Four economic dynamics are converging and forming a major financial storm. Here’s a look at the those dynamics and how to seek shelter from it…
What Storm? Why do we need shelter?
- The stock market hit all-time highs in January, corrected, and might rally to new highs… or maybe not… See below.
- Official unemployment is low if you believe the statistics and ignore the millions excluded from the calculations.
- Inflation, according to official numbers, is low. New cars may have doubled in price in the last 20 years but hedonic adjustments have “massaged” the official inflation on cars to nearly zero. Again, if you believe the numbers… The Chapwood index is more believable.
- People buy food and prescription drugs, pay rent and make house payments. They know prices increase more than shown in the “massaged” inflation statistics.
The coming storm involves a combination of:
- The end of the 35 year bond bull market. Rates are going higher. See below.
- The end of the stock market rally. This rally has persisted for a long time. Valuations are sky-high, margin debt is extreme, and complacency is overwhelming. See below.
- Mind-numbing global debt that can’t and won’t be repaid. Name any central banker or three members of congress who want to reduce the debt and balance the budget. Right!Behind door number one lives the default dragon. The inflation monster is anxious to escape from behind door number two. Both are lethal.
- Governments and central banks will delay, extend and pretend until they open one of those two doors. Expect distractions, diversions, war, more QE, benign statistics, media hype and happy talk.
A storm is coming! We need shelter. Silver bullion, not the paper stuff, provides financial shelter, is real and will not evaporate like most digital “assets” during the storm.
- Stock market capital can disappear in a correction or crash. John P. Hussman, Ph.D. expects an eventual loss of over 65% in the S&P 500 Index. His analysis is far more real than the happy talk from government statisticians and mainstream media.
- Bonds entered a bear market (ten year yield bottomed in mid-2016) and losses could be staggering. How well are Puerto Rico bonds holding their value? Does your bond fund own 100 year bonds issued by Argentina? The U.S. will add over a trillion dollars to its unpayable debt every year going forward. When happens when the music stops?
- Wall Street expects financial salvation from central bank printing, borrowing inexpensivecurrency units, and ever-increasing debt.
“I bargained for salvation and she gave me a lethal dose.”
- Has the world received a lethal dose of central bank currency printing? How much government debt is a lethal dose?
Yes, a storm is coming! Do your own due diligence, but consider:
- When paper (over-valued stocks, too many printed currency units, and sovereign debt issued by insolvent governments) becomes less trustworthy, shift from paper promises to real assets. Silver, gold, platinum and real estate come to mind.
- When the monthly Relative Strength Index (14 period RSI) for the DOW hit a 116 year high in January 2018 it warned the DOW had moved too far and too fast. Tops take time to form, but markets always correct from both lows and highs. Do you feel lucky?
- Silver is one of the most under-valued assets still available for purchase. Many tech stocks are among the most over-valued paper assets on the planet. Silver looks good. See below.
- Sovereign debt is rising. Global debt exceeds $230 trillion. Official U.S. (on-the-books) national debt is approaching $21 trillion. The debt bubble will not blow up next week, but one day the default dragon or the inflation monster will emerge and the financial storm will intensify. We need shelter from that storm.
THOUGHTS FROM OTHERS:
John Rubino: “Unintended Consequences”
“What’s wrong with deficit-led growth pushing up interest rates a bit? History, for one thing. Note how a rising Fed Funds rate preceded every recession in living memory.”
Zerohedge: “Trump Warns World”
“After unveiling the ‘heaviest sanctions ever imposed on a country before’ against North Korea earlier in the day, President Trump told the gathered media that the US will go to ‘Phase 2’ if those sanctions do not have the desired effects of denuclearizing the Korean peninsula.”
From Brandon Smith: “Central Banks Will Let the Next Crash Happen”
“The Federal Reserve is going to let the market crumble in 2018. They are going to continue raising interest rates and reducing their balance sheet faster than originally expected.”
From Chris Martenson: “The Worst Threat”
“When it comes to repaying the current global debt levels of 310% of GDP, we can confidently predict that such a debt load can never be repaid. They can only try to roll it over as long as they can – which can’t go on much longer without real consequence. Mounting losses are certain at this point.”
“… the central banks have set the stage for an enormously dangerous and disruptive market crash.”
From Alasdair Macleod: “When Will the Next Credit Crisis Occur?”
“… we will be lucky if the next credit crisis … does not strike before the year-end.”
From Jim Rickards: “A New Bull Market in Gold has Begun” from Strategic Intelligence February 2018.
“Russia and China do own a lot of gold, but they want to buy a lot more. Both countries want gold prices to be well behaved and for gold markets to be orderly until they are much further along in their gold buying programs.
Once China and Russia have all the gold they want, all bets are off and they may very well favor a skyrocketing price to undermine confidence in the U.S. dollar.”
From David Stockman: “This Time is Completely Different…”
“… the current business expansion at 104 months is over and done for all practical purposes. The post-1950 average is just 61 months and the historic record is 119 months under the far more propitious circumstances of the 1990s.”
From David H. Smith: “One Belt, One Road, One Direction for Precious Metals”
“While western investors are enamored with the stock markets, there are two billion people in the east that view gold differently and are gladly taking it off our hands at lower prices.”
GRAPHS THAT SHOW THE COMING STORM AND THE URGENCY FOR SHELTER:
The dollar index looks weak.
Ten year notes broke support. Notes lower, rates higher.
Ten year interest rates are moving higher. They are “over-bought” in late February but could go higher with additional dollar weakness. Watch for a break above 3.03%.
The DOW, S&P 500, and NASDAQ made near vertical rises into bubble territory. They can go higher, but risk is large. They broke below the steepest support line – the Danger Zone – and signaled weakness ahead. We shall see.
Silver bottomed in December 2015 and has built a base for a sustained rally. We welcome a rally above the daily high of $21.22!