment? Technically, what was announced today isn’t officially an agreement. And what was “agreed” to by the parties were the less-sensitive issues on the table.

Bloomberg controlled most of the information flow about today’s trade news, and this is how its own staff economists summarize today’s “progress”. Not exactly breathless optimism:

What Our Economists Say

“Past experience is that U.S.–China trade agreements aren’t worth the paper they are written on, and this one hasn’t even been written down. For now, though, indications on trade are a little more positive. If that persists, it could help put a floor under sliding global growth.”

Tom Orlik and Yelena Shulyatyeva, Bloomberg Economics

And the Chinese themselves are reacting with much more muted enthusiasm than our Tweeter-in-Chief. In fact, they aren’t yet willing to concede that any “deal” has been struck:

Chinese state news agency Xinhua said negotiators made efforts toward a final agreement, but stopped short of calling Friday’s outcome a deal. The Editor-in-Chief of China’s most prominent state-run newspaper Global Times, Hu Xijin, noted on Twitter that official reports from China didn’t mention Trump’s goal of signing the deal next month, which indicates Beijing wants to keep expectations low.

Long story short, we’re still a far distance from any formal compact that resolves the principal triggers that caused the US-China trade dispute. While today’s “news” may be a step in the right direction and help both parties save a little face, I think Sven Henrich summarizes it best in these twin tweets:

Proceed VERY Cautiously From Here

So did everything change this week?

Too early to tell.

But we highly caution against interpreting this week’s developments as a green light that it’s safe to jump back into the markets.

Powell’s Not-QE may do little more than slow the gangrene spread of recession within the US economy. Today’s China deal could quickly prove to be another “nothingburger” in a year-long process defined much more by disappointment than progress.

Note that despite their happy ride this week, markets are still closed below their all-time highs. So we still need to ask: What’s going to power them higher from here, now that they’ve gotten exactly what they wished for?

With new QE and an interim China agreement now priced in, what pressure remains to push stocks higher? Without a compelling answer, this weekend could very well mark the apex between “buy the rumor” and “sell the news”. If so, we could see a lot of disappointed bulls next week as today’s highs fail to stick.

We’re at an inflection point where the establishment is pulling out all the stops to keep the world’s longest economic expansion continuing and avert a market correction. It is pitted against the fundamental forces of reality, which want to eradicate the $trillions of bad debts and malinvestment that have built up in the system due to central planner intervention.

How much longer can the status quo protect itself from the repercussions of it past and present behavior?

While this great game plays out, asset prices will likely whipsaw before they make their next big move. Which is why we so strongly urge anyone with money at risk in today’s markets (in retirement funds, brokerage accounts, real estate, business investments, etc) to work with a financial advisor who understands the risks in play.

For better or worse, this is an exceptionally challenging time to navigate the financial markets. And this week’s developments have only increased the uncertainty of the trajectory that will win out from here.

Our consul remains the same: Position for safety. Deploy hedges in your portfolio. And if you don’t feel confident in how to do this yourself, partner with an experienced professional advisor  — if you’re having trouble finding a good one, schedule a free consultation with New Harbor Financial, the firm we endorse.

So many plan to do this but end up not taking action until it’s too late. I recently asked New Harbor what is the most common issue they encounter when conducting a portfolio review, and they report — by far — it’s overexposure.

Most people they talk to a) don’t have a good understanding of all of the securities they own, and b) are currently “all in” with their portfolio allocations. This hasn’t really been an issue while the markets have powered higher year after year for the past decade. But it puts them unnecessarily at risk of painful losses when the inevitable next market correction happens.

I use the word “unnecessarily” because a short conversation and a few prudent decisions can mean a world of difference to how your financial wealth fares going forward.

Whatever you choose to do from here, just make sure it’s an intentional decision. These markets are just now too damn uncertain to leave your destiny to chance.

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23 Comments

  • Sat, Oct 12, 2019 - 5:50am

    #1

    Snydeman

    Status Member (Offline)

    Joined: Feb 06 2013

    Posts: 534

    12+

    End game.

    This week has made me sick to my stomach. All of the things distorted by the Fed’s previous actions will only get worse. The crushing of fixed income retirees, the destruction of pensions, the vastly widening gulf between the Uberwealthy and the Plebeians…all of it. Powell has on the one hand said the economy is doing fine, but has taken the action of desperation. I, for one, pay more attention to what someone does than what they say, so I can only assume there was a seriously bad current moving under the placid surface somewhere. Or that Powell is spineless and couldn’t handle the criticism. I don’t know which.

     

    As for the trade deal, I don’t believe one word of it. China and the US still have completely different positions, and if China has done anything it has been to buy time and play with Trump’s obvious fear of US “”markets”” plunging. They’ve got the upper hand and Trump looks like a kid who has gotten in way over his head. My opinion, obviously.

     

    Either way, the Fed initiating QE4 – likely QEfinity – was forecast by many people on PP and elsewhere as being inevitable, since we all knew that ‘tightening’ could never happen again. If I recall from those predictions, though, the initiation of QEfinity is the endgame. Meaning, this is the last gasp of the system desperate for growth in a world that can no longer truly grow. We’ll have some time of “everything is awesome” before this explodes spectacularly.

     

     

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  • Sat, Oct 12, 2019 - 7:10am

    #2

    LesPhelps

    Status Silver Member (Offline)

    Joined: Apr 30 2009

    Posts: 484

    7+

    A Proven Strategy

    … to avoid financial distress for the handful of people who own half the planet.  Can’t have them worrying about soup lines, can we?

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  • Sat, Oct 12, 2019 - 7:48am

    #3
    Lions

    Lions

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    Words of investor Jim Rogers

    This reminds me of what Jim Rogers is constantly saying in his interviews. He keeps saying he is not buying gold yet. He says he has been through this before and right at the end they will pull out all the stops, it will be a miracle and a deal will be reached with China and the price will go down.

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  • Sat, Oct 12, 2019 - 8:02am

    #4

    Mark_BC

    Status Bronze Member (Offline)

    Joined: Apr 30 2010

    Posts: 311

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    I’m really curious why they allowed pog to rise to 1500. I’ve been following it closely for several months and its obviously being held there. I bet if you averaged the last 3 months it would be bang on 1500. Someone up top has come to that decision. Why? I think they wanted it to rise for 2 reasons, but not rise enough to create a signal.

    One, higher price discourages Indians from buying.

    Two, it might stimulate / maintain more mine supply.

    Both of those suggest that supply is running thin. I think we have a bit to go still before a transition happens but maybe part of this “deal” with China includes how the remaining gold gets allocated.

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  • Sat, Oct 12, 2019 - 9:15am

    #5

    charleshughsmith

    Status Bronze Member (Offline)

    Joined: Aug 15 2010

    Posts: 691

    10+

    Dow has gone nowhere for 19 months

    It certainly feels like we’re at the end of the expansion cycle. Glance at a long-term chart of the Dow (DJIA or INDU): price is only signal-noise away from its January 2018 peak.  In essence, the Dow has gone nowhere for 19 months.  This is remarkably close to the going-nowhere phase in 2007-08, when the market topped in 2007 and then drifted sideways for about 18 months before collapsing in late 2008. The saying is that tops are processes, not events, and it sure looks like the process has been grinding along for 18+ months–more or less the outer boundary of such decay cycles.

    Everyone assumes the Fed’s $60B a month will levitate stocks again, as this was the result of previous QE.  But the Fed never engaged in this stimulus this late in the expansion cycle or when stocks are whiskers away from new all-time highs.  QE worked when markets were in free-fall, early and mid-cycle. But the situation is different here at the end of the longest expansion in modern US history and with stocks one big one-day rally away from new all-time highs. Past performance is no guide to future performance–the classic investment caveat applies to the Fed, too.

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  • Sat, Oct 12, 2019 - 10:25am

    #6
    TimAyles

    TimAyles

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    I know this won't be a popular opinion on this site....

    But I wrote an argument here showing things are different under QE than anything we have seen in the past, and it is pure conjecture to say it will “end”. Be interested for a dialogue that doesn’t include the usual “you are an idiot’ comments but with no actual refuting of the facts presented: https://seekingalpha.com/article/4296202-recessions-know-thing-past

     

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  • Sat, Oct 12, 2019 - 12:40pm

    Reply to #6

    Mark_BC

    Status Bronze Member (Offline)

    Joined: Apr 30 2010

    Posts: 311

    2+

    Thanks for the alternative viewpoint. I do agree with you that, while the central banks retain control of the system with their digital printing presses, any conventional measure of the markets and predictions based on this are pure conjecture. Technical analysis means little anymore.

    I have a couple points though: how are you defining, “recession” and “expansion”? Are you just taking the banks’ word that recessions have happened when they supposedly did? Since it is a well known fact that the measures of price inflation have changed so much over the years that the conventional CPI is useless beyond providing cover for the central banks’ money printing policies, all they have to do is understate true price inflation by 4% and then suddenly a real economic contraction of -3% magically turns into 1% growth.

    Personally I think the economy is “faking” growth — it is going through the motions of it, chasing imaginary financial profits, but if you look at actual true-inflation adjusted GDP then I would suspect it would be going down. John Williams from Shadowstats would have more to say about that but I haven’t listened to him for a while. I think a lot of other hard measures that are harder to fake would support this, like the various industrial activity measures, from what I have read, but I haven’t looked into it much myself.

    When you say we are in “the longest expansion in history”, what kind of expansion are you referring to? Do you mean real inflation-adjusted per capita GDP, or do you mean expansion in central bank balance sheet, or expansion of the money supply? The former would tend to support your argument but the latter would not.

    Just to prove my point, let’s take a look at an ounce of gold the last time it went through a parabolic spike in 1980. The average price of gold in 1980 was $615/oz. Back in 1980, the minimum wage was listed as $3.10 per hour. This means it would require the minimum wage laborer to exchange 198 hours of labor (before taxes) to earn that ounce of gold. Today, with gold sitting at $1,480/oz. and the minimum wage at $12.00 here in California, the minimum wage worker need only exchange 123 hours of labor to earn that same ounce of gold!

    I don’t think you are going to convince many here that wages are rising along with price inflation by using the price of gold as the metric of price inflation of “goods and services”!!! It is pretty commonly accepted here that the price of gold is the most manipulated number in the financial system. It’s all just digital money flowing back and forth into ETF’s that don’t have any real gold backing them, so the supply of “gold” can be created in infinite amounts allowing the banks to set the price at anything they want, barring a price too low which puts gold miners out of business. The whole point of gold price manipulation is to cover up the massive expansion of balance sheet and money supply which should otherwise trigger a run on gold. I’m a bit bewildered how you can classify gold as a “good and service”. Do the same analysis with a gallon of gasoline or a house.

    While the prices for cars, gas, food and candy bars have gone up, the key point is that productivity and wages have more than compensated for this increase.

    What? Not where I live. Wages have barely gone up at all. A good professional wage here is $100k (I still don’t make that despite excelling in my field in engineering), not much more than it was 20 years ago. But house prices have quadrupled and gasoline has maybe tripled.

    I do agree with you, however, that we could very well see the same pattern continuing for a good while yet. This is all due to the central banks having digital control of the markets and the ability to send prices of anything anywhere they want. The consumer is trapped into using this system as a savings and currency vehicle as the government is enacting more and more rules to prevent people from doing otherwise. What the central banks are counting on is that the deflation from the ongoing retraction of the real economy offsets the balance sheet expansion from their money printing. Hyperinflation will not occur due to natural forces.

    What I did notice in your article however, is no analysis of the underlying physical and biological processes supporting the economy and thus the financial system. The central banks can only continue their manipulation as long as the real flows supporting the economy continue. I see this ending at some point. The government can support unprofitable shale oil fracking but only as long as there remains oil there to pump…

    The system will end eventually, the question is when. When it happens, for whatever reason, we will indeed see the much anticipated mother of all crashes and breakdown of society. Every year that the central banks continue their manipulation, the greater the distortion they create between underlying real world flows in the economy and the purported indicator of this, the financial system (since “profit”, around which the financial system is built, can only have real world meaning if it can be converted into a “profit” in real world things it can be exchanged for).

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  • Sat, Oct 12, 2019 - 1:19pm

    #7

    Mark_BC

    Status Bronze Member (Offline)

    Joined: Apr 30 2010

    Posts: 311

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    I did some internet searching and found the following (and I had to wade through a lot of phony CPI-adjusted nonsense to find some real numbers):

    Average US home price in 1980: $47,200. US minimum wage: $3.10. Ratio = 15,226

    2000: $119,600; minimum wage: $5.15. Ratio = 23,223

    2019: $266,800; minimum wage: $7.25. Ratio = 36,800

    So this suggests that home prices are becoming increasingly unaffordable. I suspect that the actual numbers are worse than this if you dig into it in more detail. I wonder how they define “home”. That isn’t necessarily a detached house. A home could be a tiny apartment. Since people today are being crammed into apartments and condos rather than detached houses, which were more common in 1980, the unaffordability of houses is even worse than the above numbers suggest.

    For California: 2019 average “home” price: 548,700. Minimum wage: $12. Ratio = 45,725.

    I’m pretty sure “home” does not mean house, as you won’t find many houses in urban California areas for $500k. And if you did, you probably wouldn’t want to live there!

    Furthermore, minimum wage isn’t a good measure of the income of workers since it could be that a greater proportion of workers today are earning minimum wage compared to 1980 or 2000. What you really need to look at to make a fair comparison is median (not average) yearly income (including those “unemployed” people that have given up and which the government has taken out of the statistics) in relation to average price of a 3 bedroom detached house. Do that comparison and you’d see that prices have skyrocketed.

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  • Sat, Oct 12, 2019 - 4:53pm

    Reply to #6
    Crapper

    Crapper

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    3+

    This time truly is different... but you won't like the reasons why

    TimAyles: we’re living in the “long now” as described in Epsilon theory. Everything, and I mean everything, is being sucked into the present for consumption… our children, profits, culture… and our currencies. This is just one of the many symptoms of how civilisations die… they consume everything of value from the future.

    The present central bank cult will end like a light switch going On/Off. There’s a stable equilibrium in one position which can remain stable only until enough pressure is applied for the switch to rock over…. this new stable equilibrium becomes our ruinous inflation / hyperinflation.

    All civilisations decline in money quality at their end. Note that I don’t say empire, even though the same applies. Empires change during the up cycle (ie Greek to Roman to Byzantine; Dark Age! Arab to Spanish to French to British to USA  – there’s a few tuppence halfpenny ones I’ve missed out like the Dutch and Portuguese). But in my opinion we’re not at an empire change (ie USA to China) but at an end of civilisation epoch.

    All symptoms point to a Dark Age ahead. We’re all living in a civilisation of terminal decline. I shake my head in disbelief at many posters on this site who appear to believe that we can gently live simpler lives while holding hands in love and harmony. Let me tell you what goes out in a time of collapse: equality; respect for the weak; democracy; honesty; rule of law; anti-racism; order. This is what comes in: hatred; fear; violence; racial slaughter; tribalism; starvation and deprivation; chaos.

    So I agree with you that this time is truly different, but not because we’re on an eternal boom (aka economic nirvana). It’s different this time because as a civilisation we’re going bankrupt; we’re consuming everything including our oil, our culture, our minerals and via the central bank-political class… our currency!

    I gave you a thumbs-up, not because I agree with you but because you’re thinking differently, which is what I admire.

    Side note: don’t worry about people calling you an idiot TimAyles … I get called it, and worse, all the time. I reply in kind with frightful curses and shocking obscenities. If they get you over an intellectual barrel give then give them the proverbial “speak to the hand” response (always irritating to those who thought they were engaged in an intellectual discourse with a reasonable person, lol). After that log off and throw a fit of rage, kicking the furniture and screaming shocking profanities at the household and neighbors. Sulking over a date with Jim Beam also helps. Oh… and I double-up on my meds.

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  • Sat, Oct 12, 2019 - 6:28pm

    Reply to #6

    Rector

    Status Bronze Member (Offline)

    Joined: Feb 07 2010

    Posts: 331

    2+

    Not bad

    Dark, but not entirely inaccurate IMO.

    Rector

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  • Sat, Oct 12, 2019 - 6:36pm

    #8
    Steve

    Steve

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    Posts: 21

    7+

    One Day at a time.

    They will steal everything we have, one QE at a time … one discount rate reduction at a time.  One war at a time.  One bailout at a time.  One iceberg/icesheet at a time.  One species at a time.  How long can this last?  It can last until you are out of savings (and you may be too old by then to complain, or dead.)  Until all but the super wealthy are completely bankrupt.  The well is deep, my friend and there is still plenty of water in it.  “They” will not stop at implementing extraordinary measures to keep the party going.  When the impact of these measures dry-up, there will be more.  They will never cease to surprise us.  Go listen to George Carlin’s “Big Club Rant” and strap in for the whip-saw rocket ride.

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  • Sat, Oct 12, 2019 - 7:35pm

    #9

    sand_puppy

    Status Platinum Member (Offline)

    Joined: Apr 13 2011

    Posts: 1961

    5+

    Very negative view of the future

    Though I most certainly do not KNOW what the future holds, I suspect that there is a strong chance that it will be very dark.  Many of us here suspect this.

    How do we prepare for that?  Both the uncertainty, and the range of possibilities, including, perpetual growth.

    The “Blue Church” narrative (“the Matrix”) has faltered.  How will the elite maintain  dominance during a stuttering descent / crash when they cannot fully control the narrative?

    Hong Kong may give some clues.

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  • Sat, Oct 12, 2019 - 8:26pm

    Reply to #6
    gkcjrrt

    gkcjrrt

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    Posts: 19

    2+

    While I don’t think that QE  can eliminate the business cycle and prevent recessions, I agree that it can mitigate/attenuate them and extend the cycle.  It may be able to do this somewhat indefinitely IFF:

    1) the rest of the developed worlds CB’s also do it (check) – so there is no risk of capital flight from the US and things remain balanced at least as far as the price and quantity of money/credit across the world is concerned AND

    2) CONfidence in the system is maintained -the biggest threat I see here is the political situation we have at present in the U.S. – economically, things appear pretty good to the masses I would presume at present

    I don’t believe the FED cares about the stock market more than it does the stability of the banking system and the preservation of the wealth of the “owners” of the system.  The FED continues to support the market IMO b/c the “dumb” retail money has not joined the decade long equity rally en masse, and the owners hold the overvalued equities and have been unable to distribute them to retail – as always happens in equity market cycles (see Charles Dow’s theory on the the 3 trends of a market cycle).  A rapid and sustained push higher in equities to pull in the dumb money and get the blow off is needed for the owners to liquidate to retail.

    The system however must end (be reformed) to eliminate usury b/c of the rank injustice of it.  Making money off of money without real labor (read creating wealth not working to flip assets or extract surplus labor value) is contrary nature – and it is this which usurious banking and the CBs are meant to protect.

     

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  • Sat, Oct 12, 2019 - 9:20pm

    Reply to #7
    TimAyles

    TimAyles

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    Joined: Oct 12 2019

    Posts: 2

    1+

    Thanks for the thoughtful replies

    I hate to keep sending you to my articles, because SA will pay my $.01 for you view….. therefore I have a conflict of interest. But….. it will save me much more time to give you a link .vs writing it all out again. I think this article will give my perspective in regards to some of your points:  https://seekingalpha.com/article/248003-the-end-of-america-not-quite

    Have a great rest of the weekend. I’ll check back during the work week!

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  • Sat, Oct 12, 2019 - 10:46pm

    #10

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3206

    2+

    margin debt vs SPX

    This is a very long running timeseries – US margin debt and SPX.  They are usually very closely aligned.  Right up until just this past year, when SPX made a new high, while margin debt is continuing to move lower.

    Expanding margin debt supports higher equity prices.  Certainly inflows from the rest of the world can take its place, as can QE, as can stock buybacks, but you can see the pattern since 2008: margin debt doesn’t contract when SPX rallies.

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  • Sun, Oct 13, 2019 - 5:14am

    #11
    brushhog

    brushhog

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    Posts: 59

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    I don't know whats going to happen

    ….and neither does anyone else. Thats a scary thing to consider. Its hard to just say “I don’t know” and trust in the universe to deliver you. Unfortunately that is the situation we are all in. Alot of people predicting doom in our future but the reality is YOU DON’T KNOW. You are looking into a black hole and filling it with your own fears. There’s an old saying “when man looks into the abyss, he sees himself staring back at him”.

    That means you are looking into nothingness and therefore whatever you see is simply a reflection of yourself. The mind tries to paint a picture and create something that makes sense but whatever it creates can only have come from the mind itself and is therefore only a reflection of it. There’s nothing to cling to.

    We are all mortal and therefore doom is in all of our futures. I am trying to take a more positive [ or at least neutral ] approach. As Shakespeare famously quipped “there is nothing good or bad but thinking makes it so”. This concept is reflected in many ancient traditions from stoicism to taoism and certain types of buddhism.

    The concept is simple and exemplified in this analogy; If you fall into a river you suddenly lose control of yourself and are swept along by the current. If you stiffen up and cling to yourself fighting the will of the river with your own you will be dashed on the rocks and drown. If you surrender yourself and allow the river to take you as it will, staying loose, going WITH the current rather than fighting against it, you will stay afloat and be carried safely past the rapids.

    So if you see “doom”, which is a reflection of your own fear, and ‘clinch up’ preparing for impact you will inevitably be dashed against the rocks of life.

    In that vein, I am trying to remain neutral in the face of the unknown. Neither bracing for impact nor being so nonchalant that I get flipped on my belly. Staying loose and supple, ready to ‘go with’ the current and careful not to impose my own fears  upon it. Neither clinging to hope nor impending doom….and always, ALWAYS enjoying the ride.

    This, my friends, is the art of living.

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  • Sun, Oct 13, 2019 - 5:43am

    Reply to #7
    Steve

    Steve

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    Posts: 21

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    In hindsight, everything is coming up roses ... as long as we have perpetual growth, that is.

    TimAyles, thank you for your articles.  You did earn a few cents from my clicking, I suppose.  And I did read them.

    Ah, the magic of statistics and averages.  If only we were all shaped into a bell curve.  Let’s say there is an 85% chance of survival after a particular cancer treatment.  On the average, 85% of the people survive.  However, for those 15% who did not survive,  they are not 85% alive and 15% dead.  They are 100% dead.  Similarly, for those who did survive, they are 100% alive, although at varying levels of vitality (or lack there of).  But, the averages are nice to talk about.

    It’s like the farmer, who replied when asked if it was painful when he castrated the bulls by slamming two bricks together, “as long as you keep your fingers from between the bricks, you don’t feel a thing.”  I guess the bulls weren’t included in the sample set.

    In your argument, productivity continues to improve.  Costs, relative to earnings continue to improve.  There is a continued replenishment of the system … into perpetuity.  That’s all great, looking back, and with an eternally productive work force. But, not so good looking forward.

    Unfortunately, your argument assumes a static view of the sample set with perpetual replenishment of productivity.  In reality, over time that the older members of that sample set are retired and replaced by newer, more productive workers.  The “used-up” workers end up living on the numbers below the averages.  At some point in time, our ability to earn the average wage declines and ends … with 30 or 40 more years of life remaining to live on our savings from previous years.  Since they no longer earn wages, how can they even be included in the sample set of costs vs. average wages?

    Looking back, everything is great.  We (those no longer working) had a good run and we fed the machine.  However, looking forward, we find the purchasing power of our savings is destroyed without taking on larger and larger levels of risk … that is, we no longer have the ability to physically participate in the perpetual growth of earnings and productivity increases.

    Without the perfect hedge, increasing levels of risk will by definition diminish our savings as will continued risk free interest at rates below inflation.  It’s a no win scenario.  Averages are nice, as long as one can work forever at increasing levels of productivity.  Such a limit function, the human condition (and ecosystem) does not support.

     

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  • Sun, Oct 13, 2019 - 11:02am

    Reply to #11
    ao

    ao

    Status Platinum Member (Offline)

    Joined: Feb 04 2009

    Posts: 943

    4+

    well stated

    brushhog,

    Thank you for so eloquently stating a mindset very similar to the one that I was lead to after my “awakening” was initiated by this site over 10 years ago.  I am going to cut and paste and perhaps edit what you said a bit and keep a print-out of that page at hand as a reminder and an inspiration   Rather than a survival mindset, I would call it a “living mindset”.  I’m reminded of two of the top proponents of Russian Systema, Mikhail Ryabko and Vladimir Vasiliev, both Russian Orthodox Christians as well as former Spetsnaz warriors of consummate abilities.  They are caring and compassionate humans of good will who value and enjoy life and yet have the knowledge and skills to protect themselves and their loved ones from as much as any human being can.  They are balanced human beings who, in the most realistic manner, understand the dangers of life but just as fully understand the importance of overcoming fear and not allowing it to control your life.

    I look around the world and see Hosea 4:6, “My people are destroyed for lack of knowledge”

    And then I meditate and pray and hear Psalm 46:10, “Be still and know that I am God”

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  • Sun, Oct 13, 2019 - 2:58pm

    #12

    charleshughsmith

    Status Bronze Member (Offline)

    Joined: Aug 15 2010

    Posts: 691

    8+

    Labor and Energy Are Finite, But Money Is Infinite

    Central banks have played a game for 19 years: create “money” (fiat currency)  to inflate asset bubbles to generate the illusion of growth. As everyone here knows, energy is finite while “money” can and will be created in near-infinite quantities.  Labor is also finite, so the purchasing power of labor will continue to decline as every additional unit of currency devalues every existing unit of currency.

    The federal deficit is $1 trillion and will rise to $2 trillion in the recession. Then Universal Basic Income (UBI) will add another trillion.  The only politically and financially expedient “fix” is to create more “money” to placate entrenched interests, elites and the disenfranchized masses who are losing purchasing power.

    The collapse of the purchasing power of all fiat currencies is already baked in: labor and energy are finite, while “money” is infinite. When will this become self-reinforcing and unstoppable? They’ve duct-taped the system for 19 years, I doubt that will work for another 5 years.  Everybody talks about 2030 or 2050, I think the system will implode by 2025. Beneath the surface, the structure is already collapsing, evidenced by the dire need to extend “emergency measure” for a decade and restart those measures after a brief attempt to live without the opioid drip of central bank “money” creation.

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  • Sun, Oct 13, 2019 - 3:20pm

    Reply to #12
    MillenialFalcon

    MillenialFalcon

    Status Member (Offline)

    Joined: Oct 29 2016

    Posts: 7

    Adam or Chris - Repo Question

    Everything I hear about the Repo Market is that it’s “overnight” lending.  I don’t understand that term.  Does that mean the next day the Fed gets the money back its “lending?” Or does the word “overnight” mean something different? It doesn’t seem like “overnight” lending would increase the balance sheet beyond the next morning…

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  • Sun, Oct 13, 2019 - 3:48pm

    Reply to #7
    CrisisMode

    CrisisMode

    Status Member (Offline)

    Joined: Dec 21 2011

    Posts: 29

    1+

    Your articles are nonsense.

    Wake up and smell the roses.

    All the articles you post are pure propaganda.

    The sooner you realize this, the better your outcome will be.

    Read it and weep.

     

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  • Sun, Oct 13, 2019 - 3:58pm

    Reply to #7
    CrisisMode

    CrisisMode

    Status Member (Offline)

    Joined: Dec 21 2011

    Posts: 29

    1+

    Unwise investments . . .

    . . . derived from unwise life decisions.

    Had you invested in gold in the ’90s, you would be very well off right now.

    Buying at $250 and $350 per ounce was a no-brainer back then.

     

    But, instead, you chose to put your money into the ”’Market””.

     

    And so it goes.

     

     

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  • Mon, Oct 14, 2019 - 3:04pm

    #13

    Adam Taggart

    Status Platinum Member (Offline)

    Joined: May 25 2009

    Posts: 2639

    2+

    Does This Sound Like You?

    I asked the partners at New Harbor Financial, Peak Prosperity’s endorsed financial advisors, to elaborate on the “overexposure” risk I mentioned at the end of my article above.

    Here’s their reply:

    Recently, when people seek us out to get an opinion on their investment portfolio, we often find that they are over-allocated to stocks relative to their risk appetite and concerns.   Most of the time, these folks don’t understand the amount of risk they are taking, or what their overall exposure to equities and other risks assets is.  It is very common for these portfolios to be greater than 60% in stocks, and for the investments to be very highly correlated to the S&P 500, even if they own several different mutual funds.  Our most important objective is to help them understand the risk they are taking and to make sure it is consistent with their stated risk tolerance and current concerns.  Often, we find there is a glaring inconsistency between the two, and we therefore encourage them to reduce risk right away. Everyone’s financial situation is different, but for most we urge them to reduce exposure to stocks, particularly US stocks, to a level as low as they feel comfortable doing.

    If this ‘over-allocation’ to stocks sounds uncomfortably like you & your current portfolio, please make time soon to review your positions with your professional financial advisor and/or schedule a free, no-strings-attached consultation with New Harbor to get their feedback.

    Given the importance of the matter, I can’t think of a good reason not to make this a top near-term priority.

    As I mentioned above, “a short conversation and a few prudent decisions now can mean a world of difference to how your financial wealth fares going forward.”

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