Dollar Collapse

What can you say about crypto-currencies that hasn't been said already. However, Kerry and I are proposing a new form of crypto backed up by Tulips, preferably the Dutch variety. After all, Tulip prices only go up, right? And what of all those ICO's (Initial Coin Offerings) that are headed to the moon and back. Just today Bancor raised $153 million. Pretty good work if you can get it.  Now Amazon is taking over Wholier Than Thou Foods. What could possibly go wrong. Just take an old fashioned business, add robots and internet ordering and make a zillion dollars. It always works out in the long run, but then again in the long run we're all dead. 

Terrorist attacks have become a regular occurrence in England. What can be done about it? Seems like there's always a reason why they didn't stop the guys from carrying out the attack, even though they were well aware of them before the deed was done. Will vacating the Middle East and leaving them to their own demise solve the problem? John believes it couldn't make it worse.  Trump's withdrawal from the Paris Climate Accord is irrelevant. Cheap solar will eventually make the matter moot, if it's not already. There won't be much CO2 when everyone is driving an electric self-driving vehicle and generating their energy from the sun. 

Employment numbers came in highly negative. Full time employment down, bartenders and part-timer employment went up. This is bad news for the economy and gold/silver is going up as result. Illinois's debt was downgraded to slightly above junk. The emerging public pension crisis is just about to begin. Get ready for the new paradigm. 

Trump's first overseas trip have proved and unmitigated success. While it looks good now, we've never been able to figure out the right move in the Middle East. It won't be settled anytime soon and expect periodic flare-ups. But defense stocks are doing well now, which is good for the market.  Looks like the achilles heel of crypto-currencies has been exposed. While you can create many more Bitcoin units, you can create an infinite supply of crypt-currencies. Where will it end. ICO's (Internet Coin Offerings) are bypassing the stock market and the SEC. We'll see how long that lasts. 

It's no secret that finding the mother lode keeps getting harder and harder to do. A new generation of miners is entering the industry. They are younger, creative and don't hesitate to utilize the best new technologies that are revolutionizing the industry. In addition, the majors have effectively abandoned exploration and have subcontracted it out to the juniors. Large mining companies are very slow to move and are generally unable to take advantage of new opportunities. Thus the junior miners exist to locate and uncover new mines that will eventually be taken over by the majors. That's why a conference like the Metals Investor Forum has taken on so much more importance in recent years. 

Kerry and John discuss - News from China says that the world's largest aluminum producer, China Hongqiao Group,  is on the brink of insolvency. This is a company that's nearly twice the size of Alcoa. It's been showing amazing growth and profit numbers for year. Now it turns out that they've been relying upon Chicom accounting and the profits were fraudulent and illusory. The company is begging for a government bailout to avoid civil unrest. Have we reached the point where everything is too big to fail? Perhaps, but then eventually the party that bails everyone out will wind up failing as well. Get set and buckle your seatbelt for that day may soon be upon us.  Especially if Marine LePen triumphs in the upcoming French elections. The same people who said Brexit couldn't pass and were all in a lather about President Hillary Clinton are saying LePen's an outside long shot at best. But the communist party candidate has been rising in the polls as well, now sitting at 19%. This is shaping up to be a battle of the extremists and whomever wins will immediately go after the Euro. 

Debt is still growing way faster than GDP. Therefore, we're just digging a bigger hole. For most of the past 6 months it looked like we had a real recovery going. But that was an illusion. The Atlanta Fed has lowered it's 1Q Growth Projection to less than 1 percent. That's a recessionary number that won't help the economy create new jobs or to create new industries or service new debt. The debt to gdp ratio continues to increase. Unless we radically increase worldwide growth rates, we're stuck on a treadmill and a crisis will eventually occur. 

Inflation is back, thanks to the past year's global debt and money printing binge. Meanwhile populist politicians are gaining traction in Europe, threatening both the European Union and the eurozone. The world has never seen this combination of excessive financial leverage and widespread political upheaval, so the next few years might be bad for most financial assets and great for real things like gold and silver.   

The news is slow. Not much coming out of Trump. Not much coming out of Europe. Outside of the Academy Awards debacle last night, there's not much going on. We're due for something to happen shortly. Could it be the calm before the storm? John believes that the currency crisis is just around the corner, the question is which corner? We've been waiting a long time for it. 

A new administration means new policies. But the only up to a point. Debt will continue to soar, which means financial instability will only intensify. And the business cycle will do its thing regardless of who's in office -- which means a another downturn is coming. So strap in. A return to the Great Recession or something much worse is on the horizon.

Since the presidential election, US equities have been soaring – which is reminiscent of 1999 and 2006 when investors decided that “this time it’s different” and were therefore willing to buy stocks at pretty much any price. Like those previous bubbles, today’s will end badly, probably in 2017. Gold, on the other hand should do just fine. 

It's rare for the world to worry about Italy. But Sunday's referendum has the global Establishment on the edge of its seat. The worst case scenario -- from the Establishment point of view -- is the vote going against the government, causing the Prime Minister to resign and be replaced by an anti-euro, anti-EU party that throws sends Italian banks into crisis and the European economy into chaos.   

The presidential campaign is just about over, which means the US will soon start reversing out the surprisingly good numbers it has reported lately. Gold is still looking for a bottom and could find one before year-end. And the groundwork is being laid for the next generation of experimental monetary and fiscal policies, which makes 2017 an epic year for financial instability. 

Deutsche Bank, Commerzbank, the Italian banks...it's getting ugly across the pond and the worst is yet to come. Here's a brief explanation of why that's so, including derivatives, ridiculous capital rules, dumb lending practices and, of course, negative interest rates. If you're looking for short sale candidates, Europe's banks are a great place to start.  

Last week the Fed found out what will happen if it raises rates: The global financial markets will melt down. So this morning a new member of the central bank's seemingly endless army of talking heads said some soothing words, which stabilized the US stock prices. Now the question is when the Fed will finally capitulate, abandon the rate hike threats and join the global inflationary party. After last week, that's likely to come soon. Then it's off to the races for real assets. Get that gold and silver now, before it's too late. 

It's becoming clear to a growing number of people that the world's central banks, including the US Federal Reserve, have no idea what they're doing. Yet they keep on making threats, predictions and other nonsensical statements, most of which are quickly exposed as such. Is this the end off their credibility -- and the beginning of gold's new bull market? 

  Normally, when one asset class is expensive others are cheap, making it reasonably easy to use historical relationships to decide where to invest. That's not the case today. Every major asset class, including stocks, bonds and even precious metals, are looking at best temporarily overbought by past standards, and at worst (in the case of stocks and bonds), wildly overvalued. Here's a discussion with some tentative advice.   

Terrorists and other crazies have figured out that they don't need guns. Trucks, axes and machetes will do just fine. Meanwhile, political parties around the world are imploding or otherwise descending into chaos. Welcome to the new normal, where excessive debt makes the old ways of muddling through impossible. Advice on how to invest for the inevitable bust will follow shortly. 

Brexit looked like the end of the world -- until people figured out that central banks would have to ease in response. Then markets turned positively jubilant with US stocks, for example, hitting record highs. The result: A world of mounting debts, weekly terrorist attacks and even military coup attempts alongside financial assets priced for perfection. Wonder which side is right?

Italian banks are collapsing, with Germany's Deutsche Bank not far behind. Anti-euro parties now lead polling in France and Italy. Interest rates around the world are plunging. Add it all up and it's clear that the developed world is heading into a very tough patch with results ranging from slower growth all the way out to global financial crisis. Only gold is immune to what's coming. 

Expect the UK to drop out of the headlines as it grapples with the nuts and bolts of choosing new leaders and untangling itself from the EU. The big news going forward will be the trend Brexit started, as other European countries consider their own variations on the "leave" theme -- with all that that implies for interest rates, bank stocks and general financial instability. Fascinating and terrifying year ahead. 

Brexit is dominating this week's headlines, but the event itself is less important than what it signifies, which is the increasing loss of faith in governments and central banks. Voters no longer trust big institutions to act in their best interest and are voting for alternatives of various kinds. When this lack of trust spreads to the financial markets, it's game over.

With the terrorist attack in Orlando world markets have headed down. It’s looking more and more likely that there will be a Brexit. What impact will it have? Will other countries follow? The system is ripe for a further unraveling. In its already weakened state, how much more abuse can it sustain? Gold and silver are up since the beginning of the year. They got through a minor correction the week before last and have now fully recovered, obviously a sign of strength. There’s a new financial system on its way. Get ready for it now.

John and I discuss the upcoming referendum in California, where barring a conservative reformation in the state, will certainly pass. Recent polls show 60 percent of the public in favor. This provides and interesting contrast in constitutional views of the right and the left. Everyone supports the Constitution when it comes to pushing their agenda. It’s when something they oppose is on the ballot, that all of a sudden the Constitution takes a back seat to the overwhelming need at hand. This is exactly what the framer/founders wanted to avoid when they drafted the document. The Constitution was not intended to be flexible and allow a sliding scale of enforcement. Rather, limited government was its primary goal. Perhaps we are in the process of getting back to this fundamental core belief.

Watch Brexit, the Movie, to understand why Britain might just leave the EU -- and why other members should leave as well. Meanwhile, the Saudis are apparently out of money, the bricks and mortar retailers are out of customers and Wall Street bankers are looking at mass unemployment. Brutal times for obsolete institutions!          

Macy's reports horrendous earnings and Italian banks finally reveal their non-performing loans. Share prices plunge accordingly. China, meanwhile, admits that it's over-leveraged and promises to stop borrowing. In other words, wherever you look, a global slowdown is coming and a massive devaluation will soon be the only politically feasible solution. 

China's most recent borrowing binge didn't work. Japanese and European negative interest rates resulted in their currencies going up, not down as they hoped. Global growth is slowing. Inflation is nonexistent and debt keeps rising. Only gold and silver are looking strong. The world's governments, in short, are about to panic. 

Combine record-high stock prices with weak corporate earnings, a too-strong dollar and rising turmoil in Europe, Asia and Latin America, and the result is a dangerously vulnerable market. Time to go "risk-off", in other words. But don't forget to keep buying gold and silver.

Goldman, Morgan Stanley and IBM release numbers that look, well, depression-like. Housing starts plunge, gold and silver spike, China's bond market seizes up, and Deutsche Bank prepares to name names in its gold manipulation scandal. And US stocks keep rising...what's wrong with this picture? 

Most US companies will report earnings this month, and most analysts think the results will depressing. That's bad news for stock prices and might add to the (already considerable) pressure on governments to step up their stimulus programs. Gold and silver, meanwhile, seem to like all this financial turmoil. 

Between the "Panama papers" and the DC Madam's customer list, we might be witnessing the end of personal (and corporate and government) privacy. The result? Less financial and geopolitical risk-taking and more gold buying. But don't get burned by failing precious metal dealers. Here's how to make sure you get what you pay for. 

It's just about official: With corporate sales and profits shrinking and consumer spending flatlining, the US economy will grow hardly at all this year while the rest of the world will probably drop back into recession. The result: Massive policy changes here and abroad, with major implications for stocks, bonds, precious metals and real estate. 

If easy money has stopped working, then what's left? Massive deficits, of course. Pressure is building on governments around the world to increase spending and pay for it with borrowed funds. Sound familiar? It should, since it's what they've been doing on and off for decades. But this time, "fiscal stimulus" will, like QE and NIRP, turn out to be too much of a good thing, with dire consequences for just about everyone. 

What do record corporate share repurchases, the rise of Modern Monetary Theory, China's attempts to support its currency and Europe's political turmoil have in common? They're all examples of big players on the global stage repeating the same behaviors while each time expecting a different result. They'll be disappointed again, and the consequences will be epic. 

Over the next couple of weeks the Chinese, European, US and possibly Japanese central banks will say things that move the markets. None of this will change the fact that the global economy is slipping into a deflationary depression, but in the short run, traders might once again be fooled. Gold, meanwhile, has had a great run and might be ready for a correction. But don't worry. Reality (terrible for mainstream investors, great for gold bugs) will win out in the end. 

Gold just finished its best two months in several years, and a prominent gold mining analyst has finally turned bullish. Meanwhile, the European Union continues to suffer the death of a thousand cuts, with Britain threatening to leave and other members rebelling against Germany's liberal immigration policies. The world, in short, is becoming ungovernable. 

Money is pouring out of banks and into home safes, leading to calls for the elimination of cash.  Britons are thinking of leaving the EU, sending the pound sterling down and gold up (in pound terms). Silicon Valley unicorns are dying (you'll have to listen to find out what that means). The global financial crisis, in short, has acquired some new facets, each of which could cause widespread trouble in the year ahead. 

Another Monday, another extreme market move. This time, though, underlying conditions are changing in an especially serious way. European banks are running into various kinds of trouble that, if not resolved in a hurry, might lead to a replay of the 2008-2009 financial crisis. So keep an eye on Banca Monte dei Paschi in Italy and Deutsche Bank in Germany. As they go, so might go the world in 2016. 

A few weeks of falling stock prices have led the world's central banks to respond in their usual way, with lower interest rates and easier money -- in other words with the same policies that failed to prevent the ongoing slide into deflationary recession. The result: Over $5 trillion of bonds worldwide now trade with negative yields (meaning they charge their owners instead of paying them interest), by far the most ever. Anyone who thinks this will return the economy to "normal" hasn't been paying attention. 

Last week's dead cat bounce ended with a thud on Monday. Oil plunged, stocks retraced more than half of their bounce, and a couple of manufacturing reports reinforced the sense that the US is tipping into recession. Meanwhile, political systems around the world continue to teeter on the edge of (what establishment elites would consider) the abyss. A Donald Trump/Bernie Sanders race is now at least conceivable in the US this November, while formerly fringe parties of both the right and left are gaining power in Europe. That's what happens when you grossly mismanage the economy. 

On Monday, stocks tanked around the world and so did oil, breaking $27. On Tuesday things looked better. Central banks were jawboning, with Mario Draghi making noises about intervening. The Chinese were also busy buying stocks. The true test is when the banks really start intervening and whether they will be able to reflate another cycle. At some point this strategy is bound to fail. Will it be now or the next time? That past couple of weeks have seen a very brutal bear market. If you look at the average stock, it has lost more than 20 percent. Sounds like a bear market in the making with tech stocks leading the way. 

For US stock markets, last week was the worst start to a year EVER. And lots of other countries were hit even harder. What happened? In two words, debt and China. We've borrowed way too much money in the past few decades, so a crisis was long overdue. And China's myriad mistakes are now impacting the rest of the world. Toss in a eurozone political crisis and Middle-East war, and as goes January, so might go the rest of 2016. 

The sound money community woke up this morning to a world finally behaving rationally — which is to say cowering in abject terror at the prospect of insane levels of debt, criminal incompetence at most major governments and geopolitical turmoil on a scale not seen since Vietnam, if not WWII. Stocks are plunging everywhere (with the Chinese market closed because of instability), gold is surging, and the “buy the dip” voices in the mainstream media are vacillating between bemusement and panic.

2016 is off to an eventful start. Already, Iran and Saudi Arabia have blundered into a Middle East confrontation while China has had to close its stock markets to prevent a melt-down. On Monday the turmoil spread to the developed world, with US and European share prices plunging while terrified capital poured into cash and gold. The likely result? More hedge fund failures, plunging corporate profits and yet another central bank attempt to preempt market forces by bailing out everyone in sight. Will it work again? Maybe not. 

Gold is down in the US but rising in most other places. Could this be the start of the next bull market in precious metals and mining stocks? Meanwhile, the shape of next year's monetary policy is becoming more clear, and it's unlike anything seen since, well, biblical times. You'll be amazed and probably shocked.     

The Dallas Fed just announced the Texas numbers and they are terrible. The manufacturing report is abysmal at negative 20. Texas is heading into a recession due to the oil price implosion. What's really bad is that the Oil Patch kept the US Economy afloat during the post-crash era. Is there possibly another sector that can keep it all going? Junk bonds are becoming worth what their name implies. So what's next? Does it spread to the rest of the economy or will it be contained? 

Three smaller stories -- a debt default by a Mexican construction firm, Spain's recent election of an anti-euro government, and Brazil's replacement of its finance minister with an easy-money political operative -- combine to paint a picture of a world that's heading inexorably towards a financial mess. It will begin with a wave of defaults, as emerging market borrowers of US dollars are unable to manage their debts. Then a critical mass of newly-elected (or newly-configured) governments will throw austerity and other related notions of fiscal restraint out the window. The result will be another wave of aggressively easy monetary and fiscal policies that will set the stage for an epic crisis. Get the details here. 

  John writes, "Sometimes one big event dominates the landscape, like last week when the Fed raised interest rates. Other times a bunch of less-universally-significant-things add up to a meaningful story. And the story that follows here is, of course (given the venue), ominous.  First up is the much-discussed US$9 trillion that developing countries borrowed back when the dollar was weak and their currencies were relatively strong. Pundits have been warning that with the dollar soaring this debt was largely underwater and therefore a threat. But as far as anyone could tell it wasn’t blowing anything up.  Then on Friday a big Mexican construction company ICA has defaulted." Listen on to hear more about those dominoes.     

Interest rates were finally increased after many years of threats/promises by the Fed. Economic numbers coming out of the Philadelphia Fed are decidedly negative and portend more economic weakness. Oil prices are going lower and there's stories of tankers full of the stuff not being able to find a will storage site. This is bad news for the oil patch, the banks and junk bond holders. The bond issuers will be defaulting en masse and this could lead to another banking crisis or a stock market collapse. Corporate profits were down 5% last year and could fall more this year. Combined with the imploding junk bond market there could be a major market collapse in early 2016. So keep your eyes open and be ready for the opportunities that will inevitably arise.

John writes, "For a while there, companies deemed to be highly risky were nonetheless able to borrow money for less than 6%. And borrow they did. Frackers, ultra-high-leverage retail chains and various other close-to-the-edge entities slurped up trillions from yield-starved investors who had forgotten about the other side of the risk/return equation.  That this hasn’t worked out so well is not much of a surprise. But the speed with which it has gone bad is still breathtaking. The following chart from Bloomberg illustrates just how fast an illogical market can be brought back to reality."

In Greek plays the authors were never sure how to write the ending. They used a technique known as the deus ex machine, now referred to as the Hand of God to magically solve the seemingly unsolvable. John asks if the Fed is not modern man's deus ex machine. But perhaps they're running out of their magical god-like powers. How will they save Kentucky or Illinois's pension plans, or the thousands of other public pension plans that are heading towards insolvency? The answer isn't yet known, but perhaps the deus ex machine is being dusted off now.