Welcome to the 04-11-18 update from your Pocono Summit Financial Planner and retirement planner, Mike Savage. Today, Mike discusses how printing of money and issues surrounding the generation of debt may have dire consequences.
Many of you may have not heard of Gerald Celente but he is known as one of the world’s best Trend forecasters. He has come up with a few quotes I like to use like “When people lose it all- they lose it!” and “When all else fails- they take you to war!”.
It seems that these two quotes are unusually important as I sit down to write this. The gap between rich and poor has become such a great chasm that many are starting to rebel all across the globe. This is one reason that the war cycles mentioned by Larry Edelson prior to his demise have been ramping up for years and face a crescendo around 2020.
In my opinion, many have been deceived by rising stock markets, low bond yields and a general lack of volatility – until recently. Bond rates are being kept dead low with trillions of “printed” out of nowhere currency units providing demand where none would likely exist – at least not anywhere near these terms and rates.
Even with the massive intervention rates are creeping up. This is seriously something to keep an eye on. I have said many times that if bond rates explode higher the stock, bond and real estate markets will suffer.
Stocks are being artificially propped up by central bank direct buying of stocks and stock ETFs. It has been shown that the Japanese Central bank has bought ETFs and stocks when the Nikkei has been weak.
Wouldn’t it be great if we could ALL just hit a button and purchase any asset that we want? Oh yeah- we would go to jail for that!
This would be tragic if this is all there was but the low interest rates are keeping assets such as real estate artificially elevated because of the lower carrying costs that the low rates provide. The low rates also allow companies to buy back their own stock. According to Money GPS a staggering $4 trillion has been spent on stock buybacks since 2009. In addition, the largest amount of buybacks occurred in the first quarter of 2018. To me, this is an ominous sign because even with all of the intervention from all over the globe stocks are showing signs of a bear market formation.
It appears that all of this support is not quite enough to take us to new highs. Of course, there is no limit on the amount of “money” they can throw at the problem. There is, however, in my opinion, a point where the “printers” will lose all credibility.
When will that be? I don’t know but I will tell you this. It could be fairly soon. According to ZeroHedge (Article Global Debt Hits Record $237 Trillion, Up $21 Trillion in 2017). The world issued $21 TRILLION in new debt- in one year! The sad part is that much of this debt was likely being used to pay interest on existing debt, paying social welfare programs, fighting wars, and paying for current projects. Translation: This is debt that I call BAD DEBT. It is a debt that is consumed and produces nothing but more debt. It is a vicious cycle- once started it is almost impossible to stop- particularly when your starting point is far past the ability of the underlying economy to carry the debt already. That happened in 2008! Now, we are over $110 trillion more in debt than then and, as I have written many times in the past, each intervention has to be larger than the last to get the same results. $21 Trillion is a staggering number for new debt in one year.
There are rumors all over the place about derivative problems at many major banks. It is estimated that around $575 trillion in derivative exposure exists just based upon interest rates and that $2 Quadrillion exists in derivative exposure overall. Keep in mind that these are estimates because a large portion of these trades are unregulated.2 A quadrillion is a thousand trillions for those of us who stopped paying attention at a billion many years ago not believing that these numbers would ever be used- who knew?
My point here is that the numbers are getting so absurd that it may just be time for a black swan event that may lead to some sort of a war and an excuse for a global reset.
I listened to Michael Savage- the radio host who uses my name- and crowds me off of the internet because of his notoriety- and he made a compelling argument based upon his knowledge (PhD in epidemiology) that Sarin gas could not have been used in the chemical attack in Syria. He said it was likely Phosgene.
He showed a picture of people attending to the injured with no masks and no gloves. He stated that if this was Sarin gas they would all be dead. That is pretty convincing to me!
It appears that every time the USA threatens to leave Syria- which is what Syria, Iran and Russia want- somehow Assad gets chemical weapons and uses them on his own people even though he is essentially in control of the country again. To me, this makes NO sense. Many are calling this a false flag event which doesn’t mean it didn’t happen but that those being blamed for carrying it out are likely just scapegoats.
There are many reports about Chinese and Russian warships meeting up and Russian planes harassing US naval vessels near the Syrian coast.
While Gregory Mannarino has been updating us on the monstrous interventions in the US Treasury Bond markets and others have been reporting on record bond buys of corporate debt by the ECB to keep European corporate debt rates low it appears the interventions just may be reaching a crescendo and that the next move may possibly be in an area that is non- monetary.
I can’t imagine a scenario where a shooting war- regardless of how limited it may or may not be could be good news for asset values of traditional assets. I do, however, see in a situation such as this where certain currencies could benefit, and gold, silver, oil, and other tangible assets could also see price spikes.
I am in no way predicting anything. I am just exposing the fact that the numbers are off the charts and there are a few ominous signs taking place particularly in the Middle East. I should not neglect to mention China also where they are trading oil contracts in Yuan. The last few countries that didn’t use the US dollar for settlement of oil were Iraq, Libya, currently Iran. That is not a great list to be on!
There are reports that actual oil may settle in Yuan before the end of 2018. (Reuters.com 3-29-18)
Who knows what comes next. All I can do is implore you to be as diversified as your assets will allow you to be and …
Mike Savage, ChFC, Financial Advisor
Securities are offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.
Any opinions are those of Mike Savage and not necessarily those of RJFS or Raymond James. Expressions of opinions 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 n ot 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.
Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only form a small part of a diversified portfolio. There may be sharp price fluctuation even during periods when prices are overall rising. Precious metals, including gold are subject to special risks, including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.
Diversification does not ensure gains nor protect against loss.
1- X22 Report / Central Bank Reports
2- Zerohedge.com, etc.