What a difference 6 weeks makes. After the last Fed meeting many assets fell in value because the Fed hinted that they may raise rates a couple of years from now. It was a ridiculous reaction in my opinion and after virtually the same type of statement many assets are taking off and the US dollar is getting hammered. Of course, Mr. Powell did say that the Fed is nowhere near raising rates anytime soon.
One major difference was the institution of a standing REPO facility for both domestic and global players. To me, this is an admission that the problems in the banking system that they are attempting to hide may be far more extensive than we on the outside may imagine. Again, if I may ask, where could $145 TRILLION that Dr. Mark Skidmore has discovered “missing” from government receipts possibly be hiding other than in the derivatives markets to make the banks look solvent? It may just be backstopping the entire reported $2 Quadrillion derivatives market so that the entire edifice doesn’t collapse.
As I said at the time- anyone who thinks that the zero interest rates, money “printing”, buying of assets and manipulation of virtually all prices is going to end is not paying attention. An end to the extraordinary interference in markets would likely see these same artificially inflated “markets” collapse at amazing speed. If I am right about that “missing” money an end to the propping could lead to a total collapse in virtually no time.
It appears that the Fed is keenly aware that they cannot even give the illusion of tapering or raising interest rates without risking a serious decline in most “markets”. The Fed and other central banks are the “markets”. Without their constant intervention we would get true price discovery which would likely shock many people- what the real value of their “assets” are. It would also likely lead to the realization that most of the entities that owe the debts are insolvent without lower rates, easy credit and bailouts. This would go all the way from individuals all the way up to our Federal government. How sure are you that those you are counting on to pay you back will do so? How confident are you that the purchasing power you are being repaid in will buy anywhere near what it bought when you entered into the transaction? These are questions that any thinking person should be asking at this time as the Fed and indeed most other central banks are conjuring up cash in unprecedented numbers with not only no end in sight but is also growing exponentially.
The “exponential” part is, in my opinion, the most important part of this equation. If the exponential growth stops- so do the “markets”. If they don’t stop, at some point, the currencies themselves will be at risk of MAJOR devaluation or of even becoming worthless.
Too many people are under the illusion that “it can’t happen here”. Believe me it can and most likely will if we don’t change course quickly.
There are many historical precedents from places like Weimar Germany, Brazil, Argentina, Venezuela and many others that all play out the same way. At first, everyone is happy because the “printing” allows those with assets to be enriched with rising asset prices. It also allows the economy to function even though the national income and production cannot support the level of consumption taking place. Then more printing of cash. The cash becomes less valuable with each currency unit created and prices start to rise. The rising prices lead to social unrest and a breakdown of civil society. Then comes violence and new leadership. We are WELL on the way.
Personally, I am only trusting companies that are producing real goods and who are making excellent profits. I also want companies with low levels of debt and a decent dividend. Yes, they are out there.
I believe that the end of this scheme is getting closer and closer. I believe that stocks, bonds and real estate are obviously all being artificially propped up and will end in a thud. Of course, that doesn’t preclude higher prices before that happens. The main question is will you be able to get out if you are more than a second late?
It may pay for many to think about replacing some bonds (which some call return-free risk) and think about an asset that counts on no one to repay you. Gold and silver fit that bill. As a matter of fact, only treasury notes and gold are listed as “riskless” assets on the central bank’s balance sheets.
One of the main reasons people argue that holding gold isn’t good is that it pays no yield. That is true but compare that to a 10-year government bond that yields 1.25% and inflation (Grossly underreported) is at 4%. That is a MINUS 2.75% real yield. By the way, with all the shenanigans that JP Morgan and the banks and central banks play to keep the price artificially suppressed so they can load up for themselves gold has risen 23% in the past 5 years. (Kitco) The level of fraud here is off the charts. If there were ever any true price discovery for gold, I believe it would be MINIMUM 10X its current price and likely FAR higher.
See Kitco.com and see what Rhodium (the only precious metal that trades without paper manipulation) is selling for.
Currently, it is trading at over $19,500.00 per ounce. It is the only price that is settled in the physical market rather than the fantasy paper markets where contracts for the entire years mine supply are created out of nowhere and sold into the market in minutes when there are the fewest buyers available. This action not only affects people who invest in metals but even more so impacts those that produce the metals. Those that give their blood, sweat and tears are grossly underpaid because the asset they produce is grossly undervalued with financial games. Those that put up the money and make new discoveries are underpaid for their efforts because of the same games and it also leads to less actual supply because many projects that would be economical with a real price are not economical with a suppressed price. This will ultimately lead to FAR higher prices. I believe that is why the major banks, central banks and their buddies are all loading up on metals while the suppression scheme is in full effect. Personally, I am doing what they are doing with the idea that the manipulation will likely not stop. More than likely, when the time is right and they have the amount they want, they will manipulate the price the other way- again for their personal gain.
Why would major banks be paring down their stock positions at this time? Maybe because it appears that Main Street is fully invested and as optimistic as ever with prices and valuations that make the .com bubble look tame?
There are many warning signs that MAJOR changes are on the way.
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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