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Preparing For The 'Big One'

The damage of the next true market crash will be staggering
Friday, October 12, 2018, 6:54 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, 11:29 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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WARNING: The Markets Are Suddenly Looking Very Sick

Why this may be the long-awaited turning point downwards
Friday, October 5, 2018, 12:59 PM

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

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Off The Cuff: Why The Government Allows Corporate Rackets

There's just too much money in play
Thursday, September 27, 2018, 8:20 PM

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

  • The Impact Of Natural Disasters
    • There are always surprise ramifications
  • Unequal Oversight
    • Corporations skate free while individuals get nailed
  • Why The Government Allows Corporate Rackets
    • There's just too much money in play
  • Where Is The Tipping Point?
    • When does the abused populace say "No more!"

The government is not famous for its efficiency, or for its fairness. In many cases, that's intentional -- particularly when you look at the incentives in play. Charles explains why our crony capitalist system is allowed, and even protected from enforcement: it's simply too cheap for corporations to influence government policy, regulation and oversight.

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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Peak Prosperity

What I Am Personally Doing To Prepare Right Now

You've asked. I'm answering.
Thursday, September 27, 2018, 6:19 PM

Executive Summary

  • Enough with the problems already. What are you doing, Chris?
  • But first: My big personal reveal
  • Re-building resilience from scratch
  • The list of specific actions I've made my priority this year

If you have not yet read Our Delusional Economy Is Poised To Slam Into The Brick Wall Of Reality, available free to all readers, please click here to read it first.

Our mission at Peak Prosperity is to "Create a world worth inheriting".  The way Adam and I pursue that is by surfacing models of resilient living and doing our best to become the change we wish to see.

Both of us have spent years on this website chronicalling the many liefstyle changes we and our families are making (gardening, farming, nutrition, fitness, home schooling, homesteading, etc), sharing the learnings of our successes and failures, and hopefully insipring others that, if we can do it, so can you.

We constantly encourage our readers to invest across all Eight Forms of Capital both as a means of being more personally resilient to face an uncertain future, and to begin living in ways that support both current and future life on this planet.

I’ve written a lot and will write even more on the difficulty of staying focused and keeping on track during bubbles.  It’s hard!

When the stock markets are continually jammed higher, and the newspapers are constantly touting malarky that distract us from what’s truly important, staying properly oriented can become a full-time job.

Many people I’ve talked to lately are tired of "problem definition". They fully know we're on a bad path. What I'm hearing more and more is: What should we do about it? What are you, personally, doing about it in your own life?

I get it the frustration, as well as the craving for specific guidance.  I really do. 

So in this report, I fully open the kimono and share what I've been focusing on most this year to make my life more resilient.

But first, I have something important to reveal... » Read more

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Off The Cuff: Why Does Our Society Refuse To Learn From Its Past Mistakes?

Our self-delusion is courting disaster
Friday, September 21, 2018, 12:30 AM

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

  • Our Inability To Learn From The Past
    • Society is much less resilient because we keep making the same mistakes
  • The Litany Of Potential Future Calamaties
    • There's a growing risk too many will arrive at the same time
  • Currency Crises All Over The Globe
    • When will they start taking the dollar and Euro down with them?
  • The State Of Cryptocurrencies
    • Down nearly 80% since December. Where to next?

Recorded last week as Hurricane Florence was just arriving at the North Carolina shore, John and Chris noted how our chronic vulnerability to hurricanes and our inability to change our real estate development approach in light of them is symbolic of our society's self-imposed courting of disaster.

We could learn our lessons from the disasters we suffer, and adopt better behaviors afterwards. But we don't. We prefer to self-delude with magical thoughts that, despite the latest insult, we'll be spared in the future.

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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The Easy Way To Secure A Better Future For Yourself

Change is coming. So change now, on your own terms.
Friday, September 14, 2018, 6:51 PM

Executive Summary

  • The noose is tightening around the neck of the 99%
  • Cutting through the "bullshit" data we're being deluged with
  • The Easy Way to secure a better future for yourself
  • Moving ahead with integrity

If you have not yet read Bad Money, available free to all readers, please click here to read it first.

The longer all this goes on, the harder it is to stay on point, remaining focused and keeping preparation efforts moving forwards.

Some of you have done all the preparing you plan to do, and find that “keeping abreast” of all the discouraging news comes at a price, and have wisely decided to limit your intake of new news to preserve your happiness and in the interest of preserving your energy for other important matters. I get it.

For everybody else, this is all dragging on for much too long. Can’t we just get on with things already? How much more information do we really need that it’s time to stop our (self) harmful behavior, and begin doing a host of other entirely new, constructive and necessary things?

For example, stop attempting to grow at any cost. And begin investing in regenerative and life-supporting activities.

However, for many, the collapse has already arrived. It just hasn’t been called that yet in the newspapers and on TV, so people just lack the proper frame of reference. It’s really a matter of perspective.

For the people who are already struggling under mountains of student debt, or homeless, or unable to afford medical care, the collapse has already begun. For many, opportunities to advance have already evaporated; and they're stuck in a slow, steady, out-of-control decent into a future of "less".

What do we predict a long emergency style collapse will look like? It arrives with a slow erosion of dreams, a steady decline in the ability of the marginal bottom-of -the-monetary-pyramid players to survive.

In other words, it will look like this... » Read more

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Off The Cuff: Expect More Interest Rate Hikes

Hikes that the market has not yet priced in
Thursday, September 13, 2018, 12:20 PM

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

  • Contagion Risk
    • Where will the Emerging Markets melt-down end?
  • Inflation On The Rise
    • Now cresting above 2%
  • More Fed Rate Hikes Coming
    • Not yet priced into the market
  • Gold/Silver Ratio
    • What is today's extreme level telling us?

Recorded last week, Axel -- who has close access to Federal Reserve insiders -- explains why he predicts the Fed will hike rates higher than the market currently expects.

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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Off The Cuff: Why The Market Has To Crash

Too much bad debt
Monday, September 3, 2018, 2:25 PM

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

  • Tax-Cut Sugar-High
    • Corporate earning shoot the moon, but wages are little changed
  • Emerging Markets Deja-Vu
    • Crisis always follows borrowing too much debt from foreign creditors
  • Our Captive Political System
    • The democratic dream has long been suffocated by those who control DC
  • A Gold Suprise?
    • Historical precendent strong suggests gold will rebound sharply soon

As the markets hang at record highs (yet again), Chris and Mish revisit the data -- are these levels justified by the data?

A fresh look makes it very hard to defend them. And while there are lots of reasons to support that conclusion, the core one is the same as it was prior to the 2008 crash: Too Much Bad Debt.

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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The Outlook For The Markets Is Deteriorating Fast

Countries all over the globe are suddenly failing
Friday, August 31, 2018, 7:57 PM

Executive Summary

  • The evidence that the dominant social narrative is breaking down
  • The Emerging Market spark may ignite a broad market conflagration
  • Financial market complacency is completely unprepared for such a risk
  • And escalating risk of conflict in the Middle East threatens to make the situation a whole lot worse

If you have not yet read The Whole System Is Rigged, available free to all readers, please click here to read it first.

An Emerging Nightmare

About the kindest thing I can say about the reckless $trillions the central banking cartel flooding the world with is that they gave us more time to get our preparations in order. I certainly hope you used that time wisely.

So what happens when every financial market around the globe has been dangerously inflated by massive money printing?

Those enormous flows that were virtuous on the way out will be vicious on the way back in. 

And don't forget: as a combined group, the big central banks are still expanding their balance sheets today.

Yet despite that, the weaker players on the board are beginning to flounder severely:

Every single country on that list that is the proud holder of US denominated debt is now facing serious difficulties.  Worse, the situation compounds itself as all of the debt holders have to sell their local currency in increasing amounts to buy the dollars with which they will pay off these debts. 

The more they sell, the weaker their local currency gets.  The weaker it gets the more they have to sell. It's this dynamic that then bleeds over into their local stock markets.  Companies being crushed by external dollar-denominated debts see their interest costs spike higher and higher.  Very rapidly this crushes their income stream, so their stocks fall in price.

The contagion is spreading, quite rapidly too.  It’s well beyond a single story that we can confine to the particulars of Turkey or Argentina.  It now involves India, for heaven’s sake!

Next up is the big kahuna – the debt crisis that results when the individuals and companies toss in the trowel and declare bankruptcy or simply stop paying off their loans or debts.  This is when the debt crisis starts.

The ramifications of all this are... » Read more