Category Archives: Housing Market

Make America Great Again: Buy Extremely Overvalued Stocks

Key Economic Data Continues To Show A Recession

The stock market assumed a decidedly bearish tone last week, in the face of apparent domestic political instability, increasing geopolitical tensions and, most important, a continued flow of hard economic data reflecting an economy that is in recession (click image to enlarge).

The SPX declined 3 out of the 4 trading days this last week to close down 1.1% from the previous Friday’s close. It’s down nearly 3% from the all-time high it hit on March 1st. Thursday’s big red bar took the SPX below the 50 dma. On all four days the SPX closed well below its intra-day high. This indicates to me that, at least for now, stock market traders are better sellers. Also of interest, for the first time in seventeen years, the stock market declined the day before the Good Friday market holiday.

The growth in loan origination to the key areas of the economy – real estate, general commercial business and the consumer – is plunging. This is due to lack of demand for new loans, not banks tightening credit. If anything, credit is getting “looser,” especially for mortgages. Since the Fed’s quantitative easing and near-zero interest rate policy took hold of yields, bank interest income – the spread on loans earned by banks (net interest margin) – has been historically low. Loan origination fees have been one of the primary drivers of bank cash flow and income generation. Those four graphs above show that the loan origination “punch bowl” is becoming empty.

HOWEVER, the Fed’s tiny interest rate hikes are not the culprit. Loan origination growth is dropping like rock off a cliff because consumers largely are “tapped out” of their capacity to assume more debt and, with corporate debt at all-time highs, business demand for loans is falling off quickly. The latter issue is being driven by a lack of new business expansion opportunities caused by a fall-off in consumer spending. If loan origination continues to fall off like this, and it likely will, bank earnings will plunge.

But it gets worse. As the economy falls further into a recession, banks will get hit with a double-whammy. Their interest and lending fee income will decline and, as businesses and consumers increasingly default on their loans, they will be forced to write-down the loans they hold on their balance sheet. 2008 all over again.  (The commentary above is an excerpt from the latest Short Seller’s Journal).

Despite the propaganda coming from the media, the housing market is in trouble.  37% of all transactions in 2016 were flips.  A flip double-counts a sale because the house trades twice before it ends up with the end-user.  I would bet that in the $300-$600k price-bucket that close to 50% of all transactions YTD in 2017 have been flips.  This is how the mid-2000’s housing bubble ended.

Today the housing starts report for March registered the biggest drop in four months.  Single family starts plunged 32% in the midwest and 16% in the west.   Both multi-family and single-family starts dropped.  Multi-family is going to be a big problem.  Prices in NYC and Miami are dropping like a rock and vacancies are soaring because of oversupply – just like in 2007.  Apartment rental rates are falling quickly and vacancy rates soaring across all the major MSA’s.   Manufacturing  output plunged in March, likely reflecting bulging car inventories at auto dealers, which are at  a post-2009 high.   OEM auto manufacturers are closing plants and laying off workers.  The latter, no doubt, will miraculously fail to register in the Governments next employment report.

Meanwhile, the stock market continues disconnect from underlying economic reality. Auto, retail and restaurant sales are plunging. The explanation for falling retail sales is simple: real average weekly earnings have dropped two months in a row. The consumer, as I’ve been suggesting, is tapped out on two fronts: disposable income and the capacity to take on more debt.

Despite the obvious intervention in the stock market by the Fed and the Government, via the Treasury’s Exchange Stabilization Fund, plenty of stocks are tanking. As an example, I recommended shorting Kate Spade (KATE) to my Short Seller Journal subscribers about a month ago at $23.50. The stock is trading at $18 this morning – 23% gain if you shorted the stock and even more if you used puts. You can get in-depth economic and market analysis plus ideas for taking advantage of the most overvalued stock market in U.S. history via IRD’s Short Seller’s Journal. For more information, click here:  Short Seller’s Journal Subscription Information.

The Military Complex Has Taken Control Of The White House

“The astonishing reinvention of Donald Trump:”  Washingtonians are still puzzling at the speed with which the man who promised to “drain the swamp” has come to bask in its approval. In the past 10 days, Mr Trump has belied many of the city’s worst fears. Having promised to launch a trade war with China, Mr Trump is rapidly abandoning his protectionist rhetoric. Likewise, having vowed to avoid foreign wars, he has acquired a sudden taste for Levantine missile launches. And having dismissed Nato as obsolete, Mr Trump is now singing the alliance’s praises. – Financial Times, April 13, 2017

It was just a matter of time before the Deep State got its meat-hooks into Trump.   The move to remove Steve Bannon from the National Security Council and replace him with two Deep State operatives who had been formerly removed from NSC was our signal that the Deep State had restored its control of the Oval Office.  Shortly after that power swap was accomplished, missiles started flying in Syria in response to false flag “gas” attack and the world’s largest non-nuclear bomb was dropped on CIA-built underground tunnels in Afghanistan.

Trump has back-pedaled on every single “plank” in his campaign platform – about as quickly as Obama did after he was inaugurated.  Trump’s geopolitical policies now resemble the same policies endorsed by Hillary Clinton, who is a neocon dressed in drag.

When all else fails, start a war.  The opinion ratings on Trump are plunging, along with the major portions of the economy.  Auto sales are down 10% since the beginning to 2017 and JP Morgan, despite “beating” earnings estimates, disclosed a troubling spike in credit card write-offs, which rose to nearly $1 billion in Q1.  Retail sales have now declined two months in a row.  It’s no coincidence that the dismal sales report was released on Good Friday when the market was closed.  The original .1% gain reported for February was revised down significantly to a decline of .3%.   Restaurant industry sales have declined for 11 of the last 12 months in a row on a year over year monthly basis.

The economy is been fueled on money printing and credit creation for the better part of 40 years.  That artificial stimulation went parabolic in 2009.   The tech and housing bubbles have been reinflated along with every other asset class into an “everything” bubble.  Real weekly earnings have declined two months in a row. The consumer is tapped out on two fronts:  disposable income and the capacity to take on more debt.  Now comes the part where the average household begins to default on the debt it’s taken on over the last 8 years.  Hence the big jump in credit write-offs disclosed opaquely by JP Morgan last week.

Today’s Shadow of Truth discusses the role played by the Deep State in ushering in the inevitable economic collapse of the United States which will lead to the implementation of Totalitarianism and a dystopic political system:

Fake News And Real Money

But the most brilliant propagandist technique will yield no success unless one fundamental principle is borne in mind constantly and with unflagging attention. It must confine itself to a few points and repeat them over and over. Here, as so often in this world, persistence is the first and most important requirement for success. – Adolf Hitler

Propaganda, also known as “fake news,” has become the norm in mainstream media reporting. Somehow the idea of Russia hacking the DNC computers morphed into the generic, “Russia hacked the election.” Per Hitler’s formula, Hillary Clinton introduced the idea during one of the presidential debates and kept repeating it until the press seized it and ran all the way with to the end zone with “Trump is a Russian ally.” Now Congress is pre-occupied with the fraudulent charge that Russia is controlling U.S. politics. The whole spectacle is beyond idiotic.

In a similar manner, the reporting of economic statistics has become another tool of propaganda. The Government, as we all well know by now, spits out economic reports based on shoddy statistical samples that are seasonally adjusted. Then the data that is cooked for any specific month is annualized. While the result might not be too far off base for any specific month, the errors aggregate over time so that some statistics, like the GDP report, bear no resemblance to reality.

A great example of using propaganda to promote an idea is the continuous mantra coming from the National Association of Realtors that “low inventory” is hampering home sales. It’s an effective device to make the public think that a lack of homes for sale is the explanation for declining sales. It’s also a lie. Homebuilders are sitting on a record level of inventory. Flippers and investors bought 37% of all existing homes that traded in 2016. Many are sitting on homes they can’t sell for enough to cover their rehab expenses. The over $750,000 segment of the market is flooded with inventory.

The truth is that, if you examine the historical data in order to question the NAR’s assertions, the facts show that since 1999 – which is when the Fed began tracking existing home sales – relative inventory levels do not drive home sales:

In fact – if anything – there is an inverse correlation between inventory levels and home sales. In other words, since 1999, homes sales rise when inventories are low!

Thus propaganda is a tool used to manage public perception.  Unfortunately, a high percentage of the population only consumes headlines and sound-bytes.  It’s the perfect set-up for politicians to employ Hitler’s advice on administering propaganda.  The commonly accepted idea is, in fact, the opposite of the truth.

The commandeering of a country by elitists begins by eliminating real money and replacing it with a fraudulent fiat currency.  But the eastern hemisphere is moving in an opposite direction as the west.  As reproduced in The Daily Coin, Russia and China have quietly struck an agreement laying the groundwork to replace the U.S. dollar’s reserve status with a gold-backed currency system:   Moscow and Beijing join forces to bypass US dollar in world money market.    In today’s episode of the Shadow of Truth we discuss the decline of the United States and the advancement of the new superpower bloc emerging in the east.

The Market Has Its Head Buried Deep In The Sand

Several “black swans” are looming which could inflict a financial nuclear accident on the U.S. markets and financial system.   I say “black swans” in quotes because a limited audience is aware of these issues – potentially catastrophic problems that are curiously ignored by the mainstream financial media and financial markets.

The most immediate problem is the Treasury debt ceiling.  The Treasury is now projected to run out of cash by mid-summer.  Of course, in the spurious manner in which the markets evaluate the next trade, July may as well be a decade away.  My best guess is that the “market” assumes that, after drawn out staging of DC’s version of Kabuki Theatre, Congress will raise the debt ceiling, probably up to $22 trillion.  Then the Fed will extend its highly secretive “swap” operations to foreign “ally” Central Banks (hint:  Belgium and Switzerland) in order to fund the onslaught of Treasury issuance that will ensue.  Problem solved…or is it?

(Note:  Plan B would be another one of Trump’s bewildering Executive Orders removing the debt ceiling.  Plan B is another form of “fiat” currency issuance)

The second “black swan” seen by some but invisible to most is the ongoing collapse the shopping mall business model, erroneously blamed on the combative growth of online retailing.  But when I look at the actual numbers, that argument smells foul.

Is Online Retailing Actually The Cause Of Brick/Mortar Retail Apocalypse?

More than 3,500 stores are scheduled to be shuttered in the next few months. JC Penny,
Macy’s, Sears, Kmart, Crocs, BCBC, Bebe, Abercrombie & Fitch and Guess are some of the
marquee retailing names that will be closing down mall and strip mall stores. The Limited is going out of business and closing down all 250 of its stores.

The demise of the mall “brick and mortar” retail store is popularly attributed to the growth in online retail sales. To be sure, online retailing is eating into the traditional retail sales
distribution mechanism – but not as much as the spin-meisters would have have you believe. At the beginning of 2015, e-commerice sales were about 7% of total retail sales. By the end of 2016, that metric rose to 8.3%. However, looking at the overall numbers reveals that nominal retail sales have increased for both brick/mortar stores and online. In Q4 2015, total nominal retail sales were $1.186 trillion. Brick/mortar was $1.096 trillion and online was 89.7 billion, which was 7.6% of total retail sales. In Q4 2016, total sales were $1.235 trillion with brick/mortar $1.133 trillion and online $102.6 billion, which was 8.3% of total retail sales.

As you can see, there was nominal growth for both brick/mortar and online retailers. My point here is that the spin-meisters present the narrative that online retailers are eating alive the brick/mortar retailers. That’s simply not true.   Part of the problem that the total retail sales “pie” is shrinking, especially when analyzing the inflation-adjusted numbers.  I created a graph on from the St. Louis Fed’s “FRED” database that surprised even me (click to enlarge):

The graph above shows the year over year percentage change in nominal (not inflation-adjusted) retail sales on a monthly basis from 1993 (as far back as the retail sales data goes) thru February 2017, ex-restaurant sales, vs. outstanding consumer credit. As you can see, since 1994 the growth in nominal retail sales on a year over year basis has been in a downtrend, while the level of consumer credit outstanding as been in a steady uptrend. Since 2014, the rate of growth in debt has exceeded the rate of growth in retail sales. If we were to adjust the retail sales using just the Government-reported CPI measure of “inflation” retail sales would be outright declining.

The problem with the mall business model is debt.  The mall-anchor retailers who are vacating mall space like cockroaches vacate a kitchen when the light is flipped on have been leveraged to the hilt by the financial engineers who control them who in turn have been enabled by the most permissive Federal Reserve in U.S. history.   Too be sure, online retailing is cutting into the margins of Macy’s, JC Pennies, Sears, Dillards, etc.  But these companies would have no problem “fighting back” if they were not over-leveraged to the eyeballs.

Layer on top of that the leverage employed by the mall REITs and the recipe for a financial crisis larger than the 2008 “big short” mortgage/housing crisis has been created.  To compound this problem, mall owners are now starting to mail in the keys to financially troubled malls:   More mall landlords are choosing to walk away from struggling properties, leaving creditors in the lurch and posing a threat to the values of nearby real estate…[as] some of the largest U.S. landlords are calculating it is more advantageous to hand over ownership to lenders than to attempt to restructure debts on properties with darkening outlooks (LINK).

But it gets worse. I referenced the consumer’s ability to borrow in order to spend money. Economic activity in the United States has relied heavily on an increasing amount of debt issuance for several decades. At some point consumer borrowers reach a point at which they can no longer support taking on more debt, whether in the form of mortgages, auto loans/leases or credit cards. The problem for the U.S. financial system is that there will be widespread defaults on the consumer debt that’s already been issued.   The average U.S. household has “hit a wall” on the amount of debt it can absorb.  This is why restaurant and retail sales are dropping and why auto sales have rolled over.  All three will get worse this year.

This Will Crush The Pensions

Finally, the third “invisible” black swam is the looming pension crisis.  A colleague of mine who works at a pension fund did a study last year in which he concluded that, because of the extreme degree of public pension underfunding, a 10% decline in the stock market for a sustained period – i.e. more than 3 or 4 months – would cause every single public pension fund to blow up.  As he has access to better data than most, he also surmised that the degree of underfunding is 2-3x greater than is publicly acknowledged by the mainstream media (see this article for instance:  Bloomberg claims $1.9 trillion underfunding).

Circling back to the mall/REIT ticking time-bomb, while the Fed can keep the stock market propped up as means of preventing an immediate nuclear melt-down in U.S. pensions (all of which are substantially “maxed-out” in their mandated equities allocation), the collapse of commercial mortgage-back securities (CMBS) will have the affect of launching a nuclear sub-missile directly into the side of the U.S. financial system.

The commercial mortgage market is about $3 trillion, of which about $1 trillion has been packaged into asset-backed securities and stuffed into yield-starved pension funds. Without a doubt, the same degree of fraud of has been used to concoct the various tranches in these CMBS trusts that was employed during the mid-2000’s mortgage/housing bubble, with full cooperation of the ratings agencies then and now.   Just like in 2008, with the derivatives that have been layered into the mix, the embedded leverage in the commercial mortgage/CMBS/REIT model is the financial equivalent of the Fukushima nuclear power plant collapse.

It’s a  matter of time before a lit match hits one of the three lethal powder-kegs described above.  This is why the bank stocks were hit particularly hard last week when the Dow was in the middle of its 8-day losing streak.  Of course, all it took to spike the Dow/SPX higher was a couple of immaterial “consumer confidence” reports in order to reflate the stock market with some “hope.”   Don’t forget, the last time consumer confidence high-ticked was in 1999, right before the tech bubble imploded.

Unfortunately, the next financial catastrophe that is going hit the system, and for which the Fed is helpless to prevent, will make everyone yearn for just the tech bubble or “big short” bubble collapses.   Meanwhile, the stock market and its collective universe of “investors” will continue sticking its head deeper into the sand, oblivious to the sling blade that is swings closer to its neck.

Portions of the above analysis were excerpted from the current Short Seller’s Journal. That issue contained more in-depth data and two short ideas, a mall REIT and retailer that has bubbled up beyond comprehension.   You can learn more about the Short Seller Journal here:   SSJ Weekly Subscription.

The Big Short Part Two

Truth is like poetry. And most people f*cking hate poetry. – from “The Big Short”

Ron Paul was on Fox Business last week explaining that stocks and bonds are in a big bubble. He said that, “you need to short this market.” As is my modus operandi, I had the volume muted so I didn’t get hear the Fox hosts’ exasperation. Interestingly, it was reported last week that the short interest in the S&P 500 ETF (SPY) hit an all-time low on March 7th. This is a fantastic contrarian indicator. It also removes the general “short-squeeze” risk from the risk of shorting the market.

Perhaps more curious than Ron Paul’s comments was the warning about the stock market issued by Robert Shiller, who is typically a Wall Street apologist, in an interview on Bloomberg this past Tuesday: “The market is way over-priced,’’ he says. “It’s not as intellectual as people would think, or as economists would have you believe.” Shiller is noted for his warnings about the tech bubble in 1999 and the mid-2000’s housing bubble before it collapsed.

Extreme levels in consumer confidence, investor sentiment, valuations and a steep incline in stock prices have historically marked market peaks. A week ago Investor’s Intelligence bullish sentiment among investment advisors hit its highest level in 30 years. That previous peak corresponded to the market peak in 1987 (the 1987 stock crash was the steepest in history). Consumer confidence hit a 16-year high. The prior peak in consumer confidence occurred right before the tech bubble crashed in 2000.

As detailed in recent Short Seller Journals, the retail mom & pop investor has been piling into the market since the beginning of the year. When the realization that Trump’s campaign promises will never become reality and the “music stops” in the stop market, there will be a broad base of retail stock geniuses looking for seats that don’t exist.

The stock market is perhaps the most disconnected from the underlying fundamental systemic reality than at any time in history. This is true if we were to evaluate the total amount of debt as a percentage of GDP, which is about 345%. At the beginning of 2000, it was about 270%. If we were to adjust the current level of GAAP earnings for the S&P 500 using the GAAP standards applied in 2000, it’s likely that current p/e ratio for the SPX would be at least as high as it was in 2000. And recently it was revealed that retail traffic at malls across the country has fallen off a cliff (15% in February and another 13% so far in March). Used car prices are plunging, which reflects both an oversupply of used cars and a big fall-off in demand. This will quickly spill over into the new car market, which faces a record level of dealer inventory. And bank loan creation has begun to rip in reverse:

Bank loan creation is a product of both demand and supply. A drop of the magnitude shown above occurs because borrowers have stopped forming new businesses or expanding current businesses (except for real estate developers, who will borrow relentlessly until the banks cut them off) and banks have determined that, in the current economic environment, the risk of losing money from lending to businesses and consumers exceeds the potential return (real estate developers are finally getting cut off).

In short, based on the above fundamental data the economy for the most part has fallen off a cliff.

Extreme levels in consumer confidence, investor sentiment, valuations and a steep incline in stock prices have historically marked market peaks. A week ago Investor’s Intelligence bullish sentiment among investment advisors hit its highest level in 30 years. That previous peak corresponded to the market peak in 1987 (the 1987 stock crash was the steepest in history). Consumer confidence hit a 16-year high. The prior peak in consumer confidence occurred right before the tech bubble crashed in 2000.

Most of the above commentary is excerpted from the latest issue (released Sunday) of IRD’s Short Seller’s Journal.  The primary short idea presented is down  4.7% from last Friday’s close.  I just closed out a put position from an idea I presented (including the put otion I would be buying)  two weeks ago for an easy 30% gain.  If you are interested in learning how to make money shorting the most overvalued market in history, click here: Short Seller’s Journal subscription.

I have a feeling, in a few years people are going to be doing what they always do when the economy tanks. They will be blaming immigrants and poor people. – from “The Big Short”

Bank Loans Take A Dive: It’s The Economy, Stupid

I am compelled to correct a report posted on Zerohedge about the cliff-dive going on in commercial, industrial and consumer loans.  The report in ZH suggested the plunge is connected to two possibilities:  1)  this one from a Wall Street sleazebag from Barclays: “it is possible that companies have shifted from the loan to the bond market, and are selling more bonds to lock in cheap financing before rates rise, while not encumbering assets with issuing unsecured debt;” and 2) political uncertainty connected to Trump.

The first possibility could have some small amount of legitimacy except that if you parse through all the data available at the Fed, you’ll see that bank credit has plunged across the entire spectrum of U.S. business (I used size of loan as the proxy). Smaller businesses do not have access to public credit markets and thus the first explanation is the typical apology for a negative economic report that we would expect from a Wall Street con-artist. The second possibility is part of the anti-Trump narrative found in the fake news reports coming from the ignorant.

“It’s The Economy, Stupid”

That quote was created by James Carville as one of Bill Clinton’s campaign slogans in 1992. Those words ring even truer today. A primary example is the restaurant industry numbers discussed above. “Hope” and “confidence” do not generate economic activity. And “hope” is not a valid investment strategy. A better guide to what’s happening to economic activity on Main Street is to see what banks are doing with their lending capital. I borrowed the two graphs below from the @DonDraperClone Twitter feed (click to enlarge):

Commercial bank lending is a great barometer of economic activity. The top graph above shows the year over year percentage change in commercial and industrial loans for all commercial banks. You can see that the rate of bank lending to businesses is falling doing a cliff-dive. These are primarily senior secured and revolving credit loans that sit at the top of the capital structure. If bank lending is slowing down like this, it means two things: 1) the ability of businesses to repay new loans is declining and 2) the asset values used to secure new loans will likely decline. In fact, it is highly probable that the tightening of credit by the banks is a directive from the Fed. Yes, the Fed.  Despite its public commentary suggesting otherwise,  the Fed knows as well as anyone that the economy is tanking.  This is why the Fed can’t hike rates up to a level that would bring real interest rates up to at a “neutral” level (using a real price inflation measure, Fed Funds needs to be reset to at least 6%, and likely higher, to get the real rate of interest up to zero).

The only reason the Fed might “nudge” interest rates higher next week is for credibility purposes. Everyone knows inflation is escalating, which makes it difficult for the Fed to keep interest rates so close to zero. In addition, a rate hike now, even though it will be insignificant in magnitude, will give the Fed room to take rates back to zero when the public and Congress begin to scream about economy.

The second graph shows the year over year percentage change in auto loans. The implications there are fairly self-explanatory. Auto sales are slowing down because the “universe” of potential prime and subprime rated car buyers, new and used cars, has been largely exhausted. In fact, with the default rate on subprime auto loans beginning to hit double-digits, the next phase in the automobile credit market will likely be credit implosion crisis.

The above commentary was an excerpt from the latest issue of the Short Seller’s Journal.

What Will Catch The Falling Housing Market Knife This Time?

“There’s so much inventory, and that influx is hitting across all price points, even studios.” – director of leasing at Douglas Elliman (NYC). NYC was one of the first markets hit hard in 2007-2008.

For awhile, any weakness in the NYC housing market was attributed exclusively to the high end. I am on record stating that price dynamic would spread to all price segments. It’s not rocket-science, it’s simple supply/demand/price economics. Studio rents in NYC dropped the most on record in February. This same dynamic is also beginning to happen in many of the other hottest cities across the country. To compound the spreading price weakness in the rental market, a record number of new units will hit the markets coast to coast over the next two years. It would be a mistake to assume that price weakness in the apartment market will not affect the home rental market. Again, the laws of supply, demand, price, income and substitution will once again invade the entire housing market and take sales volume and prices lower.

Eventually the housing market implosion that occurred in 2008 will repeat, only this time it will likely be worse. Why? Because the institutional money that soaked up most of the foreclosed inventory are either fully invested in the asset class or outright selling down their buy-to-rent portfolios. Where will the money come from to catch the falling housing knife again?

Interest rates were dropped from 5% in 2008 to zero percent. This created a reservoir of cheap capital with which to fund new homebuyers with marginal credit. The cheap money and reduced requirements to qualify for a Government-backed mortgage (FHA, FNM, FRE) transformed a subprime borrower in 2008 into a prime/conventional buyer by 2015. While it may not look exactly like the junk mortgages issued by the likes of Countrywide et al during the big housing bubble, most of the low-to-no-to-borrowed down payment agency mortgages issued to the average homebuyer look quite similar in terms of absolute debt to income and income to monthly payment ratios. Just like more than 50% of American households are unable to write a $500 emergency payment check, many of the new homeowners in the last 2-3 years are living on the edge of defaulting on either their car payment, their mortgage payment or both.

A fairly large proportion of the home “buyers” over the last couple of years have been mom and pop speculators looking to “get in” on flipping or buying and renting. A large percentage of that cohort has been using debt to finance their flips/investments. When the music stops, many of these buyers will be left without a buyer or renter. Again, this is similar to the dynamic that unfolded in the housing market leading up to the 2008 collapse.

The above analysis is an excerpt from the latest Short Seller’s Journal, released earlier today.  There’s a lot more information and analysis, most of it not found in your primary alternative media websites or in the mainstream media.  The issue also has two primary short ideas and a couple other ongoing short trades highlighted plus ideas for using options.  SSJ is a weekly, email-delivery based subscription service.  Subscribers also have the option of subscribing to the Mining Stock Journal for half-price.  To learn more, click here:   Short Seller’s Journal

Hugo Salinas Price: The World Will Hyperinflate Into A Gold Standard

If one can only see value in paper currency terms, one cannot see value at all

Hugo Salinas Price – website link – posted a couple of comments on Stewart Dougherty’s guest post earlier this week. I concluded that his insights needed to be shared on the front of this blog and he gave me permission to edit them together to make them easier to read for everyone.  “I know my comment was complex but I wanted to condense the thoughts I have developed over three decades:”

I would like to take this chance to share a few of my thoughts on this. To me it is pretty clear that the American gold is encumbered. Not because of the usual reasons found on the web but because America defaulted on its gold under the Nixon administration. There are still, many foreign claims on that gold.  If America starts to use that gold officially, the gold vultures, like the bond vulture funds, will be out en masse and with force.  So it is in America’s best interest to ignore that gold – and gold in general.

The world has (finally) realized that a country with the reserve currency is not something a country should want and that the dollar can fail. The danger is that it will fail to soon. That is why the euro was created for example. The currencies from the individual countries were all issued from the US treasury.  Meaning that if the dollar went the way of the dodo, the European currencies would die with it. Enter the euro, issued from gold [the euro was originally partially backed by gold].  The gold held by the ECB is priced on a mark to market basis. You can check the website of the ECB, its number one asset is listed as gold and, sadly, gold receivables [meaning that gold is leased out].  Most of the Eurasian landmass followed this initiative [pricing Central Bank gold on a mark to market basis] – for instance, the BRICS countries.  All that is needed a rebalancing of the gold holdings of major countries. Enter China. They had way too little gold and way too many dollars. But last year they also started to mark their gold holdings to market.

Seems to me the world is ready to hyperinflate into gold.  After all, all currencies have already hyperinflated in the financial world.  When the run on real things happens, as a system operator, you don’t want that since a functioning printing press is worth way more than gold. So you want to guide the hyperinflation into a useless metal and use this gold to help equalize the tradeflows. They cannot implement a global political & economic system when things are unstable because it will fail again and soon.  Just as all reserve currencies did since late 1400.  If I were in the position of the globalists, I would aim for the Roman model. Split the money concept. Currency for spending and settling debts but use gold and silver as a final debt extinguisher.  This would function to prevent the kind of mess the EU countries are now  in. The debts of the south are the assets of the North. This is a recipe for disaster.

Let me elaborate on why I think that the world is ready to hyperinflate in gold terms. The Western public will not hold an asset that goes nowhere, at least in currency terms. The public in the East were never fooled that way. Some  – I think rightly – joke “if one can only see value in paper currency terms, one cannot see value at all”.  I also think gold is wealth and not money. Gold has always been funny in that way. So many people worldwide think of it as money even though its supply tends to dry up as the price rises.

First the Comex will be thrown under the bus to destroy the paper leverage (price suppression) game. Maybe the LBMA as well though I would not be surprised as well if it’s allowed to stay alive. Then the prices can rise and the message will sent:  “gold is the new wealth reserve to balance trade imbalances and then the Western hyperinflation will be killed.”  Central banks lose most of their gold reserves (and that is good) and gold can do what it did for millennia again, settle trade imbalances.

As usual, in historical terms, most of the average people wont have it besides a few grams. But it will be people, not institutions that control it and will help to create a decentralised counterforce to the centralized system we live in that is hopelessly out of touch with reality.

A last thing, courtesy of JS mineset, of the countries that value their gold on a  mark to market basis (a few others may have followed since this graph was created:

 

ADP’s Job “Creation” Report Is A Fraud

Put it on CNN and it’s “true.”  Americans will turn on their tv’s and open their newspapers tomorrow (the small percentage that still read newspapers) to hear and read that the U.S. economy “created” nearly 300,000 jobs in February – at least according to ADP. .

The easiest way to hold ADP accountable and eviscerate the credibility of their report is to examine their “methodology.”  Of course, this requires searching the ADP website to find the area way at the bottom where it describes its “methodology,” something no fake news reporter or analyst has to time with which to bother.

As ADP describes in its “methodology” section, it seeks to “closely align” the final output of its calculations with that of the “final print of the U.S. Bureau of Labor Statistics (BLS) numbers.”  Thus,  ADP’s “job creation” report is really nothing more than a regurgitation of the fraudulent employment report issued by the U.S. Government.

Here’s the other variables of input that the new ADP methodology now incorporates into its methodology used in ADP’s  “enhanced  ADP National Employment Report

  • ADP matched-pair growth rates by industry
  • Lagged values of BLS estimates of growth of employment by industry with industry specific restrictions
  •  Unemployment Insurance Claims (UNI_US)
  •  Oil Prices
  •  The Michigan Consumer Sentiment Index (CSENT_US)
  •  The Composite Index of Leading Indicators (LEAD_US)

The “soft” data reports above have nothing do with job creation.  Unemployment claims are historically low because the labor force participation rate is historically low, which means that the number of people who are terminated and can file for nemployment benefits is historically low.  How is this variable an input on job creation?

WELCOME TO ADP’S RABBIT HOLE

Since when did the manipulated price direction of oil create jobs?  Consumer confidence creates jobs?  Please.  In fact, ALL of the variables listed above and used by ADP in formulating its job creation report are highly manipulated and in no way represent the process by which jobs are created – other than the growth in propaganda creation positions at the Government and at the mainstream media outlets.

But there’s more.  ADP claims that 106,000 jobs were created in February in the “goods producing sector.”  The primary goods producing sector in the U.S. is the auto industry, which is currently cutting jobs in order to cut production in the face of record auto inventory sitting on dealer lots.  In fact, GM announced 1,100 job cuts at one of its production facilities yesterday.

ADP also claims that 66,000 jobs were “created” in construction. But we know based on the Government’s construction spending report that the Government alone cut construction spending by nearly 8% last month.  Most major cities around the U.S. now have years of apartment inventory.  For instance, San Francisco now has 5 years of vacant supply:  LINK.   Commercial real estate occupancy rates are soaring with the number of retailers filing bankruptcy and closing stores.  At least 7 major retailers this year have filed chapter 11 or are in the process of trying to restructure debt.  This is a major source of job loss and it’s simply not credible that commercial construction is on the rise, which means that the 66,000 “new” jobs attributed to construction is a complete fraud.

Leisure and hospitality is credited with producing 40,000 new jobs in February.  I’d love to sit down with the ADP analyst to find out where this number came from.  The restaurant industry experienced revenue declines nearly every month in 2016.  Same-store-sales and foot traffic plunged across the industry.  It’s inconceivable that the leisure and hospitality industry produced this many jobs, if any at all, given the underlying fundamental condition of the median average household, which has been experiencing declining real disposable income for several years now

The report also gives credit to small businesses for “creating” 104,000 jobs.  This is  not even remotely credible.  A report out just a couple months ago stated that the creation of new businesses in the U.S. is at a 40-year low:  LINK.  Does anyone really believe that Trump’s “hopium” effect suddenly inspired a rush to start new businesses which then hired 104,000 people?

There’s several more inconsistencies in ADP’s report. I’ll leave it to the reader to sort through the actual report itself and decide what’s real and what’s fraudulent.  As far as I can tell, the ADP report has been designed to piggy-back and “confirm” the fraudulent employment issued by the Government every month.

 

Big Brother In America Is The Media

Journalism and a free, open media is another “check and balance on the three branches of Government and we don’t have that check and balance anymore.” – Shadow of Truth

One of the hallmarks of a totalitarian political regime is control of the media. In 1996 president Bill Clinton signed into law the Telecommunications Act of 1996. This law, which was bought and paid for by corporate media lobbies, allowed big corporations to acquire and consolidate media outlets nationwide.

The 1996 law lifted the limit on the number of television and radio stations any one corporation could own. In 2003, the FCC voted to lift the ban on cross-ownership of newspapers and full-power broadcast stations that serviced the same community. This was the final nail in the coffin of free and competitive media and news-reporting in the U.S.

The 1996 Clinton law followed by the lifting of the cross-ownership ban enabled Corporate America to increase their monopoly on the flow of information in the U.S. and around the world. Now six corporations control well over 90% of all media in the U.S.: NewsCorp, Disney, Viacom, Time Warner, CBS and Comcast.

“Wall Street slips on and geopolitical worries” (Reuters headline).   What does the Trump/Obama wiretapping squabble have to do with whether the stock market goes up or down? It has nothing to do with whether or not corporations can produce goods and services profitably. Too be sure the accusation of wiretapping and the possibility that the accusation is accurate is troublesome in and of itself.  But it has nothing to do with the fact that the stock market is currently the most overvalued in U.S. history.

The headlines, however  reflect the degree to which all media reporting in the U.S. is now under the control of Corporate America – a Corporate America that has assumed control of the political process and has become Orwell’s  Big Brother .

Most people associate the term “fascism” with an authoritarian and nationalistic political system. But it’s much more than that. Mussolini described “fascism” as the merger between Corporations and Government. The political system in the U.S. can easily be considered “fascist,” as Corporate America and Wall Street have used billions of dollars to take over the entire political process including all of the mainstream outlets of communication and news reporting.

The result is directly reflected in the nature of the 2016 presidential and congressional elections. The content of any news reporting is now a product of the material fed through the broadcast and print communication outlets controlled by six corporate monoliths and the Too Big To Fail banks that finance the system.

A good friend and colleague of the Shadow of Truth, John Titus, once quipped with regard to the public’s consumption and acceptance of anything reported as news, “put it on CNN and it’s true.” This statement succinctly summarizes the propaganda which supports the process by which the Government seeks to control the views and perceptions of the public at large.  In today’s Shadow of Truth podcast, we toss around that fact that the United States has become a Goebellsian “playground” and George Orwell’s nightmare: