I have been writing for a long time that the “markets” are so fake that they really aren’t markets at all. Every time the “markets” try to do their job and determine fair value for the asset being traded, central banks, major banks and hedge funds step in to make sure there is NO true price discovery. Probably because if there was the reality would be far more scary than anyone can imagine.
While the central banks are feigning calm, their actions (many being cleverly disguised in my opinion) are signaling that they are panicking. The ECB, Bank of Japan, the Fed and other central banks are “printing and buying” in record amounts. The “repo story” has all but disappeared from the financial game shows but in looking at the Fed’s own numbers on its website it appears FAR more hundreds of billions are being lent out than are being returned as advertised. I have also seen that the supposed longer-term loans have been oversubscribed by as much as 50% just this week. Of course, the $60 billion of NOT QE, I believe is plain old debt monetization (Central bank conjures “money” up out of nowhere and buys government debt that no one else will buy with the current rates and risks being taken). In my opinion- this could be the beginning of the end.
Throughout history this has been the undoing of every great country. As I wrote 10 years ago- once you go down this path there is no turning back. It is totally obvious that any pullback in credit creation could cause the entire debt load to implode upon itself. The central banks have become the lenders and buyers of last resort. I believe that if the Fed and other central banks were not pumping trillions of dollars, yen, yuan, euros, etc. into the system our economy would be unrecognizable. The clue came last December when ONLY the Fed was pulling back and US stock markets dropped 20% in a couple of weeks. That led us from “automatic QT (balance sheet runoff) to Not QE4 in a matter of no time.
In researching what happened in Weimar Germany I read that the German Central Bank knew what they were doing (Printing money up out of nowhere to pay off war reparations and government debts-counterfeiting to me and you) was wrong but they were afraid to stop because of the damage they feared it would do. Their concern was that the economy would collapse and the communists would take over. Hmm… any similarities to what we are seeing today? I believe they know what the outcome of this will be but paying debts off with cheaper dollars (or other currencies) is better than admitting that you are insolvent. It will at least buy time. Default is still the most likely outcome. There will almost certainly come a day when the world realizes the confetti that has been conjured up from nowhere and has been used by those at the top to enrich them selves at our expense by buying real assets with debt notes that they create (and charge us interest for what they bought) for what it is. Yes. Read that again! They buy real assets with “Money” created from nothing and charge us interest. They have the asset- we have the debt- what a deal!
It is not only the central banks that are in on this either. Many have heard that machines that use algorithms to trade are doing most of the trading in the markets these days. It is awfully amazing that every time the markets fall the “trade talks are going well and a deal could be made soon” for almost 2 years now! Of course, the machines pick up the headline and buy. I was listening to a podcast by David Mcalvaney and Kevin Oreck where Kevin stated that Bloomberg decides the headlines and also sells the programs that make the trades. They made the analogy of movies and TV shows being produced to sell action figures and toys. I also noticed that when my daughter used to watch American Idol it was nothing more than a 60 minute commercial. It sounds to me like propaganda and mind control- but that’s me.
These are the people that we are getting our information from. It is no surprise that probably less than 1% of our population knows that even though gold has been artificially suppressed for years the average annual return since the year 2000 is 25%. 1 Yes. That is annually. This, while their masters at the banks and central banks are buying gold in record amounts and countries are repatriating their gold holdings and also buying in record amounts. But you are not supposed to know that!
All you are supposed to know is that the market is up. Don’t ask why! Debt is at record amounts. The stock market charts are in lockstep with central bank balance sheets. As the central banks add assets the markets rise. In the meantime, according to Joseph Carson (Former Director of Global Economic Research at Alliance Bernstein in the last 5 years the S&P 500 stock index has risen 50% while operating profits for non-financial companies have fallen 15%. After peaking in 2014 earnings are 5% less today than they were then. It is also important to understand that in this “booming economy” (say something enough and people start to believe it) less people are working today than in 2008. (Labor participation rate). BOOMING??? Maybe as in blowing up?
The numbers I am seeing suggest an economy in real trouble.
The level of interference in these “markets” is unprecedented and will likely lead to a major re-pricing of all assets. The only question is when. I have to ask- does it really matter? If you know it is coming you should be prepared. It is probably better to be a year early than a second late. Central Banks are wasting no time buying gold in record amounts. Major banks are buying. Billionaire hedge fund managers are buying gold also. In the meantime, the regular guy is buying stocks because of a fear of missing out while corporate insiders are dumping their own shares in record amounts and CEOs are leaving at an unprecedented rate. Does this sound normal for a booming economy? Even countries are bringing their gold holdings home- not trusting others to hold their wealth. Recently, Poland brought back 100 tons from London. National Bank of Poland Governor Adam Glapinski says “The gold symbolizes the strength of the country”. In another National Bank of Poland statement “Gold is the “most reserve” of reserve assets: It diversifies the geopolitical risk and is kind of an anchor of trust, especially in times of tension and crises”. Well said in my opinion.
It is also being reported that Russia is exploring a gold-backed crypto-currency. Just maybe that is why Mr. Putin was so sure the dollar’s days are numbered when he made that statement a couple of weeks ago.
One thing is for sure. What is happening right now is NOT sustainable long-term. The fact that there is so much financial intervention, so much turmoil and angst around the globe and general instability it appears to me that we are near a MAJOR inflection point. As a matter of fact, if it weren’t for all of the Fed and other central bank intervention it is highly likely we would have the same type of situation happening right now as happened in 2008. The only difference this time is that they are not asking anyone for trillions- they are just providing it and keeping everyone as clueless as possible. It will all be ok- until it’s not!
Financial Advisor, Raymond James Financial Services, Inc.
2642 Route 940
Pocono Summit, Pa 18346
1-Gold price was $250.00 in 2000. Price now is $1480.00. Gain of $1230.00 (492% gain) 492divided by 19.9 years =24.72% Avg annual return.
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