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The “Helicopter Parent” Fed and the Fatal Crash of Risk

This article was originally published by Charles Hugh Smith at Of Two Minds Blog. 

All the risks generated by gambling with trillions of borrowed and leveraged dollars didn’t actually vanish; they were transferred by the Fed to the entire system.

The Federal Reserve is the nation’s Helicopter Parent, saving everyone from the consequences of their actions. We all know what happens when over-protective Helicopter Parents save their precious offspring from any opportunity to learn from mistakes and failures: they cripple their child’s ability to assess risk and learn from failure, guaranteeing fragility and catastrophically blind-to-risk decisions later in life.

Helicopter Parents generate a perfection of moral hazard, defined as there is no incentive to hedge risk because one is protected from its consequences. Moral hazard perversely increases the incentives to take on more risk because Mommy and Daddy (the Fed) will always save me / bail me out.

For example, when Mommy and Daddy make their reckless teen’s DUI charge go away, the teen’s already potent sense of godlike liberation from real-world consequences floats even higher. So next time the teen gets into his car drunk and takes his friends on a high-speed spin down Mulholland Drive, he loses control and kills everyone in the car–not just himself but those who trusted his warped sense of risk.

The Fed is the ultimate Helicopter Parent, protecting all the power players in our economy and society from the consequences of their risky actions. By crushing interest rates to near-zero, the Fed has perversely incentivized increasingly risky expansion of credit, and given the green light to there’s no limit, spend as much as you want government borrowing.

The Fed’s implicit promise to never let the stock market drop for more than a few days–the Fed Put–has incentivized every punter from billionaires to corporations to unemployed people with stimmy checks to max out their credit (or margin accounts) to increase their bets in the market casino.

The Fed has implicitly informed the bigger players that they can bet as big as they want because the Fed will always bail them out, transferring private losses to the public via Fed bailouts, lines of credit, backstops, etc.

The Fed has also signaled it will change the rules as needed to save its Players from loss. Mark-to-Market reveals the insolvency of the Players? Well, we’ll just get rid of that. All fixed! (heh)

Once the path of moral hazard has been taken, a fatal feedback loop takes hold: as reckless punters take on more risk to boost their gains, the fragility and brittleness of their positions increase geometrically. This soon endangers not just their own bets but the entire financial system, as it’s not just one punter who responds to the Fed’s Helicopter Parenting promise of no consequences for taking on more risk–every punter gets the green light to take on more risk because the Fed has our back.

Indeed, now that the Fed Put has been established as unbreakable, it would be irrational not to max out margin to increase one’s exposure to risky bets. And voila, margin debt has soared as the Fed has signaled its commitment to bail out every risky bet in the market casino.

Now that every punter has maxed out their margin account to increase their bets on markets lofting ever higher, the Fed has no choice but to increase the system’s moral hazard: as punters respond to the Fed’s incentives to take on more risk, the Fed has to expand its protection of punters from the consequences of their recklessness, which then increases their recklessness.

Nobody’s ever had a more generous and godlike Helicopter Parent than the Fed. But alas, just as actions have consequences (first-order effects), those consequences have consequences (second-order effects): in the case of the Fed, credit and markets, the second-order effects are as catastrophic as the drunken teen’s there’s no risk I can’t handle last race down Mulholland: all the risk that the Fed has supposedly dissipated into nothingness has been transferred to the entire financial system.

All the risks generated by gambling with trillions of borrowed and leveraged dollars didn’t actually vanish; they were transferred by the Fed to the entire system, which is itself now too fragile and brittle to withstand even the slightest intrusion of consequence.

The entire financial system is now careening down a treacherous stretch of curves and blind spots, absolutely confident that being dead-drunk on the Fed’s promise of never-ending gains in the market poses no risk whatsoever because the Fed has our back.

Unfortunately for the drunken teen, Mommy and Daddy could make the DUI go away but they can’t bring the lifeless bodies of those who reckoned their distorted view of risk was actually accurate back to life.

Once the fragile, brittle, disconnected-from-reality system the Fed has created crashes, the Fed will be as powerless as all the other grief-stricken Helicopter Parents to reverse the irreversible consequences of their meddling with moral hazard.

The post The “Helicopter Parent” Fed and the Fatal Crash of Risk first appeared on SHTF Plan – When It Hits The Fan, Don’t Say We Didn’t Warn You.

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Experts Are Warning That A U.S. Stock Market Crash Is Very Likely In The Months Ahead

This article was originally published by Michael Snyder at The Economic Collapse Blog.

Stock prices are not going to stay this high.  Everyone can see that we are in a stock market bubble that does not have any parallel in all of U.S. history, and everyone can see that the end of that bubble is approaching.

The only debate is about how fast and how far the eventual fall will be.  For the first time ever, the ratio of U.S. stock prices to U.S. GDP has reached 200 percent.  In other words, the total value of U.S. stocks is now twice as high as the value of all U.S. economic output for an entire year.  To get an idea of how crazy this is, just check out this chart.  Historically, the ratio of U.S. stock prices to U.S. GDP is normally under 100 percent, and so if all stock prices were cut in half U.S. stocks would still be overvalued.  That is how extreme this bubble has become.

Other key valuation measures also indicate that stock prices have gotten wildly out of balance.  The following example comes from a Motley Fool article entitled “Here’s Why You Should Expect a 20% Stock Market Crash in 2021”

Looking back 150 years, the S&P 500 has averaged a Shiller P/E of 16.78. Admittedly, the Shiller P/E ratio has been a lot higher over the past 25 years. The advent of the internet has broken down information barriers for retail investors, and historically low lending rates for more than a decade have fueled borrowing and lit a fire under growth stocks.

But as of Feb. 3, the Shiller P/E for the S&P 500 was knocking on the door of 35 — more than double the long-term average. To put this figure into some context, there have only been five periods in history where the Shiller P/E ratio topped 30 and stayed there during a bull market run. Two of these events — the Great Depression and dot-com bubble — led to some of the biggest pullbacks ever witnessed in equities. Two other events (not counting the current move) occurred within the past three years, delivering declines of 20% and 34%, respectively, in the S&P 500.

Basically what this is saying is that if stock prices fell by half, the Shiller P/E for the S&P 500 would still be above the long-term average.

So if the market only falls by 20 percent this year as that Motley Fool article is suggesting, we should consider ourselves to be extremely fortunate.

We have never seen anything like this before.  The bubble that we are in now absolutely dwarfs the epic stock market bubbles of 1929 and 2000.  Stock market mania has gripped the entire nation, and all sorts of people have been getting rich, at least on paper.

But many Wall Street veterans that have been watching all of this transpire have become extremely concerned.  The following comes from a Forbes article entitled “Is The Stock Market About To Crash?”

‘Very, very concerning’ echoes of the 90s dot-com bubble are being heard loud and clear by nervous market experts. A 12-year-old bull market; SPAC mania; IPOs that more than double on the first trading day; an army of amateur traders and GameStop mania. It certainly feels like irrational exuberance–and it triggers alarms for those who remember the dot-com bubble of the late 1990s. “The parallels we have today are historically very, very concerning,” notes Jim Stack, president of Whitefish, Montana’s InvesTech Research and Stack Financial Management. “The current froth is the icing on the cake, and when you look through it, you see a lot of other underlying issues.”

In this sort of environment, videos by kids on YouTube showing people how to make a million dollars by day trading stocks get hundreds of thousands of views.

If you have been able to make a lot of money by playing the stock market, good for you.

Just make sure that you get out in time.

Every other stock market bubble in U.S. history has ended badly, and as John Hussman recently noted, this is our generation’s moment of peak financial insanity…

Nothing so animates a speculative herd as a parabolic price advance in an asset detached from any standard of value. I am convinced that future generations will use the present moment to define the concept of a reckless speculative extreme, in the same way our generation uses “1929” and “2000.”

So just how far does Hussman think the market could ultimately fall?

Well, he believes that stock prices would have to drop 65 to 70 percent just to get back to historical norms…

Understand how extreme current valuations have become. In order to simply touch run-of-the-mill historical valuation norms, the S&P 500 would have to lose somewhere in the range of 65-70% over the completion of this cycle.

Stock prices always, always, always get back to their historical averages eventually.

It is just a matter of time.

However, we should hope that a stock market crash can be put off for as long as possible because a truly catastrophic stock market crash would cause far more economic pain than we have experienced so far.

Our system simply would not be able to handle a decline of 50 percent or more in stock prices.  It would essentially mean the end of our financial system as we know it today, and that is something that nobody should want.

The good news is that I do not expect a stock market crash within the next 30 days unless some sort of major “trigger event” comes along.

Stocks may go down, but for the moment I expect at least a short-term period of relative stability.

But that short-term period of relative stability will not last very long at all, and I fully expect 2021 as a whole to be a very, very painful year.

***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 Amazon.com.  In addition to my new book, I have written four others that are available on Amazon.com 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 anyway 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 Experts Are Warning That A U.S. Stock Market Crash Is Very Likely In The Months Ahead first appeared on SHTF Plan – When It Hits The Fan, Don’t Say We Didn’t Warn You.

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Guess Which Side The Corporate Media Is Taking In The GameStop Story…

This article was originally published by Michael Snyder at The Economic Collapse Blog.

*Wake up! They (the media, the government, and the corporations) are all in this together against us! No one is coming to save us. It is time to save ourselves.

You would think that a plucky group of Internet rebels standing up to a bunch of notorious hedge funds and short-sellers would be a story that even the mainstream media should be able to get right, but apparently, that is not the case.

As you will see below, the corporate-controlled media is attempting to convince all of us that the hedge funds and the short sellers are actually “the good guys” and that the “Reddit army” that is taking them on is a bunch of dangerous insurrectionists that are a threat to the entire system.  Of course, I suppose that it shouldn’t be a surprise that the corporate-controlled media is standing up for the establishment, because the establishment showers them with millions of advertising dollars.  But it really has been disgusting to watch them totally sell out like this.  If you listen to the mainstream media long enough, you would be tempted to believe that we now live in a “Bizarro World” in which everything that was once evil is now good and everything that was once good is now evil.

Just within the past few days, the New York Times has called the “Reddit army” a “rebellion”, Investing Daily has referred to it as an “insurrection”, and NBC News has used the word “insurgency” to describe it.

But the first prize actually goes to the Washington Post.  They had the gall to run a story entitled “The good guys in the GameStop story? It’s the hedge funds and short-sellers”…

The Gamestop speculators are not merely in a frenzy about one stock. Their goal is to destroy the traders who link stock prices to fair value. To suggest a political analogy, they are not just blindly devoted to their candidate; they deny the legitimacy of the opposition party. They are not just acting within the system; they want to overthrow the system. It’s as though — just imagine — a rabble gripped by conspiracy theories were to attack the rules of democracy itself. The name “Gamestop” is apt.

Are you kidding me?

What is next?  Is the Post going to come out with a story about how Luke Skywalker was evil because he wanted to overthrow the established order that Darth Vader and the Emperor had instituted across the galaxy?

The official slogan of the Washington Post is “Democracy Dies In Darkness”, and that is quite ironic because they have totally gone over to the dark side.  In the same article that I just quoted above, the Post laughably asserted that “a market without short sellers” would be like “a political system without investigative journalists”…

What about short sellers? These are specialists who research stocks that might go down, sometimes because bosses are illegally covering up bad news about their companies. When short sellers identify a case of fraud or similar, they borrow and sell the stock, hoping to buy it back at a lower price later. Again, there is nothing evil about this. To the contrary, it’s a way of keeping prices honest. A market without short sellers is like a political system without investigative journalists.

Yes, let us take a moment of silence right now to acknowledge all of the wonderful contributions that short-sellers have made to our society.

It really has been amazing to watch the lengths that some in the mainstream media will go to in an attempt to demonize the retail traders that have banded together to go after the short-sellers.  On CNN’s website, Chris Cillizza did his best to try to turn the “woke mob” against the Reddit traders by linking them with Trump.  The following comes from his article entitled “How Trumpism explains the GameStop stock surge”

The point is that there is no real point beyond showing up the pros — proving to them that they aren’t as smart as they think they are and that they don’t have the ability to control everything.

Which, again, has its roots in Trumpism. The entire notion of Trump’s candidacy and presidency was to stick it to the elites. And then, well, uh, there wasn’t really a plan beyond that. The screwjob was the point.

Others have gone even farther.  To me, it was extremely offensive when former SEC Commissioner Laura Unger compared the short squeeze on Wall Street to the rioting at the U.S. Capitol.

Of course, whenever something happens that the establishment really doesn’t like, it is just a matter of time before they start blaming Russia.

The other night, Jimmy Kimmel suggested that “maybe even some Russian disrupters” were at least partially responsible for the chaos on Wall Street, and MarketWatch actually published an article entitled “The GameStop saga is a road map for the Kremlin and other enemies of America”.

Ever since the 2016 election, Russia has become the ultimate boogeyman.

If something major goes wrong, Russia has to be blamed for it somehow.

President Trump at least attempted to keep our relations with Russia fairly stable while he was in office, but now that he is gone I have a feeling that U.S. relations with Russia are going to completely fall apart.

But that is a topic for another article.

Getting back to the topic at hand, the short-sellers only have themselves to blame for what happened.  The number of GameStop shares that had been sold short was greater than the number of GameStop shares that actually existed, and that was a golden invitation for anyone that wanted to attempt a massive short squeeze.

If it wasn’t the Reddit army, it was probably going to be someone else.

What a year this has been already.

On the first Wednesday of 2021, there was a massive riot at the U.S. Capitol.

On the second Wednesday of 2021, President Trump was impeached by the House of Representatives.

On the third Wednesday of 2021, Joe Biden was inaugurated.

On the fourth Wednesday of 2021, the GameStop short squeeze made headlines all over the globe.

So will something historic happen this Wednesday?

We shall see, but without a doubt, the chaos that we have witnessed so far is just the very start of our troubles.

Everywhere you look, people are extremely angry.

And everywhere you look, our system is being greatly shaken.

Most Americans are sick and tired of the corruption and injustice that they see all around them, and they know that our “leaders” aren’t going to do anything about it.

People are increasingly taking matters into their own hands, and the Reddit army is thrilled that the hedge funds and the short sellers can finally feel their fury.

But fury is not going to fix our system.

At this point, nothing will.

***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 Amazon.com.  In addition to my new book, I have written four others that are available on Amazon.com 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 anyway 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 Guess Which Side The Corporate Media Is Taking In The GameStop Story… first appeared on SHTF Plan – When It Hits The Fan, Don’t Say We Didn’t Warn You.

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

This article was originally published by Michael Snyder at The End of the American Dream. 

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 Amazon.com.  In addition to my new book, I have written four others that are available on Amazon.com 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 anyway 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 SHTF Plan – When It Hits The Fan, Don’t Say We Didn’t Warn You.

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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 Amazon.com.  In addition to my new book, I have written four others that are available on Amazon.com 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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Social media spread a deceptively edited clip of billionaire Leon Cooperman appearing to attack retail investors

A deceptively edited clip of New York hedge fund billionaire Leon Cooperman railing against the term “fair shair” went viral Thursday, leading many to accuse Cooperman of attacking the retail investors of the Reddit discussion board WallStreetBets.

Cooperman was interviewed on CNBC and spoke about the WallStreetBets day traders who drove up the price of GameStock’s stock to squeeze Wall Street hedge funds who wanted to short GameStop. In an edited clip of the interview shared on Twitter by Disclose.tv, Cooperman appears to belittle the WallStreetBets investors as people who are “sitting at home getting their checks from the government.”

Disclose.tv’s tweet frames the clip as “billionaire Leon Cooperman fumes at retail traders and shouts: ‘It’s a way of attacking wealthy people.'”

This clip, however, is edited to cut out several of Cooperman’s statements that provide needed context for the points he makes.

Cooperman told CNBC that he believes the meteoric rise of GameStop’s stock will end poorly for many of the retail traders who are climbing aboard the bandwagon while the stock price is artificially high, but he does not find fault with the initial Reddit investors who decided to put the squeeze on the hedge funds and make some money. Cooperman believes that several factors have contributed to what the market is experiencing, including near-zero interest rates imposed by the Federal Reserve and the stimulus checks sent to most Americans by Congress.

“It’s all interconnected,” he explained. “The reason the market is doing what it’s doing is, people are sitting at home, getting their checks from the government, basically trading for no commissions and no interest rates. I’m not saying they’re stupid. Show me a guy with a good record consistently, and I’ll show you a smart guy.”

“I’m not damning them. I’m just saying from my experience, this will end in tears,” he added.

He went on to explain that based on what he’s seen, GameStop is not worth the extraordinary price the stock is trading at. As of Friday afternoon, the stock was trading at about $330.

“GameStop is not worth $500, not worth $400, not worth $300, not worth $200, not even worth $100, not even worth $50,” Cooperman explained. “I don’t know what the hell it’s worth to be honest with you, I’m not involved with it.”

Later in the interview with CNBC, Cooperman expressed concern that the current conditions of the market are unsustainable in the long term. He said that the Federal Reserve’s monetary policy is incentivizing investors to make higher risk bets with their money in search of better returns. As people move money out of traditionally safe places like savings accounts because interest rates are too low and put them into risky stocks to make more with their money, the stock market keeps rising and reinforces those investment patterns.

But someday interest rates will have to go up. And Cooperman predicted that taxes will have to be raised so that the federal government will be able to continue making payments on the national debt.

“Everybody is moving out on the risk curve, and one of these days — not today, not tomorrow — but one of these days people are going to come in on the risk curve, and I think we’ll have lots of issues to deal with,” Cooperman said.

It was at this point when Cooperman criticized rhetoric from Democrats about how the wealthy need to pay their “fair share” in taxes, even though he voted for President Joe Biden.

“I hate that expression with a passion,” Cooperman said. He questioned how Democrats define “fair share.”

“I’m willing to work six months a year for the government and six months for myself, which means a marginal tax rate of 50%,” he said. “This fair share is a bulls**t concept. It’s just a way of attacking wealthy people, and I think it’s inappropriate.

“We’ve all got to work together and pull together.”

So, his comments about “It’s just a way of attacking wealthy people, and I think it’s inappropriate,” in context, were clearly not about the people who are trading on GameStop, but rather about the tax plans being put forth by Democrats. He clearly did not trash people for using stimulus checks to play the stock market or say that what they were doing was just trying to get back at rich people, as many have interpreted the deceptively edited clip.

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Horowitz: The Robinhood-GameStop scandal, lockdowns, and a two-tiered justice system

The internal effects of a mutable policy are still more calamitous. It poisons the blessing of liberty itself. It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?” ~James Madison, Federalist No. 62

If you are not a member of the ruling oligarchy, you can buy a stock only when it benefits the ruling oligarchy, but not when the oligarch shorted the stock and will lose money. In that case, you can only sell. They, the esteemed members of the system, on the other hand, can do what they want at any point to win the rigged game.

That was essentially the lesson the American people learned this week about our government-corporate manipulated economy when the oligarchs got together to block people from buying stocks like GameStop after the well-connected Wall Street hedge funds were slated to lose billions on their short-sale gamble. However, what happened this week was emblematic of a broader trend that has taken over our economy this past generation, but should have become patently obvious to the American people since the unconstitutional lockdowns began last March. The oligarchs in charge of our country have manipulated the entire economy in a way that arbitrarily weighs down individual risk-takers and business owners in order to benefit the ruling class, which includes large corporations like Walmart and Amazon.

In the ultimate unconstitutional market distortion, the government refashioned life itself with its draconian lockdowns in a way that forced entire chains of commerce only through narrow, well-connected giant companies while crushing small businesses. Just like the GameStop investors on Reddit who were shut down from making profit and could only take a loss in order to transfer wealth to the hedge funds, small businesses were shut down so that the consumer capital would flow to Zoom, Amazon, Apple, Facebook, Google, Microsoft, and Netflix. Amazon’s stock price has nearly doubled since the lockdowns began last March.

The difference between who was shut down and who was given a waiver to open their business was so arbitrary in Pennsylvania that the auditor general wrote in a report, “The waiver process appeared to be a subjective process built on shifting sands of changing guidance, which led to significant confusion among business owners.” He observed, “Some owners of small businesses may not have had the knowledge to use the right ‘buzzwords’ in their justification for remaining open, or realized they could ask a legislator for help to navigate the process.”

It’s not only the fact that the government criminalized commerce through traditional means, forcing consumers into “high tech” commerce; it’s that they benefited from the trillions the Federal Reserve artificially injected into the economy. They had the economies of scale to borrow record amounts of cash at dirt-cheap interest rates.

So while small businesses owners are shedding tears and committing suicide at record rates, Wall Street and Silicon Valley are cashing out on the ultimate venture socialist scam of the government – in which politicians criminalize traditional commerce and property rights and then throw trillions of dollars of cheap money at the people who just benefited from the ultimate form of communism. Who made or lost money this past year, for the first time in history, had zero to do with smart investment, innovation, or even risk-taking, and everything to do with the luck of the government’s venture socialist draw.

Or perhaps it wasn’t luck at all. It was systemized and arranged based on who built up connections with the government over the years.

Unlike the left, which seeks to “rectify” this broken system it supported by throwing endless free money at people, we seek to reset the economy to what it’s supposed to be without any government intervention. That begins by ending all COVID restrictions and allowing all those businesses harmed by the illegal lockdowns to go five years without paying taxes or being subjected to costly regulations. It’s time to even the playing field that government distorted.

The way to end double standards is to return to constitutional governance, where there is a limit to what government can do to our lives. The wealthy masters of the universe can lobby all they want, but most subsidies, regulations, market distortions, and certainly restrictions are unconstitutional. Thus, if government can’t do it, the incestuous corruption of the oligarchy lobbying scam comes to an end. The only reason why government is able to rig society through reckless fiscal and monetary policy is because it has stepped outside the constitutional limits constraining the scope of its power.

Take stock for a moment of just a few of the appalling double standards we are witnessing in our economy, government, and society today:

  • The wall to protect Americans from illegal invaders is being dismantled, while a wall is being constructed between the politicians and the people around the Capitol complex.
  • Restaurants were shut down because of the COVID religion, but Walmart and Home Depot weren’t because they supposedly don’t spread virions.
  • Illegal aliens get court injunctions against deportations within hours of filing, even though they have no right to be here, while Americans have failed to secure an injunction against masking and lockdowns in nearly every state for 10 months.
  • Antifa and BLM have rioted nearly every day since last June, yet very few people have been prosecuted. But for one violent incident, the military is deployed even long after it was over, the entire intelligence and national security apparatus is being marshalled against Trump supporters, and the DOJ is now casting such a wide net in prosecutions that it is bordering on First Amendment violations.
  • BLM is such a religion that you can attend endless mass funerals for a career criminal like George Floyd, but not hold a 50-person funeral for your grandmother.
  • Hundreds of thousands of drug traffickers, gang members, and career violent criminals have been released from jail because they were considered “low-level,” while business owners are being threatened with jail time for exercising their property rights.
  • Millions of people who didn’t lose a penny during the lockdowns because of the nature of their jobs received thousands in “stimulus” checks, while small business owners often didn’t receive a penny, and worse, they were forced by a communist mandate not to evict derelict renters, but still had to pay property taxes.
  • The elites disregarded their own unconstitutional COVID restrictions, and then the minute Trump left office, they called for the reopening of schools and restaurants (albeit with the abuse of masks), using data that we were censored for posting online.
  • They bring in more refugees, foreign workers, and illegal aliens, while instituting curfews on Americans within the states. They place travel bans on American residents of other states while inviting illegal aliens to cross the border and use the very hospitals we are supposedly trying to protect with these restrictions.
  • The same courts that said states engaging in voter fraud and illegal election law changes mid-election were the business of the states blocked red states from requiring proof of citizenship to vote.

It all gets back to the fact that we are no longer a nation of laws with a fixed written law – whether it’s the Constitution or statutes – but a nation of men. The written law has been replaced with executive and judicial fiats that are based on the capricious whims of the corporate media that promotes corporate commerce and academia – all tied back to the politicians. They enrich themselves with pay-for-play schemes, but they also empower themselves by instituting these policies under the guise of helping “the little guy,” particular races or classes of people that are elevated by the culture at the expense of the whole of the people and the general common good, as required by the social compact.

In all these examples, it’s not that the ruling oligarchs inherently care more about black people, illegal aliens, foreign workers, the poor, or any other class about which it is easy to virtue-signal. It’s that they built a rigged system in which they are empowered by promoting or elevating the plight of those celebrated classes over the whole of the people. If they lost power by doing so – for example, if illegal aliens were conservative – we would see the opposite policies emanating from their citadels.

Article 7 of the Massachusetts Declaration of Rights, which was written by John Adams, states: “Government is instituted for the common good; for the protection, safety, prosperity and happiness of the people; and not for the profit, honor, or private interest of any one man, family, or class of men.”

What we witnessed this week in the stock market and what will only intensify in the coming weeks is the inevitable endgame of a system that arbitrarily picks winners and losers and uses the boot of government, culture, and economy to confront the “losers” with a checkmate, one-way street, and dead end at every turn. The losers will revolt. As it states in the next passage of the Massachusetts Bill of Rights: “Therefore the people alone have an incontestable, unalienable, and indefeasible right to institute government; and to reform, alter, or totally change the same, when their protection, safety, prosperity and happiness require it.”

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Fox Business host Charles Payne shreds Wall Street for ‘whining’ about GameStop losses

Fox Business host Charles Payne on Wednesday blasted Wall Street for “whining” about the retail investor squeeze of hedge funds that tried to short GameStop, AMC Entertainment, and BlackBerry.

Payne, the host of “Making Money,” defended the rights of retail investors to make money by reading the market and outwitting hedge fund investors in a discussion on GameStop’s incredible stock price surge. GameStop’s stock price increased by more than 1,000% in about one week before falling slightly Thursday after independent small-time investors on the internet discussion board WallStreetBets campaigned to buy up the stock in response to hedge fund plans to short-sell it.

The retail investor campaign was wildly successful, causing those short-selling GameStop and other stocks popularized on the discussion board to lose over $70 billion on their bad bets. But it was not without critics who accused the users on WallStreetBets of manipulating the market and called for new regulations to mitigate their influence and protect hedge fund short-sellers.

Payne was having none of it.

“First of all, all of the nonsense, all of this noise, all of this whining by Wall Street – it’s making me sick,” Payne told Fox Business host Neil Cavuto on “Cavuto Coast to Coast,” pointing out that hedge funds were able to short 140% of GameStop’s stock.

“I didn’t hear one person on TV complaining about Wall Street trying to crush GameStop,” he said. “I told my subscribers: Buy this stock. And they made a fortune.”

He added that he also told his audience to buy other stocks including Virgin Galactic Holdings, National Beverage and Tanger.

“You can’t allow Wall Street to short 75% of a stock – and nobody says anything – crush these companies into the dirt, and then when the individual investor makes money, everyone’s up in arms,” Payne cried.

He dismissed hand wringing from Wall Street investors and financial analysts over the risk that some of GameStop’s investors will lose money when the bubble bursts.

“People are ringing a register! I have a kid who bought a house, he made $50,000 and bought a house!” Payne said. “So yeah, some people are going to lose and some are going to win. But if they want to change the rules of the game now because the general public is making money after decades of the shorts crushing thousands of stocks into the dirt — I’ve watched stocks being crushed completely to zero and no one ever whispered anything because those stocks didn’t have Wall Street sponsorship.

“The shorts have had their way with the market for decades,” Payne continued. “So I am thrilled. If you’re going to try to destroy a company by shorting 140% of its stock, you have to accept the fact that individual investors are playing the same game, and now you’re losing.”

Watch:

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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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How The Fed Fails

This article was originally published by Charles Hugh Smith at Of Two Minds Blog. 

The Fed has a binary choice: preserve America’s global hegemony or further enrich the billionaires. You can’t have both.

The Fed will fail as a result of two dynamics: diminishing returns and the U.S. dollar’s role as a global reserve currency. The Fed’s reign as the godhead of financier-banker supremacy has been fun and games for the past 12 years of stock market euphoria, but that’s about to change.

All those expecting the Fed to sink the USD to near-zero to “save the stock market” don’t seem to realize that they’re also expecting the U.S. to surrender its global hegemony, which rests entirely on the U.S. dollar. The USD is the world’s dominant reserve currency–please examine the chart below. The USD dwarfs the next largest reserve currency, the euro. The Chinese yuan–due to its peg to the USD, essentially a proxy for the USD–is a tiny sliver of global reserves.

The owner of a reserve currency can create “money” out of thin air and trade it for autos, oil, semiconductors–real-world goods that were not created out of thin air. All these real-world goods required tremendous investment and significant costs to be produced and transported.

No wonder trading something for nothing–a remarkably good deal–is termed an exorbitant privilege.

It is not an exaggeration to say that the ability to create “money” out of thin air and trade it for real-world goods is the foundation of America’s global power. If the Fed prints USD to near-infinity and the USD loses value relative to other reserve currencies, the U.S. loses its exorbitant privilege of trading “money” created out of thin air for real-world goods.

So everyone expects the Fed to “print” the USD to zero is claiming the Fed is consciously choosing to lay waste to the foundation of American power–just to boost Big Tech Robber Barons and zombie global stock markets.

Recall that the Fed is not the Empire, it is the handmaiden of the Empire. The Fed’s dual mandate– for PR purposes, stable employment, and prices–is actually balancing the conflicting demands of a global and domestic currency–Triffin’s Paradox writ large.

The inherent problem with a reserve currency is that it must meet global economic needs and domestic needs, and these are intrinsically in conflict. America’s billionaires and pension funds want the US stock market to loft higher on the back of a declining USD, but that diminishes the global purchasing power of the USD–a trend spiraling down to economic ruin.

The Fed’s balancing act has run out of runway. It’s either destroy American hegemony by crushing the USD or secure hegemony and let the stock market function as a “market” rather than as a device to further enrich the top .01%. (Recall that “nearly half of the new income generated since the global financial crisis of 2008 has gone to the wealthiest one percent of U.S. citizens. The richest three Americans collectively have more wealth than the poorest 160 million Americans.” The Dangerously Diminishing Returns on Monetary and Fiscal Stimulus)

As for diminishing returns: consider what the Fed “bought” by handing $1 trillion to financiers, banks and billionaires in 2008-09 and what it “bought” with $3 trillion last March. The Fed’s balance sheet shot up from $925 billion on 9/9/08 to $2.08 trillion on 9/9/09– an injection of $1.16 trillion to “save” the global financial system (and the U.S. stock and debt markets) from a complete meltdown.

The Fed continued goosing markets higher, adding another $1 trillion by 2013 (balance sheet $2.96 trillion). So the Fed “bought” a five-year rally in global risk assets–a rally that sent wealth and income inequality into orbit–for a mere $2 trillion.

Last year the Fed had to print over $3 trillion in three months to “save the markets” from a reckoning with reality. Take a quick look at the chart below. Notice how the Fed’s “saves” are tracking a near-parabolic curve. So will the next “save” require $5 trillion, or will it be $7 trillion? And what are the consequences for such insanity on the U.S. dollar’s global hegemony?

So the Fed has a binary choice: preserve America’s global hegemony or further enrich the billionaires. You can’t have both. Hegemony requires a currency that’s increasing its value relative to other currencies, not plummeting to near-zero.

If the Fed chooses to further enrich the billionaires and top .01%, then the skyrocketing wealth-income inequality will unravel the domestic social and political orders. There is no way that will be a “win” for the Fed, as the resulting backlash against the Fed’s strip-mining the nation to enrich the top .01% will have consequences for the Fed as well as the nation.

So the Fed will fail. If it spews endless trillions to further enrich the billionaires it will destroy the exorbitant privilege of the reserve currency and the global hegemony that privilege enables. If it preserves global dollar hegemony by not spewing endless trillions, global stock and debt markets will experience the equivalent of a financial tsunami, earthquake, and hurricane hitting all at the same time.

It’s either/or–there is no win-win. Choose wisely, Fed.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

The post How The Fed Fails first appeared on SHTF Plan – When It Hits The Fan, Don’t Say We Didn’t Warn You.

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The Rich Got Richer During COVID-19. Here’s How American Billionaires Performed

This article was originally published by Tyler Durden at ZeroHedge. 

We’ve all been affected by the pandemic-induced mayhem of 2020. But, as Visual Capitalist’s Carmen Ang noteswhen it comes to finances, some have fared far better than others.

While job loss persists for Americans making less than $20 an hour, the rich have gotten richer. More specifically, the most wealthy American billionaires have seen their net worth bounce back dramatically, thanks to strong stock market performance.

Here’s a look at who’s gotten richer since the market bottom in March 2020, and just how much their net worth has increased since then:

Billionaire Net Worth Growth in 2020

Between March’s market bottom and December 2020, the billionaires included on this list grew their wealth by 57% on average. Interestingly, that’s about 10 percentage points higher than the overall growth of the S&P 500 index during the same time period.

Elon Musk saw the highest increase during this period, with a $129 billion boost in net worth—that’s a whopping 523% in gains.

This makes sense considering the year Musk has had. Tesla’s market value has skyrocketed throughout 2020, and SpaceX’s long-term valuation doubled after making some monumental strides in the private space industry.

Jeff Bezos saw the second-highest growth in net worth with a $74 billion increase. This isn’t surprising, given that Amazon’s stock price has climbed 69% since the beginning of 2020.

But Amazon hasn’t been the only company to benefit from the accelerated e-commerce market—other retailers, like Nike, have also seen a significant boost in online sales this year as well.

Billionaire Wealth, in General, is Up

It’s not just the billionaires on this list that have increased their wealth. In fact, during the pandemic, billionaire wealth on average has increased 27% worldwide. Growth has been exceptionally strong in tech and healthcare.

Will things level out post-pandemic, or will the wealth gap continue to grow?

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BREAKOUT or MELTDOWN: READ CLOSELY!

This article was contributed by The Wealth Research Group. 

When you’re done reading today’s letter, you’ll be left with a big decision to make, and my message to you is that instead of boxing yourself into a corner and making it today, you can choose to do as I have done throughout my career and diversify your assets, while “living” the environment and the economic conditions.

As 2020 ends, here’s what bulls claim:

  1. Yes, the stock market is expensive and, yes, there’s a strong sentiment that resembles the Dot.Com days, but the world today is not like it was back then, since there are fewer investment alternatives outside of the stock market. Therefore, this market can remain expensive.
  2. The unprecedented stimulus of 2020 has not yet been felt. In 2021, this fresh currency supply will flow into Main Street, making the recovery stronger, more inclusive and stocks can actually rally big in 2021.
  3. Technology, automation, cloud, IoT, and breakthrough medicine are making the world better, more efficient, and more affordable, which, in turn, makes corporations more valuable.

If you’re not buying that, you’re not alone; there are a few bears left out there, and here’s what they say:

  1. Currency printing has inflated asset prices, at the expense of starving the real economy. It’s causing all sorts of societal mass, the introduction of government dependency, historically-high wealth, and income gaps and it’s an “artificial” economy – a balloon that will pop.
  2. Debt levels are simply absurd; governments run perpetual deficits, which will collapse and equities will, in turn, drop in price.
  3. Corporations and households are loaded with toxic debt, which keeps them afloat for now.

It’s a giant house of cards is the bottom line for this camp and they mostly refuse to participate.

Courtesy: Zerohedge.com

Big, macro-economic predictions are not money-makers. It’s extremely difficult to build a screenplay of how the global economy will behave and play your hand, going off one’s forecast.

Many have tried and failed this way; Ray Dalio, the famed hedge fund manager, has been underperforming indices for several years, ever since his switch to macro-economics, as a leading catalyst for results.

The fact of the matter is that many “brilliant” people said Bitcoin is a joke and have been eating their own s**t for missing out on an amazing boom. Plenty of billionaires scoffed at gold, while it has appreciated by 700% in the past 20 years!

Hundreds of hedge funds shorted companies, such as TSLA, only to lose their clients a bundle in the process.

The point here is that one better not comment on what one has no idea about. My chief conclusion from having been at the entrepreneurship, business building, and investing world in the past two decades is that intolerance is the greatest sin of the one whose goal it is to generate returns over time.

Evolution and the ability to admit mistakes, in order to grow, is perhaps the most vital trait of the winner – who isn’t tied to his opinions if they neither hold the water nor withstand the test of RESULTS.

Look at the chart above; it implies that a huge market crash is imminent, but it could also prove that a major surge is coming, breaking out of the resistance line.

What should one do, then?

What I do is live and breathe the action and make decisions, based on current circumstances, not future scenarios. If something makes sense today, I do it.

By definition, if every single day you do only what makes sense, your overall result will make sense.

Don’t fall into traps, hype, or doom. THINK!

The post BREAKOUT or MELTDOWN: READ CLOSELY! first appeared on SHTF Plan – When It Hits The Fan, Don't Say We Didn't Warn You.

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Greg Mannarino: The Economic Collapse Is Here

Greg Mannarino says the economic collapse has arrived. “Sit down. Buckle up because this is going to be a wild ride,” says Mannarino.

Mannarino starts by showing the jobless claims have once again almost reached the 1 million mark. People are rarely unemployed and there is no recovery happening unless you are a corporation. “Look, I don’t know another way to say it. We are in an economic collapse here in the United States!”

Even though the entire system is collapsing around us all, the stock market will go higher. It all debt and we have a debt-based system that will eventually self-destruct.  This will have lasting effects on a global scale. The last two presidents have made certain that the debt issued is in record amounts as the middle-class is destroyed by design. “They sold the United States, or whatever is left of it, to the Federal Reserve, and right now, we’re watching a merger in front of our face. Corporations and the new American government, New World Order. Welcome to it!”

Greg Mannarino: It’s Critical To Understand That The Goal Is “Full Control By The Federal Reserve”

America is in free fall. Things will not improve even if another stimulus package is passed, in fact, that will hasten the collapse. If you are not prepared for an economic crash the likes of which we have never seen in human history, now is a great time to get things in order.

We are also seeing countries locking down for a second time doing more untold damage to already fatally wounded economies.  Brace yourself. It has only just begun. “You have no idea what’s coming. This is all by design,” Mannarino makes clear. “Realize how this is set up from the getgo…understand that a new set of rules are coming down the pike as America is in collapse.”

Prepare For An Economic Emergency Or Recession

PREPPING FOR THE UPCOMING GOVERNMENT-INDUCED FOOD SHORTAGES

“With regard to the economic collapse we are in, believe me when I say this: you haven’t seen anything yet,” Mannarino says. “This is the opening act. It’s gonna get much much worse.”

 

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BRING DOWN THE ROOF: Market Predicts BIDEN!

This article was contributed by James Davis with Future Money Trends. 

This week, we saw markets start to factor in something that many TRUMP SUPPORTERS are refusing to believe, which is that Joe Biden is DEFINITELY LEADING in most polls.

What the Trump supporters cling onto is that in 2016, all of these SO-CALLED GENIUS POLLSTERS were dead-wrong, not accounting for what are referred to as “Shy Trumpsters,” which are supporters who will only admit the fact to themselves and sometimes their close family.

Failure to understand this IMPORTANT DYNAMIC caused the shock around CLINTON’S LOSS in 2016, and they believe history will repeat itself on November 3rd, which is less than a month away.

There is SOME MERIT to this, as the company that predicted Trump’s victory back then is forecasting him to win in a TIGHT RACE!

Courtesy: Zerohedge.com

Despite this being issued by the only polling firm that CORRECTLY CALLED the 2016 election, the wisdom of the crowds favors Biden right now.

For one, China’s yuan just had an incredible week. The dollar dumped to THREE-WEEK lows, even though real rates actually climbed. What’s behind these BIG MOVES? Well, if Biden wins, tensions with China are supposed to ease, which is another way of saying that HARDBALL NEGOTIATIONS will be canceled and the policy that wiped out the American middle class –  which is to allow the Chinese to compete with the West without respecting the rules of the game – WILL RETURN.

In the case of a Biden win, FAR LESS unpredictability is almost guaranteed. One thing about the past four years that was very noticeable is how aggressive Trump’s governance style is. If he has a MISSION AT HEART, it will get done, even at the cost of short-term mayhem.

His supporters love this about him; his haters think it is borderline insanity to run a country in this manner.

Less unknown things and fewer LAST-MINUTE BOMBSHELLS reduce the need to be as LIQUID, therefore resulting in a weaker dollar.

Courtesy: Zerohedge.com

So, a Biden victory is actually BETTER FOR METALS than a Trump one.

Trump has caused the dollar to strengthen significantly in his term compared with other fiat currencies. In 2018, the dollar actually had its BEST YEAR since 1969. This made the gold/silver ratio reach an all-time high of 123:1, so if you’re LONG SILVER, Biden’s policies will actually make you richer.

Regardless of who wins, Future Money Trends believes that the stock market will GO UP.

Our watch lists have brought TREMENDOUS WINS in March, June, over the summer, and just recently, in the SEPTEMBER CORRECTION.

With the INITIAL ONE, there are companies that are up over +70% now!

With the SECOND ONE, there are companies that are up over +50% now in less than FIVE MONTHS.

With the THIRD ONE, released over the summer, we believe that Ciena (CIEN), which we’re personally big shareholders of with an entry price of $44.05, will see a massive long-term opportunity. Put differently, we think that in 2030, when you look at this holding compared with the indices, you’ll potentially see a BIG GAP to its advantage.

In late August, anticipating a TERRIBLE SEPTEMBER, we issued a tech-centered watch list, OUR FOURTH ONE. One company is already up 15.3% for us. Ironically, the other companies are up MUCH MORE, +20% and even +30% and +40%, if one didn’t wait for the price to drop to the proposed LIMIT ORDERS.

Being able to invest DESPITE the innumerable reasons NOT TO, which the gloom and doom crowd always finds, is probably what investors in the 1940s and EARLY 1980s had to DEAL WITH as WW2 ended and the 1970s inflationary nightmare ended.

The eternal mandate is to be a contrarian or SUFFER.

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LET JOE SPEAK: TRUMP’S BIGGEST MISTAKE EVER!

This article was contributed by James Davis with Future Money Trends.

I watched the debate and my FIRST CONCLUSION is that no one has truly WON IT decisively.

Going into it, everyone expected Trump to dominate it and to have the UPPER HAND, but ex-Vice President Joe Biden did not get RATTLED or shaken up by Trump’s strategy of meddling with Biden’s AIRTIME.

In our opinion, the tactic of constantly INTERJECTING and commenting, which worked with Hillary, didn’t achieve the SAME OUTCOME this time around. It did not buy Trump sympathy points since the moderator did not fall for the same trap the 2016 hosts did.

We believe that because of the setting and the subject matter, viewers wanted SUBSTANCE, not entertainment. We believe that Biden was able to present his side calmly and that by cutting him short, it seems to us that Trump didn’t let Biden MAKE MISTAKES and sound inaccurate like he did in previous occasions.

Trump’s advisors, if that’s where this thought process originated from, did a BAD JOB here.

To make sure I’m not confusing you, we’re definitely not Biden supporters and we remain pretty far away from politics, but we do know the outcome of these elections mean A WHOLE LOT to you, so we’re publishing what we think is important. OBJECTIVELY, we saw Trump win AS EXPECTED, but not by crushing his adversary like we initially anticipated.

This means that Trump lost an IMPORTANT MILESTONE, which means that markets might continue to wander WITHOUT DIRECTION since it’s not yet known who has the UPPER HAND.

Look how perfectly this is displayed by the FEAR/GREED index:

Courtesy: Zerohedge.com

It’s SMACK-DAB in the middle of the column; a sign of the times.

Here are a few things to consider if you’re A TRUMP SUPPORTER:

  1. People that are of the same age group as Joe Biden OR OLDER might actually empathize with Joe and not appreciate Trump’s bullying him on account of his age alone.
  2. Because everyone came into this debate EXPECTING TRUMP to crush Biden, the fact that Biden was able to CARRY THROUGH was a pleasant surprise to UNDECIDED VOTERS who have heard that Sleepy Joe is senile and have now seen somewhat CONTRADICTING EVIDENCE.
  3. Biden’s approach was to keep the conversation civil, which is not Trump’s style and makes many reject him RIGHT OFF THE BAT. We wonder how many swing voters did not resonate with his manners.

Courtesy: Zerohedge.com

September’s MARKET ROUT has been a catalyst for dollar strength, and that’s AWFUL for silver prices. Since Trump was elected, this has been the dollar’s SECOND-BEST month, so what is the market thinking here?

One thing to keep in mind as a GOLD BULL and a SILVER SPECULATOR is that Trump’s demeanor and his HANDS-ON approach with China have actually strengthened the dollar a lot!

The dollar has been VERY STRONG under his reign and a Biden win will LESSEN TENSIONS, which will lower the need to own so much liquid cash.

This isn’t over yet.

The presidential race is ALIVE AND WELL. Either can still win and, in our opinion, a Biden win is actually MORE INFLATIONARY.

It would be a shame, though, to see Trump concede since before Covid-19, things were looking good.

The post LET JOE SPEAK: TRUMP’S BIGGEST MISTAKE EVER! first appeared on SHTF Plan – When It Hits The Fan, Don't Say We Didn't Warn You.

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BULLETPROOF VEST IS ON: Big Money IS LIQUIDATING NOW!

This article was contributed by James Davis with Future Money Trends. 

For the past 28 years, ever since the Clinton (1992) victory and probably WELL BEFORE it, institutional money has ALWAYS BEEN selling equities in the month leading up to the elections.

Once a winner was announced, the same investors would REENTER EQUITIES.

It’s a predictable pattern because all sorts of presidents have won from both parties under INNUMERABLE DOMESTIC conditions; it seems that buying before the elections is a buying opportunity in most cases.

The most successful fund manager of all time, Peter Lynch, has summed it up in the most simplistic manner: the downside in stocks IS NOTHING compared with the upside, and he’s so right.

From October 3rd, 1980, can you even BEGIN TO IMAGINE the total amount of BULLSHIT NEWS that was probably thought of as imminent danger and a reason to go ALL-IN on CASH, yet the market returned 2,500% even if one spent ZERO MINUTES understanding investing?

Thought about in the right way, on a long-term basis, the market is always a BUYING OPPORTUNITY. It’s sometimes a very attractive one, while other times it’s less attractive, but it’s always a machine of WEALTH CREATION.

The only time one needs to pay attention to multiples, cycles, and valuations in CLOSE FASHION is when the time comes that they need EQUITIES TO BE FULLY-PRICED since they plan to liquidate and spend the sums on living expenses.

If you’re under the age of 55, every pullback (0%-10%), every correction (10%-20%), and every bear market (-20% or more) is a MASSIVE DISCOUNT window to buy more quality companies or an index fund.

You won’t catch the ABSOLUTE BOTTOM 99% of the time, but remember the eternal wisdom of the chart above and of Peter Lynch, who said the upside is greater than the downside.

Even if you bought at the top of the NASDAQ bubble in the year 2000 and had to wait for 15 YEARS until the index got back to its previous high (THAT’S INSANE!), you’re still up 150%.

The NASDAQ 100 is only up 137% in twenty years!

Courtesy: Zerohedge.com

Throughout this SEPTEMBER CORRECTION, we’ve asked you to consider contrarianism as a philosophy.

You can see why above: the masses are JUMPING SHIP before the elections, but unless you need access to funds in the coming months (which means you shouldn’t even be trading), the indices are inviting you to BUY CHEAPER than before.

Cyclical industries are not included in this way of thinking since the key to those is to buy during BUSTS and sell during BOOMS.

Gold and silver mining stocks are the PERFECT EXAMPLE:

The junior mining companies BOTTOMED IN MARCH!

Literally, this is the birth of a BULL MARKET after seven years of sideways action; THE FUN is only beginning.

In my opinion, the GDXJ can return to triple-digit figures and it’s currently 55 points, so that’s NEARLY DOUBLE its current value.

Many forecast higher prices than in 2011; to me, that kind of BULLISH RALLY largely depends on the price of silver.

If silver can SURPASS $30/ounce between now and March 2021, it has a chance of going ALL THE WAY to $50/ounce, which would propel the GDXJ to new highs and your mining portfolio would beat JUST ABOUT anything else out there.

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EPIC SHORT SQUEEZE: NASDAQ Bears Go BELLY UP!

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

The NASDAQ 100 has GONE DOWN from 12,420 to 10,833 points from September 2nd to September 23rd, a -12.8% CORRECTION! During that same period, the S&P 500 has HEADED SOUTH by -10% from 3,580 points to 3,226. This is AWFULLY SIMILAR to the period of September 2018.

Back then, the S&P 500 also hit an ALL-TIME HIGH (as it did just recently), went into a DEEP DIVE, flattened in October, and GOT BUTCHERED in December – a total decline of NEARLY 20%!

It was also a BRUTAL PERIOD for precious metals since the backdrop for this WHOLE EPISODE was Jerome Powell’s automatic rate hikes policy.

We have NO SUCH THING on the plate at the moment, so in my view, this was a correction WORTH BUYING and that’s what I did personally.

We believe that the September 2nd ALL-TIME HIGH reached just three weeks ago, will stand supreme for a FULL YEAR.

Markets, as we view them, are range-bound for the next 6-12 months…

Courtesy: Zerohedge.com

There’s an ENORMOUS SHORT POSITION on the NASDAQ 100, which indicates that we’ve probably bottomed for this correction, but we also fail to conceptualize that ANIMAL SPIRITS will prevail.

Between Covid-19, the elections, Brexit, and the already pricy stock market, we’re calling for a SIDEWAYS TRADING pattern.

This is good for MINING STOCKS, because it shines a light, IN CONTRAST, on their growing earnings, thanks to higher commodity prices.

ONE MAJOR LESSON OF 2020

The power of blindly trusting in the INTEGRITY OF LIFE was made apparent to me this year.

Between the various propaganda tools and the hundreds of thousands of conflicting opinions and beliefs on what the right thing to do is, I found I was INCREASINGLY DISTANCING myself from the ceaseless flow of subjective information thrown at me.

More and more, I went inside the chambers of my mind to solidify the characteristics and values that I care to embody in daily living, no matter how OUTSIDERS were behaving. I looked to reach a sense of detachment from criticism.

A major lesson for me is to reach a LOOSENED state of mind towards any statement or action taken by a specific person, keeping a high level of tolerance towards all and a LIGHT VIBE of humor, even when an individual seeks to undermine me.

There are GROWING DISAGREEMENTS between countries and within the country itself; the only way to be effective about it is to LET IT SLIDE, without secretly wanting to have the opposing person AGREE with us or think we’re right. We must show the other side that our way of doing things is better, BY WAY of RESULTS, and not by preaching it to existence.

Optimism is the MAGIC FORMULA; if you can maintain your charm and A DEGREE OF PATIENCE, even when confronted by seemingly impossible conditions, you’ll have a HEALTHY OUTLOOK and I bet you’ll ENJOY LIFE, even in the midst of chaos!

Focus on optimism, patience, tolerance, poise, and humor, even in ADVERSE SITUATIONS; you’ll be most effective.

The post EPIC SHORT SQUEEZE: NASDAQ Bears Go BELLY UP! first appeared on SHTF Plan – When It Hits The Fan, Don't Say We Didn't Warn You.

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GOLD DUMPED: Don’t Just STAND THERE!

This article was contributed by James Davis with Future Money Trends. 

The dollar is punishing traders; throughout July and August, the dollar was HEAVILY SHORTED, as we pointed out and warned about. So far in 2020, we’ve called EACH MAJOR move of the dollar and precious metals ahead of time – this is a big correction for stocks, gold, and silver, but we’re forecasting that the MAJORITY OF IT is behind us.

The main reason for the SELL-OFF in gold and silver is the rise in REAL RATES, whereas the reason stocks have entered a correction is because of ELECTION UNCERTAINTY and healthy de-leveraging after August was SUPER-EUPHORIC.

Courtesy: Zerohedge.com

So far, in 2020, each breakdown below the 200-DMA has been a HUGE OPPORTUNITY to buy mining stocks and physical gold.

You can also observe that each time has been QUICK, lasting two or three weeks AT THE MOST; gold has massive support.

My point is that if one is UNDER-INVESTED in precious metals, this is a potential discount window before we resume the uptrend.

This coming week, markets will receive SOME CLARITY, as the presidential debate will be a PIVOTAL MOMENT in American history!

It’s a big week; please don’t STAY INDIFFERENT to the gravity of the debate because much is riding ON IT!

Courtesy: Zerohedge.com

This uncertainty is what’s REALLY DRIVING the huge surge in dollar demand; the wait and see approach is manifesting in the dash for cash and there could be MORE OF IT as we enter October, but Friday’s action towards the end of the session might signal the end of the correction, so STAY TUNED.

It now becomes a question of what’s next to come after the huge gains we’ve ALREADY EXPERIENCED in 2020 and the answer is, as it ALWAYS IS, that no one knows.

What we know is that the NASDAQ 100 is 13% cheaper than it was at the end of August and that the S&P 500 is 10% cheaper than it was just three weeks ago.

Everyone is selling and cashing out; are you doing THE EXACT opposite?

Courtesy: Zerohedge.com

There are ELECTION JITTERS, but ask yourself this: will interest rates be different if a Republican or Democrat is in office?

Ask yourself the same question about stocks: are companies going to be worth less because of who’s in the WHITE HOUSE? Here, the answer is YES; higher corporate taxes make stocks less attractive.

COVID-19 has made many companies face DIRE CONDITIONS, so my thought is that as the mining companies report earnings GOING INTO OCTOBER, the dramatic results will bring back investors like Warren Buffett and the sector will GO NUTS.

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SILVER ON DEATH BED: Chopped And SLAUGHTERED!

This article was contributed by Lior Gantz with Wealth Research Group. 

September has been HARD to STOMACH; the NASDAQ 100, S&P 500, and the Dow Jones Industrial Average have all been THROUGH THE WRINGER. A proper correction is in place, just like we’ve been WARNING ABOUT since the end of August.

There are COUNTLESS money managers, who RETAIN THE VIEW that there’s so much more selling in the coming months that it is becoming apparent that we’re actually in a BUYING OPPORTUNITY.

I want to show you why I’ve been BUYING THIS DIP:

Courtesy: Zerohedge.com, @BearTrapsReport

As you can see, the NASDAQ 100 has seen its FAIR SHARE of big down days, but the trend is VISIBLY BULLISH; I don’t see a reason to believe that this index has entered a rough patch – the companies that comprise it are GROWING and this is normal action for the past two years.

This sustained bull market won’t go on WITHOUT VOLATILITY, though, since now there are hundreds of thousands, IF NOT MILLIONS, of new traders. That means QUICKER sentiment changes and people flipping ON A DIME.

I am staying focused on the big-picture FUNDAMENTALS, which are driving the BULL MARKET:

  1. Interest rates pegged to zero until 2023, if not longer.
  2. Massive hoard of cash on the institutional sidelines.
  3. An entire generation of investors is entering peak earning years, forming families, leaving their parents’ homes and buying homes of their own (millennials).
  4. Newly-found awareness towards gold, influenced by Bitcoin’s adoption.

Courtesy: Zerohedge.com

A RECORD AMOUNT of money has exited stocks in the past week, so if you’re STILL IN CASH, waiting for further discounts, know that you’re PLAYING WITH FIRE, since you may not get a chance to enter at a better price.

In Europe, where quarantines are being attempted again, the general population is LASHING OUT, letting politicians know that it’s time to learn to live WITH COVID-19, not to close everything down like in March and April.

The consensus towards accepting the fact that this pandemic will continue costing lives, but that there’s a NEED FOR BALANCE as well, is coming to the forefront.

You can save the people who are at risk by isolating only them, taking care of their health and well-being by various means, while the economy stays open.

The GDP shrinkage has been DEVASTATING for small businesses; I’m stunned at how households that have LOST EVERYTHING are behaving in a very civil manner, but I don’t expect this politeness to last much longer.

There are REAL VICTIMS here, financially speaking, who have lost their whole livelihood.

Courtesy: Zerohedge.com

The dollar index, which is going back up to JULY LEVELS (two-month highs), before gold’s and silver’s INCREDIBLE MOVES, is indicating that the euphoric mania of the summer has come to a close.

That doesn’t mean a new one isn’t starting, though.

In other words, buying certain stocks, after they’ve fallen by 20%-30% in ONE MONTH, isn’t a bad idea (maybe half a position).

Silver is the MOST SUSCEPTIBLE to the strength of the dollar; you can look at its chart and tell that a new POWERFUL RALLY could spark shortly:

Courtesy: Zerohedge.com

In March, after a similar-sized clobbering, it proceeded to DOUBLE in five months!

I’m not sure that’s in store right now, but I do know we were probably handed an opportunity that will not REPEAT ITSELF too often.

The trend hasn’t changed: negative rates, no sign of higher bond yields, and perhaps even INFLATIONARY PRESSURES. Gold and silver have a long racetrack in front of them.

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CRYING WOLF: POWELL WON’T HELP TRUMP!

This article was contributed by Tom Beck of Portfolio Wealth Global. 

Are you waiting for Jerome Powell to pull a RABBIT out of his HAT? There’s a presidential debate tentatively scheduled for the 29th, so don’t expect the central bank to MEDDLE in the MARKETS between now and then, since there’s absolutely no chance they want to be appearing to be TAKING SIDES.

For the next few weeks, we have freer markets, so PRICE DISCOVERY will be real. The Federal Reserve won’t do much to offer artificial support.

We saw a run to cash, but institutional money looks to be COMFORTABLE with buying the DIP at this point, with the S&P 500 in correction mode (-10%), on top of the NASDAQ 100.

Courtesy: Zerohedge.com

The global markets have GOTTEN USED TO government debt rising perpetually, so no one is TOO ALARMED by this, but when global GDP is at 252%, the REAL MEANING of it is that there are GUARANTEED VICTIMS in the sovereign restructuring in the years to come.

Portfolio Wealth Global believes that both gold’s and silver’s PUKE yesterday shows that there’s BIG SUPPORT at the $1,900/ounce area, so we are eager to see if a NEW UPTREND is starting, after this BLOODBATH WEEK.

The majority of people are vaccine-biased, which means that they won’t return to FULL CONFIDENCE until we “beat the corona.”

Many industries are GOING BACK 5-10 years and even worse than that, in terms of demand for their products and services, facing massive default waves and I’m telling you that this is where BIG MONEY will be made.

Hoteling, real estate, aviation, office space, healthcare – you name it and it’s in REBUILDING MODE.

What are you doing to capitalize on this? Consumers, corporations, and governments need you to innovate and you can make a fortune on the way.

Courtesy: Zerohedge.com

EVERYONE is betting on technology, but the value is in the BEATEN-DOWN sectors.

The markets have SHAKEN OUT the people who aren’t ready for volatility, but September isn’t over, nor is this SECOND WAVE scare.

Personally, I follow our WATCHLISTS, which have come out in the past few months.

The first is from late March and delivered HUGE RETURNS – click HERE!

The second came out right before the June 8th peak – click HERE!

The third came out JUST RECENTLY to address the September massacre – click HERE!

Just a few days ago, when NASDAQ peaked, we published this (so timely) – click HERE!

FEAR LEVELS are up; this is when contrarians act. We’re like nocturnal animals – we wait for everyone to sleep and then WE HUNT.

I feel the same way about gold; this week’s dump to just over $1,900 took care of the LEVERAGED TRADERS.

Courtesy: Zerohedge.com

It’s LITERALLY IMPOSSIBLE to be looking at these charts and not allocate funds into precious metals.

I ask people from the U.S., from Europe, from Central America, from Asia, and from Australia; the answer is the same: NO TRUST in government.

Gold is essential and the fact remains that the uptrend is IN PLACE.

The post CRYING WOLF: POWELL WON’T HELP TRUMP! first appeared on SHTF Plan – When It Hits The Fan, Don't Say We Didn't Warn You.

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ROUND TWO IS HERE: BRACE FOR IMPACT!

This article was contributed by James Davis with Future Money Trends. 

Some have been calling for a RETEST of MARCH LOWS, and I’m telling you that while Future Money Trends doesn’t see the indices going there AS A WHOLE, we are pretty certain that some companies, especially in COVID-19-SENSITIVE industries, are going to those levels ONCE MORE!

Make sure you analyze our four WATCH LISTS published since March: 1, 2, 3, and TECH.

What this SECOND SCARE of COVID-19 is guaranteeing is more social unrest, more riots, more division, and MUCH MORE media propaganda.

It’s going to be EXTREMELY DISHEARTENING to see countries coming apart, democracies crumbling, friendships coming undone, corruption reigning supreme, and old ideas falling from a cliff, but the next three to four months WILL BE DISASTROUS.

Don’t stoop to the level of general society; instead, help lift others upwards instead.

Courtesy: Zerohedge.com

I want to really DRIVE HOME the point of why rates can’t go higher. If anything, they’re probably HEADED DOWN even more.

Sovereign debt is, in nominal terms, increasing to INDEFENSIBLE levels. Governments will never be able to keep paying down the principal and the interest, so they’re defaulting and are SOLELY FOCUSING on the interest servicing, which is easy with ZERO RATES and child’s play with NEGATIVE RATES.

If a government can restructure MOST or ALL of its debt to zero and negative rates, they’ll also be able to issue very long-term bonds, going out 50 and 100 years.

That’s one MAIN REASON why the central banks must continue monetizing the debt by suppressing bond yields down.

The governments aren’t by themselves in this, solely thanks to zero rates. Corporations are RIDDEN WITH DEBT that can only be serviced in this environment.

Should lenders decide that they just can’t accept these rates any longer, the DEFAULT TSUNAMI (across the board bankruptcies) that will ensue will be HISTORICAL.

Courtesy: U.S. Global Investors

As you can see, in September 2018, two years ago, when I mentioned that I’m buying gold personally, the price was $1,200/ounce and interest rates topped. Since then, THE TRANSITION to negative rates, which accelerated in June 2019, has brought HUGE REWARDS to us!

Many doubt how rates could plummet further. True, they’re already -1%, so for them to sink BELOW THIS, either inflation ticks up or 10-year yields go lower, two scenarios that are HARD TO IMAGINE.

Future Money Trends believes that inflation can rise by another +0.4%, while rates can lower by another -0.2%. In total, this represents a 50% move in real rates, from -1.00% to -1.50%, which doesn’t seem like much, but in GOLD TERMS, it represents a potential +25% upwards potential to $2,750/ounce.

You can see a SNEAK PEEK of it below:

Courtesy: U.S. Global Investors

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PANDEMIC PANIC: 2nd Wave Climax – FED CRIPPLED!

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

What NO ONE expects is a deep recession; there are a number of CONFLICTING THEORIES as to what the recovery will look like, but nothing about entering a recession. The consensus is that the pandemic is highly contagious, but not lethal; “with a vaccine coming and FEAR LEVELS subsiding, a recovery has begun,” is the general idea.

Where OPINIONS DIFFER is about its strength and inclusiveness of the recovery:

  1. Dichotomy – This is the thesis that claims BIG BUSINESS is eating up SMALL BUSINESS, so the recovery is HAPPENING, but it isn’t a healthy one. We’ll see GDP printing better stats with each PASSING QUARTER, but poverty is increasing, since BIG gets BIGGER and small gets TINY.
  2. Vaccine-Dependent – This camp believes that the PENT-UP DEMAND will be unleashed, once first-responders agree to take the vaccine. That stamp of approval will LEAD to CONFIDENCE worldwide; I want to show you how much DISTRUST THERE IS in the value stocks, which are companies that dominate their industries but are growing slowly and predictably, not fast and sporadically.

The market believes that each company that isn’t on the cloud is going out of business, which has led to a bubble:

Courtesy: Zerohedge.com

You should consider THE FACTS about the pandemic before I move on to the THIRD CAMP, which are the investors who believe in the “V”-shaped or quick “U”-shaped recovery. They’re BUYING DIPS, as I am right now, following our FOUR WATCH LISTS: 1, 2, 3, and TECH.

The MOST IMPORTANT fact is that the PANDEMIC ITSELF isn’t lethal; the real crisis is overwhelmed hospitals and insufficient medical staff.

While no one likes to see CROWDED HEALTH FACILITIES, if those do return, this would be nowhere near the panic levels of March, when healthy people feared FOR THEIR LIVES.

Therefore, to expect markets to price in MARCH LOWS is a bit of a stretch of the imagination.

Instead, be agile in your thinking; there are REAL BARGAINS out there. Flexibility is needed, though. Don’t wait for sellers to hand you once-in-a-generation prices for the second time in six months.

Courtesy: Zerohedge.com

As you can see, tight presidential races WEIGH ON PRICES, since it’s a huge unknown factor, especially when the parties are THIS POLARIZED on policy and public ideas.

It’s a tale of two Americas with two opposite agendas.

Where does gold come into the picture?

  1. Slow “V” or Fast “U” – Those who are FREE-MARKET oriented understand that businesses have muscled through the ROUGH PATCH and that capitalistic forces are driving innovation in this post-COVID-19 reality.

Wall Street and institutional money will be ENTERING EQUITIES on this severe dip and you ought to know that BUYING NOW is playing with fire, but I am certainly am.

Gold stocks have also reached their MOMENT OF TRUTH:

Courtesy: U.S. Global Investors

They MUST PENETRATE below the average of 2.5; that will signal a MULTI-YEAR TREND, which will confirm the bull market. The fact that Kinross and Newmont, among other large-cap miners, are RAISING DIVIDENDS, is a healthy sign of confidence from the most reputable management teams out there.

The September dip has allowed us to find companies with GREAT SUPPORT and I’m going to present new stock profiles, since, as the chart above shows, we’re ON THE CUSP of the REAL MOVE.

Gold might sell in this panic even further, but that’s not the REAL TREND; think ahead by 6-12 months and you’ll realize that inflation is accelerating!

The post PANDEMIC PANIC: 2nd Wave Climax – FED CRIPPLED! first appeared on SHTF Plan – When It Hits The Fan, Don't Say We Didn't Warn You.

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NASDAQ NOSEDIVES: Can You Handle THE HEAT?

This article was contributed by Tom Beck of Portfolio Wealth Global.

We warned all throughout the MONTH of AUGUST that markets just don’t accept the REALITY of VALUATIONS anymore and one week afterward, the S&P 500 and NASDAQ peaked and have since entered a correction (NASDAQ for now).

Historically, as we explained, September is the market’s WORST MONTH, but this is getting even more SCREWED UP since Europe is considering a second quarantine period while elections in the U.S., which are the BIGGEST UNKNOWN, are rapidly approaching.

Listen closely: Americans are so programmed by propaganda ON BOTH ENDS of the spectrum that the questions asked to everyday citizens reflect the SERIOUS NUMBNESS of the average voter:

 

Courtesy: Zerohedge.com

As you can see, the RACE IS TIGHT and the stakes are high!

Yesterday, I watched the amazing documentary “The Social Dilemma,” which proves beyond any shadow of a doubt what the business model incentives of social media giants are, and it will be them that DECIDE THE OUTCOME of this presidential run come November.

Between now and then, here’s what could HELP TRUMP, and below that is what could help BIDEN:

  1. Vaccine news – the cure will obviously be positive for Donald Trump, who will RIDE THE COATTAILS, taking credit for the record-fast approval process.
  2. Quarantines and school closures – I have no doubt that Democratic states are going to MAKE LIFE a living hell for residents because they must show Trump’s inadequacy with containing the pandemic.
  3. Debates – obviously, the more we allow these two TO CONFRONT each other, the more Trump has a chance to shine.
  4. Social unrest – if chaos returns, police defunding claims will bring voters to Trump, who is against it. Police brutality, on the other hand, indirectly helps Biden.

Courtesy: Zerohedge.com

For now, markets are still IN SHOCK that Trump’s approval ratings aren’t what they were pre-COVID-19. In January, no one predicted a close race, so I believe that if Biden’s chances are real, it could be AN INITIAL re-rating of equities downwards due to the high probability of higher corporate taxes.

So, when looking at this -12% correction in the NASDAQ, don’t assume it has anything to do with the presidency because it doesn’t.

Prices of equities are TOO HIGH and it’s dawning on institutional investors that they can invest in the recovery by going LONG the beaten-down industries, thus leaving the “bubble territory” to the retail public to MESS WITH.

Now, after the dynamite has exploded, we believe institutions will use stink bids and get back into tech.

We sure are exploring the matter using THIS new watch list.

After already being out of the woods, the SECOND-WAVE mentality that is taking over is depressing and I expect many controversies in the COMING MONTHS.

Lastly, we’re working on a BIG ALERT that you don’t want to miss, so stay focused on what’s coming.

The post NASDAQ NOSEDIVES: Can You Handle THE HEAT? first appeared on SHTF Plan – When It Hits The Fan, Don't Say We Didn't Warn You.

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HIT PLAY: BUCKLE UP – PARABOLIC MOVE IMMINENT!

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

I want you to understand that stocks have MUCH MORE appreciation ahead of them, as a whole. What you’ll see below is that households STILL OWN about a fifth of their wealth IN BONDS!

In my mind, that’s a bubble! There is ZERO JUSTIFICATION to park 20% of society’s net worth in bonds that don’t generate a return, are exposed to inflationary erosion, and can’t be relied upon for the years to come. On top of that, having 15% in cash (now even more) creates a situation where investors have TOO LITTLE EXPOSURE to stocks.

There are trillions of dollars on the sidelines. I’m telling you that in 2018, equities BEGAN TO see outflows from stocks and inflows to bonds, a trend that HASN’T REVERSED until present day. That’s not a smart move to sell equities and own bonds instead.

My message isn’t that stocks are a REAL BARGAIN, but that if you see an opportunity to own a high-quality company at a reasonable price, the attitude of WAITING FOREVER until its price returns to some historical norms MIGHT COST YOU big-time since you’ll never get exposure. Stocks might not return to those P/E ratios of the past.

Courtesy: AwealthofCommonSense.com

Instead, consider a TRIED AND TRUE strategy of splitting your purchases in increments, BEING METHODICAL about two elements:

  1. Total Position Size – Figure out PRECISELY HOW MUCH you’re going to invest into a given security, why you’ll SELL IT (for a good or bad reason), what the ideal entry price would be, and then execute a tactic of buying 10%-20% of the OVERALL SIZE.
  2. DROP-SIZE STEPS – Companies either experience INCREMENTAL REDUCTIONS in price or one-day BIG DROPS. The incremental ones are created because of collective views about the company or its industry, while DRAMATIC SELL-OFFS that occur instantly are reactions to news releases.

You need to be ready to capitalize on these INSTANT DROPS and one of the best ways is to set limit orders.

Courtesy: Zerohedge.com

As you can see, the OVERWHELMING NUMBER of equities is owned by the top 10% of wealthy households and that’s A HUGE MISTAKE that the rest are making.

My one wish for families who have low-wage incomes is that they would save 5%-10% of their net income every month and buy equities. Even if their careers never take off, they’ll SAVE THE NEXT GENERATION from poverty!

Save, invest, REPEAT!

Escape poverty in 25 years or less and be the hero of your dynasty.

 

The post HIT PLAY: BUCKLE UP – PARABOLIC MOVE IMMINENT! first appeared on SHTF Plan – When It Hits The Fan, Don't Say We Didn't Warn You.

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