Friday, April 19, 2019

Don’t Fear The Fork: The Future of Bitcoin & Steem

by Jeff Berwick, The Dollar Vigilante:
Last week, I did an interview with Josh Sigurdson of World Alternative Media to talk about the latest news in the cryptocurrency arena and particularly about the future of bitcoin and steem.

There has been plenty of talk about bitcoin being in “a bubble” especially by the likes of Peter Schiff, so I made sure to point out that the real bubbles are mainly caused by central banks who expand and contract the money supply.

Josh made a good point about the volatility and large price swings which take place in the crypto markets and how they scare a lot of people because this is the first time many of them are experiencing what it’s like to trade in a truly free market.

The Two Charts That Dictate the Future of the Economy

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by Charles Hugh Smith, Of Two Minds:

If you study these charts closely, you can only conclude that the US economy is doomed to secular stagnation and never-ending recession.

The stock market, bond yields and statistical measures of the economy can be gamed, manipulated and massaged by authorities, but the real economy cannot. This is espcially true for the core drivers of the economy, real (adjusted for inflation) household income and real disposable household income, i.e. the real income remaining after debt service (interest and principal), rent, healthcare co-payments and insurance and other essential living expenses.

If you want to predict the future of the U.S. economy, look at real household income. If real income is stagnant or declining, households cannot afford to take on more debt or pay for additional consumption.

The Masters of the Economy have replaced the income lost to inflation and economic stagnation with debt for the past 17 years. They’ve managed to do so by lowering interest rates (and thus lowering interest payments), enabling households to borrow more (and thus buy more) with the same monthly debt payments.

But this financial shuck and jive eventually runs out of rope: eventually, the rising cost of living soaks up so much of the household income that the household can not legitimately afford additional debt, even at near-zero interest rates.

For this reason, real household income will dictate the future of the economy. If household incomes continue stagnating or declining, widespread advances in prosperity are impossible.

The Masters of the Economy have played another financial game to mask the erosion of real income: inflating speculative asset bubbles to boost the illusion of wealth, a form of financial sorcery called the wealth effect: households that see their stock and bond funds swelling by 50{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} to 100{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} in a few years are emboldened to believe this phantom “wealth” is permanent and thus can be freely spent in the present.

The problem with this financial shuck and jive is only the top 5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} own enough assets to experience the speculative high of asset bubbles. This is one reason why the top 5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} have pulled away from the bottom 95{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, a trend that is blindingly obvious in this chart of Real Average Household Income by Quintile and the Top 5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} from the always-insightful Doug Short (U.S. Household Incomes: A 49-Year Perspective):

The gains since 1992 reflect the national distribution of wealth very closely: those with minimal financial wealth (the bottom 80{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}) experienced minimal gains in real income.

Those with some financial wealth (the top 20{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}) enjoyed substantial gains, but the truly outsized gains were reserved for the top 5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, the class that owns the majority of the nation’s wealth.

Read More @ OfTwoMinds.com

Risk has been Abolished, According to Institutional Investors

by Wolf Richter, Wolf Street:

Why? Wall Street sells “more financial products and generates more profits when investors are bullish.”

“Covenant-lite” loans – risky instruments issued by junk-rated borrowers, with few protections for creditors – set an all-time record at the end of the second quarter.

They’re part of the risky universe of “leveraged loans,” and they’re secured by some collateral, but they don’t come with the protections and restrictive maintenance requirements in their covenants that traditional leveraged loans offer creditors.

Even leveraged loans with more restrictive covenants are so risky that banks just arrange them and then try to off-load them to institutional investors, such as pension funds or loan funds. Or they slice and dice them and package them into Collateralized Loan Obligations (CLOs) and sell them to institutional investors. Leveraged loans trade like securities. But the SEC, which regulates securities, considers them loans and doesn’t regulate them. No one regulates them.

The amounts are not trivial. Total outstanding leveraged loans in the US reached nearly $1 trillion ($943 billion) at the end of the second quarter, according to S&P Capital IQ LCD. And covenant lite loans made up 72.5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of them, the highest proportion ever.

That’s up from 69{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} at the end of the fourth quarter. This chart shows the surge in the proportion of covenant-lite loans to total leveraged loans over the past three years, from about 55{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} at the end of Q2 in 2014 to 72.5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} at the end of Q2 2017:

So what’s the big deal? When there is no default, there is no difference. And since there is apparently no longer any risk of default, it’s, well, no big deal. That’s what investors are thinking.

But when defaults do occur – as they have a nasty tendency to do – or before they even occur, investors have less recourse and fewer protections, and losses can be much higher.

The Fed and the OCC have been jawboning banks into backing off with leveraged loans for three years. Banks can get stuck with leveraged loans. They did during the Financial Crisis, which helped sink the banks. That’s when investors found out that leveraged loans are not exactly, as they say, as good as gold. But back then, the proportion of covenant lite loans was much smaller. So next time, the ride will be wilder.

Why do investors do this? They’re chasing yield, little else matters, and companies take advantage of that. LCD about the covenant lite loans:

For obvious reasons, they are more attractive to issuers, and have gained steady acceptance from loan arrangers [banks] and investors, particularly since 2012, when the US leveraged loan market found a higher gear after the financial crisis of 2007-08.

Then again, as naysayers are fond of pointing out, they’ve never comprised this much of the market before, so they will be under scrutiny once the current credit cycle turns.

Read More @ WolfStreet.com

DOVISH FED WITH “LACK OF INFLATION” SENDS GOLD AND SILVER SOARING AFTER COMEX CLOSES

NORTH KOREA WILL LAUNCH ANOTHER ICBM MAYBE BY TONIGHT/USA PASSES LEGISLATION ORCHESTRATING MORE SANCTIONS AGAINST RUSSIA: THIS TIME SANCTIONING ANYBODY DOING BUSINESS WITH THEIR OIL
from Harvey Organ:

GAS SECTOR/RUSSIA RESPONDS!! EUROPE WILL RESPOND SHORTLY

In silver, the total open interest ROSE BY ONLY 279 contract(s) UP to 206,347 WITH THE RISE IN PRICE THAT SILVER TOOK WITH YESTERDAY’S TRADING (UP 10 CENT(S). YESTERDAY THE COMMERCIALS TRIED IN VAIN TO COVER BUT TO NO AVAIL. THE SPEC SHORTS ARE HEARING RUMOURS OF TROUBLE WITH DELIVERIES IN LONDON SO THEY TOO ARE TRYING TO GET OUT OF THEIR SHORTS. THE LONGS CONTINUE TO REMAIN STOIC AND ADD GENTLY TO THEIR LONG SIDE.

In ounces, the OI is still represented by just OVER 1 BILLION oz i.e. 1.03 BILLION TO BE EXACT or 148{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 21 NOTICE(S) FOR 105,000 OZ OF SILVER

In gold, the total comex gold SURPRISINGLY ROSE BY 4859 CONTRACTS DESPITE THE FALL IN THE PRICE OF GOLD ($2.10 with YESTERDAY’S TRADING). The total gold OI stands at 463,827 contracts. Surprisingly the liquidation in the front month has stopped as spec longs decided to foolishly take on the bankers on comex expiration week. The bankers mercilessly supplied all the necessary paper. The spec shorts continued to pile into the short side and thus the OI rise.

we had 14 notice(s) filed upon for 1400 oz of gold.

Read More @ Harveyorganblog.com

Are We Staring Down A Silver Price of $15? [If So, Lock & Load!]

[Ed. Note: If you want a great deal on PHYSICAL SILVER, click HERE.]
from Silver Doctors:

“If anything comes out of left field, a quick repricing in the metals could follow”

The silver price has closed up on 8 of the last 10 days. This comes as not much surprise at is has been a difficult couple of months for the white metal. This coming week, however, will be a test in price action that could have significant consequences. As we have noted on the daily chart before, silver seems to be stuck in downward channel, and while bullish in the long run, we are now at a make-it or break-it point where we will either punch through the channel resistance, or we are on the cusp of another downleg. If the movement reflects the latter, could we be staring down $15? There has been very little riding of either the high or low trendlines of this channel, with the exception of just a few days riding to the high side in early June, so we’ll know soon enough if there is a break-out.

Why Surging UK Household Debt Will Cause The Next Crisis

by Mark O’Byrne, Gold Core:
– Easy credit offered by UK banks is endangering “everyone else in the economy”
– UK banks are “dicing with the spiral of complacency” again
– Bank of England official believes household debt is good in moderation
– Household debt now equals 135{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of household income
– Now costs half of average income to raise a child
– Real incomes not keeping up with real inflation
– 41{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of those in debt are in full-time work
– £1.537 trillion owed by the end of May 2017

FOMC Decision and Comex Option Expiration For Precious Metals Tomorrow – Beware the Leaven of the Pharisees

from Jesse’s Café Américain:
“Beware the leaven of the Pharisees, which is pious, hollow hypocrisy. There is nothing covered that shall not be revealed, and hidden, that shall not be made known. Whatever has been said in the darkness shall be heard in the light: and what has been whispered behind closed doors shall be shouted from the roof tops.”

Luke 12:1-3

“Those among the fortunate rich who are not, in the rigorous sense, damned, can understand the neediness of poverty, because they are needy themselves, after a fashion;  but they cannot understand true impoverishment.