central banks

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pressano.com

How To Avoid The Pain Of The Coming Market Downturn

The 9 steps to increase your true wealth
Thursday, January 18, 2018, 9:35 PM

Executive Summary

  • Bubble markets short-circuit our assessment of risk
  • Bubble markets are hard to resist, and wear down your resolve
  • How to avoid the pain of the coming market downturn
  • The 9 steps to increase your true wealth

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

I truly despise the many bubbles the central bankers have blown. I consider them ill-advised and distracting at a critical moment of history.

Where we should be attending to serious matters -- like accelerating ecosystem destruction, reigning in the practice of borrowing more than can ever be paid back, and transitioning rapidly off of fossil fuels -- people instead cheer the latest new shiny Dow Jones price record. Folks are just too distracted to have any interest in acknowledging the sobering predicaments we face.

It’s all rather cartoonish. The thinking, if I can call it that, goes like this; “But if any of your concerns were indeed true, certainly we’d not all be getting rich in the stock markets?”

Rising prices seem to be all the comfort these folks need to conclude that everything is A-OK.

“Your arguments are invalid because I'm richer today than I was yesterday.” As if a few more printed-up claims on wealth were the same thing as a better future.

So the prime reason that I hate the central banker-created bubbles is that they short-circuit the important conversations we should be having.

Rising equity prices coupled with the endless cheerleading they receive on the TV and in the press blunt people’s sense that we maybe should be doing things differently. And there is so much we need to be doing differently right now -- in the long run to secure a prosperous future, and in the immediate term, to protect against the inevitable destruction when these bubble markets burst.

Specifically, we need to... » Read more

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Drowning In The Money River

Why the 99% of us are falling farther behind
Friday, January 12, 2018, 8:43 PM

If you suspect society is unfair, that there's a different set of rules the rich live by, you're right.

I've had ample chance to witness first-hand evidence of this in my time working on Wall Street and in Silicon Valley. Simply put: our highly financialized economy is gamed to enrich those who run it, at the expense of everybody else. » Read more

Insider

Off The Cuff: Is This The Blow-off Top?

And if so, how long can it continue?
Thursday, January 4, 2018, 8:42 PM

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

  • How Long Can This Continue?
    • Debt has been rising faster than income everywhere for decades
  • The Rules Will Certainly Be Changed
    • Desperate elites will always act in their best interest
  • Are We Seeing The Blow-off Top?
    • Dear God, let's hope so
  • A Commodities Price Spike Will Pop This Bubble
    • If it doesn't collapse under its own overshoot, first

Chris and John kick off the new year by remarking how similar the conditions now feel to 1999 and 2007. The world financial markets have been running much too hot for far too long, and yet they've kicked into an even higher gear of late. Fortunes are being made in the cryptocurrencies -- a space most of the investors throwing their capital into have next to zero understanding of. The Dow is hitting new price records faster than it ever has in its history.

Obviously this can't end well, and it won't. And when the inevitable crash occurs, expect those who created this mess to take cruel-handed measures to sacrifice the rest of us in order to protect whatever amount of their privilege they can.

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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Rangizzz | Dreamstime.com

So What Comes Next & How Can We Prepare For It?

Prices and incomes are headed (much) lower
Friday, December 29, 2017, 8:14 PM

Executive Summary

  • The dangerous unintended risks and consequences of central bank policies
  • Returns diminish as you move along the expansion S-curve
  • Why the current practice of moderating extremes will fail
  • What comes next & how to prepare for it

If you have not yet read Part 1: The Inescapable Reason Why the Financial System Will Fail, available free to all readers, please click here to read it first.

In Part 1, we covered the financial system’s dependence on credit, and the central bank’s conundrum: they can’t raise rates without stifling the credit-binge-dependent “recovery” and asset bubbles, but they also can’t keep pushing asset bubbles higher without increasing systemic risks, as valuations are already stretched to historic extremes.

So what happens next?  Can central banks raise rates without popping the bubbles the system needs to remain solvent? Or can they keep yields near zero and keep pushing asset valuations higher for years or decades to come?

I hate to spoil the ending, but the short answer is: these are incompatible goals.  The central banks cannot raise yields (i.e. normalize rates to historically average levels) and push asset valuations higher, nor can they eliminate the systemic risk generated by extreme valuations and leverage.

Unintended Risks and Consequences

Extreme financial policies generate unintended consequences as a result of being extreme: a moderate policy wouldn’t have the “whatever it takes” impact, but it also wouldn’t jam all the levers to maximum.

Once the levers are on maximum, the extremes generate instability and blowback, as those who benefit from the extremes are incentivized to go even deeper into speculative gambles in the mistaken belief that “the central banks have my back” while those who did not benefit express their dissatisfaction in the political arena, a dynamic that is often dismissed or derided as “populism.”

Central banks have suppressed measures of volatility in an effort to mask the rising risk that their policy extremes will trigger...   [enroll now to continue reading] » Read more

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girardatlarge.com

The Inescapable Reason Why the Financial System Will Fail

Credit cannot expand faster than fundamentals forever
Friday, December 29, 2017, 8:13 PM

Central banks are now trapped.

If they raise rates to provide low-risk, high-yield returns to institutional owners, they will stifle the “recovery” and the asset bubbles that are dependent on unlimited liquidity and super-low interest rates. But if they keep yields low, the only way institutional investors can earn the gains they need to survive is to pile into risk assets and hope the current bubbles will loft higher.

This conundrum has pushed the central banks into yet another policy extreme: to mask the rising systemic risk created by asset bubbles, central banks have taken to suppressing measures of volatility—measures than in previous eras would reflect the rising risks of extreme asset bubbles deflating.
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2017 Year In Review

Markets fiddle while Rome burns
Friday, December 22, 2017, 4:15 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. A downloadable pdf of the full article is available here, for those who prefer to do their power-reading offline. -- cheers, Adam

Introduction

“He is funnier than you are.”

~David Einhorn, Greenlight Capital, on Dave Barry’s Year in Review

Podcast

Doug Noland: There Will Be No Way Out When This Market Bubble Bursts

Financial assets will become toxic to hold
Monday, December 11, 2017, 3:07 PM

This week Doug Noland joins the podcast to discuss what he refers to as the "granddaddy of all bubbles".

He certainly shares our views that prices in nearly every financial asset class have become remarkably distorted due to central bank intervention, first with Greenspan's actions to backstop the markets in the late-1980's, and more recently (and more egregiously) with the combined central banking cartel's massive and sustained liquidity injections in the years following the Great Financial Crisis.

All of which has blown the biggest inter-connected set of asset price bubbles the world has ever seen. Noland foresees tremendous losses as inevitable, as the central banks lose control of the monstrosity they have created: » Read more

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stocksmasters.com

If You Don't Own Any Bitcoin, Read This

This week it hit $19,000. What's next?
Friday, December 8, 2017, 8:50 PM

Bitcoin's price has gone 'beyond exponential' this week.

Just yesterday, while I was working on this article, it shot up 22% -- from $14,000 to $17,000 (hitting an intraday high of $19,000). And that's after a mind-blowing upwards rocket ride over the past several months. I think it's safe to say that the vicious melt-up in price over such a short timeframe has surpassed the expectations of even the starriest-eyed Bitcoin fanboys.

The whole world, especially the 99.99% of us that own zero cryptocurrency, is asking: What happens next? And, What should I do?

Is this insane trajectory going to continue for a lot longer? Do I need to get in now to avoid missing this once-in-lifetime fortune-making opportunity?

Or is this a classic bubble blow-off top? Is this the deadliest time to enter, right before the price implodes?

 
Blog

takemetotruth.org

You're Just Not Prepared For What’s Coming

Not even close
Saturday, December 2, 2017, 12:57 AM

All bubbles burst -- painfully of course. That’s their very nature. Mathematically, it's impossible for half or more of a bubble's participants to close out their positions for a gain. But in reality, it's even worse. Being generous, maybe 10% manage to get out in time.

That means the remaining 90% don’t. For these bagholders, the losses will range from 'painful' to 'financially fatal'.

Which brings us to the conclusion that a similar proportion of people will be emotionally unprepared for the bursting of these bubbles.  Again, playing the odds, I'm talking about you» Read more

Insider

Off The Cuff: The Central Banks Are Starting To Really Worry

About the Frankenmarkets they've created
Friday, December 1, 2017, 12:29 AM

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

  • Worried Central Banks
    • The risks of financial instability are mounting
  • The Cryptocurrency Conundrum
    • Can the central banks afford not to contain it?
  • Too Much Leverage
    • When credit tightens, the system will crash
  • Housing Harm
    • Many regional real estate markets are poised to burst

Wolf watches the minutes of the Fed and ECB closely, and concludes they are (finally!) becoming very concerned about the market imbalances that years of central bank liquidity and intervention have resulted in. They desperately want to cool things off, but have no idea how to do so without pricking the massive asset bubbles they have created. Whether they figure out a graceful way to do it or not (and he and Chris bet "not" is much more likely), he sees a fast-approaching sudden end to the era of ever-rising asset prices.

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.