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FWIW : Goldman: The "Most Likely" Outcome Of The Trump-Xi Dinner Is More Escalation : https://www.zerohedge.com/news/2018-11-30/goldman-most-likely-outcome-trump-xi-dinner-more-escalation
In considering that WSJ report in which they speculated that China may buy US grains and oil in exchange for not increasing tariffs, that would only put us back to square 1 with nothing changing since China put restrictions on oil and grains in response to the original tariffs.
Stocks Rebound On WSJ Report China, US "Exploring Deal" To Ease Tensions : https://www.zerohedge.com/news/2018-11-29/stocks-rebound-wsj-report-china-us-exploring-deal-ease-tensions
My comment: If China were to lift restrictions on purchases of U.S. farm and energy products, that would be positive for stocks.
Excerpts:
While it should hardly come as a surprise that just two days ahead of a meeting between the US and China seeking to resolve and defuse trade tensions, the two sides are, well, seeking to resolve and defuse trade tensions (and boost markets) and are "exploring a trade deal in which Washington would suspend further tariffs through the spring in exchange for new talks looking at big changes in Chinese economic policy",
Furthermore, it isn’t clear what specifics the U.S. is asking for or what Beijing is willing to entertain. One offer, according to Chinese officials: in return for the suspension of U.S. tariffs, Beijing would agree to lift restrictions on China’s purchases of U.S. farm and energy products.
I think Mueller's investigation puts Trump in a weaker position as it gets closer to Trump himself and I also think the Chinese sense this weakness in their trade dispute and any negotiations. We may get a fig leaf type agreement this weekend, but I'm not expecting much.
You have to wonder what Powell was looking at. It did not take much for him to cave on interest rates, especially given that the stock market was already giddy over the possibility of a trade deal with China.
Three More Strikes Against Social Security's Already-Dismal Batting-Average : https://www.zerohedge.com/news/2018-11-28/three-more-strikes-against-social-securitys-already-dismal-batting-average
My comment: Means testing coming ?
Excerpt:
Over the past decade, payouts have increased by an average of 1.66% per year, according to the Social Security Administration (SSA).
But for 2019, the increase will be 2.8% to keep pace with inflation.
Seems like a trivial difference until you realize that’s 69% higher than expected.
That amounts to about $39 extra per check for the average retiree, according to the SSA.
And with about 62 million Americans receiving Social Security, that’s an extra $2.4 billion per month… $29 billion per year.
Social Security is underfunded by $50 TRILLION. By the government’s own estimates, the Social Security fund will run out of money in 2034.
But those calculations used previous cost of living adjustments.
Keep in mind that all future cost of living adjustments will compound on top of 2019’s increase.
So even if they get back to the 1.66% average adjustments, the extra $29 billion is included in the base for future calculations.
Will Social Security really last until 2034?
Last year, they said it would last until 2035… Wrong. One year passed and insolvency came two years closer…
Before that, the Social Security Administration estimated that the funds would last until 2040… wrong again!
After Congress passed some Social Security reforms in 1983, the SSA expected the system to remain financially sound for 75 years, until 2058.
Say it with me… they were wrong.
And the economy is currently about as good as it gets.
October unemployment was 3.7% according to the Bureau of Labor Statistics. It hasn’t been this low since 1969…
There are record numbers of people in the workforce… paying into Social Security.
Yet Social Security still looks dismal, during the best economic times in decades.
What happens when a recession hits?
Or forget a recession, what happens at normal unemployment levels?
The goal posts keep moving.
If there's no meaningful trade deal this weekend, I think these gains will evaporate.
I'm not so sure about that. Even a pause in rates will not help RE and more layoff announcements like GMs imply a slowing economy. Then there's the debt as exemplified by GE. The debt keeps growing: The October trade deficit was reported at $77Billion due in large part to inventory build ahead of expected tariffs (That inventory build boosted GDP, but will detract in coming months as spending is brought forward). But a large number nevertheless which is $925Billion annualized. Also, let's see what consumer spending looks like for Christmas. After 10 years of CB liquidity, this expansion is very long.
FWIW -
Gold To Push To $1,350 In 2019 As U.S. Dollar Faces Headwinds – Natixis : https://www.kitco.com/news/2018-11-26/Gold-To-Push-To-1-350-In-2019-As-U-S-Dollar-Faces-Headwinds-Natixis.html
Excerpts:
“The tax cuts were short-term stimulus measures, but now we are starting to see the budget deficits widening quite a bit,” he said. “We expect that deficits will be in great focus next year, which will weigh on the U.S. dollar.”
Silver To Shine In 2019
As optimistic as Natixis is on gold, the bank is even more bullish on silver seeing an average price of $16 an ounce next year and pushing as high as $18 an ounce. The bank’s 2019 average represents a gain of 12.5% from current prices.
Although gold and silver have been largely disconnected in 2018 as the gold-silver ratio has pushed to its highest level since 1993, Dahdah said that shifting fortunes in commodity markets will benefit both precious metals. He added that because silver is more volatile then gold it stands to benefit more.
The comments come as silver struggles to find momentum above critical support at $14 an ounce; December silver futures last traded at $14.225 an ounce.
“Although silver has significant industrial demand it is still a precious metal and eventually we see a pickup in investor demand,” he said. “Safe-haven demand will be a major driving factor for both gold and silver in 2019.”
Funny, but some truth to what he says (I only listened to part it). Thanks
JPMorgan Spots The Next Big Problem: A Plunge In Global Bond Demand : https://www.zerohedge.com/news/2018-11-24/next-trigger-plunge-global-bond-demand-2019
My Comment : The Bond Supply/Demand balance will only worsen in the next recession and investors will demand higher rates to be compensated for the risk of owning sovereign debt. The CBs could buy up a lot of the government debt to suppress rates, but that would only be one source of the debt problems.
Excerpt:
The continued deterioration in the bond supply/demand balance we expect for next year looks set to put further upside pressure on yields in 2019."
re: The "powers that be" will have to inject monstrous stimulus in order to right the ship and not sure that will do it for any extended period
My comment: I'm sure the CBs would like to be able to stave off a major economic downturn, but the only stimulus they have is printing (ie buying up assets). But in doing so they risk destroying their currencies against hard assets such as PMs and non-industrial commodities. If all CBs stimulate by printing, the relative value of the currencies may not change much, but their purchasing power will. And there's no room for more fiscal stimulus given the tax cuts and the very real prospect for much higher deficits in a recession. It's payback time for all of the foolishness originating from the CBs over the past 30 plus years. The real problem is and always has been the huge amount of debt at all levels. I think the Christmas shopping will be muted even though there are a lot of Black Friday idiots out there now. And once layoffs start, it will be like a snowball rolling down hill. How did we ever get to such extremes ?
It's just a matter of time -
Weiner: "Buying Gold Is A Non-Expiring Hedge" : https://www.zerohedge.com/news/2018-11-21/weiner-buying-gold-non-expiring-hedge
My comment: Apparently corporate bonds are the weak link that could lead to the next financial crisis. Both this article and Doug Noland in his most recent CreditBubbleBulletin.blogspot.com discuss zombie companies with BBB rated debt that could easily tip into junk status and trigger forced selling by funds. A lot will be exposed in the next recession/depression (2019-2020). As an aside, I think it is fitting that Trump is the sitting President when the next depression hits since he represents the decaying both socially (Koshoggi murder) and economically (massive debt buildup) of the country. “For what profits a man [or country] if he gains the whole world but loses his own soul”.
Excerpts:
So we end on a conclusion we have reiterated many times. When gold goes to $10,000 it is not gold going up. It is the dollar going down. It is inevitable that the dollar will go down. I just gave a talk at an Austrian economics conference in Madrid “There Is No Extinguisher of Debt” (paper to be published soon). The collapse of the dollar is baked into the mathematics.
People could buy gold today at an 88% discount from that price. But do yourself a favor. Watch any politician on TV. Watch a Republican promise to “grow our way out of the debt”. Or watch a Democrat promise a free university education to everyone. Watch even many libertarians promote Universal Basic Income(!).
If you think they don’t understand, you are right. But the vast majority of voters support these politicians. The voters, too, don’t understand. And the same holds for investors.
Buying gold is a non-expiring hedge. But only people who perceive a need to hedge, will buy the hedge. The rest may think that stocks are a bargain here, being down almost 7% from the high last month. So far in this incredible boom following the crisis, every time people who bought the dip were rewarded.
Are we getting close to the point where it won’t be? If GE is any indication, if GE will have a contagion effect (remember that word?) then the answer is likely yes.
Off Topic, but a sign of the times -
Kunstler: Welcome To GenderWorld : https://investorshub.advfn.com/secure/post_new.aspx?board_id=23176
My comment: I always offer my condolences to men who are considering marriage. It is a very dangerous time for men to have long term encounters with women since too many women harbor anger against men in general. The "gentle sex" can be very brutal.
Excerpt:
The defeat of Hillary, and the elevation of the vulgar Mr. Trump, loosed a fury of women against men in America that now verges on a kind of all-consuming chaos, like those western wildfires turning every product of human endeavor in the burn-path to smoke and ash. All the sorrows of our national life are assigned lately to the wicked white male patriarchy that must be defeated to usher in a satori of female sharing-and-caring.
Corporate debt (including leveraged loans) -
November 13 - Reuters (Jason Lange): "U.S. corporate bonds are by far the most dangerous part of the bond market and more than half of triple-B-rated debt would have a below-investment-grade rating based on leverage alone, Jeffrey Gundlach, chief executive officer of DoubleLine Capital, warned… Gundlach said investment-grade corporates got to the most overvalued levels in the history of the U.S. bond market last September and have since been underperforming the broad bond market against the rising-rate environment… 'A lot of sectors look rich but the one that looks by far the worst - and is the worst - are corporate bonds,' said Gundlach… 'Ultimately, should a recession ever arrive, junk bonds will be particularly dangerous.'"
November 15 - Financial Times (Colby Smith): "The loan market for highly indebted companies has had a lot to celebrate this year. In May, the so-called leveraged loan market, which is typically tied to the three-month Libor rate (plus a spread relative to the respective risk), and therefore does well in rising rate environments, surpassed the $1tn mark in the US. Issuance, according to S&P Global Market Intelligence's LCD unit, is now on course to top last year's record high of $650bn. And in terms of returns, it's one of the best performing asset classes this year, outstripping high-yield bonds. Leveraged loans… have returned 4% this year, while high-yield bonds have returned less than 1%... But beneath the boom lies an unsettling reality: lending protections are bad, and may be getting worse. In fact, they're just about the weakest on record, according to a Moody's gauge…"
November 12 - Reuters (Alwyn Scott and Kate Duguid): "General Electric Co will sell assets with 'urgency' to reduce its high debt, Chief Executive Officer Larry Culp said…., as GE shares tumbled as much as 10% and the cost of insuring its debt hit a six-year high… 'We have no higher priority right now than bringing leverage levels down… We have plenty of opportunity to do that through asset sales.'"
More on Japan -
My comment: More debt to fix the debt problem.
November 13 - Reuters (Stanley White and Leika Kihara): "Japan's economy shrank more than expected in the third quarter, hit by natural disasters and a decline in exports, a worrying sign that trade protectionism is starting to take its toll on overseas demand. The contraction in the world's third-largest economy adds to growing signs of weakness globally, with China and Europe losing momentum… The annualized 1.2% contraction in July-September was bigger than a median estimate for a 1.0% drop and followed a robust 3.0% expansion in the previous quarter…"
November 11 - Reuters (Stanley White): "Japan's Prime Minister Shinzo Abe called… for a new public works spending program to stimulate the economy amid growing concerns about global risks. The spending, which is expected in the first half of next fiscal year starting in April, will focus on strengthening infrastructure to withstand earthquakes and frequent flooding…"
Japan just keeps getting deeper in debt -
My comment : Where is the breaking point ? It most certainly will occur in the next global recession. Currencies will get trashed.
November 12 - Bloomberg (Yuko Takeo): "The Bank of Japan's massive asset purchase program has taken it into uncharted territory, with its ballooning holdings now larger than the country's annual economic output. Its hoard reached a staggering 553.6 trillion yen ($4.9 trillion)…, compared with nominal gross domestic product of 552.8 trillion yen… To put the milestone into perspective: the Federal Reserve's assets are about 20% of U.S. GDP, while the European Central Bank's holdings are equal to around 40% of the euro-zone economy."
As much as I would like to see gold move higher, so far, it's only a one day bounce. BUT, here's the real kicker : debt implosion /explosion accompanied by higher interest rates (see article below). So, can the CBs bail out all of the bankrupt companies and state and local governments as well as the sovereign debt ? Sure, but their currencies will be trashed. Got gold ?
Rubino: Elites Are Terrified Of 1930's Depression Or Weimar Hyperinflation : https://www.zerohedge.com/news/2018-11-14/rubino-elites-are-terrified-1930s-depression-or-weimar-hyperinflation
Excerpts:
Financial writer John Rubino says everywhere you look, debt is exponentially mounting.
Nothing demonstrates the “imminent bankruptcy” problem better than the financial obligations of New York City. Rubino says,
“They just announced that they have unfunded liabilities for retiree healthcare, just retiree healthcare and not the rest of their pensions, of $100 billion. That’s for a city, not a state or a country, and if you add their unfunded liabilities for their pensions, which is another $50 billion or so, and their official debt, which is $50 billion or so, you get $200 billion that New York City is on the hook for that they have not put money away for. If a private sector company had finances like that, they would be insolvent, and their accountants would force them to say that.”
Rubino contends massive bailouts will explode in the next economic downturn, and they will have grave consequences for interest rates and the U.S. dollar. Rubino says,
“They would say, hey, here’s $5 trillion to bail out states and localities across the country. People will see that and will worry about what that means for the value of the dollar. So, they sell dollars, and not just here, but all around the world.
The dollar starts to fall, and interest rates start to go up. If the dollar is tanking, who wants to lend money to the federal government that is going to be paid back in a depreciating currency?
So, our interest rates go up. That causes our interest costs to go through the roof and forces the government to borrow even more...
At some point, the whole thing blows up. There is a number out there when all this will happen... So, the question is what is that number, and when do we hit it?
"...The concept of fiat currencies will be called into question when all this happens. The dollar might lead this down or some other fiat currency might lead it down...
At some point, they will realize all the fiat currencies are basically in the same boat... We can’t know the timing of this, but we can know what will do well when this happens, and that is gold and silver.”
Gold/Silver Ratio Hits 25-Year High; Silver Underperforms : https://www.kitco.com/news/2018-11-13/Gold-Silver-Ratio-Hits-25-Year-High-Silver-Underperforms.html
Excerpts:
"The silver price has been very weak in recent days – in both absolute and relative terms....The gold/silver ratio has risen to 86, its highest level in 25 years,” said a research note from analysts at Commerzbank.
Large cap miners are being hit, but PMs are holding. May need the Fed and other CBs to have their backs to the wall before the PMs really move substantially higher. It's been a long time coming. Good news in the sector is mostly ignored.
Understanding The Global Recession Of 2019 : https://www.zerohedge.com/news/2018-11-12/understanding-global-recession-2019
My comment: It's going to get very interesting.
Excerpts:
The global economy has changed. Demand has been brought forward for a decade, effectively draining the pool of future demand. Unprecedented asset purchases, low rates of interest and unlimited liquidity have inflated gargantuan credit / asset bubbles around the world, the so-called everything bubble as most asset classes are now correlated to central bank policies rather than to the fundamentals of the real-world economy.
Keenly aware that they've thinned their policy options and financial buffers to near-zero, central banks are struggling to normalize their policies by raising rates, reducing their balance sheets by selling assets and tightening lending conditions / liquidity.
Unfortunately for central banks, global economies are now junkies addicted to zero interest rates and central bank stimulus / support of bond markets, stock markets and real estate markets. The idea of normalization is to slowly inch the financial system and economy back to levels that were normal in previous eras, levels that allowed some room for central banks to respond to recessions and global financial crises by lowering rates and extending credit to insolvent lenders.
But reducing the drip of financial heroin hasn't ended global economies' addiction to extraordinary easy financial conditions. Rather, it's illuminated the dangers of their continued addiction.
As soon as authorities attempt to limit their support / stimulus, markets wobble into instability. The entire economic structure of "wealth" is now dependent on asset bubbles never popping, for any serious decline in asset valuations will bankrupt pension funds, insurers, local governments, zombie companies and overleveraged households--every entity which is only solvent as long as asset bubbles expand or maintain current valuations.
So how do central banks normalize their unprecedented policies without popping the asset bubbles they've created? The short answer is: they can't. Rising interest rates are a boon to savers and Kryptonite to borrowers--especially over-leveraged borrowers who must roll over short-term debt and borrow more just to maintain the illusion of solvency.
As if this wasn't enough to guarantee recession in 2019, there's the unintended consequences of capital flows. Capital famously flows to where it's treated best, meaning wherever it earns the highest yields at the lowest risk, and where the rule of law protects capital from predation or expropriation.
When all central banks pursued roughly the same policies, capital had options. Now that the Fed has broken away from the pack, capital has only one option: the U.S. The Federal Reserve should have begun normalizing rates etc. back in 2013, and if they'd been wise enough to do so then even baby steps over the past 5 years would have led to a fairly normalized financial environment.
This leaves the central bank with a stark and sobering choice: either let the asset bubble collapse and accept the immense destruction of "wealth," or buy the whole darn market. This is the unintended consequence of employing unprecedented policies for a decade: like using antibiotics every day for years, eventually resistance develops and the "fix" no longer works.
Now that central banks have inflated assets into the stratosphere, there's $300 trillion in global financial assets sloshing around seeking higher yields and capital gains. How much of this $300 trillion can central banks buy before they destabilize currencies? How much can they buy before they run out of political goodwill?
The CBs will surely try to forestall a recession/depression, but they have already used a lot of their options. Lower short term rates (they do not have much here) will not help if the deficits are ballooning.
Yep. January should be interesting.
Recession and Rates -
My comment: I have long contended that the next recession will be accompanied by higher rates on sovereign debt. The sovereign debt will explode higher in the next recession and rates will rise to compensate investors for the added risk. Note also that a lot of US debt is funded with bond maturities of less than 4 years.
"A Chinese Recession Is Inevitable" - Ken Rogoff Ruins 'Decoupled-America' Narrative : https://www.zerohedge.com/news/2018-11-09/chinese-recession-inevitable-ken-rogoff-destroys-decoupled-america-narrative
Excerpt:
Investors today are also concerned about rising interest rates, which not only put a damper on consumption and investment, but also reduce the market value of companies (particularly tech firms) whose valuations depend heavily on profit growth far in the future. A Chinese recession could again make the situation worse.
I appreciate the usual Keynesian thinking that if any economy anywhere slows, this lowers world aggregate demand, and therefore puts downward pressure on global interest rates. But modern thinking is more nuanced. High Asian saving rates over the past two decades have been a significant factor in the low overall level of real (inflation-adjusted) interest rates in both the US and Europe, thanks to the fact that underdeveloped Asian capital markets simply cannot constructively absorb the surplus savings.
Former US Federal Reserve chair Ben Bernanke famously characterised this much-studied phenomenon as a key component of the “global savings glut”. Thus, instead of leading to lower global real interest rates, a Chinese slowdown that spreads across Asia could paradoxically lead to higher interest rates elsewhere – especially if a second Asian financial crisis leads to a sharp draw-down of central bank reserves. Thus, for global capital markets, a Chinese recession could easily prove to be a double whammy.
As bad as a slowdown in exports to China would be for many countries, a significant rise in global interest rates would be much worse. Eurozone leaders, particularly German Chancellor Angela Merkel, get less credit than they deserve for holding together the politically and economically fragile single currency against steep economic and political odds. But their task would have been well-nigh impossible but for the ultra-low global interest rates that have allowed politically paralysed eurozone officials to skirt needed debt write-downs and restructurings in the periphery.
When the advanced countries had their financial crisis a decade ago, emerging markets recovered relatively quickly, thanks to low debt levels and strong commodity prices. Today, however, debt levels have risen significantly, and a sharp rise in global real interest rates would almost certainly extend today’s brewing crises beyond the handful of countries (including Argentina and Turkey) that have already been hit.
Nor is the US immune. For the moment, the US can finance its trillion-dollar deficits at relatively low cost. But the relatively short-term duration of its borrowing – under four years if one integrates the Treasury and Federal Reserve balance sheets – means that a rise in interest rates would soon cause debt service to crowd out needed expenditures in other areas. At the same time, Trump’s trade war also threatens to undermine the US economy’s dynamism. Its somewhat arbitrary and politically driven nature makes it at least as harmful to US growth as the regulations Trump has so proudly eliminated. Those who assumed that Trump’s stance on trade was mostly campaign bluster should be worried.
Lacalle: "The Question Is Not If, But When" The Next Financial Crisis Strikes : https://www.zerohedge.com/news/2018-11-01/lacalle-question-not-if-when-next-financial-crisis-strikes
My comment: My guess is next financial crisis occurs in 2019 and the CBs will print, print, print.
Excerpts:
What will the next crisis look like?
Nothing like the last one, in my opinion. Contagion is much more difficult because there have been some lessons learnt from the Lehman crisis. There are stronger mechanisms to avoid a widespread domino effect in the banking system.
When the biggest bubble is sovereign debt the crisis we face is not one of the massive financial market losses and real economy contagion, but a slow fall in asset prices, as we are seeing, and global stagnation.
The next crisis is not likely to be another Lehman, but another Japan, a widespread zombification of global economies to avoid the pain of a large re-pricing of sovereign bonds, that leads to massive tax hikes to pay the rising interests, economic recession and unemployment.
The risks are obviously difficult to analyse because the world entered into the biggest monetary experiment in history with no understanding of the side effects and real risks attached. Governments and central banks saw rising markets above fundamental levels and record levels of debt as collateral damages, small but acceptable problems in the quest for a synchronised growth that was never going to happen.
The next crisis, like the 2007-08 one, will be blamed on a symptom (Lehman in that case), not the real cause (aggressive monetary policy incentivising risk-taking and penalising prudence). The next crisis, however, will find central banks with almost no real tools to disguise structural problems with liquidity, and no fiscal space in a world where most economies are running fiscal deficits for the tenth consecutive year and global debt is at all-time highs.
When will it happen? We do not know, but if the warning signs of 2018 are not taken seriously, it will likely occur earlier than expected. But the governments and central banks will not blame themselves, they will present themselves -again- as the solution.
Short Candidates -
I think MA and V are good shorts once the rebound is completed. Unsecured debt will be defaulted on in the next recession.
Westhaven up on drill results -
Westhaven (v.WHN/WTHVF) is trading at $0.866, up $0.20 (29.5%) based on drill results.
Disclosure: I own shares of WTHVF
Westhaven Drills 46.20 Metres of 8.95 g/t Gold and 65.47 g/t Silver at Shovelnose
Read more at http://www.stockhouse.com/news/press-releases/2018/10/31/westhaven-drills-46-20-metres-of-8-95-g-t-gold-and-65-47-g-t-silver-at#HG5IH7t1i7Xg3Djb.99
Deficits and rates -
True Japan has kept their rates low even though they have large deficits, but that's because the BOJ has been buying ALL of the new government debt issuance (JGBs) for several years now. Japan essentially does not have a bond market. I just don't think the Fed will be able to do that because it could easily double their current balance sheet of $4.5Trillion very quickly. Look at Italy's rates as they increase their deficits. There are a lot of countries that have artificially low rates due to CB QE and that will all reverse in the next recession with higher rates due to higher deficits.
This market is toast even if there are buybacks.
The numbers are in -
America's True Deficit: US To Borrow Over $1.3 Trillion In 2018 : https://www.zerohedge.com/news/2018-10-29/americas-true-deficit-us-borrow-over-13-trillion-2018
My comment: $1.3Trillion deficit in a good economic year..$2Trillion PLUS in the next recession.
Excerpts:
The revised Treasury numbers bring the total net borrowing needs for calendar 2018 at $1.338 trillion, while borrowings for fiscal year 2018 (which ended on Sept. 30) amounted to just under $1.2 trillion.
So why did the US borrow $1.2 trillion in Fiscal 2018 even though the official budget deficit was reported to be $779 billion for the same period? That is mostly due to "off budget" items that Congress thinks shouldn’t be part of the normal budgetary process. It includes things like Social Security and Medicare, which vary from year to year, and can be anywhere from $200 billion to almost $500 billion.
Debt Alarm Ringing : http://www.mauldineconomics.com/frontlinethoughts/debt-alarm-ringing
My comment: I do not think Mauldin is a very good analyst, but he does how some things that are worth reading. I don not understand some of his comments which seem contradictory, such as the following statement just after he has argued that US rates will rise due to huge deficits :
Now, buyers will appear at the right price, i.e. some higher interest rate. Barring recession-induced lower rates (which would be a different problem), government borrowing could get way more expensive.
My comment: But deficits will explode higher in a recession which would imply higher rates.
Other excerpts:
I am trying to imagine a scenario in which this ends in something less than chaos and crisis. The best I can conceive is a decade-long (and possibly more) stagnation while the debt gets liquidated. But realistically, that won’t happen because debtors won’t let it, and they outnumber lenders. Hence, something like the Great Reset will happen first.
Even though you are reading about a budget deficit of under $800 billion this year, the actual amount of debt added last year was well over $1 trillion. That is due to “off budget” items that Congress, in its wisdom, thinks shouldn’t be part of the normal budgetary process. It includes things like Social Security and Medicare—which vary from time to time and year to year—and can be anywhere from $200 billion to almost $500 billion.
My comment: The deficits also do not include the amount the Treasury borrows from Trust Funds such as Social Security, Highways, etc to offset the deficit. These funds are never paid back, as Bush said the SS Trust fund just has a bunch of IOUs (in the form of Treasury Bonds)
The November election could be a factor. If Dems take the House, nothing will get done for the remainder of Trump's term and there will be vitriol from both sides. Given how bitter things are in the nation during a strong recovery, one can only imagine how they will be once the economy turns down. I also expect the Dems to strongly support deficit spending just as the Reps have, but with different priorities. $2Trillion deficits are in our future. And, of course, the US markets are at the mercy of big problems in overseas markets: Watch China and Italy.
I see 1.5 million shares traded
Eight Reasons a Financial Crisis is Coming : https://moneymaven.io/mishtalk/economics/eight-reasons-a-financial-crisis-is-coming-ZQOvhrkkSEKxlWOjxlG-xQ/
My comment: So, just how would a debt jubilee work ? How about the fairness ? Who would get bailed out and who would not ? The banks are not so vulnerable this time...it's the zombie corporations, the pension funds, and the bond markets globally. I think the Fed and other CBs just print to try to cover it up. It would take a lot of printing.
Excerpts:
Potential Catalysts
1.Junk Bond Bubble Bursting
2.Equity Bubble Bursting
3.Italy
4.Tariffs
5.Brexit
6.Pensions
7.Housing
8.China
And this from one of the comments on the article:
When it begins to really hurt expect some sort of debt jubilee else the debt will be a weight around global economy's neck for very many years. Recovery will take ages otherwise.
With a jubilee other changes will occur.
I just wonder who/how to be on the right side of it. Possibly through gold but I don't trust tptb not to somehow find a way to limit gold repricing upwards.
Some have reported poor earnings (e.g GG), but gold seems to be responding counter to the moves in the stock market. One stand out today is West Haven (WTHVF), up $0.15 (29%) to $0.68. I would really prefer this one not move up just now, because I would like to add to my position. That's life (Se La Vi).
The volatility may be giving dip buyers second thoughts. There's plenty of good economic news, but the markets cannot sustain a rally.
What A Bunch Of Idiots!? : https://www.zerohedge.com/news/2018-10-25/what-bunch-idiots
My comment: It's all about the debt and that debt is what will make the next economic downturn severe. The global economy has been propped up by CB liquidity for far too long.
Excerpt:
It starts at the top: the US government is sitting on a record $21.7 trillion in debt.
That’s several trillion dollars more than the size of the entire US economy.
Each year the government burns around a trillion dollars, and the Treasury Department expects to sustain those grim deficits for the foreseeable future.
State and local governments are in a similar position– in debt up to their eyeballs and drowning in unfunded pension obligations.
And each year it gets worse. The government’s own projections show the debt only increasing– they have no chance of paying it off.
Even in the private sector, most corporations aren’t much better off.
Not including banks, companies in the US have around $7 trillion in total debt.
Go figure, that’s the highest amount on record. Ever.
More than 40% of all corporate debt is rated just one notch above ‘junk’ status.
And a full 14% of companies in the S&P 500 don’t even generate enough revenue to make interest payments.
Then there’s the consumer– supposedly the rock solid pillar that drives the US economy.
Consumer debt is on pace to reach a record $4 trillion this year.
Credit card debt is at an all-time high. Auto loans are at an all time high. Student debt is at an all time high.
And the average American has little chance of repaying that debt.
According to a recent study published by the Federal Reserve, 40% of adults don’t have enough money to cover a $400 emergency expense like a medical bill or flat tire.
And 21% of Americans have ZERO savings.
Neither governments, nor most businesses, nor the consumer, has any chance of paying down these debts.
And yet the money keeps flowing.
So far, it's just a dead cat bounce. Some companies, especially those with international exposure, are reporting lower than expected earnings. But the key to watch is China and Italy. Both over extremely overleveraged and vulnerable. As an aside, the political background is getting uglier and uglier.
Look for margin calls and ETF outflows. More downside ahead. It's a house built on sand.
It's time for fundamentals, not technicals, to rule the markets. The only thing preventing that is CB interventions and that is having less and less of an impact.