Warren Buffett- “Price is what you pay- value is what you get”.

What value are people actually getting these days when they buy stocks and bonds? Or for that matter real estate? At least real estate has a tangible value that will likely never go to zero which many paper assets can and often do- particularly when the prices have been so artificially inflated as we have seen many times before. Currently we are witnessing prices that have no bearing on reality and some valuations that are so high there is no historical comparison.

The only investment strategy alive today appears to be the greater fool theory. This is where you are grossly overpaying for something but expect “a greater fool” to come along and pay even more therefore earning you a profit. Of course, many have been conditioned to believe this will just keep going because every time the “market” tries to do its one job- reflect true price discovery- the central banks, major banks and hedge funds step in to make sure that doesn’t take place.

Taking it to another level many entities are using MASSIVE leverage to buy assets which will allow them to make outsized gains on the way up but lead to even more massive losses on the way down.

Recently, a hedge fund (Archegos) blew up and has caused at least multiple billions of dollars of losses to major banks and possibly many others. This is likely not a situation that is isolated. This is VERY likely a strategy that is being used by many other funds. It has also caused a few high-flying stocks (flying high likely because of the leverage on the way up) to crash up to 50% in ONE DAY.

These are not mom and pop stocks- many are household names.

While the focus has been on the banks and the fund implosion, what might the crashing share price mean to the employees of the companies involved?

These “traders” are just trying to skim off a profit while providing NOTHING in return. They want to profit off of others labor without doing anything of value. Eventually the jig is up and they are exposed. Their antics eventually make the prices so fake that the real economy can’t function. There is no price discovery and the things needed to sustain human life cannot be produced in an economically viable manner. Look at our farmers who are shutting down production because they cannot produce their goods and earn a profit. That may be because of the currency being destroyed OR it could be that the traders in manipulating prices for their own benefit create fake pricing. That costs ALL of us- not just the producer and laborer.

In doing research for clients I have noticed that many of the stocks that have been moving up in an irrational manner have many things in common. In most cases their balance sheets are a disgrace.  By that I mean that their debt is nearly as high as their assets (those may be questionable also) and many are losing money rather than booking profits. I got a kick out of president Biden’s tax plan that will make the corporations pay for the “profits” that they report to Wall Street so people will buy their stock but then tell the IRS that there were no earnings. It is about time something like this was done. I have written many times about the “two sets of books”.

These same actors manipulate the price of precious metals also. The only difference is that they manipulate them the other way to keep the illusion that the dollar is holding its value better than it actually is and that longer-term bonds are still a good bet.

Many people are taken in by this illusion but, in my opinion, anyone who is not concerned about the level of fraud, fake prices and hundreds of trillions of currency units being conjured up out of nowhere to continue the game- you are really in for a rude awakening and it may not be far away.

Some of the most telling signs are:
$140 TRILLION is reported “missing” by Dr. Mark Skidmore (Phd in Economics- Michigan State U)

This is after he initially reported $21 Trillion was missing from HUD and Dept. of Defense from 1998-2015 previously. This sounds like exponential money “printing” to me.

Each crisis in the financial “markets” are growing in orders of magnitude- again suggesting exponential growth in debts, derivatives and bailouts. Where else BUT the derivatives “market” where there may be over $2 Quadrillion in bets- could you possibly hide $140 TRILLION dollars?

Tens of Trillions of currency units being conjured up out of nowhere to take the place of missing productive output that is needed to have a strong economy with NO END IN SIGHT. Again this week it was just reported that ANOTHER 719,000 Americans filed first-time unemployment claims last week. Of course, some of them may make more income by collecting the generous benefits that are being conjured up out of nowhere and burying us all deeper into debt by the minute.

Does this sound like a solid plan moving forward?

It appears to me that gold and silver may have just completed a correction that was taking place since August of 2020. The level of fraud in this market is off the charts. I have written many times about how, why and where this takes place and the major players so I won’t go into that again here but I will say that there is plenty of evidence that the banks are funneling silver out of the major silver etf, there are obvious physical shortages that many are being assured don’t exist- even though if you want to get physical silver in any size it is a LONG wait and nowhere near the fake paper prices that are quoted.

This is an INVERSE BUBBLE. To me, this means that we, like the central banks and major banks, can get an asset that is nobody else’s liability (so we don’t have to count on someone else honoring their word and paying us) and get it at an extremely discounted rate- as they are.

As the central banks and major banks play their games in the “markets” they have also been hoarding gold and silver for their own accounts. It was just announced that Russia is further divesting from the US dollar and buying gold with the proceeds. Many other central banks, including Russia also have been buying particularly gold at an astounding pace. (2200 TONS in the last 3 years).

If I am right in believing that the Fed and other central banks are setting up for a major collapse and purchasing junk bonds of major corporations to take ownership of those corporations after the collapse and reorganization where their defaulted debt becomes equity in a company that now has all of the infrastructure and none of the debt then anyone holding stock in companies that are drowning in debt (more the rule than the exception these days) should get a long hard look at their portfolios. Those common shares, preferred shares and unsecured bonds will likely all be worth ZERO after a default. The secured bonds will, after a default be worth virtually nothing but will likely hold great value after they are transitioned to equity in an unencumbered company.

With this risk out there- which probably 95% of market participants are unaware of- how much sense does a 60/40 portfolio make in this type of scenario?

When it is obvious to anyone who can do math that the debts are so far off the charts there is no way for them to be paid back- particularly if the currency you are getting paid back IN holds its value- how smart is it to be counting on getting paid back?

I wish all of you who are experiencing FOMO (Fear of Missing Out) good luck. I believe you will be needing it if you are expecting this to just keep going like this.

I would love to laugh at the joke our fake economy is but, alas- the joke is on us.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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