“By suppressing Rates, The Fed has borrowed Growth and Returns from the Future.”
Mohammed el Erian, 5/21/15 (Former PIMCO CEO)
“‘Now we’ve had the weakest recovery in post-war history and what has happened?
The Fed has simply reflated the bubble to an even more gigantic proportion.’
Submitted by Deepcaster:
“And it’s not just stocks that are in trouble. Stockman sees some troubling signs in the bond market. ‘It’s not possible that the interest rate on the 10-year German bond (NYSE Arca: BUNL) should be 70 basis points when it was 5 just a few weeks ago-or even that the U.S. Treasurys [sic] (U.S.:US10Y) should be trading at 2 percent on the 10-year when we have taxes and inflation.’
“To Stockman, the message is clear, “everything is totally distorted and there is a day of reckoning coming down the pike.’ “
David Stockman, Former OMB Director, via Yahoo Finance (05/22/15)
Despite Main Stream Media Spin, Savvy Investors are beginning to Realize that The Fed and other Major Central Banks have created Dangerous Bubbles.
And one Key Market is already beginning to reflect that Realization.
And, yes, this increasing Realization indeed reflects a “Ticking Time Bomb” / Bubble.
So consider the “Ticking Time Bomb” / Bubble.
And consider the Actions which can be taken to Profit and Protect.
In just the eight days prior to May 22, Yields on 10Yr German Bonds were up over 500%. As of 5/21 they had reached .75% (from Negative Yield Territory a few weeks before). Similarly, yields on French bonds have shot up with a one day jump of 14bps on 5/21 to 1.05%.
But European Central Bank President (Goldman Sachs Alum) Mario Draghi said he was going to keep rates low for “as long as it takes” and has initiated another round of QE so the Eurozone Economy will recover.
But the Eurozone economy is not recovering.
And despite QE and Low Rates, The Fed policies are not helping the U.S. Economy either. A clear Multi-Quarter Downtrend in Official GDP (5% to 3%, to 2%, to -.7%) is now confirmed. The Central Banks’ policies have only served to temporarily boost paper Asset Prices, but not economies.
So what gives?
The Great Delusion that Many Investors still (but decreasingly) entertain is that The Central Bankers “have everything under control and have not created any Bubbles, and that, therefore, the Economy is recovering.” But those Main Stream Media and Central Bank Narratives are increasingly being exposed as Delusions. And the Bubbles became increasingly evident, and Dangerous. The Central Banks have and are engaging in “Currency Wars” — competing to Devalue the Purchasing Power of their currencies. That cannot continue, and is a recipe for disaster.
In sum, in the USA, despite Multiple Rounds of Fed QE, the lousy Economic Numbers show that Economy is not recovering. Indeed, since the Obama presidency began in 2009, the annual wage of the average American worker has dropped about $6,000 from appx $58,000 to appx $52,000. No wonder consumer spending, which is 70% of the U.S. Economy, is lagging.
And in the Eurozone, the ostensible Stimulative Effects of European Central Bank QE, are muted because Eurozone Banks still have $1Trillion in Nonperforming Loans on their Books, and Unemployment Rates are stunningly High. A Possible Grexit is neither the only, nor the most serious, problem the Eurozone faces.
The Economic Circumstances of the Middle Class in the USA and Eurozone are in fact weakening.
And in large part because of the aforementioned, the Market is beginning to drive rates up (on German Bonds, e.g.) because it anticipates, rightly, that all the Central Banks’ Hypermonetary Inflation is beginning to increase Risk and create Price Inflation.
Similarly, the Price of WTI Crude, another Inflation Harbinger, has recently bounced up to, and is now bouncing around $60/bbl, notwithstanding adequate above-ground supplies, and recently lower Rig Counts.
Further, regarding the Real State of the U.S. Economy, the BEA has just recently admitted it has a problem in calculating GDP for the USA. Typically, this sort of Mea Culpa means they don’t like the result politically, so they are going to recalculate it (in the same manner as the BLS has changed the way they calculate inflation nine times since 1997). Of course, real U.S. GDP is Negative and has been for a while, as Deepcaster and Shadowstats.com (Note 1) have been saying for months.
In sum, the Reality that the U.S. (and other Governments) are trying to hide is that we have a Contracting Economy with accelerating Price Inflation — i.e., that we are headed for Stagflation and a consequent Bursting of The Bubbles.
And thus we reiterate that The Great Delusion that the increasing visibility of this Stagflation trend is dispelling, is that The Central Banks’ policies have everything under control. The fact is they do not, and we are sitting on a “Ticking Time Bomb” of Asset Bubbles, which have been generated by Central Banks’ QE and easy Credit policies, coupled with Major Governments’ failures to get their Fiscal Houses in order.
Of course, this will at some point sooner than later wreak Havoc on the Equities Markets, first and then on the Bond Markets, and especially the Markets for U.S. and other major countries (e.g., the ECB and Japan) long-dated Treasuries. Deepcaster has already made specific recommendations aimed at Profit and Protection from what is impending. And we note we correctly forecast the 2008 Takedown and recommended Profitable Positioning for our Subscribers (Note 2) and have since then as well (Note 3).
As to both Protection and Profit, we do recommend considering the Asset that has historically been the most Wealth Protective and now offers excellent Profit Potential — Physical Gold (with Physical Silver a close second) and Quality Mining Shares. So it is not an accident that Gold price has bounced stubbornly around $1200 and Silver around $17 despite ongoing Cartel Price Suppression Attempts.
And certain Agricultural Assets provide Profit and Protection in a Stagflationary Environment as well.
Nota Bene, Investors.
Note 1: *Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported May 22, 2015
-0.20% / 7.38%
U.S. Unemployment reported May 8, 2015
5.44% / 23.0%
U.S. GDP Annual Growth/Decline reported May 29, 2015
2.73% / -1.31%
U.S. M3 reported May 9, 2015 (Month of March, Y.O.Y.)
No Official Report / 5.40% (i.e., total M3 Now at $16.634 Trillion!)
Note 2: * We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s July, 2014 Letter entitled “Profit, Protection, Despite Cartel Intervention” in the ‘Latest Letter’ Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation, and manipulation in other Markets. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
Note 3: Our attention to Key Timing Signals and Interventionals and accurate statistics has facilitated Recommendations which have performed well lately. Consider our profits taken in recent months in our Speculative and Fortress Assets Portfolios*
- 60% Profit on a Telecommunications Company on March 11, 2015 after just over 3 years (i.e., about 20% Annualized)
- 45% Profit on a Currency Double Short ETF on January 22, 2015 after just 9 months (i.e., about 59% Annualized)
- 23% Profit on a leveraged ETN on the Volatility Index on January 6, 2015 after just 119 days (i.e., about 70% Annualized)
- 85% Profit on a REIT on December 31, 2014 after just three years (i.e., about 25% Annualized)
- 105% Profit on a leveraged ETN on the Volatility Index on October 15, 2014 after just 36 days (i.e., about 1090% Annualized)
- 70% Profit on Russell 2000 Small Cap Sector Put on October 10, 2014 after just 2 days (i.e., about 12,275% Annualized)
- 70% Profit on Russell 2000 Small Cap Sector Put on October 1, 2014 after just 8 days (i.e., about 3215% Annualized)
*Past Profitable Performance is no assurance of future Profitable Performance.