Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
"That Would Be Crossing The Rubicon": The BoJ Is About To Own More Than Half Of All JGBs
https://www.zerohedge.com/markets/would-be-crossing-rubicon-boj-about-own-more-half-all-jgbs
My Comment: So how does this end ? Japan has huge sovereign debt relative to GDP (over 200%, I think). If rates increase on that pile of debt it could be devastating. If the BOJ keeps printing and buying JGBs, then the Yen would drop precipitously and inflation becomes uncontrollable. Lots of luck on those inflation resilient equites as the global economy goes into recession.
Excerpt:
The private sector in Japan is already very overweight JGBs and underweight equities. Inflation has recently surged to a 10-year high, and further falls in the yen promise to pressure inflation yet higher. Ownership-concentration risks mean that any sign that inflation is getting out of control would likely prompt an exodus from JGBs into to more inflation-resilient equities.
Owning half the JGB market is a potential tipping point that could eventually find the BoJ the sole bag-holder of the world’s third-largest bond market.
Biden losing more votes -
10,000 Flights Delayed Over Holiday Weekend As Aviation Chaos Concerns White House
https://www.zerohedge.com/markets/10000-flights-delayed-over-holiday-weekend-aviation-chaos-concerns-white-house
Excerpts:
Constant flight disruptions are caused by staffing shortages, bad weather, and reduced flights and come at a time when airlines can barely keep up with demand.
The origins of the shortage began in the early days of the virus pandemic when pilot hiring, training, and licensing came to a standstill. Then airlines forced thousands of pilots into early retirement to reduce labor costs as travel demand cratered.
The combination of reduced flights, pilot shortage, soaring jet fuel costs, and robust flying demand has sent ticket prices sky-high.
So, will cryptocurrencies' demise translate into more support for Gold ? I've been reading several analysts who are negative on gold's prospects for the end of the year. I think we're in uncharted waters and the probability of something breaking and causing another financial crisis is high. Two vulnerable weak links are 1) Japan as it keeps QE in place even as it weakens the Yen an causes a lot of inflation, especially in the price of oil which Japan imports a lot of AND 2) The EU's attempt to prevent fragmentation (where rates on sovereign debt rise in weak sovereigns with a lot of debt, like Italy, relative to stronger sovereign debt like Germany). And then there are derivatives.
History says the next bull market is just months away, and it could take the S&P 500 to 6,000, according to Bank of America
https://www.msn.com/en-us/money/markets/history-says-the-next-bull-market-is-just-months-away-and-it-could-take-the-s-p-500-to-6-000-according-to-bank-of-america/ar-AAYAozS?ocid=msedgntp&cvid=c160c719ced84b95b8d1c4a3fe02bb7e
My Comment: Yeah and I have some land in Florida I'll sell you. Nuts. History is meaningless when the mother of all bubbles bursts.
The next financial crisis ? -
My Comment: Not mentioned in this article is that with the Yen falling, it increases inflation since Japan imports so much oil.
Bond Meltdown's Next Driver Is BOJ Policy Implosion
https://www.zerohedge.com/markets/bond-meltdowns-next-driver-boj-policy-implosion
Excerpt:
There may be no good choices left for Japan’s central bank. If it sticks to its guns it risks further yen declines, adding to rampant dollar strength that is a key pain point for numerous currencies, markets and economies worldwide. The BOJ would also likely end up holding more than half of all JGBs to make dysfunction the norm in one of the developed world’s second- largest bond markets.
But a shift away from curve control would bring its own dangers by turning JGBs from an island of stable returns into yet another bond meltdown. That would be especially cruel for private holders of the debt after curve control saw JGBs miss out on the massive gains Treasuries experienced amid pandemic stimulus.
Japan’s insurers hold about 20% of the country’s 1.2 quadrillion yen ($9 trillion) government bond market, so the potential for severe value-at-risk shocks is massive -- this in a market that still shudders at the memories of the 2003 VaR meltdown.
The last thing bruised global markets need is for some of the managers holding Japan’s $1.2 trillion of Treasuries to need to liquidate some of their assets to cover losses.
“Mad Max” scenario -
"They're Pulling The Plug... It's Game Over"
https://www.zerohedge.com/markets/theyre-pulling-plug-its-game-over
Excerpts:
Holter explains, “Interest rates are the key to the whole collapse..."
"... Mortgage rates, as of right now, are about 6.15%. Mortgage rates started the year just over 3%. In the fourth quarter of last year, we had mortgage rates as low as 2.75%. What that tells you is if you qualified for a $1 million mortgage at the end of last year, you only qualify for a $500,000 mortgage now. If you are a property owner, that means the pool of potential buyers is far less than 6 months ago, simply because interest rates have basically doubled."
Holter also says that means property values are dramatically cut.
Holter also talks about gold and silver and why you should hold them in hand.
Holter thinks a “Mad Max” scenario is a real possibility and says we have not seen the peak on inflation.
El Erian: Inflation "Could Have Been Avoided" If Fed Had Acted Earlier
https://www.zerohedge.com/economics/el-erian-inflation-could-have-been-avoided-if-fed-had-acted-earlier
My Comment: Perhaps if the Fed had acted by letting the economy have a real recession 10 years ago by not flooding the economy with liquidity, but El Erain is talking about the Fed's failure to quell inflation within the past year and I do not agree with him. The Fed does not control supply which driving inflation.
What's it going to take for gold to move up ? -
My comment: It's a perfect storm: High inflation, crude keeps moving higher, huge debts, war, geopolitical chaos, and so many countries in dire straits: EU, China, Turkey, Japan, Italy. The dominoes are ready to fall. Something is going to break to trigger the next financial crisis.
Japan On Verge Of Systemic Collapse With "Dramatic, Unpredictable Non-Linearities" In Financial Markets, DB Warns
https://www.zerohedge.com/markets/japan-verge-systemic-collapse-dramatic-unpredictable-non-linearities-financial-markets-bank
Rabobank: Western Leadership Has Successfully Turned Our Economies Into Emerging Markets
https://www.zerohedge.com/markets/rabobank-western-leadership-has-successfully-turned-our-economies-emerging-markets
Excerpt:
Bringing it back to inflation, we are close to the summer solstice: then it’s six months until the depths of winter. At that point, Europe says it won’t be buying any Russian oil. If global supply is then constricted and demand hasn’t fallen, US retail gasoline prices might be $6 or $7 a gallon, or higher. Is that a recession? Yes, a deep one. Is it an inflation crisis too? Yes, a large one. And, crucially, it is driven by the geopolitical backdrop.
Gold made a big U-turn on Friday even as the US$ continued to rise -
Fatal Macro Warnings: We're Gonna Need A Bigger Boat
https://www.zerohedge.com/markets/fatal-macro-warnings-were-gonna-need-bigger-boat
Excerpt:
So, what will Powell do? Will he 1) tighten QE into a topping market (and thus create an historical market blow-off and global meltdown) or 2) pivot, reverse course and start creating more fiat money faster than a bat out of Hell?
No one, of course, can know for certain.
Volatility Ahead
The Fed is in such a ridiculous corner that neither option is a sane option, and thus the base-case is to expect more market volatility ahead as investors stand on the razor’s edge of either a tanking market or a dying (inflated, devalued and debased) currency.
Gold’s Bull Cycle Is Just Beginning
From its 2009 low to its high late last year, the Fed-created U.S. stock market became the biggest bubble in modern history.
But we believe the gold market’s rise has not even begun. In 1980, when gold topped an 8X move in just 3 years, stocks were flat. If anything, the only “bubble” then was gold itself.
But until recently, the only bubbles in sight were risk assets (from junk bonds to junk tech), which means gold’s time to shine is ahead of us, not behind us.
When considered in the larger backdrop of a commodities cycle, such confidence is an evolution rather than bias.
The recent uptrend in the Bloomberg Commodities Index, for example, is admirable, but does not even compare to the highs it reached in 2011 and prior.
In short, commodities in general, and precious metals in particular, are at the beginning of a bull cycle, whereas over-valued risk assets are approaching the traumatic end of theirs.
As for interim price action in gold, we are not promising a straight line. When risk asset markets tank, gold can temporarily follow, as seen in October of 2008 or March of 2020.
But just after joining those tanking markets, gold then divorced the tantrum trend and skyrocketed north. We see an inevitable gold surge in the tumultuous years ahead, and as investors rather than speculators, time is clearly on our side.
Another terrible day for stocks, but tomorrow will be better since markets are closed for the weekend.
Stocks were pummeled today. Maybe tomorrow will be worse.
California's solution to water shortages -
My Comment: Ridiculous. Also, how many of these farm worker are Illegal immigrants? Also, if there are multiple farmworkers in a household, could that mean multiple $1000s? It would be raining cash if it is not raining water.
The U.S. Drought Situation Is Getting Increasingly Desperate
https://www.msn.com/en-us/weather/topstories/the-u-s-drought-situation-is-getting-increasingly-desperate/ar-AAY9nNV?ocid=msedgntp&cvid=7b653c31ef6a4437afba9fd42ebc4703
Excerpt:
The state’s senate is considering a bill to help support farmworkers unable to find employment under drought conditions that is basically farmworker UBI. The legislation would provide monthly payments of $1,000 for three years to households that include a farmworker.
Buyer beware -
My Comment: Risky business
Scammers bring in over $1 billion in crypto craze — FTC report https://www.kitco.com/news/2022-06-06/Scammers-bring-in-over-1-billion-in-crypto-craze-FTC-report.html
Excerpt:
Investing in crypto is risky enough, but scams in the space are also rising, with the Federal Trade Commission (FTC) reporting that since 2021 more than 46,000 people have lost over $1 billion in crypto scams. This is more than any other payment method.
"That's about one out of every four dollars reported lost," the FTC said in the report published on Friday. "The median individual reported loss? A whopping $2,600."
Keystone Cops -
My Comment: So many examples these days
1) Is This The Stupidest Thing The UN Has Ever Done?https://www.zerohedge.com/geopolitical/stupidest-thing-un-has-ever-done
Excerpt:
Last week, North Korea assumed control as the chair of the United Nations Conference on Disarmament, the U.N. forum for negotiating multilateral disarmament efforts across the globe. It’s the latest in a string of questionable moves the U.N. has taken in putting nation officials in contradictory positions.
North Korea officially took over the U.N. disarmament conference on Monday
2) Then there's the Peruvian government:
Adolf Hitler model for Peru ?
Peru’s prime minister cites Hitler as a model, stirring outrage
http://thewashingtonpost.newspaperdirect.com/epaper/viewer.aspx
Excerpt:
Peru’s prime minister Thursday cited Adolf Hitler as a model in infrastructure development who turned Germany into a “leading economic power in the world,” a comment that drew outrage as his country continued to descend into political chaos.
Prime Minister Anbal Torres celebrated the late Nazi leader while speaking in a cabinet session in Peru’s central region of Junn, where protests have erupted for nearly a week in response to the rising cost of fuel and fertilizer.
The prime minister’s comments are the latest controversy to hit the Castillo administration, which has been plagued by allegations of corruption and criticism of his cabinet appointments. In the eight months since the inexperienced former schoolteacher came to office, he has survived two impeachment votes. His agriculture minister was implicated but not convicted in two homicides, allegations he denies. His education minister was accused of plagiarizing his doctoral thesis. His health minister, who peddled a flavored water as an anti-aging treatment, was recently impeached.
3) And of course, there's the US Border Patrol's response to the Uvalde, Texas shooting
This is a serious problem -
California’s Drought Is So Bad, It’s Going to Slash Hydropower
https://www.msn.com/en-us/weather/topstories/california-s-drought-is-so-bad-it-s-going-to-slash-hydropower/ar-AAY2VRJ?ocid=msedgntp&cvid=37d3d32871134b72af2c5a5cd1a0c2f9
My Comment: What happens when Lake Mead and Lake Powell run dry. Water is an essential resource. California could be dramatically impacted.
Excerpt:
California’s ongoing megadrought—which has already led to water restrictions—is also going to start affecting the state’s ability to generate hydropower. This could raise energy costs for residents and increase emissions,
Energy concerns in California will likely continue into the summer as the drought sees no end in sight.
It's all about the DEBT -
No Soft Landings
https://www.mauldineconomics.com/frontlinethoughts/no-soft-landings
My Comment: Interesting read. I especially like Bill White's comments
Excerpt:
“My real worry on the downside is that it may be that the fragilities are so great at the moment that a moderate degree of tightening will in fact spark a downturn of such a magnitude that even if the Fed does back off, that there's not much that can be done about it, that will have a downward momentum... that we really won't be able to handle.”
Deflation does the opposite, making debt repayment harder. That would be a guaranteed global crisis. Many overextended debtors (especially emerging market corporations with dollar-denominated debt) would be unable to pay—probably including some governments. Then what? Bill White—one of a handful on our planet who will have the answer if one exists—says we aren’t ready for it.
Yes, we have a system for individual and corporate bankruptcies. It works but slowly. Exponentially increasing its case load will be a problem. We don’t have a good system for handling sovereign defaults. Are we going to foreclose on China? Italy? Brazil? That won’t go well.
US Social Security and Medicare Approach Insolvency, Warns Trustees
https://www.zerohedge.com/personal-finance/us-social-security-and-medicare-approach-insolvency-warns-trustees
My Comment: Debt and more debt. How much longer can this continue?
Excerpts:
The Social Security program will be insolvent in 13 years by 2035,
Once the program becomes insolvent, all beneficiaries will face an across-the-board benefits cut of 20 percent.
This year, the Trustees estimate Social Security to run a cash-flow deficit of $112 billion, which comes to 1.3 percent of taxable payroll.
Over the next decade, Social Security is calculated to run deficits of almost $2.5 trillion, which is equivalent to 0.8 percent of GDP or 2.1 percent of taxable payroll.
By 2040, the annual deficit is predicted to grow to 3.4 percent of taxable payroll, moving even higher to 4.3 percent of payroll by 2096
Meanwhile, the Medicare Hospital Insurance (HI) trust fund will exhaust its reserves over the next six years by 2028,
The estimates of Trustees closely match with the recent predictions of the Congressional Budget Office (CBO) which calculates Medicare HI trust funds to become exhausted by 2030 and the Social Security to become insolvent by 2033.
With Turkish PPI Hitting A Shocking 132%, Erdogan Goes After Short-Sellers As Hyperinflation Craters The Lira
https://www.zerohedge.com/markets/turkish-ppi-hitting-shocking-132-erdogan-targets-short-sellers-hyperinflation-sends-lira
My Comment: Turkey is on the verge of economic collapse. Other oil importing countries are under pressure (think Japan).
Excerpts:
The biggest drivers of the latest surge in inflation were food and energy, exacerbated by the global rally in commodities and the Russian invasion of Ukraine. Turkey is a major importer of oil.
With neither Erdogan nor anyone else in Turkey, willing to make sacrifices and stabilize prices, the currency, or the economy, the lira will be the first modern FX major currency to crater and lose all its value under the unbearable weight of hyperinflation.
Pakistan On The Verge Of Inflationary Collapse - Pleads For Larger IMF Bailout
https://www.zerohedge.com/economics/pakistan-verge-inflationary-collapse-pleads-larger-imf-bailout
My Comment: Emerging Market distress is building. Pakistan has an inflation rate of 13%. Turkey is much worse. Turkey has an inflation rate of 70%. There will be major currency problems in EMs.
Excerpt:
To be sure, Pakistan is not the only country facing these conditions today, it is one of many. However, unlike many African or South American nations where the effects of inflationary collapse remain mitigated to domestic concerns, a collapse in Pakistan could have international implications.
Stockman: Perpetual Debt, Perpetual War
https://www.zerohedge.com/geopolitical/stockman-perpetual-debt-perpetual-war
My Comment: I'm expecting the national debt to reach $40Trillion by 2026.
Excerpt:
but even then CBO’s latest 10-year forecast is a shocker. It shows that even if there is no recession for the next ten years (fat chance!) and existing tax and spending policies (dashed red line) remain in place without enactment of a single new spending program or tax cut (even fatter chance!), the deficit will exceed $3 trillion per year by the end of the decade.
That would amount to a structural deficit equal to 8.4% of GDP and a ticket to fiscal perdition. In dollar terms, it would add $20.3 trillion to the public debt over the next decade, taking the total debt to $50 trillion by 2032.
The End Of The 40-Year Bull In Debt & A "Global Depression" Threat
https://www.zerohedge.com/markets/end-40-year-bull-debt-global-depression-threat
My Comment: Watch Emerging Markets and energy importing nations for cracks. Something is going to break. Currencies are vulnerable.
From Doug Noland in this week's Credit bubble Bulletin: Does the Fed have the resolve necessary to mount a serious inflation fight, one that would invariably unfold with significant market and economic turmoil? That the leading FOMC “hawk” would last week raise the possibility of rate cuts next year suggests some weakened knees. Bullard: “The more we can front-load and the more we can get inflation and inflation expectations under control, the better off we will be. In out years -- ’23 and ‘24 -- we could be lowering the policy rate because we got inflation under control.”
My Comment: The more the Fed signals that they are nervous about the stock market decline, the more emboldened speculators will be to drive prices higher. If the Fed adopts a stop and go approach to controlling inflation, inflation will get out of control. I also think inflation is due to supply issues (Covid Ukranian war, labor shortages, China lockdowns, climate change, government spending, etc) which the Fed has no control over, so rate increase will not tame inflation.
I also found the following comments from Bill White, the former chief economist at the Bank for International Settlements, interesting:
1) Bill’s top fear is the Federal Reserve may get so far behind the curve it can’t ever catch up. This could happen if inflation rises faster than the Fed hikes. In that case, real interest rates would actually be moving lower . That’s when people start fleeing a currency. Then inflation gets very high, and worse things follow. He didn’t predict this but thinks it is possible. This isn’t just a US problem. It is potentially even worse in Europe and much of Asia.]
2) Asked about China, Bill said China has basically tried to follow the Japanese postwar growth model, using low exchange rates to generate exports. Beijing now wants to change this, but can’t, because the old regime is of great benefit to certain people and because the transition is hard. They will keep trying but will ultimately fail.
Interest on the debt is a huge threat : https://www.msn.com/en-us/news/politics/interest-on-the-debt-is-a-huge-threat/ar-AAXIrRq?ocid=msedgntp&cvid=d08b44ee38d54ff2aa7bea74f257dd3c
My Comment: No one seems concerned about the debt and it has not been a problem as government spending continues unabated despite Biden's claim of having reduced this year's fiscal deficit by $1.5Trillion (We'll see if that holds true in September). So, when does this debt begin to affect the economy and the markets ?
Excerpts:
Between 2019-2021, annual interest on the debt averaged $389 billion, an increase of $117 billion, or 43 percent. The president’s fiscal year 2022 budget, which is the first to project deficits of more than $1 trillion for 10 consecutive years, estimates that FY 2022 interest on debt of $26.3 trillion will be $305 billion and reach $941 billion in FY 2031, or more than triple the amount for the current fiscal year. By that time, interest payments will account for 59 percent of the projected $1.6 trillion deficit.
The projected interest payments in the budget were made with the assumption that 10-year Treasury interest rates would be 1.4 percent in FY 2022, then average 2.2 percent for the next four years and average 2.8 percent for the following five years. But the 10-year Treasury interest rate is already 2.8 percent and likely to go higher given the Federal Reserve Bank’s plan to continue raising interest rates.
An increase in interest rates of one percentage point above projected rates, according to Brian Reidl of the Manhattan Institute, would raise interest payments by $30 trillion through 2051, and at that time the payments would be equal to 70 percent of all tax revenue. An increase of two percentage points would mean that interest payments would equal 100 percent of all tax revenue in 2051.
Not much of a dead cat bounce. A lot more downside to go. Food and energy inflation is squeezing consumers. I listened to some "market expert" on the national news who said that there would not be a recession because of strong consumer spending. I don't know if these guys are idiots or just lying because the strong consumer spending is due to inflation and to credit card debt.
The Fed's next 50bp rate increase is expected about that time at the next FOMC meeting. So, will the Fed stay the course even though rate increases will not reduce inflation? Gas is over $5 locally and is expected to be over $6 once the summer driving season starts. And food prices will only increase as supply diminishes. I would welcome a hard recession/depression to get stocks and RE prices down to a reasonable sustainable level. It's been a very long time since there were any bargains to be had. I'm just starting to see some now, but I think it has a long way to go.
IMO: The government needs to stop bailing out people and institutions who make bad financial decisions. Because 1) It's not free money, it's taxpayer money and 2) It's not fair for those who are responsible to bail out those who are irresponsible.
Biden wants to bail out students with a $10K student debt write-off. (Total student debt is now $1.7Trillion). I saw an interview on the news this evening in which a person was arguing for the bailout said some of these borrowers never finished college for which the loans were granted. It's similar to the government bailing out home buyers (who bought homes at a very bad time to buy) with special programs after the Housing bubble burst in 2008. People who make bad financial decisions need to suffer the consequences and so do the institutions that made the loans.
Too much leverage, something is going to break -
Crypto bloodbath will spill over to stocks; Market crash isn't over yet - Ted Oakley
https://www.kitco.com/news/2022-05-16/Crypto-bloodbath-will-spill-over-to-stocks-Market-crash-isn-t-over-yet-Ted-Oakley.html
My Comment: I agree with this guy. He says there's too much leverage and it will cause something to break (see @ 8 minutes into the interview). It's all about the debt.
I think I see a pattern in the POG:
When stocks go down, gold goes down
When stocks go up, gold goes down
When inflation goes up, gold goes down
When inflation goes down, gold goes down
When interest rates go up, gold goes down
When interest rates go down, gold goes down
When risk-off, gold goes down
When risk-on, gold goes down
Lacalle: Powell's "Soft Landing" Is Impossible : https://www.zerohedge.com/economics/lacalle-powells-soft-landing-impossible
My Comment: Something is going to break. Thirty five years of Fed (and other CBs) induced speculation and bubble creation cannot be resolved without a lot of pain. A soft landing is not viable. It's all about the debt. Watch China.
Excerpts:
The first problem of a soft landing is the evidence of the weak economic data.
The second problem of believing in a soft landing is underestimating the chain reaction impact of even allegedly small corrections in markets. With global debt at all-time highs and margin debt in the US alone at $773 billion, expectations of a controlled explosion where markets and the indebted sectors will absorb the rate hikes without a significant damage to the economy are simply too optimistic. Margin debt remains more than $170 billion above the 2019 level, which was an all-time high at the time.
However, the biggest problem is that the Federal Reserve wants to curb inflation while at the same time the Federal government is unwilling to reduce spending.
The Federal Reserve cannot expect a soft landing when the economy did not even take off, it was bloated with a chain of newly printed stimulus packages that have made the debt soar and created the perverse incentive to monetize all that the Federal government overspends
The idea of a gradual cooling down of the economy is also negated by the reality of emerging markets and European banks. The relative strength of the US dollar is already creating enormous financial holes in the assets of a financial system that has built the largest carry trade against the dollar in decades. It is almost impossible to calculate the nominal and real losses in pension funds and the negative result of financial institutions in the most aggressively priced assets, from socially responsible investment and technology to infrastructure and private equity. We can see that markets have lost more than $7 trillion in capitalization in the year so far with a very modest move from the Federal Reserve. The impact of these losses is not evident yet in financial institutions, but the write-downs are likely to be significant into the second half of 2022, leading to a credit crunch exacerbated by rate hikes.
There is no easy solution. There is no possible painless normalization path. After a massive monetary binge there is no soft hangover. The only thing that the Federal Reserve should have learnt is that the enormous stimulus plans of 2020 created the worst outcome: stubbornly high core inflation with weakening economic growth. There are only two possibilities: To truly tackle inflation and risk a financial crisis led by the US dollar vacuum effect or to forget about inflation, make citizens poorer and maintain the so-called bubble of everything.
One day someone may finally understand that supply shocks are addressed with supply-side policies, not with demand ones. Now it is too late. Powell will have to choose between the risk of a global financial meltdown or prolonged inflation.
Curveballs In The Housing Bubble Bust : https://www.zerohedge.com/markets/curveballs-housing-bubble-bust
My Comment: I also think that the Achilles heel for housing is leverage. When only 3%-5% down is required to buy and prices are at record highs, it does not take much of a decline to have negative equity. Also, in the recession, if you lose your job, then you lose your house. RE prices are insanely high.
Excerpt:
One reason why people with cash will be interested in using it to buy a house is the urban migration is reversing. The rich people who snapped up tony homes in tony urban neighborhoods are quietly selling to the unwary and moving to rural towns and exclusive enclaves far from decaying urban centers.
Strong demand from cash buyers and limited supply equal home prices which don't drop, they only notch higher.
A large number of people with insane amounts of cash are not U.S. citizens, and they're seeking safe havens and nice neighborhoods in places like Canada, Australia and the U.S.
Corporate owners and buyers are another curveball. Corporations which snapped up hundreds or thousands of rental houses may have confused greed with investing genius, and a nice little recession may leave them with hundreds of vacant homes or newly unemployed renters resisting eviction for non-payment of rent.
As these corporations unload their massive inventory, prices could fall considerably lower than pundits anticipate.
Trading Cryptos -
My Comment: Never put yourself in a financial position from which you cannot recover. Never.
https://www.reddit.com/r/terraluna/comments/un3w7t/i_lost_over_450k_usd_i_cannot_pay_the_bank_i_will/
I lost over 450k usd, I cannot pay the bank. I will lose my home soon. I'll become homeless. suicide is the only way out for me
The Biggest Crash In History Is Coming? Kiyosaki Says So... : https://www.zerohedge.com/markets/biggest-crash-history-coming-kiyosaki-says-so
My Comment: Conditions 1-3 (see below) are in place and conditions 4 (Real Estate bubble Bursting) and 5 (Yen & Yuan) are in the making. After 35 years of Fed induced speculation and bubble creation, the fallout will be tremendous.
Excerpts:
Robert Kiyosaki recently tweeted, “The best time to prepare for a crash is before the crash. The biggest crash in world history is coming. The good news is the best time to get rich is during a crash. The bad news is the next crash will be a long one.”
Again, every financial bubble, regardless of the underlying drivers, had several things in common:
* Tremendous amounts of speculative interest by retail investors.
* A sincere belief “this time was different:” and,
* A tragic ending that devastated financial fortunes.
This time is likely no different.
Timing Is Everything
So, yes, a crash is coming.
However, the problem is the “when.”
A crash could come at any time, next month, next year, or another decade.
However, historically speaking, crashes have always resulted from just a few issues.
1) An unexpected, exogencous event that changes economic outlooks (Geopolitical Crisis, War, Pandemic)
2) A rapid increase in interest rates.
3) A sudden surge in inflation.
4) Credit-related events that impact the financial system (Bankruptcies, Real Estate foreclosures, defaults)
5) Monetary event (currency crisis)
Almost every financial crisis in history boils down ultimately to one of those five factors and mainly a credit-related event. Importantly, the event is always unexpected. Such is what causes the rapid change in sentiment from “greed” to “fear.”
US Budget Deficit Shrinks $1.6 Trillion on Record Tax Surge
https://www.msn.com/en-us/money/markets/us-budget-deficit-shrinks-1-6-trillion-on-record-tax-surge/ar-AAXamtF?ocid=msedgntp&cvid=c94ba722c03e4fe2bc111925a51b99f2
My Comment : A slowing economy will not help the deficit reduction going forward. Nor will the strong dollar as the trade deficit widens and lowers GDP.
Excerpts:
(Bloomberg) -- The US federal government’s budget deficit has shrunk by some $1.57 trillion so far this fiscal year, driven by record receipts from a strong economy and a slowdown in spending as pandemic-era programs fade.
The deficit dropped to $360 billion over the seven months from October through April 2022, according to Treasury Department data released Wednesday.
The Treasury has spent $350 billion in interest payments on federal debt since the start of the fiscal year in October, $76 billion more than in the previous period. Most of that increase is due to additional costs tied to inflation-linked securities, Treasury officials said. The weighted average yield on debt securities was 1.66% at the end of April, barely changed from 1.65% a year before.
Americans Are Using Plastic To Make Ends Meet As Prices Continue To Rise : https://www.zerohedge.com/personal-finance/americans-are-using-plastic-make-ends-meet-prices-continue-rise
My Comment: With all of the debt, something is going to break to cause the next financial crises
Excerpts:
They’re charging it.
Consumer debt continues to climb at a staggering rate.
Total consumer debt rose by $52.4 billion in March, a 14% increase according to the latest data released by the Federal Reserve. Outstanding consumer debt now stands at $4.54 trillion.
The Federal Reserve consumer debt figures include credit card debt, student loans and auto loans, but do not factor in mortgage debt. When you include mortgages, US consumers are buried under more than $15.8 trillion in debt.
With stimulus money long gone and savings depleted, Americans have clearly turned to credit cards to keep up with rapidly rising prices. Revolving credit, primarily reflecting credit card debt, rose by 35.3% in March. American consumers added $31.4 billion to their credit card bills in a single month. US credit card debt now stands at just under $1.1 trillion and is fast approaching all-time highs.
In a nutshell, the Federal Reserve and the US government have built a post-pandemic “economic recovery” on stimulus and debt. It is predicated on consumers spending stimulus money borrowed and handed out by the federal government or running up their own credit cards.
The eye of the beholder -
Warhol’s ‘Marilyn,’ at $195 Million, Shatters Auction Record for an American Artist
https://www.nytimes.com/2022/05/09/arts/design/warhol-auction-marilyn-monroe.html
My Comment : Absolute insanity
Gold's bearish momentum is fading, prices to hit $2,050 after moving past this level – ANZ : https://www.kitco.com/news/2022-05-10/Gold-s-bearish-momentum-is-fading-prices-to-hit-2-050-after-moving-past-this-level-ANZ.html
Excerpts:
"We see a falling wedge formation on the chart starting from early March,which suggests bearish momentum is fading. Prices have hit a lower bound of USD1,830/oz, and we expect a trading range of USD1,850–1,930/oz in days ahead," they wrote. "A convincing break of above the upper trend line of USD1,930/oz would confirm a bullish move. Once this level breaks, prices could touch the previous highs of USD2,000/oz and USD2,050/oz."
Gold and silver should continue to struggle | Kitco News
https://www.kitco.com/commentaries/2022-05-09/Gold-and-silver-should-continue-to-struggle.html
My Comment: All of the ingredients are in place for gold to benefit:
1) Risk-off (check)
2) High inflation (check)
3) Geopolitical turmoil (check)
4) Out-of-control government spending (check)
Yet gold keeps falling. What's it going to take for gold to move higher ?
Excerpt:
Looking at the major levels in gold, the current short-term range is $1850 -$1900, longer term range is $1800 – $1900. Silver’s ranges are short term $22-$24 and long term, $21 – $26. These levels are general guidelines and should be used based on your time frame for holding.
There is good news for gold investors, the most bullish pattern known as Cup and Handle has been forming over the last 12 years. When gold breaks to the upside, the move could be huge; however, the patience to wait for it is always problematic.
It's all about the debt -
My Comment: I'm expecting the national debt to reach $40Trillion by 2026. And I think Biden is dreaming if he thinks he is reducing this year's fiscal deficit by $1.5Trillion.
Stockman: The Fed Is Not Fixing The Problem : https://www.zerohedge.com/markets/stockman-fed-not-fixing-problem
Excerpts:
At the same time, Federal borrowing requirements will remain massive because the structural deficit has become deeply embedded in policy. Even after the $3.1 trillion and $2.8 trillion back-to-back deficits in FY2020-2021, the red ink is barely abating as Covid spending rolls off.
In fact, the US Treasury is in a virulent catch-22 when it comes to impending borrowing requirements. That’s because debt service costs will be far higher as interest rates rise, while revenue growth will slowly sharply from current levels as the Fed’s pivot to aggressive tightening grinds the economy to a halt and then into recession.
For instance, OMB’s current net interest expense projection for FY 2022 totals $415 billion, which represents an implied yield of just 1.75% on the average of $23.9 trillion publicly-held debt outstanding during the the fiscal year. But as the Treasury debt rolls over—especially T-bills and 2-year notes—the average carry cost of the public debt will rise sharply.
By FY 2024 that rise could easily be 200 basis points, meaning a weighted average debt service cost of 3.75% on $26 trillion of projected publicly-held debt. In turn, that implies $975 billion of annual net interest expense or more than double the current fiscal year estimate.
Likewise, OMB projects revenue growth of 4.6% next year (FY 2023) and an outlay decline of -1.0%. But we’ll take the unders on both—especially the risible notion that spending will actually decline during the run-up to the most fraught presidential election of modern times.
In short, Uncle Sam is likely to be hitting the bond pits with at least $2 trillion per year in new debt paper in the period ahead, even as the Fed dumps in another $1.2 trillion at annualized rates, as it ramps down its balance sheet per today’s announcement.
What that adds up to is the return of the bond vigilantes—a revival of the old “crowding-out” syndrome as the bond pits struggle to fund $3.2 trillion of government debt paper per annum with no helping hand from the Fed’s printing press. In that context, of course, it will be business and home mortgage borrowers who will get the short-end of the stick
This has been in the making for 35 years, since Greenspan bailed out the markets from the crash of '87. The economic distortions including the bubble stock market are the creation of the Fed and they have no solution to the disaster they have created. The Fed is no longer in control.
What's wrong with this picture ? -
With deficit falling, Biden highlights fiscal responsibility
https://www.msn.com/en-us/news/politics/with-deficit-falling-biden-highlights-fiscal-responsibility/ar-AAWTVP4?ocid=msedgntp&cvid=f271fa93c6604a95afad8aaf19d92c69
My Comment: Spending keeps going up and the deficits are reduced ? We'll see. The economy is slowing which means reduced revenues.
Excerpt:
Besides the quarterly reduction in the national debt, the Treasury Department estimates that this fiscal year's budget deficit will decline $1.5 trillion. That decrease marks an improvement from initial forecasts and would likely put the annual deficit below $1.3 trillion.