Showing posts with label US. Show all posts
Showing posts with label US. Show all posts

Monday, May 13, 2019

How Chinese Trade Issues Will Drive Market Trends

It is becoming evident that the US/Chinese trade issues are going to become a point of contention for the markets going forward. We’ve been review as much news as possible in an attempt to build a consensus for the future of the U.S. markets and global markets. As of last week, it appears any potential trade deal with China has reset back to square one. The news we are reading suggests that China wants to reset their commitments with the US, remove all tariffs and wants the US to commit to buying certain levels of Chinese goods in the future. Additionally, China has yet to commit to stopping the IP/Technology theft from U.S. companies – which is a very big contention for the US.

This suggests the past 6+ months of trade talks have completely broken down and that this trade issue will likely become a market driver over the next 12+ months. The global markets had anticipated a deal to be reached by the end of March 2019. At that time, Trump announced that he was extending talks with China without installing any new tariffs. The intent was to show commitment with China to reach a deal at that time – quickly.

It appears that China had different plans – the intention to delay and ignore U.S. requests. It is very likely that China has worked to secure some type of “plan B” type of scenario over the past 6+ months and they may feel they are negotiating from a position of power at this time. Our assumption is that both the U.S. and China feel their interests are best served by holding their cards close to their chests while pushing the other side to breakdown through prolonged negotiations.

Our observations are that an economic shift is continuing to take place throughout the globe that may see these US/China trade issues become the forefront issue over the next 12 to 24 months – possibly lasting well past the November 2020 US Presidential election cycle. It seems obvious that China is digging in for a prolonged negotiation process while attempting to hold off another round of tariffs from the US. Additionally, China is dealing with an internal process of trying to shift away from “shadow banking” to eliminate the risks associated with unreported corporate and private debt issues.

The limited, yet still valid, resources we have from within China are suggesting that layoffs are very common right now and that companies are not hiring as they were just a few months ago. One of our friends/sources suggested the company he worked for has been laying off employees for over 30 days now and he just found out he was laid off last week. He works in the financial field.

We believe the long term complications resulting from a prolonged U.S./China trade war may create a foundational shift within the global markets over the next 16 to 24+ months headed into the November 2020 U.S. Elections. We’ve already authored articles about how the prior 24 months headed into major U.S. elections tend to be filled with price rotation while an initial downside price move is common within about 16+ months of a major US election event. This year may turn out to prompt an even bigger price rotation.

U.S. Stock Market volatility just spiked to levels well above 20 – levels not seen since October/November 2018, when the markets fell nearly 20% before the end of 2018. The potential for increased price volatility over the next 12+ months seems rather high with all of the foreign positioning and expectations that are milling around. It seems like the next 16+ months could be filled with incredibly high volatility, price rotation and opportunity for skilled traders.

Our primary concern is that the continued trade war between the U.S. and China spills over into other global markets as a constricted price range based trading environment. Most of the rest of the world is still trying to spark some increased levels of economic growth after the 2008-09 market crisis. The current market environment does not settle well for investor confidence, growth, and future success. The combination of a highly contested U.S. Presidential election, US/China trade issues, a struggling general foreign market, currency fluctuations attempting to mitigate capital risks and other issues, it seems the global stock markets are poised for a very big increase in volatility and price rotation over the next 2 years or so.

Our first focus is on the Hang Seng Index. This Weekly chart shows just how dramatic the current price rotation has been over the past few weeks and how a defined price channel could be setting up in the HSI to prompt a much larger downside objective. Should continue trade issues persist and should China, through the course of negotiating with the U.S., expose any element of risk perceived by the rest of the world, the potential for further price contraction is very real. China is walking a very fine line right now as Trump is pushing issues (trade issues and IP/Technology issues) to the forefront of the trade negotiations. In our opinion, the very last thing China wants is their dirty laundry, shady deals and political leadership strewn across the global news cycles over the next 24+ months.



The DAX Weekly Index is showing a similar price pattern. A very clear upper price trend channel which translates into a very clear downside price objective is price continues lower. Although the DAX is not related directly to the US/China trade negotiations, the global markets are far more interconnected now than ever before. Any rotation lower in China will likely result in a moderate price decrease in many of the major global market indexes.



As we’ve suggested within our earlier research posts, U.S. election cycles tend to prompt massive price rotations when the election cycles are intense. In our next post PART II of this report, we talk about what happened in the past election cycles reviewing the monthly charts and weekly SP500 index charts which are very telling in what could be about to happen next for the stock market from an investors standpoint.

For active swing traders, you are going to love our daily trading analysis. On May 1st we talked about the old saying goes, “Sell in May and Go Away!” and that is exactly what is happening now right on queue. In fact, we closed out our SDS position on Thursday for a quick 3.9% profit and our other new trade started Thursday is up 18% already.

Second, my birthday is only three days away and I think it's time I open the doors for a once a year opportunity for everyone to get a gift that could have some considerable value in the future.

Right now I am going to give away and shipping out silver rounds to anyone who buys a 1-year, or 2-year subscription to my Wealth Trading Newsletter. I only have 7 left as they are going fast so be sure to upgrade your membership to a longer term subscription or if you are new, join one of these two plans, and you will receive:



One Year Subscription Gets One 1oz Silver Round FREE (Could be worth hundreds of dollars)

Two Year Subscription Gets TWO 1oz Silver Rounds FREE (Could be worth a lot in the future)

I only have 13 more silver rounds I’m giving away ​​​​​​​so upgrade or join now before it's too late!



Happy May Everyone!


Chris Vermeulen
Stay tuned for PART II next!




Stock & ETF Trading Signals

Wednesday, May 17, 2017

Top Two Ways to Store Wealth Abroad

Nick Giambruno sits down with Doug Casey to get his take on what his favorite places and ways to store our wealth abroad.

Nick Giambruno: For centuries, wealthy people have used international diversification to protect their savings and themselves from out of control governments. Now, thanks to modern technology, anyone can implement similar strategies. Doug, I’d like to discuss some of the basic ways regular people can internationally diversify their savings. For an American, what’s the difference between having a bank account at Bank of America and having a foreign bank account?

Doug Casey: I’d say there is possibly all the difference in the world. The entire world’s banking system today is shaky, but if you go international, you can find much more solid banks than those that we have here in the US. That’s important, but beyond that, you’ve got to diversify your political risk. And if you have your bank account in a US bank, it’s eligible to being seized by any number of government agencies or by a frivolous lawsuit. So besides finding a more solid bank, by having your liquid assets in a different political jurisdiction you insulate yourself from a lot of other risks as well.

Nick Giambruno: Moving some of your savings abroad also allows you to preempt capital controls (restrictions on moving money out of the country) and the destructive measures that always follow.

Doug Casey: This is a very serious consideration. When the going gets tough, governments never control themselves, but they do try to control their subjects. It’s likely that the US is going to have official capital controls in the future. This means that if you don’t have money outside of the US, it’s going to become very inconvenient and/or very expensive to get money out.

Nick Giambruno: Why do you think the US government would institute capital controls?

Doug Casey: Well, there are about $7 - 8 trillion, nobody knows for sure, outside of the US, and those are like a ticking time bomb. Foreigners don’t have to hold those dollars. Americans have to hold the dollars. If you’re going to trade within the US, you must use US dollars, both legally and practically. Foreigners don’t have to, and at some point they may perceive those dollars as being the hot potatoes they are. And the US government might say that we can’t have Americans investing outside the country, perhaps not even spending a significant amount outside the country, because they are just going to add to this giant pile of dollars. There are all kinds of reasons that they could come up with.

We already have de facto capital controls, quite frankly, even though there’s no law at the moment saying that an American can’t invest abroad or take money out of the country. The problem is because of other US laws, like FATCA, finding a foreign bank or a foreign broker who will accept your account is very hard. Very, very few of them will take American accounts anymore because the laws make it unprofitable, inconvenient, and dangerous, so they don’t bother. So it’s not currently against the law, but it’s already very hard.

Nick Giambruno: What forms of savings are good candidates to take abroad? Gold coins? Foreign real estate?

Doug Casey: Well, you put your finger on exactly the two that I was going to mention. Everybody should own gold coins because they are money in its most basic form—something that a lot of people have forgotten. Gold is the only financial asset that’s not simultaneously somebody else’s liability. 

And if your gold is outside the US, it gives you another degree of insulation should the United States decide that you shouldn’t own it—it’s not a reportable asset currently. If you have $1 million of cash in a bank account abroad, you must report that to the US government every year. If you have $1 million worth of gold coins in a foreign safe deposit box, however, that is not reportable, and that’s a big plus.

So gold is one thing. The second thing, of course is real estate. There are many advantages to foreign real estate. Sometimes it’s vastly cheaper than in the US. Foreign real estate is also not a reportable asset to the US government.

Nick Giambruno: Foreign real estate is a good way to internationally diversify a big chunk of your savings. What are the chances that your home government could confiscate foreign real estate? It’s pretty close to zero.

Doug Casey: I’d say it’s just about zero because they can make you repatriate the cash in your foreign bank account, but what can they make you do with the real estate? Would they tell you to sell it? Well, it’s not likely.

Also, if things go sideways in your country, it’s good to have a second place you can transplant yourself to. And I know that it’s unbelievable for most people to think anything could go wrong in their home country—a lot of Germans thought that in the ’20s, a lot of Russians thought that in the early teens, a lot of Vietnamese thought that in the ’60s, a lot of Cubans thought that in the ’50s. It could happen anywhere.

Nick Giambruno: Besides savings, what else can people diversify? How does a second passport fit into the mix?

Doug Casey: It’s still quite possible—and completely legal—for an American to have a citizenship in a second country, and it offers many advantages. As for opening up foreign bank accounts, if you show them an American passport, they’ll likely tell you to go away. Once again, obtaining a foreign bank or brokerage account is extremely hard for Americans today—that door has been closing for some time and is nearly slammed shut now. But if you show a foreign bank a Paraguayan or a Panamanian or any other passport, they’ll welcome you as a customer.

Nick Giambruno: The police state is metastasizing in the US. Is that a good reason to diversify as well?

Doug Casey: It’s a harbinger, I’m afraid, of what’s to come. The fact is that police forces throughout the US have been militarized. Every little town has a SWAT team, sometimes with armored personnel carriers. All of the Praetorian style agencies on the federal level—the FBI, CIA, NSA, and over a dozen others like them—have become very aggressive. 

Every single day in the US, there are scores of confiscations of people’s bank accounts, and dozens having their doors broken down in the wee hours of the night. The ethos in the US really seems to be changing right before our very eyes, and I think it’s quite disturbing.

You can be accused of almost anything by the government and have your assets seized without due process. Every year there are billions of dollars that are seized by various government entities, including local police departments, who get to keep a percentage of the proceeds, so this is a very corrupting thing.

People forget that when the US was founded there were only three federal crimes, and they are listed in the Constitution: treason, counterfeiting, and piracy. Now it’s estimated there are over 5,000 federal crimes, and that number is constantly increasing. This is very disturbing. There is a book called Three Felonies a Day, which estimates that many or most Americans inadvertently commit three felonies a day. So it’s becoming Kafkaesque.

Nick Giambruno: Thanks, Doug. Until next time.

Doug Casey: Thanks, Nick.

Editor’s Note: The US is nearing the worst financial disaster of our lifetimes. It’s inevitable. And it’s the single biggest threat to your financial future.

Fortunately, you can learn the ultimate strategy for turning the coming crisis into a wealth-building opportunity in this urgent video from New York Times best selling author Doug Casey.

Click Here to Watch it Now





Stock & ETF Trading Signals

Friday, April 7, 2017

Surviving and Thriving During an Economic Collapse

By Nick Giambruno 

In just over a century, the international monetary system has collapsed three times: in 1914, in 1939, and in 1971, when Nixon severed the dollar’s last ties to gold. We are due for another major breakdown soon.

This time, the US dollar will lose its status as the world’s premier reserve currency. And the ramifications of that happening are hard to overstate. It will likely be the tipping point at which the US government becomes desperate enough to officially restrict the movement of people and their money… desperate enough to nationalize retirement savings… and desperate enough to make other forms of overt wealth confiscation routine.

For decades, countries around the world have conducted most of their international trade in US dollars. If they want to play in the international sandbox, most have to buy US dollars on the currency market first. This creates a (frequently artificial) demand for dollars, which makes those dollars more valuable.

Imagine the overall boost this arrangement gives to the dollar’s value. It’s enormous.

This system allows the US government and US citizens to live way beyond their means. It also gives the US government immense geopolitical leverage. It can pick and choose which countries can participate in the US-dollar-based financial system—and, by extension, the vast majority of international trade.

All of these unique benefits will disappear when the dollar loses its premier status. No one knows exactly when that will happen, but we’re quickly moving in that direction. Russia, China, Brazil, and India are all making serious moves to dump the dollar and trade in their own currencies. The momentum is quickly gaining critical mass.

I believe it won’t be long before the US government will be desperate enough to enact the restrictive measures we all fear. It’s important to prepare for the economic and financial consequences now. However, you also need to prepare for the sociopolitical consequences of the next economic collapse. It’s probably not going to happen tomorrow, but the direction the bankrupt US government is headed is clear.

Once the dollar loses its status as the world’s premier currency, your options for protecting your savings will have likely narrowed significantly, if not disappeared altogether. It’s important to act before that happens.

P.S. New York Times best-selling author Doug Casey and I think that a crisis for the record books is coming soon. We think your savings are highly vulnerable. There’s a good chance you could be wiped out.

That’s why we released an urgent new video on surviving and thriving during the next financial crisis. 

Click here to watch it now.




Stock & ETF Trading Signals

Friday, February 24, 2017

Donald Trump, Saudi Arabia, and the Petrodollar

By Nick Giambruno

Obama pulled out his veto pen 12 times during his presidency. Congress only overrode him once. In late 2016, Obama vetoed the Justice Against Sponsors of Terrorism Act (JASTA). The bill would allow 9/11 victims to sue Saudi Arabia in US courts. With only months left in office, Obama wasn’t worried about the political price of opposing the bill. It was worth protecting Saudi Arabia and the petrodollar system, which underpins the US dollar’s role as the world’s premier currency.

Congress didn’t see it that way though. Those up for reelection couldn’t afford to side with Saudi Arabia over US victims. So Congress voted to override Obama’s veto, and JASTA became the law of the land. The Saudis, quite correctly, see this as a huge threat. If they can be sued in US courts, their vast holdings of US assets are at risk of being frozen or seized.

The Saudi foreign minister promptly threatened to sell all of the country’s US assets. Basically, Saudi Arabia was threatening to rip up the petrodollar arrangement, which underpins the US dollar’s role as the world’s premier currency.

Donald Trump and the Saudis

Unlike every president since the petrodollar’s birth, Donald Trump is openly hostile to Saudi Arabia.
Recently he put this out on Twitter:


Dopey Prince @Alwaleed_Talal wants to control our U.S. politicians with daddy’s money. Can’t do it when I get elected.

The dopey prince that Trump is referring to is Al-Waleed bin Talal, a prominent member of the Saudi royal family. He’s also one of the largest foreign investors in the US economy, particularly in media and financial companies. The Saudis openly backed Hillary during the election. In fact, they “donated” an estimated $10 million–$25 million to the Clinton Foundation, making them the most generous foreign donors. Besides Hillary Clinton, the single biggest loser from the US presidential election was Saudi Arabia. The Saudis did not want Donald Trump in the White House. And not because of some bad blood on Twitter. There are real geopolitical issues at stake. At the moment, Trump seems determined to walk back on US support for the so called “moderate” rebels in Syria.

The Saudis are furious with the US for not holding up its part of the petrodollar deal. They think the US should have already attacked Syria as part of its commitment to keep the region safe for the monarchy.
Toppling Syrian President Bashar al-Assad is a longstanding Saudi goal. But a President Trump makes that unlikely. That’s not good for Saudi Arabia’s position in the Middle East, nor its relationship with the US.
This is just one of the ways President Trump will hasten the death of the petrodollar.


Saudi Arabia, Islam, and Wahhabism

I loathe quoting a neoconservative historian like Bernard Lewis, but even a broken clock is right twice a day:


Imagine if the Ku Klux Klan or Aryan Nation obtained total control of Texas and had at its disposal all the oil revenues, and used this money to establish a network of well endowed schools and colleges all over Christendom peddling their particular brand of Christianity. This is what the Saudis have done with Wahhabism. The oil money has enabled them to spread this fanatical, destructive form of Islam all over the Muslim world and among Muslims in the West. Without oil and the creation of the Saudi kingdom, Wahhabism would have remained a lunatic fringe in a marginal country.

This is actually an apt description of Wahhabism, a particularly virulent and intolerant strain of Sunni Islam most Saudis follow. ISIS, Al Qaeda, the Taliban, and a slew of other extremists also follow this puritanical brand of Islam. That’s why Saudi Arabia and ISIS use the same brutal punishments, like beheadings.
Many Wahhabis consider Muslims of any other flavor—like the Shia in Iran, the Alawites in Syria, or non-Wahhabi Sunnis—apostates worthy of death.

In many ways, Saudi Arabia is an institutionalized version of ISIS. There’s even a grim joke that Saudi Arabia is simply “an ISIS that made it.” After living in the Middle East for three years, it’s clear to me that many people in the region despise everything about Wahhabism. Yet it flourishes in certain Sunni communities, among people who feel they have nowhere else to turn.

It’s also widely believed in the Middle East that Western powers deliberately fostered Wahhabism, to a degree, to keep the region weak and divided—and as a weapon against Shia Iran and its allies. That includes Syria and post-Saddam Iraq, which has shifted its allegiance towards Iran. Thanks to WikiLeaks we know the Saudi and Qatari governments, which are also the two largest foreign donors to the Clinton Foundation, willfully financed ISIS to help topple Bashar al-Assad of Syria. Julian Assange says the email revealing this is the most significant among the Clinton related emails his group has released.

Here’s an excerpt of the relevant interview with Assange:


Interviewer: Of course, the consequence of that is that this notorious jihadist group, called ISIL or ISIS, is created largely with money from people who are giving money to the Clinton Foundation?
Julian Assange: Yes.
Interviewer: That’s extraordinary….

With all this in mind, Vladimir Putin opened an unusual conference of Sunni Muslim clerics recently. It took place in Grozny, the capital of Chechnya, a Sunni Muslim region within Russia’s southwestern border.
The conference, which included 200 of the top non-Wahhabi Sunni Muslim clerics, issued an extraordinary statement labeling Wahhabism “a dangerous deformation” of Sunni Islam. These clerics carry serious weight in the Sunni world. The imam of Egypt’s al-Azhar mosque, one of the most important Islamic theological centers, was among them. (Egypt is the Arab world’s most populous Sunni country.)

Basically, Putin gathered the world’s most important non Wahhabi clerics to “excommunicate” the Saudis from Sunni Islam. In other words, Putin is going for the jugular of the petrodollar system. Russia and Saudi Arabia have been enemies for decades. The Russians have never forgiven Saudi Arabia (or the US) for supporting the Afghan mujahedeen that drove the Soviet Army out of Afghanistan. And they haven’t forgiven the Saudis for supporting multiple Chechen rebellions. As far as I know, the British writer Robert Fisk was the only Western journalist to cover this extraordinary conference.

Here’s Fisk:
Who are the real representatives of Sunni Muslims if the Saudis are to be shoved aside? And what is the future of Saudi Arabia? Of such questions are revolutions made.

If the Saudis are shoved aside, it could strike a fatal blow to the petrodollar system. The truth is, the petrodollar system is in its death throes. It doesn’t matter if the Saudis willfully abandon it, or if it crumbles because the kingdom implodes. The end result will be the same. Right now, the stars are aligning against the Saudi kingdom. This is its most vulnerable moment since its 1932 founding.

That’s why I think the death of the petrodollar system is the No. 1 black swan event for 2017

I expect the dollar price of gold to soar when the petrodollar system crumbles in the not-so-distant future. You don’t want to find yourself on the wrong side of history when that happens. But that brings up another crucial point.

There’s also likely to be severe inflation
The petrodollar system has allowed the US government and many Americans to live way beyond their means for decades. The US takes this unique position for granted. But it will disappear once the dollar loses its premier status.

This will likely be the tipping point….

Afterward, the US government will be desperate enough to implement capital controls, people controls, nationalization of retirement savings, and other forms of wealth confiscation. I urge you to prepare for the economic and sociopolitical fallout while you still can. Expect bigger government, less freedom, shrinking prosperity and possibly worse. It’s probably not going to happen tomorrow. But it’s clear where the trend is headed. It is very possible that one day soon, Americans will wake up to a new reality.

Once the petrodollar system kicks the bucket and the dollar loses its status as the world’s premier reserve currency, you will have few, if any, options. The sad truth is, most people have no idea how bad things could get, let alone how to prepare. Yet there are straightforward steps you can start taking today to protect your savings and yourself from the financial and sociopolitical effects of the collapse of the petrodollar.

This recently released video will show you where to begin. Click here to watch it now.


The article Donald Trump, Saudi Arabia, and the Petrodollar was originally published at caseyresearch.com




Stock & ETF Trading Signals



Sunday, July 24, 2016

How to Profit From These Massive, Brexit Induced Trends

By Justin Spittler

This has the makings of a classic speculative opportunity—one where politically caused distortions are liquidated and prices readjust. But a word of caution. It’s going to take place within the context of the Greater Depression. And, as Richard Russell, who lived through the last depression, observed: In a depression, nobody wins. The winner is just the person who loses the least.

The EU will disintegrate. It never made sense from the beginning to try to get Swedes to live by the same rules as Sicilians or Germans by the same rules as Portuguese. Not to mention that the rules are entirely arbitrary. Worse, almost all the rules are economic in nature, with legislated winners and losers. Deals like that always lead to resentment, among both the winners and the losers.

In addition to this, the EU is very problematical when it comes to immigrants. There will be more migrants trying to settle in Europe. Why? Because the Muslim world, the swath of countries extending all across northern Africa, through the Middle East, Central Asia, and the Far East, is likely to become increasingly unstable. The EU, as a very politically correct organization is loathe to turn them away. However, once they’re within Schengen, the migrants can travel anywhere. Perhaps where welfare benefits are best and where other migrants are gathering. Remember, when times get tough, both politicians and the capite censi look for someone to blame.

How to profit from this? Most people don’t think the EU will collapse just because Britain (which has always been closer to the U.S. than the Continent anyway) has left. They’re wrong. For one thing, although Brussels won’t become a ghost town, it’s going to lose scores of thousands of highly paid Eurocrats and their minions. I recall that property there was some of the cheapest in Europe in the early ’80s, it’s going to return to that status. We’ll look for a REIT to sell short, specializing in the Brussels market.

It will accelerate the disintegration of nation-states everywhere. 

There are about 200 nation-states in the world. The international “elite,” the “intelligentsia,” the members of the Deep State everywhere, and organizations like the EU in Brussels, would like to see a much smaller number of more powerful states. Orwell anticipated just three mega-states in his dystopia. But the actual trend is in the opposite direction.

It’s not just the UK seceding from the EU, but Scotland from the UK. The Basques and Catalans may eventually secede from Spain. Belgium, a totally artificial country, may eventually break up into Flemish-speaking Flanders and French speaking Wallonia. France has half a dozen secession movements. Italy was only unified into its present form from scores of principalities, duchies, and baronies in 1871 by Garibaldi. It was the same with Germany until Bismarck in 1871. 

The break-up of the USSR in 1990 into 13 smaller states was a good start, but Russia itself is a small empire with dozens of distinct ethnic and linguistic groups. You will rarely hear about this in the mass media, but there are dozens of secession movements throughout Europe. That’s one more reason why (in addition to the interest rate risk and the inflation risk, which are both substantial) you should stay away from long-term government bonds.

The euro will cease to exist.....
The Esperanto currency was doomed from the beginning. It was not just an “IOU nothing,” like the U.S. dollar, but a “Who owes you nothing” since it’s not even backed by a specific government’s taxing power. How to profit? I’ve put on long-term futures contracts, long the British pound vs. short the euro. My rationale is simple. Britain will benefit from exiting the EU, attracting capital and strengthening the pound—which is down 11% against the euro since Brexit. The euro, meanwhile, will approach its intrinsic value at an accelerating rate.

A truly major banking crisis.....
Much worse than that of 2007–2009. Governments, who are all bankrupt, borrow money from commercial banks. Commercial banks have lent it to them because they believe it’s a risk free loan. Governments encourage them to lend recklessly, hoping that will jump-start sluggish economies. Central banks, which are the arms of their governments, have taken interest rates to zero and below for that reason and to make it easier for governments to service their debt. This policy has encouraged businesses to take on debt.

It’s an idiotic and reckless experiment that will end—likely in this cycle—with bankrupt central banks and governments bailing out bankrupt commercial banks and businesses. Just the way they did in 2007–2009. Except this time, the situation is much more serious. How to profit? Don’t own European companies, stocks or bonds, and banks in particular. In fact, even though they’re already down considerably, they’re going lower and are excellent candidates for short sales, or the sale of naked calls.

A panic into gold..... 
You’ve heard this story many times before here. But it’s truer than ever as we approach a genuine crisis. There are no stable paper currencies anywhere in the world. The dollar has been strong only because it’s liquid. Liquidity is good, but here, we’re talking about liquid like nitroglycerin. Hedge funds will start buying gold in size. As will central banks, who don’t want to hold each other’s paper. As will individual investors. Right now, few people even think about gold, much less understand it. How to profit? Buy gold. I expect we’ll see it well over $5,000 this cycle. Silver should do even better in relative terms. And gold stocks have explosive upside.

An exodus of capital and people from Europe.....
to parts of Latin America, plus to the U.S., Canada, Australia, and New Zealand. This is, obviously, bad for Europe and good for the recipient countries. In recent years, I might not have included Latin America, but things have changed. Argentina and Colombia are liberalizing economically. The continent isn’t involved in any entangling alliances, isn’t on the migration highway, and has low costs. Why a wealthy European would stay in that stagnant and unstable continent when he could live better, and mostly tax free, at a fraction of the cost in Argentina is a mystery to me.

Chaos in Africa..... 
Almost every country in Africa is an ex-European colony. Over the last 50 years, Europe, with the U.S. and now China, have shipped over a trillion dollars to the continent. Most of it has been recycled back to Europe by the African elites that stole it, and the rest has mostly been wasted. 

That flow is going to stop for a number of reasons, but among them is that it makes no sense in an “every-man for himself” world. At the same time, essentially all of the world’s population growth over the next couple of decades is going to come from sub Saharan Africa. It’s a nasty economic environment that’s a formula for conflict. 

Millions of Africans will want to emigrate, especially to the homelands of their ex-colonial masters in Europe. They won’t, however, be welcome. How might one take advantage of this? The higher population is going to put upward pressure on commodities, and the chaos is going to make their production much riskier in Africa.

In conclusion..... 
Brexit itself is likely to be good for Britain. And it augurs some big changes in the world at large. Don’t forget that it will all be in the context of both the Greater Depression and the accelerating and world-changing technological revolution I described last month. Our objective here remains to not only keep you advised of what’s happening, but help you profit from opportunities while avoiding major dangers.

Editor's note: The biggest threat to your wealth right now isn’t an economic recession, a stock market crash, or even a global banking crisis. It’s something much bigger and far more dangerous. This short video explains more…

It explains how violent currency moves—like we’re seeing today—have preceded some of the worst financial disasters in history. By the end of the video, you’ll know why you can’t afford to ignore the warnings we’re seeing right now. You’ll learn how to protect yourself and profit from the coming crisis. Click here to watch this free video.



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Stock & ETF Trading Signals

Monday, May 16, 2016

Obama’s Cuban Ambitions as Seen by Cubans Themselves

By Jeff Thomas

For half a century, Americans have been largely unable to visit Cuba and have had to rely on the US government and media for an understanding of the political, social and economic conditions there. What has been described as the “American Berlin Wall” has been successful in providing Americans with quite an inaccurate view.

Throughout this period, those Cubans who exited the island in 1959 (and their descendants) have maintained a propaganda programme that, rightly or wrongly, reflected their desire to return to Cuba and to once again rule it. Additionally, they’ve contributed regularly to both the primary US political parties in order to assure that the blockade would be maintained and that Americans would be kept out until such time as the island could be re-taken.

This is not to say that all is rosy in Cuba. For the past 25 years or more, I’ve periodically spent time there, observing its developments, beginning with its attempt to recover from the loss of its principle trading partner, the Soviet Union, in the early 1990s. It’s been a rocky road, as Cuba has sought to become an international tourist destination whilst attempting to maintain a closed, communist society. Results have been mixed, to say the least.

Still, the US government embargo remains in place and Americans have little real understanding of Cuba, or how the Cuban people view the US. All Americans can rely on is the “official view”—reports fed to the US media by their government, which, in turn, are influenced by Miami-based Cubans.

Recently, Barrack Obama visited Cuba, gave speeches and even walked the streets of Havana, “meeting the people”. Americans have now had time to digest the official US view of that visit, yet, understandably, have no idea whatsoever as to the Cuban view.

If I could sum up the Cuban people’s perception, based upon discussions with Cubans in Havana after the visit, I’d say that the best word to describe their reaction would be “wary”. Cubans are only too aware that Americans have, for half a century, received a highly one-sided view of anything Cuban and, for the most part, tend to agree with their leaders that any dealings with the US government should be cautious.

As in any country, there are varied viewpoints and, to be sure, the Cubans who oppose the existing regime to the point that they’ve stolen a boat and braved the seas to escape Cuba, would have a far different view from those who are glad to remain in Cuba.

A particular concern that they tend to voice is that Americans leaders are arrogant, seeming to believe that they have all the answers for every country and seem to perceive themselves as magnanimous, in offering to unilaterally change other countries “for the better”. In the present instance, they resent Mister Obama stating in a Havana speech that his country is considering diminishing its economic punishment of Cuba, but that, first, he would need to be assured that the Cuban political structure be altered to reflect the American model more closely. As stated by President Raul Castro in the Havana Reporter, “he should not expect the Cuban people to give up their destiny…for which they have made huge sacrifices.”

A continuing sore in the side of Cuba is the occupation of Guantanamo Bay. Cubans, when confronted with their government’s admitted incarceration of some citizens for political reasons, may respond by reminding Americans that Cubans regard Guantanamo as “the horrible torture center”, housing the US government’s political prisoners. They are bolstered in their view by American presidential candidates who vehemently support the continued violation of the Geneva Convention at Guantanamo. (Most Cubans have television and there’s no restriction on American broadcasts. Cubans therefore know far more about the US than Americans know about Cuba.)

Again, quoting the Havana Reporter, “The Cuban authorities request for the illegally occupied military territory to be returned, although spokespeople for Obama’s administration say that the subject is not on the agenda for discussion.”

Again, the American presidential message, as seen from the Cuban perspective, appears to be, “We’ll decide what we will or won’t do for you, and we’ll decide what you’ll do for us.”

And the discussion is not an isolated one. For many years, the UN has regularly held votes on the legality and morality of the blockade and, in each case, all members except the US and Israel vote for its elimination. Just prior to Mister Obama’s Cuban visit, Federica Mogherini, Vice President of the European Commission, reiterated the UN request for the “rejection of the economic, commercial and financial blockade imposed on Cuba by the US”, which she described as both outdated and illegal.

In his book, “Obama and the Empire”, Fidel Castro comments, “You state…that your country…would not tolerate any intervention in the hemisphere, reiterating that this right must be respected, while demanding the right to intervene anywhere in the world with the aid of hundreds of military bases and naval, air and space forces distributed across the planet. I ask: Is that the way in which the United States expresses its respect for freedom, democracy and human rights?”

To be sure, Mister Castro has his own agenda, as do all political leaders, yet his point is well taken. In spite of US pressure, he has outlasted ten US presidents since 1959. Cuba boasts universal literacy and the lowest rate of violent crime in the hemisphere, whereas, in the US, the percentage of those who are functionally illiterate varies between 15% and 35% (depending on the definition of illiteracy). The US also has both the highest number of prison inmates and the highest percentage of inmates per capita. Whether the US or Cuba has the greater claim to the moral high ground is therefore very much an individual assessment.

But, what’s the view on the street in Havana? What’s the reaction of the average Cuban to the Obama visit?

Well, for a start, people in the street, who are accustomed to seeing their leaders with a minimal entourage and few armed guards, were surprised to see a virtual army of suited protectors, making Mister Obama’s stroll through Havana anything but casual. Of course, this has become the norm for any American leader, but what message does this convey, when the visitor displays such a show of force?

In spite of this; however, a young waiter at a bistro in the popular Empedrado Callejón del Chorro commented that, whilst he doubted the sincerity of the visit, anything that brings the two countries closer together can only be an improvement. And, to be sure, younger Cubans are more likely than the previous generations to acknowledge that the inevitable passage out of the Castro’s leadership may be overdue, but that a softening of Cuban distrust of the “American imperialists” can only take place if the American government learns to regard Cuba as a sovereign nation, not as a whipping boy.

And, of course, this is a sentiment that we see worldwide. The more the US positions itself as the world’s policeman, the more it alienates the peoples of other countries. At a time when the US has begun its economic decline, it would do well to soften its approach, yet it is clearly doing the exact opposite. This does not bode well for the US. No one likes a bully. Bullies are typically only tolerated until they weaken. When this occurs, people turn on the bully, whether he is a person, or indeed, a government. What we are observing is the decline of a large nation and, soon, the rebirth of a small one. As events unfold, the comparisons between the two will be fascinating to observe.

Editor’s Note: Nick Giambruno, editor of Crisis Investing, thinks Cuba is a huge investing opportunity...
Nick is an expert “crisis investor.” He invests in markets that are bombed out, hated, and depressed. This strategy allows Nick to buy world-class companies at bargain prices… and to buy a dollar’s worth of assets for pennies. This sets him up to make big gains, like the 210% gain he made on the Cypriot hospitality business Lordos Hotels in the wake of that country’s banking crisis a few years back.

According to Nick, Cuba has been in a slow motion crisis for decades. The U.S.' ban on trade with Cuba killed any chance of economic growth for the last 60 years. But Nick says the embargo will soon become “a page in the history books.” When this happens, money should pour into Cuba. Nick has a “back door” way to profit from Cuba’s huge untapped potential...

Here’s Nick:
Cuba has over 2,000 miles of pristine coastline and the potential to be a top tourist destination. If Cuba ever opens up, there’s potential to make a fortune.

Nick’s investment is a legal way to profit from the “opening up” of Cuba while the embargo is still in place. It trades on the NASDAQ stock exchange. This investment is up over 25% in the last three months. But Nick expects it to go much higher. We can’t disclose the investment here, because it wouldn’t be fair to paying subscribers. But you can get instant access to Nick’s “back door” Cuba investment by signing up for a trial subscription to Crisis InvestingClick here to learn more.



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Thursday, October 29, 2015

The Financialization of the Economy

By John Mauldin


Roger Bootle once wrote:
The whole of economic life is a mixture of creative and distributive activities. Some of what we ‘‘earn’’ derives from what is created out of nothing and adds to the total available for all to enjoy. But some of it merely takes what would otherwise be available to others and therefore comes at their expense.

Successful societies maximise the creative and minimise the distributive. Societies where everyone can achieve gains only at the expense of others are by definition impoverished. They are also usually intensely violent. Much of what goes on in financial markets belongs at the distributive end. The gains to one party reflect the losses to another, and the fees and charges racked up are paid by Joe Public, since even if he is not directly involved in the deals, he is indirectly through costs and charges for goods and services.

The genius of the great speculative investors is to see what others do not, or to see it earlier. This is a skill. But so is the ability to stand on tip toe, balancing on one leg, while holding a pot of tea above your head, without spillage. But I am not convinced of the social worth of such a skill.

This distinction between creative and distributive goes some way to explain why the financial sector has become so big in relation to gross domestic product – and why those working in it get paid so much.

Roger Bootle has written several books, notably The Trouble with Markets: Saving Capitalism from Itself.

I came across this quote while reading today’s Outside the Box, which comes from my friend Joan McCullough. She didn’t actually cite it but mentioned Bootle in passing, and I googled him, which took me down an alley full of interesting ideas. I had heard of him, of course, but not really read him, which I think may be a mistake I should correct.

But today we are going to focus on Joan’s own missive from last week, which she has graciously allowed me to pass on to you. It’s a probing examination of how and why the financialization of the US and European (and other developed world) economies has become an anchor holding back our growth and future well being. Joan lays much of the blame at the feet of the Federal Reserve, for creating an environment in which financial engineering is more lucrative than actually creating new businesses and increasing production and sales.

There are no easy answers or solutions, but as with any destructive codependent relationship, the first step is to recognize the problem. And right now, I think few do. What you will read here is of course infused with Joan’s irascible personality and is therefore really quite the fun read (even as the message is sad).

Joan writes letters along this line twice a day, slicing and dicing data and news for her rather elite subscriber list. Elite in the sense that her service is rather expensive, so I thank her for letting me send this out. Drop me a note if you want us to put you in touch with her.

I am back in Dallas after a whirlwind trip to Washington DC. I attended Steve Moore’s wedding at the awe-inspiring Jefferson Memorial; and then we hopped a plane back to Dallas and Tulsa to see daughter Abbi, her husband Stephen, and my new granddaughter, Riley Jane, who was delivered six weeks premature while we were in the air.

The doctors decided to bring Riley into the world early as Abbi was beginning to experience seriously high blood pressure and other problematic side effects. Riley barely weighs in at 4 pounds and will spend the first three years of her life in the NICU (the neonatal intensive care unit). Having never been in one before, I was rather amazed by all the high tech gear surrounding Riley and all of the usual medical devices shrunk to the size where they can be useful with preemie babies.

The doctors and nurses assured me that the frail little bundle I was very hesitant to touch would be quite fine. And Abbi is much better and already up and about.

As I was flying back to Dallas later that afternoon, it struck me how, not all that long ago, in my parents’ generation, both mother and daughter would have been at severe risk. Interestingly, both Abbi and her twin sister were significantly premature as well, some 30 years ago in Korea. The progress of medicine and medical technology has allowed so many more people to live long and productive lives, and that process is only going to continue to improve with each and every passing year.

And now, I think it’s time to let you get on with Joan McCullough’s marvelous musings. Have a great week!
Your glad I’m living at this time in history analyst,
John Mauldin, Editor
Outside the Box

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The Financialization of the Economy

Joan McCullough, Longford Associates
October 21, 2015

Yesterday, we learned that lending standards had eased and that there was increased loan demand from institutions and households, per the ECB’s September report. (Which was attributed to the success of QE and which buoyed the Euro in the process.)

This has been bothering me. Because it is a great example of the debate over “financialization” of an economy, i.e., is it a good thing or a bad thing?

The need to further explore the topic was provoked by reading this morning that one of the larger shipping alliances, G6, has again announced sailing cancellations between Asia and North Europe and the Mediterranean. This round of cuts targets November and December. The Asia-Europe routes, please note, are where the lines utilize their biggest ships and have been running below breakeven. So it’s easy to understand why such outsized capacity is further dictating the need to cancel sailings outright. G6 members: American President, Hapag Lloyd, Hyundai Merchant Marine, Mitsui, Nippon and OOCL. So as you can see from that line-up, these are not amateurs.

We have already discussed in the past in this space, the topic of financialization. But seeing as how the stock market keeps rallying while the economic statistics have remained for the most part, punk, time to revisit the issue once again. Is it all simply FED or no FED? Or is the interest rate issue ground zero and/or purely symptomatic of the triumph of financialization over the real economy?

Further urged to revisit the topic by the seemingly contradictory developments of the ECB banks reportedly humming along nicely while trade between Asia and Europe remains obviously, significantly crimped. Let’s make this plain English because it takes too much energy to interpret most of what is written on the topic.

Snappy version:
Definition (one of quite a few, but the one I think is accurate for purposes of this screed):
Financialization is characterized by the accrual of profits primarily thru financial channels (allocating or exchanging capital in anticipation of interest, divvies or capital gains) as opposed to accrual of profits thru trade and the production of goods/services.

Economic activity can be “creative” or “distributive”. The former is self- explanatory, i.e., something is produced/created. The latter pretty much simply defines money changing hands. (So that when this process gets way overdone as it likely has become in our world, one of the byproducts is the widening gap called “income inequality”.)

You guessed correctly: financialization is viewed as largely distributive.

So now we roll around to the nitty-gritty of the issue. Which presents itself when business managers evolve to the point where they are pretty much under the control of the financial community. Which in our case is simply “Wall Street”.

This is something I saved from an article last summer which ragged mercilessly on IBM for having kissed Wall Street’s backside ... and in the process over the years, ruined the biz. “And of course, it’s not just IBM. ... A recent survey of chief financial officers showed that 78 percent would ‘give up economic value’ and 55 percent would cancel a project with a positive net present value—that is, willingly harm their companies—to meet Wall Street’s targets and fulfill its desire for ‘smooth’ earnings.... http://www.forbes.com/sites/stevedenning/2014/06/03/why-financialization-has-run-amok/

IBM is but one possible target in laying this type of blame where the decisions on corporate action are ceded to the financial community; the instances are innumerable.

You probably could cite the well-known example of a couple of years back when Goldman Sachs was exposed as the owner of warehouse facilities that held 70% of North American aluminum inventory. And how that drove up the price and cost end-users dearly. (Estimated as $ 5bil over 3 years’ time.)

First link: NY Times article from July of 2013, talking about the warehousing issue.
http://www.nytimes.com/2013/07/21/business/a-shuffle-of-aluminum-but-to-banks-pure-gold.html?pagewanted=all&_r=0

Second link: Senate testimony from Coors Beer, complaining about the same situation.
http://www.banking.senate.gov/public/index.cfm? FuseAction=Files.View&FileStore_id=9b58c670-f002-42a9-b673- 54e4e05e876e 

Well, here’s another from the same article which makes the point quite clearly: Boeing’s launch of the 787 was marred by massive cost overruns and battery fires. Any product can have technical problems, but the striking thing about the 787’s is that they stemmed from exactly the sort of decisions that Wall Street tells executives to make.

Before its 1997 merger with McDonnell Douglas, Boeing had an engineering driven culture and a history of betting the company on daring investments in new aircraft. McDonnell Douglas, on the other hand, was risk-averse and focused on cost cutting and financial performance, and its culture came to dominate the merged company. So, over the objections of career long Boeing engineers, the 787 was developed with an unprecedented level of outsourcing, in part, the engineers believed, to maximize Boeing’s return on net assets (RONA). Outsourcing removed assets from Boeing’s balance sheet but also made the 787’s supply chain so complex that the company couldn’t maintain the high quality an airliner requires. Just as the engineers had predicted, the result was huge delays and runaway costs.

Boeing’s decision to minimize its assets was made with Wall Street in mind. RONA is used by financial analysts to judge managers and companies, and the fixation on this kind of metric has influenced the choices of many firms. In fact, research by the economists John Asker, Joan Farre-Mensa, and Alexander Ljungqvist shows that a desire to maximize short term share price leads publicly held companies to invest only about half as much in assets as their privately held counterparts do.”

That’s from an article in the June, 2014, Harvard Business Review by Gautam Mukunda, “The Price of Wall Street’s Power” also cited in the Forbes article. This is the link; it is worth the read though you may not agree with parts of the conclusion: https://hbr.org/2014/06/the-price-of-wall-streets-power

The upshot to this type of behavior is that the balance of power ... and ideas ... then migrates into domination by one group.

Smaller glimpse: Over financialization is what happens when a company generates cash then pays it to shareholders and senior management which m.o. also includes share buybacks and vicious cost cutting. This is one way, as you can see, in which the real economy is excluded from the party!

Part of the financialization process also includes ‘cognitive capture’ where the big swingin’ investment banking sticks have the ear of business managers.

And the business managers/special interest groups, in turn, have the ear of the federal government. See? The control by Wall Street is still there, but sometimes the route is a tad circuitous! The clandestine formulation of the TPP agreement is a perfect example of this type of dominance. (Congress shut out/ corporate lobbyists invited in.)

So the whole process goes to the extreme. Therein lies the rub: the extreme. So that business obediently complies with the wishes of these financial wizards. Taken altogether, over time, our entire society morphs to where it assumes a posture of servitude to the interests of Wall Street.

An example of that? John Q.’s sentiment meter (a/k/a consumer confidence) is clearly known to be tied most of the time to the direction of the S&P 500. Which of course, is aided and abetted by the foaming at  the mouth Talking Heads who pretty much .... dictate to John Q. how he is supposed to be feeling.

Forty years on the Street, I am still agog at the increasing clout of the FOMC to the extent where we are now hostages to their infernal sound bites and communiqués. Another example of the process of creeping financialization? I’d surely say so!

This is not an effort to try and convict “financialization” as indeed it has its place. When it is used prudently. Such as to facilitate trade in the real economy! Sounds kind of Austrian, eh? You bet. The simplest example of this which is frequently cited is a home mortgage. The borrower exchanges future income for a roof via a bank note.

And so it goes. Financialization humming along nicely, facilitating trade in the real economy. Unfortunately, along the line somewhere, it got out of hand. Which is where the World Bank comes in.
http://data.worldbank.org/indicator/FS.AST.PRVT.GD.ZS

As they have the statistics on “domestic credit to private sector (% of GDP)”

Why do we wanna’ look at that? Well the answer is suggested by yet another institution who has studied the issue. Correct. The IMF. Which espouses the notion that “the marginal effect of financial depth on output growth becomes negative ... when credit to the private sector reaches 80-100% of GDP ...
https://www.imf.org/external/pubs/ft/wp/2012/wp12161.pdf

Does the above sound familiar? Right. Too much financialization crimps growth.
That’s when we turn to the above-referenced World Bank table. Which shows the latest available worldwide statistics (2014) on domestic credit to private sector % of GDP.

Okay. Maybe we oughta’ read this bit from the World Bank before we get to the US statistic:
... “Domestic credit to private sector refers to financial resources provided to the private sector by financial corporations, such as through loans, purchases of nonequity securities, and trade credits and other accounts receivable, that establish a claim for repayment. ...
The financial corporations include monetary authorities and deposit money banks, as well as other financial corporations ...
Examples of other financial corporations are finance and leasing companies, money lenders, insurance corporations, pension funds, and foreign exchange companies.” ....

Clear enough. Again, the IMF suggests that 80 to 100% of GDP is where it gets dicey in terms of impact on growth.....

In 2014, the US ratio stood at 194.8. In 1981 (as far back as the table goes), our ratio stood at 89.1.
For comparison, also in 2014, Germany stood at 80.0; France at 94.9. China at 141.8 and Japan at 187.6. Which is suggestive of what can be called “over-financialization”. So what’s the beef with that, you ask?
For all the reasons mentioned above which led to increasing dominance by the financial sector on corporate and household behavior, the emphasis leans heavily towards making money out of money. Which I’d like to do myself. You?

But when massaged into the extreme which is clearly, I believe, where we find ourselves now ... at the end of the day, we create nothing.

By creating nothing, the economy relies on the financialization process to create growth. But the evidence supports the notion that once overdone, financialization stymies growth.

“ ... The whole of economic life is a mixture of creative and distributive activities. Some of what we “earn” derives from what is created out of nothing and adds to the total available for all to enjoy. But some of it merely takes what would otherwise be available to others and therefore comes at their expense. Successful societies maximize the creative and minimize the distributive. Societies where everyone can achieve gains only at the expense of others are by definition impoverished. They are also usually intensely violent.” ... Roger Bootle quoted here: http://bilbo.economicoutlook.net/blog/?p=5537

In short, corporate behavior is dictated by Wall Street desire which in turn results in a flying S&P 500. Against a backdrop, say, of a record number of US workers no longer participating in the labor force.
So instead of cogitating the entire picture and all of its skanky details, we have so farbeen willing to accept a one-size fits all alibi for stock market action where financialization still dominates; the only choice is what financialization flavor will trump the other: “FED or no FED”.

I now wonder if when Bootle said a few years back ... “they are usually intensely violent”, if this wasn’t prescience. Which can be applied to the current political landscape in the US where the financialization of the economy has so excluded the average worker ... that he is willing to put Ho-Ho the Clown in the White House. Just to change the channel. And hope for relief.

As you can see, I am trying very hard to understand how as a society we got to this level.

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Thursday, October 22, 2015

The Government’s Fun with (Inflation) Numbers

By Tony Sagami


My normally super sweet baby sister barked at me like an angry dog when I told her that there simply isn’t any inflation in the US. “You need to go to the grocery store with me. You are completely out of touch with reality,” she snapped.   Geez. Excuse me!

My sister, however, should know. She has two boys—one teenager and one college student that still lives at home—with big appetites, so she spends a lot of time and money at her local grocery store.

The topic came up because of the latest Producer Price Index (PPI) numbers from the Labor Department, which said that prices at the wholesale level actually declined by 0.5% in September. Over the last 12 months through September, the PPI has dropped by 1.1%... that’s the eighth consecutive 12-month decrease in the index.


Even if you exclude food and energy—the so-called core prices were down 0.3% in September.
Is my sister crazy? That depends on whether you believe the government’s heavily massaged numbers or people like my sister and farmers. Here’s what I mean. While the Labor Department was spitting out its PPI numbers, the Wisconsin Farm Bureau Federation (WFBF) begged to differ.




The Wisconsin Farm Bureau Federation tracks the prices of key agricultural commodities that most American households use every day. Sure, the price of a gallon of milk may be slightly different in Texas than in Wisconsin… but not by that much, and the price trends are usually very similar.

Well, according to the WFBF, the prices of basic grocery staples are rising.


The bureau tracks the cost of 16 widely used food items to come up with its Marketbasket index. The newest semi annual survey of the 16 items rose to $53.37, up $1.41 or 2.7% compared with one year ago.
Nine of the 16 items surveyed increased in price while six decreased in price compared with WFBF’s 2015 spring survey. One item, apples, was unchanged.


“The survey’s meat items are the heaviest price pullers. As high-value items, they influence our survey’s overall price even if they only change slightly,” said Casey Langan of the WFBF. So my baby sister was right!

Moreover, the WFBF doesn’t have an ax to grind when it comes to inflation. It is simply reporting the prices of a static basket of commonly used food items. I don’t bring this up to prove how smart my sister is. Heck, any housewife in America could have told you the same thing. Moreover, my sister also complained about big price increases for pharmaceutical drugs, college tuition, and services like dry cleaning and automotive repair.

My points are that (a) you should always look at government produced numbers with a skeptical eye, and (b) understand that the government, particularly the Federal Reserve, uses these heavily massaged numbers to justify its agenda. For example, the lower the cost of living, the less the US government has to pay out in cost of living adjustments for Social Security and federal pension recipients.

And when it comes to interest rates, the Federal Reserve has proven that it doesn’t want to raise interest rates—and it will happily use the latest PPI numbers to prove its point that inflation isn’t a problem.
Fed officials have said they want to be “reasonably confident” inflation will move toward their 2% target before they raise interest rates. The latest PPI numbers will keep rates at zero for at least the rest of 2015 and well into 2016.

Daniel Tarullo, a member of the Fed’s Board of Governors, said last week that the Federal Reserve should not increase interest rates this year. “Right now my expectation is—given where I think the economy would go—I wouldn’t expect it would be appropriate to raise rates.”

Fellow Fed Governor Lael Brainard echoed that view and made the case for more patience last Monday.
Bottom line: You should absolutely believe the Fed when it says that it will “remain highly accommodative for quite some time.”

If you’re an income-focused investor, that conclusion has gigantic implications for how you should invest your money, and if you’re keeping your money in short term CDs, T-bills, and money funds in anticipation of higher rates….. you are making a big mistake.

Try my monthly newsletter, Yield Shark, for stock recommendations with high yield and great potential upside—with a 90 day money back guarantee.
Tony Sagami
Tony Sagami

30 year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here.

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