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  • Anatomy Of A Market Bubble [View article]

    Sorry I was late in reading your latest, and arguably greatest, article. Your intricately spun narrative of a building market bubble(s), amply supported by data and charts revealing telling trends, is a masterpiece.

    Coming late to the party afforded me the opportunity to read all of the numerous comments, most of which were supportive. Those challenging your conclusions were based largely on opinion, not data, and were supportive of the commenters’ own strategies. I was shocked that there was very little, if any, commentary on, nor challenges to, the keen insights you revealed in the most crucial part, in my opinion, of your case-building story:

    “The chart below looks at the year-to-year change in the growth rate of the combined public and household debt. What we see is that we are closer today to moving into negative growth territory in credit expansion than we have been in decades:”

    (Chart showing precipitous drop in year-over-year rates of growth in total debt outstanding, from pre-recession level of 25%, to a post-recession bounce back to 16% in 2011, and then a steep drop to 6% by early 2014)

    You then go on to explain the importance of this chart as follows:

    “The reason this metric is so important has to do with the fact that we must have an expansion in money supply to support GDP growth. In the analysis above, we can clearly see that as we began to see a de-leveraging in mortgage debt we also saw a collapse in GDP. We know that money creation is achieved only through the process of borrowing it into existence. We also know that money, and therefore, debt - either public or private - provide the engine for GDP growth. And we also know that GDP growth is the engine for growth in corporate sales.”

    And then you explain why corporate sales (and GDP) growth rates have fallen off dramatically and will continue to decline:

    “Perhaps the best explanation for the very stagnant rate of growth since coming out of the recession is the fact that we simply aren't creating enough money to drive GDP as hard as that might be for some to believe. The real truth though lies in the fact that we are creating enough money - we just aren't allocating it in a way that provides GDP growth.”

    You then go on to explain, with the help of some great charts, where the money created has gone – onto banks’ balance sheets in the form of unprecedented levels of excess reserves and Treasury/Agency securities and corporate profits at historic levels, most of which have gone into buying shares of stock (their own as well as stock of others), leaving corporate cash balances even with historic levels, the bottom line being little to no increase in M2 levels that would be required to create “true recovery” levels of economic growth. Meanwhile, those corporate stock purchases (of both their own and others) have been a major driver creating the stock market bubble. Meanwhile also, the decimated middle-class, the main historic body of spenders responsible for 70% of GDP growth, is tapped out, and we’ll likely see negative growth rates in consumer spending in the near future.

    In my opinion, that’s game-set-match! As corporate sales increases go from declining rates of growth to actual declines, and as corporate profits begin reverting to mean, we will see the major market declines you predict…it’s just a matter of when.

    Sep 23, 2014. 08:42 AM | 1 Like Like |Link to Comment
  • The Fed Is Backed Into A Corner With No Way Out [View article]
    Thank you, Joseph, for clarifying the new momentum investing paradigm driving this market, the Fed’s urgent moves to prop up the dollar, and the importance of the carry trade, especially USD/JPY, in supporting both. As we have discussed, I believe “managing” the price of gold is another factor necessary to support the relative strength of the dollar; hence we have seen the recent gold run-up reversed in the past 10 days by almost $100 per ounce.

    The recent release on reverse repos by the Fed was typically disingenuous. “As an operational readiness exercise, this work is a matter of prudent advance planning by the Federal Reserve. These operations do not represent a change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future.” The clause in bold is hardly credible, as the accelerated pace of the reverse repos essentially has sanitized the ongoing volume of QE!

    I’m sure Ms. Yellen will keep stating that continued tapering, not to mention the ongoing reverse repo operation (which she won’t mention), is justified by the economy. In golf, we joke about the “power of the pencil” wielded by the scorekeeper in the foursome. The government is the sole scorekeeper when it comes to reporting statistics, and I would argue that have used that power (witness the accounting change last summer that added at least .5% to GDP; another favorite trick is reporting a high number that is revised lower later) and will continue to use it. Translation – I expect the reported numbers we’ll see in the coming weeks to be “positive,” as our government will do anything it can to continue this contrived “recovery” of ours.

    Mar 27, 2014. 06:51 AM | 1 Like Like |Link to Comment
  • The Least Understood Dynamic In Today's Economy And What It Means For Investment Assets [View article]

    Your clearest and best effort yet to warn of the building international imbalances and their likely coming negative impact on world stock and debt markets.

    In your explanation of QE's direct impact on rising stock values (cash from QE flowing into equities rather than into the economy, and the carry trade), you left out one other direct and powerful impact of QE -- record corporate profits and PE multiple expansion. With zero interest rates, and tepid economic growth leading to tepid top-line growth, corporations, rather than investing, added massively to profits via productivity gains (read employment cuts) and expanded PE multiples via massive stock buy-backs.

    Feb 20, 2014. 07:23 AM | 1 Like Like |Link to Comment
  • Why A Gold Play Finally Makes Sense [View article]
    Excellent analysis and writing, Joseph. The charts added greatly to readers' understanding. I'm sufficiently convinced to buy GLD and NUGT call options this morning.
    Re your statement on the banks' fortress balance sheets, you could not be more correct. Many do not realize that the banks' balance sheets have been enhanced by another factor (other than the obvious excess reserves) -- taking mortgage backed securities (MBS) off the hands of the banks at values likely much higher than market because of the FASB suspension of mark-to-market accounting rules in 2009 (an underhanded addition to the bank bail-out, as they were allowed to value assets however they wished). I estimate that the Fed's $4 Trillion balance sheet is more than one-eighth MBS. Whether the Fed ever sells them or holds them forever, the taxpayer will eventually pick up the losses.
    Feb 12, 2014. 11:33 AM | 1 Like Like |Link to Comment
  • Oxfam Report Suggests The NWO Is Almost Upon Us [View article]

    Excellent work – the article and the blogs! I could not agree more with your solution. Its greatest virtue is that it removes control from the mega-banks and places control where we have a fighting chance to insure that it is exercised wisely…unlike where the control currently resides. For those few commenting who disagreed with your premise regarding the bankers, I strongly recommend they read G. Edward Griffin’s “The Creature from Jekyll Island.” There, in 1913, the elitists who owned and controlled the major U.S. banks (and via family and friend relationships, the major banks of Europe), concocted the most sensational conspiracy in recorded history…and the conspiracy is alive and well 100 years later…and, as you say, nearing its culmination in the New World Order…absent our collectively coming to our senses (please, Joseph, no apologies for your use of the C word; it's exactly the right term!).

    While I agree with you that “fractional reserve banking” is the magic that creates money by creating debt (including mammoth amounts to sovereign nations, eventually picked up by the taxpayer), I think you underestimate the importance of the Federal Reserve to the scheme. The original Rothschild patriarch, Mayer Amschel Rothschild, certainly realized the central bank’s importance when he succeeded in selling the concept of the first one – the Bank of England – in the late 1700s, witness the following quote years later by one of Mayer’s five sons, Nathan Mayer Rothschild, one of the wealthiest individuals ever to walk the earth, “I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain’s money supply controls the British Empire, and I control the British money supply”

    And in "Creature" (referenced above) Griffin said “It was realized that the bankers would have to become partners with the politicians and that the structure of the cartel would have to be a central bank.” According to Griffin’s research, the five objectives of the bankers in creating the Federal Reserve were: “stop the growing competition from the nation’s newer banks; obtain a franchise to create money out of nothing for the purpose of lending; get control of the reserves of all banks so that the more reckless ones would not be exposed to currency drains and bank runs; get the taxpayer to pick up the cartel’s inevitable losses; and convince Congress that the purpose was to protect the public” ("Creature," p.23). So I think there is little doubt that the bankers’ scheme would not be possible without a powerful central bank (whom the elites own and control) to manage the currency and help them in exercising political control of the government.

    As for the Oxfam “85 richest” report that provided empirical support for your conclusions, I checked out the Forbes list and, surely enough, the top 85 added up to just under $2 Trillion, which is indeed less than 1% of total world net worth ($240 Trillion), which would equate to about $600 average net worth for half (3.5 Billion) of the world’s population, versus an average of $20 Billion+ for the top 85. Curiously, however, there were some prominent names missing from the top 85 list – Rothschild, Rockefeller, Vanderbilt, Carnegie, Mellon, Morgan, etc. – and I know that some of the descendants of these very wealthy families…are very wealthy themselves (e.g., Nathaniel Rothschild) with an estimated net worth in excess of $50 Billion, “including Swiss trust accounts.” So my bet is the number of people whose combined wealth is more than that of half the world’s population is, in reality, far fewer than 85.

    Thank you, Joseph, for your tireless research, your logical conclusions and your excellent writing.

    Feb 2, 2014. 07:42 PM | Likes Like |Link to Comment
  • A Solution For Creating Stable Economic Growth And Why We Will Never Implement It - Part 2 Defining The Solution [View instapost]

    You have (long) been the quintessential observer, analyst, and reporter on our ongoing economic and political malaise, brought on by ill-advised monetary and economic policies and complicit, if not corrupt, government "leaders." I create a new word to describe the misanthropic "economists" and puppet politicians responsible for the mess we're in -- "destructionists!" Their concerted efforts to destroy are at the bidding of the direct descendants of those industrialist and banking elites who, 100 years ago, created “The Creature from Jekyll Island” (see G. Edward Griffin’s book), without doubt the greatest and most sensational scandal ever perpetrated in the history of civilization. You quoted several of them in your recent excellent writings.

    But you now move from commenting to offering a solution, one that is so brilliant in its simplicity. I did not see your reply to wmateri’s good points, but I’m sure they were equally good. And I’m equally sure that no “perfect” solution exists, but your suggestion is a sound economic base from which reasonable and honest leaders (who are unfortunately in very short supply today) can craft a final solution that has the greatest chance to succeed.

    Of course, your plan can never be even communicated widely, much less enacted, so long as the criminal industrialist and banker elites retain control. But I to add to commenter Roletee’s comment above – “I do agree that such a system might emerge on the day that we all stare into the abyss of our current system in collapse - that might create the conditions for the right thing to be done…” – with a “revolutionary” idea – a political framework within which your economic solution can be put into place. It too is simple in its concept; remember, this plan’s enactment begins as we all “stare into the abyss of our current system in collapse.”

    The first need is a leader with Dr. Ron Paul’s knowledge and honesty, combined with the charisma of a re-incarnated Ronald Reagan.

    Second, we turn the social networks and the internet into a creative communications tool and reach a great majority of the American public (the 99+ percent) with a simple message that will “go viral” – corrupt governmental regimes of the past that have brought us to this point in history…ARE NOW history themselves – thereby leading to an “American Spring” similar to the “Arab Spring” 3 years ago that toppled dynasties, and announcing a new political movement with the following key components and attributes:

    ● the announcement of a new Constitutional Convention, with delegates chosen by an open election run by the newly patriotic leaders identified in each state; the theme of the convention will be a pledge to return to governance under the Constitution as it exists, rather than tinkering with it, tightening laws under the Constitution to eliminate the great document’s being distorted and corrupted; if we need to give new political entity a name, it could be the New Patriots (or N-Pats)

    ● the current basic governmental structure created by our country’s founders will be retained – it has worked well for a few brief periods of our history, those in which a central bank system was absent

    ● going forward, the only “special interest group” is the American people

    ● lobbying and lobbyists will be totally outlawed

    ● government will be dramatically downsized

    ● the Federal Reserve System will be eliminated; the U.S. currency will be issued and managed by the U.S. Treasury

    ● the military industrial complex will be dismantled, and our military will be downsized substantially; our new greatest strength will once again become economic might under a completely open and honest system

    ● a new tax code will be written that is (1) greatly streamlined and (2) fair and equitable

    ● dramatic entitlement reform will be an urgent priority as part of the economic/monetary re-set that will be required in the aftermath of the precipitating collapse leading to this “revolution”

    ● the responsible industrialist and banking elites that perpetrated the current fraudulent condition will be tracked down, arrested, and tried as war criminals; the class of players just below the elite level who were, willingly or un-willingly, complicit in the crimes against humanity, would be offered amnesty upon repenting and swearing allegiance to our new constitution-centric way of life…and they will be monitored

    ● the “new” U.S. will not attempt to impose its political, economic, or ideological will on others; rather we will respect the sovereignty of other nations, try to live in peace with them, trade with them, and continue to help where there are urgent needs, with the latter (1) being second in priority to similar domestic needs, and (2) not being used as bribes or supporting corrupt regimes, as currently is the case

    This list above is, of course, incomplete. It must be expanded greatly, but it is a start, and it reflects the key principles of the new order. The key to this idea is a peaceful revolution precipitated by a viral mass communication campaign to the American people, utilizing the social networks and the internet, exposing the fraudulent regime in charge for most of our 220+ years of history, and announcing a “call to arms” for a new constitutional commitment and a dramatically reformed government.

    Until my real education began (only about 4 years ago) I often longed for the days of what I thought was the post-World War II “golden era” of the United States…only to learn that it was mostly an illusion. Going off the gold standard in 1971 and the repeal of the Glass Steagall Act in the late 90s – these were the two key events that freed the Federal Reserve the mega-banks, and complicit government leaders to accelerate the movement toward a New World Order, long the plan of the world’s elites, with those elites in charge, and with the remainder of us in various positions of servitude. But I have hope that good will arise out of the disaster that looms before us.

    Thank you, Joseph, for your continuing to feed us your valuable insights, from another of your avid followers.

    Jan 26, 2014. 06:53 PM | Likes Like |Link to Comment
  • A Disturbance In The Force [View article]
    Great article Mr Flynn...and prescient comment Mr North. I agree that Mr Market likes to do the opposite of what is expected, but I believe also that he enjoys reacting to occasional black swan events and isn't bothered by his not being able to price them in. Neither can Mr Bond Market...his yield is near 5-year highs just on the unlikely near-term tapering risk. As for black swans, Mr Draghi staved off the blackest of them in 2011 with his simple but eloquent words and the ECB avoided a grey one in Cyprus via its newly discovered central planning tool, the bail-in, which is in the US's arsenal also. But the Mother of All Swans is coming in this upside-down, centrally-planned world of ours, and it likely will not be one of the tens of them that we can visualize. I take comfort in making this prediction via, if nothing else, the broken-clock theory...but I think it'll come in my lifetime.
    Dec 12, 2013. 07:21 AM | 1 Like Like |Link to Comment
  • Moving Goalposts [View article]
    Great article, Inflation Trader, and so cleverly written. Ms Yellen's testimony purports to provide us assurance, allowing us to sleep well each night, knowing that the fate of our world is in the competent hands of brilliant they continue to pursue the only policies they know....out of absolute desperation! DA
    Nov 15, 2013. 07:06 AM | 4 Likes Like |Link to Comment
  • Debt Ceiling And Stocks: Why The Media Is Deceiving You [View article]
    Excellent commentary, JK. The truth is in short supply from our nation's political and financial "leaders," further exacerbated via delivery through their mainstream media mouthpieces. Your article is a refreshing breath of fresh air!
    Oct 18, 2013. 10:31 AM | 3 Likes Like |Link to Comment
  • The Real Crisis For Washington And Wall Street [View article]
    Bravo, Mr. Parnell. You couldn't have said it better. We are living in desperate times where our financial and political leaders are attempting to hold together an extremely fragile imbalance in every aspect of our economy (very high "real" unemployment and under-employment, tepid growth that is not likely even what is reported, suppressed interest rates, artificially inflated corporate profits, and our eviscerated middle-class, among many others). The most telling indicator to me is where our national "lie meter" needle is pointing (almost straight up!). Our financial and political leaders HAVE TO lie to us in order to keep the current crop of bubbles inflated and especially to keep at bay any issues threatening to prick them. A major re-set is coming, including the third and major correction in the current secular bear market that you explain so clearly, and I believe it is not far off.
    Oct 10, 2013. 07:03 AM | 7 Likes Like |Link to Comment
  • SPY Vs. VXX: Pimco Chiefs Call For More Volatility [View article]
    Are your projected "rosy results for many companies" for 3Q 2013, for which there has been a record multiple of negative versus positive estimate revisions by companies (almost 5 to 1)?
    Oct 7, 2013. 06:57 PM | Likes Like |Link to Comment
  • Take Me Out To The Stock Game [View article]
    Your "Financially Healthier Consumer" chart is grossly misleading. It must be "average" net worth, which includes, of course, the upper band of "consumers" where the preponderance of the wealth effect has been realized. Try median (main street America) on for size. You'll get a dramatically different picture, and it's mainstream Americans that have to spend (as in 70% of GDP) in order to spur economic growth.
    Oct 6, 2013. 08:28 AM | 4 Likes Like |Link to Comment
  • Racing Toward The Zombie Apocalypse [View article]

    Thank you for this excellent commentary on our upside-down world! It rubs all my prejudices in exactly the right way. I am preparing for the zombie apocalypse. The zombies, along with mainstream citizens of the world that are incapable or unwilling to look at the facts and arrive at their own non-mainstream-media influenced conclusions, are in for some long days ahead.

    Sep 18, 2013. 11:16 AM | Likes Like |Link to Comment
  • As The Bernanke Era Comes To An End A New Global Paradigm Is Almost Certain But Few See It Coming [View instapost]

    Another set of pieces masterfully placed into the puzzle! I'm glad you called on Henry Ford and Lord Acton to illustrate the absolute insanity of our government and financial leaders in pursuing policies, and non-policies, that let the middle-class, actually median net worth is at least 35% below (in 2011) 2005 highs, while that of the "average" American has increased substantially thanks to the stock market bubble. As you know, Chairman Bernanke outright lied to Congress, and to us, in July when he said his policies have not helped "Wall Street more than Main Street" Americans and that the Fed is "focused on Main Street America." Appalling!

    As for your change of opinion on tapering, I still believe it will start after the September meeting. Last week's hurried (and I believe contrived) first revision to 2Q GDP estimate from 1.7% to 2.5% set the stage for it; if the upcoming jobs report prints surprisingly high, I think it's even more likely. If you are correct, the jobs report will be a stinker.

    I'm also glad you found Jim Rickards' work to help you in continuing to connect the dots.

    While Keynes is derided by economic conservatives, he got it right in Bretton Woods re the sovereign reserve currency conundrum; he also said that in addition to government's need to prime the pump during economic downturns, we also should pay down government debt during periods of budgetary surplus...I suppose his disciples forgot that part of his theory.

    Based upon your zeal to dig in and find these urgent truths, so obvious in your excellent ongoing commentary, I believe your 100- hour-per-week claim, and I thank you for it.

    Sep 2, 2013. 04:00 PM | 2 Likes Like |Link to Comment
  • Short-Term/Long-Term Forecast Of Stocks, Bonds And Gold [View article]

    Thanks for another well-thought-our and clearly expressed assessment of the state of the markets. I agree with all three of your calls – stocks, bonds and gold.

    Regarding gold, however, I don’t know if I’m a gold bug or not, but I am a substantial investor in gold (and silver), and my motivation is not the anticipation of a coming inflation or hyper -inflation (though one or both could indeed happen at some future point). Rather my motivation is the reason you cited for your call for gold to rise – the likelihood of a reserve currency change, and my belief that gold will have a role. I firmly believe the dollar’s days are numbered as the predominant currency for international trade. It has already eroded from 72% to 61% of international trade transactions since 2001, and the recently agreed upon direct trade agreements that China has negotiated with BRICs and other countries, including some in Europe, have yet had time to gain traction.

    There have to be reasons for the maniacal accumulation of gold by China, the other BRICs, and many other central banks over the past several years, and I believe it is the likelihood of a non-sovereign reserve currency evolving. It has been the logical move since Keynes recommended it at Bretton Woods and since Triffin expounded his dilemma/paradox more than 40 years ago. Moreover, I believe it could be happening as we speak. The Jackson Hole meeting at which Bernanke mysteriously announced his non-attendance in April is less than 3 weeks away, and a G20 meeting is coming up September 5 in Russia. Bullion banks and gold exchanges are scrambling to get their hands on increasingly scarce physical gold, and why should it take 7 years for the U.S. to deliver one-fourth of Germany’s gold supposedly being held in U.S. vaults? More immediately, the GOFO rate has gone negative, which hasn’t happened since just before Lehman’s collapse. We could be in for some interesting times soon!

    Aug 12, 2013. 01:15 PM | Likes Like |Link to Comment