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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

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Library of Congress

Off The Cuff: Swamped!

The "swamp" isn't draining. It's overflowing at this point.
Wednesday, August 29, 2018, 12:07 PM

In this week's Off The Cuff podcast, Chris and James Howard Kunstler discuss:

  • Complicit Insiders
    • Nearly everyone in DC has their hand in the cookie jar
  • No Heroes
    • There are no "good guys" left. Just varying degrees of criminals.
  • Not A US-Only Phenomenon
    • Most other countries/regions are as "swampy" as America (or worse)
  • A Hard Re-Set May Be The Inevitable Outcome
    • It's increasingly looking like a breakdown will occur. That may be the chance we need for real change.

James Howard Kunstler sits down this week to explain why he sees a systemic breakdown -- or "convulsion" -- is likely ahead, and why that may be our best opportunity to re-orient society on a saner path; provided we have the courage and smarts to abandon the 'leadership' and behavior that got us to this breaking point.

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: The Real Emerging Market Danger Lies In Asia

The debt bubbles there can gut-punch the world economy
Wednesday, August 22, 2018, 11:38 PM

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

  • Commodity Carnage
    • Not just due to a strong dollar
  • Argentina Is Faltering
    • Its currency is collapsing (yet again)
  • More Trouble In Turkey
    • Threatening the EU banks who loaned it billions
  • The Real Threat
    • Asia is where the real damage will occur

Recorded last week, Wolf Ricther explains why the real Emerging Market contagion risk lies not in Turkey, or Venezuela or Argentina or Brasil -- but in Asia.

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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Bloomberg, ILLUSTRATION: 731

The Emerging Market Contagion Threat

How Turkey & the other EM countries can crash the world
Friday, August 17, 2018, 7:11 PM

Executive Summary

  • The dangers of contagion from Turkey
  • Which other countries pose an even bigger threat?
  • How I'm accelerating my personal preparations
  • Why the next crisis will happen swiftly when it arrives 

If you have not yet read We Are All Lab Rats In The Largest-Ever Monetary Experiment In Human History, available free to all readers, please click here to read it first.

It's Time To Talk Turkey

“Talking turkey” is an idiom which means to talk serious business or to talk frankly.  So let’s talk Turkey. 

Turkey, the country, is currently in a major currency crisis and heading towards a sovereign debt crisis.  

Its self-inflicted wounds include piling on massive new debts and making a big bet that the US dollar would continue to weaken, which it did not.

The huge predicament facing Turkey is that many of its debts are denominated in dollars and euros. So as the Turkish lira fell, those debts became more and more expensive for their holders to service. Just this year alone, the Turkish lira has fallen by nearly 40%(!) against the dollar.

Imagine that you're a Turk with a mortgage denominated in US dollars. Suppose it was for $200,000 and your payment in local currency was 5,625 lira ($1,500) for the month at the beginning of the year.  Today, your payment would be 9,090 lira (still $1,500) to account for the dollar translation.

Ouch!

That’s happening to businesses and consumers alike across Turkey.  To help ease the pain, the authorities are busy allowing inflation to run rampant which gives people more lira to work with. But that’s a two-edged sword that also causes the value of the lira to continue to fall against external currencies.  So it buys a bit of time, perhaps, at the risk of a full blown currency collapse that leads to a major sovereign debt crisis.

The effects are already rippling through the European banking system. We see that clearly here in... » Read more

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Off The Cuff: Why Most Will Remain Unaware Until Its Too Late

The masses are focused on the wrong signals
Thursday, August 9, 2018, 9:35 PM

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

  • The Folly Of Pursuing Infinite Growth On A Finite Planet
    • Limits simply matter
  • The Signs Of Limits Are All Around Us
    • Depleting resources, stagnating wages, weakening economies
  • Few See The Signs Though
    • The "noise" of politics, media & markets distracts the masses
  • Where To Direct Your Focus
    • What to watch to track the onset of the approaching crisis

This week Chris gives a 30,000-foot view of the big predicaments facing our global society. Most of the signals of the arriving crises won't be tracked by most people -- draining aquifers, species loss, declining net energy. The masses are only going to pay attention when the signaling media they focus on -- the financial markets, the news reports, the unemployment rate, home prices  -- start to show panic. By then, it will be far too late to avoid the unfolding pain.

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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Mark Mulligan

Building Resilience In A Warming World

Preparations for a world on fire
Friday, August 3, 2018, 3:46 PM

Executive Summary

  • Future shock (on track, unfortunately)
  • Hope for the best, plan for the worst
  • What too little water means to those living without reliable rains
  • Planning for too much water
  • How great garden soils mitigate...well...practically every ill
  • Electricity at risk.  Plan accordingly.
  • Storms and rising seas.  Got any coastal real estate in low lying areas?  Get rid of it.

If you have not yet read Time For Some Climate Honesty, available free to all readers, please click here to read it first.

Truth be told, I would prefer to live in a world that is 3 degrees warmer than 3 degrees cooler. Ice ages and cooling are associated with crop failures and famines. In New England, where I live, there was a mile or two of ice overhead as recently as 10,000 years ago.

I love my garden here in western MA and know nothing at all about how to grow veggies on top of a mile-thick sheet of ice. I suspect it’s difficult.

So I guess that’s the best spin I can put on it. Warmer is better than colder, all things being equal.

However, beyond that there are a growing number of new risks that we need to take into account. Heat waves. Too much rain. Too little rain. Punishing arctic cold making winters long and delaying spring planting. Crop failures.

These are all things that I laid out in the Crash Course back in 2008. Here’s what I said about the convergence of dangerous trends in the... » Read more

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The Coming Valuation Crisis

And why it will be so difficult to contain
Friday, July 27, 2018, 6:49 PM

Executive Summary

  • The Fed's inability to recognize the true dynamics of the 2008 crisis has re-inflated a market bubble and unfairly rewarded the big banks
  • More credit/liquidity cannot solve valuation/collateral crises. But that's exactly what central banks tried to do -- creating today's "Everything Bubble"
  • How the Crisis of 2018/2019 will differ from 2008
  • Why this time, the Fed's fixes will be futile

If you have not yet read The FAANG-nary In The Coal Mine, available free to all readers, please click here to read it first. Note that this Part 2 is an updated version of a report first published in 2014.

In Part 1, we noted the eroding good options for investment capital in today's "Everything bubble" financial markets, as well as the dangerous risks that another 2008-style crisis is brewing. If markets are fractal, as argued by Benoit Mandelbrot, then we can anticipate more “once in a lifetime” crises than economists expect, and that such crises will be less predictable than expected.

In Part 2 of this report, we explain why the policies of the governments and central banks around the world that have boosted assets such as stocks, bonds and real estate to new bubble highs will cause a crisis that will be as damaging as 2008 -- yet unfold quite differently, in ways the system is not prepared for.

Fighting the Wrong Battles

The outlines of the coming crisis were readily visible in 2007; the subprime domino was toppling the market for mortgage backed securities which in turn was toppling the market for credit defaults, collateralized debt obligations (CDOs) and a host of other exotic financial instruments.

Those of you who were actively following stock markets in 2007 and 2008 may recall the wild surges of euphoria that accompanied every Fed policy announcement. Stock indices shot up every time, only to falter once again as the liquidity injections failed to resolve the underlying collateral/valuation crisis.

When liquidity programs failed to fix the erosion of collateral, markets went into a free-fall.

We can anticipate that the Fed (and other central banks) will respond to a renewed collateral/valuation crisis in the same way they resolved the crisis in 2009—by buying assets directly in vast quantities.  The Fed’s option of buying stocks directly (for example, index contracts or funds) is sometimes referred to as the Nuclear Option, the ultimate backstop to a global meltdown.

But the nuclear option won't fix anything, because... » Read more

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John Tenniel

Off The Cuff: Tax Donkeys & Debt Serfs

The many are increasingly in servitude to the few
Friday, July 27, 2018, 12:15 PM

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

  • Broken Signals
    • We're focusing on the wrong priorities, in the wrong order
  • Dangerous Hubris
    • We've removed critical buffers to risk
  • Tax Donkeys & Debt Serfs
    • The many are in servitude to the few
  • Late-Stage Empire Decline
    • Signs of it are everywhere in our economy & society

Charles breaks down for Chris how the masses are trapped by today's economy, forced to work harder and harder for a system that rewards them less and less, while the elites and unneccessary bureaucracy syphon off what profits remain.

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 Rich Are Planning For Catastrophe

What do they know that you don't?
Friday, July 20, 2018, 3:10 PM

Executive Summary

  • Why the wealthy are plotting to leave us behind
  • The "madness of crowds" virtually ensures a period of social chaos when the system breaks
  • The media is, and will continue to be, used to manipulate the masses
  • The growing risk of a new kind of civil war in America
  • Preparing today will give you vastly more options tomorrow

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

The Wealthy Are Plotting To Leave Us Behind

In the absence of an official plan, you'd better have your own -- something the extremely wealthy are already working on for themselves.

As the co-founders of Peak Prosperity, Adam and I happen to know and/or interact with quite a few wealthy people who are deeply concerned about the future and taking steps to assure their survival in it.  These people have access to the very best information; they know the system better than your average citizen.  They know what the weak points are and what could go wrong.

From our observations, it’s safe to say that the more insider-experience an individual has, the greater their concern.

The least-concerned people are those without much knowledge of the system (i.e., most "regular" folks). Or a weak sense of curiosity. Or, most damagingly, a propensity to get their news from the mainstream media.  Let’s just say that the information available to the “retail crowd” is either incomplete or misleading (and quite often intentionally so).

What I mean to say more directly is: if you're not already a billionaire and getting access to the very best and most accurate information, you’d do well to.... » Read more