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Off The Cuff: Buy The @%&^ Dip!

This phrase will be a widow-maker in the next downturn
Thursday, May 25, 2017, 5:20 PM

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

  • Fake, Fictitious Markets
    • None of today's prices is justified by the underlying data
  • Death By Drowning
    • Too much liquidity is killing our markets
  • Housing Bubble Trouble?
    • Prices now declining in the San Francisco Bay Area
  • Buy The @%&^ Dip!
    • What will happen when this universal strategy no longer works?

After last week's brief re-emergence of volatility in the financial markets, the world's various sovereign plunge protection teams have been hard at work flooding liquidity into the system to push prices back up. Losses will not be tolerated!

And so the "Buy the dip!" crowd is victorious once again. This strategy, mindless as it is, has worked extremely well over the past 6 years -- due to an ever-present influx of 'thin air' $billions supplied by the central banks. But for many reasons, that mindless approach can't -- and won't -- continue forever. And likely not for much longer. » Read more

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Prepare For The Great Global Contraction

How hard will we hit the ground?
Friday, May 19, 2017, 8:01 PM

Executive Summary

  • The repercussions of the Fed's Free Money Machine
  • Why debt-funded state control stagnates productivity
  • The importance of the 8-year cycle
  • What should guide investors' focus and decisions

If you have not yet read Part 1: How Long Can The Great Global Reflation Continue? available free to all readers, please click here to read it first.

In Part 1, we asked these questions: can we just keep doubling and tripling the economy’s debt load every few years? What if household incomes continue declining? Are these trends sustainable?

In the near-term, we asked: is this Great Reflation running out of steam, or is it poised for yet another leg higher? Which is more likely?

Let’s start by looking at the mechanism that funds the government’s deficit spending, i.e. its ability to borrow and spend enormous sums of money year after year.

The Free Money Machine

The state can afford to continue or increase fiscal stimulus (deficit spending) because the central bank (the Federal Reserve) has created what amounts to a free money machine. Here’s how the machine works.

The federal government issues $1 trillion in new bonds to fund another $1 trillion in deficit spending. The central bank (Federal Reserve) creates $1 trillion with a few keystrokes, and buys the $1 trillion in bonds with newly created money.

The Federal Reserve earns interest on the $1 trillion in bonds it now owns, but it returns this income to the Treasury, minus the Federal Reserve’s relatively modest expenses of operation. Let’s say the bonds carry an interest rate of 2.5%.  The government pays the Federal Reserve $25 billion in annual interest, and the Federal Reserve returns $20 billion annually, so the net cost of borrowing and spending $1 trillion is an insignificant $5 billion.

If this isn’t entirely free money, it’s extremely close to free money.

So in ten years, the Federal Reserve owns $10 trillion more in federal bonds (assuming the bonds are long-term and didn’t mature).

It's no wonder that some economist propose... » Read more

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Off The Cuff: Volatility Attacks!

The market calm is suddenly shattered
Friday, May 19, 2017, 2:03 AM

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

  • Volatility Attacks!
    • The market calm is suddenly shattered
  • Trading A Credit Crisis For A Currency Crisis
    • How all this ultimately ends
  • Misuse & Abuse Of Power
    • Is the norm these days, not the exception
  • The Coming Reset
    • Yes, it will be painful. But let's focus on what we want to come afterwards

In this week in which volatility in the markets -- which has been MIA for longer than any other time in history -- has suddenly come roaring back, Chris and John focus on the inherent fragility of the financial system, which is now utterly dependent on continued central bank subsidization. 

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. » Read more

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How To Be

True change starts from within
Friday, May 12, 2017, 9:02 PM

Executive Summary

  • Understanding The Ego & How It Can Be Manipulated
  • Shifting Our Own Minds
  • Creating A World Worth Inheriting
  • Becoming The Change We Wish To See

If you have not yet read Part 1: The Way To Save Ourselves available free to all readers, please click here to read it first.

In beginning to tackle this big topic, first, let's take a closer look at the ego.

The Ego

Humans are indeed set apart from the other sentient species on the planet such as dogs, elephants, whales, and dolphins. But what makes us 'special’ is not the use of language or tools. Plenty of other animals make use of both.  Humans seem to be unique in having an ego. 

The ego is the part of the mind we interact with (almost) entirely each day. It mediates between the conscious and unconscious parts of ourselves, and is how we interact with the world. It forms our sense of personal identity.  For most people it's a fair statement to say they are their ego.  They identify with it fully, just as I did with mine until not that long ago.

The ego thinks, assumes, that it is everything about you

One feature of the ego is that it is always, and forever, in a state of wanting.  It needs more and more and MORE all the time.  The ego sets goals and attains them, but is rarely if ever satisfied by reaching a goal.  If it obtains one, it immediately sets a new one. Therefore it remains in a perpetual state of wanting as it strives towards each new goal.

Ekhart Tolle, who has had a huge impact on my thinking, puts it this way... » Read more

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Off The Cuff: Too Many Balls In The Air

Why the central banks will ultimately crash the markets
Friday, May 12, 2017, 3:26 PM

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

  • Too Many Balls In The Air
    • The central banks are losing control of them all
  • Growing Risk In Europe
    • Macron's victory masks huge looming problems
  • Without Continued Central Bank Balance Sheet Expansion...
    • ...The markets will crash
  • Things Don't Matter Until They Do
    • Why the crash will happen unbelievably quickly

This week Chris and Mish enumerate how completely dependent today's financial market prices are on the continued expansion of central bank balance sheets around the world.

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. » Read more

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Off The Cuff: Sowing The Seeds Of Our Self-Destruction

Our broken culture is failing us and our progeny
Thursday, May 4, 2017, 4:11 AM

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

  • Our Sick Culture
    • Disconnected and depressive
  • We Are Deficient In Meaning
    • More & more of us live without purpose and value
  • Emotional Resilience
    • Each of us has the ability to chart a better course
  • Engaging Others
    • How to help others break free, too

This week's Off The Cuff takes a more existential turn, as Chris and Charles focus on the many broken elements of today's culture, and the toxic effects they have on our quality of life. With so much social disconnectedness and disappearing prosperity, more and more of the population is simply surviving as opposed to living.

To have quality of life, it is becoming more important than ever for each of us to become the captain of our own destiny, and seek to break out of the current our culture is dragging us along with.

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. » Read more

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Keep Your Eye On The Ball

What the France election tells us about the world economy
Monday, April 24, 2017, 4:13 PM

For investors and regular folks just trying to protect and growth their wealth, now is the hardest of all possible times.

As we've written extensively about here at PeakProsperity.com, we're living through the Mother of all Financial Bubbles. Simply maintaining this sham is requiring the world's central banks to inject an enormous amount of thin-air money into the markets. Every. Single. Day.

Everything has become distorted. Price signals are completely broken and mean nothing. Fundamentals? They haven't mattered for nearly a decade. It’s very, very hard to maintain one’s perspective during such a time.

And things get even more nuts each time a critical election occurs, as we just had yesterday in France. » Read more

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The Coming Conflagration

Prepare for it before things explode
Friday, April 21, 2017, 8:26 PM

Executive Summary

  • Have overt central bank propping efforts created a bubble in asset prices?
  • Will these overinflated markets EVER collapse?
  • What to expect when today's smoke turns into tomorrow's conflagration
  • Which assets are most sensitive to a price correction if the central banks' efforts fail?

If you have not yet read Part 1: Where there’s smoke... available free to all readers, please click here to read it first.

Question #2: How much does overt central bank propping have to do with their elevated prices?

Overt propping of the stock and bond markets also happens with some regularity.  First, at the macro level, dumping hundreds of billions of freshly printed currency units into the financial markets each month without any question whatsoever, plays a huge role in keeping them elevated.

One the one hand you have the central banks talking at every turn about how they are confident in the economy, that they feel the data is good, if not solid, and yet you have them dumping money into the financial “”markets”” (double quote marks because one is no longer sufficient to convey how unreal they’ve become) at the fastest pace in all of recorded history through the first 4 months of 2017; $1 trillion dollars(!!).

(Source)

If you were wondering why these markets are having such a difficult time going down, $250 billion a month goes a long way towards helping you appreciate why that’s the case.

It’s an astonishing number, and I want you to appreciate the fact that central banks would not be dumping record amounts of thin-air money into the ““markets””

The next point is that... » Read more

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Off The Cuff: The Era Of Easy Money Is Over

Debt-funded stimulus no longer yields an increase of GDP
Thursday, April 20, 2017, 8:44 PM

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

  • Sovereign Sabre-Rattling
    • Suddenly, the world became a lot less safe
  • Market Misdirection
    • The central planners are doing their utmost to paint a positive picture
  • The Era Of Easy Money is Over
    • Debt-funded stimulus no longer results in an increase of GDP
  • How This All Will End
    • Exploring the likely pins that will pop this "mother of all bubbles"

Chris and John look at the disconnect between world events and stock prices and urge folks not to misled: risk is high, and getting higher. There is *no* rational reason for the current price levels in financial markets -- only gobs and gobs of liquidity being force-fed into the system by the world's central banks.

But the data is increasingly showing that the era of "easy money" we've lived under since the Great Recession has reached its inevitable terminus. Shoving more debt into the system is no longer boosting GDP. We are now simply blowing bigger asset bubbles that will monumentally destructive when they burst -- as they must.

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. » Read more

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The Benefits & Challenges Of Maintaining A Retreat Property

Be smart when making the decision to purchase one
Friday, April 14, 2017, 6:18 PM

Executive Summary

  • The matrix of factors to consider in a Plan B residence
  • What to know abot eacf of the five key factors
  • Not all second homes are fully functional
  • The challenges & benefits of maintaining two separate fully functional residences

If you have not yet read Part 1: Does Your Plan B Include a Second Place to Live if Plan A Doesn’t Work Out? available free to all readers, please click here to read it first.

In Part 1 we reviewed the three basic categories of Plan B Residences: temporary (to ride out an emergency); semi-permanent (to weather a recession/loss of income) and permanent (replacing Plan A residence with Plan B residence).

In Part 2, we’ll consider a Matrix of Factors that will help us choose the inevitable trade-offs of costs and benefits, and add a category—permanent maintenance of two fully functional residences.

The Matrix of Factors

While there are many factors in any Plan B, I’ve pared the key factors in Plan B residences down to five: cost, control, security, depth of resources and functions enabled. Each is on a sliding scale from low to high. There are costs and benefits to each being low, medium or high.

Let’s go over each factor.

Cost:

While cost measured by price is self-explanatory, this also includes opportunity costs (what else could have been accomplished with the money?), time (the hassle factor of how long it will take to get something done) and labor—how much labor must be invested to accomplish a goal.

There is even a stress cost: how much will this goal/project add to my stress load? Even if the money needed is on hand, the overall cost can be high in terms of time, hassle, stress and opportunity cost.

Control:

By this I mean ownership (of the land, the house, etc.), contractual control (of jointly owned assets, of any hired labor, etc.) and functional control, i.e. residency.  As many have discovered to their regret, it’s possible to have legal ownership/control but end up with effectively zero functional control, as your house might be occupied by squatters or family members who morphed from allies to enemies.

Control is important because... » Read more