The central banks of the world are on a historic run that I believe just a few years from now people will be wondering how we could have been as clueless as we are. In the past few weeks we have seen literally tens of trillions of pretend currencies conjured up from nowhere to purchase assets and stave off a collapse of the financial system. While this may work as a band aid for a few weeks or months the damage done to the real economy will likely be with us for far longer.
The global economy has been shut down in a way that has no historical precedent. The global economy is virtually closed. We, even here in the USA, have a major percentage of our population being fed and housed with “money” conjured up from nowhere and producing NOTHING. This is tragic as we will all likely see this in just a few months.
Of course, this manipulation started LONG ago but, as with all things experiencing exponential growth, the real fireworks come near the end- which I believe we are rapidly approaching.
Japan was the first economy to experience a burst bubble. It happened in 1989 with their Nikkei Index at near 40,000. They have been “printing and buying” since and as of April 20, 2020 the balance sheet at the Bank of Japan is a STUNNING 612.746 TRILLION YEN. Just yesterday they announced that they will now launch Unlimited QE replacing the (obviously not enough) 80 trillion- yen plan to purchase Japanese Government bonds for this year. I know that if I kept doing something that didn’t work for 30 years I might just try something else instead of digging a deeper hole. By the way, the Nikkei closed on 4-23-2020 at 19,479- a full 51% LESS than it was in 1989- even after over 600 TRILLION YEN was used to prop it up. Tell me again how this money “printing” works? It hasn’t even SNIFFED 40,000 again.
Just yesterday the ECB also announced that they will be buying junk bonds as well as all of the other assets that they are “printing and buying”.
Gregory Mannarino has been saying for months that the Fed has been sending trillions and trillions of dollars to foreign central banks. While we can’t see the numbers (maybe he can?) the Fed just announced a few days ago swap agreements with 14 MORE central banks. A swap agreement is usually an asset that is pledged for cash. The Fed has also announced that they will even take stocks as collateral in their swap programs- so much for safety!
It appears that between the Fed, ECB, Bank of Japan and maybe the People’s Bank of China along with other central banks the “printing” will go on for as long as the population is willing to take worthless chits for their labor. The more passive collectors of those chits make each one worth less and less because they are produced en masse but there is no hard asset or product to create any more value.
This “printing” allows for asset prices to be propped up but masks the underlying rot in the economy that real markets would sniff out and give us clear signals of the underlying weakness and lead us to make more prudent investment decisions.
Since there are really no markets anymore- just managed exchanges by central banks, hedge funds and the banks that own them- it appears that any effort to use traditional valuations for virtually any asset is an effort in futility. When you lose 4.6 million jobs in a week and over 26 million in 5 weeks and the “market” rises- you know it’s not real.
Even Blackrock- certainly “insiders” (they have been chosen to buy the distressed bonds for the Fed) have pretty much come right out and said they will “buy what the Fed buys” or something that rhymes.
Why wouldn’t they- they’re the ones buying! Just like the banks trade their shares and other bank’s shares in their dark pool accounts to keep their prices elevated- or so it appears as on the days that the bank’s shares are in trouble there is a WHOLE lot more activity than on days when share prices are stable or rising. (Wall Street On Parade).
Anyone who looks at this situation should be able to see that with all of this “money” creation but the real economy falling off of a cliff we are headed for a rough ride. There are many stories about supply chains breaking down, companies filing for bankruptcy, tens of millions losing jobs- many not likely to return any time soon, farmers dumping milk and plowing crops under, meat processors closing because of the virus, etc. and food banks already being stressed because of unprecedented demand- and this has just begun!
We are not months or years into this depression- just weeks- and we are already showing how vulnerable a large swath of our population is and has been as I have been reporting for the last 2+ years.
Because of this massive manipulation you who have assets have been given a gift- TIME.
As the Fed artificially props up stocks and bonds it will allow you to sell and reallocate. As the Fed buys bonds it keeps those prices and other assets elevated and allows you to sell at a decent price and reallocate. Unfortunately, it appears that even with ultra-low rates real estate is going to have a HARD time holding anywhere near its value as loans are getting harder to come by, people’s incomes and livliehoods have been shattered and their balance sheets are not anywhere near as strong as they once supposed.
JP Morgan announced you will need a 700 credit score and 20% down to qualify for a mortgage. Think about how many just got disqualified! Also ponder that those entities that had been buying those mortgages have stopped buying also. No liquidity- no market!
Personally, I would sell ASAP if that was my intention and wait for a true washout in that market to find exceptional values at the right time. Heads up- we are NOWHERE near that time right now but may get there quicker than many imagine.
On the other side, gold and silver are being artificially suppressed. This also allows you to buy at a price that, in a free market, would likely not be available. As a matter of fact, the quoted paper price is becoming more irrelevant every day if you want to actually purchase the physical metal and hold it. There are long waits and large premiums being charged because supply is weak and getting weaker while demand is increasing.
I can’t stress enough how important it is to be ready for what appears to be coming.
If you have a portfolio that only goes up when stocks go up- we should have a talk!
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