By: Chris Waltzek Ph.D., GoldSeek Radio - 6 June, 2019
• Virtually every asset class was inflated by profligate monetary policies and various fiat schemes. • The global economy could be on the cusp of a 2nd Great Recession due in part to protectivist trade barriers. • Fed policymakers may have lost their favorite method of ringing liquidity from the global financial system. • The perpetual debt accumulation system may mark the tipping point of galloping inflation. • Consumer's experience ever declining purchasing power and higher cost of living expenses. Full Story
The reason why the slowdown should be a concern for investors is because of the manufacturing sector’s outsized role in the broader U.S. economy. In the fourth quarter, manufacturers contributed some $2.38 trillion to the U.S. economy, accounting for nearly 12 percent of gross domestic product (GDP). The sector also has a huge multiplier effect. For every $1 that’s spent in manufacturing, another $1.82 is created, according to the National Association of Manufacturers (NAM).
Higher consumer demand for goods and services means manufacturers require greater amounts of raw materials and natural resources. This benefits the metals and mining sector, not to mention energy, transportation and more. Full Story
By: Gary Christenson, Deviant Investor - 6 June, 2019
“Anybody who cares to read the 1978 Humphrey Hawkins law will know that the Fed is directed by Congress to seek full employment and then zero inflation. Not 2 percent, but zero. Yet going back a decade or more, the Fed, led by luminaries such as Janet Yellen and Ben Bernanke, has advanced a policy of actively embracing inflation.” Full Story
What does this all mean for consumers? Likely higher prices for pork bellies, corn flakes, and more. And possibly even shortages of some foodstuffs. There is surprisingly little margin for error in the “just in time” inventory system that ultimately puts food on the shelves.
One obvious way to protect yourself from agricultural inflation and a food supply crunch is to stock up on non-perishable and long-lasting food essentials. Full Story
An inverted yield curve has historically been the most accurate indicator of an impending or concurrent recession. The inversion during late 2006 and most of 2007 is a good example. Studies have shown that curve inversions precede a recession anywhere from 6 months to 2 years. I would argue that, stripping away the affects of inflation and data manipulation, real economic activity has been somewhat recessionary for several years. Full Story
Here’s where JPMorgan comes in. If they sell when the hedge funds are buying back their shorts it takes the steam out of the price rise. On numerous occasions over the past eight years JPMorgan has built up its own short position to quell a substantive gain in silver. Will they do it again? We know that higher silver prices would be hugely profitable for them because while they have acted to keep the price down in the futures market, they accumulated a gargantuan hoard of physical silver. Ultimately, they want silver to rise in price. Furthermore, for the first time they do not have a short position in COMEX silver. In fact, they are long silver futures to the tune of 25 million ounces. Mr. Butler thinks the timing is right for JPMorgan to stop sitting on the price and let it go. If so, he claims the price rise will take your breath away. Full Story
Gold prices exploded to the upside on Friday May 31, 2019 following the announcement that Trump was slapping tariffs on Mexico. Gold prices rose along with the stock market, but bond yields and oil prices fell. The question now is, have gold prices bottomed? On the surface that appears to be the case. We caution, however, that silver prices, that normally lead these rallies, lagged significantly. While gold rose 2.1% this past week, silver prices were up only 0.1%. Platinum fared worse, falling 1.1% while palladium rose 0.6%. Copper suffered along with other industrial metals and oil, losing 2.2%. Gold took out the high of May 14 at $1,304. More importantly, gold needs to take out the other recent highs at $1,314 and $1,324 as well. Over $1,324 our confidence rises that we should make an assault on the $1,350 high and the major $1,350 $1,370 breakout zone. As a result, we have not eliminated our thoughts of a potential targets down to $1,235 to $1,250. All that would be needed is for Trump to suddenly back off his Mexican tariffs. He has backed down before when it became clear that the damage could be considerable. Or a sudden breakthrough in the talks with China. Trump is well known for his threats, only for them to dissipate later. As well, we question as noted whether the U.S. dollar has topped. Still the cup and handle pattern remains intact and that has considerable potential but not until new highs are seen above $1,350. The cup and handle pattern projects up to around $1,535 with further potential to $1,725. While a return back under $1,300 would be a slight negative, only a decline back through $1,290 would suggest that we could be on our way to fulfilling the earlier targets for the E wave down. That would complete a rather complex B wave stemming from the July 2016 high at $1,377. Since then despite a few attempts, gold has failed to break over the key $1,370 zone. For the short term we are cautious, but for the longer term we are quite bullish. We did not reach the kind of a bearish sentiment numbers that we normally associate with a bottom. A quick rise like this can quickly lead to very bullish sentiment. For that reason alone, we are cautious but optimistic. Full Story
The huge majority of international trading is underpinned by U.S. banks and the dollar. Other currencies and banking systems cannot offer the same level of liquidity and convenience.
Nevertheless, sovereign nations don’t like having trade policy dictated to them. The U.S. is wielding its fiat dollar like a weapon and, predictably, countries around the world are busy developing alternatives. Full Story
I started this article by asking a simple question: Who is winning the trade war? I wanted to take a bit of a different tack, by answering the question with shipping data. Actual shipments are something tangible, and therefore have more value, in my opinion, than GDP data, a PMI, or imports and exports. Shipping stats also give us, as investors, something to watch for. They are important indicators of future economic activity, and are therefore ignored at our peril. Remember, those who paid attention to the Baltic Dry Index could have avoided the Great Recession.
The US is in fact winning the trade war. We see it in the slowed imports of Chinese goods, and increased exports of US goods, with the resultant narrowing of the US-China trade deficit. Shipments from China went bonkers last year, as US retailers stocked up before getting whacked by 25% tariffs. Now, those same companies are shunning China, and cozying up to South Korea, Vietnam and Mexico. Chinese goods are being replaced. Full Story
The posters’ logic works like this: The market has been dropping ever since the China deal fell apart. So, it is clear that the cause of the drop is the China deal debacle. And I am quite certain that almost all of you think in this exact same way. I mean it so logical, right?
Well, it sounds logical only if you ignore facts that blow this logic out of the water. Consider that the S&P500 rallied 9% in 2018 during the heart of the trade war with China. With each escalation, we saw the markets continue higher and higher. How could that even be possible based upon the “logic” everyone seems to espouse today? Full Story
We have been discussing the impossibility of China nuking the Treasury bond market. We covered a list of challenges China would face. Then last week we showed that there cannot be such a thing as a bond vigilante in an irredeemable currency. Now we want to explore a different path to the same conclusion that China cannot nuke the Treasury bond market.
To review something we have said many times, the dollar is borrowed. It is not printed. Every time fresh new dollars are created, there is a borrower. There is never a giftee. The borrower has the dollar as an asset—but he also has a matching liability.
Once we understand that the balance sheet has assets and liabilities, it is senseless to talk about the increase in quantity of the asset side without addressing the liabilities. In familiar monetary economics terms, the asset is supply. However, there is a liability too. That liability represents demand. Perpetual demand. Let’s look at this. Full Story
Don’t fight the Fed, as the saying goes. The implication is that the central bank is firmly in control of the money supply: loosen it and stocks have nowhere to go but up. Betting on this outcome has been a big winner since the bull market took off in March 2009. However, all bull markets end, and so will this one. When it does — and there are reasons to think this has already occurred – the crackpot notion that we can borrow our way to lasting prosperity will die with it. The good news is that when capital becomes scarce in the hard times that accompany bear markets, our savings are much more likely to finance the growth of economically productive companies rather than merely increase the wealth of Wall Street hucksters. Full Story
One of the broadest indices for the US stock market, the NYSE, entered a bear market in January of 2018 (falling to the point where it could be classified as a bear market (down 20% or more) in December of 2018). It has not recovered from its approximately 22% fall after two tries that now represent a downward trend line for the index’s subsequent major peaks. (By “entered” I’m talking, not about the date on which an index was first down 20% from its previous highest point, but the date on which it began the trip down that eventually wound up passing the 20% mark.)
Another one of the broadest major indices of the US Stock market, the Russel 2000, entered a bear market on August 31, 2018, falling about 28% by December, and has never even come close to recovering from its fall, even at most recent peak.
Thus, by some of its broadest measures, the US stock market remains a bear market... Full Story
However, like generals preparing for the last war - there is a strong case to be made that most analysis of the FOMC minutes is focusing on the details, while missing the big picture for the next recession (which could be growing more imminent).
As explored herein, the Fed itself is as much focused on how to change the "SOMA" to enable the strongest form of "MEP" in the event of another recession, as it is on Fed Funds rates.
When we get past the jargon, what the Fed is debating in plain sight are the specifics for how to give as much money as possible to some investors in the event of another recession, in the shortest time possible. Full Story
The Fed released Q1 household debt numbers two weeks ago. It showed that total household debt grew by $124 billion in the first quarter of 2019, boosted by increases in mortgage, auto and student loan balances. That increase in debt is not translating into economic growth. Part of the reason for the increase in mortgage debt balances is the proliferation of cash-out refinancings, which are now back to 2006-2008 levels... Full Story
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