Many may COMPLETELY HATE today’s content, but that’s because it’s BREAKTHROUGH NOTES about how the world’s best investors have missed out on the world’s most profitable companies of the PAST TWO DECADES. Since they sound very bearish and are warning about a bubble, they’ve become popular, but are they WRONG, nonetheless?
Technology is advancing SO QUICKLY that value investing as the art of buying companies trading at reasonable multiples of CURRENT EARNINGS is mostly a thing of the past. Today, the name of the game is DEEP THOUGHT into the future.
The generation of Warren Buffett obsessed about competitive advantages, which can ENDURE FOR DECADES, but today’s new companies can disrupt existing ways of delivering a product or servicing a customer in a matter of years, not decades. In 20 years, Amazon killed retail shopping. Netflix did away with video and I can give you COUNTLESS OTHER examples.
Changes are rapid and YOU MUST realize that there’s a NEW WAY of looking at companies, which is much more profitable than being TRAPPED INTO “VALUE.”
As you can see, the algorithms aren’t ALL-IN and there are trillions in cash around the world.
The reason stocks are moving up is because businesses, using A.I., robotics and technologies, IN GENERAL, are creating so much wealth that the world is advancing SUPER-FAST.
The thing is that it’s really CONFUSING to traditional investors, since they’ve never encountered, IN THEIR CAREERS, so much revolutionary progress in one generation.
For example, I tried to watch a movie from the 1990’s yesterday and had to stop it AFTER FIVE MINUTES. It’s almost like you’re viewing a movie that has NO CREDIBILITY, since so much has happened in 30 years that the movie looks like it was made by first-graders.
The central bank of the United States, the same one that creates dollars out of thin air, is “fighting the last battle.” Things are going to get a lot worse, and it’s all by design.
The goal is a full control centralized dollar and dependence on the system for a universal basic income. In other words, complete slavery is the ultimate final goal of the New World Order. The central banks are in control right now, the dollar is collapsing, and this is all being done on purpose.
The Fed won’t be changing anything dramatically with regards to their monetary policy, and if you already know what the end game is, you know this. The “last battle” they are fighting now is for ultimate control over every single transaction of all human beings.
“They are on a mission to own it all,” says Mannarino of the Fed’s ultimate plans. “They’re gonna buy more debt, they’re gonna issue more debt, and they’re gonna melt the dollar…nothing is gonna change here. The goal of these central banks is to inflate massively. Debts and deficits are going to balloon.”
Mannarino continued, saying: “It’s pretty obvious and it should be to anyone that things are going to get monumentally worse by design...it’s all a scam. This entire thing is a charade, it’s fake.”
The United States alone has Great Depression levels of unemployment, half (or more) of small businesses are gone for good, never to return, meanwhile, Wall Street executives are ettin the biggest bonuses in history this year. Let that sink in. There is no recovery. There was never meant to be.
Momentum is FULLY RESTORED in the stock market. It’s QUITE EVIDENT that this isn’t a BEAR MARKET BOUNCE and we probably won’t retest the lows of March 2020, contrary to what many forecasters had been predicting. Instead, we’re at the GROUND FLOOR of what could only be described as the last GREAT CYCLE of American dominance before the dollar goes under the guillotine.
When the MARCH PANIC occurred, we were on the other side of that trade and we DID WELL. Once the FED slashed rates TO ZERO, we made and published this WATCH LIST, and it has resulted in SEVEN potentially filled orders, all delivering +25% gains. The following dipped to their mentioned LIMIT PRICES and have rallied with the indices: AXP, VFC, UGI, LEG, HSY, SWK, and TRV. You’ll notice that these are all WORLD-CLASS companies, from credit cards to apparel, from utilities to furniture, from chocolate to work tools and even insurance.
Nothing MOVES UP in a straight line so we HEDGED OUR BETS and released a second WATCH LIST in case markets cooled off (and they did in early June), offering a SECOND CHANCE. Even the five companies that dipped below their mentioned LIMIT PRICES are up in a major way. Among them, Trane Technologies (TT) is up 38.8% and Axis Capital (AXS) is up 24.3%. CINF is up 34.4% and MMM and SYY are the two remaining winners.
The limit order prices on these watch lists still stand but most of these have LEFT THE STATION already so we’re publishing our THIRD WATCH LIST today, comprised of fewer companies (since there are fewer bargains), but we’ve CAREFULLY SELECTED them.
For many years, while the ECB and BOJ (European Central Bank and Bank of Japan) were going around with slogans saying they’ll print as much as needed and keep rates at zero or negative for as long as needed and will do anything to avoid deflation, the Federal Reserve wasn’t promising the world to investors.
It kept the hope alive that the GENERAL PLAN is actually to go back to normal rates.
The coronavirus has made this impossible. It means that money will not FLOOD INTO the American enterprise system with the same enthusiasm it did in the 2010s.
That is expressed in the chart below, where we can see the dollar IS WEAKENING, but I want to see it dipping below the support of late 2017 levels in order TO BE CERTAIN.
FutureMoneyTrends.com believes that in September and October, while the president is busy with the November elections and Congress is AT A DEADLOCK, markets might slow and retrace some of the gains made.
We expect “reality” to enter into the minds of the day-trading mania and we anticipate the CRAZY EXCITEMENT that investors are feeling to wane.
Fund managers SHARE THIS VIEW, with many more of them believing this is a “W”-shaped recovery.
There’s no doubt that many issues have remained unsolved and the stimulus money in most countries is DRYING UP.
We don’t believe in a DEEP “W,” though.
Instead, we anticipate a quick downturn, almost unfelt.
The amount of LIQUIDITY EXPANSION that central banks and governments have provided will overwhelm any slowdown, but the price we’ll have to pay as a society is that the global reset will be HASTENED and will COME SOONER than most think.
This is the LAST BOOM before the world switches away from the dollar in this decade.
This time, it literally won’t matter who wins, loses, is selected, or elected. The elitists have already made it clear this election will be a contested one that will seal the division they seek in order to conquer us all. Now they are mixing in a potential world war narrative that should alert everyone that it’s all set up.
Back in April, journalist Caitlin Johnstone began alerting the public to the plans for this “election.” She said, “China’s gonna be so surprised when it finds out it interfered in the November election.” Now, three months ahead of schedule China is already getting its surprise, alongside Iran and Russia.
Mass media throughout the western world are uncritically passing along a press release from the US intelligence community because that’s what passes for journalism in a world where God is dead and everything is stupid. –Caitlin Johnstone
U.S. intelligence agencies say China and Iran are working to sway voters against Trump while Russia is working against Biden https://t.co/enFRpMEBkr
We have also been attempting to warn the public that this election is going to be one that will play us like fiddles. And yet, Americans, rather than stand up for real rights, liberty, and justice, will go vote in November, in an election that’s already been decided to they feel like they did their duty the ruling class told them they had to fulfill. They have already modeled this election, months before it will happen, just like they did with Event 201 for the coronavirus scamdemic.
What this completely unsubstantiated narrative means, of course, is that no matter who wins in November America’s opaque government agencies will have already primed the nation for more dangerous escalations against countries which have resisted being absorbed into the blob of the US-centralized empire. If Trump wins we can expect his administration to continue its escalations against Russia in retaliation for its 2020 “election interference,” and if Biden wins we can expect his cabinet of Obama administration holdovers to ramp up escalations against China in the same way while Joe mumbles to himself off to the side as his brain turns to chowder. –Caitlin Johnstone
Can you really not see what’s happening? They are setting up the voting pawns to react regardless of the outcome, with potential violence that could lead to civil war, or even worse, another world war by blaming other countries for the election results. If you are easily triggered by political truths, stop reading here.
The dumbest thing about believing foreign nations are interfering in American democracy is believing America has any democracy to interfere with. The integrity of US elections ranks dead last among all western democracies, public opinion is constantly manipulated by the media-owning plutocratic class which has a vested interest in maintaining the status quo which keeps them rich and powerful, and it’s a two-headed one-party system where both corporate-owned parties advance the same establishment agendas. –Caitlin Johnstone
To actually believe your vote matters is the height of delusion. We don’t choose the president or any of the other political puppets. The Federal Reserve does, and they are trying to take over the world right now. To assume they will allow you a say in the matter when they know all they have to do is tell you to vote, is naive. They have already decided which puppet will win the selection.
We are being played like a grand piano and most have no idea.
The mainstream media uses this type of propaganda to control the narrative. They do this for the central banks and political puppets because all of those entities understand that whoever controls the narrative controls the world, and there is no amount of evil they won’t do to ensure that they continue to control the world.
The reason sociopaths are able to insert themselves so easily into positions of power and influence in human civilization is that highly manipulative people with no empathy quickly learn that society is dominated by narrative, while the rest of us do not understand this. This must change before we will be able to create a healthy world. We all have to wake up to what has been done to us. There’s no other option unless you want to be a slave for the foreseeable future.
The best way to prepare at this point in human history is to be aware that this is a war for your mind. There are no amount of preps I could suggest if you choose to remain blind to the reality that your perception is being altered. This is a spiritual and mental battle. Prepare by exercising critical thinking, and you’ll soon be able to see through the facade.
The Federal Reserve is about to sell Americans another massive lie, so be prepared for what’s coming. Greg Mannarino says the central bank is preparing to do untold devastating damage to those living in the United States in their quest to enslave humanity.
This situation, according to Mannarino is critical to understand. “You should not be surprised” by the “screaming rally,” says Mannarino. But, the dollar go weaker, which is also no surprise, but the Fed’s massive lie is what you should be aware of.
The Fed president will come out and try to sell lies to you. “I consider the Federal Reserve public enemy number one…Everything they’re doing, especially now, as they’re trying to fulfill their final solution is NOT in your best interest.” Mannarino says you have to understand the creation of the Federal Reserve, a central bank that controls and manipulates currency, took place in 1913, and it’s a date that will live in infamy, and one none of us should forget or dare to repeat if we can even come out of this.
In 1913, that’s when they “started working their plan. And they’ve had a plan since day one! Their plan since day one is to do what they’re doing today! That is, to be the lender and buyer of last resort so that they can own, not just the United States, but the entire world. It is unstoppable.”
Next, Mannarino warns that he’s going to touch on politics, and tells people to “sit down.” People hate having their false illusions and the masters they’ve developed Stockholm Syndrome because of shattered. So if you’re easily triggered by facts, this is your warning.
“No two presidents have been a better friend to the Federal Reserve than Barack Obama and President Trump. Both of these men have the Federal Reserve, not just LET, but have CALLED ON the Federal Reserve to run amok. No restraint whatsoever. Print, print, print, create cash out of thin air, buy the debt, buy assets,” Mannarino says.
Fed president Lael Brainard is now trying to sell us all on a lie. “I do NOT want you to buy it,” says Mannarino. Other Fed presidents will try to sell this lie as well. This is imperative to understand: Yield curve control.
“They’re trying to sell you a lie that they’re considering yield curve control. Let me explain…The Federal Reserve has been DIRECTLY, not indirectly, DIRECTLY controlling the yield curve since quantitative easing one. I’ve said this a million times…I want you to pay attention to this…the Fed, number one, has NO MAGICAL POWERS, though they are the most evil institution on the face of the earth.” –Greg Mannarino
Mannarino explains that when the Fed says they will “suppress rates” or they will “keep them low,” and you have a president of the United States (Donald Trump) calling for negative rates, the Federal Reserve has to create cash out of thin air in “epic amounts.” And they have to get into the debt market an buy the debt. Why? So that when the wave of defaults, that they caused with the phony lockdown scam comes, they will own the world because people cannot pay.
It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. –Henry Ford
“We have not seen anything yet,” added Mannarino. “In order for the Federal Reserve to finish it’s plan [own the planet], which we’re in the heart of it right now, they’re funneling trillions of dollars around the world to other central banks to buy assets. They themselves are being called upon by members of Congress…to do MORE! Do you understand? It’s ONE PARTY. Democrats and Republicans all go to the Federal Reserve and that helps them fulfill their goal.”
Will they succeed in total enslavement? Well, that’s up to us. As of right now, there’s no way out. People still believe the government will save them and that voting matters. Until they open their eyes, they are dooming us all to lifelong slavery. No one is coming to save you. The government is working with the Fed to enslave you. “This is the truth. This is why the Fed was created,” Mannarino says. Your inability to break your own brainwashing does not negate facts. “Do a little research and understand how the Fed works,” suggests Mannarino. It’s critical to understand this, but it’s your responsibility too, which means most will just cast a vote because that’s much easier than the application of critical thought.
You have to save yourself. This is a war for your mind, and republican or democrat, they’ve got most of you and you don’t even know it. Your participation in the system is required as a distraction only and while you all bicker about which senile old man will be your master, the Federal Reserve continues on its warpath against you and everyone else.
Federal Reserve Chair Jerome Powell and San Francisco Fed President Mary Daly both recently denied that the Federal Reserve’s policies create economic inequality. Unfortunately for Powell, Daly, and other Fed promoters, a cursory look at the Fed’s operations shows that the central bank is the leading cause of economic inequality.
The Federal Reserve manipulates the money supply by buying and selling government securities. This means that when the Fed decides to pump money into the economy, it does so by putting it in the pockets of wealthy, and oftentimes politically-connected, investors who are able to spend the new money before the Fed’s actions result in widespread inflation. Wealthy individuals also tend to be among the first to invest in the bubbles that form when the Fed distorts interest rates, which are the price of money. These investors may lose some money when the bubble bursts, but these losses are usually outweighed by their gains, so they end up profiting from the Fed-created boom-bubble-bust cycle.
In contrast, middle-class Americans lose jobs as well as savings, houses, and other assets when bubbles burst. They will also not benefit as much as the rich and well-connected from government bailouts and stimulus schemes. Middle- and working-class Americans also suffer from a steady erosion of their standard of living because of the Fed’s devaluation of the currency. This is the reason why so many Americans rely on credit cards to cover routine expenses. The Federal Reserve is thus the reason why total US credit card debt is almost one trillion dollars.
Big-spending politicians are also beneficiaries of the fiat money system. The Fed’s purchases of US debt enable Congress to massively increase welfare and warfare spending without increasing taxes to politically unacceptable levels. The people pay for the welfare-warfare state via the Fed’s hidden and regressive inflation tax.
Low interest rates also benefit politicians by keeping the federal government’s interest payments low. This is an unstated reason why the Fed will keep interest rates near zero or even lower interest rates below zero.
In response to the government-caused economic collapse, the Federal Reserve increased the money supply by about a trillion dollars from mid-April to early June. In contrast, it took the Fed all of 2019 to grow the money supply by 921 billion dollars. Even before the lockdown, the Fed was massively intervening in the economy in a futile attempt to prevent an economic crisis.
A coming crisis will likely be triggered by a collapse in the dollar’s value and a rejection of the dollar’s world reserve currency status. The economic collapse will be worse than the Great Depression. This will result in widespread violence along with government crackdowns on liberties, accelerating the US slide into authoritarianism. The only way to avoid this is for Congress to make drastic cuts in spending — starting with defunding the military-industrial complex — and to audit then end the Fed.
ANYONE in human history, who has ever BOUGHT AN OUNCE OF GOLD, is now up!
Though the metal closed higher in 2011, with intra-day reaching $1,913, it was during a BLOW-OFF TOP parabolic mania surge, not a sustainable, real and EARLY-STAGE pop like today’s!
Literally, any person, government or institution that owns GOLD, as we do, is now up.
Just think of the media coverage that is still to come; think of the millennials, who in 2017 took Bitcoin from $500/coin to $20,000/coin, quit their jobs, mortgaged their couches and sofas, borrowed from friends and family, all so they could buy a digitally-mined technology, and are now learning in their Robinhood app that there’s such a thing called the GDX and the GDXJ indices!
I get tickled just thinking about the upside here. We’re already seeing huge, TRIPLE-DIGIT MOVES with previous picks that are SNAPPING BACK like coiled springs or rallying into NEW DOMAINS and all-time highs.
I’m compiling a COMPREHENSIVE, no-holds-barred updated summary on stock profiles, which are in need of TIMELY UPDATES. This is the SICKEST BULL MARKET ever for gold, and the reason is that inflation has NOTHING WHATSOEVER to do with it.
We are SO FAR BEHIND what 2011 felt like. In terms of sentiment alone, the way I felt yesterday (happened to be my birthday) was the way I felt FOR MONTHS ON END during 2011.
Central banks have TAKEN OVER the capital markets. Forget about P/E ratios and normal economics – the markets are now POLITICIZED, since non-functioning companies, industries and communities immediately get BAILED OUT.
Listen to me closely: YOU ARE WINNING!
Governments and central banks have run their course of monetary policy to the point of NO RETURN, to the limit – to the BRINK OF COLLAPSE.
Had China, Russia, India and Brazil been ready to introduce a competing system, the dollar would have already MELTED DOWN – but they aren’t.
This is PRECISELY YOUR SHOT, your opportunity; their lack of readiness is your opportunity to participate in the most CRYSTAL-CLEAR bull market in the history of man!
Interest rates are NEVER GOING HIGHER; the balance sheet of central banks will continue exploding and stocks of the major companies will turn, along with gold, into SAFE HAVENS. Silver hitting $20/ounce is the next CRITICAL HURDLE.
Once that is locked in, this precious metals NASA shuttle is headed for the stratosphere!
I’m LONG on the sector – LONG gold, LONG gold stocks, LONG silver stocks; we are days away from some SENSATIONAL MOVES, 20% days for juniors and 40% days for companies with major news. THE BULL IS HERE!
Gold’s price means a lot for central bankers. It is a sign of how much TRUST the general population has in the system at any given point. Therefore, the rationale is to make sure that gold does not pierce through $1,800 like a knife through hot butter all of a sudden and that it doesn’t quickly disappear off the radar and move into the $2,000/ounce land.
It provides a FALSE SENSE of SECURITY.
The same year that the Great Depression in America began, halfway around the world, in WW1-victorious France, one of the ministers wanted to make sure the country was COMPLETELY FORTIFIED at the border in order to ensure the Germans could never invade again.
On its borders with Italy, Switzerland, Germany, and Luxembourg, it built numerous weapon installations, bunkers, and other land obstacles. They were so confident of this that they were EUPHORIC about putting an end to the German threat for good. This was called The Maginot Line. The French could not envision that the Germans would attempt to invade through other areas based on their WW1 knowledge and conclusions. They were DEAD WRONG!
The Germans surprised the French altogether.
The next bit of information is not WIDELY KNOWN, but the French did know the Germans were coming from another front. A French pilot had gotten lost on a routine mission and ended up being many miles from his original course when he spotted what he described as the largest line of tanks ready for an invasion that he’d ever seen. He reported this to his direct commanders, which relayed the news to the generals, but they COULDN’T ACCEPT such a “weird” fact and they dismissed it. The high command couldn’t grasp the Germans were preparing the most extensive invasion ever, since the terrain was so difficult, where the pilot reported he saw them.
Had they acted on this VALUABLE INTELLIGENCE, their bombers could have ELIMINATED the German army and forced Hitler to the bargaining table back in 1940.
There’s no reason to ARGE OVER THIS with your coworkers, family members, and neighbors if they are STILL ASLEEP because the sheep masses won’t GET IT: the media is snowballing the GOOD NEWS into a second wave!
You have to be TOTALLY NAÏVE to not connect the dots. Literally, they’re reporting that A MASSIVE AMOUNT of people are infected (which we knew all along), but the death rate is PLUMMETING.
In other words, we should be celebrating that the LETHALITY LEVELS are much lower than these experts led everyone to believe in February, March, and April, but we’re considering imposing NEW RESTRICTIONS instead.
Without a doubt, investors FEAR the RESUMPTION of either RESTRICTIVE AREAS or other measures since they’re voting with their wallets – or speculative brokerage accounts, I should say.
The first thing that’s tragic is that CHINA tried to cover it up. So much of this chain reaction could have been STOPPED EARLIER if other government trusted the reports that came from Asia, but they didn’t.
Lack of trust, especially on a global scale in the information age, is such a UNIQUE OCCURRENCE.
The second tragedy is that we’re teaching THE WHOLE WORLD wrong habits about economics.
Can you imagine how many business owners and employees now think that FAILING IS IMPOSSIBLE? The system being above the rules of economics is what they may be SEDUCED TO BELIEVE.
The voices of reason, those of people that have been around the block and have lived to tell about it, are PILING UP, though, and they’re saying the same thing: WEAK DOLLAR.
This is what Goldman Sachs has just published to its 8-figure clients:
It’s very interesting because we have written DOZENS OF LETTERS explaining this very topic. Gold is not an INFLATION HEDGE, but a SURPRISE INFLATION hedge.
In other words, investors don’t buy gold when inflation is JUST AS THEY EXPECTED, but rather when it is out of control from its trend.
What has the world BEEN TOLD for nearly a decade by the most powerful central bank? “We don’t understand inflation; it is STUBBORNLY BELOW our 2% target and we can’t figure this thing out.”
I want to stress this because it will be the DRIVING FORCE behind the insane BULL MARKET evolving in precious metals right now.
They’ve domesticated the animal to believe 2% inflation is an INSURMOUNTABLE WALL. When that is breached, even though it’s VERY LOW in absolute terms, the reaction will be like HYPERINFLATION HAS ARRIVED!
This chart explains it best:
There’s no doubt that the FED is not in control of what’s happening, especially now that the government is actually COMING OUT with fiscal programs all the time. The FED is now one of two actors instead of being the only one, like in the Obama years.
My point is that during the times of Ben Bernanke and Janet Yellen, it was mostly those two that were PULLING THE STRINGS and they had more control over interest rates, money supply, and policy, but Trump is different.
In a speech at the Cambridge House Vancouver Resource Investment Conference back on January 19, 2020, Peter Schiff said it was “game over” for the Federal Reserve. The central bank is destroying itself with the incessant money printing, which is a wealth transfer from the bottom to the very top.
Have many people ever stopped to ponder why they have to pay taxes if the Federal Reserve can print as much money as it wants? Perhaps it’s time we start asking the hard questions of the banking elitists and the ruling class.
Schiff has been accurate in his predictions about the central bank.
The central bank was able to raise rates a few times in 2018 thanks to the election of Donald Trump and the optimism about the economy he generated, along with tax cuts and government spending increases that gave the economy a boost of a stimulus, according to a report by SchiffGold. But just before the Fed raised rates for the final time in December 2018, Schiff appeared on Fox Business and predicted it would be the last hike. During that same interview, Schiff also predicted that the next move for the Fed would be rate cuts and a return to quantitative easing.
“The reason the Fed is back to quantitative easing, the reason the Fed is cutting interest rates, is because they helped create an economy that was completely addicted to cheap money.
Once the dollar starts to fall on the acceptance that rates are never going to normalize, that’s when you have a crisis. Because inflation is going to rear its head in a very, very ugly way.”
And then we had the coronavirus lockdowns to cover for the Federal Reserve’s failures. People were forced to close businesses and lose their livelihoods while the central banks printed money to try to keep up with the destruction they caused. The Federal Reserve has put the policies that were pushing us toward a complete financial crisis on hyperdrive. We now have interest rates at zero again. The Fed was able to get away with this in 2008, but too many know now what the central bank is doing. It’s trying, like the government and the elitists everywhere, to hang onto power with everything they’ve got.
The Fed is repeating their mistakes on an even grander scale and are doing it in an even weaker economy because we never really recovered from the recession of 2008.
“We papered that over with a bigger bubble. So, instead of correcting the imbalances that existed, we made the imbalances bigger. We went even deeper into debt. And so now that this even bigger bubble has popped, the Fed is back to the drawing board doing exactly what it did before, only printing a lot more money, running much bigger deficits, and so this time there is no way to kick this can. We are now going to experience everything that I assumed we were going to experience back then, only much worse. Only a much deeper collapse. Even more inflation than we had then.”
The road has ended for the central bank. They cannot kick the can further. Expect in the next few years, or sooner, the introduction of the one wold global currency, as laid out by Agenda 21. Was this “end game” for the Fed all a part of the plan? It’s hard to say, but the timing is uncanny…
Several years ago, when conventional wisdom dictated that to push inflation higher and jumpstart lethargic economies, central banks have to push rates so low as to make saving punitive and force consumers to go out and spend their hard-earned savings, several central banks including the ECB, SNB and BOJ crossed into the monetary twilight zone by lowering overnight rates negative.
Then, year after year, we would hear from the likes of Kuroda and Draghi how the BOJ and ECB will continue and even extend their insane monetary policy, which now includes the purchase of 80% of all Japanese ETFs…
… until the central banks hit their inflation targets of 2%.
And yet, year after year, the BOJ would not only not hit its inflation target but appeared to drift ever lower, as did the ECB, SNB, and any other bank that had gone NIRP, confounding all economists and central bankers: why has this happened if rates were negative? Why were consumers not taking their money out of the bank and spending it, pushing inflation higher?
Nobody had an answer, until in late 2015, we offered a glimpse into what was structurally flawed with this “model”: using a report by Bank of America, we showed that not only had household savings rates not declined in countries with negative rates, they had in fact risen. There was a simple reason for this, as the BIS had highlighted: ultra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain.
What logically followed from this is that inflation would also track rates lower, resulting in a crushing blow to economic orthodoxy where the only weapon central banks had left to spark an economic – read inflationary – recovery was to ease monetary conditions even more in hopes that eventually they would drop low enough to spark the long-awaited recovery.
It never happened, even though amusingly it was all the way back in 2015 that we predicted – correctly in retrospect – just what the monetary endgame is:
Fear not: when even “moar” QE and NIRP do not work, and the economists of the ECB admit the “monetary twilight zone” was a disaster, there is one last “tool” they can and will use – helicopters. Because when it comes to printing money, whether in digital reserve format, or physical paper format, there is literally no limit how much can and will be created to achieve what is the endgame of the current monetary dead end: the total destruction of fiat as a store of wealth in order to preserve the global equity tranche while wiping away a few hundred trillion in debt.
Thanks to COVID-19, we have now moved beyond merely the “twilight” and are now in the “helicopter” zone.
But what about the relationship between rates and savings, and by extension inflation? After all, that is the topic of this post. Well, we can now confirm that our intuition from 2015 that negative rates are not only not inflationary but outright deflationary, and encourage consumers to save even more, was correct all along.
Below we post a chart from the latest Research Investment Committee report by BofA titled “Stagnation, stagflation or elevation”, which with just one image blows up everything that is flawed with monetary policy. It shows that while lower rates indeed stimulate spending and lead to lower savings, this effect peaks at around 4% and then goes negative. In fact, the lower yields – and rates – drop below 4% – not to mention to 0% or below – the lower the propensity to spend and the higher the savings rate!
There is another reason why this chart of such epic importance: it confirms what so many have known but were afraid to voice as it ran against decades of flawed economic theory: it demonstrates without a shadow of a doubt, that hyper-easy monetary policy is not inflationary but is deflationary. Which is catastrophic for central banks, who publicly state that the only reason they are pursuing ultra-easy monetary policy which includes QE and negative rates, is not to goose the market higher (even though by now we all know that’s the real reason) but to stimulate inflation.
This is how Bank of America summarizes this stunning observation:
As low growth & inflation make low-risk-asset income scarce (e.g. from government bonds), households are forced to reduce consumption and increase savings in order to meet retirement goals.
Forced saving further depresses demand in a vicious cycle.
This means that the lower (and more negative) central banks push rates, the lower (not higher) the spending, the higher (not lower) the savings rate, the lower the inflation, the higher the disinflation (or outright deflation), which in turn forces central banks to cut rates even more, to add QE, yield curve control, buy junk bonds, buy ETFs, or pursue any of a host of other monetary policies that are even more devastating to consumer psychology, forcing even more savings, resulting in even more disinflation, causing even more intervention by central banks in what is, without doubt, the most diabolical feedback loop of modern monetary policy and economics.
Said otherwise, monetary easing is deflationary. Let that sink in.
In effect, what the chart above shows, is that once trapped by NIRP, there is no way out, and the more central banks pursue inflation to offset deflation via monetary policy, the more pronounced the deflationary outcome resulting in even more central bank deflationary “stimulus”!
Meanwhile, as central banks spark even more deflation with their policies, the one place where all those trillions in liquidity they conjure out of thin air ends up in, is what was once known as the “market” and is now, in the words of BofA the “fake market” or as DB calls it “administered markets“, leading to ever-higher fake asset prices, and ever greater wealth and income inequality, which ultimately tears the fabric of society itself.
In fact, just look at what’s happening to America right now: rioting, looting, pillaging, Americans fighting other Americans and while the media is spinning self-serving narratives that frame the bad guy as Trump, or China, or Russia, or this political party, or that, or some social movement, the truth is that the culprit behind the upcoming collapse of the US is just one, the same one that Thomas Jefferson warned the brand new nation about more than two centuries ago:
I believe that banking institutions are more dangerous to our liberties than standing armies. The issuing power of currency shall be taken from the banks and restored to the people, to whom it properly belongs.
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.”
And sure enough, looking at what’s happening in any major city today, we see a lot of homeless and desperate people. And as a further reminder, the Fed – as the Bank of England was so kind to remind us – was and remains a private institution, no matter its claims otherwise.
Now if only someone could explain to all those millions of angry Americans that the source of virtually all of society’s ills is to be found in the building below (which just happens to house an unknown amount of freshly printed dollar bills), it would be a much-needed start to the reset the US so desperately needs to avoid complete destruction.
It was so evident that gold WOULD SOAR that some investors made fortunes so large that they still LIVE OFF THEM today.
In JUST ONE DECADE, gold’s price rose from $35 to $850 per ounce, and that type of return has NEVER MATERIALIZED again in gold. In 2000, gold ended a 20-year bear market and SOARED AGAIN, but not by 2,400% because it couldn’t.
You can’t RECREATE the initial big bang of the universe, metaphorically speaking; it’s physically and mathematically IMPOSSIBLE to start anew.
It’s unfair to those of us who WEREN’T THERE in 1971 to capitalize on this. We never know how much we would have RISKED on gold and would have gained.
In 2009, the price of silver WENT BALLISTIC and climbed from around $9/ounce to eventually reclaim its 1980 all-time high of $49/ounce. A year before, in 2008, though, while the banking sector was in shambles, one of the failing banks supposedly had to sell its silver position, causing the price to go from $21 to $8 in NO TIME.
This was the precursor that birthed the opportunity position in silver as it WENT PARABOLIC.
Warren Buffett is FAMOUS FOR hating on gold. He simply doesn’t get it, and while he is one of the best BUSINESS EVALUATORS ever, perhaps the greatest, he is a POOR DIVERSIFIER of funds out of stocks, which is why he has probably MISSED OUT on $100B or more just in the past 20 years alone.
Buffett always keeps plenty of cash around, but instead of SPREADING HIS LIQUID ASSETS between gold and silver, for example, he has kept it mostly in Treasury bonds.
Just since the year 2000, his dollar CASH PILE, money devoted to staying liquid and handy for use during market crashes and buying undervalued stocks, has lost much of its purchasing power while gold has JUMPED from $250/ounce to $1,750 TODAY.
That’s a 700% gain, and it is a TREMENDOUS loss for his shareholders, which could have heard about how the company’s pile of cash is GROWING RAPIDLY at each annual shareholder meeting, instead of getting excuses like that you can’t teach an old dog new tricks.
Buffett simply has not taken the time to UNDERSTAND THE FLAWS of fiat currencies. We can see this because his opinion on Bitcoin is that it is worthless, while the cryptocurrency has led to remarkable returns.
Contrary to his notions, we NOT ONLY take pride in being the FIRST NEWSLETTER to ever cover Bitcoin, to our knowledge, when its price was $13/coin, but we kept on covering it until late in 2017 when at $10,000/coin, we warned that this was a bubble and that PROFITS WERE TO BE TAKEN.
Throughout 2017, Wall Street tycoons blew off Bitcoin, most famously Jamie Dimon, CEO of JPMorgan Chase, who attacked the cryptocurrency.
Buffett has been wrong on it, Wall Street totally missed it from 2013 and onwards, and only in 2020 do we see people like Robert Kiyosaki and billionaire investor Paul Tudor Jones understanding the TRUE POTENTIAL.
The Federal Reserve is PUSHING AHEAD with aggressive ETF purchases and DEBT MONETIZATION on behalf of the Federal Government. June is going to be one of the most CENTRALLY-ASSISTED months in U.S. history. The deficit is getting out of hand and the S&P 500 is kissing 3,000 again.
The point is that in order to HEDGE these expensive bonds and stocks, investors MUST turn to gold.
EXCLUSIVE REPORTS, Featured In This Article and in Others, Which Are Considered ESSENTIAL READING:
On March 23 – the day the S&P dropped to its cycle low of 2,237 – the Fed stunned capital markets when it announced it would purchase investment-grade corporate bonds, traversing a Rubicon into a secondary market intervention that not even Ben Bernanke had dared to cross. A few weeks later, on April 9, the Fed doubled down by announcing it would purchase not only junk bonds from “fallen angel” issuers (an announcement which came just days after a quarter in which a record $150BN in investment-grade bonds were downgraded to junk, starting the long-awaited tsunami of “fallen angels”), but would also buy junk bond ETFs such as HYG and JNK.
This is what the Fed’s Secondary Market Corporate Credit Facilities term sheet said on this topic:
The Facility also may purchase U.S.-listed ETFs whose investment objective is to provide broad exposure to the market for U.S. corporate bonds. The preponderance of ETF holdings will be of ETFs whose primary investment objective is exposure to U.S. investment-grade corporate bonds, and the remainder will be in ETFs whose primary investment objective is exposure to U.S. high-yield corporate bonds
Naturally, the news cheered beaten-down markets and was enough to send junk bond ETFs such as JNK and HYG soaring.
One month later, following a surge in inquiry including from the bond king Jeff Gundlach as to when the Fed would actually start buying corporate bond ETFs, the Fed realized it would not be able to jawbone markets anymore and would have to put its money where its term sheet was, and on May 11 the NY Fed said it would “begin purchases of exchange-traded funds (ETFs) on May 12.”
And while the central bank said the focus of its ETF purchases would be on IG-focused ETFs, the New York Fed also disclosed it would start buying junk bonds ETFs as well:
As specified in the term sheet, the SMCCF may purchase U.S.-listed ETFs whose investment objective is to provide broad exposure to the market for U.S. corporate bonds. The preponderance of ETF holdings will be of ETFs whose primary investment objective is exposure to U.S. investment-grade corporate bonds, and the remainder will be in ETFs whose primary investment objective is exposure to U.S. high-yield corporate bonds.
Then, last Thursday, we reported that as part of the Fed’s record balance sheet, which for the first time ever surpassed $7 trillion, the Fed disclosed that it also held $1.8 billion under Corporate Credit Facility holdings, the line item that includes purchases of both investment grade (LQD) and junk bonds ETFs (HYG, JNK, etc).
This came two days after Powell defended the Fed’s program to buy junk bonds during his testimony before the Senate Banking Committee, which asked how purchases of junk bonds is “helping folks on Main Street.” Powell flagged that the Fed allowed for buying bonds from so-called “fallen angels” to ensure there is “no cliff” between the two lending markets (even though as we pointed out previously, a clear cliff has formed), saying “we don’t want to have a cliff there to where investment grade markets are working well, but the leveraged markets are not, non-investment grade markets are not.”
He then added that “we made a very limited, narrow set of actions to support market function in these markets, including buying ETFs, and that’s had an effect to improve market function there.”
Powell concluded by saying “we’re not buying junk bonds generally across the board at all,” which of course is correct: he is merely buying ETFs that have junk bond constituents.
And this is where the Fed’s first major test of directly manipulating and intervening in market functioning is about to take place.
While the Fed’s H.4.1 statement does not breakdown how much of the $1.8 billion in ETF holdings is allocated to investment grade and how much is junk, it is safe to say that at least $1 dollar of that amount has been allocated to purchases of Junk ETFs.
That will be a problem for Powell, because a quick scan of the holdings of both HYG and JNK reveals that these junk bonds ETFs own, among the hundreds of other securities, several bonds from the just defaulted rental giant, Hertz.
Here are HYG’s holdings of HTZ bonds: they amount to just over $50MM in face value across 4 bonds (out of a total of $23.3BN in holdings across just over 1,000 bonds).
And here is JNK: just under $$30MM in notional across 3 CUSIPs out of a total of $11.55BN in total assets in the ETF.
And yes, for those asking, both ETFs hold that infamous Hertz bond that was issued last November and that will default before paying a single coupon.
To be sure, we can only extrapolate but it is safe to say that the Fed’s holdings of both these ETFs are modest for the time being, and we assume that the bulk of ETF purchases have targeted the investment grade, LQD ETF; still the fact is that as of this moment, the Fed is a holder, via BlackRock and via HYG and JNK, of bonds which are in default, and which make the Fed a part of the Hertz post-petition equity once it emerges from bankruptcy!
This means that unless the Fed somehow manages to divest of Hertz bonds that comprise its HYG and JNK holdings, the US central bank is as of this moment a stakeholder in the Hertz bankruptcy process, and assuming there is no liquidation, will end up owning a pro-rata stake of the post-petition equity once the company emerges from bankruptcy in the not too distant future.
What happens then nobody knows: will the Fed take a vocal position in the company’s future? Can the Fed even own equities via a debt-to-equity swap? What happens when hundreds of other junk bonds default and the Fed ends up owning billions in post-petition equity pro forma for equitization?
We don’t know; we doubt anyone on Wall Street or in Congress knows. And we are certain that the Fed itself doesn’t know because, in its scramble to stabilize the bond market, it forgot that once companies file for bankruptcy (certainly there is no discussion in the Fed’s term sheets of what happens once its corporate bond holdings default) the Fed will – sooner or later – end up being an equity holder.
As a reminder, the ECB was faced with a similar scandal in Dec 2017 when it ended up holding bonds of insolvent Steinhoff, but back then Mario Draghi quickly liquidated the bonds and the market pretended nothing ever happened. The problem for Powell is that one look at the HYG and JNK holdings reveal dozens if not hundreds of companies which will file for bankruptcy within months if not weeks, suggesting the Hertz debacle is just the start of a bankruptcy flood in which the Fed will emerge as a key actor in bankruptcy court and Powell will have to explain away why it is now an equity stakeholder of bankrupt companies.
We eagerly look forward to Powell answering all these questions, hopefully as soon as this Friday when the Fed chair holds yet another video conference.
The markets have GONE UP, almost in a straight line, since the March 23rd lows. Who’s been doing all the buying? Institutional money has been SELLING into strength, so we know FOR SURE it’s not them. Hedge funds have turned even MORE BEARISH, so it’s absolutely not them. Buybacks from the likes of Apple Inc. are back, so that’s part of it, but is that the only explanation?
Retail investors, the younger demographics, are RUSHING BACK, thinking that every blue-chip company that is down 50% MUST go back to its all-time high, pre-COVID-19.
It’s not only buybacks and retail that are buying, it’s also the FEAR OF FIGHTING the Federal Reserve, which is scaring away investors who want to either SHORT the indices or bet on a slow recovery.
All of this is leading to many investors simply resorting to cash, which means markets are ARTIFICIALLY-HIGH. Without the Federal Reserve, there would be more pressure on the downside and the retail millennials would be out of the picture.
Courtesy: Zerohedge.com, Paul Tudor Jones (newest Bitcoin bull)
Is there VALUE to be found in current index prices? The answer, as we see it, is that prices are TOO FORWARD-LOOKING.
In other words, in the future, the S&P 500 will trade (in real terms, inflation-adjusted) much higher than the 3,300 it reached before the panic; America’s businesses are the best, no question. But we don’t see that occurring in 2020 or in 2021, and even IF IT DID, the returns it represents are not worth THE RISK.
In the chart above, you can see that Jerome Powell’s actions can ONLY BE MATCHED by the Federal Reserve’s reaction to WW2.
You and I are going through a SURREAL PERIOD on our journey. Covid-19 isn’t the result of IDIOTIC BEHAVIOR by consumers, lenders, Wall Street or CEOs; it is the PRICE PAID for reacting responsibly and maybe too aggressively to the unknowns of the pandemic.
In other words, its impact on the economy is real, but because of the way it happened, we’re seeing BAILOUTS that are justified by authorities as Making People and Businesses Whole.
The problem is that the government DOESN’T HAVE any tax reserves; it’s already operating from a position of weakness. These extensions of goodwill, these helping hands that reach out to us via Helicopter Money and QE programs, are not MAGIC PILLS. They come at a great price.
While many have speculated the price would be runaway inflation, this HAS NOT manifested yet. Still, other UNDESIRABLE OUTCOMES have been introduced to our lives.
As judged by Goldman Sachs’ re-opening gauge, the reality is that we still DON’T HAVE the slightest idea how fast the world will go back to growth and full economic activity.
We don’t know what the ramifications are of all the stimulus money, Federal Reserve loans, and HATRED towards China.
It’s extremely difficult to PLAN AHEAD, which means that CEOs aren’t making big decisions or masterminding strategies right now; they’re focused on DAY-TO-DAY operations.
This is an environment ideal for gold.
We’re passing an IMPORTANT MILESTONE because Quantitative Easing seems to only result in higher asset prices, but not in more productivity.
I expect governments to be PROACTIVE in ways that we’ve not seen since the days of Franklin Delano Roosevelt.
We are also hearing that the U.S. government, using TAXPAYERS’ money (whatever that means at this point), is considering BUYING STOCKS!
We are stretching the limits of what America even means. This is the worst transformation of our core ideas I’ve ever seen.
These are measures that put in jeopardy the mere meaning of fair competition: PERSONAL ACCOUNTABILITY and BEING AN INDIVIDUAL.
All laws are written, as we go along.
We are creating a new society, a new global economy, and a new paradigm.
FORGET about the past. You have woken up to a new reality. The financial losses mean absolutely NOTHING, compared with the loss of LIBERTY.
The government will own real estate, stocks and bonds and will exercise TOO MUCH control over the economy.
This should CONCERN you.
The government has asked FEMA to get involved and they’ve AGREED to send paychecks to all Americans.
Every prediction that I’ve made, which five years ago was CONSIDERED TABOO, is coming true.
I discussed the day that the FED would cut back to zero. I highlighted that we’ll first see a HUGE RALLY in the dollar (because everyone is selling), and I forecasted that we will see STOCKS PURCHASED by federal agencies.
His comments come on the heels of President Trump’s prime-time Wednesday address in which he announced that travel would be suspended to most of Europe for 30 days in an attempt to slow the spread of coronavirus. He said he will also ask Congress to provide payroll tax relief for Americans – and would instruct the Small Business Administration to “provide capital and liquidity” to small businesses.
The moment we may all remember, shows the power of @jimcramer and @CNBC – Jim calls for the federal government to back liquidity and credit. Instantly gets phone call on live TV, returns to say the White House is discussing his plan. pic.twitter.com/bs1u7h3Vfw
Cramer’s Thursday comments were reminiscent of his infamous “They know nothing!” rant in 2007.
‘They haveno idea how bad it is out there… NO IDEA. They know NOTHING!’
Of course in 2008: ‘Bear Stearns is fine.‘
Investor Peter Schiff disagrees with Cramer, big time:
Crazy @jimcramer just advocated live on @CNBC that the Federal Government suspend all taxation and just "print the darn money." A new low for economic thinking from the network that claims to be number 1 in finance!
Has @JimCramer ever considered what would happened if everyone stayed home from work, no one produced anything, no one paid taxes, but the government just printed trillions of dollars out of thin air and effectively dropped them on the populace from helicopters?
Cramer now advocating getting rid of US bankruptcy laws and just having "the government/Federal Reserve" pay everyone's bills. Or at least Boeing's. I think this is a fair representation of what he just said.
I agree with Jim Cramer, where are the Hank Paulsen’s of the current administration, it needs decisive measures to placate the market and recover some semblance of rationale. It is absolutely ridiculous that all trust and confidence can simply go up in smoke!