Swiss America Blog Archive

Swiss America Blog Archive


12.2.22 - Will stocks recover in this decade?

Gold last traded at $1,797 an ounce. Silver at $23.14 an ounce.

EDITOR'S NOTE: Billionaire Leon Cooperman is speaking up about the sting of future price inflation, the long-term repression of financial markets and the mirage of bitcoin. There is no shortage of opinions as to what the future holds, but it's worthwhile to take a closer look when people who have seen this all before are talking.

Billionaire investor Leon Cooperman says the S&P 500 won't hit a new high for a long time - and predicts a US recession and stubborn inflation - Markets Insider

bears By Theron Mohamed

  • Leon Cooperman expects the S&P 500 to eke out mediocre returns for the rest of this decade.
  • The billionaire investor predicts a US recession and stubbornly high inflation.
  • Cooperman trashed crypto, saying he was happy the government never endorsed it.

US stocks will suffer a hangover for years, and the US economy will endure stubborn inflation and slump into recession, Leon Cooperman has warned. He also trashed cryptocurrencies following the recent collapse of Sam Bankman-Fried's FTX exchange.

"We've been through probably the most speculative period in our financial history, aided and abetted by foolish fiscal and monetary policy," the billionaire investor told CNBC on Wednesday.

Cooperman pointed to the boom in cryptocurrencies, special-purpose acquisition companies (SPACs), and commission-free trading during the pandemic, fueled by near-zero interest rates and historic amounts of government stimulus.

He warned that after years of easy money and rampant speculation, ... READ MORE

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11.30.22 - Double-digit percentage drop to hit stocks?

Gold last traded at $1,769 an ounce. Silver at $22.17 an ounce.

Wild ride': Morgan Stanley's Mike Wilson predicts double-digit percentage drop will hit stocks in early 2023 - CNBC

What's in your portfolio? As we get ready to head into a new year, some analysts are suggesting that the bear in this market is still not ready for hibernation. Earnings forecast are not rosy and the fundamentals are still a bit suspect; to put it mildly. Read on to see what these forecasts may mean for your portfolio.

Investors may be on the doorstep of a deep pullback.

Morgan Stanley's Mike Wilson, who has an S&P 500 year-end target of 3,900 for next year, warns corporate America is getting ready to unleash downward earnings revisions that will pummel stocks.

"It's the path. I mean nobody cares about what's going to happen in 12 months. They need to deal with the next three to six months," he told CNBC's "Fast Money" on Tuesday. "That's where we actually think there's significant downside. So, while 3,900 sounds like a really boring six months. No... it's going to be a wild ride."

Wilson, who serves as the firm's chief U.S. equity strategist and chief investment officer, believes the S&P could drop as much as 24% from Tuesday's close in early 2023.

"You should expect an S&P between 3,000 and 3,300 some time in probably the first four months of the year," he said. "That's when we think the deacceleration on the revisions on the earnings side will kind of reach its crescendo." READ MORE


gold Derivatives Time Bomb - Is **YOUR** Bank on this list? - Hal Turner Radio Show

As the woes of FTX have dominated the news in recent weeks, it would appear an issue related to them may be getting ready to rear its ugly head again. The connectivity derivatives have to the various asset classes creates a compounded vulnerability; meaning if one domino falls, there's a potential they all may fall.

For years there has been much talk about how "Derivatives" are a gigantic problem, and if Derivatives Markets collapse, it is the end of the financial world as we know it. We looked at Bank exposure to "Derivatives" and below is a list that will likely frighten you. US Banks are on the hook for two Quadrillion dollars, in "Derivatives." Is **YOUR** bank on this list? If it is, ask yourself "If they LOST all this money, would MY money still be safe in this bank?" Act accordingly.

Below is the list of United States banks and how much exposure they have to "Derivatives." Two quadrillion dollars is the total notional value of derivative contracts off-balance sheet. Need collateral.

It’s notional. Not sustainable. Triffins dilemma. Dollar shortage. More collateral. But from where?

Of course, net notional value is completely different than directional risk. Just seeing these numbers does NOT indicate how much the bank itself is on-the-hook for.

Moreover, there is still value in the underlying commodities for many of these derivatives. People that think these are all bilaterally netted (Hedged) and those people are partially correct. But that bilateral netting will lead to the complete collapse of equities markets.

The numbers are utterly staggering and logic dictates the banks with the highest exposure, have the most to lose.

Being that derivatives are interest rate sensitive, for most of these banks, it’s a doomsday scenario. READ MORE


Market Crash Alert: FTX Could Still Be the Next Lehman Brothers - InvestorPlace

Will the recent woes associated with the FTX collapse create a Lehman Brothers-style collapse with a similar consequential ripple effect throughout the markets? This event is yet another example of the very delicate underbelly of today's marketplace. Nobody wants to relive 2008, but is a crash of that magnitude a realistic possibility?

Will FTX's collapse ring in a wider market crash like Lehman Brothers in 2008?

As fears continue to swirl that FTX’s bankruptcy may lead to a wider market crash, parallels are being made to another once-upon-a-time financial darling: Lehman Brothers. While some maintain FTX’s losses will be relatively self-contained, investors shouldn’t underestimate the lag between major market catalysts and eventual economic repercussions. It’s not too late for FTX to become the next Lehman Brothers.

In 2008, Lehman Brothers, the then-fourth largest investment bank in the country, declared bankruptcy due to overexposure to the collapsing subprime housing market.

For many, this was confirmation that the once-booming real estate industry would give way to a widespread, malicious recession. What followed Lehman’s demise was a virtual firestorm of government intervention in order to prevent a wider collapse of our entire economic system, bringing about a major recession in its stead. In 2022, it’s not hard to see the analogy with Sam Bankman-Fried’s monolithic crypto platform.

FTX was the crypto exchange. It had dozens of brand deals, endorsements from the biggest celebrities, billions of dollars in investments, and a renowned founder. FTX was the second-largest crypto exchange in the world.

On Nov. 8, FTX stopped allowing customers to withdraw cash from the platform in fear of a virtual bank run. This, it turned out, was because ... READ MORE

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11.29.22 - FTX Could Be the Trigger to a Major Market Crash

Gold last traded at $1,748 an ounce. Silver at $21.24 an ounce.

Market Crash Alert: FTX Could Still Be the Next Lehman Brothers - InvestorPlace

EDITOR'S NOTE: Will the recent woes associated with the FTX collapse create a Lehman Brothers-style collapse with a similar consequential ripple effect throughout the markets? This event is yet another example of the very delicate underbelly of today's marketplace. Nobody wants to relive 2008, but is a crash of that magnitude a realistic possibility?

Dana Summers/Copyright 2022 Tribune Content Agency

Will FTX's collapse ring in a wider market crash like Lehman Brothers in 2008?

By Shrey Dua

  • With FTX at the center of a potentially major crypto collapse, parallels to the 2008 financial crisis continue to gain validity.
  • Some argue FTX could be the 2022 equivalent of the Lehman Brothers.
  • While markets have been relatively stable given the magnitude of FTX’s collapse, we could be in a sort of lag before the storm.

As fears continue to swirl that FTX’s bankruptcy may lead to a wider market crash, parallels are being made to another once-upon-a-time financial darling: Lehman Brothers. While some maintain FTX’s losses will be relatively self-contained, investors shouldn’t underestimate the lag between major market catalysts and eventual economic repercussions. It’s not too late for FTX to become the next Lehman Brothers.

In 2008, Lehman Brothers, the then-fourth largest investment bank in the country, declared bankruptcy due to overexposure to the collapsing subprime housing market.

For many, this was confirmation that the once-booming real estate industry would give way to a widespread, malicious recession. What followed Lehman’s demise was a virtual firestorm of government intervention in order to prevent a wider collapse of our entire economic system, bringing about a major recession in its stead. In 2022, it’s not hard to see the analogy with Sam Bankman-Fried’s monolithic crypto platform.

FTX was the crypto exchange. It had dozens of brand deals, endorsements from the biggest celebrities, billions of dollars in investments, and a renowned founder. FTX was the second-largest crypto exchange in the world.

On Nov. 8, FTX stopped allowing customers to withdraw cash from the platform in fear of a virtual bank run. This, it turned out, was because ... READ MORE

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11.28.22 - Biden Stuffs America's 401(k)s With ESG

Gold last traded at $1,740 an ounce. Silver at $20.92 an ounce.

For Thanksgiving, Biden Stuffs America's 401(k)s With ESG - ZeroHedge

EDITOR'S NOTE: As we entered into Thanksgiving weekend this year, President Biden presented us Americans with some extra stuffing for our 401ks. Stuffing that will further flatten our retirement returns and will ultimately give us the gift of anemic retirement savings. Read more to see what the experts are saying.

{Image Courtesy of ZeroHedge}

by Tyler Durden

On Tuesday, the Department of Labor finalized a rule that provides regulatory cover for retirement plan sponsors who want to emphasize environmental, social and governance (ESG) factors in plan management.

Since 1974, the Employee Retirement Income Security Act (ERISA) has rightly required that plan sponsors act "solely in the interest" of employees and beneficiaries when selecting and monitoring investments and casting shareholder votes.

The Trump administration reinforced that principle by prohibiting retirement plans from considering investment attributes that aren't material to risk or performance. Trump's DOL explicitly prohibited funds with ESG principles from being used as the default investment for plan participants.

With Biden's Thanksgiving week move, that's all out the window, setting up tens of millions of Americans to have their retirement potential clipped as woke corporations corral their money into ESG-tainted investments.

The administration knows it's doing something that a broad swath of society would find objectionable: In choosing Tuesday of Thanksgiving week to post the rule, the White House was clearly aiming to minimize reporting and public awareness.

In Orwellian fashion, Secretary of Labor Marty Walsh issued a statement declaring that "removing the prior administration’s restrictions on plan fiduciaries will help America’s workers and their families as they save for a secure retirement.”

However, by its very nature, ESG reduces diversification by eliminating broad swaths of the investment universe. That means leaving money on the table. An ESG-managed 401k plan, for example, would have likely prevented employees from benefiting from the 79% year-to-date gain in Exxon Mobil.

As if that weren't bad enough ... READ MORE

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11.23.22 - Could Corporate Defaults Double?

Gold last traded at $1,739 an ounce. Silver at $21.07 an ounce.

Corporate Defaults Would More Than Double Even In Mild Recession, S&P Global Warns - The Epoch Times

As fingers remain crossed that our economy is turning around, some experts warn even a mild recession would wreak havoc on many corporations. There is only so much more corporate America (and our households) can take on top of the last few years of financial distress.

by Katabella Roberts

The rate of corporate defaults for companies in the United States could soar if the economy tips into a "shallow recession," S&P Global analysts warned on Monday.

According to S&P Global Ratings, the default rate for American companies could reach 3.75 percent by September 2023 if the Federal Reserve’s hawkish policy of raising interest rates prompts a shallow or mild economic downturn.

In a far worse scenario in which a more serious economic downturn occurs, default rates could reach 6 percent, the highest since March 2021, analysts said.

“Much will depend on the length, breadth, and depth of a recession should one occur, and if the Fed will continue to raise rates through a recession,” the S&P analysts wrote on Monday.

“The current pace of widening yields in secondary markets would continue, while consumption would contract, forcing businesses to dig into their cash holdings to ride out a deeper recession.”

Elsewhere on Monday, Deutsche Bank said that default rates on U.S. leveraged loans - those made by banks to companies or individuals who have considerable amounts of debt - will hit a near-record high of 11.3 percent in 2024, while defaults on euro-leveraged loans will reach 7.1 percent.

Analysts at the bank said that the U.S. economy will likely slip into a recession in the second half of 2023, and companies will take a significant hit to their profit margins resulting in missed interest payments, and prompting increased default rates.

However, Deutsche Bank does not anticipate default rates to soar in 2023. READ MORE


central Banks China 'likely' stockpiling gold to lessen reliance on US dollar - FinBold

We've been hearing a lot about Central Banks buying up physical gold in recent months and now China is following suit; with the specific purpose of offsetting the vulnerabilities in the US Dollar. Gold has historically served as the ultimate hedge during times of uncertainty and China is taking full advantage of this approach.

by Jordan Major

This year, central banks have been on a buying frenzy for gold, but it is unclear which ones are responsible for most of that spending, which has fueled speculation that China is a major participant.

Analysts believe that China and perhaps other nations, seeing how Russia has been affected by monetary sanctions imposed by the West, must be making haste to minimize their dependency on the dollar, according to a report by Nikkei Asia.

Central banks purchased a net amount of 399.3 tonnes of gold from July through September, an increase that more than quadruples the previous year’s figure, per a study published in November by the industry group the World Gold Council. READ MORE


The CPI Inflation Number Is A Lie, And That's A Fact -Bruce Wilds/AdvancingTime Blog

Over the last several weeks we've been offered assurances that inflationary pressures are dying down with the Fed working hard to keep things in check; but are the numbers reflecting the same scenario? Many experts suggest not, as least as it relates to the CPI. Let's take a closer look at what they are saying.

It is important to remember the CPI inflation number is a lie. This means even if the CPI falls dramatically in 2023, we may, or most likely will still have inflation. When economic growth is slow and unemployment rises, inflation takes on the moniker of stagflation. Currently, the website ShadowStats claims real inflation is closer to 17.15% rather than the 8.5% that the media, the Biden administration, and the Federal Reserve claim.

America’s inflation is now the highest since 1981. The number slightly above 17% is based on calculating inflation the same way economists and politicians did in the 1980s. Yes. inflation is a problem and indicators such as the inverted yield curve in the bond market are screaming that we should expect a recession. Considering what we are seeing and the fact Fed Chairman Jerome Powell has warned of pain ahead, there is good reason to think he is telling the truth.

The crux of this issue is that there is a huge difference between these two views of inflation and accepting the wrong number as fact could greatly impact your future. This rapidly becomes apparent in retirement for those older Americans fortunate to have accumulated some savings. The problem is that unless their investments perform at least as well as inflation they face seeing their wealth vanish into the deep dark hole of inflation.

Decades ago, politicians and those concocting this system created it as a way to reduce the cost of living adjustments for government payments to Social Security recipients, etc. By moving to a substitution-based index and weakening other constant-standard-of-living ties those reporting inflation have muddied the water lessening the impression of just how much our cost of living is being impacted by inflation. The general argument used to promote this change was that changing relative costs of goods results in consumers could easily substitute less-expensive goods for more expensive goods, the reality is that this assumption is often false. READ MORE

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11.22.22 - Will this be worse than Lehman?

Gold last traded at $1,739 an ounce. Silver at $21.07 an ounce.

Hedge funds left with billions stranded on FTX - Financial Times

EDITOR'S NOTE: The FTX saga continues ...

In today's headlines, hedge fund managers now have billions of invested dollars stranded on the FTX exchange; with very little hope they will be able to recover even a portion of their losses. A huge amount of wealth has been vaporized in the past few weeks and now the government wants to get in on this medium of exchange? If the greatest money minds among us were duped into believing this system was sound, what chance does the Fed have? Or any of us for that matter.

by Laurence Fletcher and Joshua Oliver

mug shot Hedge funds have billions of dollars stuck on failed cryptocurrency exchange FTX and could face years of waiting to recover anything at all from a marketplace they once believed to be one of the industry’s most reliable bets.

In a situation reminiscent of Lehman Brothers in 2008, which left billions of dollars of hedge funds’ assets trapped for years, investors who traded on the Bahamas-based exchange have found themselves among the thousands of creditors in a highly complex bankruptcy.

The sudden failure this month of FTX, valued at $32bn this year, has shocked investors who backed it and traders who used it. Legal filings on Sunday revealed that FTX owes its 50 largest creditors, likely to include a wide variety of hedge funds, more traditional asset managers and other traders, more than $3bn.

“I lost my investors’ money after they put faith in me to manage risk and I am truly sorry for that,” tweeted Travis Kling, founder of Ikigai Asset Management, which has a “large majority” of its hedge fund’s assets stuck on FTX. “I have publicly endorsed FTX many times,” he added. “I was wrong.” Crypto-focused hedge funds have direct exposure to FTX Group or to FTT, FTX’s own digital token which it promoted to incentivise more trading on its main exchange, of around $2bn, according to data group Crypto Fund Research. Read more...

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11.21.22 - Will Money Go Marxist?

Gold last traded at $1,738 an ounce. Silver at $20.86 an ounce.

Fedcoin: It Starts with a Trial Run - Mises Institute

EDITOR'S NOTE: It appears a new digital currency - to replace our existing currency - may be on the horizon. This comes at a time when news of widespread theft, negligence and gross mismanagement plagues the crypto world daily. Our government - in conjunction with the big banks - will begin testing what could become our new, global means of exchange. What could possibly go wrong?

By Robert Aro

USD A cashless society would be the nail in the coffin for liberty and freedom, offering centralization, the likes of which Marx could only dream. The existence of a government backdoor or spyware becomes a real possibility, and given the State’s track record, a real likelihood. Then, of course, the ability to track, freeze, and even set expiry dates on money, will be marketed as “features” to protect the public.

As for the 5.9 million Americans considered “unbanked,” i.e., those who have no checking or savings accounts, (the poor, weak, and vulnerable) they can expect life to get more difficult. This is the price we pay for free market intervention.

Earlier in the week, the Federal Reserve Bank of New York made the announcement: READ MORE

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11.18.22 - ‘This situation is unprecedented’

Gold last traded at $1,751 an ounce. Silver at $20.94 an ounce.

‘This situation is unprecedented’: 10 crazy things detailed in FTX’s bankruptcy filing -MarketWatch

EDITOR'S NOTE: As more details emerge from the FTX meltdown, it's becoming increasingly clear that anything goes in the virtual currency world. In an instant, crypto wealth can be created ... but it can just as easily and swiftly be erased. Whether bitcoin will weather this latest storm is yet to be seen but it begs the question, is this the type of investment that will hold true in the long term?

by Nathan Vardi

On Thursday, John Ray, III, the new CEO of FTX, dropped a long-awaited declaration in U.S. bankruptcy court, giving a sober assessment of the collapse of Sam Bankman-Fried’s crypto empire. The bankruptcy-court filing followed a whirlwind of events, including the publication of explosive texts Bankman-Fried sent to a Vox reporter earlier this week.

Ray set the tone for what he has found since FTX filed for bankruptcy protection last week, citing his 40 years of experience in the legal and restructuring business, including a role as chief restructuring officer and CEO of Enron, one of the biggest corporate collapses ever.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray wrote. “This situation is unprecedented.”

Here are 10 revelations that Ray made in federal bankruptcy court on Thursday about Bankman-Fried and the FTX debacle he created. READ MORE

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11.17.22 - $17 Billion in Paper Losses for Banks

Gold last traded at $1,760 an ounce. Silver at $20.98 an ounce.

Mortgage Market Upheaval Spurs $17 Billion in Paper Losses for Banks -Bloomberg

EDITOR'S NOTE: Interest rates continue to dominate the financial news with banks now reporting paper losses due to the changing landscape of the mortgage market. Even though these are only paper losses reported in adherence to accounting requirements, they are also reflective of the many lingering storms in the financial markets. We all need to keep a watchful eye on this, as its movements could have a large ripple effect throughout all markets.

by Jenny Surane and Hannah Levitt

rate chart Higher interest rates helped Wells Fargo & Co. land more than $3 billion in profit in the third quarter. From a capital perspective, they also wiped out nearly three-quarters of that.

While rising rates buoy revenue for the country’s largest banks, in the short term they also force them to write down the value of assets they hold on their balance sheet, exacerbating a capital squeeze that’s prompted most of them to halt buybacks. At Wells Fargo, it was an additional $2.4 billion in unrealized losses on mortgage-backed securities and other bonds that weighed on shareholder equity in the third quarter.

Wells Fargo’s three biggest rivals took a similar hit. On mortgage-backed securities alone, the four banks’ unrealized losses have climbed to $17 billion, based on company filings.

“When it comes to managing capital, we should be extremely conscious of what the risks are that are around us,” Wells Fargo Chief Executive Officer Charlie Scharf warned last month, citing swings in the value of the bank’s investment portfolio as well as geopolitical risks. “Those are all reasons, given where we sit today, to be more conservative on capital rather than less conservative.”

The unrealized losses don’t appear on the firms’ income statement, but under accounting rules they still end up hitting the banks’ balance sheets, affecting so-called accumulated other comprehensive income, or AOCI. There, the country’s four largest banks -- JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo -- reported a $16 billion drop in AOCI for the third quarter, to negative $102 billion, company filings show. Because swings in AOCI affect shareholder equity, the drop in AOCI has weighed on key capital ratios.

The writedowns come at a tough time for banks, which are trying to hoard capital to meet new, higher regulatory requirements. They’re just one of a bevy of headwinds weighing on capital ratios. Others include new accounting rules that say banks must set aside even more in reserves as a result of rising inflation that’s threatening the overall economic outlook. And with markets on edge over the Federal Reserve’s rate hikes, banks have also been battling back an increase in risk-weighted assets, which are used to determine minimum capital levels. Read more...

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11.16.22 - UK Inflation hits 11.5%

Gold last traded at $1,773 an ounce. Silver at $21.51 an ounce.

‘Big Short’ Michael Burry projects gold to rise amid ‘contagion’ of crypto scandals - Finbold

The discussion about the big unknown of cryptos continues. To add misery to the mystery, there is now talk of widespread scandal of this barely understood currency. If there is a silver (golden) lining to this cloud, some say it could be a good thing for gold prices. Here's why.

By Paul Luvaga

American investor and hedge fund manager, Michael Burry, commonly known as “The Big Short,” has shared his view on the prospects of gold in the wake of the crypto market downturn. Burry, credited with predicting the 2008 financial crisis, believes gold might rise to the occasion, especially in the wake of crypto scandals.

In a now-deleted tweet on November 15, Burry stated that the moment for gold to rise would be when crypto-related scandals merge into what he termed a ‘contagion.’

Burry’s comments come as gold continues to rally despite the prevailing macroeconomic factors driven by rising inflation and possible continued interest rate hikes. In particular, gold hit a 60-day high, trading at $1,780.

Crypto market remains depressed amid piling scandals

It is worth noting that the crypto space has been impacted by myriad scandals that have significantly contributed to the depressed prices. For instance, in May, the market was hit with the Terra (LUNA) ecosystem crash, followed by widespread bankruptcy filings, impacting firms like the Celsius Network and Voyager Digital. READ MORE


inflation Inflation hits 41-year high of 11.1% on the back of energy and food price hikes -Yahoo Finance UK

Inflation is continuing to pushing higher in the UK in sectors that affect everyone - energy and food. There's been much discussion - dare I say debate in some circles - as to whether or not inflation is here, was here or is coming, but make no mistake; if food and energy cost more, it will hurt a lot of families as we head into the holiday season. These are not optional expenses.

By Pedro Goncalves

The UK’s rate of inflation hit a fresh 41-year high in October, accelerating to 11.1% on the back of the soaring cost of dairy products, eggs and energy bills.

The Office for National Statistics (ONS) estimated that the 11.1% reading for the consumer prices index (CPI) measure of inflation was the highest since October 1981. It added that prices rose between September and October 2022 by as much as they did in the entire year to July 2021.

The latest increase was driven by the biggest surge in grocery bills since the late 1970s and higher energy costs even after the government introduced a £2,500 cap on average gas and electricity prices.

Food and non-alcoholic beverage prices rose by 16.4% in the 12 months to October 2022, up from 14.6% in September 2022. That’s the highest since September 1977, the ONS estimates.

“The largest upward effect came from milk, cheese, and eggs, where prices for shop-bought milk and cheddar cheese rose between September and October 2022 but by more than between the same two months in 2021,” the ONS said. READ MORE


'A major problem': The US is now a record $31 trillion in debt, made worse by rising interest rates — and this is who holds the IOUs -Yahoo! Finance

EDITOR'S NOTE: The US is breaking records! Problem is, they aren't good ones. The US is now over $31 trillion in debt. If this wasn't a big enough problem, higher interest rates are accelerating that debt at a very rapid rate. This equates to $93k of debt per person in the country! Read on to find out what this means for each of us and how much worse it could get.

By Lauren Bird

The gross national debt in America has hit new heights, surpassing $31 trillion, according to a recent U.S. treasury report.

If you find that hard to wrap your head around, it basically boils down to more than $93,000 of debt for every person in the country, according to the Peter G. Peterson Foundation.

And with the dramatic rise in interest rates over the past few months — the Fed funds rate is currently between 3.7% and 4% — the national debt will be growing at a rate that makes it even harder to ignore.

"Interest rates are a major problem," says Phillip Braun, clinical professor of finance at North Western University’s Kellogg School of Management.

"The Treasury finances the debt with a lot of short-term borrowing … It'll push other budgetary items out."

The last couple of years have been expensive

A deficit is what happens when the government spends more money in a fiscal year than it brings in through taxes — and the last couple of years have been expensive.

Several large bills with hefty price tags have been approved since the start of the pandemic, including the American Rescue Plan Act, which cost $1.9 trillion, and $750 billion for student debt relief, all adding to the deficit, which then adds to the debt. READ MORE

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11.15.22 - A bigger Big Brother?

Gold last traded at $1,777 an ounce. Silver at $21.55 an ounce.

EDITOR'S NOTE: Changes are coming to our currency and it appears this will happen sooner rather than later. What type of changes, you may ask? Digital changes. Will this mean a better tomorrow for you and me? Nobody knows with certainty all of the consequences these changes may bring, but one guarantee is a loss of financial privacy for all of us. Is that a good thing? You be the judge.

CBDCs: What Can We Learn From Dollarized Countries? - AIER

by Nicolás Cachanosky

CBDC A central bank digital currency (CBDC) is a digital currency issued by a central bank. It is important to distinguish between digital currency and a digital claim to a currency. Commercial banks offer digital claims to a currency in the form of checking account balances. A CBDC, in contrast, would be a digital currency, not a mere claim. In simple terms, the US dollar would be issued electronically.

CBDCs are not merely a matter of intellectual curiosity anymore. Several countries have already issued CBDCs. As William Luther has written, the White House looks to be moving towards issuing a CBDC at some point in the future, as well.

Launching a CBDC would imply a significant change in the financial market, and the everyday life of every individual. There are important trade-offs to consider, including issues related to financial privacy. Advocates of a cashless economy argue that eliminating cash would reduce tax evasion and illegal transactions. In plain English, the government will be able to see what you are doing with your money. Granting the state more powers to become an even bigger Big Brother is probably not a good idea.

Dollarized countries offer important insights for the CBDC discussion. Ecuador, El Salvador, and Panama are three dollarized countries in Latin America. Zimbabwe, which was dollarized from 2007 to 2017, is also an interesting case. Each one of these countries implemented dollarization, albeit somewhat differently in each case.

Dollarization is not a single monetary reform. It is a set of reforms, just like a chain is a set of links. Also like a chain, dollarization is as strong as its weakest link. Paying attention to the weakest link of monetary reform is an important lesson for the US, and any country considering launching a CBDC.

Dollarization is, first and foremost, an institutional reform. It can protect the public from the advances of a populist regime. A robust dollarization is designed to limit the damage by the government. Weak dollarization leaves the door open for government abuse. For example, El Salvador and Ecuador kept their central banks when dollarizing at the turn of the century. Panama, on the other hand, never had a central bank. Dollarization in Panama is more robust than in El Salvador and Ecuador as a consequence.

Consider Ecuador. It is estimated that between 2005 and 2017, Rafael Correa seized $5.8 million of reserves. The process was quite simple:

  • Step 1. Impose a new tax on foreign assets and mandate banks to transfer their foreign reserves to Ecuador’s central bank.

  • Step 2. Increase the banks’ reserve requirements.

  • Step 3. Instruct the central bank to purchase treasury bonds with those reserves.

Zimbabwe also illustrates how weak dollarization is easily undone. READ MORE

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11.14.22 - National Debt 'a major problem'

Gold last traded at $1,770 an ounce. Silver at $21.98 an ounce.

EDITOR'S NOTE: The US is breaking records! Problem is, they aren't good ones. The US is now over $31 trillion in debt. If this wasn't a big enough problem, higher interest rates are accelerating that debt at a very rapid rate. This equates to $93k of debt per person in the country! Read on to find out what this means for each of us and how much worse it could get.

'A major problem': The US is now a record $31 trillion in debt, made worse by rising interest rates — and this is who holds the IOUs -Yahoo! Finance

By Lauren Bird

Fed The gross national debt in America has hit new heights, surpassing $31 trillion, according to a recent U.S. treasury report.

If you find that hard to wrap your head around, it basically boils down to more than $93,000 of debt for every person in the country, according to the Peter G. Peterson Foundation.

And with the dramatic rise in interest rates over the past few months — the Fed funds rate is currently between 3.7% and 4% — the national debt will be growing at a rate that makes it even harder to ignore.

"Interest rates are a major problem," says Phillip Braun, clinical professor of finance at North Western University’s Kellogg School of Management.

"The Treasury finances the debt with a lot of short-term borrowing … It'll push other budgetary items out."

The last couple of years have been expensive

A deficit is what happens when the government spends more money in a fiscal year than it brings in through taxes — and the last couple of years have been expensive.

Several large bills with hefty price tags have been approved since the start of the pandemic, including the American Rescue Plan Act, which cost $1.9 trillion, and $750 billion for student debt relief, all adding to the deficit, which then adds to the debt. READ MORE

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11.11.22 - New Bull Market Unlikely

Gold last traded at $1,771 an ounce. Silver at $21.71 an ounce.

EDITOR'S NOTE: Yesterday's market rally was in large part fueled by what some are saying is an overly optimistic perspective on inflation while the costs of good and services continue to soar. Granted these factors have a lead time in terms of being absorbed into finished goods pricing, but the underlying fundamentals suggest the inflation train is still rolling down the tracks and will be for some time to come.

Fed Pivot Will Be No Cure For Stock Market's Ills - Zero Hedge

Posted by Tyler Durden

Authored by Simon White, Bloomberg macro strategist

recession The longed-for Fed pivot may come quicker than expected -- especially after this week’s very soft inflation data -- but equities still face more downside if hopes for easier monetary conditions clash with the rising risk of a recession.

The Fed’s battle with inflation this year has pitched the stock market into one its most bearish cycles in decades. The expectation -- or hope -- is that once the Fed takes its foot off the brake, stocks will cast off their shackles and new a bull market will take flight.

That doesn't look likely. And that’s despite the fact that evidence is mounting that the Fed is at, or at least very close to, peak hawkishness.

Central-bank rhetoric has begun to soften, the midterms are now behind us, and market expectations of where the Fed rate will peak now consistently exceed the high-point implied by its so-called “dot plot” projections. With the market now helping, not hindering, the Fed in its monetary objectives, the central bank shouldn’t have to keep sharpening its talons for much longer.

On top of that, the Fed pivot could come much sooner than most expect. The median length of time between the peak in inflation and the first rate cut is 22 weeks, according to US hiking cycles going back to 1972. June’s CPI print likely marks this cycle's peak in headline inflation which, historically speaking, would put the first cut in as little as four to eight weeks.

This is not a prediction. But it does highlight how a Fed reversal could happen more quickly than the market expects. Either way, equity investors should treat it as the false dawn it is.

Firstly, financial conditions continue tightening for about five quarters after the first Fed hike. In the current cycle this would take us until the second half of 2023. Secondly, there’s a still greater squeeze in liquidity to come. The Global Real Policy Rate is still extremely negative and close to the all-time lows of -6% it reached in 1974, before it rose all the way to +3% by the early 1980s. Today it is at -4.4%, barely above its -5.6% nadir.

Overall, global financial conditions, as measured by the Global Financial Tightness Indicator, remain very restrictive, with no respite on the horizon. This will remain a poor environment for equities and other risk assets. READ MORE

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11.10.22 - Is bitcoin back?

Gold last traded at $1,753 an ounce. Silver at $21.65 an ounce.

EDITOR'S NOTE: The value of Bitcoin is making headlines once again this week. The price has plummeted due to a crash of FTX - a major platform utilized for exchange. FTX boss Sam Bankman-Fried is now making plans to rescue his company. But is this really what has crypto owners on edge? Or is it because this recent hiccup reveals even more uncertainty surrounding these markets. The SEC has been very vocal about the lack of oversight as well as their inability to prevent things like this from happening. But will oversight really remove the unknowns?

Crypto market sees bounce as FTX boss outlines next steps - Yahoo! Finance

by Anthony Cuthbertson - Independent

bitcoin The price of bitcoin has bounced back from a two-year low after the boss of the beleagured FTX cryptocurrency exchange apologised for his role in the crash and outlined his plans to rescue his company.

FTX suffered a “significant liquidity crunch” this week when customers rushed to withdraw billions of dollars worth of assets due to fears relating to its digital token FTT.

As the world’s third largest exchange by trading volume, the uncertainty had repercussions for the rest of the market.

Rival exchange Binance initially sought a rescue deal, with both FTX founder Sam Bankman-Fried and Binance CEO Changpeng Zhao, known as CZ, announcing a non-binding letter of intent for the takeover.

“Our teams are working on clearing out the withdrawal backlog as is... But the important thing is that customers are protected,” Mr Bankman-Fried tweeted.

However this fell through late on Wednesday. READ MORE

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11.9.22 - I'm Selling My Blood To Eat, I Have No Choice

Gold last traded at $1,706 an ounce. Silver at $21.12 an ounce.

"An Asymmetric Payoff": Why Goldman Sees Gold Soaring 30% When The Fed Starts Cutting Rates - Zero Hedge

At a time when it seems there is a drought of good news, we may finally have some for gold investors from Goldman. These remarks are reflective of what has been a pretty consistent and long-standing tradition of the yellow metal being a safe haven - or hedge - during inflationary periods.

In recent weeks, gold has been caught in a perfect vice of bullish and bearish forces.

On one hand, the Hawkish Fed has continued to pile relentless pressure on the precious metal; to wit, during his recent press conference, Chairman Powell hinted at slowing down the pace of rate hikes, while also signaling that terminal rates may peak at a higher level. Following the conference, US rates and the dollar surged. Importantly, the Fed reiterated that bringing inflation down to 2% remains a top priority, triggering a sharp fall in gold after the announcement.

But wait, isn't inflation good for the world's oldest inflation hedge? Well, as Goldman's Mikhail Sprogis writes in a note this morning, in given circumstances, it is: for example, high inflation tends to be (extremely) bullish for gold when the market questions the central bank’s ability to fight it, such as during Burns’s tenure in the 1970s. In contrast, high inflation tends to be bearish for gold when the market gives the CB credit in its ability to reduce it, such as during Volcker’s fight on inflation in the early 1980s.

In any case, the Fed’s consistent message that it is willing to sacrifice growth to bring inflation under control has helped keep breakeven inflation expectations stable and pushed real rates to the highest level since the GFC. As a result, gold ETFs and speculative positions have fallen as the effect of higher real rates has offset the impact of rising recession worries.

gold demand On the other hand, as we reported last week, Central Bank buying of gold, especially among emerging markets, just hit a record: according to the World Gold Council, in Q3 2022 CB gold purchases of 400 tonnes, the largest quarterly figure on record, and 300 tonnes above trend.

As an aside, and as we discussed last week, the record-high buying emanated from an "unexplained" component of the World Gold Council data, which reflects purchases by countries which either do not report their activity or report with a lag. For example, Russia stopped reporting gold purchases this year, while China often reports with a large lag. The largest reported purchases came form Turkey, Uzbekistan and Qatar. Still, one thing we can be reasonably sure of is that the buying is done by a combination of EM CBs. Meanwhile, DM CBs have not been significant gold buyers since the 1960s. READ MORE

S&P 500 will fall another 16% before bottoming out at 3,200 in the middle of next year, UBS economist says - Market Watch

There's been a lot of optimism as it relates to the chatter on Wall Street recently. After many positive days, there's been a lot of talk about the markets finally turning the corner. There are some however who are saying don't break out the bubbly just yet; we may have more than just a few more down days ahead of us.

U.S. stocks won’t bottom out until the middle of next year as the Federal Reserve pivots back to lowering interest rates, according to Arend Kapteyn, an economist at UBS Group AG.

Kapteyn expects the S&P 500 will fall as far as 3,200, which would represent a decline of nearly 16% based on the large-cap index’s value around 11:30 a.m. Eastern Time on Wednesday.

The decline is expected to be driven by weak corporate earnings growth and more Fed interest rate hikes, which will continue at least through the first quarter of next, the UBS economist said.

“We expect it will not regain its January 2022 high of 4,796 before end 2025,” Kapteyn said. READ MORE


"I'm Selling My Blood To Eat, I Have No Choice": Biden Inflation Crushes Americans -Zero Hedge

In yet another chapter of today's economy and the ever growing disconnect between the government and American citizens, more truly disheartening news about the state of US households. There is a growing trend of families who are having to sell their own blood in order to put food on the table. As commonplace as it seems anymore to hear or see a negative economic report, there's nothing run of the mill about this current phenomenon.

Gas, groceries, electricity, and rent -- the price of everything has soared to four-decade highs under the Biden administration. Household finances are under severe pressure as wage growth fails to outpace inflation for 18 months, leading many folks to find a second job. Even holding two jobs isn't enough to sustain the cost-of-living crisis, as some are finding the nearest plasma clinic to donate blood to earn extra cash.

Cashe Lewis, 31, of Denver, Colorado, works multiple jobs and is trying to find a third job due to rising shelter inflation. She told The Guardian she works six days a week, sometimes more than 16 hours per day, just to pay the bills.

"I'm exhausted all the time ... on the one day I have off a week, I donate plasma for extra money. I'm literally selling my blood to eat because I have no choice," Lewis said.

She said many of her "friends and family work multiple jobs" as inflation makes "nothing affordable and the roadblocks set up to keep people in the cycle of poverty benefit the most wealthy members of our society."

Lewis said: "We aren't living, we're barely surviving, and we have no choice but to keep doing it."

More Americans than ever are working multiple jobs as inflation wipes out real wage growth.

Real wage growth has been negative for 18 consecutive months.

The personal savings rate has tumbled to multi-decade lows at 3.1%, just shy of the record low of 3.0%...

And some experts are concerned about the pace of growth in consumer credit as debt loads for households soar as their wages can't cover added costs of food, shelter, and energy.

But according to MSNBC's Joy Reid, her latest comments claim that Americans were oblivious to inflation until conservative political candidates started talking about it. READ MORE

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11.8.22 - Rates above 6%?

Gold last traded at $1,711 an ounce. Silver at $21.34 an ounce.

EDITOR'S NOTE: The stock market continues to rally in anticipation of favorable midterm election results. What isn't clear is exactly what that will bring. Republican victories may be wildly contested. If the Democrats instead stay in power, we will likely have more of the status quo which most would say has been anything but pleasant. Regardless of tonight's outcome, it seems imminent that the Fed will soon be raising rates yet again as they attempt to control inflation.

The Fed may need to hike interest rates above 6% to crush stubborn inflation, ex-Treasury chief Larry Summers says - Business Insider

Fed by Theron Mohamed

  • The Fed may have to hike interest rates above 6% to curb stubborn inflation, Larry Summers said.
  • The US economy seems to be shrugging off the rate increases so far, the former Treasury chief said.
  • Summers warned that rising inflation expectations could lead to more, intractable price increases

Unrelenting inflation could force the Federal Reserve to hike interest rates to north of 6%, the highest level in more than two decades, Larry Summers has warned.

The US central bank has rapidly raised rates from virtually zero in March to a range of 3.75% to 4% today, in a bid to cool the economy and bring down inflation from near 40-year highs.

Yet prices rose an annualized 8% in September — not far off their peak pace of 9.1% in June — and there's little sign of demand weakening or the labor market softening.

"The good news is the economy is looking robust," Summers said in a recent Bloomberg interview. "The bad news is there's not much evidence of inflation restraint yet."

Summers is a Harvard economics professor who previously served as Treasury secretary and the director of the National Economic Council. He suggested the economy might be more resilient to rate increases than expected, which could heap pressure on the Fed to hike further.

"It would not be surprise me if the terminal rate reached 6% or more," he said. The Fed last targeted an interest rate that high in 2001.

Summers also flagged a worrying increase in inflation expectations, which can spur workers to demand higher wages, and businesses to raise prices in anticipation of rising costs. Those behaviors can kickstart a wage-price spiral, making inflation a self-fulfilling prophecy. READ MORE

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11.7.22 - Does the Market Care Who Wins Tomorrow?

Gold last traded at $1,675 an ounce. Silver at $20.82 an ounce.

EDITOR'S NOTE: The stock market rallied heavily today in anticipation of tomorrow's midterm election results. The optimism is refreshing, but is it realistic? Many experts suggest that the economic factors and vulnerabilities brewing out there are nonpartisan in nature; meaning things are not going to magically improve or go away no matter who is elected.

Stocks start week higher as midterms, CPI report loom- Yahoo! Finance

by Alexandra Semenova

meta U.S. stocks pushed forward Monday as investors geared up for another week of potentially market-moving events: the Nov. 8 midterm elections and October consumer price data.

The S&P 500 (^GSPC) rallied 1%, while the Dow Jones Industrial Average (^DJI) jumped more than 400 points, or roughly 1.3%. The technology-heavy Nasdaq Composite (^IXIC) gained about 0.9% after the index posted its worst weekly decline since January.

A batch of downbeat corporate news has renewed focus on the wreck across technology stocks after disappointing earnings last week dragged the sector's heaviest hitters — Apple (AAPL), Amazon.com (AMZN), and Alphabet (GOOGL) — to losses of more than 10% each.

Apple (AAPL) reversed a loss of more than 1% to close higher after the company said in a statement Sunday it expects fewer shipments of its newest premium iPhones than previously anticipated, citing COVID lockdowns in China that dented operations at its biggest smartphone maker Foxconn's factory.

Also among tech giants, Facebook parent Meta (META), which is now the worst performer in the S&P 500 index this year, is expected to begin large-scale layoffs this week, according to a report from the Wall Street Journal on Sunday. Shares rose 6.5%. READ MORE

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11.4.22 - The Mad Dash to Cash

Gold last traded at $1,681 an ounce. Silver at $20.85 an ounce.

EDITOR'S NOTE: BofA reports that investors are fleeing to cash at a very rapid pace right now; at a time when inflationary pressures are greater than we've seen in many, many years. Is cash the safest vehicle in times like these? Historically the answer to that question is no. It's actually one of the worst places to be.

If you haven't already contacted us to receive your free copy of TheSecret War on Cash - which outlines what's happening to our money and what we can do about it - do so right now. You can receive your copy by calling or texting our offices at (800) 289-2646. Do it today!

BofA Says Rush to Cash Is Now at Fastest Pace Since Pandemic

Cows (Bloomberg) -- Cash is king, with investors fleeing to the safety of cash funds at the fastest pace since the coronavirus pandemic as the Federal Reserve remains firmly hawkish, according to strategists at Bank of America Corp.

The asset class had inflows of $62.1 billion in the week through Nov. 2, according to a note from the bank citing EPFR Global data. That’s contributed to $194 billion of inflows into cash from the start of October -- the fastest start to a quarter since the pandemic roiled markets in the second quarter of 2020.

Bank of America’s strategists don’t expect the Fed to pivot anytime soon as inflation remains high and unemployment is low. “Lesson is job losses catalyst for 2023 pivot,” strategists led by Michael Hartnett wrote in the Nov. 4 note.

A recession and credit events will need to occur for the Fed to end tightening, prompting the start of a new bull market, Hartnett said. Data today showed that US businesses reported strong hiring and wage increases in October although the unemployment rate climbed.

Hartnett’s comments come after Fed Chair Jerome Powell indicated this week that he’s prepared to push interest rates as high as needed to stamp out inflation, even as the central bank eyes a downshift to a slower pace of increases. The Nasdaq 100 closed at the lowest level since July 2020 on Thursday, with the gauge on track for its worst week since January. The S&P 500 is set for its worst week since September.

Among other asset classes, global equity funds saw $6.3 billion of inflows in the week, while nearly $4 billion was pulled from bonds, according to the EPFR data. READ MORE

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11.3.22 - Central Banks Quietly Buying Gold

Gold last traded at $1,629 an ounce. Silver at $19.45 an ounce.

EDITOR'S NOTE: On the heels of an email we sent earlier this week, here's another on the record pace at which Central Banks are buying up gold right now. With this in mind, there is one question we should all be asking ourselves; should I be doing the same?

We often times receive emails from our clients and readers asking, "why isn't gold going up with all of this buying?". In short, there's likely a lot of short selling and manipulation stalling its rise, but this isn't stopping the banks from gobbling it up. Be diversified. Own gold. It will be there for you when you need it and you will be glad it is.

Central Banks Are Quietly Buying Gold At The Fastest Pace In 55 Years - ZeroHedge

Posted by Tyler Durden

By Alex Kimani of OilPrice.com

gold chart Central banks globally have been accumulating gold reserves at a furious pace last seen 55 years ago when the U.S. dollar was still backed by gold. According to the World Gold Council (WGC), central banks bought a record 399 tonnes of gold worth around $20 billion in the third quarter of 2022, with global demand for the precious metal back to pre-pandemic levels.

Retail demand by jewelers and buyers of gold bars and coins was also strong, the WGC said in its latest quarterly report. WGC says that the world's gold demand amounted to 1,181 tonnes in the September quarter, good for 28% Y/Y growth. WGC says among the largest buyers were the central banks of Turkey, Uzbekistan, Qatar and India, though other central banks also bought a substantial amount of gold but did not publicly report their purchases. The Central Bank of Turkey remains the largest reported gold buyer this year, adding 31 tonnes in Q3 to bring its total gold reserves to 489 tonnes. The Central Bank of Uzbekistan bought another 26 tonnes; the Qatar Central Bank bought 15 tonnes; the Reserve Bank of India added 17 tonnes during the quarter, pushing its gold reserves to 785 tonnes.

Retail buyers of gold bars and coins also surged in Turkey to 46.8 tonnes in the quarter, up more than 300% year-on-year.

These developments are hardly surprising taking into account gold is still considered the pre-eminent safe asset in times of uncertainty or turmoil despite the emergence of cryptocurrencies like bitcoin. Gold is also regarded as an effective inflation hedge, though experts say that this only rings true only over extended timelines measured in decades or even centuries.

Unfortunately, rising interest rates spoiled the party for the gold bulls, with exchange traded funds (ETFs) storing bullion for investors becoming net sellers. Indeed, offloading of bullion by ETFs countered buying by central banks pushed gold prices down 8% in the third quarter. Gold is a non-interest bearing asset, and investors tend to move their money to higher yielding instruments during times of rising interest rates. An overly strong dollar has also not been helping gold (and commodity) prices. Gold prices are down 9.3% YTD and nearly 20% below their March peak of $2,050 per ounce. READ MORE

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11.2.22 - About those Brutal Losses in Your 401(K)

Gold last traded at $1,634 an ounce. Silver at $19.21 an ounce.

Stocks could sink 25% as the liquidity crisis in Treasuries threatens to spill over to other markets, analyst says - Business Insider

As Wall Street celebrates the recent upswing as a market turnaround, several analysts are saying some underlying problems could bring this recent rally to an end. Here are some of the lingering issues at hand.

By Brian Evans

* A liquidity crisis is brewing within the $24 trillion US Treasury market, and the turmoil has the potential to sink stocks.
* Treasury liquidity is showing signs of weakness not seen since the Great Financial Crisis, warned James Demmert.
* "A liquidity crisis would most likely extend the current bear market in stocks to much deeper levels in the range of a further 20-25% or total of 50% for the year."

A liquidity crisis is brewing within the $24 trillion US Treasury market, and the turmoil has the potential to sink stocks as well as cripple financial markets more broadly, according to analysts.

Bond yields have seen big swings as a lack of liquidity has widened the price gaps between investors buying and selling Treasuries. That means trades that didn't move the market before are now creating more volatility. Rate-sensitive growth stocks are especially vulnerable as borrowing costs are already rising on Fed rate hikes.

In fact, Treasury liquidity is showing signs of weakness not seen since the Great Financial Crisis, warned James Demmert, founder and managing principal at Main Street Research.

"One has simply to look back at 2008 or the pandemic to understand the seriousness of a liquidity freeze — particularly in the US Treasury market — which is deemed to be the most liquid market in the world," he said. "A liquidity crisis would most likely extend the current bear market in stocks to much deeper levels in the range of a further 20-25% or total of 50% for the year." READ MORE

The end of cheap money reveals global debt problem - Reuters

debt chart In other debt related news, we have now officially left the era of cheap money. What some are referring to as the "handwriting on the wall", is not too promising. It's another vulnerability that has serious potential ramifications.

By Hugo Dixon

The global financial crisis of 2008 was supposed to have taught the world the dangers of excessive debt. But borrowing has shot up since then. The debt of governments, companies and households was 195% of global GDP in 2007, according to the International Monetary Fund. By the end of 2020 it had reached 256%.

These debt mountains are harder to bear because interest rates are rising to stamp out inflation, the Covid-19 pandemic and the energy crisis have clobbered growth, and investors are more averse to risk. This will cause economic stress especially in Europe, China and the Global South, poisoning domestic politics and geopolitics.

Debt has risen for three main reasons. First, governments bailed out the financial system. Then they supported households and companies during the pandemic. Now they are cushioning the blow of eye-popping gas and electricity prices.

QE DEBT SPLURGE

Cheap money enabled these splurges. In the West, this came in the form of quantitative easing (QE), where central banks bought government bonds and other assets. While they were right to use QE to prevent an economic slump, cheap money has been a painkiller. Many governments stopped worrying about balancing their books. Companies and emerging markets also leveraged up.

If the borrowers had used the money to fund productive investment, that might not have mattered. But instead, they spent much of it on unproductive investment or consumption.

China’s excess property construction is the prime example of unproductive investment. The country’s debt as a proportion of GDP has doubled since 2007, according to the IMF. This is suffocating its economy and is one of the reasons the World Bank has just slashed its growth forecast for China this year from 5% to just 2.8%. READ MORE

About those Brutal Losses in Your 401(K) – Here Are the Charts -Wall Street on Parade

Are you retired or nearing retirement? Do recent losses have you worried? Even those of us still working and contributing to a retirement plan have had some restless nights watching the markets have their way with our nest eggs. Is the worst over, or is there more to come?

By Pam Martens and Russ Martens

Whether your mutual fund was one of the popular 60/40 funds (60 percent equities and 40 percent bonds) or was 100 percent in equities, you’ve been battered this year. The Fed’s relentless hiking of interest rates this year beat down the market value of existing bonds because they have lower fixed rates of interest, thus making them less valuable than the newly issued bonds with higher rates of interest. Growth stocks, which have dominated the investment scene for years, were particularly crushed because growth companies need to borrow money to grow and higher interest rates mean that their cost of capital will become more expensive, thus slowing growth and hurting their earnings outlook.

Another factor weighing on the negative performance of equities (stocks) is that higher interest rates pumped up the value of the U.S. dollar, hurting the earnings of U.S. companies that are big exporters. (Consumers in foreign countries hold foreign currency that has lost value to the U.S. dollar, thus making the cost of U.S. manufactured goods more expensive to them. That incentivizes those consumers to trim purchases of U.S. goods and/or switch to a less expensive foreign brand.)

The Financial Times reported on Saturday that the strong dollar is forecast to wipe $10 billion off U.S. corporate earnings in just the third quarter. Bloomberg News estimates that “The greenback’s strength is likely to reduce the profits of a third of the companies in the S&P 500 this quarter.” READ MORE

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11.1.22 - Mystery Buyers Responsible For Central Bank Gold Boom

Gold last traded at $1,647 an ounce. Silver at $19.63 an ounce.

EDITOR'S NOTE: The mainstream financial news media has had a field day talking about gold prices taking a hit in the month of October ... while touting the recent surge in cryptocurrencies. What's interesting is that during this period of a slump in gold prices, central banks have "scooped" up more than 400 tons of physical gold. That's more than FOUR times the physical consumption compared to the year prior. How can all this buying be taking place and prices be dropping? What's really at work here?

Who Are The Mystery Buyers Responsible For Central Bank Gold Boom? -Bloomberg

By Eddie Spence
With assistance from Sing Yee Ong

gold chart Central banks bought a record amount of gold last quarter as they diversified foreign-currency reserves, with a large chunk of the purchases coming from as-yet unknown buyers.

Almost 400 tons were scooped up by central banks in the third quarter, more than quadruple the amount a year earlier, according to the World Gold Council. That takes the total so far this year to the highest since 1967, when the dollar was still backed by the metal.

Bullion prices have been pressured this year by aggressive US interest-rate hikes as the Federal Reserve tackles soaring inflation, which have prompted exchange-traded fund investors to sell the non-yielding asset. But support has come from other areas, such as retail buyers in Asia and central banks.

Central banks including Turkey and Qatar were among recent buyers, ... READ MORE

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10.31.22 - A Lot For Markets To Be Scared About

Gold last traded at $1,633 an ounce. Silver at $19.15 an ounce.

EDITOR'S NOTE: Happy Halloween! Tonight many people will get dressed up, spend time with family and friends, and make sure their children get enough candy to keep their dentists busy for years to come. There will be those intent on trying to put their fair share of scare into this evening as well; but hopefully all in the name of fun. What's not fun, however, are scared markets. We want confident, strong and unshakable markets. Some analysts are saying there are many reasons for the markets to be terrified worldwide.

"It's Halloween And There's A Lot For Markets To Be Scared About" - Zero Hedge

Posted by Tyler Durden

By Michael Every of Rabobank

candy It’s Halloween and, clichéd as it is, there is a lot for markets to be scared about.

Let’s start off with the optimists, who, like Linus and his never-appearing Great Pumpkin, are waiting for a Fed pivot to bring them gifts. Yes, the RBA, BOE, BOC, and (on the surface) the ECB all backed off hawkishness to some degree, and the BOJ stuck to their guns on yield curve control on Friday.

However, the Japanese government is increasing stimulus by another $200bn to fight inflation(!) while insisting JPY cannot fall - something is going to break there; we don’t think the ECB were as dovish as the market interpreted them; the RBA are seen going 50bp this week by at least one big name; the BOE are still likely to go 75bp; and not only is another 75bp from the Fed baked into the pumpkin pie too, but others just upgraded where it stops to 5%, which we said months ago.

However, the Japanese government is increasing stimulus by another $200bn to fight inflation(!) while insisting JPY cannot fall - something is going to break there; we don’t think the ECB were as dovish as the market interpreted them; the RBA are seen going 50bp this week by at least one big name; the BOE are still likely to go 75bp; and not only is another 75bp from the Fed baked into the pumpkin pie too, but others just upgraded where it stops to 5%, which we said months ago.

Indeed, Eurozone inflation data on Friday will have made the ECB jump, as core inflation did too. The same scare was seen in US personal income and spending, while Bloomberg reports ‘Wages are soaring in US cities with the highest inflation’. Even though we are in a blackout period ahead of the FOMC, the Fed Whisperer at the Wall Street Journal put out another article saying last week’s data offered, “more questions to the Fed than answers about the true trajectory of the economy… But the compensation report... could keep the Fed raising interest rates slightly higher in 2023 than officials had anticipated at their meeting last month."

The depth of analysis on how we get out of this is also terrifying. Central banks are in the dark, with an inflation monster. "Inflation is going up due to Wall Street decisions", says Alexandria Ocasio-Cortez (whom Gad Saad dubs Occasional-Cortex). Stumbling Big Tech aside, Wall Street is going up due to official decisions, whisper some. Stocks have surged off lows and bond yields have tumbled, which the Fed has no desire to see given it loosens financial conditions - so they are more likely to raise rates further.

Worse, fears are soaring on the global supply-side inflation. Even as some FinTwit voices calling for looming deflation now underline that they think inflation will soar again afterwards, a see-saw assumption long floated as a risk here too, Russia cancelled the Ukraine Grain Deal.

As our Michael Magdovitz puts it, removing Ukraine’s food supply from global markets will drive up food prices everywhere. The exception, perhaps, is Ukraine where there will be a glut, which will ultimately cause long-term scarring of the agri economy, because Ukrainians will refuse to produce things they cannot sell. Major improvements in westbound road, rail, and river transport can now handle 50%-60% of Ukraine’s normal exports, which is not enough to stop food prices surging. Meanwhile, it is being reported Ukraine, Turkey, and the UN have notified Russia they are organizing a convoy of 14 grain ships with grain to sail despite the renewed Black Sea blockade. The tensions are palpable. READ MORE

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10.28.22 - 65% of employed Americans living paycheck-to-paycheck

Gold last traded at $1,644 an ounce. Silver at $19.24 an ounce.

EDITOR'S NOTE: Yet another consequence of mounting inflationary pressures; more and more American families are having to live paycheck-to-paycheck. Some of these families have had to tap their emergency savings and, even worse, their retirement accounts. From our vantage point, it sure looks like the worst is yet to come.

‘Living paycheck-to-paycheck has become the norm’: Inflation takes its toll on American finances as emergency funds run dry -MarketWatch

inflation By Quentin Fottrell

'Americans’ monthly expenses have outpaced their personal income growth,' said Kristi Rodriguez, senior vice president of Nationwide Retirement Institute

Inflation is taking its toll on people’s emergency funds.

The share of workers who say they are living paycheck-to-paycheck has surged among middle- to high-income earners — 63% and 49%, respectively — up from 57% and 38%, respectively, a year ago, according to an independent survey of almost 4,000 workers released this week by online loan specialist LendingTree. Overall, 65% percent of employed consumers were living paycheck-to-paycheck in September 2022 — up from 60% a year ago.

Meanwhile, the personal savings rate — savings as a percentage of disposable income — fell to 3.3% in the third quarter from 3.4% in the prior quarter, the government said Thursday, the lowest level since the Great Recession 8th. Adjusted for inflation, savings are down 88% from their 2020 peak and 61% lower than pre-pandemic. (Personal savings hit $629 billion in the second quarter of 2022, down from $1.41 trillion in the second quarter of 2019.)

Millions of Americans face rising prices on essential goods and services such as food and rent as their savings are drying up after a post-pandemic spending splurge. On Wednesday, Kraft Heinz Co. KHC, 2.39% said its third-quarter prices were 15.4 percentage points higher than a year before. National retail sales rose 8.2% on the year in September. “There has certainly been some pent-up demand from the pandemic,” said Larry Pon, a financial planner based in Redwood City, Calif.

To help retain and attract workers, some major companies — including Starbucks SBUX, 2.13% and life-insurance company Transamerica — are offering “savings programs” and “emergency savings accounts.” There appears to be genuine cause for concern: Only 68% of people said they had $400 in emergency cash or its equivalent, according to the most recent survey on the issue by the Federal Reserve, although that figure that has been steadily climbing from 50% in 2013.

But there’s another reason for the apparent dearth of emergency funds. “Because of the spike in inflation, Americans’ monthly expenses have outpaced their personal income growth,” Kristi Rodriguez, senior vice president of Nationwide Retirement Institute, told MarketWatch. “This suggests that households are spending more, not as much because they want to, but because they have to with increased costs for essential items such as gasoline, groceries and healthcare.” ... READ MORE

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10.27.22 - Will interest rates continue their climb?

Gold last traded at $1,662 an ounce. Silver at $19.55 an ounce.

EDITOR'S NOTE: Challenging economic data continues to be reported in a year already full of investment snafus. The latest? Mortgage rates are now at their highest levels since 2002. Our government continues to tell us all is well, but how much more strain can our financial markets take? Rates at these levels could have a crippling effect on our markets and therefore result in severe losses in wealth for households throughout the country.

{Photo credit: Dan Moyle/Flickr}
Mortgage interest rates reach highest level since 2002 -UPI

by Patrick Hilsman

Average mortgage interest rates have surpassed 7%, rising to their highest level in 20 years, the Federal Home Loan Mortgage Corp. said Thursday.

Significant interest rate increases from the Federal Reserve, aimed at curbing inflation, are affecting the housing market. As inflation endures, customers are seeing higher costs at every turn, causing further declines in customer confidence this month," Freddie Mac's chief economist, Sam Khatar, said in a statement.

The increase has led to stagnation in the housing market, and "many potential homebuyers are choosing to wait and see where the housing market ends up, pushing demand and home prices further downward," Khatar said. READ MORE

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10.26.22 - Gold at $2,250?

Gold last traded at $1,664 an ounce. Silver at $19.66 an ounce.

Goldman Sachs sees a scenario where gold prices rally sharply to $2,250 by 2025 - Kitco

At a time when markets are volatile and there is a thirst for stability, gold may be the perfect place to watch your money shine. This is according to recent commentary by Goldman Sachs. Owning physical gold gives you the benefit of an unencumbered asset - an asset that is not in some way tied to debt. Goldman Sachs and others are suggesting gold will not only provide you with much needed stability but some nice returns as well.

"by Neils Christensen- The Federal Reserve's commitment to slow the economy to cool down rising inflation continues to push the U.S. economy closer to a recession.

Tuesday, in an interview with CNBC, David Soloman, CEO of Goldman Sachs, said that this is a time to be cautious as there is a good chance of a recession. The comment comes as the investment bank sees potential upside for gold in a recessionary environment.

In a report published last week, commodity analysts at Goldman Sachs said that despite gold's volatile year, its upside potential is greater than the downside risks, even as uncertainty dominates the marketplace." Read more.

{Photo by Cole Burston/Bloomberg}
Fundamentals 'flashing red' as last pillar of credit crumbles - Bloomberg

It's not only households feeling the pain of rising prices and inflation, but US corporations as well. The deterioration of corporate credit has now reached a critical level, according to financial analysts. The repercussions of this are far reaching as it falls into the global vacuum of financial strains as well as the personal application to our own finances through falling stock prices.

"Corporate credit conditions are worsening, says Janus Henderson Investors

by Tasos Vossos

Corporate credit conditions are worsening, with the last of three key measures now “flashing red,” according to a traffic-light system used by Janus Henderson Investors." Read more.

Wall Street Warns of Trouble Brewing in Auto Loans as Prices Dip - Yahoo Finance

The auto manufacturing sector in another vulnerable area of the stock market. Analysts are anticipating poor earnings as car loans fall into default and higher interest rates prevent access to auto loans for many. Here's a breakdown of what they see happening.

"By Jenny Surane and Max Reyes The largest US banks are warning of trouble ahead in auto loans as dropping prices for used cars risk leaving borrowers underwater.

Wells Fargo & Co. said that higher loss rates for loans it originated late last year contributed to an increase in write-offs for the period. Ally Financial Inc., the country’s second-largest auto lender, saw charge-offs for retail auto loans quadruple in the third quarter. And Fifth Third Bancorp said it’s pulling back on originations.

Used-car prices slumped 7% in the third quarter, the worst decline since the depths of the global financial crisis, according to data compiled by vehicle-auction company Manheim. The risk, investors fear, is that if consumers end up owing more than their cars are worth, they might stop making payments and let the vehicles be repossessed.

“There has been a real tightening in margins on new-auto production, on one hand, and on the other there’s been a decline in used-car prices,” Fifth Third Chief Executive Officer Tim Spence said in an interview. “That has caused us to throttle a bit back on production” of loans." Read more.

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10.25.22 - Are supply chain shortages the "new normal"?

Gold last traded at $1,651 an ounce. Silver at $19.31 an ounce.

EDITOR'S NOTE: Inflation, inflation, inflation ... just a euphemism for price increases. The term 'price increase' seem to personalize it a little more; especially when those price increases directly impact our families. We've seen some pretty dramatic inflation for two straight years now, but what's in store for us going forward? According to the CEO of Kraft Heinz - a very well established food provider - not only are we going to see more increases through 2022, but he expects to continue seeing them well into 2023.

Kraft Heinz CEO predicts continued inflation, more price increases next year - Fox Business

by Aislinn Murphy

Kraft Heinz CEO Miguel Patricio predicted in a recent interview that inflation will persist and more price increases will happen in 2023.

He made the comments during a CNN Business interview published Monday in which he discussed certain challenges impacting the food industry.

"We’ve already increased the prices that we were expecting this year, but I’m predicting that next year, inflation will continue, and as a consequence [we] will have other rounds of price increases," he told the outlet.

chart

Both consumer and wholesale inflation have been hovering at painfully high levels, FOX Business previously reported.

The consumer price index in September rose 0.4% from August and 8.2% from the prior year. Meanwhile, in the same month, the producer price index climbed 0.4% on a monthly basis and 8.5% on a yearly basis.

Kraft Heinz has attempted to "minimize inflation on everything we do," Patricio reportedly said, noting it would be "very easy to just pass the price to consumers, but that has consequences." READ MORE

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10.24.22 - The Honest Indicator of a Market Bottom

Gold last traded at $1,651 an ounce. Silver at $19.28 an ounce.

EDITOR'S NOTE: As the stock market continued Friday's rally into today, is the market telling us that the worst is behind us? One potential lurking danger is the amount of leverage (or debt buying) that is supporting stocks right now. Currently the leverage factor is almost 40% higher than what we saw at the 2020 lows. The below commentary outlines some of the things we might expect to see with such a high leverage factor in the market today.

Margin Debt Is Still Far from Calling a Bottom for Stocks- Wolf Street

chart It nailed the top last November and it nailed the tops and bottoms going back at least to the 1990s.

By Wolf Richter for WOLF STREET

Increases and decreases in leverage, when large enough, drive markets up or down. The only summary data on stock-market leverage that we can get is margin debt, reported monthly by FINRA, which obtains the data from its member brokers. There is a lot more leverage in the market, but we don’t get a summary figure of it. Margin debt is our stand-in for overall stock market leverage.

Margin debt data that was released last November, for the month of October, nailed the top in the stock market, as margin debt had nailed prior tops. More on that in a moment, including my annotated long-term chart. Now we're looking for signs of a bottom. But as of the latest release of margin debt, we’re far from any bottom. READ MORE

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10.21.22 - Is Another Lehman Effect on the Horizon?

Gold last traded at $1,657 an ounce. Silver at $19.42 an ounce.

EDITOR'S NOTE: Leading stock market indices ended the week on a high note; but is this reflective of the true health of our markets? Are markets immune to all of the pitfalls we are hearing so much about these days? The threats of inflation, defaults, canceled production orders, etc ... and that's only the short list. Economist Nouriel Roubini believes not only are corrections coming, but they are going to be some of the worst we've seen.

'Dr Doom' Nouriel Roubini says to brace for a crash that combines the worst of the financial crisis and 1970s-style stagflation - Business Insider

By George Glover

Roubini

  • Markets should brace for a period of decline that echoes crashes of the 1970s and 2008, according to Nouriel Roubini.
  • He predicted that central banks will "wimp out" from fighting inflation, fueling a financial crisis.
  • "It's going to get ugly, the recession, and you'll have a financial crisis," Roubini told Bloomberg.

The global economy will experience a period of decline that combines the worst aspects of the 2008 financial crisis and the 1970s, Nouriel Roubini has warned.

The "Dr Doom" economist said Wednesday that he expects red-hot inflation to lead to a recession – before major cracks start to appear in financial markets.

"It's going to get ugly, the recession, and you'll have a financial crisis," he told Bloomberg's Odd Lots podcast.

Roubini sees supply-side shocks including the coronavirus pandemic and the war in Ukraine as drivers of global stagflation, which refers to a combination of soaring prices and sluggish growth.

That would echo the economic pain of the 1970s, when efforts to tame high inflation plunged the US into a deep recession.

"Inflation is not going to fall fast enough because you have the negative supply shock," Roubini said.

"Remember when you have negative supply shock, you get a recession and high inflation," he added. "We're not going to get a fall in inflation that's rapid enough to go to 2%."

But Roubini also compared the current outlook to the 2008 crisis ... READ MORE

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10.20.22 - US heating worries mount

Gold last traded at $1,626 an ounce. Silver at $18.63 an ounce.

EDITOR'S NOTE: Over the past few weeks, temperatures across the country have started to drop as we head into another winter. There is grave concern over what inflation will do to the cost of heating. Many fear they will be facing some very tough decisions soon - feeding their families vs. keeping them warm. Sadly, it seems the current administration will acknowledge the situation, assure us it is not as bad as it is being portrayed, and then do nothing to provide a solution. These inflationary pressures are real and the time to prepare is now. Read on to learn more about what me might expect to see this winter.

US heating worries mount amid growing costs, uncertainty - Associated Press

By DAVID SHARP

JAY, Maine (AP) — Across the U.S., families are looking to the winter with dread as energy costs soar and fuel supplies tighten.

The Department of Energy is projecting sharp price increases for home heating compared with last winter and some worry whether heating assistance programs will be able to make up the difference for struggling families. The situation is even bleaker in Europe, with Russia’s continued curtailment of natural gas pushing prices upward and causing painful shortages.

In Maine, Aaron Raymo saw the writing on the wall and began stocking up on heating oil in 5-gallon increments over the summer as costs crept upward. He filled a container with heating oil as he could afford it, usually on paydays, and used a heating assistance program to top off his 275-gallon oil tank with the arrival of colder weather.

His family is trying to avoid being forced into a difficult decision — choosing between food or heating their home. CONTINUE READING

heat prices

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10.19.22 - US Recession Forecast? 100% chance

Gold last traded at $1,628 an ounce. Silver at $18.45 an ounce.

America's 6 biggest banks are expected to set aside $4.5 billion in Q3 to cover future loan losses — why that's a clear bad sign for the global economy--Yahoo! Finance

As price inflation and increasing interest rates continue to plague the economy, banks are preparing for the worst. If you want to know how banks feel about the Fed's attempts to regain control of this economy, the following story should give you an idea.

Fears of a looming recession and a tightening economy are pushing the country’s big banks to prepare for the worst.

According to a report from Bloomberg, six of the biggest banks in the U.S. — JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Wells Fargo and Morgan Stanley — plan to set aside about $4.5 billion to protect against loan losses in their third-quarter earnings.

Banks typically build up their loan loss provisions when there are concerns borrowers won’t be able to make their payments. Read more.

Chart Forecast for US Recession Within Year Hits 100% in Blow to Biden- MSN

There's been a lot of back and forth discussion about whether or not we are entering a recession. I think we all want to hope for the best, but that's fairly challenging as we look at the numbers currently being released. If Bloomberg is right, they say our chances are 100%!

(Bloomberg) -- A US recession is effectively certain in the next 12 months in new Bloomberg Economics model projections, a blow to President Joe Biden’s economic messaging ahead of the November midterms.

The latest recession probability models by Bloomberg economists Anna Wong and Eliza Winger forecast a higher recession probability across all timeframes, with the 12-month estimate of a downturn by October 2023 hitting 100%, up from 65% for the comparable period in the previous update.

The forecast will be unwelcome news for Biden, who has repeatedly said the US will avoid a recession and that any downturn would be “very slight,” as he seeks to reassure Americans the economy is on solid footing under his administration. Read more.

Noland: "Dominoes Are Aligning For A Major Synchronized Global Crisis"-- Zero Hedge

Many of us remain concerned over the weaknesses in our markets and our economy domestically, but there is also growing concern about what is developing globally. In today's world, it seems any pebble thrown into the financial pond has a ripple effect across the globe. Here's what we're seeing overseas.

It would have been a nonevent; inconsequential. Confirming New Cycle Dynamics, the Truss government’s “mini budget” has unleashed absolute mayhem. Pension funds blowing up. Emergency central bank rescue operations. Global market instability. UK’s Treasury Secretary sacrificed after a mere 38 days, while an entire government hangs in the balance.

Friday evening Financial Times headlines: “Gilts in Fresh Slide as Investors Say Truss U-turn Did Not Go Far Enough.” “Can Liz Truss Survive as UK Prime Minister?”; “Austerity Beckons as Truss Seeks to Restore Britain’s Reputation with Investors.” And “UK Debacle Shows Central Bank ‘Tough Love’ is Here to Stay.” Read more.

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10.18.22 -Average American is losing $34K and everything else on Biden’s watch

Gold last traded at $1,652 an ounce. Silver at $18.75 an ounce.

EDITOR'S NOTE: Bidenflation is here. And no matter what the Fed says or tries, it doesn't look like it's going away any time soon. Yesterday we highlighted some of the concerns faced by those who are retired or planning for retirement - and what some of the potential consequences of not having a well balanced portfolio might bring. Today we'll take a look at the real rate of inflation and some of the more specific implications it is bringing with it.

Average American is losing $34K and everything else on Biden’s watch - New York Post

By Stephen Moore and E. J. Antoni

Have you taken a peek at the balance in your 401(k) retirement accounts lately? Here’s our advice: Don’t bother. It will ruin your whole day, week and month.

Here’s why: We’ve now had seven straight months of 8%+ inflation. A year ago we were assured by the White House economic wizards that these rapid price increases in everything from groceries, to rental cars, to gasoline at the pump, to health insurance were merely “transitory.” Whoops.

The most immediate sticker shock from Bidenflation, of course, has been to shrink real take-home paychecks of workers. We have calculated that over the past 20 months, this rise in consumer prices over wages means that the average family in America has lost nearly $6,000 in purchasing power. This from the Lunch Bucket Joe president who promised to help boost the incomes of the middle class. When, exactly?

But this pay-cut effect on family incomes is only part of the curse of runaway inflation.

We’ve just completed an analysis of how the highest inflation rate in almost 40 years has impacted the retirement funds of ordinary Americans. Here is what we found.

Savings collapse

Not surprisingly, since President Biden took office, monthly savings have collapsed, falling 83%. (We could never understand how Biden could say with a straight face that Americans are saving more. His “transformation” of the US economy has had just the opposite effect.) Many millions of Americans who are living paycheck to paycheck just don’t have the money after paying the inflated bills to save much.

But to add insult to injury, even what has been already saved and invested by older Americans over past years and even over several decades has been erased from these accounts.

Thanks to the thief of inflation.

Most of the 150 million Americans with one form or another of retirement savings have invested the majority of those tens of thousands of dollars in stocks. The major stock indices are all way down since Biden came into office. Here are the returns as of Oct. 10, according to the Federal Reserve Bank of St. Louis: .... CONTINUE READING

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10.17.22 - This is Why Your Portfolio Needs Gold

Gold last traded at $1,650 an ounce. Silver at $18.67 an ounce.

EDITOR'S NOTE: As we draw nearer to the election, American families continue to face mounting economic pressures. Market volatility has become the investment norm; which is unnerving to those planning for retirement or those who are currently retired. When you combine this volatility with the sharpest price increases in our consumable goods that many have seen in their entire lifetime, it leaves most of us feeling completely overwhelmed.

Is there a solution to this problem? Is there a safe way to approach investing during these times? The one thing we can count on is that markets are going to fluctuate; they will go up and they will go down. What many experts suggest as the solution to uncertainty and volatility is a properly diversified investment portfolio. Here's a breakdown of how a properly balanced portfolio has performed.


Today millions of Americans are worried about how rising market volatility could affect the value of their IRA, 401(k) or 403(b) retirement accounts.

During uncertain times like these, physical GOLD offers financial stability by protecting the long-term purchasing power of your savings and retirement funds - as well as offering excellent growth potential in the future! Click here for more info!


This is Why Your Portfolio Needs Gold - StashAway

There are a lot of misconceptions among today’s investors about Gold as an asset class. Many investors feel that Gold is an old-fashioned investment. And some investors are reluctant to invest in Gold because Gold doesn’t provide dividends or capital gains the way stocks can. But in these arguments, these investors don’t recognise that Gold, as a protective asset class, plays a crucial role in any balanced portfolio.

Gold hedges against a depreciating US Dollar

In a globally-diversified portfolio, a declining US Dollar will eat into your returns, but having an allocation to Gold hedges your investments against a depreciating US Dollar.

How?

The value of the US Dollar can decline significantly if there’s an oversupply of US Dollars in the global economy. An oversupply of US Dollars drives international investors and major central banks to reduce their US Dollar exposure in order to preserve their assets’ value in their home currencies. Specifically, they reduce their US Dollar exposure by selling their US Dollar reserves and then buying Gold.

This act of mass offloading the US Dollar drives down its value while driving up the demand for Gold. Basic rules of supply and demand tell us that when demand increases, so does the price. We saw this exact scenario play out after the 2008 Financial Crisis: The Fed’s quantitative easing caused the US Dollar to depreciate by more than 20% on a trade-weighted basis by 2011. At the same time, Gold prices nearly doubled up until 2012.

Gold protects your downside in a financial crisis

A factor that makes an asset class a good diversifier is when its value isn’t correlated to other assets classes in a portfolio all the time. Correlation measures how one asset class moves in relation to another asset class. Two asset classes are positively correlated when they move in tandem, and negatively correlated when they move in opposite directions.

In the case of Gold, its prices are relatively uncorrelated to equities in good times and positively correlated to equities when the stock market is doing exceptionally well.

Figure 1 shows how Gold performs depending on how big of a move up or down the S&P 500 makes. When we see the S&P 500 move up or down moderately (less than 2 standard deviations), the price of Gold has very little correlation with the market. But, when the S&P 500 does exceptionally well as measured by an upward move of more than 2 standard deviations), Gold prices tend to move up along with the market.

To get to the heart of why Gold is such an important protection in a financial crisis, pay attention to how Gold performs when the market goes down significantly (down more than 2 standard deviations). As seen in Figure 1, Gold prices have a high negative correlation when the markets go down significantly. That is to say, when the market crashes, Gold goes up substantially.

Figure 1: Correlation of US stocks to gold and other commodities READ MORE

gold chart

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10.14.22 - The Era Of Cheap Food And Cheap Gasoline Is Over

Gold last traded at $1,642 an ounce. Silver at $18.22 an ounce.

EDITOR'S NOTE: Inflation, unemployment, soaring interest rates, falling markets ... these are just a few of the terms we are bombarded with each day. They are words used so often, they now ring hollow. Somehow we always manage to navigate through the turbulence of these terms; but is this time perhaps different? Some market watchers are saying yes. The article below outlines why and how cheap prices -on everything from food to gas- may soon be a distant memory. Read on to learn more on this perspective.

Also, if you haven't already done so contact our office via phone or text at (800) 289-2646 and request a free copy of our most sought after report The Secret War on Cash which breaks down the war being waged against our finances daily.

The Era Of Cheap Food And Cheap Gasoline Is Over - Zero Hedge

Posted by Tyler Durden
Friday, Oct 14, 2022 - 04:20 AM

Authored by Michael Snyder via TheMostImportantNews.com

All of our lifestyles are about to change in a major way, but the vast majority of the population still does not understand what is coming. Throughout our entire lives, we have always been able to depend on a couple of things. There would always be cheap gasoline to fuel our vehicles and there would always be mountains of cheap food at the grocery store. No matter who was in the White House and no matter what else was going on in the world, those two things always remained the same. Unfortunately, those days are now over and they aren’t coming back.

So you might as well get used to high gas prices. Earlier this month, brand new all-time record highs were set all over southern California…

  • Los Angeles-Long Beach – $6.46 (Record high)
  • Orange County – $6.42 (Record high Saturday)
  • Ventura County – $6.40
  • Riverside County – $6.33 (Record high)
  • San Bernardino County $6.32

But that isn’t the real problem.

The real problem is with natural gas.

Thanks to the war in Ukraine, supplies of natural gas in Europe have become extremely tight, and this has pushed prices into the stratosphere.

Needless to say, this is going to greatly affect food productions in the months ahead. According to Bloomberg, over two-thirds of all fertilizer production capacity in Europe has already been shut down due to soaring natural gas costs…

Europe’s fertilizer crunch is deepening with more than two-thirds of production capacity halted by soaring gas costs, threatening farmers and consumers far beyond the region’s borders.

This is an absolutely massive story, but hardly anyone in the United States is covering it.

Global fertilizer production is going to be greatly reduced, and that is going to have very serious implications for agricultural production all over the world…

“Nitrogen plant shutdowns in Europe are not simply a problem in Europe,” she said. “Reduced supply on the scale seen this week not only raises the marginal cost of production of nitrogen fertilizers, but will also tighten the global market, putting pressure on plant nutrients’ availability in Europe and beyond.”

We’re already seeing prices elsewhere rise again. The price of the common nitrogen fertilizer urea in New Orleans rose over 20% in weekly prices Friday, the most since March, a few weeks after the war began, according to Green Markets.

I know that fertilizer may not be the most exciting topic for a lot of people, but the truth is that approximately half the global population would starve if we didn’t have any…

In fact, it’s estimated that nitrogen fertilizer now supports approximately half of the global population. In other words, Fritz Haber and Carl Bosch — the pioneers of this technological breakthrough — are estimated to have enabled the lives of several billion people, who otherwise would have died prematurely, or never been born at all.

Let that paragraph sink in for a moment.

The only way we can even come close to feeding everyone on the planet is by using vast quantities of fertilizer, but now fertilizer plants all over Europe are being forced to shut down because of the price of natural gas.

As long as this global energy crisis persists, the global food crisis will also persist.

Russia is normally the largest exporter of natural gas in the entire world, and an end to the war in Ukraine would go a long way toward solving our current problems.

But there isn’t going to be an end to the war in Ukraine.

Once again, western leaders are assuring us that the war will not end until Russia is forced out of every inch of Ukrainian territory.

That includes Donetsk, Luhansk and Crimea.

Of course the Russians would use tactical nukes long before we ever get to that point.

And once the Russians use tactical nukes, the west will do the same.

As it currently stands, there is no “off ramp” for this war.

Instead, we are simply counting down the days until it goes nuclear.

I am sorry to tell you that, but it is the truth.

If the American people truly understood what was at stake, there would be massive peace protests all over the nation right now.

Meanwhile, the worst multi-year megadrought in 1,200 years continues to absolutely ravage agricultural production in the western half of the United States.

A reporter from FOX recently visited the cornfields of Wayne County, Nebraska and what he discovered is extremely chilling… READ MORE

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10.13.22 - The Never-Ending State of Excessive Gov't

Gold last traded at $1,666 an ounce. Silver at $18.89 an ounce.

NEWS SUMMARY: Precious metal prices eased slightly Thursday amid rising U.S. Treasury yields. U.S. stocks ended higher as traders shook off another hot inflation report.

New bill introduced to bring the U.S. back to the gold standard to control gov't spending and inflation -Kitco

"One American politician proposes bringing stability back to the U.S. economy and its currency by introducing a new gold standard.

Last week, U.S. House Representative Alex Mooney (R-WV) introduced the Gold Standard Restoration Act. The bill looks to peg the U.S. dollar to gold to address the growing inflation threat, massive deficit spending and instability within the U.S. monetary system.

'The gold standard would protect against Washington's irresponsible spending habits and the creation of money out of thin air,' said Rep. Mooney in a statement.

'Prices would be shaped by economics rather than the instincts of bureaucrats. No longer would our economy be at the mercy of the Federal Reserve and reckless Washington spenders,' Mooney added.

The bill noted that the dollar, referred to as the Federal Reserve note, has lost more than 30% of its purchasing power since 2000. At the same time, the U.S. has lost 97% of its purchasing power since the Federal Reserve Act was passed by congress in 1913.

The proposed legislation would require the Federal Reserve and the U.S. Treasury to disclose all records pertaining to the government's gold reserves and gold-related transactions over the last 60 years....

'Today's debt-based fiat-money system serves primarily to support big government and wealthy financial insiders - while the Federal Reserve's serial policy of currency debasement punishes savers and wage earners as it undermines the economy,' explained Stefan Gleason, President of the Sound Money Defense League, in a statement.

'A return to gold redeemability would arrest the problem of inflation, restrain the growth of wasteful and inefficient government, and kick off an exciting new era of American prosperity,' Gleason added.

Although the proposed legislation has some grassroots support, some political analysts see it as a long shot. Federal Reserve Chair Jerome Powell has actively opposed the idea of a gold standard."

central banks The Not-So-Invisible Hand: Central Banks -Wall Street Journal

"Politicians may debate whether big-government socialism or free-market capitalism leads to better economic outcomes. Their constituents may worry about rising prices and declining prospects for retirement.

But neither group has the power to create money with no questions asked, manipulate the cost of capital, or counteract movements in financial markets. The central bankers are in charge - and perhaps that should change.

Even if duly elected leaders try to make good on campaign promises, they face hurdles if monetary authorities, domestic and global, disagree. What happened in Britain is a cautionary tale for nations that have relinquished to central banks the keys to economic performance. British Prime Minister Liz Truss, together with her finance minister, Kwasi Kwarteng, last month announced plans to spur investment and economic expansion by cutting taxes for individuals and businesses. Days later, they were verbally lashed by Mark Carney, a former governor of the Bank of England, for 'working at some cross-purposes' with the nation’s central bank....

Then there’s the audacity of the International Monetary Fund, which publicly rebuked the U.K. government’s budget and urged it to 're-evaluate the tax measures, especially those that benefit high income earners.'

Since when did unelected monetary officials gain the authority to tell political leaders what to do? It’s unseemly, but perhaps not surprising: When government organizations are imbued with breathtaking powers to determine financial conditions, it magnifies their clout - and elevates their status.

But central banks, led by the U.S. Federal Reserve, have embraced the notion that curbing demand is the road to monetary redemption. That same Fed not long ago failed to anticipate the pervasive inflationary pressures unleashed through the extraordinary fiscal and monetary measures to mitigate the economic consequences of the Covid-19 shutdown....

It is time to question whether central banks have become too powerful, too prominent and too political. In the name of preserving central bank independence, lawmakers have ceded huge swaths of their own responsibility for ensuring the welfare of citizens through sound economic policies. By doing so, elected representatives have granted influence to unelected officials that is inconsistent with democratic norms and limited powers.

It will require a Copernican revolution to shift the field of monetary theory from an understanding of economic performance that doesn’t put central banks at its core. But it’s a change that must be made if we are to prevent further demoralization of free markets and free people."

The never-ending state of rotten and excessive government -Washington Times

"Many, including those in government, often fail to remember when the U.S. Federal Reserve was established back in 1914, it was given the sole mandate of price stability. A few decades ago, the Fed’s mandate was expanded to include maintaining full employment - as if the requirement of price stability would never conflict with the requirement to support policies that would ensure full employment.

The Biden administration has now required that the Federal Reserve take on the added responsibilities of offsetting the cost of the pandemic, ensuring climate preservation, and promoting race and gender equality - but the inflation rate is almost 9%. Oh, never mind!

I expect that at some point a Fed chairman will testify before the Senate and be berated by a senator for not hitting the inflation targets. And the Fed chairman responding: 'Yes, we missed our inflation targets but we did hit our target for hiring Native American women, and our target of reducing our carbon impact by replacing the Fed motor vehicle fleet with electric cars and trucks. So two out of three is not bad.'

The European Central Bank (ECB) also had as its original mandate 'price stability,' which it did quite successfully until it was hit with eight or so other goals in the past couple of years. And like America, the euro countries now have a 9% inflation rate. So much for keeping their eyes on the ball.

As President Thomas Jefferson wrote more than two centuries ago, it is the nature of government to expand at the expense of the liberties of the people. Most are aware that governments have been growing, but most are not aware of how rapidly the governments in every major and most smaller countries have grown in the last half-century....

The natural tendency of bureaucracies is to grow because of the desire of those in charge of them to gain power and money by expanding their turf. Many government agencies and regulatory bodies endlessly poach off the real bailiwicks of others to expand their influence, power, and budgets. The Securities and Exchange Commission in the U.S. is now trying to give itself an environmental regulatory role, even though it has no statutory authority for doing so."

To Rein in Biden, Look To Florida's Example -Newsweek

"President Joe Biden's regulatory assault on American families is easily the worst in American history.

It's driving up grocery prices, utility bills, and the cost of everyday life, leaving people paying a lot more while getting a lot less. If Republicans truly want to fight back, they should look to the states for inspiration - especially our home state of Florida.

The Sunshine State is rolling back red tape at a record pace, thanks in large part to a unique policy that empowers lawmakers to block new mandates. Republicans in Congress should rally around a similar law to stop President Biden's rule by administrative fiat.

Compare what's happening in D.C. to what's happening in Florida.

At the federal level, President Biden proposed and enacted new regulations costing a staggering $201 billion in his first year alone. That's more than three times the burden imposed by President Barack Obama over the same timespan, and 40 times that of President Donald Trump....

Compare that with what's happening in Florida.

The Sunshine State proposed the lowest number of regulations in modern history last year, according to new research from the Foundation for Government Accountability. It follows years of regulatory repeal and relief by governors and lawmakers alike.

This sustained progress puts Florida well ahead of its competition. California now has more than twice as many regulatory restrictions. New York has about 75% more, and Illinois 65% more. Even Texas has a larger regulatory burden than Florida....

Why is Florida cutting red tape so quickly and effectively? One of the biggest reasons is a 2010 law, passed over then-Gov. Charlie Crist's veto, that says the state legislature must approve all rules that cost $1 million or more over five years. If lawmakers don't affirmatively approve such a regulation, it doesn't go into effect. This policy ensures that the people's representatives have a say on new mandates.

Florida's policy is the definition of common sense - but the federal government takes the opposite, and nonsensical, approach. President Biden can force Americans to pay hundreds of billions of dollars in higher regulatory costs because there's no real check on his administration's ability to propose new rules. Congress gets no say in the matter, even though the Constitution invests the House and the Senate with sole lawmaking power. Lawmakers are bystanders when they should be referees....

Florida proves this policy works. The state's economy is booming, with new residents moving here every 50 seconds and 1,800 new start-ups setting up shop every day. The state's light touch on red tape, driven by the governor's and lawmakers' willingness to stop costly new rules, is undoubtedly contributing to the Sunshine State's ever-brightening outlook."

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10.12.22 - The Real Reason The Fed Should Pause Rates

Gold last traded at $1,674 an ounce. Silver at $19.07 an ounce.

NEWS SUMMARY: Precious metal prices steadied Wednesday amid rising whoesale inflation data and a firmer dollar. U.S. stocks traded flat as investors weighed price data that came in higher than expected, signaling more interest rate hikes are ahead.

The Gold Market's Great Migration Sends Bullion Rushing East -Bloomberg

"There’s a global migration underway in the gold market, as western investors dump bullion while Asian buyers take advantage of a tumbling price to snap up cheap jewelry and bars.

Rising rates that make gold less attractive as an investment mean that large volumes of metal are being drawn out of vaults in financial centers like New York and heading east to meet demand in Shanghai’s gold market or Istanbul’s Grand Bazaar.

As a result, gold and silver are selling at unusually large premiums over the global benchmark price in some Asian markets....

The rotation of metal around the world is part of a gold-market cycle that has repeated for decades: when investors retreat and prices drop, Asian buying picks up and precious metals flow east - helping to put a floor on the gold price during times of weakness.

Then, when gold eventually rallies again, much of it returns to sit in bank vaults beneath the streets of New York, London and Zurich....

While plenty of gold is heading east, it’s still not enough to meet demand. Gold in Dubai and Istanbul or on the Shanghai Gold Exchange has traded at multi-year premiums to the London benchmark in recent weeks, according to MKS PAMP - a sign that buying is outstripping imports."

money printing An Economics Nobel for and by Central Bankers -Wall Street Journal

"The committee that awards the Nobel Prize in economics announced Monday it has chosen three U.S. economists for the 2022 prize: former Federal Reserve Chairman Ben S. Bernanke, Douglas W. Diamond of the University of Chicago and Philip H. Dybvig of Washington University in St. Louis.

The award is for 'research on banks and financial crises.' The committee praised the winners for doing work 'of great practical importance in regulating financial markets and dealing with financial crises.' Many monetary economists would disagree....

'I would like to say to Milton Friedman and Anna Schwartz: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again,' said Mr. Bernanke, then a member of the Fed’s board of governors, at Friedman's 90th birthday party in 2002. Unfortunately, as Fed chairman, Mr. Bernanke, with his fellow Fed governors, did do it again.

The difference between the Bernanke and Friedman/Schwartz views was that Mr. Bernanke thought providing more liquidity during a crisis wasn’t enough; he emphasized the importance of salvaging particular financial intermediaries, even if some of them arguably should have gone bankrupt....

Quantitative easing, which expanded the money supply, got all the press. Less discussed were two Bernanke initiatives that choked off the increase in the money supply. One was the sale of Treasury securities, which removed from the economy much of the money the Fed had injected in 2008 via the Bear Stearns bailout and the Term Auction Facility. Economists call this 'sterilization.'

The result was that in the year ending August 2008, the monetary base (currency plus bank reserves) had increased by less than $20 billion, or 2.24%. Had Mr. Bernanke simply increased the money supply substantially, as Alan Greenspan had done in response to the 1987 market crash, the 2007-09 recession would have been shorter and shallower. The second measure restraining liquidity was Mr. Bernanke’s 2008 choice to pay interest on bank reserves, which caused banks to sit on reserves rather than lend them out....

The Nobel Prize in economics is funded not by the Nobel Foundation but by Sweden’s central bank. I don’t usually think that matters, but in this case I wonder if it does. The 2022 award seems to be an affirmation by central bankers of the value of central banking."

The Real Reason The Fed Should Pause -Alhambra Investments

"The Federal Reserve has been on a mission lately to make sure everyone knows they are serious about killing the inflation they created. Over the last two weeks, Federal Reserve officials delivered 37 speeches, all of the speakers competing to see who could be the most hawkish. Interest rates are going up they said, no matter how much it hurts, no matter how many people have to be put on the unemployment line, because that’s the only way to kill this inflation, to save the people from higher prices....

The big problem with the Fed's plan to kill inflation by reducing economic growth and raising the unemployment rate is that those things are not the source of our current inflation problem. People working don’t cause inflation unless they are not creating sufficient supply to meet their own demand.

That being the case, one could easily see why too many government workers might be highly problematic. But in the private sector, companies generally don’t hire people who aren’t productive. I’d just suggest that maybe it isn’t the job of the Federal Reserve to determine how many people are allowed to work. Maybe they could help the inflation rate by laying off half - or more - of the 400 economists they employ who don’t produce anything useful.

It is certainly true that the Fed could hike rates far enough to cause an economic contraction and higher unemployment. And it is also true that in that situation, inflation is likely - but not certain - to come down. But has anyone at the Federal Reserve considered that maybe they could reduce inflation without killing the economy and throwing people out of work? Does the medicine have to kill the patient? Do we have to destroy the village to save it?

Powell has said previously that backing off rate hikes too soon was a big mistake in the 1970s and he doesn’t want to repeat that. But is it true? Well, maybe, but I think the Fed is drawing the wrong conclusion from the 70s. From December 1968 to August 1969, the Fed raised the Fed Funds rate from 4.0% to 9.75%. In other words, they tightened rapidly. They then had to cut rates all the way back down to 3% in the subsequent recession.

The logical conclusion here is that the rapid - and large - tightening of policy led to big drops in economic activity that then necessitated a rapid loosening of policy which caused another burst of inflation and a repeat of the pattern.

The Fed today seems hell-bent on repeating this mistake. Powell and the other members of the Federal Reserve have said repeatedly in all these speeches that their goal is to raise rates to a restrictive level and hold them there for a long time. If they keep hiking rates at the current pace, they will either create a severe recession or a financial crisis of some kind that ensures they will fail in that goal."

Some Questions I Have About Stocks, the Economy & Other Stuff -Wealth of Common Sense

"We humans have an insatiable desire to predict the future. This desire gets even worse during bad times.

I have opinions just like everyone else but I truly don’t know how the current economic mess is going to shake out.

I do have some questions though:

How long will good news be bad news for stocks?

On Friday, the employment data came out stronger than expected. The unemployment rate actually fell, despite the Fed’s best efforts.

The stock market immediately fell on the better-than-expected labor market news.

Why did stocks fall on good economic news?

The Fed is trying to slow the labor market to slow inflation....

What if companies just went through laying off a bunch of people during the pandemic and had such a hard time finding workers these past few years that they don’t want to turn around and do it again so soon?

The Fed wants to make the unemployment rate go higher. They keep telling anyone who asks that they want people to lose their jobs to bring supply and demand back into balance so inflation will fall.

I’m not a fan of this plan but they don’t care what I think.

Regardless, I’m worried about what happens if the Fed’s plan doesn’t work, at least for a while....

How are we ever going to increase the supply of homes in this country?

For a decade following the Great Financial Crisis, we didn’t build enough homes because homebuilders were so scarred the housing bust.

I can’t imagine things are going to be much better in the 2020s, despite the millennials now being the biggest demographic in the country and ready to buy.

Homebuilders basically had an 18 month window of insane demand that is falling off a cliff now that mortgage rates are 7%.

How could we ever expect them to build enough houses if their business goes from boom to bust and back to quickly?

One of my biggest worries is an entire generation of young people is going to be forever pissed off about the state of the housing market."

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10.11.22 - Economists Fear Deep Downturn

Gold last traded at $1,678 an ounce. Silver at $19.45 an ounce.

NEWS SUMMARY: Precious metals rose Tuesday on bargain hunting and a weaker dollar. U.S. stocks see-sawed as investors worried that higher interest rates and inflation will tip the economy into recession and hurt corporate earnings.

Gold's Contribution to Society -World Gold Council

"The WGC has long believed that responsible gold mining supports sustained socio-economic development in countries and communities that host gold mining operations, through its contribution to jobs, tax revenue and investment in local communities. The gold industry makes a meaningful contribution to the UN's Sustainable Development Goals.

Gold itself also plays a critical role in supporting societies’ needs and is considered important across cultures globally. It is deeply understood and recognized as a source of financial security and is critical to numerous technological and healthcare applications.

Gold mining is a major economic driver for many countries across the world. Well-managed, transparent and accountable resource extraction can be a major contributor to economic growth due to the creation of employment and business opportunities for local people. As well as direct and indirect jobs, gold mining also brings foreign direct investment and tax revenues to countries....

Gold mining companies also have ethical and commercial incentives to improve the health and education of the communities that they operate in. Many invest in social infrastructure, including schools, colleges and health centers that improve the opportunities and well being of local people....

Gold is an extraordinary metal, which has an array of unique properties which makes it irreplaceable in today’s world. Gold is used extensively in electronics but is also widely used in many other applications. It is now one of the most studied nanomaterials, and has been incorporated in a variety of products and devices. For example, gold nanoparticles are used in the billions of rapid medical diagnostic test kits produced annually, including in the COVID-19 antigen and antibody tests.

Beyond gold's role in our daily lives , it is also at the cutting edge of scientific advancement. In our documentary series The Golden Thread, we highlight many of gold’s unique but often less well-known or hidden applications, from space exploration to wearable diagnostic electronics. Gold is being used in increasingly varied and innovative ways and continues to help shape the world around us."

currency Currency Crises Make a Comeback -Camelot Portfolios

"It has been quiet in the currency markets during the last few years. Now, currency crises are coming back with a vengeance.

In the last 10+ years of worldwide synchronized low interest rates, with some even running below zero, currency movements have been mostly benign. The early days of these loose monetary policies saw allegations of currency wars, an allegation first waged by Brazil's Finance Minister of the time, Guido Mantega. Smaller currencies had occasional hiccups, of which the surprise Swiss Franc revaluation of 2018 was the most notable...Now, with the U.S. going it alone in its aggressive tightening, we expect turmoil in the currency markets to return to levels of the 1980s.

The Fed is pretty much alone in its aggressive rate hikes and is seen as the only major central bank that is not just talking about inflation, but acting. Neither the ECB nor the BoJ dare to follow its lead due to the high level of indebtedness of the public sectors in these two currency blocks. Despite a decade of ultra-low and negative interest rates (two decades in Japan), governments have not been able to balance their budgets, much less reduce debt levels....

While the pound's brief flash crash to its lowest level created headlines, many seem to have overlooked that the pound's weakness is not an isolated case. Against the Euro, at 55% of exports still the dominant trading partner of the UK, sterling is barely changed.

The brief all-time low against the US dollar on September 25 that made headlines was reversed within hours. It appeared to be a technical move during Asian trading hours early on a Monday morning...Somehow, headlines focused on the low point of the exchange rate only, while volatility is the real story. 5% intraday moves in a currency typically are associated with currency crises....

Overall, the strong dollar is bad news for the stock market and the economy. After the strong moves that we have seen in currencies, we would normally be inclined to be contrarian and recommend increasing exposure to foreign equities. After all, the risk/reward ratio now favors the dollar over other currencies – we would need dollar-appreciation-forever to make a case for pulling out of non-dollar assets and reallocating to dollars. All it takes is a Fed pivot, and we would expect to see a violent dollar depreciation, given that everyone is positioned for a strong dollar."

Fed’s Inflation Fight Has Some Economists Fearing an Unnecessarily Deep Downturn -Wall Street Journal

"Some economists fear the Federal Reserve - humbled after waiting too long to withdraw its support of a booming economy last year - is risking another blunder by potentially raising interest rates too much to combat high inflation....

Fed Chairman Jerome Powell has said the central bank isn’t trying to cause a recession, but it can’t fail in its effort to bring down inflation. 'I wish there was a painless way to do that. There isn't,' he said last month.

Still, several analysts worry the Fed is on track to raise rates higher than required, potentially triggering a deeper-than-necessary downturn.

'They’ve done a tremendous amount of tightening,' said Greg Mankiw, a Harvard University economist who advised President George W. Bush. 'Recessions are painful for a lot of people. I think Powell’s right that some pain is probably inevitable…but you don’t want to cause more than is necessary.'....

Former Fed Vice Chairman Donald Kohn agrees it is near time for Fed officials to slow their rate increases. 'They need to downshift soon. They need to somehow downshift without backing off,' he said....

Some Fed critics say the current surge in inflation is the result of global disruptions rather than an overheated U.S. labor market, and they are pointing to signs that prices have begun to fall for a swath of goods and services, including commodities, freight shipping, and housing....

Asset prices have also taken a beating, which tends to reduce spending and investment. A portfolio invested 60% in stocks and 40% in bonds is down nearly 20% this year.

'The housing market doesn’t look pretty, and that will eventually spread to the rest of the economy,' said Mr. Mankiw. Lower asset prices will, too, at some point, he said."

Earnings Preview: Q3 and Beyond -Briefing.com

"The third quarter is over, but we're not done with it yet. In fact, we are going to hear a lot about the third quarter in coming weeks as publicly traded companies report their earnings results for the July-September period.

We know already that it was a tough period for the stock market. The S&P 500 declined 5.3% in the third quarter. It did so as interest rates went up and earnings estimates came down.

We'll soon learn if the third quarter earnings estimates were cut too much or not enough. According to FactSet, the estimated earnings growth rate for the third quarter was 9.8% on June 30. Today it sits at 2.3%.

The third quarter earnings bar has been lowered significantly, and we suspect it will be relatively easy for most companies to clear it. The bigger hurdle - and where we think more companies than usual will get tripped up - is the guidance.

We do not want to go astray on this earnings preview piece delving into the economic releases, but the fact of the matter is that the economy is going to factor prominently in the earnings reporting period.

That isn't anything new, yet it will have more bearing than it typically does because the U.S. economy - and the global economy for that matter - is thought to be at a tipping point because of the rapid-fire rate hikes from many of the world's leading central banks.

In many respects the global economy has already tipped. Growth is slowing and now it is a matter of whether the economy keeps tipping into a recession. Some will argue that it already has, sticking to a technical definition of two straight quarters of a decline in real GDP, yet others will point to remarkably low unemployment rates to refute that notion.

Regardless, the behavior of the stock market this year and the inverted yield curve make it clear that economic optimism is not running high.

An 8.1% growth rate for 2023 sure seems to be generous at this point given all the writing on the economic wall of worry that points to little growth at best in 2023 or a recession at worst."

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