Monday, August 3, 2020

The B.S. About ‘Valuations’


by Karl Denninger, Market Ticker:

One of the common chestnuts is that stocks are “not that expensive” on a forward P/E basis, especially with the recent drop that took about 1 point off that P/E.

While those forward numbers remain above historical averages, down is down and thus this is a buying opportunity, right?

Not so fast.

One must look first at how the earnings numbers we have today are being made.

Let’s look quickly at one example from last night: Disney.

In percentage terms all of their business segments lost operating profits except one: Theme parks, which were up big (21%).  The theme park business has seen utterly-monstrous ticket price increases, both on a gross and “best deal” basis over the last several years.  In fact they’re gone up 116% for some people (like Florida Residents) over the last decade.  We used to be able to buy Play Four Days tickets that were good from early January until June 30th, were park hoppers, good for any four days during that period of time, and were $100 each.  That’s $25/day, per person, and got you into any or all of the Disney parks in Orlando except the waterparks (which were not included.)

Today the “best deal” for a Florida Resident is $179, which sounds fairly comparable except they’re not hoppers!  To be able to go between parks the price is $216.50, which is well more than a clean double.

It’s just as bad if you want to attend any of the other Orlando parks.  Universal has gotten downright extortionate since their Harry Potter stuff opened up, in that now to really enjoy it you have to buy the two-park ticket because they cleverly put part of it in each of Universal and Islands of Adventure.  So if you only want to do the amusement park sort of ride thing — no real Potter deal for you. Never mind one-day ticket prices that are now well north of $100 and that’s before you pay the daily parking fee and buy a $10 hotdog that cost them fifty cents.

Now take Disney’s other businesses.  Films were down by a couple percent, consumer product sales off 4%, and broadcast TV license fees down an utterly-enormous 25%.  But for people buying overpriced park tickets — a clearly-discretionary purchase that they’ve ratcheted up enormously to get higher and higher “ARPU”s Disney would be cooked.

They’re not alone in this.

Note that virtually all of the so-called “high flyers” measure, in some form or another, their success by rising ARPU. (Average revenue per user.)  Hotels, for example, measure their “success” based on the increase in price paid per night, which of course means prices are being jacked.  Hilton, which owns Hampton Inn, has become one of the masters of this; I used to stay in their properties almost-exclusively, but their price increases have gotten so extortionate over the last few years, well north of 50% at most properties over the last three to five years and in some cases nearing or even exceeding a double while the quality and amenities offered have not increased materially at all and in some cases, such as their “free” WiFi, quality has been reduced to scrap in an attempt to force you to pay a daily fee for actual working WiFi, that I no longer think they’re worth it.  As such my room nights on their properties have gone to an effective zero over the last three years, with the exception being the few properties where (probably) they have found themselves with a near-empty hotel and thus are being more-reasonable.

Obviously I’m not in the majority of opinion on this as Hilton’s stock has more than doubled over the last couple of years.

What makes this sort of thing possible?

Big spreads where companies and individuals can borrow nearly-unlimited amounts of money for non-productive purpose, whether that be consumption in the case of individuals on their credit cards and car loans, stock buybacks and dividends and other purposes that do not result in net investments being made in productive capacity.

This is especially telling when it comes to banks and other financial firms that have seen stock prices double or more since they can borrow for 1% but your credit card interest is still 14%, 18% or even 24%!  Gee, that’s a nice spread!  But, in the case of Wells Fargo, even that wasn’t enough for their “desired” equivalent to “ARPU” as they ripped off even more money via scamming customers repeatedly.

And that goes to the next issue, which is that sort of scam.  Wells just plain robbed people.  But Apple, which also has had a big rise in their stock price, appears to have done the same thing by effectively trying to force people to buy new $700-1,000 phones instead of $25 batteries.  They’ve gotten away with it too for quite some time; it was only recently they got caught.

And then there’s the last part of it: Even when caught ripping people off on a blatant basis, say much less by deception, nobody gets indicted and goes to prison.

Of course Apple denies any wrongdoing.

As I have repeatedly noted this sort of ripoff is literally the business model of everything.  Just take one tiny little example, like the find I recently made with regards to Xylitol and how using it as a toothpaste appears to materially improve oral health.  The selective activity of it on “bad” mouth bacteria is published and has been known for quite some time — years, in fact in formal, medical literature — yet there have been no studies by the NIH or dental research groups that I can find on this as a specific modality compared against other (very profitable for the dental industry) options, no studies by private groups either and when informed of the cause of improvement the standard dentist’s reply is that they cannot recommend doing that for legal reasons as it hasn’t been studied in that way.

Well, yeah — you won’t study it because there’s no money to be had from using a commonly-available plant extract as a toothpaste where if someone doesn’t do that and ultimately requires surgery or you recommend very expensive implanted antibiotic treatments you make thousands.  Worse, for the dentists, if such a study was ever conducted and found it to be materially effective then all the money currently being made by the dental and periodontal practices pushing temporary “fixes” that wind up being an effective forced subscription model that costs the patient thousands a year would go “poof” like a fart in a church and lots of class-action lawsuits would be likely to immediately follow.

The same is true for Type II diabetes. I’ve literally lost count of the people who have reported on this very site that they were either Type II diabetic formally (diagnosed) or knew damn well they would be if they went to the doctor, stopped eating carbs and within days their blood sugar normalized.  Not only is there plenty of evidence that the medical system knows this works and has deliberately ignored it for decades (indeed it was the only option for severe diabetes before insulin was isolated and produced – and doctors were well aware of itthere is a formal association, the ADA, that recommends the exact opposite.  Just as with gingivitis progression being sold as an “inevitably progressive disease” the same is said about Type II diabetes.  Allowing medical practitioners to run this crap results in literally $400 billion or more of spending by the government on Medicare and Medicaid for diabetes and related medical issues alone, and likely double that in total when private medical spending is included.

All of the government spending is financed since we run huge deficits that would be nearly erased if we cut that crap out and a huge part of private spending is as well.  How much of the so-called “earnings” in the market today is a direct consequence of not just these two areas but the dozens if not hundreds of similar schemes and the near-zero cost of late in financing all that crap?

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Manhattan, London Housing Markets Are Suddenly Reeling


from ZeroHedge:

When the latest reading on the Case-Shiller 20-City Composite printed within 1% of its record highs from 2006 a little more than a week ago, we asked a question that’s seemingly on every real-estate investors’ mind: Is this a “top” or a “breakout”?

And with the effects of the Trump tax reform plan – which is expected to hammer real-estate markets, particularly in high-tax blue – having yet to take effect, already states – one early indicator that softness might be entering one of the country’s most iconic (and expensive) real estate markets was reported by Bloomberg today. To wit, the trend of landlords handing out rental concessions continued to intensify in January, as landlords are increasingly being pressured to hand out incentives like rent-free months or gift cards to entice potentially renters to sign on the dotted line. Concessions jumped to a record in January, with 49% of newly signed leases coming with some kind of incentive, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate.

That share surpasses the previous peak of 36% set just a month earlier.

All of these concessions have caused the median rent to drop 3.6% from a year earlier to $3,141 – the biggest decline since October 2011 – interrupting six years of near-constant growth.

“Landlords have finally realized, ‘OK, we have to adjust these prices because the concessions aren’t doing as much,'” said Hal Gavzie, who oversees leasing for Douglas Elliman. “Customers are looking past the concessions being offered and just looking for the best deals they can find.”

Rents fell last month in almost every Manhattan neighborhood, including some of the borough’s priciest, Citi Habitats said in its own report. On the Upper West Side, the median was $3,450, down 2.8 percent from a year earlier. Rents in the West Village dropped 4.5 percent to $3,700, while on the Upper East Side, they declined 5.3 percent to $3,185, the brokerage said.

“The dynamic has shifted,” with Brooklyn, Queens and the New Jersey waterfront becoming viable options to many renters,” said Gary Malin, president of Citi Habitats. “Tenants are looking for value, and they’re open to suggestions.”

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Hyperinflation Watch: Paying The Price For Something So Sweet


from SilverDoctors:

An item we all likely buy on a regular basis has a double-whammy price that includes inflation plus shrinkflation. We know how this story ends…

We have taken many looks at different types of inflation in the Hyperinflation Watch.

We chronological, in real time, the early stages of hyperinflation that keep creeping up on a global scale.

We’re not talking about Venezuela or Zimbabwe here, but First World industrialized nations.

Here’s the thing: When taken individually, these isolated incidences seem unrelated, but just like snowflakes accumulate one by one on the mountaintop before the deadly avalanche, as time goes by these seemingly unrelated goods and services take their cumulative toll on everybody and eventually turn into a full blown loss of confidence in the currency.

You see, at a point, as sheeple as the masses may be, something clicks in the collective psyche and we enter into what is called a “crack-up boom”.

Think any of the hyperinflation of late, and that’s where we’re headed. Whether it’s the Wiemar Hyperinflation, or the more recent Zimbabwe or Venezuelan Hyperinflations, that is the end stage.

The death spiral happens on the periphery, but make no mistake about it. We’ll get there at some point.

Sometimes I highlight goods, other times its services, and there’s even been a time I’ve highlighted a virtual good. Check out the link at the beginning of this article to see some of the different topics.

This week, let’s look at something that may people take for granted: The chocolate bar.

And for this edition, we’re going across the pond for the news.

It’s fitting.

In somewhat of an irony to George Orwell and a point he made about chocolate in his famous book 1984, let’s first start with some doublespeak since this is a doubly-bad inflation plus shrinkflation whammy.

Winston Smith, the protagonist in 1984, said that with propaganda, the government could reduce the size of the chocolate ration and the people would think they actually increased it (bold added for emphasis):

The phrase ‘our new, happy life’ recurred several times. It had been a favourite of late with the Ministry of Plenty. Parsons, his attention caught by the trumpet call, sat listening with a sort of gaping solemnity, a sort of edified boredom. He could not follow the figures, but he was aware that they were in some way a cause for satisfaction. He had lugged out a huge and filthy pipe which was already half full of charred tobacco. With the tobacco ration at 100 grammes a week it was seldom possible to fill a pipe to the top. Winston was smoking a Victory Cigarette which he held carefully horizontal. The new ration did not start till tomorrow and he had only four cigarettes left. For the moment he had shut his ears to the remoter noises and was listening to the stuff that streamed out of the telescreen. It appeared that there had even been demonstrations to thank Big Brother for raising the chocolate ration to twenty grammes a week. And only yesterday, he reflected, it had been announced that the ration was to be REDUCED to twenty grammes a week. Was it possible that they could swallow that, after only twenty-four hours? Yes, they swallowed it. Parsons swallowed it easily, with the stupidity of an animal. The eyeless creature at the other table swallowed it fanatically, passionately, with a furious desire to track down, denounce, and vaporize anyone who should suggest that last week the ration had been thirty grammes. Syme, too — in some more complex way, involving doublethink, Syme swallowed it. Was he, then, ALONE in the possession of a memory?

So without further ado, compliments of the BBC, here’s the new chocolate ration. It’s actually been raised you know!

No matter your bar of choice, in all likelihood everybody’s favorite chocolate bar is affected.

Since 2014, for example, the price of a Twix 4-pack has gone up a mind-blowing 43.5% (what about that 2% inflation target? Oh yeah, stuff people actually buy like food aren’t counted in the “official” statistic, at least on this side of the pond anyway):

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The State of the Union – Markets


by Gary Christenson, The Deviant Investor:

Global stock and bond markets: Watch out below!

I discussed over-priced markets here and here and here.

2017 was an outstanding year in many markets.

  • DOW up 24.7%
  • NASDAQ 100 up 31% (Wow!)
  • Nikkei up 19%
  • DAX up 12%
  • Gold up 13.6%
  • Silver up 7.1%
  • XAU (gold mining stocks) Index up 8%
  • Dollar Index DOWN 10%

We can be certain of the following:

  • Death, Taxes and Politics.
  • When markets move too far and too fast in either direction, they correct.
  • Bubbles crash!


We live with the inevitability of death, and the predations of taxes and politics. Stock markets rise as the dollar inevitably devalues, and as investors become optimistic (higher P/E ratios). Stock prices fall when investors lose faith in the narrative that things are good, central banks are in control, this time is different… whatever. P/E ratios fall as investors lose confidence or earnings weaken.

Where are stock prices now?

Examine the 26 year chart of the DOW.

  1. Prices accelerated into a near vertical (unsustainable) rise and corrected.
  2. The monthly and weekly RSI (Relative Strength—one of many timing indicators) reached all-time highs (over 116 years). The DOW moved too far and too fast, and then, as always, corrected.
  3. A high RSI (like late January 2018) shows high risk. It does NOT guarantee a turn down. Bubble markets often move from crazy (December 2017) to even more crazy (January 2018). And then they correct or crash!

Examine the 26 year chart of the NASDAQ 100.

  1. Same as the DOW – a near vertical rise and up over 30% in 2017.
  2. RSI reached high risk and unsustainable levels.
  3. The NASDAQ (including Apple, Amazon, Facebook, Netflix and others) in January 2018 reminded me of 1999 when people were glued to CNBC watching their “internet stocks” rise to the sky. The consequences were ugly and the NASDAQ 100 fell 84%.

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When will the next credit crisis occur?

by Alasdair Macleod, GoldMoney:

The timing of any credit crisis is set by the rate at which the credit cycle progresses. People don’t think in terms of the credit cycle, wrongly believing it is a business cycle. The distinction is important, because a business cycle by its name suggests it emanates from business. In other words, the cycle of growth and recessions is due to instability in the private sector and this is generally believed by state planners and central bankers.

This is untrue, because cycles of business activity have their origin in the expansion and contraction of credit, whose origin in turn is in central banks’ monetary policy and fractional reserve banking. Cycles of credit are then manifest in variations of business activity. Cycles are the cause, booms and slumps the consequence. It follows that if we understand the characteristics of the different phases, we can estimate where we are in the credit cycle. 

With sound money, that is to say money that neither expands nor contracts, cycles in business activity cannot exist, except for plagues and wars which interrupt the balances between money-hoarding, saving and consumption. Any exceptions to this rule are bound to be insignificant and non-cyclical, because with a steady money supply, failures are random instead of cyclically clustered by monetary policy.

Capital is always allocated by entrepreneurs to favour the efficient production of the goods and services wanted by consumers. Allocations of earnings and profits to savings are set by entrepreneurial demands for monetary capital to finance production until the goods and services produced are sold. Failures, the result of errors of judgement by entrepreneurs, are inevitable, but are quickly accepted, and capital is redeployed accordingly. As soon as a non-commercial force, such as the state, corrupts the free market’s interplay between entrepreneurial production and consumer demand, the progression of an economy becomes unbalanced. Variations in the quantity of unbacked money to achieve a managed objective are particularly disruptive. The consequence, not accepted by the vested interests of interventionism, is a cycle of credit expansion leading to a compensating crisis.

This is the outcome of monetary policy. It creates nothing but an illusion of genuine economic activity by debasing the unit of account. In pursuing an objective of economic growth, governments are simply recording the application of the unsound money they and their licensed banks have created. It is our damnosa hereditas, our ruinous inheritance.

The purpose of this article is to establish where we are in the global credit cycle, and to estimate from that the likely time-scale to the next credit crisis. And yes, it is a global phenomenon, made more powerful by global synchronisation of monetary policies through forums such as the G20. Trying to understand where we are in the credit cycle of one particular nation misses out a bigger picture. But we can observe where we are in it by assessing the interplay between business sentiment and monetary factors.

Understanding the credit cycle

The credit cycle can be broken down into the following phases: post-crisis stabilisation, recovery, expansion and finally crisis. The transition from one phase to another is somewhat arbitrary, and each cycle differs in length and character. For these reasons, applying a statistical approach to identifying the different phases usually fails to elucidate analysis. It is far better to have an understanding of shifts in sentiment in the minds of consumers, producers and lending banks, and how they interact.

At the beginning of the credit cycle, central banks exert the most economic influence through monetary policy. They do this by ensuring, as far as they can, that the market does not clear. By this we mean that the accumulation of malinvestments in the previous cycle is protected, thus preserving jobs in businesses that in a free market would have been abandoned as producing an inadequate return. The capital employed in these unserviceable industries becomes locked in, not quickly redeployed as it would in an efficient economy. And by capital we include not just money, but all the other factors of production that must be acquired, including labour. 

In today’s interventionist, neo-Keynesian world, prices must never be allowed to adjust downwards to establish new price equilibriums, as they would in free markets. The balance between savings and immediate consumption is encouraged to adjust in favour of immediate spending to shore up falling prices. 

This gives us a basic rule, which has always held to date: by debasing the currency and reducing, eliminating or even reversing the time-preference inherent in unhampered free markets, central banks have always stoped the credit crisis from running its full course.[i] There were moments in the last two crises when this nearly did not happen. We all stared into an economic and financial abyss of complete systemic failure, with the potential to destroy the banks and all their customers’ balances. And without banks, the production of all goods and services were likely to cease or be provided through nationalisation. In both instances, the Fed under the chairmanship of Alan Greenspan and then Ben Bernanke came to the rescue. 

The first crisis of the new millennia was primarily the result of a credit-fuelled dot-com bubble unwinding and had similarities with the stock market crash of 1929, which preceded the depression. The Fed was not going to allow that to happen again, and stock and bond markets were rescued by aggressive reductions in interest rates. Consequently, monetary expansion regained its momentum, with a new feature developing, the alphabet soup of securitisation, amounting to extra, unrecorded off-balance sheet credit expansion through the growth of shadow banking.

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London Paul: Gold & Silver / Asset Backed Cryptocurrencies Will Be the Future

by Rory Hall, The Daily Coin:

The other thing with gold, which is what I’ve said for many times, China and Russia have infinitely more gold than people realize. Russia has around 40,000 tons of gold, China is not quiet as much but is not far behind. That’s the reality. They’ve been building enormous gold reserves for years. Why? Because they are building for a future.

If people think that gold and silver have no relevance any more then why is the price so massively, heavily manipulated in a southerly direction? London Paul, The Daily Coin

Some people in the Western world have heard of the Shanghai Cooperation Organization (SCO), not very many, and even fewer understand what it is and what it does. Hardly anyone in the Western world has ever heard of the EurAsian Economic Union (EAEU) which is headed by Russia and includes 4 other nations, Kazakhstan, Armenia, Belarus, Kyrgyzstan. Does that mean this alliance is weak or is of little importance? Absolutely not. The nations that form the EAEU will be rolled into the Belt and Road Initiative. Once these nations become part of a much larger alliance and their economies began to benefit from these economic and social ties, these nations will be on par with nations like Greece or Spain or any of the smaller European nation states.

What is overlooked is the mineral wealth these nations are sitting on. The land within the heartland is extremely rich with minerals. Once the technology becomes available to these nations and the minerals are mined and brought to market the potential economic growth will be massive. It has been estimated that more than 70% of the global natural resources, including oil, gold and diamonds, are held within the heartland. If you’ve got gold, you’ve got money. If don’t have gold you’ve gotten a problem – Alasdair Macleod

Gold is coming back to the monetary system. It never left the monetary system it’s just not been used in everyday transactions for a number of years. This is going to change and according to London Paul, The Sirius Report, he believes the blockchain will allow this to happen. I would tend to agree that blockchain technology will be used to bring gold and silver, and possibly other assets, back to their rightful place as backing for currency or as currency itself.

 Chart courtesy  Schiff Gold
Chart courtesy Schiff Gold


These paper markets in London and New York will blow-up when the paper price of gold drops to zero or when just a fraction of the investors insist upon receiving physical gold in return.

The reality is London and New York markets are slitting their own throats with their market suppression of the gold and silver price. Undoubtedly higher gold and silver prices are coming. Eventually, there’s likely to be an arbitrage between the West and East prices and that’s going to become a reality.

What is coming is the ascent of sound money and the death of the U.S. dollar and in essence that’s what this much vaunted asset reset is all about. Basically, fiat money dies and sound money returns. London Paul, The Daily Coin

This in-depth conversation covers gold and silver from a global perspective along with the role of cryptocurrencies and blockchain, both today and their potential use in the future. London Paul paints a very realistic picture of gold and silver as money along with other assets backing currencies around the world. What benefit will this have to humanity? Will the debt based system finally be washed away? Only time will tell, however, it seems like there are nations around the world that are working towards a different type of system than the one that is currently in place.

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The State of the American Debt Slaves

by Wolf Richter, Wolf Street:

It was one gigantic party. But wait…

Total consumer credit rose 5.4% in the fourth quarter, year over year, to a record $3.84 trillion not seasonally adjusted, according to the Federal Reserve. This includes credit-card debt, auto loans, and student loans, but not mortgage-related debt. December had been somewhat of a disappointment for those that want consumers to drown in debt, but the prior months, starting in Q4 2016, had seen blistering surges of consumer debt.

Think what you will of the election – consumers celebrated it or bemoaned it the American way: by piling on debt.

The chart below shows the progression of consumer debt since 2006 (not seasonally adjusted). Note the slight dip after the Financial Crisis, as consumers deleveraged – with much of the deleveraging being accomplished by defaulting on those debts. But it didn’t last long. And consumer debt has surged since. It’s now 45% higher than it had been in Q4 2008. Food for thought: Over the period, the consumer price index increased 17.5%:

Credit card debt and other revolving credit in Q4 rose 6% year-over-year to $1.027 trillion, a blistering pace, but it was down from the 9.2% surge in Q3, the nearly 10% surge in Q2, and the dizzying 12% surge in Q1. So the growth of credit card debt in Q4 was somewhat of a disappointment for those wanting to see consumers drown in expensive debt.

The chart below shows the leap of the past four quarters over prior years. This pushed credit card debt in Q3 and Q4 finally over the prior record set in Q4 2008 ($1.004 trillion), before it came tumbling down via said “deleveraging.”

These are not seasonally adjusted numbers, and you can see the seasonal surges in credit card debt every Q4 during shopping season (as marked), and the drop afterwards in Q1. But then came 2017. In Q1 2017, credit card debt skyrocketed to an even higher level than Q4, when it should have normally plunged – a phenomenon I have not seen before.

This shows what kind of credit-card party 2017 and Q4 2016 was. Over the four quarter period, Americans added $58 billion to their credit card debt. Over the five-quarter period, they added $109 billion, or 12%! Celebration or retail therapy.

Auto loans rose 3.8% in Q4 year-over-year to $1.114 trillion. It was one of the puniest increases since the auto crisis had ended in 2011. Since then, the year-over-year increases were mostly in the 6% to 9% range. These are loans and leases for new and used vehicles. So the weakness in new-vehicle sales volume in 2017 was covered up by price increases in both new and used vehicles in the second half and strong used-vehicle sales:

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The Dow Falls 1,032 Points! Has The Financial Crisis Of 2018 Officially Arrived?


by Michael Snyder, The Economic Collapse Blog:

We haven’t seen this kind of a bloodbath on Wall Street since the great financial crisis of 2008.  Prior to this week, the largest single day decline for the Dow Jones industrial average that we had ever seen was 777 points.  That record was absolutely shattered on Monday when the Dow fell 1,175 points, and on Thursday the Dow dropped another 1,032 points.  This was the third decline greater than 500 points within the last five trading days, and the Dow is poised to post its worst week since the dark days of October 2008.  So is this just a “correction”, or has the financial crisis of 2018 officially arrived?

At this point, many of the experts are pointing to the bond market as the primary reason why stock prices are crashing.  The following comes from CNBC

There’s a not-so-quiet rebellion going on in the bond market, and it threatens to take 10-year yields above 3 percent much faster than expected just a few weeks ago.

As a result, the bumpy ride for stocks could continue for a while.

And without a doubt, analysts such as Jeff Gundlach clearly warned that there would be big trouble for stocks as bond yields rose…

Gundlach had correctly predicted that if the 10-year U.S. Treasury note yield went above 2.63 percent, U.S. stock investors would be spooked.

“Clearly, the market gets shaky when the 10-year hits 2.85 percent,” Gundlach said. “Just look at this week, and today. Makes one consider what could be coming if 10s push over 3 and 30s (30-year Treasury bond) over 3.22 percent.”

The 10-year yield is currently trading around 2.83 percent. Gundlach said it is “hard to love bonds at even a 3 percent” yield. “Rising interest rates are a problem and the U.S. is in debt and there is massive bond supply,” Gundlach said.

Moving forward, it will be important to keep a close eye on bond yields.  Every time they start going back up, we are likely to see stock prices go down

“We’re in a vicious cycle here. If the yields go up, you have to sell stocks. If you sell stocks, and they crash, yields come back down,” said Art Hogan, chief market strategist at B. Riley FBR.

The bond market’s struggle to price in higher interest rates has been kneecapped each time the stock market reacts and sells off. Strategists expect the two markets to ultimately find an equilibrium but not without more sharp swings.

This is one of the reasons why the budget deal going through Congress right now is such a bad idea.  Hundreds of billions of dollars of additional spending on top of what we are already doing is going to push up bond yields, and that is just going to make the pressure on Wall Street even worse.

Of course the folks over at the Federal Reserve could intervene, but they don’t seem inclined to do that at this point.  Late last year the Fed finally removed artificial life support from the financial system, and at first everything seemed to be going well.  But now a new crisis is brewing, and we shall see if the Fed still remains determined to keep raising rates.  The following comes from Peter Schiff

The Fed were dragging their feet in raising rates while Obama was president.  They talked about raising rates but at the end of the day, they barely moved them up. The pace of hikes has increased since Trump was elected, but part of the reason for that…I mean, the media is not talking down the economy; if anything they’re overhyping the economy.  Everybody’s talking about how strong the economy is, how everything is great. Everybody is taking credit for this great economy. The Fed wants to take credit for it, Trump wants to take credit for it, so if everybody wants to talk about how great the economy is, the Fed doesn’t have any excuse if it doesn’t raise rates…in order to keep up the pretense that the economy is as strong as everybody thinks, the Fed is in this box where it has to raise rates.

But they [the Fed] can’t tell the truth that it’s really a bubble, and if we raise rates, we’re gonna prick it, so they’re kinda in this bind.  And they are still telegraphing that they’re gonna raise rates three or four times this year.  And that is the problem.

It has been my contention for a very long time that the greatest financial bubble in human history would not be able to continue without artificial support from the Fed and other global central banks.

Once the Fed finally ended their artificial support for the markets late last year, I anticipated that there would be trouble, but stock prices continued to rise through the holiday season.

But now reality is setting in, and investors are rushing like mad for the exits.  I really like how Brandon Smith described the current state of affairs in his recent article…

After I predicted the election of Donald Trump, I also predicted that central banks would begin pulling the plug on life support for equities markets. This did in fact take place with the Fed’s continued program of interest rate increases and the reduction of their balance sheet, which effectively strangles the flow of cheap credit to banking and corporate institutions that fueled stock buybacks for years. Without this constant and ever expansionary easy fiat, there is nothing left to act as a crutch for stocks except perhaps blind faith. And blind faith in the economy always ends up being smacked down by the ugly realities of mathematics.

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by Harvey Organ, Harvey Organ Blog:


GOLD: $1317.30 UP $5.20

Silver: $16.38 UP 8 cents

Closing access prices:

Gold $1318.50

silver: $16.40









Premium of Shanghai 2nd fix/NY:$10.75



LONDON FIRST GOLD FIX: 5:30 am est $1311.05




For comex gold:



TOTAL NOTICES SO FAR:1592 FOR 159200 OZ (4.9517 TONNES),

For silver:



300,000 OZ/

Total number of notices filed so far this month: 199 for 995,000 oz


Bitcoin: BID $8562/OFFER $8613: up $998(morning)

Bitcoin: BID/ $8173/offer $8243: UP $630  (CLOSING/5 PM)



Responsible? Or, irresponsible?

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Moody’s Pegs Venezuela in “Deeper Phase” Of Financial Insolvency


by Zainab Calcuttawala, Oil Price:

Venezuela is now in a “deeper phase of economic stress,” Moody’s Investor Service said on Wednesday, according to The Oil and Gas Journal.

Falling oil production and tough economic sanctions have increased pressures on the nation’s financial capacity. Mismanagement and underinvestment in the country’s oil and gas industry is causing defunct facilities to produce low quality oil that does not meet the requirements of its usual buyers.

Moody’s sees “a negative feedback loop between declining production across all economic sectors, accelerating scarcity of hard currency, and an economic policy mix defined by price controls and forced discounting that exacerbate supply shortages and hyperinflation.”

Venezuela’s production is falling faster that high barrel prices can fill the revenue gap, the credit rating agency added.

“The fall in production will only exacerbate cash-flow stress,” Moody’s research note reads. “While oil prices have rallied in recent months, the decline in oil production will more than offset the would-be increase in dollar inflows from oil exports. This has negative implications for both debt repayment capacity and Venezuela’s already grim economic outlook.”

Hyperinflation will continue at the 4000 percent level through 2018 due to the financial deterioration.

President Nicolas Maduro is still intent on milking the digital currency fad to help alleviate the cash shortage and circumvent U.S. sanctions. After proposing an oil-backed national cryptocurrency called the petro, Maduro is now calling for an OPEC-wide one that would also include other large producers.

Speaking to media in Caracas after a meeting with OPEC’s secretary-general Mohammed Barkindo, Maduro said earlier this week, “I will make an official proposal to all OPEC members and non-OPEC states to work out a joint cryptocurrency mechanism backed by oil.”

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Keiser Report: Not Rich Enough (E1186)

from RT:

In the second half, Max interviews JP Baric of about the world of cryptocurrency mining. How does one decide which currencies to mine? What are the costs?

Did Wall Street Get Hacked, Back Away or Just Get Overwhelmed on Monday?


by Pam Martens and Russ Martens, Wall St On Parade:

The U.S. Senate Banking Committee needs to get its act together and immediately schedule hearings on the trading outages that occurred at numerous discount brokers and mutual funds on Monday. According to thousands of on-line complaints, customers of major firms like TD Ameritrade, Fidelity, Vanguard, and T. Rowe Price could not access their accounts using the firms’ websites on Monday and thus could not place sell or buy orders as the market dove 1,597 points in mid afternoon, then partially recovered to close down 1,175 points.

At online outage tracker,, both TD Ameritrade and Fidelity were verbally brutalized by outraged customers, many of whom said they had lost thousands of dollars as a result of the outage. Others commenters were stirring up momentum for a class action lawsuit.

Complaints against Fidelity included this one from a poster calling himself Lee Yih:

“The Fidelity Active Trader Platform finally loaded after 80 minutes of trying. I put in 4 orders, but nothing. No indication of orders received, no indication of an execution. I do have the order numbers, however. The website should not be giving the appearance it is up, when orders entered are swallowed up and we do not know where we stand. I called them and waited for 32 minutes on hold before giving up.”

The posts against TD Ameritrade included many people who said they were fed up and planning to find a new broker. A woman identifying herself as Stephany Crawford wrote:

“CLASS ACTION LAWSUIT! We need to make them pay for all our losses while the system’s been down. It is their fault. They cannot deny that. Let’s make them accountable!!! Gary and I have lost thousands of dollars because of this! Count us in!!!!!!!!!!!”

Angry Vanguard customers who were blocked from trading took to the popular (named after the founder of Vanguard, John Bogle) to vent their outrage. One customer, using the online ID of “Choy,” expressed what was on millions of Wall Street investors’ minds. He wrote:

“C’mon guys. It’s not a bug. It’s a feature. They call it ‘stay the course protection’ for days like this.”

Indeed, customers who called into the biggest Wall Street brokerage firms like Merrill Lynch, Morgan Stanley, Wells Fargo and UBS to seek advice from their financial advisors were more likely than not to receive the well-worn response to stand pat. That advice typically goes like this: “you’re in it for the long haul”; “you’re a long term investor, don’t let market gyrations upset your long-term goals”; or “your portfolio is well diversified, you have no reason to panic.” (If you’re in your 30s that might be fine advice. If you’re within ten years of retirement or you are overweighted in stocks or stock mutual funds, you might want to get a second opinion.)

Measured on a point loss basis, Monday’s decline was the largest in Dow history. On a percentage basis, it pales in comparison to the 22.6 percent decline on October 19, 1987.  The complaints in 1987 about brokers not answering their phones and backing away from accepting trades sounds uncannily similar to the current complaints. According to the Federal Reserve’s archives, here’s what happened on October 19, 1987:

“Market makers in the over-the-counter market were not obligated to maintain an orderly market and many withdrew from trading. Delays in processing trades resulted in investors receiving prices very different from what they expected. Many brokers did not answer their phones, leaving investors unable to reach them. Erratic price movements and quotes resulted in frequent lock-ups in the electronic trading system used in the over-the-counter market.”

There is one more dangerous and troubling aspect to Monday’s market action. According to reporting by Donna Fuscaldo at Investopedia, the network monitoring company, Thousand Eyes, says it “saw evidence of a DDoS attack – otherwise known as distributed denial of service attack. With a DDoS attack, a hacker tries to make a website inoperable by bombarding it with traffic from multiple sources.”

Fuscaldo writes further:

“According to ThousandEyes, it saw a spike of high data loss in a major internet service provider and DDoS mitigation provider networks for 20 minutes, which it said could have been an attack that was detected and taken care of. After that, there was around 40 minutes in which the infrastructure of financial services sites were ‘overwhelmed.’ “

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