Take The Opportunity To Bail Before It's Too Late

By: The Burning Platform

Monday, August 31, 2015

Jet Crashing

Last week ended with the cackling hens on CNBC and the spokesmodels on Bloomberg bloviating about the temporary pothole on the road to riches. They assured their few thousand remaining viewers the 11% plunge in the stock market was caused by China and the communist government's direct intervention in their stock market, arrest of a brokerage CEO, and threat to prosecute sellers surely cured what ails their market. The Fed and their Plunge Protection Team co-conspirators reversed the free fall, manipulating derivatives and creating a short seller covering rally back to previous week levels. The moneyed interests are desperate to retain the appearance of normality and stability, as their debt saturated system teeters on the verge of collapse.

John Hussman's weekly letter provides sound advice for anyone looking to avoid a 50% loss in the next 18 months. The market has been overvalued for the last three years and now sits at overvaluation levels on par with 1929 and 2000. The difference is that fear has been overtaking greed in the psyches of traders. The average Joe isn't in the market. Only the Ivy League MBA High frequency trading computer gurus are playing in this rigged market. The 1,100 point crash last Monday is what happens when arrogant young traders, fear and computer algorithms combine in a perfect storm of mindless selling. Suddenly the pompous risk takers became frightened risk averse lemmings.
The single most important thing for investors to understand here is how current market conditions differ from those that existed through the majority of the market advance of recent years. The difference isn't valuations. On measures that are best correlated with actual subsequent 10-year S&P 500 total returns, the market has advanced from strenuous, to extreme, to obscene overvaluation, largely without consequence. The difference is that investor risk-preferences have shifted from risk-seeking to risk-aversion. 
If there is a single lesson to be learned from the period since 2009, it is not a lesson about the irrelevance of valuations, nor about the omnipotence of the Federal Reserve. Rather, it is a lesson about the importance of investor attitudes toward risk, and the effectiveness of measuring those preferences directly through the broad uniformity or divergence of individual stocks, industries, sectors, and security types. In prior market cycles, the emergence of extremely overvalued, overbought, overbullish conditions was typically accompanied or closely followed by deterioration in market internals. In the face of Fed induced yield-seeking speculation, one needed to wait until market internals deteriorated explicitly. When rich valuations are coupled with deterioration in market internals, overvaluation that previously seemed irrelevant has often transformed into sudden and vertical market losses.
With corporate profits falling, margin debt at all-time highs, the Fed preparing to raise rates, China's fake economic system imploding, currency wars breaking out across the globe, emerging markets in turmoil, oil dependent countries in the Middle East seeing budgets go deeply in the red, Greece and the other insolvent southern European countries nearing collapse and tensions rising between Russia, Europe and the U.S., there is plenty to fear in this central banker created debt bubble world. History teaches us this isn't over. It's only just begun. The bubblevision assertions that the worst is behind us is false. They will insist all is well until you've lost half your net worth. When fear overtakes greed, neither monetary easing, propaganda, nor acts of desperation by politicians, government bureaucrats, or central bankers will turn the tide.
It may not be obvious that investor risk-preferences have shifted toward risk aversion. It's certainly not evident in the enthusiastic talk about a 10% correction being "out of the way," or the confident assertions that a "V-bottom" is behind us. But a century of history demonstrates that market internals speak louder than anything else - even where the Federal Reserve is concerned. Why did stocks lose half their value in 2000-2002 and 2007-2009 despite aggressive and persistent monetary easing? The answer is that monetary easing doesn't reliably support speculation when investors have turned toward risk aversion, as indicated by the state of market internals. 
Why has the market become much more vulnerable to vertical losses since last summer? Because market internals have turned negative, indicating that investors have subtly become more risk averse, removing the primary support that has held back the consequences of obscene overvaluation. If the Fed is going to launch QE4 and QE5 and QE6, or if zero interest rate conditions are going to support speculation as far as the eye can see, those policies will only have their effect on stocks by shifting investors back toward risk-seeking, and the best measure of that shift will be through the observable behavior of market internals.
If the powers that be are this panicked with the market only off 6% from its all-time high, imagine how they'll react when this turns into a route on par with the plunge in the Chinese markets. The average person on the street was worried early last week, but they mindlessly just regurgitated the mantra preached to them by MSM talking heads and Wall Street investment shills about long-term, blah, blah, blah. They acted the same way in 2007 through 2009, as their retirement funds were obliterated. The fact is that stocks are extremely overvalued and are going to fall, whether the moneyed interests like it or not.
It's important to recognize that the S&P 500 is down only about 6% from its record high, while the most historically reliable valuation measures are double their historical norms; a level that we still associate with expected 10-year S&P 500 nominal total returns of approximately zero. We fully expect a 40-55% market loss over the completion of the present market cycle. Such a loss would only bring valuations to levels that have been historically run-of-the-mill. Investors need not expect, but should absolutely allow for, a market loss of that magnitude. If your investment portfolio is well-aligned with your actual risk tolerance and the horizon over which you expect to spend the funds, do nothing. Otherwise, use this moment as an opportunity to set it right. Whatever you're going to do, do it. You may not get another opportunity, and if you're taking more equity risk than you wish to carry over the completion of this cycle, you still have the opportunity to adjust at stock prices that are close to the highest levels in history.
How many Boomers or Gen Xers are prepared for 0% returns on their 401ks over the next ten years, with a 50% plunge thrown in for good measure? This market pullback is a drop in the proverbial bucket. Everyone should be using this dead cat bounce as an opportunity to get out of the market. But most will not heed Hussman's advice. Their cognitive dissonance is too overwhelming.
The chart below offers a good idea of how little conditions have changed in response to the recent market pullback. The blue line shows the ratio of nonfinancial market capitalization to corporate gross value added, on an inverted log scale (so that equal movements represent the same percentage change). The slight uptick at the very right hand edge of the chart is barely discernable. That's the recent market selloff. Current valuations remain consistent with expectations of zero nominal total returns for the S&P 500 over the coming decade.
Market Cap of Non-FinancialStocks and Subsequent 10-Year S&P 500 Annual Return

The Fed is now nothing more than a helpless bunch of academic theorist bystanders as they already have interest rates at zero and have poured $3 trillion down the drain in their fruitless Keynesian effort to revive this zombie economy. Low interest rates didn't work and they will not avert the coming stock market collapse.
Yes, low interest rates may encourage investors to drive stocks to extremely high valuations that are associated with low prospective equity returns. We certainly believe that as long as investor preferences are risk-seeking (as we infer from market internals), monetary easing and QE can encourage yield-seeking speculation that drives equities to recklessly extreme valuations. The point is that once valuations are driven to those obscene levels, low interest rates do nothing to prevent actual subsequent market returns from being dismal in the longer term. The low subsequent returns are baked in the cake.
Now for the money quote. Market crashes happen in stages. After an initial plunge, a recovery bounce occurs but fails to reach the pre-plunge levels. And then the bottom falls out.
As I noted early this year (see A Better Lesson than "This Time Is Different"), market crashes "have tended to unfold after the market has already lost 10-14% and the recovery from that low fails." Prior pre-crash bounces have generally been in the 6-7% range, which is what we observed last week, so I certainly don't see that bounce as having removed any of our concerns. We remain extremely alert to the prospect for much more extended market losses.
Despite the brave talk from the buy and hold crowd, no one is prepared for a 50% loss over an 18 month horizon. These are the people who will hold until the market has already fallen by 30% and then panic. It has paid to be reckless and foolish over the last three years. It's this same reckless attitude that brought down the dot.com day traders in 2001, house flippers in 2006, and subprime derivative gurus in 2008. Rational, risk averse, clear minded people need to bail out of the stock market now. It may be your last chance.

Again, if your portfolio is well aligned with your risk-tolerance and investment horizon, given a realistic understanding of the extent of the market losses that have emerged over past market cycles, and may emerge over the completion of this cycle, then it's fine to do nothing. Otherwise, use this opportunity to set things right. If you're taking more equity risk than you can actually tolerate if the market goes south, setting your portfolio right isn't a market call - it's just sound financial planning. It's only fun to be reckless if you also turn out to be lucky.       

Market conditions are now more hostile than at any time since the 2007 peak. If you want to be speculating, and you can tolerate the outcome, then you're not taking too much equity risk in the first place. But it's one or the other. Can you tolerate a 40-55% market loss over the next 18 months or so? If not, take this opportunity to set things right. That's not the worst-case scenario under present conditions; it's actually the run-of-the-mill historical expectation.

Getting Technical

Death Crosses Everywhere; Time to Buy Gold Yet?

Even as stocks have gotten pummeled, gold has gone nowhere. Here’s what the charts tell us now.

By Michael Kahn

Updated Sept. 2, 2015 5:12 p.m. ET

As stocks get clobbered, it is surprising to many, me included, that gold is the yellow-headed stepchild of the investment world. When there is fear on Wall Street, gold is supposed to shine.
But it is down this year, and the charts suggest it has further to fall.

With big corrections always possible along the way, the cardinal rule for investors is that trends persist until something comes along to undeniably change them. OK, that’s not a ground-breaking observation — the trend is your friend — but it’s worth looking at trends, which are down for both gold and stocks.

There is a lot of chatter now over moving-average death crosses in the stock market, and rightly so. Keep in mind that these moves — when the 50-day average is sliding below the 200-day average — are useful indicators, but not necessarily sell signals. The first index to succumb was the Dow Jones Industrial Average (see Getting Technical, “Dow ‘Death Cross’ Stirs Anxiety in Fragile Market,” Aug. 12). The Standard & Poor’s 500 buckled last week (see Chart 1) and the S&P 400 MidCap Index crossed on Monday.

Chart 1

Standard & Poor’s 500

Wednesday, the small-capitalization Russell 2000 joined the group, leaving only the Nasdaq standing alone among major indexes without this dreaded signal.

Does it matter that the Nasdaq is defiant? Not really. What matters is that stocks of almost every type across the globe are trading below technical metrics that even casual users of charts believe makes them unattractive. Sure, some popular stocks may seem to offer fire sale pricing when compared with where they were just a month ago. But we have to get back to the cardinal rule — trends persist. Low prices now can become even lower later.

There is nothing on the charts that suggests otherwise. Support levels have crumbled. Leadership is gone, and that includes standouts such as Apple  and Netflix. Last month I wrote that these two leaders and a small group of others, held the key (see Getting Technical, “Apple Technicals Are Ugly and Could Sink the Market,” Aug. 5). The group is now broken.

And that brings us to gold. Even as stocks drifted lower in August, gold did very little. It only managed what looked to be a dead-cat bounce. This was to be expected after a bout of selling in July that seemed to mark capitulation in that market (see Getting Technical, “Gold Is Falling So Hard It Looks Like Capitulation,” July 20).

Gold did manage to climb about 7.5% from its depths, but it got a lot of help from a weakening dollar. The greenback fell 5% from high to low in August, but has since come roaring back.
Gold’s bounce looks to be over and a major support level is starting to call (see Chart 2).

Chart 2


Gold’s multiyear bull market stalled in 2007 before finally breaking out again in 2009. While I usually find no hard technical value in round numbers, key resistance back then was $1,000 per ounce. (See Getting Technical, “Gold Has More Upside,” Oct. 7, 2009.) Looking at a long-term chart, the difference between current trading in the $1,135 area and that key level at $1,000 is not that much. An 11% decline from here in the context of a 47% bear market from the 2011 peak is not much more than a final wiggle.

I am not saying gold will fall to $1,000, but if it does I can see a lot of buying unleashed at prices not available for six years. And if it does move down there, it should be the final blow to the psyches of the last remaining bulls. Nobody will dare espouse a bullish view for fear of ridicule, and that will be the final capitulation in sentiment.

But for now, gold had its chance to recover last month and failed. The breakdown in stocks is young, but trends in both are still to the downside. That means investors should avoid both for the time being.

Asia is a bigger problem for Europe than the US

China’s market rumbles highlight the limits of a more aggressive ECB, writes Stephanie Flanders
Mario Draghi stole the show at last year’s meeting of policymakers in Jackson Hole when a supposedly dry speech on the causes of European unemployment turned into a central banker’s call to arms. In it he made the case for a more activist approach to Europe’s growth crisis and — finally — a more energetic European Central Bank.
This weekend Mr Draghi was not in Wyoming. The focus was on rumbles in China and global markets and what it all meant for the US Federal Reserve. But Europeans should not be under any illusions: recent developments in Asia pose, if anything, an even bigger headache for the ECB. They also highlight the limits to what even a more aggressive central bank can achieve.
Much has gone right in Europe in the past 12 months. But the eurozone still has a problem with ­inflation, and with the level of demand.
This time last year Mr Draghi pointed to the decline in market measures of inflation expectations as an urgent reason for the ECB to act. Today those same measures show expectations have fallen back to where they were at the start of the year. This is a reflection of falling commodity prices and an unwelcome rise in the value of the euro — both linked to recent developments in China. But it is also a reflection of what are perceived to be the limits of the ECB’s ­effectiveness.
You can see this in the contrasting experience of the UK and the US. Like the eurozone, both saw headline inflation fall to zero in the early part of the summer due to the effects of cheaper oil. Yet consensus forecasts expect UK and US inflation to be back to about 1.7 per cent by the middle of 2016. In the eurozone prices are forecast to rise by barely 1 per cent.

In other respects the eurozone is much stronger today than it was a year ago. The strength of lending demand is especially encouraging. Borrowing costs for ordinary businesses and households in countries such as Italy and Spain have carried on falling, even during the spring and early summer, when ructions in bond markets pushed up interest costs for governments.

Business and consumer confidence have also held up well. The ECB can take some credit for this, but it is also thanks to the effects of cheaper oil. Surprisingly, perhaps, Europeans appear more willing to spend the money saved on their energy bills than do their US counterparts.

All of this is good news and a welcome improvement on a year ago. But it is not enough. Eurozone economies are still carrying very high levels of public and private debt and indebted countries, like businesses, need decent cash flow to get out from under that burden.
The cash value of the eurozone economy — real growth plus inflation — has risen by less than 6 per cent since the start of 2011 and the crisis economies have actually shrunk. Using the same measure the UK and US economies have each grown by more than 15 per cent. This means they have put the immediate threat of debt crisis behind them, even with relatively high levels of private debt. Despite the improving growth picture, the eurozone has grown by less than 2.5 per cent in cash terms in the past year, much slower than the US and UK. With inflation heading back down again and growth in the 1-1.5 per cent range it will struggle to do much better than that in 2016.
 It is a shame that Mr Draghi’s 2014 speech is remembered as a stepping stone to historic bond purchases by the ECB. Its real novelty was the insistence that governments needed to do their bit to spur overall demand — not just with structural reforms but with more growth-friendly fiscal policy and increased public investment.

We have seen some structural reforms since then, particularly to labour markets. But product markets with the most potential to boost domestic demand — such as opening up the energy sector or retailing — have been largely untouched. And while austerity has eased in most countries there is little sign of better co-ordination of fiscal policy across the eurozone, or better targeting of budget policies towards growth.

Europe is moving forward . But not fast enough for us to say it will not be blown back into deflationary territory by the next shock to oil prices or a sharp slowdown in emerging markets.

Though domestic demand is stronger, the latest output figures showed Germany and others still depend heavily on the rest of the world for their demand.

At his press conference this week we can expect Mr Draghi to offer a commitment to “do what it takes” to get inflation heading back upwards. That is important. Investors need to know the ECB is willing to do more, if it has to. But given what we have learnt about the limits of central bank action, it would be more apt to say the bank will do “what it can”. As Mr Draghi argued last year, governments also need to act; indeed the case for them to do so is now even stronger than it was then.

The writer is chief market strategist for Europe, JPMorgan Asset Management

A Cautionary History of US Monetary Tightening

J. Bradford DeLong

Janet Yellen

BERKELEY – The US Federal Reserve has embarked on an effort to tighten monetary policy four times in the past four decades. On every one of these occasions, the effort triggered processes that reduced employment and output far more than the Fed’s staff had anticipated.

As the Fed prepares to tighten monetary policy once again, an examination of this history – and of the current state of the economy – suggests that the United States is about to enter dangerous territory.
Between 1979 and 1982, then-Fed Chair Paul Volcker changed the authorities’ approach to monetary policy. His expectation was that by controlling the amount of money in circulation, the Fed could bring about larger reductions in inflation with smaller increases in idle capacity and unemployment than what traditional Keynesian models predicted.
Unfortunately for the Fed – and for the American economy – the Keynesian models turned out to be accurate; their forecasts of the costs of disinflation were dead on. Furthermore, this period of monetary tightening had unexpected consequences; financial institutions like Citicorp found that only regulatory forbearance saved them from having to declare bankruptcy, and much of Latin America was plunged into a depression that lasted more than five years.
Then, between 1988 and 1990, another round of monetary tightening under Alan Greenspan ravaged the balance sheets of the country’s savings and loan associations, which were overleveraged, undercapitalized, and already struggling to survive. To prevent the subsequent recession from worsening, the federal government was forced to bail out insolvent institutions.

State governments were on the hook, too: Texas spent the equivalent of three months of total state income to rescue its S&Ls and their depositors.
Between 1993 and 1994, Greenspan once again reined in monetary policy, only to be surprised by the impact that small amounts of tightening could have on the prices of long-term assets and companies’ borrowing costs. Fortunately, he was willing to reverse his decision and cut the tightening cycle short (over the protests of many on the policy-setting Federal Open Markets Committee) – a move that prevented the US economy from slipping back into recession.
The most recent episode – between 2004 and 2007 – was the most devastating of the four.

Neither Greenspan nor his successor, Ben Bernanke, understood how fragile the housing market and the financial system had become after a long period of under-regulation. These twin mistakes – deregulation, followed by misguided monetary-policy tightening – continue to gnaw at the US economy today.
The tightening cycle upon which the Fed now seems set to embark comes at a delicate time for the economy. The US unemployment rate may seem to hint at the risk of rising inflation, but the employment-to-population ratio continues to signal an economy in deep distress. Indeed, wage patterns suggest that this ratio, not the unemployment rate, is the better indicator of slack in the economy – and nobody ten years ago would have interpreted today’s employment-to-population ratio as a justification for monetary tightening.
Indeed, not even the Fed seems convinced that the economy faces imminent danger of overheating.
Inflation in the US is not just lower than the Fed’s long-term target; it is expected to stay that way for at least the next three years. And the Fed’s change in policy comes at a time when its own economists believe that US fiscal policy is inappropriately restrictive.
Meanwhile, given the fragility – and interconnectedness – of the global economy, tightening monetary policy in the US could have negative impacts abroad (with consequent blowback at home), especially given the instability in China and economic malaise in Europe.
It is tempting to conclude that the Fed’s eagerness to tighten monetary policy – despite unfavorable historical precedents and ongoing economic uncertainty – is driven by commercial banks with excessive influence in official policymaking. After all, commercial banks’ business model works only when the banks can earn (via passive and relatively safe long-term investments) at least 3% a year more than they pay depositors. And that is possible only if US Treasury rates are higher than they are now.
If this is true, it would reflect a failure by bankers to understand their industry’s material interests. What would most benefit commercial banks is not an immediate increase in interest rates, but a monetary policy that contributes to ensuring that the economy is capable of supporting higher interest rates in the future. If history is any guide, tightening monetary policy in the near term will only lead to further economic turbulence, followed by a rapid retreat to low interest rates. Embarking on that path should be a cause of concern for everyone.

The Past, Present and Future of Economics, According to Olivier Blanchard
ByIan Talley
Olivier Blanchard, who is soon to leave his post as the IMF’s chief economist.

Olivier Blanchard began his tenure as the International Monetary Fund’s chief economist at the start of the 2008 global economic crisis and is leaving his post amid world-wide market turmoil.

But one would be hard-pressed to say that it’s not a changed world.

In the latest issue of the IMF’s research magazine, Mr. Blanchard gives a high-altitude survey of the recent past, present and future of the global economy and the science of economics (or alchemy, depending on your view).

Here are a few highlights:

The recent past:

“The financial crisis raises a potentially existential crisis for macroeconomics. Practical macro is based on the assumption that there are fairly stable aggregate relations, so we do not need to keep track of each individual, firm, or financial institution–that we do not need to understand the details of the micro plumbing. We have learned that the plumbing, especially the financial plumbing, matters: the same aggregates can hide serious macro problems. How do we do macro then?”

“In the context of the Greek program discussions, it made good sense to argue for debt relief first in private. We did. And when we thought our argument was not getting through, it made good sense to then go public. It would have been wrong to go public from the start, or to never go public.”

“The issue I have been struck by is how to indicate a change of views without triggering headlines of ‘mistakes,’ ‘fund incompetence,’ and so on. Here, I am thinking of fiscal multipliers.

The underestimation of the drag on output from fiscal consolidation was not a ‘mistake’ in the way people think of mistakes, e.g., mixing up two cells in an Excel sheet. It was based on a substantial amount of prior evidence, but evidence which turned out to be misleading in an environment where interest rates are close to zero and monetary policy cannot offset the negative effects of budget cuts. We got a lot of flak for admitting the underestimation, and I suspect we shall continue to get more flak in the future. But, at the same time, I believe that we, the fund, substantially increased our credibility, and used better assumptions later on.

It was painful, but it was useful.”

The present:

“There is a good chance that we have entered a period of low productivity growth. There is a chance that we have entered a period of structurally weak demand, which will require very low interest rates. And low growth combined with increasing inequality is not only unacceptable morally, but extremely dangerous politically.”

“There is a clear swing [in economic policy making trends] of the pendulum away from markets towards government intervention, be it macro prudential tools, capital controls, etc. Most macroeconomists are now solidly in a second-best world. But this shift is happening with a twist—that is, with much skepticism about the efficiency of government intervention.”

“Some propositions that would have been considered anathema in the past are being proposed by ‘serious’ economists: For example, monetary financing of the fiscal deficit.”

The future:

One of the key ways the IMF’s role will evolve is through “liquidity provision. Again, the gross asset and liability positions create the risk of very large sudden stops, and the need for international liquidity provision on a very large scale.  The current haphazard combination of central bank swap lines and fund liquidity programs is a strange contraption. It should be improved, if only to eliminate the role of political factors in who gets what. The two should be better integrated, and integrated with regional agreements.”

Gold: China's Devaluation, The Beginning of Gold's Next Upleg?

By: John Ing

China Currecy Cartoon

Is China's surprise move to weaken its currency a step towards market reform or does it presage a widespread series of "race to the bottom" devaluations reminiscent of the Great Depression? China joins the Swiss National Bank (SNB) who earlier this year let the Swiss franc float freely to protect its exports. Brazil too has been weakening the real for months.

China's neighbour, Japan weakened the yen after another dose of Abenomics. And what about the devaluations of the euro and yen as a consequence of the quantitative easing (QE) by the European Central Bank, and the Bank of Japan emulating of course, the Federal Reserve's three rounds of QE which flooded the world with cheap currency. Everywhere paper currencies are under attack.

Money has never been so cheap and easy to obtain. Around the world, interest rates are near-zero and among the lowest in recorded history, much to the delight of home owners and investors. The easy money printed over the past eight years fueled bubbles abroad as well as at home with speculators borrowing cheap dollars, investing the proceeds in higher yielding securities and property from Shanghai to Vancouver. Wild currency swings are playing out in those economics that are strongly dependant on commodities. As a consequence, central banks have had difficulties holding their currencies down against the dollar and overflowing with liquidity, governments have cheapened their currencies in a series of 'beggar thy neighbour' devaluations, shifting the cost for other neighbours to bear.

We believe that the Fed's reluctance to pull back on the throttle, made more cautious in an election year, increases the risk of a last stage surge in asset prices and of course, further distortions of currencies. The Fed has a serious problem with the deficits and an overvalued dollar. China's devaluation does make the much talked about Fed rate hike questionable. That prospect means that nothing significant can be done about these global imbalances, until the United States attacks its own problems.

 Printing a Recovery

America enjoys the privilege of printing the world's reserve currency which allows it to pay its bills with its own currency and to finance its deficits by merely generating extra dollars. Valery Giscard D'Estaing, the French finance minister under Charles de Gaulle once called the US dollar position an "exorbitant privilege" in describing the dollar as the central player in global trade. The US dollar has dominated the world's financial system since the end of the Second World War seemingly enjoying a virtual unlimited line of credit denominated in its own currency. However, today the United States has serious financial problems, owing more than they produce, resorting to printing money and debt monetization as a means to keep their economy rolling. Since 2008 the Federal Reserve has created more than $5 trillion from out of thin air. Over that same period, America's debt has jumped 98 percent to $18.2 trillion from $9.2 trillion. The Fed has now created a bubble in Treasury bonds comparable to the housing bubble a few years ago. Worse, there is a lack of political will to take the necessary steps including raising interest rates, boosting savings or cutting deficits. Unlike the Greeks, America was able to bail out its financial meltdown with printed dollars instead of hand outs and debt.

Greece's problem caused a rush into the dollars. Similarly, when America needed oil, it convinced the Middle East players to take dollars. Laden with dollars, China has recycled their hoard of Treasury certificates by buying assets, commodities and gold after they discovered the dollar purchasing power and liquidity problematic. With the world choking on an avalanche of dollars, other countries too are looking for alternatives. America's nightmare is that one of these days those dollar holders will decide there is an alternative, another place to put their money.

China Challenges the Greenback

We believe China has woken up to the risk of holding $1 trillion of overvalued Treasuries. They have a diminished confidence in the United States running its financial affairs, after the unprecedented financial crisis in 2008 followed by six years of economic stagnation which required them to borrow billions of dollars a day from abroad. In printing trillions of dollars, the United States cheapened not only the value of the dollar but also of their mammoth debt.

America simply has become the biggest debtor in the world amounting to more than 100 percent of its annual domestic production. That dependency on outside financing is its Achilles heel. If one includes entitlements and off the balance sheet items, that debt rivals that of Greece with the bulk owed to foreigners.

Instead the Chinese believe that the dollar's privilege is no longer "exorbitant" but "extortionate". Financial history is a roller coaster of ups and downs, booms and busts, manias and panics, shortages and excesses. Today we have an excess of leverage, a deluge of paper money, asset price bubbles and record consumer and government debt, all financed by derivatives. To be sure we live in an overvalued world. China too has gone through its ups and down and while its stock market only makes up less than 10 percent of its economy, China's leaders know the value of wealth creation and preservation, worrying lately about the renminbi and their diminishing $3.6 trillion stockpile of foreign reserves. While the Chinese devaluation is a warning of an impending serious crisis, the precarious US debt position has not bothered the markets. However the Black Monday intraday 1,000 point decline as a result of worries about China may be the beginning of that recognition.

China is Creating a New World Order

While the dollar is the keystone of the global monetary system, China's growth and rising impact on emerging markets has resulted in a dramatic decline of cross-border transactions denominated in dollars to only 45 percent.

China's position as the world's largest trader, consumer, producer and importer has resulted in them laying the foundations for a Sino-centric financial system. China has lately been exercising their financial firepower underlining China's ambitions to make the renminbi a key player in the global monetary architecture. China is the world's second largest economy and the devaluation was a move to let market forces rather than "a fixed peg" decide levels. 

Toronto was the first in North America to have convertible swap facilities allowing direct access to the renminbi's liquidity and a counter balance to the US dollar. China too has created alternative institutions to mirror Western organizations such as the Asian Infrastructure Investment Bank (AIIB), Asian Development Bank and set up free trade trading zones (FTZ).

There is even talk of building a parallel institution to the IMF. The Silk Road plan, for example, is China's version of the Marshall Plan.

China GDP Growth, China's Stock Market and Global Stock Markets

Dollar Power

There's also a strong belief of the need to build an alternative to the American financial hegemonic banking system, which clears the payments of the world allowing it to spread its tentacles worldwide. The dollar's reserve position has been Washington's primary weapon in the past couple decades. Every institution must use their clearing facilities and thus American law has become preeminent in the world of finance, extending well beyond US borders. Last year, American regulators have meted out over $100 billion of fines to banks, many of them international. The Dodd-Frank Act of 2010 gave the Fed huge powers giving it leverage over big international players. However, like most things the once "independent" system has become politicized and abused. America's hegemony has allowed it to use this as a financial weapon, useful for imposing crippling sanctions on Iran, Iraq, Cuba and Russia and even closing tax havens in Switzerland and Cyprus.

Tied to the US dollar for the past two decades, the renminbi has soared more than 20 percent since mid-2014 in sync with the greenback, hurting China's economy and exports. Hence, a correction was long overdue. The RMB's strength was made even worse against its Asian trading partners like Japan and Indonesia. No doubt, China views abandoning the dollar-peg as an assist to its exporters but a more practical reason is that a great many Chinese companies borrowed more than a trillion dollars offshore to avoid stringent domestic lending curbs. In defending the fixed dollar exchange rate by buying renminbi with its huge foreign exchange reserves, China shrinks its money supply. However a devaluation helps avoid a liquidity squeeze, keeping its money supply flush.

China's ambitions to make the renminbi a reserve currency would allow it to settle their international trade obligations with its own currency, making it easier for payments and investments beyond the control of the United States. At one time, Great Britain's pound sterling was the world's global reserve currency. Then Britain wrote its own trade of commerce rules.

London was the centre of the world. However the World Wars sapped Britain's financial strength paving the way for the emergence of the dollar as the replacement which saw the Fed act as the world's central bank. Currencies, particularly the dollar were no longer backed by gold and the value was decided by the underlying confidence or faith in the currency. For almost half a century, this "faith-based" greenback has survived various booms and busts, until now. The main centre today is Beijing that now sells and lends dollars.

China's Currency Ambitions

Thus the International Monetary Fund's (IMF) consideration to include China's renminbi in the currency basket that makes ups its Special Drawing Rights (SDRs) is particularly important. China has been pushing for the renminbi's inclusion as part of a move to internationalize the renminbi and make it acceptable as a global currency alongside the dollar, yen, euro and sterling. The decision however was rife with politics. The IMF reviews the currency composition every five years and the deferment for one year gives all parties time to renegotiate the renminbis' entry. Politics again rules the day. The United States has quietly blocked China's moves asking for additional reforms despite support from Germany and others.

Against this backdrop, many point to the immaturity of China's financial system and their needing a Chinese-style plunge protection team to prop up the Chinese stock market. Yet, we forget their efforts are similar to the policies amid the trading halts of 2008, like the TARP and ZIRP programs and the intervention of America's regulators were a large part of the bailout of 2008. Just recently the New York Stock Exchange invoked "Rule 48" which altered their rules in the face of a big decline. The Hong Kong stock market Asian collapse in the nineties too was bailed out by the Hong Kong Authority and securities subsequently were sold at a profit.

Gold Exists Outside America's Purview

The wild card is that gold has a role as a protection against devaluation. Gold has moved up almost $100 an ounce since China's devaluation and spiked further on the global rout in stock prices. Nonetheless, there remains "mainstream" skepticism over the "barbaric metal", and gold's role as an alternative to paper money. However, as long as everyone believes that it has some value, it has value. Today, that could not be said of the dollar. Without "trust" in the dollar, the world has no valid reserve currency. To be sure, under the new rules of engagement with the renminbi chipping away at the dollar's status, there is no question that an alternative such as gold holds attraction.

Gold is backed by thousands of years of history, universally held by all countries, and in fact is already a reserve currency, as part of the SDR basket. The languishing gold price tends to make us forget that gold is quietly emerging as the linchpin of a handful of initiatives in Europe, Asia and Middle East. Russia and China continue to stockpile gold. In Europe, Germany amongst others is repatriating their gold holdings. In the Middle East, wars are being fought, financed by gold. And most importantly, gold exists outside America's purview.

In redrawing the world's financial system, China, the world's largest gold consumer recently disclosed it boosted its gold reserves by 60 percent to 1,658 tonnes making it the fifth largest holder of gold after US, Germany, Italy and France. In July, China added another 19 tonnes as prices reached five year lows. We believe gold is an important part of China's reserves, and while last month's gold announcement was the first in six years, Chinese holdings are still less than 2 percent.

China may be looking at ways to insulate itself from America's profligate policies. Rather than peg the renminbi to the dollar, China might prefer to peg to gold, preferring it to the dollar as a store of value. Move over dollar, there's a new sheriff in town.

World Oddicial Gold Holdings


An Ashley Madison-like Comeuppance

Over the past fifty years, when gold was freely traded, gold proved to be a good buy as a hedge when all looked bleak. In the seventies, gold moved up because of fears of inflation, doing better than stocks. In the eighties, stocks did better and gold went down. In the last three years, gold has been in decline while stocks have been going up. However, at a time when central banks have tried to foster growth by aggressively printing money and racking up public debt, gold has become an alternative investment to the dollar for central banks.
Surprisingly in the bubble-like market environment created by zero interest rates and zero risk, there was not much investor anxiety. Further as the Greek negotiations unfolded, like the other time, the can was again kicked down the road, albeit with more debt. Noteworthy was that gold in euros was the best hedge during the turmoil in Greece. Year to date gold has actually outpaced markets. However, while everything looked rosy, the world changed. The Dow Jones recorded a 1,000 point decline after a "death cross", Greece once again faces an election, the US dollar has peaked and of course China devalued. We believe that gold has bottomed as the dollar's hegemony comes to an end in an Ashley Madison - like comeuppance.
The Chinese devaluation underlines America's weakened financial powers to such an extent that the US is now severely constrained in its ability to finance its debt at home and abroad. This time it took the shock of a drop in the value of the renminbi to remind investors of geopolitical risk. Gold is a hedge against devaluation. There is no coincidence that gold bottomed after the Chinese devaluation.
We feel that gold's positive fundamentals always remained. Today it is fashionable at dinner parties to talk of condo prices. Investors will soon talk of a weaker, not stronger dollar. That will be good for gold but bad for the dollar. When that happens and gold then becomes the topic du jour, it will be a sign of gold's top. In the interim with so much fear lurking in the investing world, gold's second upleg has only just begun.

Recommendations: More Bounce for the Ounce

For much of this year, clients have asked us, "why gold?". The first reason is positive supply and demand fundamentals. There is less gold coming to market amid deepening geopolitical uncertainty. The second of course is the aforementioned worldwide currency debasement. The third is the lack of trust in markets, currency and the ability of central banks to manage our affairs. The fourth reason is that there is a growing distinction between paper gold and physical gold. Comex is the futures exchange where for every ounce of gold held for delivery in the warehouses, there are 124 paper ounces or claims against that ounce. If one wants physical gold they must line up and it is interesting to note that Comex physical deliveries are a mere fraction of what is delivered on the Shanghai Gold Exchange. We believe this dichotomy allows the bullion dealers the opportunity to manipulate the gold price through their algos and flash crashes.

Simply, paper gold is someone else's liabilities. Physical gold on the other hand is no one's liability, has no counterparty risk, nor is subject to the shenanigans on the Comex market. For that reason, physical gold is desired by central banks and investors alike, subject only to supply and demand. The problem is that less gold or supply is being mined with Chinese demand increasing, acquiring physical metal as a store of value. As a result, we've been in backwardation for months.

Taking that further, we believe that the gold miners' in-situ gold reserves are the miners' major asset. And when the inevitable squeeze between physical and paper comes, due to either questions about the bullion counterparties or in fact more demand for physical gold that can be supplied from the Comex warehouses, the price of gold will skyrocket. And the shares of course will be a leveraged way to play this. We thus believe that the shares represent real value here, particularly since the valuation of the market cap for in situ reserves are at record lows. We also believe that some sovereign funds will want access to the only unallocated gold in the world. Gold stocks are buys.

For most technicians and chartists, Fibonacci's measured moves are a useful indicator of directon. In August, gold retraced to $1,088, the Fibonacci 50 percent support level. The age old Fibonacci sequence retracement often, but not always occur at three levels: 38 percent, 50 percent and 62 percent. The 50 percent support level is usually key support and a level from which there is a tendency for a reversal after retracing half of the previous move. When gold bottomed in 2001, it took less than 2 months for the turnaround. This time the reversal was only days. In our view, gold is a buy technically and fundamentally, with a measured move to $2,000 an ounce.

The gold miners have developed a barbell approach with sub $1,000 an ounce gold producers at one extreme and the ones above $1,000 an ounce on the other extreme. Barrick, Goldcorp, Newmont, Centerra, and Agnico-Eagle are in the low cost category. Kinross, Yamana, Primero, and IAMGold on the other end. For some time we have emphasized the low cost producers like Barrick and Agnico Eagle believing they would be among the first group to participate in gold's inevitable rally. We continue to hold that view.

Agnico-Eagle Gold Mines

Agnico continues to perform producing over 400,000 ounces at AISC at $864 an ounce. Agnico is reducing its cost profile and with a strong operating performance will produce over 1.6 million ounces this year. Noteworthy was positive exploration results from Amaruq's Whale Tail deposit which will extend life at Meadowbank. Guidance was maintained at Agnico's nine mines in part to solid contributions from flagship LaRonde and at Lapa where a combination of higher grades and recoveries boosted output. Positive news came from Goldex Deep project will extend mine life to 2024. Development cost is only $140 million. Pinos Altos in Mexico goes underground next year. We like Agnico's growth profile and view the shares a buy here.

Barrick Gold Corp

Barrick's "back to the future" strategy has resulted in the sale of half a dozen gold mines that will allow it to meet its much advertised commitment to chop $3 billion of debt off its balance sheet. Moreover, the world's largest producer will squeeze $2 billion of expenses. We believe that Barrick could further reduce its debt and at long last has a well-defined strategy to bring down costs, debt and build ounces at the same time. In the last quarter, Barrick closed the sale of Cowal in Australia and half of cash cow Zaldivar to Antofagasta in an interesting joint venture. Also in a novel streaming deal, Barrick sold future production for $600 million in a deal with Royal Gold. Pascua Lama development in Chile has been mothballed. The Street now recognizes Barrick's strategy but has not bought into the growth profile of its core assets (e.g. Goldstrike TCM). We believe that shoe will drop and expect a revaluation and return to Barrick's premium relative to its peers. Barrick remains the most liquid and has the most reserves in the ground. Buy.

Eldorado Gold Corp

Eldorado's shares have been underperforming due largely to investor concern about its $1 billion Greek exposure. The cancellation of permits caused Eldorado to suspend all Greek mining and development activities. Consequently, investors have opted to play other gold miners while Greece sorts itself out. We do however expect that the Greek government will come to its senses and thus the recent weakness presents a purchase opportunity. Eldorado's core Turkish assets are performing well with production from Efemcukuru higher with lower cash costs. Gold production at flagship Kisladag was lower due to the grade cycle. In China, Eldorado has three mines which are cash cows. Eldorado has started work at Eastern Dragon, after receipt of the much overdue permit. Production is slated for next year. We believe Eldorado remains a leading low cost producer with operations in Turkey, China, Romania and Brazil and of course Greece. We like the shares here believing they have adequately discounted the Greek problems.

IAMGold Corporation

IAMGold has not been able to replace cash cow Niobec. IAMGold's Westwood had serious problems where a seismic event earlier in the year unexpectedly impacted development and of course production. Where were the engineers? IAMGold hoped that Westwood would give a boost but that is unlikely. Rosebel remains a concern. Only Essakane in Burkino Faso is a bright light and is at least producing a profit. The company's costs are quite high and although it has a strong balance sheet, investors are concerned about their M&A strategy. In fact, the ill-fated acquisition Côté Gold in northern Ontario bought during the heyday, is rumoured to be the next to shutdown. Côté Gold was supposed to be a big open pit and for some time we have been concerned about the continuity of this project, infrastructure expense and potential high cost. We do not see much for IAMGold on the horizon and view the shares a sell here.

Kinross Gold

Kinross' shares remain in the doldrums, due principally to its healthy Russian exposure.

Ironically, the Russian high grade Dvoinoye is performing well and the Russian mines are cash cows. Kinross will produce about 2.5 million ounces at AISC of $1,050 per ounce. The other half of Round Mountain held by Barrick is being offered for sale which is operating at full capacity. However, Kinross has very little on the horizon and the Tasiast expansion is not going ahead. Economics are uncertain there and we believe that is a correct decision. Kinross has a strong balance sheet but the near term prospects are poor. Sell.

New Gold Inc.

New Gold is an intermediate player and results were in line with New Afton performing well and on budget. New Afton in Canada and Cerro San Pedro in Mexico offset higher cost Mesquite in the US and Peak in Australia. New Gold has by-product copper production which helps, but copper prices have been lower. The company sold its 30 percent stake in El Morro copper-gold project in Chile to Goldcorp for $90 million and a 4 percent streaming deal. New Gold announced a Rainy River stream with Royal Gold for about $175 million but 100 percent owned Rainy River needs much more. Both Rainy River and Blackwater are billion dollar projects requiring a higher gold price. It is our belief that these mega projects are difficult to finance in today's environment and New Gold should concentrate on its core assets.

McEwen Mining

McEwen Mining continues to surprise investors. McEwen is owned 25 percent by Rob McEwen. McEwen's results were pretty good despite the earlier burglary at El Gallo. The El Gallo mine in Mexico was a major performer and cash costs have been reduced significantly.

McEwen Mining has a solid balance sheet (no debt) and the key will be performance at El Gallo and of course the San Jose Mine in Argentina. Nearby El Gallo 2 has been giving the ok.

McEwen will produce almost 100,000 ounces of gold this year. We think the shares are cheap.

Primero Mining

Primero reported an improvement in ounces due in part to the slow turnaround at Black Fox in Ontario. However, the company lost $6.6 million due in part to higher costs in the quarter. While ounces were up, costs were also up. Primero almost produced 63,000 gold equivalent ounces but the San Dimas in Mexico ran into the problems over permits. The delay stopped sales but the licences have now been reissued. At Black Fox there has been a slow turnaround and the mine produced 18,000 ounces in the second quarter. Primero must go underground as the open pit has run out of ore. Primero's balance sheet is so-so with about $40 million cash and a bank line of about $75 million. Primero is still paying down the debentures acquired in the Brigus acquisition. We note that all-in costs are almost $1,200 an ounce and thus we would avoid the shares.

Yamana Gold

Yamana had mixed results due in part to low grades. Yamana has mines in Brazil, Argentina, Chile, Mexico and Canada. Yamana's flagship El Penon continues to produce well and recently acquired Canadian Malartic had a good quarter. Nonetheless, while production from its core mines increased, there was a drag from its non-core operations. The bottom line is that even with Yamana's track record of missing guidance, hopes to spinoff the non-core Brio in this market is difficult and thus remains under the Yamana umbrella. We believe that Yamana is just harvesting assets and would avoid the shares. Sell.

Gold Stocks Financial Information
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Analyst Disclosure

    Rating: 5 - Strong Buy 4 - Buy 3 - Hold 2 - Sell 1 -Strong Sell
Company NameTrading Symbol*ExchangeDisclosure codeRating
Agnico EagleAEMT 5
Barrick Gold Corp.ABXT15
Eldorado GoldELDT14
IAM Gold Corp.IMGT 1
Kinross Gold Corp.KT 2
McEwen GoldMUXT 4
New Gold Inc.NGDT 2
PrimeroPT n/a
YamanaYRIT 1
Disclosure Key: 1=The Analyst, Associate or member of their household owns the securities of the subject issuer. 2=Maison Placements Canada Inc. and/or affiliated companies beneficially own more than 1% of any class of common equity of the issuers. 3=<Employee name> who is an officer or director of Maison Placements Canada Inc. or it's affiliated companies serves as a director or advisory Board Member of the issuer. 4=In the previous 12 months a Maison Analyst received compensation from the subject company. 5=Maison Placements Canada Inc. has managed co-managed or participated in an offering of securities by the issuer in the past 12 months. 6=Maison Placements Canada Inc. has received compensation for investment banking and related services from the issuer in the past 12 months. 7=Maison is making a market in an equity or equity related security of the subject issuer. 8=The analyst has recently paid a visit to review the material operations of the issuer. 9=The analyst has received payment or reimbursement from the issuer regarding a recent visit. T-Toronto; V-TSX Venture; NQ-NASDAQ; NY-New York Stock Exchange

Citigroup braces for world recession, calls for Corbynomics QE in China

Citigroup's Willem Buiter says only a blitz of helicopter money from the central bank can stop China's economy crumbling now

By Ambrose Evans-Pritchard

6:45PM BST 28 Aug 2015

China will be doing well if it can contain its slow-motion crisis to mere stagnation for the next 10 years 
China has bungled its attempt to slow the economy gently and is sliding into “imminent recession”, threatening to take the world with it over coming months, Citigroup has warned.
Willem Buiter, the bank’s chief economist, said the country needs a major blast of fiscal spending financed by outright "helicopter" money from the bank to avert a deepening crisis.
Speaking on a panel at the Council of Foreign Relations in New York, Mr Buiter said the dollar will “go through the roof” if the US Federal Reserve lifts interest rates this year, compounding the crisis for emerging markets.
Professor Zhiwu Chen from Yale University told the same event that China will be doing well if it can contain its slow-motion crisis to mere stagnation for the next 10 years, given the dangerous levels of debt in the system.
“If the Chinese government is able to manage a Lost Decade with very low growth - or no growth - without an economic crisis, it will be a policy achievement,” he said.
Prof Chen said a Western-style financial collapse in China is “highly unlikely” since the banks are largely government-owned and losses will be absorbed by the state.

There is a loose parallel with Japan, where the economy slid into a deflationary quagmire and lost its economic dynamism but never suffered a full-blown financial crash. In Japan’s case the denouement was averted by keeping "zombie banks" on life-support.

The colourful Mr Buiter - a former UK rate-setter - said China has bungled both fiscal and monetary policy, and is now “sliding into recession”. This would be fall in growth to less than 4pc on the “mendacious” figures published by Beijing, but in reality lower.

“They will respond too late to avoid a recession, which is likely to drag the global economy with it down to a global growth rate below 2pc, which is in my definition a global recession,” he said.

“The only thing likely to stop it going into recession is a large consumption-oriented fiscal stimulus funded through the central government, preferably monetized by the People’s Bank of China. Despite the economy crying out for it, the Chinese leadership is not ready for this,” he said.

This appears to be a call for “Corbynomics” in China. A similar policy was implemented by Takahashi Korekiyo in Japan in the early 1930s, with some success.

Whether China really is in such dire straits is hotly contested, even within Citigroup itself. The bank’s equity team said the August sell-off on global markets is a typical late-cycle correction rather than the onset of a major downturn.

“Current equity and bond yields suggest that investors are shifting towards pricing in a global recession. While not complacent, we believe such fears are premature – it is too early to call the end of this six-year bull market,” it said.

The bank recommended 17 stocks for those willing to take a stab at “bottom-fishing”, recommending Baidu, ICBC, Tencent and Ping An.

China has already loosened fiscal policy after an unintended crunch earlier this year when reform of local government financing went awry, causing near paralysis for four months. Mr Buiter’s recession may have come and gone already.

Local governments issued $200bn of bonds in June and July under a new debt-swap plan. This frees up the equivalent for new loans by banks to credit-starved companies.

China’s finance minister, Lou Jiwei, said on Friday that the cap on these bonds would be raised from $310bn to $500bn, a form of stimulus.

The government plans to pull forward a raft of spending projects scheduled for 2016, launching them this year instead. This comes on top of a jump in fiscal spending by more than 13pc in the second half that was already planned.

These infrastructure works include water and sewage, low-income housing for migrant workers and railway construction. The share price of China Railway Rolling Stock soared 10pc in Shanghai on Friday before hitting the maximum daily limit.

China’s chief lever at this point is fiscal policy. Interest rate cuts and monetary stimulus risk setting off further capital flight, tightening liquidity.

The 50 basis point cut in the reserve requirement ratio for banks this week added no net stimulus. It merely offset the damage already caused over the past two months by estimated outflows of $200bn, which reduces the multiplier effect of base money in China.

Prof Chen said a pattern has emerged where China’s economy weakens at the start of each year. Beijing then injects a shot of stimulus. Growth stabilizes in the late summer and then picks up in the Autumn.

The same cycle is now at work this year, but it is becoming progressively weaker as rising debt ratios slowly suffocate the economy.

Mr Buiter said the stock market crash in Shanghai and Shenzhen is a “sideshow”. The wealth effects are negligible since only one in 30 Chinese owns stocks. Companies do not rely on equity issuance to raise funds for investment.

The authorities have damaged their credibility badly by cheerleading a stock bubble and then deploying heavy-handed means in a failed attempted to stop the collapse, but this is little more than a “symbol” of management failure. “They thought it was a great way of deleveraging without paying,” he said.

Preparing for a Potential Economic Collapse in October

by Jeff Thomas

August 31, 2015

There’s no question that the world economy has been shaky at best since the crash of 2008.

Yet, politicians, central banks, et al., have, since then, regularly announced that “things are picking up.” One year, we hear an announcement of “green shoots.” The next year, we hear an announcement of “shovel-ready jobs.”

And yet, year after year, we witness the continued economic slump. Few dare call it a depression, but, if a depression can be defined as “a period of time in which most people’s standard of living drops significantly,” a depression it is.

Many people are surprised that no amount of stimulus and low interest rates have resulted in creating more jobs or more productivity. Were they a bit more cognizant of the simple, understandable principles of classical economics (as opposed to the complex theoretical principles of Keynesian invention), they’d recognise that, when debt reaches the level that it cannot be repaid, a major re-set of some sort must take place.

The major economies of the world have reached and exceeded that point and the debt problem is no mere anomaly that can be papered over. It is, instead, systemic. There must be a major forgiveness of debt, a default, or an economic collapse, or some combination of the three.

And so, those who recognise the inevitability of such an event have been storing their nuts away in preparation for an economic winter.

Those of us who warned of the 2008 crash in advance had been regarded as economic “Chicken Littles.” After the crash, we were largely resented as having made a “lucky guess.” Following that time, a moderate amount of credence has been allowed us, as we’ve recommended investments in real estate and precious metals (outside of those jurisdictions that are most at risk). However, since the Great Gold Correction (2011-2015), that begrudging credence has worn away and been replaced with renewed contempt.

To the naysayers, the 2001-2011 gold boom has been relegated to the investment dustbin and, to most punters, gold is clearly “over.”

Just as importantly, the most significant events of the “Greater Depression” that we had been predicting have clearly not yet come to pass. They’re still ahead of us. And, in this, we must confess that those of us who made this prediction did unquestionably believe that it would have taken place by now. We were wrong.

Or at least we were wrong on the timing, but most of us still believe, more than ever, in the inevitability of a collapse (again, this is true because the problem is systemic, not symptomatic).

All of the above is a preface of the coming of October, a month which, historically, has seen more than its fair share of negative economic events.

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This time around, there are warning signs aplenty that, sometime around October of this year, we shall see a number of black swans on the wing, headed our way.

The greatest of these is that, once every five years, the International Monetary Fund (IMF) renews its membership structure (SDR quota, governors, and voting power.) This is significantly in question this year, as China vies for a larger chair at the table.

Although China surpassed the US in 2014 as the world’s largest manufacturing economy, it still has less than one-quarter of the voting power of the US and even has less than France or Germany. To say the IMF has been dragging its feet on a rebalancing of IMF member voting would be an understatement.

In fairness, China should expect to be allotted significantly greater voting power in October.

But we are discussing the IMF, which has never been known for fairness. It has, indeed, been infamous for its duplicity and self-serving inclinations (having been created at Bretton Woods in 1944 to allow the US hegemony over the world economy, its primary purpose is to assure US dominance).

Still, it would be difficult to imagine how the IMF could avoid a shift in its voting (diminishing the US and increasing China). Anything the IMF did at this point to derail the re-balance would be highly suspect.

And yet, that’s exactly what the IMF has done. It has publicly questioned whether 2015 is the right year for the review. However, even it is worried enough about its presumptuousness that, rather than announce a delay, it has announced the consideration of a delay. It has run the possible delay up the flagpole to see whether it will fly or be torn down.

Clearly the IMF feels it’s on shaky ground with its proposal. And it should be. In recent years, it has arrogantly pushed China away from the IMF table time after time, so the Chinese have taken matters into their own hands. They’ve created their own international development bank, their own worldwide cable communication system, and even their own SWIFT system.

Very soon, they’ll have the ability to run their own worldwide economic system, independent of the US/EU/IMF system. Early on, many of the world’s governments recognised the future opportunities that this would bring to the world. First, Russia and the countries of Southeast Asia signed on, then South America, Africa, and, finally, some EU countries reached agreements with China.

The IMF is in a jam, no member country more so than the US. If, in October, it allows China greater voting power, it will cast in stone China’s increased economic influence over the world. However, if the IMF chooses to put off China another year, China may move ahead with its own economic system.

Buying Time

There can be no doubt that the IMF is hoping to buy time. The question is whether it merely wishes to buy time to delay the inevitable, or whether it feels it has a card up its sleeve that it might be able to play, should it gain another year.

If the US is arrogant (as it generally is), it’ll employ its customary bravado and, in so doing, may well cause the Chinese to play hardball and dump some of their US Treasuries and/or dollars.

In considering the above, the US/IMF may feel that China is in the throes of a major correction at present and cannot retaliate without feeling the pain itself. They’d be correct. And so, the Chinese, known for being patient and choosing their moment carefully, may choose to swallow the IMF delay quietly, then, when they’ve dumped some of their baggage and possibly rebounded in 2016, make an even firmer stand than they could now make. For that reason, US arrogance now would create a very short-lived gain, and a very foolish one.

So, what does this mean to the investor? It suggests that, once again in history, October promises to be a month when great economic change may well take place. When dramatic change looms, it’s best to keep your powder dry, whilst keeping an eye open for opportunities as soon as events reveal the future. Until then, nut–gathering serves to provide an insurance policy against unpleasant economic surprises.

Larry King Is Preparing for the Final Cancellation


Five years after CNN pulled the plug on his show, the TV host is thinking about whom he’ll book for his funeral.

“Bring me a plate of radishes.’’

‘‘Yes, Mr. King.’’

‘‘I don’t eat radishes, except when I’m at the Palm. It’s one of my rituals. Rituals are important.’’

We sat at Larry King’s table at the Palm steakhouse in Washington, a city the cable talk impresario has not lived in since 1997. Yet King, now 81, remained central to the restaurant’s scenery.

Caricatures of him hung on the walls, depicting various stages of his perpetual middle age. People walked by and said hello and told him they always watched his show, even though King left CNN four and a half years ago. ‘‘It’s the ageless Larry King,’’ said one well-wisher, shaking his hand. Every celebrity over 80 gets to be called ‘‘ageless.’’

When he is not interviewing anyone, just eating lunch, King tends to slump in his chair. On TV, you experienced him mainly as sharp angles, arched shoulders and pointed elbows, and a collection of features and accouterments (suspenders, saucer glasses). King’s once-black hair has now assumed, or been assumed with, a coppery orange color. The beige of his unmade face lacks the glow that radiated when King was at his peak and framed by the edges of a screen.

When you grow older, routines become important, King told me. Even to someone as emphatically nonreligious as he is, they can lend a measure of sanctity: the morning bagel quorum King leads with his old friends at the Original Brooklyn Water Bagel Co. near his home in Beverly Hills; his daily hairstyling appointment at the JosephMartin Salon (near the bagel place); his bowl of Honey Nut Cheerios with blueberries; his pills, parceled out by dosage (Lipitor, Plavix, fish oil, multivitamin tablets and human growth hormone). ‘‘I like the stability,’’ King said. ‘‘Don’t give me a surprise birthday party.’’

Like all old people, or so King claims, he likes to read the obituaries first thing every morning. God’s box scores. He can’t turn away. People might learn about someone who died at the age of 88, or 89, and say, ‘‘Oh, he lived a long life.’’ But that’s not how King views it. ‘‘I think, That’s only seven or eight years off for me,’’ he said. There were some 78s and 79s in the paper that morning. He shook his head. Negative math is terrifying.

King is fixated on dying. Everyone is, to some degree, but not like him. Shawn King, his seventh wife, told me that Larry talks so much about his demise that he started to upset their teenage sons, and she had to tell him to knock it off. ‘‘He kept saying, ‘Listen, I’m not going to be around much longer, boys,’ ’’ Shawn said. ‘‘ ‘Whatever you do, don’t let your mother put me in a home.’ ’’ Recently, Larry and Shawn met with some insurance and lawyer types to go over their family trust. They were talking about his will and who got what and the tax ramifications.

‘‘After about 20 minutes, I said, ‘Wait a minute,’ ’’ Larry told me. ‘‘I won’t be here when this happens. I won’t exist. Everything in that conversation had nothing to do with me.’’

King’s father died of a heart attack when King was 9. That, he says, is what probably initiated his own death obsession. ‘‘I took that as my father abandoning me,’’ he said. ‘‘I had a psychologist explain that to me once.’’ Not a psychologist King ever saw professionally, but a guest on his show — his kind of therapist.

Over the quarter-century that he hosted ‘‘Larry King Live,’’ King was always asking his guests, ‘‘What do you think happens when we die?’’ I saw him ask that of the ageless guitarist Carlos Santana. Santana said that upon expiration, he expected to merely enter a different room and then receive a standing ovation from the likes of John Coltrane and John Lee Hooker. ‘‘So you believe they’re somewhere?’’ King asked. Yes, Santana was certain. ‘‘What makes you believe that?’’ King wondered. ‘‘You can’t prove it.’’ Santana suggested that faith ‘‘is acceptance of things not seen.’’ This is a story we’ll be following.

Luminary deaths accounted for some of King’s best-rated programs. He would host remembrance panels. He spent five hours receiving mourners via phone on his radio show on the night John Lennon was killed (‘‘Milton Berle called in’’). ‘‘Who elected Larry King America’s grief counselor?’’ James Wolcott of Vanity Fair asked in 2009, during a summer when King was convening nightly shiva on CNN for Michael Jackson and Farrah Fawcett.

‘‘At Richard Nixon’s library, the day after he was taken to the hospital, if you look at his calendar, it says ‘Larry King Live,’ ’’ King told me. ‘‘He was going to be on my show, but he died.’’ The same thing happened with Bart Giamatti, the commissioner of baseball, in 1989: ‘‘He was supposed to come on my show a few days after he had his heart attack.’’

King had planned to have one of his all-time favorite guests, Mario Cuomo, speak at his funeral. But then Cuomo went and abandoned him, too, last January, at just 82. Maybe Bill Clinton would be willing to speak instead, King wondered. He likes Clinton. ‘‘I bet he’d do it.’’

King flashed a satisfied smile, but then his face suddenly went blank. He tends to do this, as if savoring an image (a president at his funeral — such a tribute!) and then being slapped back to his default reality (‘‘But I won’t be there to see it!’’). He lingers on the unimaginable.

‘‘I can’t get my head around one minute being there and another minute absent,’’ King said.

Larry King died in 2010. Not for real, but when CNN pulled the plug on King’s show after 25 years, it felt like a dress rehearsal for the real cancellation.

King was 77 when his run ended at the network. He told me he could see it coming. Cable news had changed. It had become all about shouting, the left-versus-right paradigm and ‘‘good TV’’ — meaning spectacles. Fox News had gone right, and MSNBC had lurched left, and somewhere in the shrinking American middle was the once-dominant CNN, adrift in a loud new century.

King’s bosses kept pushing him toward shorter segments, not the long-form interviews he always did while hunched over a bulbous RCA microphone with a pointillist map of the world behind him. CNN made him read viewers’ tweets on the air.

At the peak of his run, in the late 1990s, ‘‘Larry King Live’’ regularly reached more than 1.5 million viewers a night in the United States. That was a much smaller audience than network prime time, but King’s novelty was in his global reach. While international TV ratings are difficult to measure, King was the big rounded face of the network at a time when CNN was becoming the country’s signature media export. He was as recognizable abroad as Ronald Reagan or Bill Clinton, and largely without the geopolitical baggage. His trademark eccentricities were borderless. Mikhail Gorbachev met him for dinner wearing suspenders.

Paul Newman said that whenever he landed abroad, the first thing he did was turn on CNN and look for King. He was Newman’s own connection to home. King could be a cultural touchstone as well as a familiar background noise. Stephen Colbert told him he lost his virginity while listening to King’s radio show.

King was a broadcast pioneer who bridged the solemn authority figures of yesteryear, like Walter Cronkite, with today’s ‘‘good TV’’ yellers. He would talk about whatever the story of the day was, highbrow or low (presidents and movie stars and JonBenets). His style, endurance and presence became a form of American confidence. Conspicuously, King’s replacement, the British host Piers Morgan, was seen as a critic of his adopted country. He would use the ‘‘you people’’ construction, as if to signal that any confidence — America’s, television’s and certainly CNN’s — was no longer warranted.

Washington’s media-political fancies always viewed King with both respect and derision. The latter arose from King’s refusal to play the tough-guy inquisitor that had become the pose of so many ‘‘TV journalist’’ types. My colleague Maureen Dowd once called King ‘‘the resort area of American journalism.’’ King had an unabashed interest in celebrity and scandal, devoured the trial of his old pal O.J. Simpson and spoke at the funeral of his dear friend Tammy Faye Messner (formerly Bakker). Yet the famous and powerful coveted King’s audience and appreciated his unthreatening style. His questions were short, basic and often open-ended (‘‘Never been in the hotel? Never?’’ he asked Nixon, referring to the Watergate Hotel); solicitous (‘‘How did you emotionally hold up?’’ he asked Clinton); and at times slyly provocative (Why do you keep saying if the Holocaust happened? he asked President Mahmoud Ahmadinejad of Iran). He asked Ronald Reagan what it was like to be shot.

King let his guests talk until he became bored, which tended to happen quickly. ‘‘Larry had terrible A.D.D. issues,’’ says his brother, Marty Zeiger. ‘‘If there had been those drugs back then, he might never have learned to compensate and never would have become Larry King.’’

There is an old Vaudeville saying: ‘‘If you’re not appearing, you’re disappearing.’’ King appeared five times a week; he was the quirky uncle who kept showing up for dessert until you found yourself setting a place for him in the den out of habit. He appeared in 22 movies, playing (of course) himself. No one was appearing more than Larry King, until he wasn’t.

King’s friends wondered if losing his CNN platform and vanishing from nightly view would kill him, as a heart attack, quintuple bypass, prostate cancer and diabetes had not. They worried about him in the same way that people worry about older people falling into death spirals after their spouses of many years die. The analogy is imperfect in the case of King, who has survived quite well through the dissolution of seven previous marriages (he married the same woman twice). But the parallel still came up a lot during my conversations with his friends and family.

‘‘It’s like the camera was Larry’s lover,’’ Zeiger told me. King speaks of being transformed the second he went on the air. On his first day, his boss demanded that he jettison ‘‘Zeiger’’ (‘‘too ethnic’’), so he went from being Lawrence Harvey Zeiger, a poor kid from Brooklyn who in 1957 took a job as a fill-in host at a Miami radio station, to being Larry King. A revamped and royal identity was born the second the red light went on.

Television can be a brutally seductive business for those who become personalities.

‘‘Appearing’’ becomes their oxygen. Maybe that’s why they call it being on ‘‘the air.’’ As in: the air that King filled for decades and might as well have breathed. But then suddenly there was no air, no ‘‘Larry King Live’’ — was he now Larry King dead?

I asked King if he was ready to leave CNN or if the network fired him. It was closer to the latter, he said. He always received three- and four-year contracts. They offered one year. ‘‘I saw it as writing on the wall,’’ King said. CNN aired its last ‘‘Larry King Live’’ on Dec. 18, 2010. The low point for King came a few months after that, when he was watching TV at home on a Sunday night and learned that Osama bin Laden had been killed. King jumped to his feet.

‘‘I needed a car to come pick me up and take me somewhere,’’ King told me. ‘‘I needed to be on the air. I needed a red light to go on. But I had nowhere to go.’’

It was 2013 when I first discovered Larry King in his broadcast afterlife. I had written a book, and someone called and invited me to go on King’s show. Larry King? I thought he was long ago hauled off to the curb like an old Zenith. That was how most people responded when I shared — bragged — that I would be going on with Larry King. ‘‘Larry King still has a show?’’ they would say. ‘‘Is Larry King still alive?’’ It can be easy to lose track sometimes, especially of those aging, sick and canceled celebrities who reside in that purgatory between the where-are-they-nows and the obits. Did we miss King’s exit somewhere among the deaths of Roger Ebert and Jonathan Winters and Annette Funicello?

King had landed at an online production outfit called Ora TV, which was started by the Mexican billionaire Carlos Slim. Slim was a longtime fan of King’s and wanted him to remain on the air. He funded the production company to keep King’s franchise alive, essentially, and even let King pick the name: ‘‘Ora’’ is Shawn King’s middle name.

Of course I would go on with King. It felt like a visit to the cultural grave: the suspendered icon sitting in Los Angeles and visible again on a monitor, while I sat in a remote studio in Washington. King closed the interview by asking me, ‘‘Is the Palm still the place to go in Washington?’’ Sure, I said. He asked: ‘‘Next time I come to Washington, can we have lunch together at the Palm?’’

We met at the Palm last March. I took an immediate liking to King, beyond the camp novelty of the encounter itself. (It’s a bit unsettling to sit in the flesh with someone whose image so wholly resides in a pixelated nether-dust.) We started talking a lot on the phone after that — a kind of ‘‘Tuesdays With Morrie’’ tradition, only with Larry.

King was thrilled for my interest. ‘‘I’m being followed by The New York Times,’’ he told everyone when I was nearby. ‘‘I must be somebody again. Go figure.’’

No topic between King and me was off-limits except one: Piers Morgan. King’s publicist, Jen Hobbs, requested that I refrain from asking King anything about the host who succeeded him on CNN. Things had become ornery between King and Morgan, whose own show was canceled last year. King said in an interview with Howard Stern that watching Morgan flame out in his slot was like when ‘‘your mother-in-law goes over the cliff in your new car.’’ Morgan then called King a ‘‘poisonous twerp’’ and a ‘‘graceless, petty little man’’ on Twitter. I agreed not to bring up Morgan with King. That was fine, because King brought Morgan up himself, almost immediately (‘‘What I didn’t like about Piers is that he made that show all about him’’). Shawn King, a self-described ‘‘good Mormon girl,’’ later weighed in, too — and in language hardly befitting a good Mormon girl.

King really wanted me to know how busy he was. He is now the host of three shows, on various outlets, including one about baseball (‘‘Larry King at Bat’’) on the Los Angeles Dodgers’ cable network. He does a lot of paid speaking gigs (‘‘white-collar crime’’). He endorsed a line of suspenders. On this trip to Washington, King told me he would sit for interviews with The Washington Post, The Washington Examiner, WTOP radio and podcasts, among other media engagements.

He invited me to join him at the Ritz Carlton for breakfast with David Theall and Jason Rovou, ex-CNNers who followed him to Ora. Everyone but King ordered eggs, which he found offensive. ‘‘I despise eggs,’’ he told me, and added, by the way, that ‘‘Jews like things very well cooked. Did you know that?’’ (I did not.) Other diners stared as King walked out after breakfast. ‘‘I don’t think people would recognize the governor of Wisconsin if he walked in here,’’ King said, referring to Scott Walker, the presidential candidate. A dark-skinned man approached and asked King if he would pose for a photo.

‘‘Where are you from?’’ King asked.

‘‘Saudi Arabia,’’ the man said.

‘‘I’m a Jew!’’ King informed him. ‘‘You sure it’s O.K. to get your picture taken with a Jew back in Saudi Arabia?’’

The man assured him that indeed Larry King had many fans in Saudi Arabia. They smiled for the picture. ‘‘Thank you, Mr. King,’’ the man said. They shook hands, and King looked him in the eye. ‘‘Now,’’ he said, ‘‘please, go fight ISIS!’’

That night, King would be appearing at the Newseum, a cutesy-named gallery of American journalism history on Pennsylvania Avenue. The event was billed as ‘‘A Life in Broadcasting: A Conversation With Larry King,’’ and he was interviewed onstage by the former CNN anchor Leon Harris. ‘‘A black and a Jew!’’ King said, referring to Harris and himself. King then took it further and asked Harris, ‘‘Why did you want to eat at Woolworth?’’ Nervous laughs and a few gasps: Uncle Larry had arrived at the Seder.

King removed his jacket to reveal purple suspenders, and Harris listed career credits. He called King ‘‘an innovator’’ for nearly seven decades and ‘‘cable’s version of Walter Cronkite.’’ They talked about King’s old USA Today column, a weekly hodgepodge of one-note items, opinions and plugs, as ‘‘a forerunner to Twitter.’’

‘‘I never thought I would be a forerunner,’’ King said. The column was widely read, and mocked, notably by the comedian Norm Macdonald in a ‘‘Saturday Night Live’’ skit from the late 1990s. Macdonald would look into the camera and shout proclamations in King’s voice. He nailed its energetic banality. (‘‘Here is the dirty truth, gang: Poland Spring water does not come from Poland!’’)

Jerry Seinfeld credits King with inventing the random spirit of Twitter years before the technology enabled it. ‘‘Larry King didn’t invent drivel, but he certainly created the business model for drivel, which was the column in USA Today,’’ Seinfeld told me. No disrespect to drivel: ‘‘I’ve made a pretty nice living off of drivel myself,’’ he said.

King’s Twitter feed, @kingsthings, has become a cult-camp sensation, with 2.6 million followers. He dictates his projectiles into a dedicated voice-mail box. From there, an assistant transcribes them onto Twitter. The result is an exuberant self-parody, or a social-media burlesque, or (if you prefer) art. It’s somewhat indistinguishable from the verbal crawl I had been observing in person.

‘‘I rarely use lip balm.’’

‘‘Kiev is a hell of a town.’’

King at the Ora TV studio in Glendale, Calif. Credit Graeme Mitchell for The New York Times

‘‘The fear of a colonoscopy is unwarranted.’’

He mostly produces them in binges, late on Sunday nights. They are best consumed in binges too, one after another, as if you’re speed-eating M&Ms one at a time. Seinfeld told me that King translates so well to Twitter because he understands portion size. ‘‘Sometimes we just want to experience verbiage but nothing that requires any mental digestion,’’ Seinfeld said.

‘‘The question is: Is he going to get even better when he enters dementia?’’

‘‘The rat is perfectly named.’’

‘‘It’s strange, but I just thought about my tricycle.’’

‘‘I love to scratch an itch.’’

The tweets convey wistfulness at times. There are notes of longing, nostalgia and mourning.

‘‘I can’t stop thinking about the late Mario Cuomo… I miss him so much.’’

‘‘Do you funeral homes ever have a bad year?’’

‘‘I love the sound of little kids in a schoolyard.’’

The Newseum conversation eventually veered to the specter of King’s final episode, his death. How can a story end well if he winds up in the ground? He is planning to avoid that, he told Harris. King takes four human growth hormone pills every day. People think H.G.H. is illegal because athletes are suspended for using it. It is not, King says, and he feels great. But in case of death, King wants the Ted Williams treatment. He has arranged to have his body frozen and then thawed out when researchers discover a cure for whatever killed him — the so-called cryonics approach. (Unlike Williams, King does not wish to have his dead head cut off.) King told me later that the people behind cryonics are ‘‘all nuts,’’ but at least if he knows he will be frozen he will die with a shred of hope. ‘‘Other people have no hope,’’ King said.

In May, I turned 50. The milestone came and went and left no great psychic toll. But I found myself doing more mortality math in my head than I ever had — how many more years did I have with my kids and in my job and on this earth? I was checking the relevance clock and wondering how long before I’d be ‘‘aged out’’ myself. It occurred to me that I no longer belonged to the 18-49 demographic that TV people refer to as the ‘‘key demo.’’

I visited King at the Ora studio in Glendale, Calif. The office resembled an Internet start-up: young staff members, snacks in the waiting room. Covering the walls were photos of the octogenarian maestro posing with world leaders, the Dalai Lama and Betty White. King took a seat on a couch and grabbed his powder blue suspenders with both hands, as if he were strapping in for a ride. Over his left shoulder was a photo of him standing between Evander Holyfield and Mike Tyson while Tyson pretended to take a bite out of King’s ear.

King was getting ready to tape ‘‘Larry King Now.’’ It was a long way from CNN, but there was still a red light. King’s show is also available on Hulu and RT, the Russian state-funded television network. King is defensive about the latter. ‘‘I do not work for the Russian government!’’ he mentioned more than once. The broadcast is not subject to any approval or censorship by the Russians, as far as he knows.

The big ‘‘get’’ for that day’s show was the rapper known as Bow Wow (formerly Lil Bow Wow). Before Bow Wow arrived, King dispatched with preliminary interviews that included the author of a book called ‘‘The Rise of ISIS,’’ which King mistakenly called ‘‘The Rise of Iris.’’ This was not the first time King had called the terror brigade ‘‘Iris.’’ He has history with an Iris — Iris Siegel, a long-ago teenage crush. ‘‘Iris Siegel was every boy at Lafayette High School’s masturbatory fantasy,’’ King told me, and then for some reason felt that this required elaboration. ‘‘We all masturbated to Iris Siegel!’’

Between segments, King joined me in the waiting area while a makeup woman touched up his forehead. His flip phone vibrated. Shawn was calling. ‘‘I’m sitting here with a big admirer of yours,’’ King said. ‘‘You know, he works for The New York Times, so we both work for Carlos Slim’’ — King was always reminding me about how Slim owned a big chunk of the newspaper.

A cluster of people entered the office. ‘‘And Bow Wow has arrived,’’ King announced, hanging up on Shawn.

Bow Wow, whose real name is Shad Moss, enlisted King in a selfie. He called King ‘‘iconic’’ and appeared slightly nervous. ‘‘Larry is huge with rappers,’’ David Theall explained to me. I sat in the control room while King walked Bow Wow onto the set. The interview started, and King's questions were awesome:

‘‘What makes a good rapper?’’

‘‘Is it singing?’’

‘‘You can hum a rap song?’’

Producing ‘‘Larry King Now’’ at the Ora TV studio. Credit Graeme Mitchell for The New York Times 

In response to a query about his upbringing, Bow Wow told King that his father was never in the picture, which inspired this declaration from the host: ‘‘The strongest individual in America is the black single mother!’’ King closed with a lightning round in which he asked, If you could have one superpower, what would it be? Bow Wow answered that he would like to be invisible.

‘‘Me, too!’’ King exploded.

Later, I mentioned to King that I was surprised by his dream of invisibility. It was the opposite of what I expected from someone who relished being so present and seen. ‘‘Oh, but think about it,’’ King said. ‘‘If I could be invisible, I could walk on a plane, I wouldn’t need a ticket and I could sit with the pilot.’’ He would reap such a bonanza of consequence-free mischief and information. But if he were invisible, then how would he disseminate what he learned? No one would see him on TV. King made an adjustment: He told me he would like the ability to go back and forth between visible and invisible. He could still have dinner with friends. And then he could make himself invisible and follow them home. ‘‘Would I like to see my friends having sex? Yes.’’

He added the caveat that his friends wouldn’t be at their current ages. ‘‘Unless they have pretty wives.’’

Shawn King, who is 55, can be both protective and contemptuous of her husband. Wife No. 7 has been the current Mrs. King for nearly 18 years. They met outside Tiffany’s in Beverly Hills, in a chance encounter that inspired the name of their first son, Chance, now 16. Their second son, Cannon, 15, was named after the street he was conceived on, North Canon Drive. (King clarified that the event actually transpired in a house, not on the pavement.) King’s marriage to Shawn, an actress, singer and former homecoming queen at North Hollywood High School, is the only one of his eight that has lasted into double digits. King has three grown children with his previous wives; some of the women from his past have spoken most uncharitably about King in various forums — recurring themes being infidelity, immaturity, self-absorption and deception.

But he’s capable of great charm when pursuing women, and they often marvel at King’s wizardry in this regard. ‘‘When he was trying to woo me, he kept sending me over boxes of Hot Tamales,’’ Shawn told me. ‘‘He knew I loved them — the candies. It was very sweet.’’ He lured prospective dates to dinner with famous friends. ‘‘I love the chase!’’ King told me, and his eyes — gray slits behind glasses — suddenly bulged with life. (‘‘I love to scratch an itch.’’)

‘‘Let me tell you the story about the first night I spent with Angie,’’ King told me, referring to the actress Angie Dickinson, the star of ‘‘Police Woman.’’ King loves telling people, including me (three times), that he used to go out with her. Dickinson would seem the pinnacle of the former Larry Zeiger’s ‘‘look how far I’ve come’’ routine.

The morning after his ‘‘night with Angie,’’ King called his best friend from growing up, Herb Cohen. ‘‘Guess where the hell I am, Herbie?’’ King said. ‘‘I’m at Angie Dickinson’s house!’’ That’s the whole story.

‘‘This wouldn’t be for print,’’ King told me. ‘‘Or, I don’t know, maybe it would be for print. You tell me?’’

Inevitably the chase would end — with a warded-off advance, or lunge, or surrender, or wedding. And then King stopped trying. Shawn told me about an evening shortly after they were married. They were in the back of a limo, and King raised his left buttock and expelled a thunderous fart. Shawn was appalled. King merely shrugged. ‘‘What, do you want me to be uncomfortable?’’ said King, the incurable romantic. Shawn told me, laughing, that at that point she knew the courtship was officially over.

I asked King when we were eating at the Palm how he and Shawn had managed to stay together. They were separated for about two months in 2010. It was an unfortunate time.

Shawn believed King was having an affair with her younger sister, Shannon. ‘‘It was just a flirtation,’’ King insisted. ‘‘I never made love to her.’’ He and Shawn reunited for the sake of the boys, and, King said, because they missed each other. He was being treated for prostate cancer at the time. ‘‘I’m still sorry I did it,’’ King said. I assumed he was talking about Shannon, but he was referring to the prostate surgery. The doctors were split on how to proceed, and King chose the more aggressive treatments. ‘‘Now I can’t get it up,’’ he said. He quoted the former Yankees manager Joe Torre, another prostate-cancer survivor — King is always name-dropping wisdom through his celebrity friends. ‘‘What would you rather do, have sex or die?’’ he said. The waiter arrived with more radishes, just in time.

The day after the Bow Wow interview, King was driving me around Beverly Hills in his black Lincoln. The car smelled new and was perfectly uncluttered except for a tube of Polident on the dashboard. A handicap-parking pass hung from the rearview mirror even though King can walk perfectly well (his father-in-law, who was not with us, suffers from neuropathy in his feet and walks with a cane). King leases a new Lincoln every two years, and I made a crack about his doing the same with wives. He did not laugh.

‘‘I understand the impulse to always be looking for something else,’’ King told me. That extends to the culture, and especially television viewers, who are seeking the next thing and leaving behind the old standbys. I asked King if, for the sake of changing with the medium, he ever considered becoming more combative on CNN. Never. ‘‘If you’re combative, you never learn,’’ he told me. He would always want to make his guests feel welcome. ‘‘Oh, I would love to interview Hitler,’’ King said. Ideally, it would be several years after World War II, had Hitler lived. King might prepare a little bit (‘‘maybe I’d skim ‘Mein Kampf’ or something’’) but would mostly improvise. ‘‘Hitler had a mother,’’ King said, and he would want her to come on his show too. He chuckled at the thought. ‘‘I’d ask her, ‘Why didn’t you have an abortion?’ ’’

We stopped back at the Kings’ house to pick up Karl Engemann, Shawn’s 85-year-old father. He is a sweet and gentle man, and an observant Mormon. King introduced me to his father-in-law and started in on one of his riffs about how religion is a big delusion. ‘‘Karl thinks he’s going somewhere after he dies,’’ King said, and his voice assumed a slightly baiting tone.

‘‘Don’t you, Karl?’’ Karl nodded, and King smirked.

I asked King how he’s so certain that the afterlife is not a portal to some glorious dimension.

There was silence for a few blocks. This is a topic he has surveyed deeply: ‘‘Martin Short says people die every night when we sleep,’’ King told me. Sleep is like a nightly preview. I mentioned that people find sleep pleasant, so why shouldn’t death be?

‘‘I don’t know what I’m doing when I’m sleeping,’’ King replied. ‘‘I’m not anything.’’

It was early evening when we returned to the King house. Shawn was out getting her nails done.

King disappeared upstairs and returned with a bottle of human growth hormone, which he presented to me as if he were handing over a cherished stash of gold pellets. ‘‘Here, some H.G.H. for the road,’’ he said. ‘‘I’ll send you home healthy.’’ He showed me the items in his den, or ‘‘trophy room’’ — the cardboard cutout of Sinatra wearing Jewish payos, the portrait of King made entirely of jelly beans, his Emmy for Lifetime Achievement. ‘‘Try lifting this thing,’’ King told me. ‘‘It’s heavier than the usual Emmy.’’ He mentioned that George Washington University has tapes of his old radio show, in case his kids ever want to listen. On the wall above the front door, he pointed to two bright paintings that his sons made in an art class when they were toddlers. ‘‘Carlos Slim told me these were works of genius,’’ he boasted.

‘‘You never know where you might find genius.’’

He kept walking me into new rooms, showing off various accolades and telling me of others.

‘‘You know I was nominated for a Shorty Award,’’ King said. ‘‘That’s for social-media excellence — for the tweets.’’ What happens to his tweets after he dies? Could they offer a few stray pixels of Larry immortality? Or will they just fade away and be forgotten? ‘‘I won’t be here anyway,’’ King concluded, ‘‘so what does it matter?’’

Everything was dark around him when I left except the glow of the TV.

‘‘If my wife is late for my funeral, I will be very angry.’’

King would love to attend his own funeral. He would watch invisibly over the proceedings and laugh. ‘‘I would like the ceremony to begin, ‘Today we are honoring a 160-year-old man who was caught in bed by an irate husband,’ ’’ King said. ‘‘ ‘And the funeral is late because it took six days to wipe the smile off his face.’ ’’

The service would be at a synagogue, out of respect for his mother. It is unclear what would then happen to his body, how it would be frozen and where it would be housed, to say nothing of his soul. But he wants a rabbi to say the Mourner’s Kaddish. Rituals are important. ‘‘I think Clinton might speak,’’ King mentioned, again.

Mark Leibovich is the magazine’s chief national correspondent and the author of “This Town” and “Citizens of the Green Room.”