Tag Archives: Capital

  • Podcast

    New Harbor: A Time For Staying Out Of Harms Way

    Preserving your financial capital
    by Adam Taggart

    Sunday, January 24, 2016, 5:16 PM


    Given the brutal start to the markets in the first three weeks of 2016, we thought it a good time to check in with the team at New Harbor Financial. We have had them on our podcast periodically over the past years as the market churned to ever new highs, and have always appreciated their skepticism of these liquidity-driven ""markets"" as well as their unwavering commitment to risk management should the party in stocks end suddenly.

    So, how is their risk-managed approach faring now that the S&P 500 has suddenly dropped 8% since Christmas? Quite well. Their general portfolio is flat for the year so far — evidence that caution, prudence and hedging can indeed preserve capital during market downdrafts.

    We've invited the New Harbor team back on this week to hear their latest assessment on the markets, as well as how they're approaching their portfolio positioning moving forward.

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  • Insider

    Off The Cuff: The Betrayal Of Capital

    Leads to mal-investment that eventually topples onto itself
    by Adam Taggart

    Tuesday, October 6, 2015, 12:37 AM


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

    • Growing Weakness At The Periphery
      • A reminder that collapse happens from the outside in
    • The Betrayal Of Capital
      • We are watching the predictable result of too much mal-investment
    • Natural Limits Will Be The Ones That Matter
      • The ones that can't be addressed by printing up more money
    • TINA: There Is No Alternative
      • Those in charge of the system have run out of Plan Bs

    Recorded last week, here's the latest Off The Cuff discussion recorded between Chris and Charles Hugh Smith.

    Both note the deflationary forces that are fast-eroding the stability of periphery countries around the globe. As long repeated here at Peak Prosperity, we're of the opinion that collapse happens from "the outside in". Once the smaller dominoes start falling, watch the pace at which the next-largest drop, as it can tell you how quickly the core ("safest") counties will start being affected.

    A theme delved into in this discussion is the…

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  • Insider

    What Happens Next Will Be Determined By One Thing: Capital Flows

    Follow the money
    by charleshughsmith

    Friday, August 28, 2015, 6:28 PM


    Executive Summary

    • Why global capital flows will determine everything
    • What impact euphoria and fear wil have on liquidation and valuation
    • The importance of debt denominated in other currencies
    • What's likely as capital shifts from Risk-On to Risk-Off assets

    If you have not yet read Part 1: Here's Why The Markets Have Suddenly Become So Turbulent available free to all readers, please click here to read it first.

    In Part 1, we listed five interlocking trends that will severely limit the scale and effectiveness of official responses to the next recession. In effect, the world will not be able to “borrow and spend” its way out of recession.

    In Part 2, we’ll examine the single most important dynamic in any asset value: capital flows.

    The Tidal Forces of Capital

    Let’s start with the most basic building blocks of supply and demand.

    Capital flowing into an assets class (buying) in excess of capital flowing out (selling) increases demand and pushes prices up.

    If supply increases even faster than demand, prices may decline despite rising demand.

    If capital flows out (selling) in excess of inflows (buying), prices will decline.

    Prices are set on the margin.  If 5 homes out of a neighborhood of 100 homes sell for 25% below the previous price level, the valuation of the other 95 homes also drops 25%.

    Risk on = seeking asset appreciation and taking on more risk in exchange for higher yields.

    Risk off = seeking capital preservation and accepting lower yields in exchange for reduced risk.

    Assets have two ways to appreciate/depreciate: the nominal price, and the underlying currency the asset is priced in.

    If a Mongolian bond yields 7%, the owner earned a nominal 7% on the capital. But if the currency the bond is denominated in dropped 20%, the owner suffered a 13% loss when the investment is priced in other currencies.

    The consequences of capital flows can be counter-intuitive.

    For example, if the Federal Reserve creates $1 trillion out of thin air, our initial expectation would be…

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  • Blog

    The War On Cash: Officially Sanctioned Theft

    How banks & the government are diminishing your savings
    by charleshughsmith

    Friday, June 12, 2015, 4:07 PM


    You’ve probably read that there is a “war on cash” being waged on various fronts around the world. What exactly does a “war on cash” mean?

    It means governments are limiting the use of cash and a variety of official-mouthpiece economists are calling for the outright abolition of cash. Authorities are both restricting the amount of cash that can be withdrawn from banks, and limiting what can be purchased with cash.

    These limits are broadly called capital controls.

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  • Insider

    Off the Cuff: Hot Money, Cold Econony

    Global capital is fleeing Asia, while US GDP stagnates
    by Adam Taggart

    Thursday, April 16, 2015, 6:28 PM


    In this week's Off the Cuff podcast, Chris and Brain Pretti discuss:

    • Global Capital Flows
      • The hot money is fleeing Asia and inflating Western assets
    • What Recovery?
      • GDP growth appears to be returning to 0%
    • What Will Happen When The Fed Raises Rates
      • Or better put: can it raise rates without destroying the economy?
    • Lack Of Competent Leaders
      • Those making the big decisions are not the ones we want making them
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  • Podcast

    Grant Williams: Why The Smart Money Is So Nervous Now

    And selling out to "dumber" hands
    by Adam Taggart

    Saturday, February 28, 2015, 4:50 PM


    More and more, those who have made long, successful careers in money management are realizing that the system has morphed into a strange beast they no longer recognize, nor trust.

    Fear of epic, perhaps historic, dislocations in price when the current market reverses is causing more and more of the "smart money" to sell out now and seek safe harbor.

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  • Blog

    Time To Toss The Playbook

    In uncharted territory, flexibility & open thinking are key
    by Brian Pretti

    Wednesday, February 25, 2015, 2:07 PM


    Just when you thought the world could not spin much faster, global monetary events in 2015 have picked up speed. 

    Buckle up.

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  • Insider

    Investing In The Age Of Anomalies

    More important than ever to follow the flows of capital
    by Brian Pretti

    Wednesday, February 25, 2015, 2:06 PM


    Executive Summary

    • Will global capital continue to push US stocks higher, despite their stretched valuations?
    • Global capital is becoming more cautious
    • S&P outperforming as capital seeks the safety of "blue chip" companies
    • Investing in the age of anomalies

    If you have not yet read Part 1: Time To Toss The Playbook available free to all readers, please click here to read it first.

    This leads us to equities and, again, this very important concept of being flexible in thinking and behavior. Historically, valuation metrics have been very important in stock investing. Not just levels of earnings and cash flow growth, but the “multiple” of earnings and cash flow growth investors have been willing to pay to own individual stocks. This has been expressed in valuation metrics such as price-to-earnings, price relative to book value, cash flow, etc. To the point, in the current market environment, common stock valuation metrics are stretched relative to historical context.

    In the past we have looked at indicators like total stock market capitalization relative to GDP. The market capitalization of a stock is nothing more than its shares outstanding multiplied by its current price. The indicator essentially shows us the value of stock market assets relative to the real economy. Warren Buffet has called this his favorite stock market indicator.

    The message is clear. By this valuation metric, only the…

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