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Get Ready For The Coming Massive Correction

One we may never fully recover from
Friday, June 9, 2017, 7:46 PM

Executive Summary

  • The economic data is getting darker fast
  • The over-indebtedness of the economy is the worst it's ever been
  • Predicting the timing of the next major market correction
  • As the risks mount, what should the concerned investor do?

If you have not yet read Part 1: Why The Markets Are Overdue For A Gigantic Bust available free to all readers, please click here to read it first.

The Data Says…Another Downturn Is Upon Us

Our view is that a massive market correction is coming, one that may well rip the financial markets apart, and cause very long-term and long lasting damage, possibly to the point of taking generations to repair in any meaningful sense.

In fact things may never actually recover to the current heights because recovery requires energy and there simply isn’t the net energy per capita that existed in the past.

For now, we see plenty of signs of fundamental economic weakness, and this is not surprising at this stage of the so-called economic expansion.  The truth is this expansion has been phony to a large degree, and quite probably should have broken down many times in the past, most recently in early 2016.

But the central banks prevented that and we can all feel thankful at the extra time that has provided us to become more resilient under reasonably calm circumstances.

And yet, the one thing that central banks have never been able to do is... » Read more

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Off The Cuff: Signs Of An Approaching Downturn

We're seeing more & more of them
Thursday, June 8, 2017, 12:00 AM

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

  • The Late-Stage Housing Bubble
    • From the US, to Canada, to China
  • Signs Of The Approaching Downturn
    • Data everywhere is flat-lining
  • Soaring Debt Levels
    • At levels that make 2008 look tame
  • Canary In The Coal Mine
    • The bullet-proof Bay Area showing weakness?

The diverse data sets that Wolf tracks are showing increasing signs of building weakness across the global economy:

We see weakness all over the place now in the United States. In terms of the corporate credit cycle, we have commercial and industrial loans flat-lining since November, meaning they have grown very strongly from the financial crisis and they peaked in October. Since then, it’s all just flat-lining.

And the only time this ever happened in the past, it’s been affiliated with a recession because these are loans that companies take out to fund equipment purchases and for expansion purposes and for the things that are useful to an economy. These are not loans that are used to buy back stocks. This is not for financial engineering. These are actual productive funds. And when you see companies putting a lid on this, they’re not expanding anymore. They’ve borrowed as much as they’re going to borrow, and at some point, these commercial industrial loans will turn down. And this has happened in every recession before.

Plus, we have now a surge in bankruptcies in the United States in terms of commercial bankruptcies. I just did a report on that earlier in May. The prior peak in bankruptcies was during the financial crisis.

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: The Demise Of The Current World Order

A worldwide reset is approaching
Friday, June 2, 2017, 4:00 PM

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

  • History Is Full Of Cycles
    • 80-year & 240-year being the most dominant for empires
  • At The Cycles End
    • The US is at the end of both a 240-yr AND 80-yr cycle
  • A Global Reset
    • Given the huge distortions, a worldwide reckoning is overdue
  • What Will Emerge From The Ashes?
    • Will the new order make better decisions?

This week, Chris and Charles look across the expanse of history, at past empires and the paths they followed as they collapsed. They see many signs that the current world order is reaching its last moments before something new emerges -- likely out of the chaos of a systemic reset.

Before that happens though, the current system needs to topple under the weight of its shortcomings, one of which is the concentration of wealth and power into fewer and fewer hands. Charles explains where to keep our focus:

90% of our entire income, national income, and interactions are with a handful of cartels. Which we now have new ones. We've got Google, which is essentially a monopoly. We have Facebook, which is a monopoly. The dominant players are Apple, Netflix. The usual crowd. Amazon. They are so large, so wealthy that they're basically so far beyond competition that they're a monopoly. Once they start lobbying the pay for play democracy we have, then they're really going to be unassailable. Once they learn the tricks of the insurance companies and the military industrial complex and higher education, then they're going to build a regulatory moat that no one can get around, on top of their other advantages.

We've got for profit cartels and then we have the central state. Which is married to the cartels -- because they both need each other, they feed off each other. Those are failed models. Those platforms are going to unravel

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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Understanding The Fed's Endgame Is Key To Protecting Your Wealth

When all this breaks, the carnage will be astounding
Friday, May 26, 2017, 11:52 PM

Executive Summary

  • Why the Fed's rate hikes are not actual "hikes"
  • The new debt issuance directly or indirectly enabled by the Fed is staggeringly large
  • Why the Fed's intervention in the financial markets is creating worrisome instability
  • As the risks mount, what should the concerned investor do?

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

When Is A Rate Hike Not A Rate Hike?

The Fed keeps talking about raising interest rates, but they really aren’t doing any such thing.  In fact they are doing the opposite.

I know that’s a controversial statement, so let me explain.  The point of a ‘rate hike’ is not to make the cost of money (interest rates) go up, but to drain excess money from the system.  That’s why a rate hike cycle is called a ‘tightening’ cycle; because it is making the amount of money available for lending to shrink, or for conditions to become tighter.  The same as if you don’t have quite enough money at the end of the month, things are tight. 

This means that the interest rate is the derivative, and the amount of money is the main driver.  You don’t set interest rates, you control the amount of money in the system, and the interest rates follow along.  They are the result, not the cause.

Or at least that’s how it used to be.  But not any longer.

In the past, when the Fed ‘hiked rates’ what it actually did was drain money from the system.   Money out = interest rates up.

Now when the Fed hikes rates it removes zero money in the system, and this is why a rate hike is not actually a rate hike at all, but the opposite because it leaves 100% of the money in the system but raises the amount that banks and other financial institutions can charge you for new loans and outstanding credit.

How did we get to this ‘upside down world’ where a rate hike increases money? 

To understand let’s be sure we are clear on... » Read more

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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.

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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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