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Graham Summers
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Graham Summers is Chief Market Strategist for Phoenix Capital Investment Research, an independent investment strategy firm based in Washington DC with clients in 56 countries around the world.
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  • Graham Summers’ Weekly Market Forecast (5/18/15)

    Last week was options expiration week (equities and indexes). This is the week for market gaming as usually two things happen:

    1) The Fed juices the market to provide additional liquidity to Wall Street.

    2) Wall Street uses the additional liquidity to gyrate the markets to make sure as many options positions as possible expire worthless.

    Today is Monday, which has become a rally day for stocks. However, there are several large negatives on the horizon.

    The first concerns Greece. For three years now we've been told that Greece was "fixed." It was not for the simple reason that you cannot fix a debt problem with more debt. There are only four ways to solve a debt problem:

    1) Default

    2) Restructure (partial default)

    3) Pay it off

    4) Inflation (a default of sorts)

    Greece cannot engage in #4 because, as part of the Euro, it cannot print its own currency. This leaves one of the other three. Thus far, the IMF, ECB, and EU Government have managed to avoid facing the music largely because Greek politicians have been willing to sacrifice their economy in order to remain in power.

    This appears now to be changing. The current Greek ministers seem far more willing to disagree with the Troika, to the point that there is talk of a Grexit (Greece leaving the Euro) on the other side of the aisle, particularly from Germany.

    At the end of the day, it all boils down to money. Greece doesn't have it. In fact, its latest payment to the IMF was made using funds from the IMF. The country is completely broke and has been raiding social security funds and other Government vehicles just to keep the lights on.

    Greek banks have about 3 weeks worth of collateral on hand to remain solvent. And the country as a whole has 14 debt payments worth over €5.5 due within the next 10 weeks. This doesn't sound like a lot… but for a country that was able to only raise €450 million by raiding its municipalities in April, it's a gargantuan sum.

    The Euro has found support at 1.05. The real issue will be just how much Euro strength ECB President Mario Draghi is willing to stomach before he smashes the currency down again. The lines to watch are below.

    The Greek mess has lit a fire under Gold again, which appears to have bottomed in both the Euro (NASDAQ:BLUE) and the Japanese Yen (red). The one exception is Gold priced in US Dollars mainly because the US Dollar has been so strong for much of the last 9 months.

    It is not surprising that Gold is moving higher against most major currencies… the global Central Banks have openly declared a war on cash. Globally over $5 trillion in bonds have nominal yields that are negative… meaning that investors are PAYING for the right to own these bonds.

    But this is just the beginning. Indeed… we've uncovered a secret document outlining how the US Federal Reserve plans to incinerate savings.

    We detail this paper and outline three investment strategies you can implement

    right now to protect your capital from the Fed's sinister plan in our Special Report

    Survive the Fed's War on Cash.

    We are making 1,000 copies available for FREE the general public.

    To pick up yours, swing by….

    http://www.phoenixcapitalmarketing.com/cash.html

    Best Regards

    Phoenix Capital Research

    Tags: SPY, GLD
    May 18 12:19 PM | Link | Comment!
  • How High Are Real Costs That Wood Pulp Is Substituted For Meat?

    up in nominal price hikes because it never does at first… As we noted last week…

    Let's be clear here… inflation does NOT mean prices have to move higher in nominal terms. The reason for this is because companies cannot and will not simply raise prices overnight. Consumers will not simply put up with the cost of a good going up time and again.

    So don't look for the cost of an item to necessarily go straight up in nominal terms. This can happen, but more often than not, corporations engage in a number of different strategies to maintain profit margins without raising prices.

    These strategies include:

    1) Shrinking the box/package of the good, thereby selling less for the same amount.

    2) Not filling the package all the way; again selling less for the same amount.

    3) Changing what's considered a "serving size" or the quantity of good being sold.

    4) Swapping in lower quality ingredients, thereby selling a lower quality good for the same amount.

    Companies have been doing all of these since 2008. Most recently however, costs have risen to the point that these strategies won't cut it anymore. Consequently, we're starting to see prices going up across the board.

    Regarding #4, Burger King was caught putting wood pulp in its burgers.

    There may be more fiber in your food than you realized. Burger King, McDonald's and other fast food companies list in the ingredients of several of their foods, microcrystalline cellulose (NYSE:MCC) or "powdered cellulose" as components of their menu items. Or, in plain English, wood pulp.

    The emulsion-stabilizing, cling-improving, anti-caking substance operates under multiple aliases, ranging from powdered cellulose to cellulose powder to methylcellulose to cellulose gum. The entrance of this non-absorbable fiber into fast food ingredients has been stealthy, yet widespread: The compound can now be found in buns, cheeses, sauces, cakes, shakes, rolls, fries, onion rings, smoothies, meats-basically everything.

    The cost effectiveness of this filler has pushed many chains to use progressively less chicken in their "chicken" and cream in their "ice cream." McDonald's ranks highest on the list with cellulose integrated into 14 of their menu items including their renowned fish fillets, chicken strips and biscuits, with Burger King ranking second on the list with 13 menu items containing cellulose. Moreover, many cellulose-laden ingredients (such as honey mustard, bbq sauce, and cheese blends) can be found in multiple items throughout the menu making the filler difficult to avoid.

    qz.com/223742/there-is-a-secret-ingredie.../

    One has to wonder… just how high are real costs that a food company substitutes wood pulp for meat?

    One also has to wonder… just how accurate is the CPI or any government inflation metric that looks primarily at nominal pricing? The simple answer to that one is "not accurate at all."

    Inflation is a reality. Firms around the world are doing whatever they can to maintain profits while keeping costs low. Using wood pulp instead of meat in burgers is just one more trick.

    We'll be seeing more stories like this in the coming months. I wouldn't be surprised if food companies everywhere have been resorting to similar strategies.

    This concludes this article. If you're looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html.

    This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.

    Best Regards

    Phoenix Capital Research

    Jul 17 1:55 PM | Link | Comment!
  • The Federal Reserve Has Effectively Killed The Capital Markets.

    The Federal Reserve has effectively killed the capital markets.

    This statement may seem rather extreme. But to understand our meaning, you first have to assess the purpose of the capital markets.

    The purpose of the capital markets is to connect capital with business to create value. Investors want returns, businesses want growth. The capital markets are meant to be the mechanism through which these two groups interact. And the markets, representing the collective wisdom of investors, dictate the risk of each transaction.

    So what has the Fed done?

    Long before the 2008 Crisis hit, the Fed was already actively screwing up the markets and capitalism by stepping in to hold the markets up anytime a crisis developed. Long-Term Capital Management, Chrysler, the Asian Crisis, etc.… the list goes on and on.

    We are not suggesting that intervention on some level is not warranted. However, as anyone with even a remote understanding of human nature knows, if you continually enable certain behaviors, they will only increase in intensity and frequency.

    Indeed, the unintended consequence of the Fed's actions was that an entire generation of investors came to believe that anytime something terrible emerged in the Financial System, the Fed would step in. Faith in capitalism and the markets was replaced by faith in the Fed.

    The 2008 crisis can be directly linked to this thinking. Investment banks made trillions of dollars in bad bets leading up to the Crash. They would not have done this if they had not been

    A) allowed to increase leverage levels (a failure on the part of regulators of which the Fed is one)

    B) under the impression that the Fed would help them should the proverbial stuff ever hit the fan.

    Then 2008 happens and the Fed becomes involved in ways never before dreamt of. Since 2008, the Fed has actively pumped money into the financial system over 90% of the time.

    Reconsider that last sentence. Going back to 2008, if you go on a month-by-month basis, the Fed has been putting money into the system over 90% of the time… for FIVE YEARS. This adds up to nearly $4 trillion.

    From a secondary perspective, the Fed has become so involved in the markets that the single biggest focus for investor research today is what the Fed intends to do or what it means.

    Earnings, balance sheets, value… all of that stuff is secondary to the utterances of a group of academics most of whom have never run a business. That's how screwed up the system has become, courtesy of the Fed's incessant intervening in the markets.

    Does the Fed actually have a clue what it's doing? Its forecasting and modeling track record doesn't suggest it. You have to truly dig deep to find anything in the post-Volcker Fed era in which the Feds accurately predicted anything of significance.

    After all, if the Fed is wrong about something, what is the consequence? No one at the Fed gets fired. No one gets demoted. The Fed simply intervenes again and the world moves on.

    If you've spent any time in the corporate world, you'll recognize that a business's culture can ultimately be traced back to leadership and old habits.

    The Fed is, for all intensive purposes, the leading monetary authority for the capital markets. And the Fed is anything but a capitalist institution. It doesn't operate according to the basic tenants of capitalism.

    Just look at Ben Bernanke. He was wrong about everything leading up to the 2008 collapse. On top of this, his policies in the post-2008 era:

    1) Punished millions of Americans who rely on savings and interest rates for income.

    2) Sparked widespread inflation particularly in food prices, which fomented civil unrest (the Arab Spring), and even starvation.

    3) Provided insider information behind closed doors to select groups of hedge funds and institutions well before the making public statements about policy.

    Was he fired? Nope. He earned roughly $200K per year as Fed Chairman. Since retiring he now makes $250,000 per speaking engagement. His failure as Fed Chairman (easily the reason why he chose to stay only two terms) actually benefitted him tremendously.

    The Fed and its policies have warped the culture of capitalism to the point that we now exist in a Centrally-Planned nightmare in which a handful of academics influence the economy and world reserve currency with every speech and verbal statement.

    Worst of all, if they're wrong, none of them have anything to lose. The losers are the 7+ billion people in the world who end up losing money, starving, or working twice as hard to make ends meet as a result of the Fed's policies.

    The Fed has killed the capital markets.

    This concludes this article. If you're looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html.

    This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.

    Best Regards

    Phoenix Capital Research

    Jul 17 1:51 PM | Link | Comment!
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