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Yellen signals all clear -
Yellen Reverses Earlier Hawkish Comments Entirely, Says "I'm Not Predicting Anything" : https://www.zerohedge.com/markets/stocks-extend-losses-after-yellen-says-rates-will-have-rise
My Comment : It's very dangerous to yell fire in a crowded theatre. The Fed cannot raise rates for fear of bursting the bubbles no matter what inflation does. So will the PMs recover after today's retraction ?
The PMs are getting beaten down hard today. Not unexpected though.
Everything depends on news from the company which has been MIA
US Trade Deficit Hits Record High In March
: https://www.zerohedge.com/economics/us-trade-deficit-hits-record-high-march
My Comment : That's $900Billion annualized. Debt, debt, and more debt.
Excerpt:
the trade deficit has surged from the start of the pandemic to the latest data in March, at $74.4 billion - the largest trade deficit in US history (from $71.1 billion a month earlier), in line with expectations.
"The Costs Are Up, Up, Up. We're Seeing Substantial Inflation" Admits A Surprised Warren Buffett As Powell, Yellen See Nothing : https://www.zerohedge.com/markets/costs-are-were-seeing-substantial-inflation-admits-surprised-warren-buffett-powell-yellen
My comment : But Powell says inflation is temporary. Temporary or not, Powell will do nothing to reduce inflation because it would risk bursting the bubbles.
Excerpts:
“It just won’t stop,” Buffett added. “People have money in their pocket and they’ll pay the higher prices.... There's more inflation going on that people would have anticipated six months ago or thereabouts" he added.
WARREN BUFFETT: Let me answer that, then Greg can get more into that. We're seeing very substantial inflation - it's very interesting. I mean, we're raising prices. People are raising prices to us. And it's being accepted. Take home-building. I mean, you know, the cost of-- we've got nine home builders in addition to our manufactured housing operation, which is the largest in the country.
So we really do a lot of housing. The costs are just up, up, up. Steel costs, you know, just every day, they're going up. And there hasn't yet been because the wage-- the wage stuff follows. I mean, the-- the UAW writes a three-year contract, we got a three-year contract.
But if you're buying steel at General Motors or someplace, you're paying more every day. So it's an economy, really-- it's red hot. I mean, and we weren't expecting it.
Anomaly of a Recovery : https://www.mauldineconomics.com/frontlinethoughts/anomaly-of-a-recovery
My Comment : $40Trillion national debt by 2025 !!!
Excerpts:
John Mauldin: I actually changed my “muddle through” metaphor here about a year ago. I think this decade we’ll be stumbling through instead of muddling because, as Milton Friedman said, the most permanent thing in the world is a temporary government program. We're going to run, this year, well over a trillion in off-budget deficit spending and trillions more in regular budget deficit. We're going to be $40 trillion in debt by 2025. That’s 180% debt to GDP. That looks like Japan and Europe.
John Mauldin: There are times when you actually need a central bank. And those were times when you needed a central banker. We needed them to help keep things going. Now they've dug themselves into a big hole and they're continuing to dig. They painted themselves in the corner, whatever analogy you want. If they allow, the US government is going to be at $40 trillion worth of debt within five years. A mere 1% interest rate is another $400 billion of interest. Or something equally ridiculous.
Now, here's what's the problem. We can’t allow rates to rise without completely blowing the budget. We're not going to see a deficit under $2 trillion [this decade].
John Mauldin: Well, yeah, because the entire premise goes back to Dick Cheney when he said deficits don't matter. He was technically correct, in the sense that if your deficit is below the nominal GDP growth, you're fine because you're shrinking the total debt to GDP. We've gone way past that and the Federal Reserve is going to have to buy more of that debt. It's Japanification and how long can this go on? When does it collapse? And the answer is we don't know. And the second answer is we really don't want to know. Because the only way we're going to know is when it's already happened. That's a very dangerous trek.
Now, the US dynamic is significantly different from Japan’s. It's significantly different from Europe’s. But nonetheless, that excess debt is going to slow our economic growth. I don't see any impetus from either political party to say we're going to lock in our spending and then try to grow our way to balance. There's just no limit there. You’ve pointed out that it looks like the next round of spending will be $3 trillion or more over 10 years. It's likely to get passed. I mean, that's just the reality. You're shaking your head…
John Mauldin: I have written about this, I'm sure you have too. There's just not enough [income] taxes that we can raise to make a dent. In this problem, the only way we get out of this is to have a crisis and to completely restructure the tax code to where it's a VAT, probably in the 18 to 20% range, get rid of Social Security and include it in the VAT, drop the income tax rate to a flat rate on higher incomes. And you use the VAT to be your safety valve. That's the only way we can get back to a balanced budget. But the only way we're going to be motivated to do that is if we have a crisis, if we become Japan.
The world has truly gone mad
My comment : Indeed
'We are sitting on economic cliff': Gold price will be 'well north of $2,000 this year' - ex-JP Morgan MD : https://www.kitco.com/news/2021-04-26/-We-are-sitting-on-economic-cliff-Gold-price-will-be-well-north-of-2-000-this-year-ex-JP-Morgan-MD.html
My Comment : The debt cannot be inflated away'
Excerpts:
"We are already seeing inflation. If you look around the world, you see real estate prices, building supplies, and services skyrocket," he said. "What we created since the early 1990s is an entire financial infrastructure that is relying on debt, and we have accelerated that dramatically in our response to managing the COVID-19 crisis. In that regard, we will continue to increase the money supply globally, and we will continue to have a quite aggressive fiscal policy. We are sitting on an economic cliff."
"We'll see a real big move in gold. We've taken a lot of the length out. We are in a real position to move higher. We'll go well north of $2,000 this year. Realistically, $2,200 is probable. It may have some headwinds as we go through $2,000 again. Gold is in a much better position than where it was a few months ago," Deane said.
The outlook for silver and bitcoin is also bullish. "[Silver] can be somewhere between $35-$40 by Q1 next year. Bitcoin could be north of $100,000 or even $150,000 before the end of the year," he said
With all the debt out there, monetary policy cannot be as effective, Deane added. "If you are now at 50 basis points and you raise rates by 25 basis points. That is a 50% increase in your borrowing costs at a time when the world has the greatest amount of debt we ever had. It would be a huge economic shock to put it through the system," he stated.
The only way the governments have to get rid of some of that debt would be to inflate it away. "By inflating away the debt, that means getting inflation to uptick to get negative real rates," he said. "We backed ourselves into a corner. As a result, we actually need inflation to get us out of it. We need to inflate away the debt. We need modest secular inflation."
However, the problem with inflation is that once it starts to run hot, it is very hard to control, and that could be the problem the Federal Reserve encounters soon. "We don't want inflation to run too hot. And this is the risk of Fed's approach to inflation right now," Deane explained. "People are losing confidence in economic management. People are less likely to hold U.S. dollars. The return on them is zero."
Gold, silver and platinum getting ready to launch : https://www.kitco.com/commentaries/2021-04-26/Gold-silver-and-platinum-getting-ready-to-launch.html
Excerpt:
There will be moves up and down, we don’t expect straight up. We are looking for a consistent run as gold, silver and platinum work their way out of congestion. Our next targets in gold are $1,800. silver $27.00 and platinum $1,300. We are looking for higher but those are the first targets.
How Easy Is It To Escape Taxes By Moving Offshore Or To Puerto Rico? : https://www.zerohedge.com/personal-finance/how-easy-it-escape-taxes-moving-offshore-or-puerto-rico
Biden Plans Capital Gains Tax Hike To Help Finance $1.5 Trillion "Human Infrastructure" Package : https://www.zerohedge.com/political/biden-plans-capital-gains-tax-hike-help-finance-15-trillion-human-infrastructure-package
My Comment : The government can hand out free money like candy and then take everything you've got through taxes. An example of wasteful spending is the $1400 stimulus checks some friends and I received from the IRS when our gross incomes are well over $100K.
Excerpts:
The second phase of Biden's sweeping "Green New Deal"-inspired program centers on what administration officials call "human infrastructure".
Should it pass in its current form, it would entail spending hundreds of billions of dollars on universal pre-kindergarten, expanded subsidies for child care, a national paid leave program for workers and free community college tuition for all.
All told with tax credits and spending, the plan is expected to cost $1.5 trillion. When combined with the $2.25 trillion "American Jobs Plan", the total cost of the overhaul is slated at just below $4 trillion.
Stocks Puke As Biden's Capital Gains Tax Reality Strikes : https://www.zerohedge.com/markets/stocks-puke-bidens-capital-gains-tax-reality-strikes
My Comment : WA state just passed a 7% capital gains tax. That would equate to a 47% capital gains rate. Add in Income taxes, sales taxes, and RE taxes. Does the government want to take everything you've got ?
Excerpt:
As Bloomberg reports, President Joe Biden will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6%, which, coupled with an existing surtax on investment income, means that federal tax rates for investors could be as high as 43.4%, according to people familiar with the proposal.
For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%. For Californians, it could be 56.7%
The housing boom, central banks and the inflation conundrum : https://www.kitco.com/news/2021-04-21/The-housing-boom-central-banks-and-the-inflation-conundrum.html
My comment : Just let it continue to inflate. The housing bubble will eventual burst
Excerpt:
LONDON, April 21 (Reuters) - A multi-year boom in global house prices which even a pandemic has failed to halt is forcing central banks around the world to confront a knotty question - what, if anything, should they be doing about it?
The surge in property values from Australia to Sweden is often viewed benignly by governments as creating wealth. But history also shows the risk of de-stabilising bubbles and the high social cost as millions find home ownership unaffordable.
The irony is that while the cheap money created by low or negative interest rates has driven the price rises, they barely figure in central banks' calculations of inflation, one of the key drivers of their monetary policy.
While housing costs, whether rent or home repairs, are assigned varying weights in inflation indices ranging from 40%-plus in the United States to 6.5% in the euro zone, house prices themselves are left out. As they spiral higher and higher, many argue this is no longer tenable.
"The debate of whether we actually are reflecting inflation properly will come up more and more. House prices will start getting a lot of attention," said Manoj Pradhan, co-author of a book called The Great Demographic Reversal, which predicts a global inflation resurgence in coming years.
Hmm -
Why Record US Port Congestion May Lead To Historic Trade Deficit Blowout, Dollar Plunge : https://www.zerohedge.com/markets/why-record-us-port-congestion-may-lead-historic-trade-deficit-blowout-dollar-plunge
Excerpt:
While it should come as no surprise to those who have been following our reporting on the epic bottlenecks and congestion across West Coast ports, Standard Chartered's chief G10 FX strategist Steven Englander makes a remarkable observation, showing that based on the very close correlation between seasonally adjusted inbound containers and the US goods trade balance, then US is about to see an unprecedented explosion in its trade deficit which would push it to a record high, well north of $100BN. This, in turn, could have a profoundly negative effect on the US dollar and as Englander concludes "if the deficit is as wide as containers indicate, the USD downside risk may become clearer, especially with Fed commentary weighing on yields."
Hmm -
Why Record US Port Congestion May Lead To Historic Trade Deficit Blowout, Dollar Plunge : https://www.zerohedge.com/markets/why-record-us-port-congestion-may-lead-historic-trade-deficit-blowout-dollar-plunge
Excerpt:
While it should come as no surprise to those who have been following our reporting on the epic bottlenecks and congestion across West Coast ports, Standard Chartered's chief G10 FX strategist Steven Englander makes a remarkable observation, showing that based on the very close correlation between seasonally adjusted inbound containers and the US goods trade balance, then US is about to see an unprecedented explosion in its trade deficit which would push it to a record high, well north of $100BN. This, in turn, could have a profoundly negative effect on the US dollar and as Englander concludes "if the deficit is as wide as containers indicate, the USD downside risk may become clearer, especially with Fed commentary weighing on yields."
re: Condor -
I added today at US$0.15. I'll add as it moves lower.
From Doug Noland's CreditBubbleBulletin : http://creditbubblebulletin.blogspot.com/2021/04/weekly-commentary-huarong.html
My Comment : Noland points out that China is in even worse shape
New data this week confirm the “global government finance Bubble” is alive and unwell. In the past, a $660 billion U.S. federal deficit over the course of a year would have been concerning. In today’s crazy world, it’s accomplished in a single month. March’s shortfall compares to the $119 billion deficit posted in March 2020. Last month pushed the deficit for the first-half of the fiscal year to a frightful $1.71 TN.
For the month, spending of $972 billion was up from the year ago $356 billion, while receipts increased to $268 billion from $237 billion. Washington borrowed 70 cents of every dollar it spent last month. About 50% of the $3.41 TN first-half expenditures were debt-financed. Worse yet, our federal government is on track for back-to-back years of $3.0 TN plus annual deficits.
There Is Now A Dogecoin Billionaire Worth $15BN : https://www.zerohedge.com/markets/there-now-dogegoin-billionaire-worth-15bn
My Comment : Absolute insanity !!! Some people will buy anything. It's a herd mentality. A joke indeed !
Excerpt:
it's probably worth noting for those keeping track of where in the bubble we are now, that in the magical world of dogecoin - a cryptocurrency that was specifically created as a joke spoof on the crypto concept and which has been promoted aggressive by such luminaries as Elon Musk - there is now a holder residing at address "DH5yaieqoZN36fDVciNyRueRGvGLR3mr7L" who owns 36,711,935,369.11 dogecoins or whatever the plural is, and whose holdings - which started accumulating back in February 2019 - after the latest surge in dogecoin which has sent the joke crypto up 150% in the past 24 hours and 5x in the past week...
ForexLive probably said it best...
We've seen a lot of stupid in the past year but this takes the cake
March Deficit Blowout: US Spends 3.5x More Than It Brings In; YTD Deficit Is Biggest Ever : https://www.zerohedge.com/markets/march-deficit-blowout-us-spends-35x-more-it-brings-ytd-deficit-biggest-ever
My Comment : We've lots of room to expand the debt and deficits...right ? This year's fiscal deficit is likely going to be close to $3Trillion with the national debt exceeding $30Trillion.
Excerpt:
At 2pm, the Treasury released its latest Monthly Treasury Statement which showed that in March, the US budget deficit exploded once again, surging to $660BN, up five-fold from a tiny $119BN last March, driven by a 160% increase in government Outlays which soared to $927 billion - the third highest on record - from $355.7BN a year ago, and from $559.2BN in February.
Finally, on a year to date basis, the US deficit is now at $1.706 trillion after six month, compared to $743.453BN last year. While it is likely that government spending will slowdown now that the latest stimulus is in the books, it is just as likely that it will accelerate in the coming months if Biden's various infrastructure plans pass.
The Global Debt Problem : https://www.zerohedge.com/markets/global-debt-problem
My Comment : When will this debt driven house of cards collapse ?
Excerpts:
Non-financial Corporate Debt:
Since the Lehman crisis, the increased zombification of large corporate entities has been accompanied by economic stagnation — with the notable exception of tech industries which is not relevant to our story. The general stagnation is even worse when the underreporting of price inflation by standardised CPI method is taken into account. Furthermore, trillion-dollar annual US deficits being matched by substantial US trade deficits led to the expansion from 56% to 96% of GDP of non-financial corporate debt in emerging economies, while non-financial corporate debt in developed economies grew at a slower, similar pace to their GDPs.
Consumer Debt :
Initially, rising interest rates might not be a major factor increasing credit card delinquencies, but as the purchasing power of the dollar and therefore global fiat currencies decline, they are sure to increase. The immediate and far larger consumer problem is over mortgage finance. As a subset to wider problems, the US and UK will face increasing defaults due to rising mortgage rates and the recent rise in house prices will then almost certainly reverse, perhaps to the point where even eighty per cent loan to value mortgages become uncovered and therefore a crisis for the lenders.
In short, a significant element of the $54 trillion of consumer debt will end up as losses to be borne by the financial sector
Financial Sector
With an average ratio of assets to equity of 11.7, US G-SIBs are significantly less leveraged than most of their foreign counterparts, which might explain why so little attention is paid to systemic banking risk in the American financial press. But even at this level, mounting bad debts from the covid crisis amplifies them nearly twelve times for balance sheet equity. China’s four G-SIBs are similarly geared at an average of 11.8 times, Japan’s 21 times, the UK’s 16.8 times, and the Eurozone’s 20.5 times. The leverage ratios in Table 2 additionally take into account market capitalisation, and the three Eurozone banks heading the list tells us that markets already rate them as walking dead.
Government Debt :
But things are coming to a head, with rising bond yields. The realisation that prices, particularly of essentials, will rise well beyond CPI targets of 2%, is leading to losses on government bonds — a process that has only just started. The ECB is now trapped with increased fiscal revenue ruled out. Globally, it has been agreed that to raise taxes in the current economic environment would be counterproductive.
But the imminent failure appears to be that of using monetary inflation to puff financial markets. Once they stall on the back of rising bond yields all these debt obligations will end up being wiped out in a collapse of the fiat currencies along with the financial markets with which their fortunes have become firmly linked.
Price pressure on gold, silver, after hot U.S. PPI data : https://www.kitco.com/news/2021-04-09/Price-pressure-on-gold-silver-after-hot-U-S-PPI-data.html
My Comment : But, but higher inflation is supposed to mean higher gold prices. It's an upside down world. One thing is for certain, rates cannot be allowed above 2% whereas inflation can go much higher and actually already is much higher.
Excerpt:
(Kitco News) -Gold and silver prices are solidly lower in early U.S. trading Friday, extending overnight losses in the wake of a hotter-than-expected U.S. producer price index report for March that boosted the U.S. dollar index and pushed up U.S. Treasury bond yields
Bubble, Bubble, But Limited Housing Trouble... For Now : https://www.zerohedge.com/markets/bubble-bubble-limited-housing-trouble
My Comment: How much further can the rubber band be stretched ?
Excerpt:
Concerns stem from pockets of elevated household leverage where ballooning debt burdens raise the threat of broader systemic risks. But with rate hikes exacerbating the challenge and risking economic recoveries, more regulatory measures are likely -- with risks dominating in Canada, Sweden and Australia.
NY Rewards Illegal Aliens With COVID Relief Checks 10 Times Amount Given To American Citizens : https://www.zerohedge.com/markets/ny-rewards-illegal-aliens-covid-relief-checks-10-times-amount-given-american-citizens
My Comment : Ain't Amerika great ?
The State of New York has passed a new budget with major tax increases that will only drive more business from the declining state. It is also carving out billions to cut one-time checks for illegal immigrants who lost work due to the state’s lockdowns. The size of the checks? Over ten times that given to Americans in the last round of stimulus sent out by the Biden administration.
“New York will now offer one-time payments of up to $15,600 to undocumented immigrants who lost work during the pandemic,”
Biggest Beat On Record: Consumer Credit Explodes Higher As Americans Rediscover Their Love For Credit Cards : https://www.zerohedge.com/markets/biggest-beat-record-consumer-credit-explodes-higher-americans-rediscover-their-love-credit
Excerpt:
moments ago the Fed reported in its latest monthly G.19 statement that in February consumer credit exploded by a whopping $27.6 billion, which not only was the highest monthly increase in the series since November 2017... but was about 10x higher than the expected number of $2.8BN, making it the biggest beat on record!
Decision time for gold and silver : https://www.kitco.com/commentaries/2021-04-07/Decision-time-for-gold-and-silver.html
Excerpt:
Here we are once again at a decision point for gold, silver and platinum. The price action suggests a big move is coming; the direction is the only question. The pattern of consolidation will lead to a breakout to the upside or continuation of the downtrend
Fed's balance sheet size is far from hitting any constraints: Daly : https://www.kitco.com/news/2021-04-07/Fed-s-balance-sheet-size-is-far-from-hitting-any-constraints-Daly.html
My comment : Print to infinity and beyond
Excerpt:
(Reuters) - The size of the U.S. central bank's balance sheet, now more than $7 trillion, is "far" from hitting any limits, San Francisco Federal Reserve Bank President Mary Daly said on Wednesday, noting that there are really only two constraints on its ultimate size.
"One is we can't be the only maker in the market, because then we start actually influencing things in a way we don't want to," Daly said at an event put on by the University of Nevada, Reno. "And the second is the optics of the balance sheet, as people like to call them, the tolerance for people thinking that we are not actually influencing the market pricing across the board because we are too large...but neither of those things right now is binding us."
US Trade Deficit Hits Record High In February : https://www.zerohedge.com/economics/us-trade-deficit-hits-record-high-february
My Comment : The debt is astounding ($850B annualized)
Excerpt:
the trade deficit has surged from the start of the pandemic to the latest data in February, at $71.1 billion - the largest trade deficit in US history (from a revised $67.8 billion a month earlier).
I got a stimulus check. That's NUTS. The government is passing out money like candy. I'm sure the IRS will at some point recognize the error and want the money back which is fine.
"I Don't Know WTF I'm Doing... But I'm Making Money" - Despite Correction, Investors Are Exuberant : https://www.zerohedge.com/markets/i-dont-know-wtf-im-doing-im-making-money-despite-correction-investors-are-exuberant
My comment : Leverage will make the next correction huge
Excerpts:
“Margin debt is not a technical indicator for trading markets. What margin debt represents is the amount of speculation occurring in the market. In other words, margin debt is the ‘gasoline,’ which drives markets higher as the leverage provides for the additional purchasing power of assets. However, ‘leverage’ also works in reverse as it supplies the accelerant for more significant declines as lenders ‘force’ the sale of assets to cover credit lines without regard to the borrower’s position.”
Currently, the exuberance of investors is on full display. With a fresh round of “stimmy” checks reloading bank accounts, margin debt as a percentage of real disposable incomes has shot to record highs
We remain “bullish” on the markets currently as momentum is still in play. However, it is likely that by mid-summer we will see a decent correction as the “peak” in the economic and earnings data becomes visible.
but they worry about people taking on too much debt to buy houses -
My Comment : This will not end well. Just how will the Fed try to manage the next financial crisis ? They have to keep the bubble expanding or it will burst. It will eventually burst and it will be one for the record books. We've got $Trillions in monetary stimulus and $Trillions in fiscal stimulus. What could possibly go wrong ?
March 28 – Wall Street Journal (Mike Cherney and Patricia Kowsmann): “As the U.S. housing market booms, a parallel rise in residential real-estate prices across the world from Amsterdam to Auckland is raising fears of possible bubbles and prompting some governments to intervene to prevent their markets from overheating. Policy makers were already worried about high property prices in parts of Europe, Asia and Canada before the pandemic… But now the trillions of dollars of stimulus deployed world-wide to fight the effects of Covid-19… are turbocharging markets further. That is putting policy makers in a bind. Many want to keep interest rates low to sustain the post-pandemic recovery, but they worry about people taking on too much debt to buy houses…”
The Fed can’t keep this fight going forever -
My Comment : The leverage blow up has begun. Reminiscent of LTCM.
March 29 – Bloomberg (Vildana Hajric and Claire Ballentine): “A secretive money pool craters, causing billions of dollars of potential losses for global banks. Two storied names of American media post their worst days ever in the stock market. Securities regulators say they’re monitoring the situation. And halfway through the afternoon on Monday, the S&P 500 Index was little changed. For investors, the Archegos Capital Management blowup is proving to be just one more example of the uncanny resilience in the U.S. stock market, where neither pandemic nor hedge-fund tumbles can pierce the protective shield of Federal Reserve stimulus. Enjoy it while it lasts, warn the pros. The Fed can’t keep this fight going forever.”
The Twilight-Zone Economy & Alternate-Reality Equity Markets : https://www.zerohedge.com/political/twilight-zone-economy-alternate-reality-equity-markets
My Comment : The Fed has created an absolutely insane world. Just how long can the economy sustain the kind of commodity inflation (eg steel and lumber) ? And with $2.25T in additional infrastructure spending, inflation is just getting started.
Excerpts:
Yet, policymakers continue to become further disconnected from the real economy where people work and spend. These leaders imagine an economy of full employment forever, risk assets continually rising in price (not value) with virtually no market corrections. It is an economic wonderland for corporations to use low-cost debt to finance infinite profits and stock buybacks. Wall Street is only too pleased to hype this corporate financial engineering. Goldman Sachs forecasts a GDP surge to 8% in the 4th quarter of this year due to the $1.9T American Rescue Bill. Bond king Bill Gross predicts interest rates surge to 3 – 4 % by year end. Does all this monetary and fiscal stimulus result in a healthy solid economy or the most catastrophic inflationary bubble in modern times? Our post identifies the dimensions of the Twilight Zone Economy.
Sovereign negative-yielding debt reached a record high of $17.8T last month. Thus, a massive level of worldwide debt is not repaying the entire principal to debt holders. Correlated to soaring negative-yielding debt is the meteoric rise of trader speculation in Bitcoin and other cryptocurrencies.
Such parabolic moves in debt and speculative digital currencies like Bitcoin are candidates for a significant reversion in value at some date in the near future.
Traders are using ever-increasing levels of margin to buy stocks. Corporate executives with record levels of cash are resuming stock buybacks as the Dow and S&P continue to set new record highs. Yet, corporate sales and economic fundamentals don’t support this extreme valuation case.
This chart from Real Investment Advisors notes the divergence of stock valuations growing to 164% versus corporate sales growth of 42% and GDP growth at 22% since 2007.
Another sign of an alternative reality is bubbles in non-financial markets. For example, Christie’s just sold a digital work of art by an artist known as Beepie for $69.3M with a non-fungible (exchangeable) token (NFT) when the bidding started at just $100. NFT collectible prices have sky rocked, providing the buyer with ownership rights indicating their purchase is authentic. Beepi knows he’s riding a soaring market, observing, ‘Absolutely it’s a bubble, to be honest.”
An NFT buyer purchased 351 Top NBA Shot videos for $5,000 last January in the video clip market. Based on social media chatter, Momentranks.com values the videos at $67,000 today. Sneaker reselling has soared as the collectible marketplace, StockX, announced that Nike Dunks sold for $33,400 two months ago. StockX disclosed that a Tom Brady rookie trading card sold for a record $1.3M in January. Even innocuous things like Twitter CEO Jack Dorsey’s first tweet sold for $2.9M.
Investors, executives, and the Federal Reserve are addicted to low-interest rates. And just like physical addiction, the time will come when the zero-interest economic drug won’t work anymore, and withdrawal sets in spiraling into a market crash.
Will Biden's Spending Spree Shake Confidence In The World's Reserve Currency : https://www.zerohedge.com/markets/will-bidens-spending-spree-shake-confidence-worlds-reserve-currency
My Comment : The national debt, now at more then $28T, is expanding at a rapid rate and I expect it to reach $30T this FY and $40T by 2025-2026. Combined with inflation, the US$ will depreciate rapidly. And watch rates continue to climb.
Excerpt:
External imbalances accompanied the dollar bear market that began in the early 2000s. The ICE Dollar Index peak in 2020 is set up for another secular decline with the U.S. twin deficits already clocking in around 19% of GDP in the final quarter of 2020, before the latest infrastructure pledge.
Ultimately, U.S. growth boosted by free-flowing fiscal taps comes with an eventual price tag of a weaker greenback. Ballooning budget shortfalls, the risk of depleted private savings and U.S. strength feeding into widening trade deficits can finally shake confidence in the world’s reserve currency.
$100 silver ahead : https://www.kitco.com/commentaries/2021-03-31/-100-silver-ahead.html
My Comment : $100 Silver is entirely possible given the massive global debt and the CB response to it of printing without limit. Throw in inflation and the Green New Deal and watch out.
Excerpts:
But the reality is that so far in 2021, silver is down 9%. And meanwhile, nearly all the fundamental market drivers have remained intact. It seems the pressures on silver prices are likely from two angles. The first is after such an impressive 2020, it was due to correct. That's what bull markets do.
The second pressure point is a rising US dollar index, likely thanks to rising long-term bond yields. However, it's important to consider that this trend will also run its course and exhaust itself. That could happen naturally, or the Fed could intervene by imposing Yield Curve Control.
But higher yields are a sign of soaring inflation expectations and burgeoning economic activity. And a stronger US dollar, which favors imports over exports, is probably not a favored outcome for central planners.
If we account for inflation, and that's massively understated “official inflation”, then silver prices peaked at $120 in 1980 and around $57 in 2011. Today's price near $24 is still well below those levels, suggesting a lot of upside remains ahead.
In fact at $24 today versus the inflation-adjusted $120 in 1980, silver is currently about 80% below that peak. And yet, current economic fundamentals like debt, deficits, spending, interest rates and supply/demand outlook are so much more bullish, that the 1980 $120 level is likely to be easily surpassed.
We Have Never Seen A Home-Buying Frenzy Quite Like This : https://www.zerohedge.com/personal-finance/we-have-never-seen-home-buying-frenzy-quite
My Comment : This insanity will not end well -
Excerpts:
Could you imagine listing your home for sale and having nearly 100 offers in just three days? This sort of thing is actually happening in hot real estate markets all over America right now. Even though we are in the midst of the worst economic downturn since the Great Depression of the 1930s, we are witnessing a frenzy of home buying that is unlike anything that we have ever seen before. Of course one of the biggest reasons why this is happening is because of the utterly insane economic policies of our leaders. They have been creating, borrowing and spending money like there is no tomorrow, and that pushed M1 from 4 trillion dollars to 18 trillion dollars in just 12 months. All of that money had to go somewhere, and one place where it is showing up is in home prices in desirable rural and suburban locations around the country.
For example, a “fixer-upper” in a desirable suburban community outside of Washington D.C. was listed for sale on a recent Thursday for $275,000. On Sunday evening, 88 different offers had already been made on that property…
Ellen Coleman had never received so many offers on a house in her 15 years of selling real estate.
She listed a fixer-upper in suburban Washington, DC for $275,000 on a Thursday. By Sunday evening, she had 88 offers.
It eventually sold for $460,000, which was $185,000 above the listing price.
Isn’t that nuts?
But now that hyperinflation is hitting housing prices, a lot of middle class and poor people will be priced out of the market.
The wealthy and the ultra-wealthy will have no problem making offers on homes that are way over market price because they have lots of money.
But the vast majority of Americans that are living paycheck to paycheck will find that their options are now greatly limited.
https://www.msn.com/en-us/money/companies/huggies-diapers-and-scott-toilet-paper-may-soon-get-more-expensive/ar-BB1faxCz?ocid=msedgntp
My Comment : Expect to see a lot more this soon.
Excerpt:
Kimberly-Clark, the maker of such products, said Wednesday that it's notifying retail customers in the United States and Canada that it will increase prices on some products by mid-to-high single-digit percentages in June. The increases "are necessary to help offset significant commodity cost inflation," Kimberly-Clark said.
re: Inflation -
I got a quote for some steel tubing in May 2020 and I got and updated quote on the same items yesterday. The prices were more than 50% higher than last May. So, why is gold not reflecting the inflation in raw materials ? One thing is certain : Biden's Green New Deal is going to cost a lot more, a whole lot more.
U.S. Treasury's Yellen says with aid, Hispanic firms can lead recovery : https://www.kitco.com/news/2021-03-30/U-S-Treasury-s-Yellen-says-with-aid-Hispanic-firms-can-lead-recovery.html
My Comment : So how many are illegal aliens ? We've got a lot more entrepreneurs flooding the border. They just need a stimulus check. Yellen is not very smart.
Excerpt:
U.S. Treasury Secretary Janet Yellen said on Tuesday that she believes Hispanic entrepreneurs can help lead the United States out of crisis if longstanding barriers to their access to capital and employment can be reduced.
Higher taxes, interest rates are inevitable; ‘Things will get crazy’ – Gareth Soloway : https://www.kitco.com/news/2021-03-29/Higher-taxes-interest-rates-are-inevitable-Things-will-get-crazy-Gareth-Soloway.html
My Comment : So with rates rising (gold negative) due to higher inflation (gold positive), what happens to the POG ? One thing is certain: rates cannot be allowed to rise above 2% because it would bring down the economy. 10Y is currently at 1.74%.
Excerpt:
The question is, is the corporate tax rate going to go to 25%, or 28%,” Soloway said. “I’m also curious to hear what the long-term capital gains tax could be raised to. I think if we get a raise in the long-term cap gains let’s say starting in 2022, you could see major selling and profit taking into this year as well.”
Ultimately, the government will have no choice but to raise taxes and allow interest rates to run higher, Soloway said.
“I think it’s inevitable. The printing of money has got us in a situation where not only do you have to raise taxes to pay for this printing of money but you also create the inflation scenario where that interest rate is going to driven up because of it,” he said.
Gold's 'strongest price rally' is coming: Wells Fargo's 2021 target is $2,200 : https://www.kitco.com/news/2021-03-29/Gold-s-strongest-price-rally-is-coming-Wells-Fargo-s-2021-target-is-2-200.html
My Comment : Hmmm.