Mario Draghi gets out his big bazooka

The European Central Bank fires another salvo

Quantitative easing gets a further boost in the euro area, and interest rates are cut again           
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A YEAR ago the European Central Bank (ECB) started its big programme of quantitative easing, or QE, buying €60 billion ($65 billion) of assets a month, in an attempt to stimulate the euro area’s sagging economy and prevent deflation setting in. In December it extended the programme by six months, until March 2017. Now it has raised the tempo, to €80 billion a month, starting in April.

This was the most eye-catching of the ECB’s latest set of measures to ease monetary policy, announced on March 10th. In December, it had also reduced its deposit rate, on most funds parked by banks at the ECB, further into negative territory, from -0.2% to -0.3%. Now it has lowered the rate again, to -0.4%, while also cutting its main lending rate from an already nugatory 0.05% to zero. Up till now, the asset purchases have been mainly government bonds, together with covered bonds issued by banks (typically backed by mortgages) and a small amount of asset-backed securities. Now corporate bonds are on the menu, too. The ECB will also conduct four new funding-for-lending operations between June and March 2017, each with a maturity of four years, aimed at boosting credit to the private sector by providing funding on extremely favourable terms.

The ECB is having to do more than it initially envisaged in early 2015 and then in December because growth has been flagging and prices are falling once again. When QE was launched, the recovery that had started in the spring of 2013 was picking up momentum, reaching 0.6% (an annualised rate of 2.3%) in the first quarter of 2015. But that proved to be a (not very) high point and quarterly growth has since ebbed to 0.3% in late 2015 (an annualised rate of 1.3%).

The ECB is supposed to keep inflation close to 2%, but deflation has returned. The headline inflation rate sank from 0.3% in January to -0.2% in February. Although the renewed fall in energy prices was partially responsible, “core” inflation, which excludes volatile items such as energy, fell from 1.0% in January to 0.7% last month.

Underpinning the fresh stimulus was a set of new forecasts, which painted a gloomier outlook, especially for inflation, than the previous ones in December. ECB staff now expect the euro area to grow by 1.4% in 2016, lower than the 1.7% projected in December. Mario Draghi, the bank’s president, said that risks to the growth outlook were “tilted to the downside” because of heightened uncertainties about the world economy. The downgrade to the inflation outlook was substantial. Following a year of zero inflation, consumer prices will rise in 2016 by just 0.1% whereas in December they were expected to increase by 1.0%. In 2017 inflation is forecast at 1.3% compared with 1.6% at the end of last year.

Mr Draghi has clearly delivered considerably more than in December, in particular through increasing the scale of monthly asset purchases. The four new funding-for-lending operations may also help, although banks have hardly fallen over themselves to take advantage of an existing programme launched in 2014. But the cut in the deposit rate was overshadowed by Mr Draghi saying that “we don’t anticipate that it will be necessary to reduce rates further.” In fact this is not the first time that he has made such a statement, declaring in September 2014 for example (when the deposit rate was cut to -0.2%) that “now we are at the lower bound”, only for the ECB to lower the deposit rate still further in December 2015 and today. But as worries about the harm done by negative rates to bank profitability have mounted, it seems that Mr Draghi has now drawn a new line.

The ECB’s new measures signal resolve, and that Mr Draghi is still intent on, as he promised back in 2012, doing “whatever it takes” to save the euro. But increasingly, markets are doubting the efficacy of overstretched monetary policy. Foreign-exchange traders responded to the measures by first marking the euro down against the dollar and then up as the impact of Mr Draghi’s words on not lowering interest rates further sank in. Since one of the main ways in which QE has helped the euro-zone economy is through a weak currency, that does not bode well for the success of the ECB’s latest venture.


The Global Economy’s Stealth Resilience

Ngaire Woods
 .Christine Lagarde at G20 2016


OXFORD – Last week, Christine Lagarde, the International Monetary Fund’s managing director, warned that if countries do not act together, the global economy could be derailed.
 
Likewise, the OECD has warned that countries must move “urgently” and “collectively” to boost global growth prospects. Yet the G-20 finance ministers and central-bank governors to whom these entreaties were directed failed to agree any such action at their recent meeting in Shanghai.
 
To be sure, the communiqué released after the meeting includes a pledge to use “all policy tools – monetary, fiscal, and structural – individually and collectively” to “foster confidence and preserve and strengthen the recovery.” But the communiqué also reflects distinct divisions – particularly with regard to the role of monetary and fiscal policy in stimulating growth – among the finance ministers and central bankers who agreed on its text.
 
On monetary policy, the communiqué offers the empty statement that the G-20 would “continue to support economic activity and ensure price stability, consistent with central banks’ mandates.” That avoided the central question: Should central banks be attempting to stimulate growth through “unconventional” monetary policies?
 
The Bank for International Settlements thinks not, arguing in its 2015 annual report that “monetary policy has been overburdened” in an attempt to reinvigorate growth, a reality that is reflected in “the persistence of ultra-low interest rates.” The result is a vicious cycle of too much debt, too little growth, and too-low interest rates that, to quote the BIS’s Claudio Borio, “beget lower rates.”
 
This sobering analysis has not stopped the Bank of Japan or the European Central Bank from further monetary easing. Nor did it deter People’s Bank of China Governor Zhou Xiaochuan from expressing a willingness to shoulder more of the growth-stimulating burden in Shanghai.
 
But not everyone is ignoring the writing on the wall. Reserve Bank of India Governor Raghuram Rajan has called on the IMF to examine the effects of unconventional monetary policy not just on the countries that implement them, but also on the rest of the world.

Likewise, Bank of England Governor Mark Carney has pointed out that countries using negative interest rates (including, most recently, Japan) are, by forcing currency devaluation, exporting weak demand – ultimately a zero-sum game.
 
When it comes to fiscal policy, agreement is similarly lacking. The IMF is urging surplus countries like Germany to pursue more stimulus. The OECD, too, has called upon its wealthier members to take advantage of their current ability to borrow for long periods at very low interest rates to increase growth-enhancing investment in infrastructure.
 
These calls provoked a sharp rebuttal from German Finance Minister Wolfgang Schäuble, who condemned the “debt-financed growth model.” The result of this conflict was a vague declaration by the G-20 that it would use “fiscal-policy flexibly to strengthen growth, job creation, and confidence, while enhancing resilience and ensuring debt as a share of GDP is on a sustainable path.”
 
In light of the statements by the IMF and the OECD, this distinct failure to agree on monetary and fiscal policy seems highly dangerous. But both institutions may be overstating the problem.
 
In fact, despite widespread uncertainty – volatile capital flows, plummeting commodity prices, escalating geopolitical tensions, the shock of a potential British exit from the European Union, and a massive refugee crisis – the stalling of global cooperation may be less risky today than it was even a decade ago. The key factor in this context has been widespread recognition of the risks inherent in economic globalization, and concerted efforts to build up the needed resilience on a national, bilateral, or regional basis.
 
Consider finance. Twenty years ago, a catastrophic financial crisis began in Thailand and quickly spread across East Asia. Since then, those economies, and others in the emerging world, have self-insured against crisis by building up huge stockpiles of foreign-exchange reserves.

Partly as a result of this, the volume of reserves has risen from some 5% of world GDP in 1995 to around 15% today.
 
Emerging economies are also holding less sovereign debt, and they have created bilateral and regional currency-swap arrangements. In addition, more than 40 countries have deployed macroprudential measures since the 2008 global financial crisis.
 
Countries also benefit from greater access to more diversified sources of finance. Some emerging and developing countries now access global bond markets individually. And the role of regional development banks – including the African, Asian, and Inter-American Development Banks, as well as the newly created Asian Infrastructure Investment Bank and the New Development Bank – has grown.
 
The final manifestation of this new pattern of cooperation – which might be called “distributed governance” – appears in trade. While the Doha Round of negotiations has staggered and fallen, liberalization is proceeding apace, owing to the proliferation of bilateral, regional, and super-regional deals.
 
These new governance arrangements have important resilience-enhancing effects; but they may not offer a more efficient alternative to multilateralism, and they do not eliminate the need for traditional multilateral institutions. On the contrary, bodies like the IMF, the World Bank, and the World Trade Organization should be responsible for analyzing and transmitting vital information to the array of institutions that are filling their traditional role.
 
For example, the IMF should respond to Rajan’s request to track and analyze the effects of unconventional monetary policies. Likewise, it could strengthen its analysis of the impact of capital controls on the countries implementing them, and on other countries. It could also resume preparing models of how sovereign-debt restructuring could be better supported – whether at the national level, through GDP-linked or contingent convertible bonds, or at the regional or global level.
 
At their Shanghai meeting, G-20 policymakers vowed to adopt a range of policy tools to boost global growth and avoid currency wars. They did not deliver on that promise. But their failure may have reinforced the shift to a new phase of distributed global economic governance.
 


Trump’s rise shows how democratic processes can lose their way

Lawrence Summers

GettyImages-513157170
Donald Trump speaks to supporters after a rally at Valdosta State University in Georgia this week  © Getty Images

While comparisons between Donald Trump and Mussolini or Hitler are overwrought, Mr Trump’s rise does illustrate how democratic processes can lose their way and turn dangerously toxic when there is intense economic frustration and widespread apprehension about the future. This is especially the case when some previously respected leaders scurry to make peace in a new order — yes, Chris Christie, I mean you.

The possible election of Mr Trump as president is the greatest present threat to the prosperity and security of the US. I have had a strong point of view on each of the last 10 presidential elections, but never before had I feared that what I regarded as the wrong outcome would in the long sweep of history risk grave damage to the American project.

The problem is not with Mr Trump’s policies, though they are wacky in the few areas where they are not indecipherable. It is that he is running as modern-day man on horseback — demagogically offering the power of his personality as a magic solution to all problems — and making clear that he is prepared to run roughshod over anything or anyone who stands in his way.

Mr Trump has already flirted with the Ku Klux Klan and disparaged and demeaned the female half of our population. He vowed to kill the families of terrorists, use extreme forms of torture and forbid Muslims from coming into our country. Time and again, he has claimed he will crush those who stand in his way; his promised rewrite of libel laws, permitting the punishment of The New York Times and Washington Post for articles he does not like, will allow him to make good on this threat.

Lyndon Johnson’s celebrated biographer, Robert Caro, has written that while “power doesn’t always corrupt … [it] always reveals.” What will a demagogue with a platform like Mr Trump’s who ascends to the presidency do with control over the National Security Agency, Federal Bureau of Investigation and Internal Revenue Service? What commitment will he manifest to the rule of law? Already he has proposed that protesters at his rallies “should have been roughed up”.

Nothing in the way Richard Nixon campaigned gave him a mandate for keeping an enemies list or engaging in dirty tricks. If he is elected, Donald Trump may think he has such a mandate.

What is the basis for doubting that it will be used?

To be sure there are precedents for Mr Trump in American politics — such as Joe McCarthy, George Wallace, and Huey Long. Just as Mr Trump does, each mined the all-too rich veins of prejudice, paranoia and excess populism that lie beneath American soil. Yet even at their highest points of popularity, none of these figures looked like plausible future presidents. One shudders to think what President Huey Long would have done during the Depression, what President Joe McCarthy would have done at the height of the cold war, or what President George Wallace would have done at the end of the turbulent 1960s.

My Harvard colleague, Niall Ferguson, suggests that William Jennings Bryan is the right precursor for Mr Trump. This comparison seems unfair to Bryan who was a progressive populist but not a thug, as evidenced by the fact that he ended up as Secretary of State in the Wilson Administration. Trump’s election would threaten our democracy. I doubt that democracy would have been threatened if Bryan had beaten McKinley.

Robert Kagan and others have suggested that Trump is the culmination of trends under way for decades in the Republican party. I am no friend of the Tea Party or of the way in which Congress has obstructed President Barack Obama. But the suggestion that Mr Trump is on the same continuum as George W. Bush or even the Republican congressional leadership seems to me to be quite unfair.

Even the possibility of Trump becoming president is dangerous. The economy is already growing at a sub-2 per cent rate in substantial part because of a lack of confidence in a weak world economy. A growing sense that a protectionist demagogue could soon become president of the United States would surely introduce great uncertainty at home and abroad. The resulting increase in risk premiums might well be enough to tip a fragile US economy into recession. A concern that the US was becoming protectionists and isolationist could easily undermine confidence in many emerging markets and set off a financial crisis.

The geopolitical consequences of Donald Trump’s rise may be even more serious. The rest of the world is incredulous and appalled by the possibility of a Trump presidency and has started quietly rethinking its approach to the US accordingly. The US and China are struggling over influence in Asia. It is hard to imagine something better for China than the US moving to adopt a policy of “truculent isolationism”. The Trans-Pacific Partnership, a central element in our rebalancing toward Asia, could collapse. Japan would have to take self-defence, rather than reliance on American security guarantees, more seriously. And others in Asia would inevitably tilt from a more erratic America towards a relatively steady China.

Mr Trump’s rise goes beyond his demagogic appeal. It is a reflection of the political psychology of frustration – people see him as responding to their fears about the modern world order, an outsider fighting for those who have been left behind. If we are to move past Trumpism, it will be essential to develop convincing responses to economic slowdown.

The US has always been governed by the authority of ideas, rather than the idea of authority.

Nothing is more important than to be clear to all Americans that the tradition of vigorous political debate and compromise will continue. The sooner Donald Trump is relegated to the margins of our national life, the better off we and the world will be.


The Great Corporate Earnings Fraud

by: The Burning Platform

 

"What are the odds that people will make smart decisions about money if they don't need to make smart decisions -- if they can get rich making dumb decisions? The incentives on Wall Street were all wrong; they're still all wrong."  
- Michael Lewis, The Big Short: Inside the Doomsday Machine

Corporate earnings reports for the fourth quarter are pretty much in the books. The deception, falsification, accounting manipulation, and propaganda utilized by mega-corporations and their compliant corporate media mouthpieces has been outrageously blatant. It reeks of desperation as the Wall Street shysters attempt to extract the last dollar from their muppet clients before this house of cards collapses.

The CEOs of these mega-corporations accelerated their debt financed stock buybacks in 2015 as stock prices reached all-time highs and are currently so overvalued, they will deliver 0% returns over the next decade. This disgraceful act of pure greed by the Ivy League educated leaders of corporate America to boost their own stock based compensation is reckless and absurd.

It is proof education at our most prestigious universities has produced avaricious MBAs following financial models and each other like lemmings going over the cliff. Proof of their foolishness is self evident after perusing the chart below. These intellectual giants evidently never learned the basic rule of buying low and selling high in order to make a profitable trade.

Net Buybacks

The previous all-time high in stock buybacks occurred in 2008 at the previous peak. That brilliant strategy led to 50% shareholder losses in a matter of months. No Board of Directors fired any CEO for these disastrous strategic blunders. These cowardly ego maniacs didn't buy back any stock in 2009 and 2010 when they could have made a killing with valuations at decade lows. After the stock market recovered by 100%, these stooges then began borrowing and buying. It has now reached another all-time high crescendo.

Dividends and stock buybacks in 2015 topped $1 trillion for the first time according to S&P Capital IQ Global Markets Intelligence. As CEOs have borrowed billions to buyback their inflated overvalued stock, they have put the long-term sustainability of their firms at extreme risk.

When a dead retailer walking like Macy's, which is seeing it's sales fall and profits crater by 30%, announces a $1.5 billion stock buyback when it already is weighed down with $7 billion in debt, you realize the men running these companies have no common sense or concern for the long-term viability of their companies. They'll get a golden parachute no matter how badly they screw the pooch.

The stock buyback scheme by corporate CEOs is just one of the devious methods used to cover-up the dramatic downturn in corporate profits. These titans of industry, their Wall Street heroin dealers, and their corporate propaganda outlets need cover while they abscond with more of the nations wealth, before pulling the rug out from beneath the American people once again.

The 2008 Wall Street created financial crisis will look like a walk in the park compared to what's coming down the pike now. We now have a bond bubble, stock bubble, housing bubble, commercial real estate bubble and central banker confidence bubble all poised to pop simultaneously. The negative interest rate and banning of cash schemes will be dead on arrival, driving a stake into the heart of the Fed vampire.

Wall Street Bubble
"Oh, what a tangled web we weave...when first we practice to deceive." 
- Walter Scott

It's become perfectly clear to me over the last few weeks the deception, misdirection, spin, and outright accounting fraud being used to hide the horrific financial results of S&P 500 companies has been orchestrated by the corporations, Wall Street "analysts" and the likes of cheerleaders like CNBC.

When "dead retailer walking" J.C. Penney reported their fourth quarter results last week the stock immediately soared 15%. The Wall Street propaganda machine was declaring turnaround complete. Modest positive comp store sales after five years of double digit declines were proof J.C. Penney was back. I went to the company press release and no matter how hard I searched, they never mentioned their Net Income. They blathered on about EBITDA and adjusted earnings per share, but not a peep about the actual GAAP Net Income.

Once I was able to access their Income Statement I realized why. Their completed turnaround resulted in a $131 million 4th quarter loss, almost $100 million higher than last year's loss. They finished their turnaround year with a loss of more than a half BILLION dollars. This company will be on the retail scrap heap of history in a couple years, but the Wall Street fleecing machine tells its muppet clients to buy, buy, buy. And the lemmings do as they are told.

The other blatant manipulation and spin is headline after headline stating one company after another beat expectations. What you are not told is expectations at the beginning of the quarter were 20% higher than they were on the day they reported. The highly paid 30 year old MBA "analyst lemmings" are told by the companies to reduce earnings expectations as the quarter progresses.

Sometimes they pre-announce earnings will fall by 20% to $0.45 per share, then three weeks later announce actual results of $0.46 per share, therefore beating expectations. This game is getting long in the tooth. Corporate revenues have been falling for a number of quarters, and they have run out of accounting reserves to make the numbers. So they move on to plan C.

If you can't make the numbers work, just fake the numbers and call them "adjusted". So when a corporate CEO opens 50 retail stores that turn out to be dogs and is eventually forced to close the stores and fire 10,000 employees, they just call those one time charges and ignore the $50 million loss when reporting the results. Heads the CEO wins, tails the shareholders lose. Wall Street reports a beat, and the clueless investors believe the lies. It's all fun and games until the next financial crisis hits, recession sweeps across the land, and the fraud, deception, and lies are revealed.

Even the billionaire oligarch crony capitalist Warren Buffett addressed this despicably flagrant flaunting of basic accounting principles to mislead shareholders in his annual letter last week:
It has become common for managers to tell their owners to ignore certain expense items that are all too real. "Stock-based compensation" is the most egregious example. The very name says it all: "compensation." If compensation isn't an expense, what is it? And, if real and recurring expenses don't belong in the calculation of earnings, where in the world do they belong? 
Wall Street analysts often play their part in this charade, too, parroting the phony, compensation-ignoring "earnings" figures fed them by managements. Maybe the offending analysts don't know any better. Or maybe they fear losing "access" to management. Or maybe they are cynical, telling themselves that since everyone else is playing the game, why shouldn't they go along with it. Whatever their reasoning, these analysts are guilty of propagating misleading numbers that can deceive investors.... When CEOs or investment bankers tout pre-depreciation figures such as EBITDA as a valuation guide, watch their noses lengthen while they speak.

Buffett's words are borne out in the chart below. Based on fake reported earnings per share, the profits of the S&P 500 mega-corporations were essentially flat between 2014 and 2015. Using real GAAP results, earnings per share plunged by 12.7%, the largest decline since the memorable year of 2008. Despite persistent inquiry it is virtually impossible for a Wall Street outsider to gain access to the actual GAAP net income numbers for all S&P 500 companies. With almost $500 billion of shares bought back in 2015, the true decline in earnings is closer to 15%.

S&P500 GAAP versus Non-GAAP


The increasing desperation of corporate CEOs is clear, as accounting gimmicks and attempts to manipulate earnings in 2015 has resulted in the 2nd largest discrepancy between reported results and GAAP results in history, only surpassed in 2008. The gaping 25% fissure between fantasy and reality means the S&P 500 PE ratio is actually 21.2 and not the falsified 16.5 propagated by Wall Street and their CNBC mouthpieces. True S&P 500 earnings are the lowest since 2010. Corporate profits only decline at this rate in the midst of recessions.

Non-GAAP EPS Writeoffs


With approximately $270 billion of "one time" add-backs to income used to deceive the public, the true valuation of the median S&P 500 stock is now the highest in history - higher than 1929, 2000, and 2007. Wall Street's latest con game, with the active participation of corporate CEO co-conspirators, is a last ditch effort to fend off the inevitable stock market crash. It didn't work in 2008 and it won't work now. All economic indicators are flashing red for recession. Stocks are poised for a 40% decline faster than you can say Wall Street criminal banks.

The most infuriating aspect of this shameless ruse by corporate America and the Wall Street cabal is their complete lack of conscience or acknowledgment of misdeeds that destroyed the financial system in 2008. The American people bailed these sociopaths out, have borne the brunt of the QE and ZIRP save a banker programs, and are poised to get screwed again when financial collapse part two hits in the near future.

The establishment is aghast that Donald Trump is storming towards the presidency. They are blind to the fact their unconcealed felonious actions rise to the level of treason in the eyes of average hard working Americans. The fabric of this country is being torn asunder by a contemptible class of corporate fascists, ego maniacal bankers, shadowy billionaires, and media titans. They have reaped billions of profits since 2009 as the Fed and politicians in D.C. rolled out "solutions" designed to enrich them. They are confident their failures will be shifted to the American people again. The American people may have a different opinion this time. Pitchforks and torches are being readied.

Torches

"Success was individual achievement; failure was a social problem."  
- Michael Lewis, The Big Short: Inside the Doomsday Machine


Will Negative Interest Rates Stimulate Growth — or Backfire?

negative rates 
Almost every schoolchild knows the basic rules of saving: Put your money in the bank and earn interest, which is paid from what the bank makes by lending the money to someone else. It’s that simple.

At least it has been. Now things are changing, as more central banks are starting to charge institutional depositors instead of paying them. In theory, it’s just another step in efforts to prod economic growth by making borrowing cheap, or encouraging those with cash to use it rather than store it. But “negative” interest rates are something of an unknown quantity, making many wonder if the policy could backfire.

“I’m concerned,” says Olivia S. Mitchell, professor of business economics and public policy at Wharton, describing the uncertainty. “We’ve been used to an environment where you take a dollar to the bank and you get the dollar back,” she adds. “With this new negative interest approach, you are going to be charged a fee.”  

“I think it definitely should be considered if the economy is slow and you’ve run out of ways to stimulate,” says Wharton finance professor Itay Goldstein. “But I am somewhat skeptical that it’s going to be that effective.”

In 2014, the European Central Bank became the first major central bank to adopt a negative interest rate policy. In December, it again dropped its rate, charged on cash it holds overnight for financial institutions, to -0.3%. Sweden, Denmark and Switzerland also use negative rates.

In fact, at the end of 2015, about a third of all debt issued by eurozone governments had negative yields, according to a Bloomberg analysis.

Then, at the end of January, the Bank of Japan announced that it, too, was going to implement negative rates. And at about the same time, U.S. Federal Reserve Chair Janet Yellen said the Fed was studying the possibility, though she did not indicate it would go negative anytime soon.

‘A Sign of Desperation’

“Negative rates are a sign of desperation, a signal that traditional policy options have proved ineffective and new limits need to be explored,” the Bloomberg analysis said. “They punish banks that hoard cash instead of extending loans to businesses or to weaker lenders. Rates below zero have never been used before in an economy as large as the euro area.”

In other words, there’s not much history to indicate what will happen.

Negative rates are intended to produce an incentive to spend rather than save, and spending should help fire the economy and push prices up. Europe and Japan have resorted to negative rates to reduce the risk of deflation, which has many damaging effects such as making debt payments more burdensome over time.

Central banks have direct control only over short-term rates, such as those charged to financial institutions that keep overnight deposits on central bank books. But trimming short-term rates tends to ripple through the economy, causing a drop in long-term rates that are governed by supply and demand. In part, that’s because long-term rates on things like bonds or mortgages are based on views of what short-term rates will be in the future.

“Once you start affecting the cost of capital for banks, then this will affect the market price of assets they buy and the loans they make,” Goldstein says.

Lower interest rates also tend to reduce a currency’s value, since savers’ demand will drop as they shift to better-paying investments in other currencies. A devalued currency can boost exports and it can raise inflation by making imports more expensive. Japan’s turn to negative rates was largely an effort to devalue the yen — although it seems to be backfiring.

In practical terms, a slightly negative rate is not much different from the slightly positive rates that short-term savings have earned for years. After all, earning 0.1% is not much better than losing 0.1%. And after accounting for inflation — reflected in the so-called real interest rate — savers actually have been losing money for years.

Even if rates go negative, there remains an incentive to save if a bank, money market fund or short-term bond keeps your money safer than a stock, long-term bond or other asset. Short-term savings also are easily accessible when needed. So a saver weighing the alternatives might shrug off a negative rate — as long as it’s not too negative. But that’s not to say the situation is painless.

The effect of going negative “absolutely depends on how negative it gets,” says Mitchell. “The problem is that if there’s inflation, the cost of living is going up…. It’s already been very difficult for people like my mother, who laddered her CDs and was just trying to live on her interest and not pull down principal. The last eight years have been difficult” for people on fixed incomes.

Back to Mattresses

Some predict that negative rates — if passed on to ordinary bank customers — will cause businesses and the public to just stop using traditional savings. “I think the concern is that eventually people will just not put their money in the bank,” Goldstein says. “They will just store it. They will put it in the mattress.”

In ordinary times, savers use banks and other short-term cash vehicles even though inflation erodes savings’ value, because inflation will do its damage even if cash is stuffed in a mattress, Goldstein points out. But the effect of a negative rate can be avoided by using a mattress or some other strategy that does not involve a charge on savings, he adds.

“Once the nominal [or stated] interest rate is going to be negative, there is going to be an additional loss that you incur by putting money into the bank,” he says. Central banks going negative are, in effect, probing to “figure out what is the lower bound” — the point where savers decide that saving has too little upside.

“There is an actual storage cost — some cost of dealing with not putting money into the bank,” Goldstein says. Shifting to gold, for instance, would require renting or buying a vault. So even if banks charge for savings, a bank could still be better than the alternative, up to a point. “There still will be a lower bound. You cannot go negative 10%,” he notes.

“If they lower the interest rate enough, then you will start spending” instead of saving, Goldstein explains. “[People] can invest in real estate. They can put it into a stock, put it into a bond. They can start a business…. With most of those things, the hope is that they are going to stimulate the economy.”

That’s a good thing, right? Isn’t the point of a negative rate to get those with cash to put it to work — building new factories, hiring workers, spending on goods and services or investing in companies?

It’s good if the theory holds up, but there’s too little experience to know that it will. According to Christopher Swann, a strategist at UBS Wealth Management, the strategy could backfire if it cuts bank profits by narrowing the difference between the rates banks charge borrowers and the rates banks pay to get cash for loans. “If profits suffer too much, banks may even scale back lending,” he wrote in a February report.

Also, it is not clear negative rates could push investors from bonds to stocks, lifting equity indices.

Indeed, the narrowing of bank profitability could actually hurt stocks because banks such as those in the U.S. and Japan comprise a “large proportion of equity market capitalization,” Swann said.

Another concern is how negative interest, if it becomes widespread, might affect inflation. If money is losing value, it’s less likely that consumers and businesses will bid up prices for goods, services and labor. That could trigger deflation, which has the perverse effect of discouraging spending, exactly the opposite of what the negative interest rate policy is intended to do. In deflationary times, economies whither.

No Magic Bullet

So, will negative rates stimulate economies as intended, or have some perverse unintended consequence?

“It’s hard to say,” Goldstein says. “At the end of the day, monetary policy is limited in what it can achieve.” Central banks have kept interest rates at historical lows for years and growth has remained sluggish anyway. “It’s effective to some degree, but it’s not a magic bullet.”

He continues: “This is why [monetary policy] is not the only tool you have. You also [have to] think about fiscal policy — for example, creating a more convenient business environment, reducing regulation” and other moves.

In the worst-case scenario, says Goldstein, an easy-money policy can create an asset bubble by making it easier to bid up prices for things like homes or commodities. “That doesn’t really stimulate the economy,” he notes. It would spur inflation, but by too much.

How would negative rates affect ordinary investors’ decisions on matters like dividing a portfolio between stocks, bonds and cash?

“Regarding asset allocation, I’m not sure there is much difference between the 0.1% we’ve been earning for the last few years on money market funds and the -0.2% we might earn in a negative interest world,” says Wharton finance professor Richard Marston. It’s not certain, he adds, that banks would actually pass on to customers the slightly higher costs of interbank deposits.

It’s uncharted territory, Mitchell says, worrying about the possibility of unwelcome outcomes like bank runs. “I think it’s a big mess in the making.”


Up and Down Wall Street

Why Are Stocks Rising? Bond Market Has Answer

Equities jumped 9% in two weeks, thanks to credit bounce. But debt can backfire, as energy sector shows.

By Randall W. Forsyth  

It was a Super Tuesday for the stock market, with U.S. shares gaining 2.5%. While that might be deemed as “huuuge,” politics had little if anything to do with the rally.
 
Give credit its due. The stock market’s recovery from its Feb. 11 lows has tracked the improvement in the corporate-debt market, especially the high-yield sector.
 
Credit spreads — the extra increment of yield to compensate investors for the risk of owning corporate debt securities over government debt — have been contracting for the past couple of weeks or so. That’s meant a concomitant rise in the prices of corporate bonds, especially the speculative-grade variety, and in turn, in equities.
 
The option-adjusted spread of the Bank of America Merrill Lynch High Yield index surged from 777 basis points (7.77 percentage points) to its widest level on Feb. 11 of 887 basis points, according to Marty Fridson, chief investment officer at Lehmann Livian Fridson Advisors. From there, the spread narrowed to 768 basis points by the end of the month.
 
The spread contraction resulted in a 4.24% total return in the last two-and-a-half weeks of February, more than offsetting the 3.85% plunge at the beginning of the month. And with the market’s rebound came a revival of flows into high-yield bond mutual funds. Lipper reported inflows of a robust $2.7 billion in the latest week ended Feb. 24, up from $65 million the previous week, which had followed three weeks of outflows.
 
In like fashion, U.S. equities are up nearly 9% from their Feb. 11 lows, which Wilshire Associates estimates added some $1.9 trillion to shareholders’ paper wealth, including $525 billion Tuesday.
 
Bespoke Investment Group observes that high-yield spreads have been breaking down on the charts, “and doing so in a big way.” (Remember, a breakdown in spreads or absolute yields is positive for bond prices.)
 
Indeed, the recent tightening in the CDX HY Index of credit-default swaps on high-yield names has been the biggest (some 48 basis points in the past five sessions) since last October.
 
This reversal has helped support equity prices in the U.S. and Europe, B.I.G. analysts write. “If high yield can sustain its rally, it’ll mean a big sigh of relief for corporate treasurers and investors around the country,” they conclude.
 
As for the former cohort, treasurers and chief financial officers are hugely dependent upon the credit markets, most notably to finance buybacks of their common stocks. But, as the late economist Herb Stein famously observed, something that can’t go on forever, won’t.
 
Stock repurchases have been a major driver of the bull market, most of which has been financed by borrowing. “Debt-funded buybacks can only continue if the credit market cooperates,” writes Barclays equity strategist Jonathan Glionna.
 
According to the bank’s data, companies in the Standard & Poor’s 500 have spent some $2.5 trillion on buybacks since 2010, which has been a big contributor to the bull market, he continues.

Meanwhile, 70% of the biggest repurchasers have negative cash flow after buybacks, while 50% overall are in that position, which necessitates borrowing.
 
“When cash flow declines and the debt markets curtail funding, buybacks stop,” Glionna says. The energy sector is a good example of what can happen. Indeed, the process has gone into reverse with companies such as Marathon Oil and Weatherford International resorting to equity financing to shore up their balance sheets — despite depressed stock prices.
 
For now, the investment-grade corporate bond market remains open to top names, such as triple-A-rated ExxonMobil, which made a massive $12 billion bond offering earlier this week to support its stock repurchases. Apple also has slated another $10 billion-$12 billion in borrowing to fund buybacks while avoiding repatriation of its cash hoard held outside the U.S.
 
The revival of the high-yield market also allowed hospital-operator HCA to come to market Tuesday with $1 billion of 10-year notes. (HCA actually is rated triple-B-minus, the lowest rung of investment grade, by Standard & Poor’s, while Moody’s Investors rates the hospital chain one notch lower into junk territory at Ba1.) While HCA said the proceeds were for general corporate purposes, KDP Investment Advisors pointed out in a research note that HCA has been an active stock repurchaser.
 
While there’s a limit to this financial engineering when spreads widen enough to make borrowing too expensive, that hasn’t happened yet, Glionna concludes.
 
Still, the action in the credit and equity markets in the past few weeks clearly shows their interdependence.



Buttonwood

Living off the people

A history of investment shows how managers have prospered
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FOR as long as there have been organised economies, people have been employed to look after the wealth of others. More than 4,000 years ago landowners in Akkad, an early Mesopotamian civilisation, hired local managers to look after their farms.

In their new book, “Investment: A History”, Norton Reamer and Jesse Downing explain how the industry has changed over time. Their fundamental idea is that investment has become “democratised”, available to a wider range of individuals.

Early investment was conducted on behalf of the wealthy, often by individuals with low status—current or former slaves in the Roman Republic, for example. In the Biblical parable of the talents, a master entrusts his wealth to a range of servants. Two of the servants doubled the master’s money but the third buried it in the ground, rather than “investing it with the bankers”. For this failure, the poor performer was “cast into the outer darkness” where “there will be weeping and gnashing of teeth”. Today’s clients might welcome the ability to add this penalty clause to their contracts.

Looking after the assets of the rich—or high-net-worth individuals, as they are known in the jargon—is still big business. But the fund-management industry’s growth has been turbocharged by the evolution of a much wider client base. In the rich world, most people have some money available for savings after they have paid for the necessities of food, clothing and shelter. With a retirement age of, in effect, around 65, they have two decades or so of old age to provide for. In America, retirement savings grew from $368 billion in 1974 to more than $22 trillion by 2014—a fivefold increase in assets relative to income.

This has transformed the industry. Investment management was once a dull business, consisting mainly of helping trust funds stock up on government bonds. The standard joke was: “Why don’t fund managers look out of the window in the mornings? Because then they’d have nothing to do in the afternoons.” Nowadays fund management is a much more glamorous profession—more masters of the universe than keepers of the paper clips.

Another key to the change in the industry’s fortunes is its reward system. Fees are linked to the value of the assets, even though the cost of managing $10 billion is little more than the cost of looking after a measly $1 billion. So fund managers have benefited twice over: first, from the expansion of pension and other savings and, second, from the huge rise in asset prices since the 1980s. The latter has been driven by falls in inflation and interest rates which have reduced the yield (and thus increased the price) of financial assets. When markets faltered in the financial crisis, central banks stepped in to buy assets through quantitative easing (QE)—in effect, an indirect subsidy of fund managers’ profits.

As Messrs Reamer and Downing point out, some fund managers have become very wealthy by looking after other people’s money. A quarter of all American billionaires work in finance and investments, an industry that employs less than 1% of all workers. In ancient times, the poor looked after the assets of the rich; in modern times, it is the other way round.

Successful managers deserve decent rewards, but a lot of mediocre managers have prospered too. Just because they are rich does not mean they are clever. Their position is slowly being eroded by the emergence of index-trackers and exchange-traded funds, which charge much lower fees. But the transformation is not occurring fast enough.

A world of low inflation and low nominal returns should prompt clients to pay a lot more attention to fees. Instead, many pension funds and endowments are moving into higher-charging “alternative asset” categories like hedge funds and private equity, a “Hail Mary” strategy that cannot work in aggregate. There may be market inefficiencies that are profitable to exploit, but none large enough to give a big, across-the-board boost to the returns of a $22 trillion industry.

The authors are right that the democratisation of investment is, on the whole, good news.

Millions of people have access to diversified savings vehicles that will deliver, on average, returns that are better than those available from a savings account. But, these days, technology means that such funds can be provided for a fraction of a percentage point a year. This is becoming a utility business, and you don’t get rich by running a utility. Fred Schwed’s question to a pre-war Wall Street mogul—“Where are the customers’ yachts?”—remains as relevant as ever.

viernes, marzo 11, 2016

KISS THE EURO GOODBYE... / MONEY AND MARKETS

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Kiss the Euro Goodbye …

Larry Edelson


Way back in 1998, before the euro even got off the ground, I told everyone I could that the currency wouldn’t last. At best, I said, it would last until the year 2020.

Few believed me. Many said I was nuts. After all, how could I make such a definite longer-term forecast, especially involving a region of the world that then, and now, still represents the second-largest economic region in the world?

Well, forecasting that the euro would fail was simple: It wasn’t put together properly in the first place. It didn’t stand a chance to survive long-term and still doesn’t.

The architects of the euro — if you can call them that — didn’t have a clue as to what it takes to have a single currency. They just believed one size fits all. But oh, how very foolish, yet typical of leaders anywhere.

Fact: Although the European Central Bank (ECB) was created, each individual country’s former national or central bank was kept in place, with virtually all the powers it had previously.

In other words, the Bank of Italy, for instance, could create its own interest rate policy, set rates, itself, and yes, even print euros if desired.

Imagine that. It would be as if each of the 50 states in the U.S. had their own central bank that could decide its own interest rate policy and print dollars whenever it wanted.

Fact: Euro-planners also never set up a federal debt market. Instead, they figured the existing debts of the individual countries would suffice. No need to convert them to a national or federal debt. No need to unify anything. Just let those debts be.

Insane. What that did was create a potpourri of debts. Worse, underperforming countries could see their debts swing wildly in value as the new currency started to trade. No stability whatsoever.

And, it allowed other countries, such as Greece, to borrow oodles of euros at the low rates of another country when, in reality, its credit rating didn’t deserve such low rates.

To make another analogy, that would be as if the U.S. had no Treasury market whatsoever, and instead, relied on the debts of states as diverse as Mississippi and California as a kind of national debt market.

Fact: As a Continent, Europe is composed of almost 50 countries, each with its own language, own culture and own history. And some countries in Europe have even more than one national language.

So is there a common language in Europe so all Europeans can talk to each other? No, there isn’t.

Is there a common background of some sort that would unite them? No, there isn’t and never has been.

Is there a common future goal that would unite them? You might say an economic union would, which is what the designers of the euro had in mind. A United States of Europe so to speak. A peaceful, united Continent that could avoid the untold scores of wars that have plagued Europe throughout the millennia.

And that is certainly a nice goal or dream to have. But unless you put the infrastructure in place to make a real economic union, with sensitivity and empathy to all the different players and cultures involved …

Such an economic union doesn’t have a snowball’s chance in hell of a surviving.

And indeed, that brings us to today, where now, the euro is finally cracking the last vestiges of important, long-term support.

The currency has already plunged from a monthly high of 1.6028 in July 2008 to 1.08826 as I pen this issue. That’s a humongous plunge of 32.08% in the past eight years, a record decline for a supposed major currency.

And now, as you can see from my latest cyclic forecast chart, the euro’s plunge is about to get a whole lot worse.

The currency has just cracked important support at the 1.0900 level.

It should now fall to the 1.0500 level, then 1.0300 then to 1.000 …

And ultimately, far lower, ceasing to exist at all by the year 2020.

What’s worse are the geopolitical ramifications. What was meant to unite Europe will end up causing the opposite: More and more civil protests … more and more discontent … more revolutionary actions … secessions … anti-Semitism and more, including bloodshed.

For you see, it’s the grand experiments of harebrained politicians that are always the root cause of discontent. They endlessly tinker with the likes of you and me, with the economy, with things they don’t have a clue about …

Until the whole house of cards comes crashing down.

My view: Kiss the euro goodbye. Avoid doing business in the euro at all costs. Stay in U.S. dollars. Invest in U.S. dollars, trade in U.S. dollars.

The Liquidity Trap

By: Captain Hook


Have you noticed? Stocks don't go up anymore unless they announce a multi-billion dollar buyback program, and then the gains don't last. What's worse, it should be realized by investors that these buybacks will need to increasingly curtailed as stocks fall with the financialized economy so dependent on asset prices now. So while the high flyers like Amazon are still able to tap the credit markets to continue the Ponzi, as the rot of the collapsing colossus (better know as the economy) continues to spread, these types will be forced to cease this insanity as well, and then we see the true meaning of the term 'liquidity trap' applied to the stock market.

Definitions of the term first coined by Keynesians have changed throughout the years, but the basis of the condition is money printing becomes ineffective in stimulating the economy, where in a 'conventional sense', we are already there. This is of course why the economy continues to be increasingly financialized, meaning increasingly desperate measures become necessary to get people to invest / spend money. Negative rates are being attempted right now, but as such measures continue to fail, it will soon be realized you can't taper a Ponzi, and that what is needed is QE for the people in order to delay wholesale collapse a few more years. (i.e. because of hyperinflation.)

Because the bankers aren't (completely) stupid, they know that if you give the people money they will spend it unlike greedy rentiers / oligarchs who will use the free money to squeeze unsuspecting lower classes. They know that QE for the people will eventually bring untenable price increases in scare resources, however it appears this is what we are going to get if Bernie Sanders continues to dominate the Presidential election scene. And make no mistake about it; this is a revolution on the part of disenfranchised young people. So unless they completely rig the election (even the bought and paid for Superdelegates can't stop him), expect big change next year. (i.e. this is what the surge in gold despite its rigged condition is telling you.)

Returning to the above, in more recent years, as theory becomes reality and the excesses of prolonged neo-Keynesian economic policy around the world are seen, the definitions of the term 'liquidity trap' have morphed to adapt to conditions and attitudes, where Cullen Roche has done an excellent job of delineating this in the attached. The first quote in the attached highlights the concept of diminishing returns, and the proverbial 'pushing on a string' in terms of conventional monetary policy once interest rates hit the zero bound in a deflationary environment, and the second highlights the need for new alternatives, as follows:
"after the rate of interest has fallen to a certain level, liquidity-preference may become virtually absolute in the sense that almost everyone prefers cash to holding a debt which yields so low a rate of interest. In this event the monetary authority would have lost effective control over the rate of interest."  
And 
"A liquidity trap may be defined as a situation in which conventional monetary policies have become impotent, because nominal interest rates are at or near zero: injecting monetary base into the economy has no effect, because base and bonds are viewed by the private sector as perfect substitutes."
 
Loss of control is the big message in the above, which is definitely the case based on gold's performance not just last week, but more profoundly, since the year 2000. This is why conventional monetary policy (and even not so conventional) has not worked, and will not work moving forward and why something new, like QE for the people (A Check in Every Mailbox) will be necessary to get the economy rolling again. It's either that or wholesale debasement of the currency(s) right up front, where at least by monetizing the people, such a result can be postponed for a few years. Deflationary collapse and something akin to the Dark Ages should come after that - so enjoy all the good times as long as you can.

This is what the charts are telling you, not the least of which being the Gold / Oil Ratio, at its highest level since the Great Depression of the 1890's. This indicator has never been wrong, and is not so this time as well, although you may not be aware if one still has a good job and believes mainstream propaganda. If one is grounded in reality because of disenfranchisement however, or common sense heaven forbid (or is not a sellout), it's not difficult to see, where in fact it could be argued we are facing the biggest crisis in mankind's history moving forward, where our very survival is at stake within the full measure of time.

In bringing scope back in however, the matters at hand are the markets and economy, with both looking increasingly tenuous by the day. (See here, here, and here.) The ratios continue to tell the story in this regard, with the S&P 500 (SPX) / Gold Ratio pictured below, where it's plain to see even if this month closes with a bounce from current levels, still, it will have penetrated the all-important 233-month exponential moving average (EMA) in all likelihood, which would be a 'big deal' in terms of forecasting the future. Further to this, and as can be seen below as well, it should be noticed that this turn lower is still in its initial stages, with stochastics just turned down hard, implying momentum in the decline should continue to accelerate. (See Figure 1)

Figure 1



Some may say, 'ya but won't the Fed come in to save the day before things get out of control - especially in an election year?' Such thinking does not take into consideration that not only is the Fed between a rock and a hard place policy wise, because if they go dovish gold and commodities will really zoom higher as the dollar($) falls off a cliff; but more, you have to wonder if they want stable markets with the likes of Donald Trump and Bernie Sanders making big pushes on the political scene considering they are both looking at defrocking them. So one must wonder how far the Fed will let things go before it steps in with more QE, negative rates, etc. Letting stocks crash would show people just what life would look like by voting for rebellion. (See Figure 2)


Figure 2


This is why the smart money is selling tech now, despite all the propping and support it gets from the status quo every day. Again here, and as can be seen above, the NASDAQ is now breaking down, where again, as long as a big bounce is not witnessed going into month's end, 'trouble' is the word. (See above) The only question is pattern. Does the NASDAQ fall further here to the risk adjusted target indicated the monthly chart below before it bounces, or does it bounce here because US price managers are able to keep things glued together for a few more weeks - that's the question at this time - that and how long they will be able to maintain the positive relationship with oil and the broads. (See Figure 3)

Figure 3



Why could stocks keep falling from here even though many charts are suggesting a bounce?

The answer to that question lies in another. How can anybody short stocks at these levels knowing just how desperate the maniacs in charge are at this point? That's why open interest put / call ratios keep falling here, because who in their right mind (after watching the desperation / greed levels over the past few years) can short stocks at these levels. The fact broad market put / call ratios remain low and declining (see here) answers that question - not many. Not many are willing to get screwed over by the bankers again. This of course throws a gigantic money wrench into the perpetual short squeeze for stocks, and puts a tailwind behind precious metals.

And one should note that as postulated on these pages last week, open interest put / call ratios on some key precious metal ETF's are in fact following prices higher, especially in the case of the NUGT, and down in DUST (the inverse of NUGT), which means the most aggressive speculators have it all wrong yet again. This means they are 'hedging', or making outright negative bets on precious metal shares. What are the implications of this? It means precious metals can rally into options expiry this Friday if these idiots keep it up. I'm not sure if we want to see this pattern in desiring a strong monthly close, which might put this in jeopardy, however China is coming back on line today after a week off, so anything is possible. (i.e. currency devaluation, world war, you name it.)

Jamie Dimon was out Friday with some insider buying in an attempt to buffalo the buffoons once again. He's been successful at this in the past, which is why he's doing it again, but this time might not go so well if the banking cartel (status quo) is disenfranchised in the November election. Therein, if it becomes apparent that even a rigged election won't save them this time around (so get out there and vote you young people), an overly confident status quo will be forced to sell later in the year or risk all on the benevolence of Trump or Sanders - which is likely not a good idea. And to top that off, bankers are not exactly trusting people. So do the math in terms of implications for stocks, currencies, and precious metals.

In terms of precious metals, we remain of the opinion a pullback is likely before further gains, especially after seeing last week's COT Report, however, if World War III (WWIII) is just around the corner, along with a stock market crash, fading gold and silver anytime may become a far more dangerous endeavor compared to last year - that's for sure. Last week's price action should leave little doubt in you mind that the official turn higher in precious metals has occurred. We are just looking for pullbacks now to add to positions and not over think it too much. And again, we should get one at some point in the not too distant future with any luck. If not, it will be straight up for at least another month like in 2001.

For silver, it should be pointed out the Gold / Silver Ratio put in a weak reversal doji last week, bringing forth a low possibility it will finally begin outperforming, which is of course one of the chief hallmarks of a bull phase in precious metals. This is bad news for the bulls because we need all sector related ratios to turn on a lasting basis. This leaves the possibility of higher highs in the cards, which is sector bearish. So the 200-day MA for silver comes in at $15.11, however a drop back below $15 would not be out of the question given this observation, where the COT managers (bankers) might cause unwary paper silver market(s) speculators to puke up their positions again by unleashing the machines on them.

This tactic has worked fabulously since 2011.

We will know more in this respect by Wednesday obviously, so we will have more to say on this possibly disturbing condition then.


The World Economy Is Resetting - Are You Prepared?

Chris Vermeulen


The major global economies have had a staggering debt of $199 trillion as of Q2 of 2014. The most recent figures will be closer to $230 trillion because, after 2014, the ECB, Japan and China have all resorted to ‘massive monetary easing’ programs while the US debt continues to escalate, with every passing second.  The total debt, as a percentage of GDP, stood at 286%; the latest numbers will prove to be much worse.

global stock of debt outstanding

The Wold Economy Reset is how this will begin

All forms of madness must eventually come to an end, and the current economic madness has started with the decline of both base metals and crude oil prices. The Central Banks are not able to prop growth or inflation. I have referred to the world economies resetting in the past as ‘The Global Reset’ and it is currently underway and the equity markets have jumped on the bandwagon along with other asset classes which are plummeting, rapidly.

The 2007 ‘financial crisis’ was due to easy monetary policy by the FED

The FED sowed the seeds of the financial crisis of 2007 by lowering interest rates from 6.5 %, in May of 2000, to 1% in June of 2003. Lower interest rates, as well as easy credit, have encouraged investors to pump money into the housing markets and consequently, prices of houses soared. The banks leveraged their balance sheets to unmanageable levels and continued to extend reckless lending. Lehmann Brothers had a leverage ratio of 31 while Bear Sterns had a leverage ratio of 36, which resulted in their collapses.

The FED sought to solve the problem of high leverage by implementing even higher leverage

Every crisis is an opportunity to correct the unbalanced system, which will lead to years of instability. However, the brilliant minds of those at the FED, sought to solve the problem of ‘high leverage’ by means of implementing even higher leverage. They just transferred the leverage, from the private players, onto their own books, and surprisingly the major global Central Banks followed them, in this madness.



Who has benefitted from the Central Banks actions?

The Central Banks have maintained interest rates near zero %, or in the negative, and have resorted to massive money printing. The wealthy pumped money into various assets. Their holdings became inflated and the rich became even richer. The poor had no money to invest, nor jobs; consequently, they were not extended any loans in order for them to participate in the stock market rally, thus, their struggles continue. Due to this, the U.S. economy did not respond positively and only a few asset classes continued to perform.

The ‘Global Reset’ will continue to last some 5-7 years more

This time, the recovery will take much longer than ‘The Great Recession’ did. These massive Central Bank debts can only be cleared with an extended period of ‘deleveraging’ which will result in an extremely painful outcome. As always, the wealthy will both thrive and survive.  It is the working classes and the impoverished who will incur the hardships due to job losses and rising prices of essential commodities.

Conclusión

There are a number of experts who have conferred with my opinions and who also believe that all of this will end very badly.  However, there is nothing to fear, since adversity can also promote a positive opportunity and a better future outcome. I would like those who follow my work to be well prepared for the ‘crisis’ by adopting and implementing the right strategy. In addition, I would also like to help my followers to profit, and to be ready to embrace and thrive during this Great Financial Reset.