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Big investment companies are buying houses at high prices and renting them out, squeezing would-be homeowners

Rising housing prices across the nation are putting first-time homebuyers in a bind.

While record-low interest rates make mortgage financing incredibly easy, few people can actually afford to take advantage of these loans because prices for houses are too high. Part of the problem has to do with soaring lumber costs, which is driving up the price of building. There’s also a labor shortage for builders, which means many would-be buyers fighting with each other to find pre-owned homes, which is driving up those prices.

Those that can afford to buy a house are having trouble finding one for sale before someone else buys it. Another dimension of the problem is these first-time buyers aren’t just competing amongst themselves, they’re also facing competition from large investment companies who are buying up houses to turn them into single-family rentals, blocking many Americans from becoming homeowners.

A new report from the Wall Street Journal details “the rise of big investors as a potent new force in the U.S. housing market.” The story covers the example of Fundrise LLC, an online property-investing platform that purchased 124 houses in Conroe, Texas, for $32 million, paying building firm D.R. Horton Inc. “roughly twice what it typically makes selling houses to the middle class” — illustrating how home builders stand to make more money by selling houses to investment firms instead of middle-class Americans who want to own their first home.

The report goes on to detail how “yield-chasing investors are snapping up single-family houses to rent out or flip,” contributing to the scarcity of houses for sale and driving up prices for everyone.

According to one estimate from John Burns Real Estate Consulting, as many as 1 in 5 houses sold in the nation’s top housing markets is purchased by someone who will never move in. As a result, the consulting firm expects prices to continue to rise, climbing 12% this year and at least 6% more in 2022.

“You now have permanent capital competing with a young couple trying to buy a house,” said company CEO John Burns. “That’s going to make U.S. housing permanently more expensive.”

Burns notes there are more than 200 big money companies and investment firms competing with families and first-time buyers for houses, including titans of finance J.P. Morgan Asset Management and Blackrock Inc.

Important changes are happening in the housing market because of the involvement of big money investors. The record-level home prices driven by firms paying much more than regular people can afford for these homes, or maybe even more than the homes are worth, could lead to a market bubble.

The Journal’s report compared the speculative bubble created by these investors to the housing bubble that began in 2004 and 2005 and ended with the 2008 financial crisis.

Also, many of the houses bought by these companies are not being sold to potential homeowners. Entire neighborhoods bought by Wall Street are being turned into rentals, leaving few options for those who want to own a home.

With prices rising and big companies outbidding the middle class for the few houses that are available, how are families ever going to afford to own a home?

Intelwars investing

Golds vs. the stock market

More than 3,000 years ago in the early 12th century BC, Greco-Roman legend tells us of a mythical pair of monsters located in the Strait of Messina in southern Italy.

The monsters were named Scylla and Charybdis. And both Homer’s Odyssey and Virgil’s Aeneid describe the terror of sailors who came into contact with them.

Scylla was on one side of the Strait, and Charybdis on the other. But because the Strait is so narrow, it was impossible for sailors to avoid both of the monsters, essentially forcing the captain to choose between the lesser of two evils.

In Homer’s narrative, for example, Odysseus is advised that the whirlpools of Charybis could sink his entire ship, while Scylla might only kill a handful of his sailors.

So Odysseus chooses to sail past Scylla: “Better by far to lose six men and keep your ship than lose your entire crew.”

The story is a myth. But the idea of having to choose between two terrible options is very real.

It appears that the Federal Reserve has landed itself in this position.

In its efforts to boost the economy during the pandemic, the Fed slashed interest rates so much that the average 30-year mortgage rate for homebuyers reached an all-time low of 2.65% earlier this year.

Similarly, AAA-rated corporate bond yields reached record low 2.14% last summer.

The US government 10-year Treasury Note dropped to a record low 0.52%.

And the 28-day US government Treasury Bill rate actually turned negative for a brief period– something that has never happened before.

The effects of such cheap rates are obvious.

With corporate borrowing rates so low, the stock market has boomed. With consumers able to borrow money so cheaply, home prices have surged to an all-time high.

Yet in slashing interest rates to record lows, the Fed has essentially sailed right into the Strait of Messina. And they’re about to find themselves stuck between two monsters.

On one side of the Strait is the Inflation Monster, which grows stronger and more menacing with ever dollar the Fed conjures into existence.

Last year the Fed increased the supply of US dollars in the financial system (M2) by 26%– the single largest annual increase since 1943.

The Fed has nearly doubled the size of its balance sheet in the last 12 months alone, and nearly 10x’d its balance sheet since the financial crisis of 2008.

In simple terms, the Fed ‘prints’ money (albeit electronically) and sprinkles it around the financial system.

This is a form of debasement, not much different than how ancient Roman emperors cut corners by reducing the purity of their gold and silver coins.

Historically speaking, debasing the currency eventually causes inflation.

There are famous historical episodes, like Zimbabwe, Venezuela, or the Weimar Republic, where the government’s endless money printing caused hyperinflation.

But there are countless ‘quieter’ examples of inflation– like in Brazil, where inflation is now over 5%, or Turkey, where the annualized inflation rate is about 15%.

15% isn’t exactly hyperinflation. But it does make life pretty uncomfortable, especially when wage growth fails to keep pace. Every year people find themselves poorer and worse off.

Yet the Federal Reserve ignores these countless historic examples, recently claiming to Congress that relentless money printing will not cause inflation.

The Fed’s reasoning is that, because their money printing hasn’t caused inflation yet, it never will. This is pretty dangerous logic, given that rule #1 in finance is ‘past performance is no guarantee of future results.’

But I’ll come back to that in a moment, because on the other side of the Strait is the Market Monster.

Like the Inflation Monster, the Market Monster grows larger with ever dollar the Fed creates. It FEEDS on cheap interest rates.

Look at the US stock market: prior to the pandemic, the Dow Jones Industrial Average reached a record high of just over 29,000 points. Today, the market is more than 10% higher.

And yet–

1. Corporate earnings are DOWN. The average Earnings per Share in the S&P 500 is 30.47% LOWER than prior to the pandemic.

2. Corporate revenue is also down. Yet corporate DEBT is substantially higher.

3. The US economy as measured by GDP is weaker. Consumer spending is still lower than before the pandemic. Unemployment is higher.

4. Government debt is hilariously out of control, and the new ruling party just announced that they want to raise taxes.

Lower profit, lower revenue, higher debt, higher taxes– NONE of these trends should be favorable for stocks. Yet the market is UP, with the average Price/Earnings ratio in the S&P 500 now an incredible 40x.

The Fed knows that the strength of the stock market… along with the real estate and bond markets… is based on cheap interest rates.

They also know that if they raise rates, these markets could suffer a dramatic downturn.

So the Fed has two options to choose from, and neither is good: raise rates and cause markets to crash. Or, don’t raise rates, and risk inflation.

They’ve pretty much already told us they’re choosing inflation.

I’m not suggesting that the US is going to turn into Zimbabwe and suffer terrible hyperinflation.

But inflation levels similar to Brazil or Turkey are definitely possible. It happened before in the 1970s when inflation hit double digits– and stayed that way for years.

And given the Fed’s refusal to acknowledge the slightest chance of inflation (heresy!), it makes sense to consider preparing for the possibility.

I would point out again that gold has a 5,000 year track record of performing well during times of inflation.

It’s also among the few major asset classes that’s NOT currently at a record high.

Unlike the stock market, which has reached an all-time high despite lower earnings and higher debt, gold is down 16% from its peak even though inflation expectations are the highest they’ve been in years.

On that basis, gold looks pretty undervalued.


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Episode-2841- The Agorist View of Investing

I recently had the good fortune to be on The Corbett Report to discuss investing as an agorist.  This was a panel with fellow Goose Group member Sal the Agorist and a new friend I met named Tim Picciot.  You Continue reading →

Intelwars investing

Warren Buffett: “Retirees face a bleak future”

Warren Buffett minced no words in his most recent annual shareholder letter (which came out over the weekend) when he told investors that “retirees face a bleak future.”

Buffett was referring to the pitifully low interest rates that dominate fixed income investments (like bonds and annuities).

In September 1981, he writes, investors could buy a 10-year US government bond yielding nearly 16%.

Now, inflation was a lot higher in the 1980s than it is today. But even after adjusting for inflation, the average annual yield for any investor who held that 1981 bond to maturity over the next decade would have been 5.7% per year.

Today, that same 10 year bond yields just 1.4%. But the official inflation rate in the United States is also 1.4%. This means that, after adjusting for inflation, your net yield today is ZERO.

What’s even more incredible is that there are obvious signs inflation may be on the rise; for example, the most recent Producer Price Index of wholesale price inflation reached its highest level since 2009.

Yet simultaneously the Federal Reserve keeps saying that they want to keep interest rates low. And they’re doing their best to push the 10-year yield even lower than 1.4%.

In other words, inflation could go higher, and interest rates lower. So anyone who buys bonds will actually suffer a negative yield after adjusting for inflation.

And this is precisely what Buffett was talking about.

Retirees– along with pension funds and charitable endowments– often buy fixed income investments (like bonds) because of their perceived safety and predictability.

The stock market can be all over the map. Some days it’s up, some days it’s down. But bonds (in theory) are stable investments that pay a fixed sum of cash, every single month or quarter.

But it’s gotten to the point now that those ‘safe’ investments can actually cost you money, especially after adjusting for inflation.

Anyone who actually wants to earn a halfway decent return on investment must now seek out riskier and more volatile assets.

Stocks are the next best choice for most people. But the stock market has become absurdly overpriced. There are still undervalued gems, but they’re more and more difficult to find.

Coca Cola is a great example of how overpriced the market is; Coke’s earnings actually peaked in 2010, more than a decade ago. At that time, the company earned $2.53 per share and had $14 billion in long-term debt.

Its earnings have been in decline ever since. Last year Coca Cola earned $1.79 per share, a decline of 30% from its peak in 2010. And over the same period its long-term debt has nearly tripled to $40 billion.

Revenue is down, earnings are down, free cash flow is down, debt is up. Any rational person would look at this data and conclude that Coca Cola’s stock price should have been in the dumps since 2010.

But that’s not the case. Coke stock has more than doubled, and it’s not far off from its all-time high.

This makes absolutely no sense, yet it exemplifies the sorts of risks that stock market investors have to take today, simply because– as the saying goes– “There is no alternative.”

If interest rates were at normal levels, no sane investor would pay record high prices for a declining business. But this is what people feel compelled to do with their money now because it doesn’t seem like they have any other option.

Buffett knows this, and he has routinely lamented the overpriced stock market for the past few years in his annual letters, along with outrageous fees charged by big funds and Wall Street investment banks.

To Buffett, stocks aren’t securities to be traded. Instead, they represent shares in a business, and shareholders should view themselves as partners in that business. And the best investments are “wonderful,” well-managed businesses that can be acquired at a discount.

This year Buffett summarized his ethos by saying:

Productive assets such as farms, real estate, and yes, business ownership, produce wealth– lots of it. Most owners of such properties will be rewarded.”

One issue Buffett didn’t mention in this annual report is the sad state of finances for nearly every pension fund in the world… and that makes retirement prospects even more bleak.

Social Security, for example, is underfunded by tens of trillions of dollars according to the program’s Trustees (which include the Treasury Secretary of the United States).

Social Security’s finances have been so mismanaged that the trust funds are set to run out of money as early as 2029. And it’s not like the federal government (which already runs a multi-trillion dollar deficit) is in any position to bail out the program.

So retirees really do face bleak prospects.

This isn’t intended to be a downer, but hopefully a call to action. Because there’s plenty you can do about it.

Only a handful of people in the world have the ability to set interest rates and inflation policy, or to manage Social Security back to health. Chances are you’re not one of them. Neither am I.

But we do have the power to use every tool at our disposal to fix these challenges for ourselves.

And that’s the bottom line: unless you want to be like Buffett and still be working in your 90s, you absolutely have to set aside more money for retirement.

There are plenty of ways to do that. For example, anyone with the ability to generate side income can set up a solo 401(k) and set aside north of $50,000 per year for retirement in an incredibly tax advantaged way.

That side income can be just about anything; you could sell products on Amazon, start your own website, consult, drive for Uber, flip real estate, etc.

Whatever your talents and skills are (and I’m sure they’re numerous), you can set up a robust retirement structure and dramatically boost your retirement savings.

You just need the right information… and the willingness to take action.


Intelwars investing

Gold is one of the few assets that’s NOT at a record high

On December 24, 1943, in the midst of World War II, General Dwight Eisenhower formally took command of all Allied forces in Europe.

This was a big deal after such a pivotal year.

1943 saw Hitler suffer a devastating loss in Stalingrad; and by the end of the year, he had nearly lost Italy.

The Allies could see the light at the end of the tunnel. Victory was within reach, and they were already working on a plan codenamed Operation Overlord– the invasion of Normandy– that would begin the final push against Hitler in the summer of 1944.

Eisenhower’s appointment was the ultimate admission of US military supremacy; as Supreme allied Commander, he outranked everyone, including British and French generals.

But the US was the natural choice to take charge.

At the time the US government was pumping everything into the war effort. Military spending was already at a record high in 1942, the first full year that the US was involved in World War II.

But by the end of 1943, military spending had tripled.

The US national debt exploded as a result, surpassing 60% of GDP. That was an unconscionable figure, more than twice as much debt than the US racked up during the Civil War, or World War I.

Money was tight, and the Treasury Department did everything it could to raise cash. Tax rates soared, with the highest marginal rate hitting 94%. They were constantly pushing the public to buy War Bonds.

But most importantly, the Federal Reserve vastly expanded the money supply, essentially ‘printing’ whatever money the federal government needed to pay for the war effort.

1943 was a record year for monetary expansion, in fact. “M2 money supply,” a key measure of the amount of money in the financial system, grew more in 1943 than almost any other year in US history, before or since.

And then along came Covid.

Last year the US federal government spent so much money on Covid relief that the national debt increased by an astonishing $4.5 trillion. And they’re about to pass another $1.9 trillion spending package on top of that.

Bear in mind that the Congressional Budget Office’s projected ‘baseline deficit’ for this fiscal year was already more than $1 trillion. So now they’re piling even more on to that amount.

Just like in the 1940s, it’s the Federal Reserve that’s picking up most of the slack.

Last year the Fed printed so much money that M2 money supply increased the most in any year since 1943.

At least in 1943 they were fighting the Nazis; in 2020 they conjured ridiculous sums of money out of thin air to pay people to stay home.

Plus the record-setting money expansion is set to continue this year.

Based on the monetary programs the Fed is already executing, M2 money supply will increase by another $2.3 trillion this year, or roughly 12%.

And that’s before they do anything new. If Covid-21 mysteriously surfaces, or the government decides to spend another $2 trillion in stimulus, or they pass the Green New Everything, the money bubble will expand even further.

I cannot understate this: this extraordinary expansion of the money supply is risky. And the primary risk is inflation.

It’s a simple concept– the more money they create, the less valuable the rest of the money becomes.

And we’re already seeing some early signs of inflation and dollar weakness. For example, the dollar is down against nearly every major currency over the past six months.

Also, last week the Labor Department announced that January’s Producer Price Index reached its highest level in more than a decade.

Plus, several commodities, ranging from copper to cotton to crude oil, have surged in price, with the CRB Commodity Index up 15% so far this year.

Commodities are essentially raw materials that make up the products we consume– everything from mobile phones to new home construction.

So when commodity prices increase, it costs more to produce the goods that we consume… and that often means that companies have to charge us more for their products.

This is inflation.

It’s noteworthy that the Federal Reserve has already announced that they’re willing to allow higher rates of inflation if prices start to rise.

So they’re not even being vague about their intentions.

This raises the obvious question: how is someone supposed to protect their savings at a time when both the Treasury Department and Federal Reserve are waging holy jihad against the dollar?

There is seemingly no amount of money too great to print, no amount of debt that’s off limits.

Typically in an inflationary environment like this, it makes sense to own high quality assets. This is a big reason why the stock market has been doing well.

But a lot of people may be understandably uncomfortable buying stocks at near record-high valuations, i.e. paying 1,000x earnings for a mature, listed business.

The average company in the S&P 500 carries a Price/Earnings ratio of nearly 40 right now, nearly 3x the long-term median. It’s only been higher just prior to the dot-com crash, and the Global Financial Crisis in 2008/2009.

The same goes for real estate; with interest rates so low (again, thanks to the Federal Reserve), the cost to borrow money to buy property is practically nothing. And this has driven up the price of real estate because people can afford to borrow (and pay) more.

Whether stocks, real estate, or anything else, it’s hard to find refuge in an asset that’s already surged to an all-time high.

Ironically, one asset that’s NOT at its all-time high is GOLD. This is almost comical considering the inflationary environment that we’re in, and the fact that gold is a traditional inflation hedge.

Many commodities, stocks, real estate, cryptocurrency, and bonds have soared in price. But gold is actually down over the past ~6 months. So by comparison, gold is relatively cheap.


Intelwars investing

Some clear thinking on $50,000+ Bitcoin

There are famous stories that come out of the Great Depression in which very astute financiers sold all of their stocks just before the big crash of 1929.

Joseph Kennedy famously dumped his portfolio after receiving stock tips from a shoeshine boy. And Bernard Baruch, one of the wealthiest financiers on Wall Street, said after the crash,

Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day’s financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me [stock] tips. . .”

Now, these comments make it seem like taxi drivers and shoeshine boys don’t have financial sense. And that’s wrong.

Someone’s profession and their level of financial sophistication don’t necessarily go hand in hand; there are plenty of astute janitors, and plenty of idiot fund managers.

But I did think about Baruch’s remarks recently when an Uber driver started talking to me about cryptocurrency.

Again, his opinions are just as valid as anyone else’s. But what I found remarkable is that the only thing he knew about his portfolio was how much he’s ‘up’.

He told me about how he’d invested in a few small tokens, and that’s he’s up 3x on this, and 5x on that, and 2x on another.

There was zero discussion about the technological merits of any particular coin. He didn’t talk to me about what made their software better, or the unique proposition that any of them offers to the financial system.

He didn’t even know the basics of what he had purchased. All he knew was how much he was ‘up’, and that his portfolio was going to keep going up.

And that’s the thing about crypto: there’s a level of fanaticism that we’ve not seen before in modern history with regards to a single asset class.

There are pro-crypto people who are self-avowed “HODLers”, which is crypto-speak for “I will never sell ever… regardless of technological competition or radical changes to the marketplace.”

This is a completely emotional position to take.

But the fanaticism is on both sides. Equally, there are anti-crypto people who still claim that it’s a scam, or ‘worthless’.

Just this morning in the Wall Street Journal, in fact, some reporter wrote that Bitcoin’s “fundamental value is zero.”

This just screams ignorance. Bitcoin is software. Software is technology. And any technology that (a) serves a real purpose, and (b) has a large number of users, is by definition NOT worthless.

Bitcoin has tens of millions of users and provides actual utility, i.e. transferring value from one user to another.

Bitcoin is no more ‘worthless’ than SWIFT– the organization whose completely outdated technology facilitates international wire transfers.

Yet with Bitcoin at $50,000+, the fanaticism has reached epic levels, and people on all sides are screaming about it. One group insists that it’s going to zero. The other insists that it’s only going up.

It’s hard to make sense of the market with so much noise, so I wanted to make a few rational comments.

As a caveat, I have been pro-crypto for a long time and initially introduced our members to it back in 2013. But I’m not fanatical about anything and do my best to focus on facts.

For example, a common refrain from the pro-Bitcoin crowd these days is that “Bitcoin is gold”.

This is totally ludicrous. Bitcoin is a ‘surveillance coin,’ in that the Blockchain records every single transaction that’s ever been made, and every owner of every Bitcoin that’s ever been mined.

Physical gold has certain limitations. But there is no bar of gold that contains a record of everyone who’s ever owned it. Equating gold and Bitcoin is silly.

It’s also silly to criticize Bitcoin because its ‘throughput’ is slow. Naysayers point out that Visa can process up to 76,000 transactions per second, while Bitcoin can only process around 15 per second.

That’s true. But it’s an apples/oranges comparison. Bitcoin’s best use at this point isn’t to pay for coffee at Starbucks. It’s a great way to transfer large sums outside of the banking system.

And in that regard, Bitcoin’s throughput is more than adequate. Plus there are other coins and decentralized ledger technologies that are even better.

It’s for this reason (among many others) that very prominent investors and large financial companies, including Visa, Mastercard, Stripe, PayPal, etc. have integrated Bitcoin into their services.

And there are so many banks and funds investing in Crypto now that there may be a natural floor in the marketplace.

In other words, just like big funds tend to “buy the dip” when the stock market falls, there are enough financial players in the crypto market that they may ‘buy the dip’ if there’s a price decline in Bitcoin.

The wild gyrations in crypto prices are definitely a bit concerning; it’s hard to take an asset too seriously that can be up or down 20% in a single day. And it’s definitely hard to take something seriously when a single Tweet from Elon Musk can send its price soaring.

But that doesn’t take anything away from the technological value of what cryptocurrency presents.

Again, most people miss the point: buying cryptocurrency is ultimately a speculation in the long-term utility of its technology.

And just like Microsoft’s or Google’s technology can be worth $1+ trillion, there’s no reason that cryptocurrency can’t be worth that much.

But it makes a lot of sense to tone down the fanaticism. There are so many coins and tokens, each with different technology.

And it’s important for someone to understand the advantages and disadvantages of whatever technology they’re buying, rather than blindly buying into Bitcoin without the slightest idea of its drawbacks and benefits.

That would be like deciding it’s time to enter the stock market, and automatically buying Tesla stock without doing any research on Tesla, or any other company in the market.


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These Are The Shadowy New York Financial Institutions That Forced Robinhood To Restrict Trading In Certain Stocks

Have you ever heard of the Depository Trust & Clearing Corporation?  What about Cede and Company?  If those names are foreign to you, then you don’t really understand how the core of our financial system really works.  A lot of people are blaming Robinhood CEO Vlad Tenev and the heads of other major trading platforms for the stock trading restrictions that we witnessed last week, but it was actually the DTCC that suddenly jacked up deposit requirements ten-fold.  Robinhood and other trading platforms were put in a vise-like grip, and they had no choice but to act.  Someone needs to investigate how these decisions were made at the DTCC, and if laws were broken those that were responsible for the decisions need to go to prison.

We are being told that retail traders needed to be brought under control “for their own good”, but it was the reckless short selling of the big hedge funds that actually set the stage of last week’s chaos.

Why doesn’t anyone ever talk about restricting their exceedingly foolish trading strategies?

Thanks to relentless buying by “the Reddit Army”, several major hedge funds got absolutely slaughtered last week, and that group included Melvin Capital

Melvin Capital, a premier Wall Street hedge fund entangled in the frenzy over GameStop (GME), lost 53% in January, a source familiar with the matter told CNN Business.

Melvin, a major short-seller of GameStop, bet that the company’s shares would drop. But, on January 11, GameStop announced new board members who could help it with digital sales. That set off a fury on Reddit, namely subreddit WallStreetBets, which catapulted GameStop’s stock more than 1,600%.

Of course the small fish are not supposed to beat up the big fish like that, and the billionaires at the big hedge funds undoubtedly reached out to their powerful friends for help.

There had been speculation that the big hedge funds leaned on Robinhood CEO Vlad Tenev and the heads of other large trading platforms directly, but the truth is more complicated.

It turns out that the pressure on Robinhood and other major trading platforms came from the clearinghouse level.  The following comes from a piece in USA Today that was authored by Vlad Tenev himself

In a matter of days, our clearinghouse-mandated deposit requirements related to stocks increased ten-fold. These deposits are the collateral we post to ensure our access to clearinghouse services on behalf of our customers. They are what led us to put temporary buying restrictions in place on a small number of securities that the clearinghouses had raised their deposit requirements on. As we noted in a blog on Friday, it was not because we wanted to stop people from buying these or any stocks — we built Robinhood to provide access to investing for all. And it certainly wasn’t because we were trying to help hedge funds.

Tenev didn’t mention it by name, but the company that clears almost all of Robinhood’s trades is the Depository Trust & Clearing Corporation.  If you are not familiar with the DTCC, here is some basic info from Wikipedia

The Depository Trust & Clearing Corporation (DTCC) is an American post-trade financial services company providing clearing and settlement services to the financial markets. It performs the exchange of securities on behalf of buyers and sellers and functions as a central securities depository by providing central custody of securities.

DTCC was established in 1999 as a holding company to combine The Depository Trust Company (DTC) and National Securities Clearing Corporation (NSCC). User-owned and directed, it automates, centralizes, standardizes, and streamlines processes in the capital markets.[3] Through its subsidiaries, DTCC provides clearance, settlement, and information services for equities, corporate and municipal bonds, unit investment trusts, government and mortgage-backed securities, money market instruments, and over-the-counter derivatives. It also manages transactions between mutual funds and insurance carriers and their respective investors.

In 2011, DTCC settled the vast majority of securities transactions in the United States and close to $1.7 quadrillion[4][5][6] in value worldwide, making it by far the highest financial value processor in the world.[6] DTCC operates facilities in the New York metropolitan area, and at multiple locations in and outside the United States.

Theoretically, the DTCC is supposed to be a neutral participant in the markets.

But as we saw last week, that is definitely not the case.

So why should we allow a “for-profit monopoly” to have so much power over our financial system?  The following comes from a piece that was just authored by Omid Malekan

The brilliance of this excuse is that it only proves the skeptics and conspiracy-theory believers right. DTCC is a for-profit monopoly that sits at the heart of America’s financial system. It is controlled by the biggest Wall Street institutions and responsible for all public equity settlement. A subsidiary of it literally owns every single share of publicly traded stock in America. Yes, you read that correctly. You don’t actually own your shares of Apple or Microsoft, they do. You are only allowed to enjoy the financial benefits of being an investor because your corporate overlords let you. Why? Because the government wants it that way (the fact that financial firms like DTCC always donate a lot of money to politicians has nothing to do with it.)

Of course the DTCC is not actually the top of the pyramid.

The Depository Trust & Clearing Corporation, the National Securities Clearing Corporation and the Fixed Income Clearing Corporation are all managed “under the umbrella” of a shadowy entity known as Cede and Company…

This small New York based financial institution has a dozen directors and no more than a half dozen employees but holds, according to some reports, some 34 trillion dollars in assets.

A complex system of interlocking bodies, such as The Depository Trust & Clearing Corporation, the National Securities Clearing Corporation and the Fixed Income Clearing Corporation oversee all stock trading in the US. They all come under the umbrella of Cede.

And, on paper at least, own all the stocks traded.

One or more decision makers at these shadowy entities decided to put an extraordinary amount of pressure on Robinhood and other trading platforms.

We need to find out exactly who was involved in making the decisions, and if something illegal took place the decision makers need to be held accountable.

For now, Robinhood and other trading platforms will continue to restrict trading in certain stocks as we begin a new week

Robinhood will continue to limit trading on Monday in short-squeeze names like GameStop that have experienced explosive rallies and unprecedented volatility over the past week.

Customers can only buy one share of GameStop’s stock and five options contracts. However, the millennial-favored stock trading app did cut down its list of restricted stocks from as many as 50 on Friday to eight starting Monday.

Our financial system is far more vulnerable than most people realize, and it is just a matter of time before the house of cards comes tumbling down.

Anyone that still thinks that we have a “free market” after what we witnessed last week is simply being delusional.

Very powerful forces look out for the interests of the ultra-wealthy, and the game has been carefully designed for them to win.

***Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.***

About the Author: My name is Michael Snyder and my brand new book entitled “Lost Prophecies Of The Future Of America” is now available on  In addition to my new book, I have written four others that are available on including The Beginning Of The EndGet Prepared Now, and Living A Life That Really Matters. (#CommissionsEarned)  By purchasing the books you help to support the work that my wife and I are doing, and by giving it to others you help to multiply the impact that we are having on people all over the globe.  I have published thousands of articles on The Economic Collapse BlogEnd Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe.  I always freely and happily allow others to republish my articles on their own websites, but I also ask that they include this “About the Author” section with each article.  The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions.  I encourage you to follow me on social media on FacebookTwitter and Parler, and any way that you can share these articles with others is a great help.  During these very challenging times, people will need hope more than ever before, and it is our goal to share the gospel of Jesus Christ with as many people as we possibly can.

The post These Are The Shadowy New York Financial Institutions That Forced Robinhood To Restrict Trading In Certain Stocks first appeared on End Of The American Dream.

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GameStop stock surge: How internet day traders took on Wall Street and beat the experts

Share prices for video game retailer GameStop have shocked and awed over the past week after an online campaign to defy Wall Street expectations has sent the stock soaring.

Where Wall Street saw an opportunity to make money by shorting GameStop stock, an online community of small time do-it-yourself investors rallied to buy up shares in the company, rocketing its stock price to a dizzying 1,600% increase since the beginning of January and costing hedge fund short sellers billions of dollars.

What’s happened has been characterized as a “David. vs. Goliath story” of how trolls and memers on the internet forum Reddit have, at least for now, beat the credentialed expert investors of Wall Street.

GameStop, like many retailers, has suffered during the coronavirus pandemic but for years now has also been confronted with a changing market landscape. Simply put, customers are moving to online retail, buying digital copies of their video games over the internet relying less on brick and mortar stores to buy physical copies of their games.

Last December, the retail chain, facing mounting debt, announced it would close more than 1,000 stores by the end of its fiscal year in March after already closing more than 783 stores in the past two years.

As reported by Business Insider, in 2018, the company had a net loss of $485 million. In 2019, GameStop rebounded slightly, losing $83 million and in 2020, it faced $19 million in net losses.

In a bid to revitalize GameStop, last September investor Ryan Cohen, the founder of the online pet food retailer Chewy, bought a 13% stake in the company and started campaigning for a change of business model. Cohen envisioned GameStop as a competitor to Amazon, pushing for it to transition to online retail and compete in that sphere.

On Jan. 11, GameStop announced it had added three new directors to its board, including Cohen, causing the stock price to surge. At the beginning of 2021, the company’s stock was trading at around $17. CNN recounts that the company’s stock price surged 13% after the announcement, since then has continued to increase by leaps and bounds.

Wall Street observed GameStop’s decline and bet that it would not be able to compete against Amazon. Seeing an opportunity to make money, hedge funds Melvin Capital and Citron indicated they would short the stock, predicting that the increase in GameStop’s stock price was temporary and that prices would soon fall.

As CNBC explains, short selling is an investment strategy where “investors borrow shares of a stock to sell them at a certain price in expectations that the market value will fall below that level when it’s time to pay for the borrowed shares.”

But last Wednesday, the reddit community WallStreetBets entered the equation. WallStreetBets is essentially a messaging board that discusses day trading with some 3 million users who refer to themselves as “degenerates.” After the news broke that Wall Street hedge funds were going to short GameStop stock, members of the community started a campaign for this decentralized group of independent investors to buy up shares in an attempt to “squeeze” the short sellers, forcing them to buy more of the stock they were trying to short to cover losses as its price went up, not down. Many acted as their own stock brokers, using services like Robinhood to trade stocks at home using smartphone apps.

The campaign worked.

CNET reports GameStock blasted from $17.25 a share to a high of $159.18 on Monday. On Tuesday the stock price fell, before rising back up to $147.98. Then the market rally drew the attention of Tesla CEO Elon Musk, who tweeted about it, causing more people to pay attention to what was happening, after which the stock price soared again. As of Wednesday morning, GameStop stock was trading at $315 per share.

The astounding success of the Redditors’ campaign has some members of the WallStreetBets community attempting to replicate what they’ve done with AMC and BlackBerry. As for the short sellers, Melvin Capital was forced to close out is short position Tuesday afternoon after taking massive losses. CNBC could not report the amount Melvin Capital lost, but did note that “Citadel and Point72 have infused close to $3 billion” into the hedge fund to cover some of the losses.

For some of the Redditors, the whole episode was a joke. “It was a meme stock that really blew up,” WallStreetBets moderator Bawse1 told Wired. “The massive short contributed more toward the meme stock.”

In total, short sellers have lost more than $5 billion year to date in GameStop stock. Credentialed investors have expressed incredulity and anger at the Redditors’ investments, with hedge fund manager Michael Burry saying in a now-deleted tweet that what they had done with GameStop was “unnatural, insane, and dangerous.” Burry, who became famous for betting against the housing bubble and was the subject of Michael Lewis’ book, “The Big Short,” also said there should be “legal and regulatory repercussions.”

But the “degenerates” argue what they’re doing is no different from a hedge fund taking action to manipulate a stock’s price. As Vox reported:

From more traditional investors (and those with a lot of money), there’s been a lot of finger-wagging. But giant banks and hedge funds aren’t exactly a bastion of responsibility — take a look at the role they played in the financial crisis.

The animosity flows both ways. In a post titled “An open letter to CNBC” this week, one WallStreetBets Redditor pointed out that much of the network’s audience is composed of the retail traders who are now being criticized. “Your contempt for the retail investor (your audience) is palpable and if you don’t get it together, you’ll lose an entire new generation of investors,” the Reddit user, RADIO02118, wrote.

The user pointed out that the hedge funds that take on big risks can get a bailout — as one of the ones shorting GameStop did — whereas everyday investors generally can’t: “We don’t have billionaires to bail us out when we mess up our portfolio risk and a position goes against us. We can’t go on TV and make attempts to manipulate millions to take our side of the trade. If we mess up as bad as they did, we’re wiped out.”

Well, one difference may be how the little-guy investors are using their newfound wealth. Many users are posting about how they can afford medical bills, pay off student debt, or cover over major life expenses.

“I can now write my mom a check and put my sister through lymes treatment. This has been a very rough year, but I’m so thankful for every single one of you,” wrote u/Stammbomb in one post.

Another user, u/MasterTheGame, posted about how after investing in GameStop when it was $97 per share he can now afford a $4,000 knee surgery for his dog. “This morning after market open I was able to sell enough to pay for his TPLO surgery! I am in tears and really grateful. Thank you everyone and good luck!” he said.

As user Stylux put it to Vox, “Some of the users can now pay off their car notes, student debts, feed their kids and pay their mortgages. Who can feel bad about that?”

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This article was contributed by Future Money Trends. 

Nancy Pelosi wants a stimulus bill that is over $3 trillion. Mitch McConnell wants to pass something in the order of $500 billion. These leaders are clearly worlds apart. Nancy even rejected bills that were $1.5 trillion, saying that they were “nice but not nearly enough.” On the other hand, conservative Republicans are saying that the free market ought to be taking the lead while the government has done enough and that the debt is already gigantic.

The problem is that neither party wants to concede, giving even an inch to the other side since they’ll appear weak in front of their voters. Both parties desperately want to win the Senate race in Georgia. It’s going to get very political, with hundreds of millions raised for the cause, and January 5th is the vote – even Trump and Biden might campaign. The problem is that January 1st comes before that and if nothing is done, millions of people, many of which are parents with children, face evictions since they’re not capable of paying rent, while millions of others will cease receiving enhanced unemployment benefits.

Therefore, a bipartisan group of senators is working on a bridge-stimulus plan as we speak.

Future Money Trends believes that there’s a strong chance that, when it comes to rent, an extension of the moratorium will be introduced. If it doesn’t, Q1 2021 could be one of the best times to purchase homes since prices will dip because of the excess inventory.


November has been the best-ever month for stocks on a global basis. It’s absolutely mind-boggling how much euphoria is out there. When you think about mortgage forbearance, which has allowed households to “save” $1,000 to $2,000 every single month since the bill was introduced, you can understand how much leverage is being put into the stock market that will need to be taken out later. Households have been using the extra cash to invest, but they’ll need to pull it out, at some point.

It’s happening all over the place and the temptation to trade has never been bigger.

As you can see above, indices of entire nations have gone up in one month as much as stocks return in 4 or 5 years.

The technical Relative Strength Indicators (RSI) are just green everywhere, save for precious metals most likely.


On the 15th of December, the FED will convene to discuss interest rates and asset purchases, going forward. If there’s no bipartisan bill by then, we believe they’ll increase QE again.

There are now talks about forgiving student loan debts from $10,000 to upwards of $50,000. There are 45 million Americans who have student loans, and these are individuals who struggle to originate mortgages, raise their credit scores, and save anything.

On the flip side, forgiving these loans will fuel even more socialistic programs, and will cause tuition in this country to be jacked up further, argue the fiscally-conservative. It’s also unfair to reward debtors while punishing those that chose not to assume massive obligations.

In our assessment, when the next president asks his economic advisors for the best ROI for another fiscal program, they’ll point towards state and local government aid, where for every $1,000,000 spent, nearly 90% of it goes immediately back to the economy.

This is much higher than in the case of student loans, so while Elizabeth Warren and Bernie Sanders introduce far-left initiatives, it doesn’t seem like that’s the way the country is headed.

We currently put the odds of stimulus checks hitting the mailboxes of Americans as being very low in the next 40 days. We give it more of a chance after January 20th, but if the bipartisan proposal somehow passes, markets will celebrate this surprise.

As for us, we are not aggressively participating in this party. There’s not enough alcohol in the world to convince us to play with fire.


The post STALEMATE: 2ND STIMULUS – THIS CHANGES EVERYTHING! first appeared on SHTF Plan – When It Hits The Fan, Don't Say We Didn't Warn You.

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Episode-2767- Draeth Kata on Pirate Chain the Ultimate Privacy Crypto Currency

Draeth is an engineer by day, who also is a captain of Pirate Chain and President of the BPSAA. He was introduced into crypto in 2016 with mining, and eventually found Pirate Chain a couple months after it’s genesis block. Continue reading →

The post Episode-2767- Draeth Kata on Pirate Chain the Ultimate Privacy Crypto Currency first appeared on The Survival Podcast.

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Another COVID Warning From Bill Gates: “The Fall Will Be Worse Than The Summer”

Bill Gates is still warning and pushing new COVID-19 scare tactics. Gates, who is heavily invested in a vaccine for the coronavirus scamdemic wants everyone to fear the second wave because this fall will be worse than the summer.

“The fall is going to be worse than the summer,” Gates told POLITICO. “All the numbers are ticking up and there was always a very good chance … that we would see more transmission. Until the new tools come … all we have is our behavior, wearing masks.” New tools, meaning the vaccine.

Are Face Masks & COVID Rituals Occultist Symbols For Submission?

There are over 7 million confirmed cases in the U.S., and at least 210,00 people have died. According to the White House Task Force, 26 states are now in the coronavirus “red zone” for new cases this week, with 24 in the “yellow zone” and none in the “green zone.” Is anyone surprised? They pretty much told us we’d have to deal with the invention of a second wave.

Gates and his wife, Melinda, run the Bill and Melinda Gates Foundation, which has donated hundreds of millions of dollars towards coronavirus research, treatment, and testing, along with the search for a vaccine.

Earlier this year, Gates laid out a three-part plan for eliminating coronavirus: developing the capacity to make the necessary vaccines, obtaining the funding to pay for the vaccines, and creating a system to deliver the vaccines worldwide.

“To beat the COVID-19 pandemic, the world needs more than breakthrough science,” Gates said in a previous statement. “It needs breakthrough generosity. When COVID-19 vaccines are ready, this funding and global coordination will ensure that people all over the world will be able to access them. –Yahoo News

Censorship: Facebook Bans Anti-Vaccine Ads Ahead of COVID Vaccine Rollout

Bill Gates Warning: “We’ll Have a Deadlier Pandemic”

“It’s very impressive how the pharmaceutical industry has diverted resources, gotten involved,” Gates told NBC’s Chuck Todd. “The U.S. government, this is one category we’ve actually done a decent job, has funded the research here.”

The post Another COVID Warning From Bill Gates: “The Fall Will Be Worse Than The Summer” first appeared on SHTF Plan – When It Hits The Fan, Don't Say We Didn't Warn You.

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This article was contributed by Lior Gantz of the Wealth Research Group. 

In the UNFORGETTABLE MOVIE Braveheart, Mel Gibson plays William Wallace, a Scotsman who is leading a GRASSROOTS REBELLION against British rule and he implores his countrymen to fight for their sovereignty and freedom. It’s an epic film with MEMORABLE SCENES, in one of which his rebel army HOLDS THE LINE, while the enemy cavalry charges at them. You can watch it HERE!

If one can’t look at an INEVITABLE NIGHTMARE dead in the eye, he can’t become an investor. In March, the collective panic of BILLIONS OF beating hearts was felt in the equity and bonds market. The first-ever GLOBAL MAD PANIC ensued.

Think about it and you’ll see that there had NEVER BEEN a more widely-covered and comprehensive event, communicated simultaneously to people from EVERY COUNTRY on the planet, all at the same time.

You are living through a ONCE-IN-A-CENTURY crisis; you’re witnessing the world’s behavior in a time of GREAT UNCERTAINTY and I hope you’re drawing conclusions from this!

WW2 was another terribly DARK PART of human history; it didn’t last for a few months, but for years and inflicted poverty, tragedy, and death upon tens of millions of INNOCENT HUMAN BEINGS, so there’s plenty to learn from KEY FIGURES within that period since we’re much better off than that.

If you haven’t, for example, studied Winston Churchill yet, I believe you’re doing yourself a GREAT DISSERVICE. He was one of the bravest leaders of the war and here’s one of his many nuggets: “Success is not final; failure is not fatal: it is the courage to continue that counts.”

Courage is born of faith in the eternal design of life and of nature, always working towards EVOLUTION and growth, throwing aside anything that can’t KEEP PACE.

This is the relentless march forward of the human drama; some look at it as a DOG-EAT-DOG world, while others believe in the creative realm, which suggests that if one delivers OUTSTANDING VALUE, he is not robbing anyone else of the chance to do the same. In other words, there’s wealth in abundance.

An overwhelming number of the population believes the world of business and human affairs is a daily battle, a struggle for power and supremacy, including all CURRENT WORLD LEADERS.

They will use EVERY DIRTY TRICK possible, since winning at all costs has become their WAY OF LIFE. Both sides take NO PRISONERS and with exactly one month to go, we will see them SHOWING THEIR TEETH.

Like gorillas in the jungle, humans fight for every PIECE OF TERRITORY, prestige, position and dominating role at their disposal.

Trump is not going to BACK DOWN; to him, he’s got one month, which is 720 hours to do anything within his control to win another election and he’s going to PRESS FORWARD like an elephant stampede.

The late Steve Jobs coined a wonderful quote, which is that when studying the stories of so-called “overnight successes” closely, one finds that they’re actually years in the making.

When I was just thirteen years old, my father got into financial trouble and lost all of his savings, which obviously made my life as a teen very challenging. I began babysitting in the neighborhood, in order to save money. Next, I persuaded some of the parents to allow me to train their children in the fundamentals of basketball, being that I was actively playing myself.

I managed to save money and deposit it in my minor’s bank account. At sixteen, my banker opened my eyes to investments. He asked me if I wanted to “put my money to work.”

That started my learning curve of understanding how to strategically risk funds in order to own a portion of a living and breathing business or piece of real estate, which has a chance of growing in value.

That was a pivotal day for me. LUCKILY, it came early on in my life, as did my introduction to Napoleon Hill. By a STROKE OF LUCK or some coincidence, these moments occurred to me before the age of twenty, when my options in life were WIDE-OPEN.

This quote from Napoleon Hill SHAPED my MENTALITY a lot: “I had learned from years of experience with men, that when a man really desires a thing so deeply that he is willing to stake his entire future on a single turn of the wheel in order to get it, he is sure to win.”

Some read this quote and take it to mean that in order to advance in this world, one climbs a ladder and then MAKES SURE to trip over the next guy who wants to follow him upwards. That’s not my style; I launched as a way of allowing people to gain value if they see something worthwhile in our insights.

We believe in EMPOWERMENT, but we’re not naïve either. A presidential election month is like unleashing wild dogs to chase after rabbits.

Don’t get SUCKED INTO the anger, expressed by both sides. Instead, remember that we all share this Earth and that we either LIVE TOGETHER or, with today’s weaponry and technology, face the threat of the REAL RESET – not economic, but existential.

Be the change; be the inspiration.

The post TRUMP’S CHEWING THROUGH WALLS: All Hands on Deck! first appeared on SHTF Plan – When It Hits The Fan, Don't Say We Didn't Warn You.

Intelwars investing LM: Gold

Some clear thinking on gold at its all-time high

For as long as I can remember, I’ve been a fan of Bruce Lee.

I was probably about four years old when I first watched one of his movies. And I was instantly hooked. The guy was legendary.

As a teenager, I learned more about how he lived, and I began to admire his tenacity, discipline, and relentless pursuit of self-improvement… qualities that I endeavored to attain.

I remain a fan to this day. In fact there’s even a Bruce Lee mural on the wall at our office in Chile.

So when I had the opportunity to purchase some of Bruce Lee’s artwork a few years ago– sketches that he drew with his own hand– I jumped at the chance.

It cost me around $8,000… but it was the best money I ever spent. I had it professionally framed and hung in my home, and it’s probably my most prized possession.

I doubt I’ll ever sell it. But it’s the only asset that I allow myself to be sentimental about.

In everything else related to money, I force myself to be unemotional. I don’t fall in love with prospective investments, nor do I have an emotional attachment to businesses that I own.

You hear this a lot with entrepreneurs, who often refer to their companies as ‘their baby’.

I don’t have that view. Bruce Lee aside, I’m willing to sell any asset for the right price… especially if someone is willing to pay far more than what I think it’s worth, or what it could be worth in the future.

And this brings me to gold.

The price of gold is now at an all-time high in nearly every major currency, including US dollars. On Friday, in fact, gold briefly passed $2,000 per ounce, and it’s still hovering near that figure now.

A lot of people have an emotional attachment to gold… a borderline fanaticism.

I don’t. I write about gold quite frequently. But I’m not a ‘gold bug’.

My views on gold are unemotional, grounded in a rational understanding of gold’s advantages, and the disadvantages of the financial system. I’ve written about this extensively.

But one important thing to understand about gold is that it can be very difficult to value.

I can much more easily value a business like Apple, or private company that I own. The analysis is never perfect, but I can project future cash flows and market-based asset prices, and derive an appropriate value for what an asset is worth.

But gold does not intrinsically generate cash flow like a business or rental property, so that analysis doesn’t work.

People often try to predict the price of gold by examining certain financial benchmarks.

For instance, in theory there are some loose relationships between the gold price and the money supply. But these relationships are far from perfect.

The previous peak for gold was in 2011 when it reached around $1900. The gold price then fell for more than four years, reaching a low of around $1,000 in December 2015.

Yet during that 4+ year period, the Federal Reserve’s balance sheet increased 70% from $2.6 trillion to $4.4 trillion, and M2 money supply in the US increased 30% from $9.5 trillion to 12.3 trillion.

Gold should have performed well from 2011 to 2015 given all the money the Fed was printing. Yet instead the gold price fell.

There’s another theory that gold prices increases because the dollar is weak. But this relationship is also far from perfect.

In the summer of 2018, I wrote note to our readers suggesting that it was a good time to buy gold, and that the price could double over the next few years.

At the time, the gold price was around $1200. But the ‘Dollar Index,’ i.e. the standard financial benchmark for the US dollar’s relative strength, was around 94.

Today gold is at a record high– up more than 60% since I wrote that article. Yet the dollar index is almost exactly the same– 93.8.

But if the theory is true, the gold price should be the same as it was in summer of 2016.

Finally, there’s a theory that the gold price is correlated with ‘real interest rates’, i.e. the rate of interest after adjusting for inflation.

This relationship is also far from perfect; real interest rates in 2011 and 2012, for example, were negative. Yet the gold price was falling.

Real rates in 2017 were rising. But the gold price was also rising. So this theory is also flawed.

The bottom line is that there’s no magic formula to tell us what the gold price should be. Dollar weakness, real rates, and money supply are all useful indicators. But they’re not predictors.

It’s fair to say, for example, that gold is still undervalued right now relative to recent growth in the Feds balance sheet.

Or that, over very long periods of time as central bankers print money and create inflation, gold tends to keep up.

After all, gold has a 5,000 year track record of holding its value against inflation.

In the short-term, however, the biggest driver of gold prices ironically seems to be emotion… specifically negative emotions like fear and mistrust.

Few people buy gold because they’re happy. Some forward-thinking central banks and investors may buy gold when it’s cheap because they understand its value and potential.

But for the most part, the price rises when people lose confidence in the financial system, in their government, in their central bankers, or in each other.

And that’s what we’re seeing now.

Nearly every government around the world looks incompetent and heavy-handed against the Coronavirus.

Central bankers seem desperate.

Banks are sitting on trillions of dollars of losses, while regulators have actually asked the public ‘please do not withdraw your money.’

And social cohesion has practically collapsed. People are ripping each other apart over masks, social justice, political views, and just about everything else.

It’s hard to have trust and confidence at a time like this. And that’s been a key driver of the gold price.

If you own gold, congratulations. You’ve done well. But don’t be emotional about it.

A record high milestone like this is a good time to check your outlook; be rational and determine whether you want to buy, sell, or hold at this level.

Being rational means being able to see all sides of an issue.

You could easily make a strong case that the fear, uncertainty, and desperation could continue for quite some time. And that, long-term, gold continues to make sense.

You could also make a case that, given how quickly gold has risen in price, a short-term correction may be in order. Or that some of the fear subsides if a Covid vaccine is produced.

Remember that great quote from F. Scott Fitzgerald– “The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.”


Intelwars investing

3,500% return from a safe ‘forever asset’

In the year 1649 after nearly a decade of painstaking work, the legendary Dutch artist Rembrandt van Rijn put the finishing touches on one of his masterpieces: Christ Healing the Sick.

The piece is considered a technical and artistic marvel, proving without doubt that Rembrandt’s skills were truly ahead of his time.

So it’s no surprise that he sold the piece for a record-setting 100 Dutch guilders… an incomprehensible amount of money to pay for art at the time.

A lot of people probably thought the buyer was crazy for paying such a high price.

But the masterpiece was passed down through the generations for more than 200 years. And when it came up for sale again in 1867, it was purchased for the equivalent of nearly 12,000 Dutch guilders… more than 100x the original price paid in 1649.

Rembrandt paintings don’t change hands too often these days; in fact there are only three of his works that are still privately owned.

16 million euros would have been the equivalent of more than 35 million Dutch guilders (based on the final exchange rate in 1999 when the guilder was replaced by the euro).

You might be thinking– “That seems like a phenomenal return on investment– from 100 to 12,000 to 35+ million.”

But the return on investment works out to be just 3.5% per year, compounded annually over the past 371 years.

There are a few key lessons from this–

First, never underestimate the power of compound interest. Even small amounts compounded over long periods of time can really add up.

Second: 3.5% is actually a great return given the length of time involved. It means it held its value, and then some.

This probably seems counterintuitive since we’re accustomed to higher investment returns; big “blue chip” companies like Disney and Coca Cola, for example, generate average returns for their investors that are much greater.

But even the biggest, most powerful companies typically don’t last 371 years. They go out of business. They get acquired. They fade into obscurity.

In Rembrandt’s time in the 1600s, the most powerful company in the world was the Dutch East India Company; it was the first-ever publicly traded corporation, and it set records for its massive profitability.

But by 1800 it was out of business.

In the early 1900s, Sears was the largest and most prominent retailer in the world. But today it’s bankrupt and struggling to keep its doors open.

In the 1990s, Yahoo dominated the Internet. Yahoo executives were so certain of the company’s success that in 1998 they flat out rejected the opportunity to buy a little startup called Google for $1 million.

Yahoo reached a peak valuation of $125 billion in 2000. But fifteen years later, Verizon bought Yahoo’s assets for less than $4.5 billion.

Don’t get me wrong– I’m not suggesting that businesses are bad investments. In fact, I’ve long believed that the best investment is a great business.

A great business is a ‘real asset’, so its value rises during inflationary times. During times of deflation, it produces vital cash. And during times of crisis, it scoops up the market share of its failed competitors and emerges stronger than ever.

Yet most businesses are not forever assets, as the East India Company, Sears, Yahoo, and so many other examples show.

Great businesses require great management. But at some point in the future, even the most successful companies may hand the reins over to a new generation of incompetent executives.

So even Google, Coke, Facebook, Disney, Amazon, and the next great startup may someday fade, as hard as that is to imagine.

A forever asset is something like a Rembrandt. It doesn’t depend on a team of executives to manage it, yet it can still have value hundreds of years from now.

The downside of a Rembrandt is that there’s still some physical risk.

We’re seeing Bolshevik revolutionaries running around now defacing property, burning down buildings, and targeting anyone with wealth. I wonder how long a Rembrandt would last under their watch.

Even under normal circumstances, a painting must be stored in the right environment– not too much moisture, not too much sunlight.

Gold, on the other hand, has none of those risks.

It’s practically indestructible. You can drop it and it won’t break. It doesn’t rust. Melt it down and it is still valuable.

It’s small enough to store securely, or transport if need be.

And it REALLY holds its value.

The amount of gold it took to buy a high-end house 1,100 years ago in the Islamic Kingdom of Cordoba equals about the same price of a high-end home today.

4,000 years before that, merchants in the fertile crescent, at the very birth of civilization, were trading gold in exchange for goods.

Obviously most people don’t consider too many generations into the future when making investment decisions.

Most of us invest for the here and now… so it’s nice that gold has a lot of upside investment potential today.

As I’ve written before, the more money that central bankers print in their Covid bailouts, the more valuable gold becomes.

And I just wrote earlier this week that silver has already become one of the best performing assets in the world right now, plus gold has also been quite strong.

But aside from having substantial present-day potential, gold is also a forever asset that has already proven its worth over 5,000 years.

Gold has outlasted every company, every piece of art, every government bond.

And when you look at the universe of investment options, there just aren’t a lot of things you can say that about.


Intelwars investing LM: Gold

No surprise: silver is one of the best performing assets in world

Sovereign Man is a little over 11 years old.

And when we started this business, silver was worth $13 per ounce at the time.

My philosophy then, just like today, is that precious metals hold their value over the long-term.

But back then, there was one key indicator that told me an investment in silver could pay off fairly quickly.

In 2009, silver was trading at a ratio of over 70:1 to gold, meaning 70+ ounces of silver was worth 1 ounce of gold.

A ratio of 70 was considered quite ‘expensive’; over the last century or so, the ratio has historically hovered around 50:1, i.e. one ounce of gold was generally worth 50 times an ounce of silver.

And back in ancient times, the ratio was closer to 15:1.

The 70:1 ratio back in 2009 didn’t make sense to me. The panic of the Global Financial Crisis had prompted a lot of investors to buy gold, but silver was largely being ignored.

So we suggested to our readers that silver is a sensible long-term bet.

In fact I wrote in an article on July 7, 2009 that readers consider a long-term futures contract that would lock in the price of silver for two years at just $13.

And sure enough, within two years, the gold/silver ratio had reversed to just 35:1, and the price of silver hit a record high of roughly $50 an ounce.

Now, no financial investment should move up or down in a straight line, and we were concerned that the silver price had risen too quickly.

So, within hours of silver peak, we sent a note to our readers suggesting that silver may be at a top, and essentially locking in a gain of nearly 300%.

Silver then spent the next few years in the doldrums… until now.

Several months ago when this pandemic because a global issue, the gold/silver ratio hit a record 120:1… and the price of silver fell below $12 per ounce.

Once again, this didn’t make sense to me.

And I’ve written to you several times over the past few months that silver would probably rise, even beyond gold, because of all the Covid response.

Central banks around the world printed trillions upon trillions of dollars, and governments have increased their debt levels even more.

In the United States alone, the national debt increased by three-quarters of a trillion dollars just in the month of June!

And the Federal Reserve expanded its balance sheet from $4 trillion to $7 trillion since the start of the pandemic.

This is not without consequence. Governments are going deeper into debt, and central banks are feverishly printing more money, at a time when economies are barely functioning.

So there’s far more money circulating in an economy  that’s producing fewer goods and services… which, again, doesn’t make sense.

Plenty of government have tried this before; when their economies falter, they just print money and hope the problem goes away.

But typically this just makes the money worth less… and real assets like gold and silver worth more.

Unsurprisingly, silver is now one of the best performing assets in the world; the gold/silver ratio has fallen to 93:1… that’s still considered quite high, but clearly much lower than 120.

And the silver price just hit $19.70 per ounce as I write this– a gain of 68% in just four months.

This means that silver has vastly outpaced the gains in the S&P 500 stock index, and it even outpaced the gains that gold has made since the start of the pandemic.

I believe there’s a very strong case to be made that both gold and silver could continue to perform very well over the next few years.

Around the world we’re already seeing record government debt, record corporate debt, record consumer debt, record central bank balance sheets, record money creation, and plenty of economies still in various stages of lockdown.

This pandemic is far from over… and the economic consequences will linger for years.

My analysis is pretty simple: the more money that central banks print, and the more debt that governments take on, the more valuable gold and silver will become.

Right now, gold is still relatively undervalued when compared to the overall money supply… and silver is still historically undervalued relative to gold.

So, again, there’s a good case that both could still rise from here over the next few years.

But my personal philosophy about precious metals isn’t about trading them to make a quick buck.

I view gold and silver as an insurance policy: a way to hold wealth when there’s a lot of uncertainty.

And there’s a ton of uncertainty right now… social unrest, political upheaval, massive bailout programs, looming Cold War.

Yes, the world is rarely certain. There are always crises and hotspots and emergencies to deal with.

But the issues that we are dealing with today are genuinely unprecedented in modern times. And we’re dealing with several of them at the same time.

Ordinarily we can have a reasonable amount of confidence in what tomorrow is going to look like… or that six months from now the world will look a lot like it does today.

But the reality is that we have no idea what tomorrow will bring. Another major outbreak? Another lockdown? Another city set ablaze?

So, even though gold and silver still have strong upside potential, I believe it’s this level of uncertainty that’s the biggest reason to own precious metals right now.


Business covid economics Intelwars investing john pugliano Podcasts

Episode-2665- John Pugliano and Jack Spirko on CoVid Economic Fallout

We have reached a point where the cure is more dangerous then the disease and I feel it is getting worse daily.  Right now I feel every day we stay shut down will add 10 days to the time needed Continue reading →

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Episode-2658- House Hunting in a Buyers Market

I am gonna say it isn’t really a true buyer’s market right now, not based on the prices I see.  It is much more so than it was 18 months ago but super great deals are not everywhere, YET. Yet?  Continue reading →

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Stocks Puke Into Bear Market As US Financial Conditions Crash Most ‘Since Lehman’ – Dow Jones Crashes Into Bear Market: Fastest Drawdown In Market History …this is the fastest drawdown from a peak into bear market in history

So much for the dead cat bounce, as predicted… Stocks Puke Into Bear Market As US Financial Conditions Crash Most 'Since Lehman' #Investing #Trading #Collapse — Infinite Unknown (@SecretNews) March 11, 2020 Dow Crashes Into Bear Market: Fastest Drawdown In Market History …this is the fastest drawdown from a peak into bear market in history. … Read more

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Black Monday… Part Two: Absolute Carnage!

Black Monday… Part Two #Collapse #Trading #Investing #Stocks #Coronavirus #CoronavirusOutbreak #COVID19 #Collapse #COVID?19 #COVID_19 #COVID2019 — Infinite Unknown (@SecretNews) March 9, 2020 * * * Please support I. U. PayPal: Donate in USD PayPal: Donate in EUR PayPal: Donate in GBP

Intelwars investing

How screwed up the pension system is

Late last year, the investment management giant Morningstar published a report concluding that most people can either save money for retirement, or save money for their kids’ education… but NOT both.

They make the economic realities very clear: parents have to choose between their own future, or their children’s future.

And one of the report’s lead authors went on to say that the RIGHT choice– the ONLY choice– is to choose your retirement over your kids:

If you sacrifice your retirement savings to send your child to college, you’re making a huge mistake.”

That’s a pretty sad statement. But it’s unfortunately true for most people.

University education is already -very- expensive, and tuition fees are rising much faster than wages and income.

According to Federal Reserve data, university tuition has risen an average of 4.5% per year since 2000 (meaning that university is twice as expensive as it was at the turn of the century).

This ‘inflation rate’ in tuition is more than TWICE as much as the growth in median household income (which has averaged just 2.2% annual growth since 2000).

This means that, for the past two decades, university education has become more and more out of reach. And it’s no surprise that student debt levels are at a record high as a result.

But on the other side of the coin, retirement is also incredibly expensive. And uncertain.

People are living longer than ever before… and they want to ensure that they have enough money to last.

You used to be able to save money for your retirement in easy, low-risk investments like government savings bonds that paid a healthy rate of return.

In 1986, for example, the inflation rate in the United States was just 1.86%. But a 10-year government bond paid as much as 9%.

This was a wonderful investment for retirees who could safely earn a strong return without having to take any significant risk. And this was the case throughout the 1980s and 1990s.

But for most of the last 10-12 years, interest rates have hovered near their lowest levels in 5,000 years of human history.

US government statistics show that the overall rate of inflation in 2019 was 2.3%. Yet a 10-year government bond now only pays 1.7%.

So if you’re a retiree today and you put money into that same ‘safe’ government bond investment, you’re guaranteed to lose money when adjusted for inflation.

This is why the CEO of Blackrock (the world’s largest money management firm), has said that people today have to set aside THREE TIMES AS MUCH money to save for retirement as their parents and grandparents did. It’s precisely because of these low interest rates.

Social Security is no comfort, either. We’ve discussed this frequently in previous articles: Social Security is massively and terminally underfunded.

And this isn’t some wild conspiracy theory.

The Social Security’s Board of Trustees publishes a report on the financial health of Social Security every single year.

And those trustees include some of the most senior people in the federal government, including  the Secretary of the Treasury, Secretary of Labor, Secretary of Health and Human Services, etc.

In the 2019 report they forecast that Social Security’s primary trust fund will be fully depleted by 2034— just 14 years from now.

And in that same report, the Trustees show that Social Security would need a $50 TRILLION bailout in order to have sufficient funding for its long-term obligations.

That amount is over TWICE the national debt, and nearly THREE times the size of the entire US economy.

That’s an impossible bailout… which means Social Security is no longer a tax or political issue; it’s a simple arithmetic problem, and one that cannot be solved.

These same conditions broadly exist across most of the developed world, especially in Europe and Japan where interest rates are actually NEGATIVE and national pension funds are woefully short of cash.

Now, I really don’t intend to be gloomy. But it’s important to tell the truth about these important issues:

  • It is mathematically impossible for Social Security (and other national pension funds) to honor the promises they’ve been making for the past several decades.
  • With record low interest rates, you have to set aside more money than ever before in order to secure your retirement.
  • But simultaneously, with university tuition rising so much faster than household income, parents have to set aside more money than ever before to pay for their children’s education.
  • And the government has few options to do anything about it.

The old rules simply do not apply any longer. You can’t keep money parked in a savings account for 20 years and expect to have a comfortable retirement or a college fund for your kids… let alone BOTH.

Conventional options no longer produce the same results that they used to.

But the good news is that there is an entire universe of options out there that can still generate superior returns without having to take on substantial risk– as long as you are willing to look outside of the mainstream.

For example, you can set up a SEP IRA or Solo 401(k) that can help you put away an extra tens of thousands of dollars every year for retirement – tax free.

And instead of investing into conventional investments that simply don’t work anymore, these structures allows you more flexibility to invest your retirement savings in alternatives like cash-producing real estate, secured loans, royalties, and even venture capital and crypto.

Point is, there are plenty of options. You just have to be willing to open your mind to look beyond the mainstream.


Intelwars investing

Broke billionaires (and other ridiculous signs of the top)

File this one away under ‘completely ridiculous’.

You might have heard that Elon Musk was on trial last week in Los Angeles; he was being sued because he claimed (multiple times) that British spelunker Vernon Unsworth was a pedophile. (He’s not.)

It’s generally damaging to one’s reputation when a world-famous billionaire erroneously calls you one of the worst things anyone could possibly be.  So Unsworth sued for defamation.

Defamation in the United States is actually quite difficult to prove.

In order to win a defamation case in the US, the claimant has to demonstrate that you knowingly said something false, or that you completely disregarded whether or not something was false.

It’s pretty clear that Musk knew his comments were false; he acknowledged that Unsworth is not a pedophile.

But winning a defamation case in the US also requires proving that Musk had the deliberate intent to harm Unsworth’s reputation.  And that’s tough to do.

Musk claimed he was just engaging in ‘idle trash talk’ and didn’t actually intend to harm Unsworth’s reputation.

If the case had been held in the United Kingdom, Musk would have lost in a heartbeat.

English defamation law is totally different than in the US; in the United Kingdom, if you say something, you have to be able to back it up. And Elon would have had to prove that his comments were accurate (they weren’t).

It’s a huge difference. And Musk was fortunate to find a sympathetic jury in Los Angeles, because they ruled in his favor.

But the really interesting thing about this trial was what Musk disclosed about his personal finances.

He told the jury under oath that, despite being worth more than $25 billion, he actually has very little money.

That’s because Musk’s wealth is both illiquid AND unprofitable.

He owns around 20% of Tesla, for example, which is worth about $13 billion. But he can’t really sell his shares… for a number of reasons. They’re controlled by a trust. He has regulatory limitations. Many of his shares are either restricted or are already pledged.

This isn’t unique to Musk; Warren Buffett is the largest shareholder of his company Berkshire Hathaway, and he’s never sold a single share.

(Buffett’s stake in Berkshire is worth roughly $90 billion.)

The difference is that Buffett’s company is consistently profitable and always generates positive cashflow.

Tesla has had a few good quarters here and there. But for the most part the company has lost more than $10 billion in cumulative NEGATIVE free cash flow over the past decade.

Buffett’s net worth is derived from his company’s financial performance. Berkshire Hathaway has over $100 billion in CASH on its balance sheet and generated nearly $40 billion in Free Cash Flow last year. Buffett owns a huge piece of that success.

Tesla has tiny amount of cash by comparison, a growing pile of debt, and lost a billion dollars last year.

So Elon’s 20% stake in Tesla means that he has a 20% share of last year’s billion dollar loss.

Investors continue to believe that there’s value in Tesla’s financial misery. But that doesn’t put any money in Elon’s pocket.

And he’s definitely not the only ‘billionaire’ in this situation. All across Silicon Valley (and much of the world) we see tech entrepreneurs loaded up with shares of their loss-making businesses, but short on any actual money.

The founder of Snapchat is worth more than $3 billion thanks to his company’s stock price; yet the business has lost billions of dollars since inception and has never generated positive cash flow in a single year, ever.

Uber, WeWork, Lyft, Slack, Peloton, Pinterest– there are so many tech companies, or companies masquerading as tech companies– that consistently lose tons of money. It’s absurd.

In finance, a startup that eventually becomes worth more than a billion dollars is referred to as a ‘unicorn’ because it’s supposed to be so rare that it borders on impossible.

Now, I remember my parents taking me to the circus when I was a kid, and the feature attraction was supposed to be a unicorn. I must have been around 4 years old and I couldn’t have been more excited.

Finally, after seeing the bearded lady and the lion tamers and all that jazz, they finally paraded the unicorn out for all the spectators to see.

Even as a little kid I knew instantly– it was just a friggin’ donkey with a fake horn on it.

And that’s basically what these companies are– donkeys with fake horns. They’re not real unicorns.

They bleed cash. Many of them have no hope of ever turning a profit. And the rock-star famous people who own them are often just “Billionaires In Name Only,’or BINOs.

We live in a world where central bankers have conjured trillions of dollars out of thin air and have even made interest rates NEGATIVE in a number of countries.

Well, when interest rates are zero (or negative) and central bankers create money at will, it means that money has no value anymore.

And this is the result: you can become a ‘billionaire’, at least on paper, without your company ever generating a single penny of profit, or even having a plan to turn a profit in the future.

I also read this morning that, over the weekend at an art fair in Miami, someone paid $125,000 for a piece of ‘art’ that was nothing more than a banana duck-taped to the wall.

That’s pretty much the equivalent of lighting your money on fire… and another extreme example of how little people value and respect capital anymore.

I’ve learned over the years that it’s a fool’s errand to predict a ‘top’. This sort of absurdity always lasts longer than anyone can possibly imagine.

But it always comes to an end. It won’t happen today, and it probably won’t happen tomorrow. But at some point this madness will stop.