Australian

Housing

Bubble

House price growth in Sydney accelerates to 19pc in March: CoreLogic

Data for the first 28 days of the month shows Sydney prices have risen 19 per cent over the past year while Melbourne has posted a 16 per cent gain, the company said on Thursday.

Our Economies Run on Housing Bubbles 

What we have invented to keep big banks afloat for a while longer is ultra low interest rates, NIRP, ZIRP etc. They create the illusion of not only growth, but also of wealth. They make people think a home they couldn’t have dreamt of buying not long ago now fits in their ‘budget’. That is how we get them to sign up for ever bigger mortgages. And those in turn keep our banks from falling over. 

It’s perhaps ironic that the US doesn’t appear to be either first or most at risk this time around. There are plenty other housing markets today with what at least look to be much bigger bubbles, from London to China and from Sydney to Stockholm. Auckland’s bubble already looks to be popping. The potential consequences of such -inevitable- developments are difficult to overestimate. Because, as I said, the various banking systems and indeed entire economies depend on these bubbles. 

The aftermath will be chaotic and it’s little use to try and predict it too finely, but it’ll be ‘interesting’ to see what happens to the banks in all these countries where bubbles have been engineered, once prices start dropping. It’s not a healthy thing for an economy to depend on blowing bubbles. It’s also not healthy to depend on private banks for the creation of a society’s money. It’s unhealthy, unnecessary and unethical. We’re about to see why.

DYI

New York Times

Trump Is a Chinese Agent

Thomas L. Friedman

The Trans-Pacific Partnership was based largely on U.S. economic interests, benefiting our fastest-growing technologies and agribusinesses, and had more labor, environmental and human rights standards than any trade agreement ever. And it excluded China. It was our baby, shaping the future of trade in Asia. 

Imagine if Trump were negotiating with China now as not only the U.S. president but also as head of a 12-nation trading bloc based on our values and interests. That’s called l-e-v-e-r-a-g-e, and Trump just threw it away … because he promised to in the campaign — without, I’d bet, ever reading TPP. What a chump! I can still hear the clinking of champagne glasses in Beijing. 

DYI:  The problem with these trade deals they are done in secrecy.  So how do you know Friedman the details of the agreement?  In a nut shell; you don’t know.  You are just pulling B.S. out your lower region.

But Trump took his Make China Great campaign to a new level on Tuesday by rejecting the science on climate change and tossing out all Obama-era plans to shrink our dependence on coal-fired power. Trump also wants to weaken existing mileage requirements for U.S.-made vehicles. Stupid. 

China is loving this: It’s doubling down on clean energy — because it has to and it wants to leapfrog us on technology — and we’re doubling down on coal, squandering our lead in technology.

DYI:  Climate change; in the 1970’s it was global cooling; by the 1990’s it became global warming; and now its climate change.  So called researchers have been caught so many times fabricating their data to fit the new religion of climate change their science has been completely debunked.

What you fear Friedman is the market place.  Period!  I have nothing against green tech as long as it is developed in the market place and not by government edict.  Have you forgotten so quickly the lost taxpayer’s dollars for solar companies that went bankrupt during Obama’s tenure? 

So you tell me that Trump is not a Chinese agent. The only other explanation is that he’s ignorant and unread — that he’s never studied the issues or connected the dots between them — so Big Coal and Big Oil easily manipulated him into being their chump, who just tweeted out their talking points to win votes here and there — without any thought to grand strategy. Surely that couldn’t be true?

DYI:  Without any thought to grand strategy?  Socialist's always fears the market.  The market place is the grand strategy and if left alone Mr. Market will work wonders.

DYI

Bubble

News

Wall Street Facing Headwinds as Boomers Forced to Liquidate Their IRAs, 401Ks

Under the law those reaching age 70 and a half must start taking their “required minimum distributions” (RMDs) from their various tax-deferred accounts. These include IRAs, 401Ks, profit-sharing plans, and SEPs. The trouble is that there are so many of them, and they control so many assets, that their RMDs are going to put enormous pressure on the stock market, according to Chris Hamilton, writing at his Econimica blog.

The Baby Boom population cohort is nearly 80 million people, and those born in 1946 are now 71, with millions following right behind. 

The real question, according to Hamilton, is this: Who will buy when they are forced to sell? His conclusion is dismal: There are so few buyers compared to sellers that stock prices will be forced down as the sellers are forced to liquidate their holdings. As Hamilton explains:

At 70.5 years of age, retirees are mandated by force of law to sell tax-deferred assets accumulated over their lifetimes and do so over a 15-year period. Conversely, buyers [the younger cohort age 25-60] have a 35-year window of accumulation.... 

Over the past 65 years there were three new buyers for every new seller. [But] over the next 25 years there will be three new sellers for every new buyer.

So, although the stock market “run” exceeds historical averages, there must be more than enough buyers coming into the market from somewhere to soak up those RMD liquidations. Here are a few possible explanations. First, Trumponomics has encouraged many who have been standing aside to take positions in companies likely to benefit from it. Many of those forced to take their RMDs are paying the taxes and then putting the remainder right back into the market. Many of the boomers are continuing to work, not only adding to the economy’s GDP but also adding to their savings and investment accounts. Wall Street doesn’t operate in a vacuum, which means that investors from abroad (i.e., China, India, the UK) are finding America to be a better, safer, and more liquid and more profitable place to put their investable assets to work.

DYI:  The reason why the market on a valuation basis has remained in its overvalued territory Boomers are staying in the work force far longer in desperation to fund some basis of a retirement.  As with all things in life this cannot be maintained as many employers will tire having their corporations run by the old folk’s home.  My suspicion most boomers will leave the work force in statistical significant numbers around the age 75 as a corporate directive AND the individual themselves as even part time employment will become too difficult.  Whether the age is 71 or 75 the U.S. stock market is on borrowed time.

      DYI

The

Medical Industrial Complex

(Insurance is not the problem)

COST EXPLOSION!

DYI

DYI’s

4 Assets

Update

DYI:  DYI today has moved our sentiment indicators for gold and long term bonds.  Gold is moved down a notch from relief (at it mean) to hope (slightly undervalued).  Long term bonds as interest rates appear to be moving up have been dropped a notch as well to Denial of a Problem.

Market Sentiment

Smart Money buys aggressively!
Capitulation
Despondency
Max-Pessimism *Market Bottoms* Short Term Bonds
Depression MMF
Hope Gold
Relief *Market returns to Mean* 

Smart Money buys the Dips!
Optimism
Media Attention
Enthusiasm

Smart Money - Sells the Rallies!
Thrill
Greed
Delusional
Max-Optimism *Market Tops* U.S. Stocks
Denial of Problem Long Term Bonds
Anxiety
Fear
Desperation

Smart Money Buys Aggressively!
Capitulation

Long term bonds have been in a bull market since September of 1981 as 10 year T-Bonds peaked at 15.32% and bottomed on July 2016 at 1.50%; currently trade at 2.38%. 

DYI does not know where markets are headed (nor does anyone else) all I do know, with some degree of accuracy the under or overvalue of our four asset categories.  Have high quality long term bonds reached their peak with sub atomic low rates bottoming out?  The truthful answer is MAYBE.  The world economy good very well go into recession creating a deflationary smash pushing rates down to the possibility of going negative.  I’m not predicting this scenario however it is a possibility.  This is why my model portfolio holds only 4% in long term bonds as rates remain sub atomic precluding anything but a minor commitment.

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 3/1/17

Active Allocation Bands (excluding cash) 0% to 60%

74% - Cash -Short Term Bond Index - VBIRX

22% -Gold- Precious Metals & Mining - VGPMX

 4% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

Gold has now left its mean return and is slightly undervalued as shown by the chart below.

Fred's Intelligent Bear Site brought to you by Fred Filskov. Public, private, and commercial distribution of this material is permitted as long as a link to this site is attached.

DYI:  Since the year 2000 gold has been on a tear despite the massive selloff as shown by the chart below.

 

3-1-17
Updated Monthly

Secular Market Top - Since January 2000

+  82.7% Dow       

+218.8% Transports 

+146.5% Utilities

+62.2%  S&P 500

+44.3%  Nasdaq

+52.5%  30 yr Treasury Bond

+323.5% Gold

+108.3% Oil
  +56.1% Swiss Franc's

    

From High to Low

+323.5% Gold

+218.8% Transports

+146.5% Utilities

+108.3% Oil
+  82.7% Dow

+  62.2% S&P 500 

+  56.1% Swiss Franc's  
+  52.5% 30yr Treasury Bond 

+  44.3% Nasdaq

Since the year 2000 gold has out performed all other asset categories.  However over a shorter time perspective such as the stock market rally from 2009 to today gold is at the short end of the stick.  DYI’s weighted averaging formula was systematically reducing our precious metals mining company’s commitments and adding the proceeds to stocks as their valuations improved.  No doubt the remaining precious metals mining companies took a hit to the downsides however our long term bonds flew to the upside along with the meteoric stock market returns.  Overall a positive return for our four asset category portfolio.

It is ironic that Short term bonds, money market funds and gold (precious metals mining companies) are the most undervalued assets as world wide central banks including our own Federal Reserve (its private and they have no reserves) have MASSIVELY distorted markets the world over.  This will not end well.  DYI’s expectation based upon history and valuations is for U.S. stocks to drop by 55% to 70%!  Cutting the market by half will not bring the market back to its mean.  This is how overvalued the market has become do to the insane central bank policies.

The Great Wait Continues….

DYI

Bubble News

March 27, 2017

Dissolving Musical Chairs

John P. Hussman, Ph.D.

On the first day of March 2017, the combined market capitalization of U.S. nonfinancial and financial stocks reached $34 trillion. Those trillions of dollars in paper wealth filter down to the investment statements of millions of investors, reflected in quotes on computer screens and blotches of ink on paper. Over the completion of the current market cycle, we estimate that roughly half of U.S. equity market capitalization - $17 trillion in paper wealth - will simply vanish. Nobody will “get” that wealth. It will simply disappear, like a game of musical chairs where players think they've won by finding chairs as the music stops, and suddenly feel them dissolving as if they had never existed in the first place.

Stocks are a claim on a stream of future cash flows that will be delivered to investors over time. Historically, the most reliable “sufficient statistic” for those cash flows for the U.S. stock market as a whole is not next year’s forecast of S&P 500 operating earnings, but instead, the gross value added produced by U.S. corporations. The comparative reliability is not even close.

The next few years are likely to be difficult for those investors who cannot actually tolerate a 50-60% portfolio loss on passive equity investments. 

Investors who would not be able to maintain a disciplined passive investment strategy over the course of such a loss are encouraged to review their investment exposure based on their actual investment horizon and risk-tolerance.

 DYI

Gary Shilling’s Blog

Trump could start a massive fiscal stimulus bill

Most forecasters believe the Trump administration’s forecasts of 3 percent to 3.5 percent annual real gross domestic product growth in the next decade are far too rosy. The nonpartisan Congressional Budget Office foresees 1.9 percent per year between 2021 and 2027, and the Federal Reserve expects 1.8 percent annually in the long run. 

These differences aren’t trivial. Growth at 3.5 percent per year rather than 1.8 percent would make the economy 18 percent bigger over a decade. It also would involve reducing federal budget deficits by cutting spending on programs such as food stamps and unemployment insurance while boosting taxable personal and corporate incomes. 

Pessimists point to the ironclad law of economic growth: Annual increases in employment plus productivity growth equal yearly gains in economic output. Aging and retiring postwar babies, as well as President Donald Trump’s anti-immigration policies, will severely limit labor force growth, they maintain. And output per hour worked, which gained about 2.5 percent a year in earlier decades, has risen just 0.5 percent annually in the 2010-2016 years. 

Some blame weak capital spending while others foresee no big productivity-soaked new technologies coming along to propel productivity because everything worth inventing is extant. Malthus is alive and well. At the opposite end of the spectrum are those who believe robots will replace people to the point that there will be too few earners to buy the nation’s output. 

I disagree. First of all, consider the bias of most forecasters toward slow growth forever. Since this business expansion started in mid-2009, real GDP growth has averaged a mere 2.1 percent despite the Federal Reserve’s cuts in short-term interest rates to zero and huge quantitative easing. So the tendency of most is to assume that this pattern will last indefinitely and they select evidence to substantiate that view. It’s the easiest forecast to sell as forecasters’ audiences readily agree because it matches their ongoing experience. 

Still, the ironclad law of economic growth is actually quite pliable. Real GDP annual growth of 3.5 percent would occur with 2.5 percent yearly growth in productivity and 1 percent rises in employment, the historic numbers. True, with low fertility rates, the Census Bureau sees the U.S. population rising just 0.2 percent a year by 2026, even with net immigration of 1.3 million annually over the next decade. 

Nevertheless, the labor participation rate -- the percentage of the population over 16 that is employed or actively looking for work -- had plummeted to 62.9 percent in January from the 67.3 percent peak 17 years earlier. So 4.4 percent of the potential workforce, or 11.3 million people, have departed. About 60 percent were retiring postwar babies, but many are returning or staying in jobs past normal retirement ages because their health is better than their predecessors’ and because they need the income. Postwar babies have been notoriously poor savers throughout their lives. The participation rates of those over 65 are actually rising, not falling, as is normally true for seniors. 

Also increasingly looking for work are youths who stayed in school during the dark Great Recession years and are now better educated and attracted by expanding job openings. In addition, skills to meet available jobs are being provided by apprenticeship programs that combine two-year college degrees with on-the-job training. German manufacturers brought this system with them to their factories in the U.S. Southwest, and it is increasingly being emulated by U.S. firms. 

Trump’s threats of mass deportation of undocumented immigrants have been scaled back. They now target those with criminal records and other suspects. And with cooler heads in Congress, U.S. immigration policy may end up mirroring Canada’s with a point system aimed at admitting those with the skills this country needs. 

Trump’s planned deregulation and lower corporate tax rates may spur capital spending, but the correlation between the growth in capital expenditures and productivity gains is low, sometimes negative. More machines alone don’t spur efficiency. More important, productivity-enhancing new technologies grow explosively, but since they start from essentially zero, it takes decades before they move the productivity needle significantly. Aside from those yet to be developed, today’s well-known technologies such as robotics, additive manufacturing, biotech and self-driving vehicles are no doubt still in their infancy. 

The argument that protectionism inhibits economic growth is also suspect. Sure, eras of rapid global economic growth are also periods of strong foreign trade advances, but do trade gains stimulate economic activity or the reverse? You can’t prove causality with statistics. If you beat a drum every time there is a total eclipse of the sun, it will go away. No causality, but 100 percent correlation. 

Also questionable is the robots-will-eliminate-workers theory. A recent McKinsey study found only 5 percent of 800 occupations and 2,000 job tasks are likely to be entirely automated. Instead, half of current jobs will be changed significantly, forcing employees to adjust. At the same time, automation may hike global productivity by 0.8 percent to 1.4 percent per year during the next half century. 

The catalyst for the return to rapid economic growth will, no doubt, be a huge fiscal stimulus program. Voters who are mad as hell after a decade or more of no growth in real incomes elected Trump and the Republican Congress, and politicians will respond. It will take two or three years to come to fruition, but look for huge infrastructure outlays and large increases in military spending.

Stocks don’t normally discount that far ahead, but maybe that’s what leaping equities are anticipating, despite all the uncertainty in Washington, the nation and, indeed, the world.

 DYI

The New Gilded Age

Robber Barons

Insurance is the Symptom; the disease is runaway pricing by the Medical Industrial Complex

‘Hello, Bob’: President Trump called my cellphone to say that the health-care bill was dead

DYI:  The Medical Industrial Complex is the underlining problem insurance is only treating the symptom of runaway costs.  This industry notoriously colludes in order to price fix; creates local monopolies and trolls individuals insurance to extract the maximum.  Hospitals and Doctors’ offices especially corporate owned will not publish their prices making it impossible to comparison shop based upon price and perceived quality.  All of these activities are ILLEGAL with civil AND criminal punishment that were passed over one hundred years ago taking on the robber barons of the gilded age.  The Attorney general Sessions must begin prosecuting in order to drain this swamp of vipers by enforcing the Robinson-Patman, Clayton, and the granddaddy the Sherman Anti-trust Act.  Health care prices will fall on average 75%.  That is not a typo! 

Legislation will be required to allow for reimportation of pharmaceuticals.  This basic business practice was made illegal due to the MASSIVE campaign bribes – I mean donations – rescind immediately.  By doing so; drug prices will easily fall by 50% for new drugs and upwards to 90% for generics.

Why Mr. President you are not going this route is a mystery as you managed over thousands of employees you had to be aware of the meteoric price increases from hospitals, doctor offices, and drug prices that is responsible for pushing up premium payments?  At the current average rate for price increases – 9% - the Medical Industrial Complex within 5 years will go from consuming 20% to 30% of GDP.  Triggering massive premium insurance payments whether it is Obama Care or some other form of insurance and causing Medicare and Medicaid to consume larger and larger share of the U.S. budget along with creating a health care induced moribund economy!

It’s time to drain the swamp and by the way Mr. President your new Attorney General must begin prosecuting the banks and Wall Street as well.

  DYI

Will President Trump Reign In the Medical Industrial Complex?

Entitlement

Explosion

DYI:  The underlining cost of health care is completely different from health insurance.  Health insurance premiums are only a reflection of the underling cost.  The medical industrial complex is moving up on average at a blistering pace of 9% per year which is the true reason for the premium explosion for health insurance.  This industry regularly colludes with competitors in order to price fix and has created monopolies in many local areas.  All of these business behaviors are outlawed over 100 years ago by the Robinson-Patman, Clayton and the granddaddy Sherman Anti-Trust acts.  President Trump only needs to do is enforce these laws which will drive down the underling health care by 75%.  That is not a typo.  However he will need to go to Congress to repeal the law criminalizing the reimportation of pharmaceutical drugs.  This repeal will drop drug prices by 50% for new drugs to 90% for many generics.  So far I’ve seen zero effort.  Fixing health insurance will do nothing to reign in the marauding Medical Industrial Complex’s runaway costs.

At the current rate of growth within five years the health care industry will stifle the economy at 30% of GDP.  I don’t see how Trump will be reelected under those conditions.

DYI

Medicare

&

Social Security

Future

Taxes Raised Benefits Cut Money Printed

The federal debt is $20 trillion? Try $100 trillion

“The federal government doesn’t include those unfunded liabilities on its balance sheet,” said Bill Bergman, director of research for TIA. 

TIA estimates the federal government owes about $31.4 trillion in unfunded Social Security promises and $44.7 trillion in unfunded Medicare promises. It only owes $7.2 trillion in promised pension and other retiree benefits, a common stumbling block among many state and local budgets.

 DYI

U.S.

Stock Market

Runs Out of Alpha!

Alpha is a risk-adjusted measure of  "excess return" on an investment. It is a common measure of assessing an active manager's performance or market index as it is the return in excess of  "risk-free T-bills." 

March 20, 2017

Expect the S&P 500 to Underperform Risk-Free T-Bills Over the Coming 10-12 Years

John P. Hussman, Ph.D.

Last week, Treasury bill yields rose to 0.75% following the Federal Reserve’s quarter-point hike in the target Federal Funds rate, placing the yield on even risk-free liquidity above our 0.6% estimate for 12-year prospective S&P 500 annual total returns. This isn’t the first time in history that prospective 12-year stock market returns have fallen below the prevailing T-bill yield, but it’s certainly the lowest return that has prevailed at any of those points. 

Presently, based on the most historically-reliable valuation measures we identify, we expect annual total returns for the S&P 500 averaging just 0.6% over the coming 12-year period; a prospective return that we expect will not only underperform bonds over this horizon, but even the lowly yields available on risk-free T-bills. 

Like the unwindings that followed the 2000 peak and the 2007 peak, there will be points in the interim where the prospective total return on stocks will likely be elevated (as a result of steep market losses and improved valuations), providing patient, flexible investors substantial opportunities for long-term total returns.

DYI:  DYI has been “pounding the podium” that stock returns will be sub atomically low – so much so – despite the absurd ultra low interest rates driven by a mad cap world wide central banks including our own Federal Reserve (it’s a private bank and they have no reserves) driving down yields on bonds; stocks are now so elevated they are slanted to UNDERPERFORM 90 day T-bills!

Stock valuations are now so elevated in relation to sales, earnings, and DYI’s favorite dividends; I moved my sentiment indicator, on March 12, 2017 back to Max-Optimism forming a double secular top!

Market Sentiment

Smart Money buys aggressively!
Capitulation
Despondency
Max-Pessimism *Market Bottoms* Short Term Bonds
Depression MMF
Hope
Relief *Market returns to Mean* Gold

Smart Money buys the Dips!
Optimism
Media Attention
Enthusiasm

Smart Money - Sells the Rallies!
Thrill
Greed
Delusional
Max-Optimism *Market Tops* Long Term Bonds & U.S. Stocks
Denial of Problem 
Anxiety
Fear
Desperation

Smart Money Buys Aggressively!

Capitulation

If the Fed’s continue to increase interest rates DYI’s sentiment indicator for long term bonds will move down from Max-Optimism to Denial of Problem improving future returns.  This will increase our holdings of long term bonds computed by my weighted averaging formula.

Simply put DYI is increasing into assets as their valuations improve and reducing assets as their valuations decline.  Sounds easy – actually it is difficult for most individuals as it “moves against the grain!”  The great movements in the market are caused by the MAJORITY of investor/speculators who by their very nature are performance chasers – similar to dogs chasing cars – and despondent sellers.  Value players are dependent upon the majorities – they’re in great abundance (thank goodness) – in order to profit handsomely over the long haul. 

What’s the catch?  I’ll give you a real life example - me.  In 1997 I began to exit stocks aggressively due to valuation moving to the moon and yet from that time on, until the top of the market, the NASDAQ went on to double again!  What was I doing with the proceeds from the sale of stocks?  Buying gold and most importantly precious metals mining companies as their valuations were on the give – away – table!  Out of step with the majority of investor/speculators – YOU BET!  The mining companies didn’t begin their meteoric price rise until 2002!  For little more than 5 years non value players thought I was simply throwing away good money into a bad situation and yet that time lag was a blessing allowing for addition savings into this beleaguered asset category.

That is the life of a long term secular historical value player who will experience being “out of step” with the great majorities.  This is why this blog will never have a huge following as we know the majorities are performance chasers and despondent sellers thereby it is mathematically impossible.  Those who do follow are in an elite class of true long term historical value players who are the minority yet will earn the majority of the profits.     

     DYI

The

Great Rotation

Out of Stocks

Morgan Stanley: "Only One Thing Will Allow Central Banks To Keep The Party Going"

Last week, we presented readers with the latest note from SocGen strategist. Albert Edwards, who explained why after so many years of false rate hike starts, the market not only responded to last week's hike in a dovish manner - interpreting last Wednesday's 0.25% hike as a 0.25% rate cut- but as Goldman Sachs showed previously, the dovish reaction was one of the strongest ones since the financial crisis, in other words: "the market no longer believes the Fed." 

If the market took the FOMC at their word and discounted a 3% Fed Funds rate at the end of 2019 and beyond, then we'd probably have a 3% nominal 10-year Treasury yield by now."

That said, a 3% Fed Funds rate would also lead to steep selloff in risk assets as the dividend yield on the S&P, currently at about 2%, would be about 1% below the risk free rate, leading to a wholesale "great rotation" out of stocks. 

What is Morgan Stanley's conclusion? Simple: for the party to continue, not only must the Fed revert back to its quasi-dovish mode, but for that to happen the recent economic "rebound" has to end (the sooner the better), extinguishing any reflationary impulse, removing the impetus for Yellen to hike aggressively further, and allowing the Fed to remain on hold for an indefinite period of time.  In short: "In our view, for the cycle to last another several years, we want to see more of the same – a continued environment of ‘ok’ growth and low inflation, which allows central banks to keep the party going." 

Hopefully Trump, whose policies threaten to upstage this delicate balance benefitting the 1%, has read the memo.

 DYI

When it comes to President Nixon they didn't call him Tricky Dick for nothin!

Oil & Gas

Priced in Gold?

Moscow and Beijing join forces to bypass US dollar in world money market

Move seen as small step towards monetary alliance to bypass US dollar in the global monetary system

Russia’s central bank opened its first overseas office in Beijing on Thursday, marking a small step forward in forging a Beijing-Moscow alliance to bypass the US dollar in the global monetary system. 

Financial regulators from the two countries agreed last May to issue home currency-denominated bonds in each other’s markets, a move that was widely viewed as intended to “dethrone” the US dollar. 

Vladimir Shapovalov, a senior official at the Russian central bank, said the two central banks were drafting a memorandum of understanding to solve technical issues around China’s gold imports from Russia, and that details would be released soon.

DYI:  Dividend Yield Investor has been “pounding the table” Russia and possibly China will price oil and gas in gold.  Both countries, if news releases are to be believed, have been stock piling gold reserves at a feverish pace.  Once this business – gold based - pragmatic alliance is in place between Russia and China, just as the sun rises in the east and sets in the west, international contracts, first in Central Europe then the world oil and gas will be priced in GOLD!

The driving force mentality behind this is NOT a renaissance for gold; it is simply the easiest way for the Russians and the Chinese to shed the fiat global “funny money” called the American Dollar.  Most Americans do not realize – readers of this blog know – our biggest export is INFLATION!  Countries that attempt to move out from under the Dollar have been attacked by the U.S. or our allies.  This is exampled by Omar Gaddafi of Libya, who was moving at light speed, building up reserves of gold to have the Libyan currency the Dinar, converted on a one for one basis!  This would have the effect of displacing the French Franc – a currency that remains trading in French ex-colonies – AND a dagger into the side of the Euro plus making inroads into King U.S. Dollar.  So….The French attacked with the full blessings of the Americans.  Hillary Clinton who stated regarding Gaddafi, “We Came, We Saw, He Died” all backed up by WikkiLeaks!

Will the Russians and Chinese be successful?  The Chinese most likely will not be able to pull it off as they are living in a MASSIVE DEBT BUBBLE of biblical proportions.  The Russian’s on the other hand due to their superior monetary policies and low debt environment is HIGHLY likely to be successful.  This is the major reason for all of the Russian rhetoric – of course the politicians Republican or Democrat – will not inform the American public when oil and gas is priced in gold inflation or deflation will take off like a jack rabbit devaluing the Dollar and a severe decline in our standard of living!

The American Petro Dollar has been in effect since 1971.  President Richard Nixon closed the last vestige of the gold standard when the French President Charles de Gaulle demanded gold (instead of T-Bonds) for America’s imbalance of trade with the U.S. Nixon not wanting to deplete our gold reserves “slammed the gold window closed for convertibility of the U.S. Dollar.”  Nixon needed a replacement of gold convertibility Henry Kissinger then Secretary of State swung into action and the Petro Dollar was born. 

Also of interest Richard Nixon (Tricky Dick) created the Environmental Protection Agency (EPA) knowing full well the days of America’s gold convertibility would end thereby needing additional “Federal collateral” to prop up “Federal Dollars”.  The EPA all under the guise of environmental protection either Federalized, purchased, or controlled through regulations vast American lands.  Today the Federal government is in control/ownership by various means around 25%⁺ of the U.S. land mass.

How will this play out?  Most likely we will first experience a deflationary smash crushing stocks (55% to 70%) and junk bonds along with even worse unemployment.  The Federal Reserve will purchase up bonds during the depression AND common stocks in a vain attempt to prop up a failing system.  Once that fails the Federal Reserve with the President and Congressional approval will digitally print money and make direct payments to Social Security, then Medicare and eventually the general budget defeating deflation with surging crushing inflation.  Only until the American public demands – and I mean DEMANDS sound money – will   scenarios such as this be averted.

  Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 3/1/17

Active Allocation Bands (excluding cash) 0% to 60%

74% - Cash -Short Term Bond Index - VBIRX

22% -Gold- Precious Metals & Mining - VGPMX

 4% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

 This blog site is not a registered financial advisor, broker or securities dealer and The Dividend Yield Investor is not responsible for what you do with your money.

This site strives for the highest standards of accuracy; however ERRORS AND OMISSIONS ARE ACCEPTED!

The Dividend Yield Investor is a blog site for entertainment and educational purposes ONLY.

The Dividend Yield Investor shall not be held liable for any loss and/or damages from the information herein.

Use this site at your own risk.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

 DYI

The

Secular Bear Market Since

The Year 2000

Remains Intact

Lower Highs (very close)

 And

Lower Lows

Fred's Intelligent Bear Site brought to you by Fred Filskov. Public, private, and commercial distribution of this material is permitted as long as a link to this site is attached.

DYI

The

Maduro

Madness of Socialism!

Venezuela’s Marxist Dictator Orders Arrest of Bakers Making Croissants

Maduro, rather than to take the justified blame for the economic malaise that his socialist policies have caused, has dreamed up all manner of straw men to blame for the country’s woes, starting with the United States aim to make his administration look bad through “intervention” in the economy. He blames the greed of bakers and others still trying to eke out a living under the most draconian of rules. He also blames El Nino for the economy’s problems, along with the country’s drought.

He has inflated the money supply to the point where the local currency is all but worthless. He has set price controls — designed, he says, to check inflation and keep goods affordable — at levels that have taken necessities off the market altogether, including toilet paper, essential food items such as bread, medicines, deodorant, paper goods, and hospital supplies, including drugs, antibiotics, and intravenous solutions. If a patient needs a prescription, he must bring it with him when he checks in. 

Rolling blackouts interrupt critical hospital functions, such as respirators, forcing doctors to keep patients alive, when they can, by pumping air into their lungs by hand. Sanitary gloves and soap have vanished, as has enough water to wash blood from operating tables. 

The government is doing everything it can to stem the crisis, according to Maduro, 

everything 

except the right thing: 

letting businessmen, such as bakers, serve customers without government interference. 

But totalitarians such as Maduro have little interest in giving back any such freedom, and they squash any that happens to spring up.

 DYI