Entries Tagged as 'Economy'

Useless Advice

Useless Advice

Useless Advice

To see how misleading the Fed’s interest rate hike projections have been in recent years, have a look at the chart below.
As you can see, projected interest rate hikes compared to actual rate hikes differ drastically.

I don’t know what’s worse… the Fed’s forward guidance track record or the people who actually trade on that guidance.

Yet there I was on Wednesday night watching a Harvard-educated “analyst” on Fox News telling “Special Report” anchor Brett Baier that the most important thing investors needed to be concerned with was the Fed’s plan to raise rates three times in 2017.

That’s utterly worthless advice.

Hold on. I am being kind.

That’s moronic advice.

The data clearly shows that the Fed doesn’t do what is says it’s going to do.

Look, does anyone not sniffing bath salts believe the Fed is going to continue raising rates on schedule if the U.S. stock market craters… or if Europe implodes… or if China’s credit bubble bursts?

Please.

There are countless Fed “variables” it will use to justify altering its plan… as it has in years past.

The bottom line is the only thing of value we learned from the Fed this week is they raised rates on Wednesday.

That’s it.

What it does in 2017 has no relation to its stated projections, just as was the case in 2013, 2014, 2015 and 2016.

Worrying about the implications of the Fed’s rate hike timetable is a time-sucking charade designed to bleed you dry. The Fed and the media are never on your side.

Focus on the only truth you know, and that is the price action of all markets.

Let the price action dictate your actions, your buys and sells. That’s what winners do.

Please send me your comments to coveluncensored@agorafinancial.com. Let me know what you think of today’s issue.

Regards,

Michael Covel
Editor, Covel Uncensored

The Fed’s “Debt Monster” Is Calling the Shots

The Fed’s “Debt Monster”

Bill Bonner calls our attention to the danger:

You know our prediction: The Fed will never willingly lead interest rates to a neutral position.

It can’t. The FED  has created a debt monster. It must feed this Frankenstein with easy credit.

This time last year, the Fed began its “rate-tightening cycle.” That is, it began raising short-term interest rates.

It pledged to continue to do so in 2016. But then it diddled and dawdled, fiddled and fawdled… claiming to be on top of the situation… watching its “data” come in like a fisherman’s wife waiting for the return of the fleet… and not wanting to admit she was already a widow.

What it was really waiting for was a place to hide.

The Fed can raise short-term rates. But it will have to follow, not lead. It will have to hide in the shadow of rising consumer prices, staying “behind the curve” of inflation expectations.

That way, the expected real interest rate – the rate of return on your money above the rate of consumer price inflation – never really returns to neutral.

Already, the price of a barrel of crude oil – a key input into prices across the economy – is twice what it was 10 months ago. Leading business-cycle research firm the Economic Cycle Research Institute says the inflation cycle has turned positive.

And already, foreign nations are talking about retaliating against Team Trump by canceling orders and imposing new tariffs in their own versions of “better trade deals.”

This, too, is bound to raise prices.

Forget speculating on stocks, options, or other risky, low-probability moneymaking schemes. This wealth-building formula is the most reliable way to make seven figures in seven years or less in today’s uncertain economy…

Funny Money Antics

But if consumer price inflation were really a concern, the bond market would race ahead of the Fed, imposing its own regimen of rising yields.

The Fed’s increases would be too little and too late to have any real effect on the outcome.

Bondholders don’t care much about nominal rates. If consumer price inflation were to rise to the Fed’s 2% target, for example, bondholders might clamor for a 4% yield to give them a positive 2%.

That is a big increase over the 52-week low of 1.32% the yield on the 10-year Treasury note hit on July 4.

But you don’t get that kind of seismic shift without cracking some flower pots.

Much of the world’s $225 trillion in debt is calibrated to borrowers who will have a hard time surviving a 3% interest rate world, let alone a 4% one.

This is an economy that can stand a lot of grotesque and absurd “funny money” antics. It can survive a bizarre financial world; it can’t survive a normal one.

As inflation expectations increase, investors do not sit still and watch their retirements, their savings, and their fortunes get broken by inflation.

They don’t wait for the Fed’s policy-setting committee to meet. They don’t reflect calmly as the Fed’s wonks collect their “data” and create their “dot plots.”

Instead, they act out. The monster gets mad and starts throwing things.

First through the window are the bonds. They get chucked out before inflation manifests itself fully… and long before the Fed increases its key short-term rate.

Then, the “boom” turns quickly into stagflation… as higher borrowing costs pinch off growth even as consumer prices continue to rise.

But more likely, inflation is not really surging… Not yet.

And most likely, it will be the painfully apparent when the U.S. economy goes into recession next year.

Then, it will be stocks’ turn to get tossed out, while bonds sneak back in through the side door.

It will also be apparent that the Fed has taken another false step… that the recovery was a sham… and that it’s the debt monster calling the shots, not Janet Yellen.

Regards,

Bill Bonner

The Retirement Savings Crisis: What Will Fix It?

The Retirement Savings Crisis: What Will Fix It?

The Retirement Savings Crisis: What Will Fix It?

The numbers are staggering. An astounding $14 trillion retirement crisis is looming for millions of Americans. Nearly a third of the workforce does not own a single retirement account – not a 401(k), not an individual retirement account (IRA). Of those who do own a retirement account, the median account balance is a mere $3,000. Rising costs, longer lives and the very human tendency to not worry about it because it’ll all turn out OK in the end is driving the numbers. There are ways to fix the retirement savings crisis before it’s too late. Here’s how.

No Retirement Plan? Get One

If you think your Social Security check will be enough to live on during retirement, think again. The Social Security board of trustees anticipates that by the year 2035, all excess cash reserves will be gone. Benefits could be cut as well. Even if neither of these events occur, Social Security benefits will barely touch your living expenses. You need more.

If you don’t participate in an employer-sponsored IRA or 401(k)plan, sign up if your company offers one. You have to start somewhere and automatic contributions are a great way to do just that.

Consult a Professional Retirement Planner – Now

One 401(k) or IRA is not enough to live a comfortable retirement. Investment portfolio management, retirement savings management and strategy development are all services a professional provides to help you achieve your financial goals. A professional looks at where you are now, what you have to do to live a comfortable retirement and develops a plan to get you there. Professionals recommend the investments that work best for you, no matter what your age or financial picture. A retirement manager creates a customized solution that may include mutual funds, ETFs, annuities and other types of investments. If you’re older and starting to save late in the game, you may be reluctant to seek the help of a professional. You may feel embarrassed or ashamed, but there’s no need. Retirement planners are there to help and many have successfully helped clients in your situation – or, at least the financial planner you work with should be experienced in helping others in your situation. In fact, if you’re starting late, you need the expert advice a professional retirement planner brings to the table.

Living Longer Means Working Longer

One of the biggest reasons for the retirement savings crisis is the longer and overall healthier lives of today’s population. The amount of savings needed now far outpaces what used to be the norm. What’s a great way to improve your own retirement outlook? By working longer. There are potential problems with working harder, however. Economist David Neumark’s research indicates that employers tend to discriminate against older workers. And, there’s the problem of health issues as people age. Still, if at all possible, working longer ensures a more comfortable retirement when the time comes.

Don’t Wait

It’s much easier to do nothing and hope it all comes together in the end. But, the longer you put off, the less you’ll have later on. If you take steps now to increase your savings and reduce spending, you can avoid becoming part of the retirement savings crisis.

Gabby Revel, Founder, writer, editor & administrator at Fertile Content, is a freelance writer who specializes in lifestyle topics, as well as science and technology, investing, and personal finance. She also has a passion for adorable dogs of all kinds. She currently lives in the San Francisco Bay Area.

There is A Place for Precious Metals

Rosland Capital, a premier precious metals asset firm, is your go-to gold, silver, platinum and palladium resource. Founded on honesty, high-quality customer service and public education, Rosland Capital exists to educate you on the benefits of strengthening your assets and diversifying your portfolio.

Whether you are looking to safeguard your retirement savings, hedge against inflation or against potential stock market volatility, Rosland Capital offers precious metals in physical form, precious metal-backed IRAs, and the knowledge base you need to realize the benefits of precious metals.

The graphic below is an additional resource developed to help guide those who are seeking insight on the various savings and investment options for retirement.”

rosland_capital_avenuetoretire_v05

Unusual Meeting Today

USD 4-11-16

 

Quite the day so far. Janet Yellen calls a special meeting, the President and Joe Biden will have unusual meeting today, Gold is up fifteen dollars and the dollar is at the bottom of its range. What will happen next?

What does the new frontier of negative interest rates in the global arena mean for investors?

What does the new frontier of negative interest rates in the global arena mean for investors?

What does the new frontier of negative interest rates in the global arena mean for investors?

 

Cindy Yeap / The Edge Malaysia discusses “What does the new frontier of negative interest rates in the global arena mean for investors?”

“For RHB Research Institute executive chairman and chief economist Lim Chee Sing, NIRP “can only be seen as a temporary expedient to hold up financial markets”, albeit one that has little room to push for more economic growth in this relatively mature stage of the growth cycle.

“That means rising investment premiums and heightened market volatility will likely be the order of the day in the days ahead. Portfolio investors may have no choice but to build some degree of defensiveness into their portfolios to balance out the risks. This implies rising appetite for high-yield stocks,” Lim says.

“Even dividend stocks have caveats in the days ahead, largely due to their rich valuations vis-à-vis tougher conditions to grow at the same rate as before. For example, sin stocks might have to contend with higher taxes; the fees for telecommunications spectrum refarming have yet to be revealed; and consumer stocks have to contend with the possibility of a further tightening of consumer spending. Then, there is the higher labour cost.

“The focus should be on stocks with an improved business model, reasonable earnings visibility, strong cash flow, a dividend policy and, thus, sustainable dividend payments. Of course, one cannot ignore valuations but rich valuation stocks are still susceptible to a selldown should the global economy take a turn for the worse,” Lim adds.

“Gerald Ambrose, CEO of Aberdeen Islamic Asset Management Sdn Bhd, too, noted expensive valuations after a good run in recent years.

“We are keeping a close eye on notable high-yield companies, like the cellular phone companies, the brewers, tobacco companies and the REITs (real estate investment trusts). We’re currently about halfway though the 4Q2015 results season and to be honest, a lot of the better-managed companies have been able to find efficiencies to enable dividend payout to remain high. However, after outperforming for over a year, a lot of the high dividend yield companies are hardly cheap,” he says.”

BOTTOM LINE: Focus your strategy on yield and gold. Gold is an alternative when interest rates are negative adjusted for taxes and inflation.

The Difference Between a Good Analyst and a Great Analyst

I came across this piece from Quandl and it got me thinking about about politics and experts and analysts. Quandl is a data site that offers information on thousands of stocks, with historical data going back decades and futures data to help you forecast trends. They created this graphic to help novice analysts get ahead in the industry.
the Difference Between a Good and a Great Analyst

I love to talk politics. My dad and I conversed and analysed and argued about the Vietnam War and every other thing that was worth discussing. Sometimes they were heated. College was a disappointment. I thought there were would be more conversations in depth much like the ones between dad and me. Sadly, that only occurred in the classroom … infrequently. In my adult life, once in a while there is a conversation I look back on with fondness. Those conversations  with new friends or in depth conversations over a fine dinner. Today, it is hard to have conversations when each participant is holding on to biases and attaching their ego to those opinions.

I want to have conversations with great analysts.

When I was a broker, I made the most money for my clients when I could analyse the facts, and draw conclusions from those facts that were outside the norm. If you saw The Big Short you saw great analysts reach conclusions that were farseeing. The consequences of their conclusions were far reaching.made them huge piles of money.

It is one thing to develop a story about the future of Germany or Cuba if you are a citizen, another thing altogether to draw the conclusion that being Jewish in Germany is existential; it is another thing to be Cuban and realize that the door to Spain is the only escape and it will close soon.

To stand in a place and observe that a country that spends more than it takes in and builds up debt to the point that they can barely pay the interest is a good analyst. To be a great analyst it takes courage to conclude that this cannot stand and it’s time to leave.

Great analysts tell stories that are believable and motivate others to take action. Strive to become a great analyst.

Are We On the Verge of Another 2008?

That’s the question that Phoenix Capital Research asks.

For six years, the world has operated under a complete delusion that Central Banks somehow fixed the 2008 Crisis.

All of the arguments claiming this defied common sense. A 5th grader would tell you that you cannot solve a debt problem by issuing more debt. Similarly, anyone with a functioning brain could tell you that a bunch of academics with no real-world experience, none of whom have ever started a business or created a single job can’t “save” the economy.

However, there is an AWFUL lot of money at stake in believing these lies. So the media and the banks and the politicians were happy to promote them. Indeed, one could very easily argue that nearly all of the wealth and power held by those at the top of the economy stem from this fiction.

So it’s little surprise that no one would admit the facts: that the Fed and other Central Banks not only don’t have a clue how to fix the problem, but that they actually have almost no incentive to do so.

So here are the facts:

1)   The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion.

2)   The derivatives market that uses this bond bubble as collateral is over $555 trillion in size.

3)   Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.

4)   Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP.

5)   The Central Banks are now all leveraged at levels greater than or equal to where Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.

6)   The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion (back in 2009). Today it’s over $4.5 trillion.

We are heading for a crisis that will be exponentially worse than 2008. The global Central Banks have literally bet the financial system that their theories will work.  They haven’t. All they’ve done is set the stage for an even worse crisis in which entire countries will go bankrupt.

The situation is clear: the 2008 Crisis was the warm up. The next Crisis will be THE REAL Crisis. The Crisis in which Central Banking itself will fail.

If you’re an investor who wants to increase your wealth dramatically, then you NEED to take out a trial subscription to our paid premium investment newsletter Private Wealth Advisory.

Are the Markets About to Crash?

The following is an excerpt from Private Wealth Advisory...

The futures markets are off the lows from last week as traders are playing for the usual Monday rally.

However, the fact remains that the technical damage from last week’s breakdown has been SEVERE. Stocks even violated the “neckline” on the Head and Shoulders pattern they’ve carved out since early 2014.

SPX

In the very simplest of terms, stocks need to go almost vertical RIGHT NOW if the bull market started 2009 is not over.

I cannot stress this enough: stocks are in BIG trouble.

SPX1

 

NEW: Money Metals Issues 2016 Gold/Silver Forecast

Looking Ahead to 2016

NEW: Money Metals Issues 2016 Gold/Silver Forecast

By Clint Siegner, Money Metals Exchange

Looking Ahead to 2016

Forecasting today’s volatile, high-frequency machine driven and manipulated futures markets using fundamental analysis is futile, as a great many precious metals bulls will attest. To complicate matters, an obsession with Fed policy dominates all markets. Officials at the Federal Reserve are often less than forthcoming and are just as bumbling as the Soviet bureaucrats when it comes to centrally planning our economy.

Nevertheless, beneath all of the artificial influences and all of the leveraged paper, the gears of the physical market for gold and silver still turn. We can be sure prices will reflect actual supply and demand for physical metals at some point, even if we do not know when. With that in mind, here is a look ahead to 2016…

Supply Destruction

Silver production peaked in 2014, while gold production is expected to peak in 2015. Falling prices make an increasing number of mining projects uneconomic. Lower fuel costs are helping, but the average all-in cost of production for silver is estimated at around $17/oz and for gold at around $1,150/oz.

Today precious metals sell for well below than their all-in production cost. Primary producers of gold and silver will deliver less to market in 2016 given that a great many miners currently take a loss on every ounce they sell.

But there is another factor likely to decimate supply in 2016. Base metal prices, including for copper, fell dramatically this year, and the outlook is not too bright for the year ahead. The Chinese economy, the world’s largest market for commodities, is slowing. Brazil is in real trouble and economists are worrying more about the possibility of recession around the world.

Looking Ahead to 2016

Slumping demand for base metals will impact supply of gold and silver because huge quantities of these precious metals are produced as a byproduct of mining for base metals such as copper and zinc. The reorganization of Anglo-American PLC, one of the world’s largest mining conglomerates, earlier this month highlights just how difficult the current environment is for producers – regardless of which metal they are mining.

Gold and silver prices have been in decline since 2011, but it is only during the past year that average prices will finish well below even the most conservative estimates of production costs. The recent carnage in base metals will add significantly to constraints on precious metals supply in the months ahead.

Physical Demand Rising

Investment demand for physical bullion is perhaps the biggest story in precious metals for 2015. Mints and refiners spent much of the 2nd half of the year unable to keep up. Investors had to contend with higher premiums and delivery delays, finally getting some relief now as the year draws to a close.

Only time will tell if 2016 can top this year’s record. We look set to enter the New Year in much the same way we entered 2015 – with steady, but far from overwhelming buying activity for fabricated coins, rounds, and bars. Investors loaded up in recent months and now await the next catalyst.

Looking Ahead to 2016

It may be price action. Lower spot prices over the past 4 years have been a big driver of demand. And prices moving consistently higher will also inspire demand from newcomers (as we saw during the last bull cycle between 2009 – 2011). Only flat or range-bound prices typically lead to investor apathy.

As always, geopolitical events will play a big part in whether or not metals benefit from safe-have buying. In 2016, investors will be watching the ongoing saga surrounding Greece and other hopelessly indebted European nations. The U.S. is at odds with Russia in the Middle East and in Ukraine.

And recent tremors in high-yield debt markets may be advance warning that extraordinary leverage is about to rock financial markets once again. These stories, and others no one can predict, have potential to generate a flight to safety in the coming year.

Industrial demand for gold and silver may turn out to be tepid for 2016. This is less of a factor in gold markets than for silver, where manufacturers consume a good portion of what is produced annually. As mentioned above, some economists worry about the possibility of recession in the coming year. Any slump will weigh on demand for items such as jewelry and other goods. However, a lot of industrial demand comes from high-growth sectors which have proven resilient during past recessions. Electronic, solar, and healthcare related applications for silver come to mind.

Some 2016 Wildcards

Delivery defaults are possible in the futures markets. The explosion of leverage in COMEX gold futures bears watching in 2016. The number of registered bars available for delivery in exchange vaults relative to the number of paper ounces being traded shrunk dramatically to record lows in recent weeks. It’s a trend that simply cannot go on very much longer – not at the current pace of decline.

Looking Ahead to 2016

Exchange participants may convert more gold stocks from “eligible” to the “registered” category. That’s possible, though there is good reason to wonder how much physical metal the holders want to part with at current prices. The precipitous drop in registered stocks may well be signaling they are more than a little reluctant to part with it.

If holders of silver and gold futures contracts start standing for actual delivery of more metal than the COMEX has available to deliver, or should traders even begin to seriously entertain that possibility, we’ll see some fireworks.

Leading Republican candidates are making noises about sound money. Donald Trump, Ted Cruz, Rand Paul, and Ben Carson all have questioned the wisdom of Fed policy. Republicans everywhere are critical of federal debt and deficits and have been for decades now. Given the Party’s atrocious record of turning the talk into actual policy, we should remain skeptical that any elected Republican leader will actually achieve reform.

But there can be no doubt that the sound money issue is gaining traction. We can’t rule out someone in the crowded field of candidates tapping into the popular outrage over out-of-control borrowing and spending. Should ideas like reinstituting gold backing for the dollar gain serious momentum in the campaign, the metals markets could perk up.

 

seigner

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

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