While it has been a chore trying to find anything to write about other than the absurdity of the interventions of central banks today has provided some material which may be important going forward.
For starters, it appears to me that we are near a major inflection point. In watching a video with Charles Nenner (a well-known chart analyst formerly at Goldman Sachs) he seems to think that the upside in the markets MAY be another 5-6% but that the downside risk could be 50% or more. More importantly, his charts are saying that time is short. He actually said that he didn’t believe that the markets would make it to the usual fall time period where most of the historical pullbacks have occurred. Time will tell.
Personally, all of the traditional valuation methods that I have used for years have been rather useless in the “print and buy” regime so the sooner this ends I believe the better so we can find a bottom and get on to a sustainable and real recovery- not the faux recovery we have had for the last 10 years that has not been a recovery at all but a debt-binge that has no equal in world history.
I believe we are at a major inflection point for many reasons. They are:
#1 The global economy is imploding. Economic reports are dismal virtually everywhere. Just today adding to a long list of dismal economic reports the Port of Long Beach reported a 19.5% drop in imports in May. Part of this may have been stocking up before the tariffs took effect but the crux of the story is that the Port of Long Beach is at near full capacity and there is nowhere for the goods to go. There was also a report that showed a monthly decline in exports for the 7th. month in a row from Los Angeles.
Jack O Connell, trade advisor for Beacon Economics said “The best we can say right now is that importers- at least through the Southern California ports- were concerned probably more about the size of inventories right now than anything else.” He also stated that retailers have no more space to store goods. In other words, orders were made to beat the tariffs, the stuff is sitting there while demand is falling off of a cliff and the retailers are worried about moving what is already there. This is another reason we see dismal numbers for shipping and sales across the board.
#2 Many of the economic indicators are screaming “PROBLEMS AHEAD”. The inverted yield curve is one. The prices of copper, lumber and other commodities falling is a sign that manufacturing and new home building are slowing down meaningfully.
#3 The USA seems to be provoking many enemies across the globe. From Venezuela to Iran to Russia and China to Turkey (a supposed NATO ally). Because of this the dollar may lose its reserve currency status sooner rather than later. Anyone who doesn’t think that this will change our lives in many ways doesn’t understand economics at all. The reason we have been able to live beyond our means for the past 75 years or so is that we have had the reserve currency and we have been able to, at least since 1971, been able to “print” a virtually unlimited supply of new dollars at virtually no cost and import real stuff that people elsewhere had to toil to produce. They have been “on” to this for some time but the fact that the US dollar has been weaponized (using sanctions and the restricting access to the SWIFT international payments system) many countries are setting up trade outside the US dollar. Most notably Russia and China but also Iran and others- many to avoid the possibility of sanctions being placed on them in the future.
Iran, one of the most demonized nations by our “leaders” has issued a gold-backed currency called “Paymon”. My belief is that this could be a major reason for demonizing Iran- much like we demonized Iraq and took out Sadaam Hussein after he started selling Iraq’s oil for Euros. They take US dollars now.
It is also similar to when Moammar Quaddafi was trying to get an African Gold Dinar currency off the ground and he was executed for it.
Just today there was another attack on an oil tanker near Iran. It appears that with all of these new attacks that have started just recently we are trying anything possible to keep oil prices high and to pin the blame on Iran for these attacks. Since I was not there I can’t possibly know if Iran had anything to do with it but it appears to me that, similar to the false flag in Syria, where Bashar al-Assad was blamed for a chemical attack on his own people while he was winning the war and such an act would have made no sense. Later it was found out that the “attack” had been staged- not by Assad but by others who wanted Assad gone.
It appears to me that Iran is in the crosshairs of the USA and this is a dangerous situation- not only for Iran but possibly for the world.
#4 There are many powerful countries that are trading outside the US dollar. China and Russia are signing a new agreement to allow each other’s banks to sell their services in each other’s country. They are already trading oil and natural gas for Yuan. Both countries are buying gold in massive amounts and, as a matter of fact, in a speech at the International Economic Forum in St. Petersburg, Russia President Putin said that “The main thing is it (US Dollar) does not serve the interests of the future”. At the same time, he announced that Russia, along with China are working on a global trade mechanism outside the dollar. Could this be part of the reason that Russia has sold dollars and bought gold? Could it be part of the reason that they have reportedly bought a million ounces of gold per month through April? Russia is also threatening a gold-backed crypto currency.
I believe a gold-backed crypto that would be accepted in international trade would likely spell the end of bitcoin and all other cryptos- likely by government decree.
#5 It appears that the authorities are doing all that is in their power to keep these markets elevated- in my opinion at least until the 2020 election. Massive amounts of “printed up” money is giving the illusion that all is ok. It is just that- a debt-based illusion. The numbers are far higher than any of us can imagine and the level of intervention is unprecedented. With all of that, it appears they are preventing a collapse, but are unable to break out to new highs even though the interventions are off the charts.
#6 Though it is seldom mentioned on the financial game shows debt at all levels is off the charts. There is NO historical precedence. At every level it appears that we could be at peak debt- of course without the “printing and buying” it would have been visible at least 10 years ago. Since then world sovereign debt has doubled, corporate debt has more than doubled, personal debt is at all-time highs along with mortgage debt, auto loans, student debt and credit card debt. I have to wonder with debts at all-time highs will the anticipated rate cuts have the desired effect this time? Is the Fed wondering this also?
#7 More and more influential people are jumping on the gold bandwagon- like Paul Tudor Jones and other well-known hedge fund types. They are joining central banks, the largest banks and countries in buying large quantities of gold. They appear to know something is coming. I only wonder if they know what it is and when it may occur.
With all of these things- and far, far more than I have time to write here, it appears that the time to prepare is upon us. Whatever may be on the horizon, whether it be a war, a liquidity crisis, a seizing up of the credit markets or a derivative implosion that could put most of the major banks in a bad (possibly existential) position, it is likely to happen quickly and take all of us by surprise.
Those prepared will likely only be shocked by the timing and not necessarily the event. Hopefully, this will allow us to think more clearly and make better decision than most may make because we took the time to learn and understand what has actually been taking place rather than blindly following the financial game shows and the network shows that pretend to be news shows but are not much more than propaganda outlets- which many are now keenly aware of.