Tag Archives: assets

  • Podcast

    Brian Pretti: The World’s Capital Is Now Dangerously Boxed In

    Creating asset bubbles ready to burst
    by Adam Taggart

    Saturday, January 4, 2014, 5:22 PM

    12

    This week Chris speaks with Brian Pretti, managing editor of ContraryInvestor.com, a financial commentary site published by institutional buy-side portfolio managers. In their discussion, they focus on the global movement of capital since quantitative easing (QE) became the policy of the world's major central banks.

    The ensuing excellent discussion is wide ranging, but the key takeaway is that capital is being herded into fewer and fewer asset classes. With such huge volumes of money at play, very crowded trades in assets like stocks and housing have resulted — bringing us back to familiar bubble territory in record time.

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  • Blog
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    Four Signs That We’re Back in Dangerous Bubble Territory

    Stocks, bonds – everything – at risk
    by Chris Martenson

    Tuesday, May 21, 2013, 11:09 PM

    12

    As the global equity and bond markets grind ever higher, abundant signs exist that we are once again living through an asset bubble or rather a whole series of bubbles in a variety of markets. This makes this period quite interesting, but also quite dangerous.

    With equity and bond markets at or near all-time record highs, with all financial assets consistently shrugging off bad or worse news as the riskiest of assets continue to find consistent upward bids, we find ourselves in familiar and bubbly territory.

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  • Blog
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    This Gold Slam is a Massive Wealth Transfer from Our Pockets to the Banks

    It likely signals a big downdraft in the stock market, too
    by Chris Martenson

    Monday, April 15, 2013, 7:55 PM

    79

    I am very disappointed by, but not surprised at, the latest transfer of wealth to the bankers from everyone else.  The most recent gold bear raid has vastly enriched the bullion bankers, once again, at the expense of everyone trying to protect their wealth from global central bank money printing.

    The central plank of Bernanke's magic recovery plan has been to get everybody back borrowing, spending, and "investing" in stocks, bonds, and other financial assets.  But not equally so, as he has been instrumental in distorting the landscape towards risk assets and away from safe harbors.

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  • Blog
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    The Real Reason the Economy Is Broken (and Will Stay That Way)

    More and more economic sinkholes
    by Chris Martenson

    Wednesday, February 13, 2013, 1:54 AM

    27

    We are far enough and deep enough into the most heroic monetary and fiscal efforts ever undertaken to finally ask, why aren't these measures working?

    Or at least we should be.  Oddly, many in DC, on Wall Street, and the Federal Reserve continue to steadfastly refuse to include anything in their approaches and frameworks other than "more of the same."

    So we are treated to an endless parade of news items that seek to convince us that a bottom is in and that we've 'turned the corner' often on the flimsy basis that in the past things have always gotten better by now.

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  • Blog
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    QE for Dummies

    Understanding the most outlandish monetary experiment ever c
    by Chris Martenson

    Tuesday, February 5, 2013, 3:25 PM

    38

    A PeakProsperity.com reader recently lamented:

    I have been trying to get my head around the mechanism of QE. Not being an economist or experienced investor I don't really understand a lot of the jargon. The usual simple definition of QE as "thin air money printing" does not satisfy my need for understanding either. Have hunted for a description of QE for dummies that leaves me feeling like I get it, but with no luck. My difficulty is in understanding how thin air money gets into circulation.

    So I'm going to do my best to answer this plea in as intuitive and straightforward a manner as I can. I, too, share the need to understand the mechanism of a process in order to feel like I have a grasp of it.  And I think it's critically important to understand QE (also known by its full name, "quantitative easing") and what it really represents. Because it is, without a doubt, one of the largest market-shaping forces of our times.

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  • Blog
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    The Structural Endgame of the Fiscal Cliff

    It's not just a temporary political event
    by charleshughsmith

    Wednesday, December 26, 2012, 6:51 PM

    2

    To understand this endgame, we need to start with the financial and political basics of wealth and power in the U.S.

    1.  Wealth and thus political power are highly concentrated.  The dynamics of rising wealth disparity and the increasing concentration of wealth are debatable; the disparity is not.  Roughly 70% of all financial wealth is held by the top 5%; within this top layer of ownership, the top ½ of 1% hold an outsized share.

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  • Insider
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    Why Local Control is the Best Way to Preserve Wealth

    Control enterprises, not paper
    by charleshughsmith

    Tuesday, August 28, 2012, 3:06 PM

    29

    Executive Summary

    • Why most paper assets today have substantial "phantom" value that will evaporate when another "credit event" occurs
    • Why the future of investing is Local Control (and what that means)
    • Where to look today for undervalued assets most likely to appreciate when the next downturn arrives

    If you have not yet read Part I: The New Endangered Species: Liquidity and Reliable Income Streams, available free to all readers, please click here to read it first.

    We began our reappraisal of scarcity, demand, opportunity cost, technology, and behavioral choice with an analysis of commodity demand in an era of declining income for labor and the decline of the ownership model of resource-intensive assets such as vehicles and homes.  This led to the thesis that reliable income and liquidity (the ability to sell assets quickly and safely for cash) will become scarce in the era ahead.

    Let’s start by exploring the scarcity of reliable income streams in a recessionary, risk-averse, deleveraging environment.  In Part I, we noted the structural decline in earned income from labor, but thanks to the global financial repression of yield (that is, central banks lowering the interest rate to near zero), unearned income (i.e., interest income) has also plummeted.

    The search for reliable unearned income has led investors and money managers to pile into dividend-paying stocks. This demand has pushed up valuations and price-to-earnings (P/E) ratios to levels where they are vulnerable to earnings disappointments and margin-compression; in other words, falling stock prices that drop P/E ratios.

    Meanwhile, Web 2.0 stock market darlings such as Facebook, Groupon, and Zynga have been savagely revalued as the market recognizes that they lack reliable income streams.

    Investors account for roughly one-third of all home sales in once-speculative real estate markets, another manifestation of the search for yield in a low-yield climate. But owning rental property is not risk-free, as I have discussed here earlier this year in some detail, and it carries the additional risks of being illiquid during a “credit event”-type crisis.  Since real estate isn't mobile like other forms of capital, the investor-owners are also at risk of becoming “tax donkeys” as local authorities raise taxes on the one class of investors who can’t easily move their capital elsewhere to escape ever-higher taxation burdens.

    The potentially devastating dangers of illiquidity have driven global capital into the “safe haven” of highly liquid bonds, such as U.S. Treasury notes and Bank of Japan bonds.  So important is liquidity to professional money managers that they accept near-zero yields as the tradeoff for maximum liquidity and safety in size.  In other words, tens of billions of dollars can be moved around without distorting the market for these highly liquid financial instruments.

    Others have accepted the promise of safety offered by municipal bonds, as the promise is based on the “guarantee” that irrevocable income streams will back up the bond payments.  But very little is guaranteed when crisis erupts.  Rules are changed, bankruptcy courts void claims, voters rebel, and so on.  The risk of local government promises being amended in the future may be much higher than is conventionally accepted right now.

    Let’s review the risks created by central bank financial repression pushing yields to near 0% (or factoring in loss of purchasing power, negative real returns).  The policy’s explicit intention is to drive capital out of safe havens into risk-on assets such as stocks and to encourage new borrowing and speculation, with the goal being a reflation of asset valuations.

    The net result of this policy is that investors are now exposed to potentially catastrophic levels of risk in terms of capital loss and declining income streams…

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  • Blog

    Are Commodities Topping Out?

    by charleshughsmith

    Tuesday, December 27, 2011, 1:34 PM

    0

    The past several years have seen a growing backlash against “paper” investments as more and more investors consider hard assets to be a safe haven against the implications of central bank money printing. But as the global economy visibly slows, this question arises in many minds: Are commodities, which have been on a tear since the March 2009 bottom, finally topping out?

    The question requires both a fundamental economic response as well as a technical chart analysis.

    We can start by observing the common-sense connection between demand for commodities such as copper, cement, steel,etc. and economic expansion. When demand rises faster than supply, prices rise. Since supplies of commodities face all sorts of restraints in terms of extraction rates, energy costs, and declining reserves, increased demand quickly pushes prices higher.

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  • Blog

    Guest Post: Investing In One Lesson

    by machinehead

    Friday, September 17, 2010, 1:20 AM

    0
    by machinehead

    Many of you will recognize today’s author from his insightful comments that appear frequently across ChrisMartenson.com.

    It sucks to try earning income from investments these days. Until about ten years ago, most folks assumed they could make an easy 5 percent from safe, risk-free vehicles such as T-bills or CDs. With $500,000 saved, you could generate $25,000 in annual income. Them days are gone! Today, thanks to the Federal Reserve’s Japanese-style ZIRP (Zero Interest Rate Policy) regime, one-year T-bills yield only 0.25%, while one-year CDs average 1.25% — a mere $6,250 annually on a $500,000 account.

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  • Blog

    What Should I Do? The Basics of Resilience (Part 7 – Protecting Wealth)

    by Chris Martenson

    Tuesday, August 24, 2010, 10:13 PM

    0

    Note:  This article is part of a series on personal preparation to help you answer the question, “What should I do?”  Our goal is to provide a safe, rational, relatively comfortable experience for those who are just coming to the realization that it would be prudent to take precautionary steps against an uncertain future.  Those who have already taken these basic steps (and more) are invited to help us improve what is offered here by contributing comments, as this content is meant to be dynamic and improve over time.

    Graduates of the Crash Course series emerge aware that, economically speaking, the next twenty years are going to be completely unlike the last twenty years.  This invariably leads to the question, “How do I prepare financially?”

    We have entered some truly treacherous investing waters, where we must question everything and accept nothing, even (and especially) the base assumption that any given currency, be that the US dollar or euro or Yen, will retain its value.  Is a ‘double-dip’ recession coming?  Nobody knows for certain, but all the warning signs are there.  Our view is that it’s best to start thinking about preserving and protecting your wealth now, while you still have that opportunity.  The bottom line here is that you should not be taking your cues from what your neighbors seem to be doing, but instead being sure that your own house is in order.

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