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Signs Of Distress

The need to change is becoming more obvious than ever
Friday, August 11, 2017, 10:06 PM

The world is edging closer to the final moments after which everything will be forever changed.

Grand delusions, perpetuated over decades, will finally hit the limits of reality and collapse in on themselves.

We’re over-budget and have eaten deeply into the principal balances of all of our main trust accounts. We are ecologically overdrawn, financially insolvent, monetarily out past the Twilight Zone, consuming fossil fuels (as in literally eating them), and adding 80,000,000 net souls to the planet’s surface -- each year! -- without regard to the consequences.

Someday there will be hell to pay financially, economically, and ecologically as there simply isn’t any way to maintain these overdrafts forever. Reality does not renegotiate. Its deal terms aren't compromisable. » Read more

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Off The Cuff: A Dependable Crash Indicator Is Now Flashing

RV sales are signalling signs of a blow-off top
Thursday, August 3, 2017, 10:36 PM

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

  • Trade Wars
    • Suddenly arising with Russia and China
  • Modern Monetary Theory
    • A delusion that dates back to the days of John Law
  • A Great Crash Indicator
    • RV sales are sending a warning sign
  • Risky Real Estate
    • Private equity will sell fast when times get bad

Chris and John discuss the looming trade wars with Russia and China, the long-term implications of the worldwide credit binge, and the indicators that will presage a systemic correction. John shares his assessment of one of his most trusted crash indicators, RV sales:

This is a typical cycle for RVs. It’s a big toy and people are cocky now because they’ve been working for a little while. They have extremely easy credit. Interest rates are incredibly low. If you’ve got a decent credit score you can buy an RV for 2 or 3% interest and a lot of people are taking advantage of that, just as they spent the last three or four years taking advantage of incredibly cheap car loan terms, and running, basically, an auto sales bubble. They’ve kind of shifted to RVs now, which is yet another sign that the cycle is nearing an end.

This "recovery" is 8 years old now. The typical recovery is 6 years. So we already have an expansion that’s a couple of years longer than normal. It’s actually the third longest since World War II. Which means that, everything else being equal, we should be pretty close to the end of this cycle and ready for a downturn. And now you’ve got indicators like RV sales going just parabolic, indicating that, at least in that little section of the market, money is incredibly easy and buyers are euphoric. And that’s also a sign that things are nearing the end. There are lots of other signs, but that’s one.

Every time there’s a bubble in an asset class, there’s always a new reason for it that appears to explain it. But historically the explanation never holds. The cycle still reasserts itself at some point. And things go back to normal. And I suspect that’ll be the case with RVs at some point.

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.
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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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Where There’s Smoke...

...There’s central bank manipulation
Friday, April 21, 2017, 8:26 PM

Many questions surround the elevated financial asset prices we are faced with today.

I'm talking not just about the sky-high prices of stocks and bonds, but also of the trillions of dollars’ worth of derivatives that are linked to them.  All are intricately linked together. For instance, stocks are elevated, in part, because bond yields are so low. 

These questions are important to consider because -- if central banks have been too involved and gotten themselves mixed up in trying to ‘wag the dog’ by using elevated financial asset prices as a means to drive economic expansion -- then the risk is a big implosion in financial asset prices if their efforts fail. » Read more

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Off The Cuff: Dying From Debt

Yet we're still trying to add more
Friday, March 3, 2017, 1:44 PM

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

  • The Coming Debt Explosion
    • Really? We're going to try to add more??
  • Pension Time Bomb
    • Going off sooner than most expect
  • The Evil Fed
    • It's policies are at the root of our economic predicament
  • The Revolution Is Brewing
    • Continental Europe will see the next iconoclast elected

The only thing more frightening than the massive overburden of debt weighing on today's economy is the recent trial balloon that we need to add a bunch more in order to spark economic growth. Chris and John slam this wrongheaded thinking, and direct our attention to the damage the effects of already having too much debt is wreaking on our future prospects.

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 Bad Will It Get?

How big will the losses be? Who will bear them?
Friday, February 17, 2017, 11:45 PM

Executive Summary

  • How overvalued is the system?
  • The biggest errors that got us to this point
  • What to expect during the big reset
  • Taking necessary action

If you have not yet read Part 1: The Mother Of All Financial Bubbles, It's Time To Worryavailable free to all readers, please click here to read it first.

What will the coming reset look like when it finally arrives?

This is the operative question everybody should be asking themselves because, believe me, the bankers and politicians are already frantically at work on the only question they care about: Who, instead of us, is going to eat the losses?

Let me be clear. The coming reset is going to be very, very painful. Part of me just wants to rip the proverbial Band-Aid off and get on with it, yet part of me dreads what’s coming and is in no hurry to see it arrive. Talk about being ambivalent!

The big picture looks like this: Ray Dialo’s firm Bridgewater Associates, a mega-money management firm, put together the below chart of the IOUs of the US (most other countries look the same, so feel free to extrapolate for Japan, or most of the EU, or the UK).

There are, simply, too many promises that cannot be kept. At a recent ICV wealth conference (just this week) one of the speakers was a man named Bradley Belt, former executive director of the Pension Benefit Guaranty Corporation (PBGC).

I asked him if there were any possible solutions to the staggering risks posed by the data in this chart. And who, if anyone, is working on them?

He answered that... » Read more

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2016 Year In Review

A Clockwork Orange
Thursday, December 22, 2016, 9:03 PM

Every year, friend-of-the-site David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. As with past years, he has graciously selected PeakProsperity.com as the site where it will be published in full. It's quite longer than our usual posts, but worth the time to read in full. » Read more

Podcast

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Michael Pento: The Coming Bond Bubble Collapse

All asset classes will collapse in tandem when this bursts
Sunday, September 18, 2016, 1:42 PM

In this week's podcast, Michael Pento, fund manager and author of The Coming Bond Bubble Collapse, explains how the United States is fast approaching the end stage of the biggest asset bubble in history. He describes how the bursting of this bubble will cause a massive interest rate shock that will send the US consumer economy and the US government—pumped up by massive Treasury debt—into bankruptcy, an event that will send shockwaves throughout the global economy: » Read more

Podcast

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Recent Chris Appearances In The Media

A slew of good interviews to catch up on
Monday, September 12, 2016, 3:09 PM

Chris has been in high demand over the past few weeks, as media outlets try to make sense of the options available to the Federal Reserve at this point. More and more, the confidence in the asset price bubbles blown by the Fed's "endless easing" policy is coming under scrutiny by the average observer.

How much longer can it continue? What are the long-term societal costs of this central bank intervention?

And more important: What will trigger the return to higher interest rates? (and thereby, the puncturing of the bubbles blown by the Fed)  And what will the repercussions be? » Read more

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Dreamstime

The Marginal Buyer Holds The Pin That Pops Every Asset Bubble

So it's important to watch him very closely
Friday, August 19, 2016, 2:01 AM

Those of you who took an Economics class in college may remember the saying that prices are set "at the margin". That's a fancy way to say that prices are set by the person (or people) willing to pay the most.

This person willing to pay top dollar is called the "marginal buyer". Most of us don't really think about him, but he (or she) is very, very important.

Why? Because the marginal buyer not only determines price levels, but also their stability and degree of volatility. The behavior of the marginal buyer, as well as the degree of competition for his/her "top dog" spot, sets the prices of nearly every asset class held by today's investors. » Read more