Interest

Rates Bottom

In 2012?

Deutsche: Is The US Headed For An Imminent Debt Crisis? Here Are The Signs

The thesis is simple and familiar: the United States is running a fiscal deficit and a current account deficit (i.e. "twin deficits") and relies on domestic and foreign investors to buy US Treasuries. 

The  bigger the fiscal deficit is the more Treasuries investors - including the Federal Reserve - need to buy. At the same time, the more Treasuries that have to be sold, the highest the interest rate all else equal... until something snaps (or unless an stock market crisis forces the Fed and investors to monetize/park cash in Treasuries). 

This was, in a nutshell the grim message from the IMF's latest Fiscal Monitor Report, which warned that the US would be the only country with growing debt levels over the next 5 years.

BofA: The 10Y Treasury Is No Longer A "Safe Asset", Here's Why

At the end of his lengthy presentation to DoubleLine investors in January, Jeff Gundlach, who was aggressively pitching commodities at the time, a trade that has since returned double digits, made an interesting observation: he predicted that in the next recession "we won't see a bid for safety out of stocks and into bonds." In other words as stocks tumble we "won't see a bond market rally", which means that bonds will no longer be a "safe asset."

What’s driving the expansionary debt dynamics of the US? First and foremost, the increase in spending authority by $150bn (0.7% GDP) per year, for the next two years, coupled with lower individual and corporate tax rates (tax reform) will result in US budget deficits being greater than $1tr for the next 3yrs. Meanwhile, the Congressional Budget Office recently forecast that US federal debt (held by the public) will rise close to the WWII peak over the next decade.

 DYI: During any economic downturn the Federal Reserve will step in and once again purchase Treasuries dropping interest rates.  In the meantime they’ll continue to sell off 50 billion per month increasing the supply of bills, notes, and bonds hence lifting interest rates.  The Fed's will have ammunition for the next downturn and hopefully not have to resort to negative interest rates.  Of course if we have a severe downturn which is possible due to our multitude of economic imbalances negative rates will occur.

As our economy continues to move along I do agree that rates will lift over time in a seesaw fashion only interrupted by recession(s).  Unless a horrific economic smash occurs rates as measured by the 10 year T-bond bottomed in 2012 at 1.4% from now on [in a seesaw manner] interest rates will continue to rise as they did during the great bond bear market of 1946 to 1981.

DYI

The main stream media does not report real events; it subsists to entertain or titillate and propagandize the masses as diversions from real events and their consequences.

Wells Fargo seeks dismissal of Navajo Nation lawsuit

FARMINGTON — Wells Fargo Bank wants a federal court to dismiss a lawsuit filed by the Navajo Nation last year over alleged unfair banking practices and fraudulent activities against tribal members. 

The motion to dismiss comes two months after the Navajo Nation alleged Wells Fargo and Company and Wells Fargo Bank N.A. deceived tribal members by opening multiple accounts without authorization and used sales tactics to pressure others into increasing bank account services.

 

Southwest passenger who died after major engine failure has been identified as a Wells Fargo VP and mother of 2

• The passenger who died in Tuesday's accident aboard Southwest Flight 1380 has been identified as Jennifer Riordan, 43.
• Riordan was a vice president of community relations at Wells Fargo.
• She is survived by her husband and two children.

Riordan had been a vice president of community relations at Wells Fargo since 2008. According to her LinkedIn page, she was in charge of the bank's public relations, internal communications, community involvement, and work with nonprofits.

 DYI:  Supposedly on April 17, 2018 Southwestern Airlines made an emergency landing with one heavily damaged engine.  Making a harrowing descend from 30,000 feet (5.68 miles) to around 4 or 5 thousand feet no longer requiring oxygen masks;  the only problem none of this actually happened!  A total hoax and yes Southwestern Airlines is in on it.  They realize that even bad publicity is good publicity in this upside down world.  The women Jennifer Riordan who allegedly died [she didn’t] is a vice president – community relations – for Wells Fargo Bank regional bank in Albuquerque New Mexico.  Right at the foot steps of the Navaho Nation who are pressing a 100 million dollar lawsuit against Well Fargo.  How convenient for Wells Fargo their community organizer is now dead.  However if this law suit continues I doubt a judge will buy any of this nonsense and if she doesn’t appear in court will place a bench warrant for her arrest.         

 Below are links highlighting this absurdity proving it is a hoax.

Tidbits & Tall Tales – Southwest Airlines Hoax

Jeffersonian Girl

Tidbits & Tall Tales - Just when you think these actors can’t say something more ridiculous, they surprise us again! They need to go over CPR and First Aid basics with all of their Crisis Actors prior to their staged events! I’m an Engineer, and I haven’t had a CPR class for 10 yrs now but I can recall the basics and perform it if the situation was ever dealt before me. The fact that these are people that claim they are in a medical position should either scare us, or tell us they are not who they claim. BTW, Marty’s Back for a Encore! You will love what he has to say! VIDEO ENDS AROUND 12:30!! I forgot to cut the last couple min off.

Marty Martinez being Trolled – Southwest Hoax

How NOT to Wear Oxygen Mask – Southwest Hoax

Southwest Airlines Ridiculous Community Organizer

DYI

Buy

Russian Stocks??

The U.S. Stock Market’s Impressive Outperformance May Be Coming To An End

Since putting in a major bottom in 2009, the U.S. equity market has dramatically outperformed the rest of the world. This may have something to do with the fact that the Fed explicitly encouraged greater risk taking on the part of investors by buying up trillions of dollars of risk-free instruments over that span. But now that this unprecedented balance sheet expansion has come to an end the relative outperformance of U.S. equities appears to be coming to an end, as well. 

The U.S. stock market is now the most expensive developed market in the world. Using the “Buffett Yardstick,” market cap-to-GDP, not only have we eclipsed the peak set during the dotcom mania we have also eclipsed the Japanese peak set back in 1990 which has resulted in 28 years of losses for investors over there… so far.

DYI:  If you click onto the article the author has two charts showing the Russian market as the least expensive as compared to the U.S. Brazil, India, China, Euro Zone, Great Britain, and Japan.  Though not within my model portfolio Russia does demand further study.  Obviously this would be for speculative dollars.

***************************

***************************

Interesting

Concept!

Report: Gravity-based energy storage could prove cheaper than batteries

Gravity-fed systems use a heavy weight - up to 2,000 tonnes - suspended in a deep shaft by cables attached to winches. When there is excess electricity, for example on a windy day, the weight is winched to the top of the shaft ready to generate power. 

This weight can then be released when required - in less than a second - and the winches become generators, producing either a large burst of electricity quickly, or releasing it more slowly depending on what is needed. 

According to the paper, gravity-fed storage providing frequency response costs $141 per kW, compared to $154 for a lithium-ion battery, $187 for lead acid batteries and $312 for flywheel. 

Despite its high upfront cost, the paper argued that unlike battery-based storage systems, gravity-fed solutions have a long lifespan of more than 50 years and aren't subject to degradation. This means they could cycle several times a day - allowing them to 'stack revenues' from different sources.

DYI:  Interesting concept that appears to have merit especially in its simplicity and longevity as compared to other means of electrical storage.  Lithium batteries are a great complement for home usage during peak hours or power outages.  However for mass electrical storage nothing beats fly wheels and gravity fed systems using weights or water as these systems have excellent longevity before replacement and ease of maintenance.  Let’s hope we see these technologies put into place soon here in the States.

DYI

Canadian

Housing & Debt

 Bubble!

Canadian as of Q3 2017 House Prices to Income is 142.6%!

U.S. Q3 2017 House Prices to Income is 120.5%! 

Poloz Says Canadian Inflation Spike Doesn't Violate 2% Target

Bank of Canada Governor Stephen Poloz said he’s not worried about inflation temporarily rising above the 2 percent target this year, and the acceleration by itself isn’t sufficient to warrant an interest rate increase. 

Speaking Saturday to reporters in Washington, Poloz said a tolerance for temporary movements is exactly why the central bank uses a 1 percent to 3 percent range for inflation and doesn’t mechanically raise interest rates when price growth surpasses the 2 percent point.

 

2017 Canadian debt to Household Income 171% 

2017 U.S. Debt to Household Income 78.4% 

Canada’s debt-to-household-income ratio rises to 171 per cent, StatCan says

By CRAIG WONGThe Canadian Press

Thu., Dec. 14, 201

OTTAWA—The amount Canadians owe relative to their income hit a new high in the third quarter. 

Statistics Canada said Thursday that household credit market debt as a proportion of household disposable income increased to 171.1 per cent, up from 170.1 per cent in the second quarter. 

That means there was $1.71 in credit market debt, which includes consumer credit and mortgage and non-mortgage loans, for every dollar of household disposable income.

DYI:  Oh Canada Oh Canada’s debt and real estate bubble has been building for over a decade and appears to be in the process of popping as sales for homes are no longer brisk especially in the bell weather province of Ontario including the epicenter Toronto. 

Is Canada the possible start of a world wide downturn?  Anything is possible just as Iceland was the kick off [though very few realized it at the time] for the world wide Great Recession.  Whether this is or not [kick off] if I was Canadian I’d be selling my house yesterday and becoming debt free as quickly as possible.  For those who are ahead of the game, house free and debt free, with reserves to put to work here is an economic survivors list:

• Canadian Treasury Securities:  Either direct purchase or though a mutual fund.  Don’t forget Canadian Savings bonds an easy way to build reserves as well.

• Utility Stocks:  Canadian and/or U.S. Gas and Electric providers will survive the most vicious of downturns with their dividend stream intact.

• Precious Metals Mining Stocks:  DYI’s favorite is Vanguard’s Precious Metals and Mining Fund [VGPMX].  I’m certain there are many fine Canadian mutual funds to work with.  This is one of the few bright spots as most common shares either Canadian or U.S. valuations have been bided to the moon.

• Physical Gold and Silver bars and coins.  Same reason as before gold and silver are one of the few asset categories that are of reasonable value. 

This list works just as well for Americans all you have to do is substitute out Canadian for U.S.  U.S. real estate has gone bonkers but NOT every where it is mostly hugging our coastlines.  Our interior [or as some say fly over country (not me I grew up in Ohio)] is not in the crazy valuation stratosphere.  If HGTV is highlighting house flipping in your area then a sale would be advisable as speculation is back with the soon to be bust. 

Debt free and reserves invested defensively when bargains once again will rein supreme you’ll have the firepower to scoop up the bargains.  This has been a long wait all created by world wide central banks who have gone bonkers pulling interest rates down either negative (Europe) or sub atomically low thus pushing valuations to the moon.

DYI   

Recession???

Treasuries spread:

 5 to 30 years hits narrowest since 2007!

Investors Are Getting Worried About an Inverted Yield Curve

The yield curve from 5 to 30 years flattened Wednesday to as little as 29 basis points, the narrowest spread since 2007. From 2 to 10 years, the gap touched 41 basis points, also the smallest in more than a decade. For extending to 10 years from 7, investors pick up a mere 4.3 basis points, less than a quarter of what they got a year ago. 

If the barrage of Fedspeak this week is any indication, the persistent flattening is creating a dilemma for officials, who appear intent on gradually tightening policy. St. Louis Fed President James Bullard was the latest to weigh in, saying that central bankers need to debate the yield curve right now, and that it could invert within six months.

The Impact of an Inverted Yield Curve

As concerns of an impending recession increase, 

investors tend to buy long Treasury bonds based on the premise that they offer a safe harbor from falling equities markets, provide preservation of capital and have potential for appreciation in value as interest rates decline. 

As a result of the rotation to long maturities, yields can fall below short-term rates, forming an inverted yield curve. Since 1956, equities have peaked six times after the start of an inversion, and the economy has fallen into recession within seven to 24 months.

DYI:  There are four components that are strongly associated with U.S. economic downturns [recessions].

• Widening credit spreads...NO
• Moderate, flat, or inverted yield curve...YES
• Falling stock prices...NO
• Purchasing Managers Index below 50...NO 

Widening credit spreads between 5 year T-Notes and Vanguard High-Yield Corporate Fund Investor Shares.  5 year T-Notes are currently yielding 2.80% as compared to Vanguard’s High-Yield Fund at 5.41%.  So far there hasn’t been much of a change for Vanguard’s High-Yield Fund.  When investors begin noticing a slow down with the possibility of recession they back off purchasing high yield paper thus prices fall and yields rise.  So far been unable to check this indicator; for an upcoming recession.

Yield curve no doubt about it the curve has definitely flattened out.  Once inversion occurs most likely the economy will already be in recession making it prediction ability of only stating the obvious.

Falling stock prices from 6 months earlier so far despite stock price turbulence prices remain 4% higher.  This indicator all by itself is of little value as stock prices are well known for their volatility, however, when part of the broader picture especially when stocks drop greater than 10% AND  the remaining three indicators are negative a high probability of recession is imminent.

Current Purchaser’s Managers Index report as of March of 2018 is 59.3% definitely out from recession range however not indicating an overheated economy as well.  The Fed’s desire to lift rates will continue but it will be muted to 25 basis points increases and possibly not at every meeting.

Conclusion:

So far recession is not in the cards however since the yield curve has flattened DYI will be on the outlook monitoring my other 3 indicators for any negative changes.

DYI

Medical

Industrial Complex!

It's Official! Curing Patients Is Bad for Business

Milton Packer describes the end result of profit-dominated drug development

Pharmaceutical companies are developing new drugs in only two therapeutic areas these days -- cancer and rare diseases. Why? These are the only therapeutic areas where exorbitant pricing is tolerated by payers. How exorbitant are we talking about? Most new drugs for cancer and rare diseases are being priced above $400,000 a year per patient. Some drugs are being priced at $1 million per treatment. And prices continue to soar. Who loses from this pricing practice? You might think the patients with cancer or with rare diseases are most likely to suffer. But that isn't true. To cover these exorbitant costs for even a small number of people, payers slash their expenditures in other therapeutic areas, and these cuts affect millions of people. For example, instead of agreeing to pay for the best treatment for diabetes for $1,500, payers approve the use of a second-rate treatment for $75. Physicians are not good at challenging payers, so most patients will get the second-rate treatment. So the patients who lose the most are typically those who do not have cancer or rare diseases. Actually, nearly everyone else loses when a company prices a novel drug at extreme levels.

According to an article by Tae Kim on CNBC, Goldman Sachs issued a report (by Salveen Richter) that suggested that drug developers might want to think twice about making drugs that were too effective. Richter's report, entitled "The Genome Revolution," was issued on April 10 and says: 

"The potential to deliver 'one shot cures' is one of the most attractive aspects of gene therapy, genetically-engineered cell therapy and gene editing. However, such treatments offer a very different outlook with regard to recurring revenue versus chronic therapies.... While this proposition carries tremendous value for patients and society, it could represent a challenge for genome medicine developers looking for sustained cash flow." 

Translation: 

If you develop a new drug that cures people rapidly, then patients will not need to take the drug on an ongoing basis; that limits the amount of money a company can make. 

Curing cancer ‘not a realistic goal,’ doctors focus on managing instead of curing disease 

DYI:  Addictive drug dealers:  Big Pharma…Goldman Sachs and the American Cancer Society are so brazen they are willing to say straight to your face that chronic consumption of drug therapies [using therapy loosely] is their preferred business model.  This is no different than a dealer of addictive drugs.  And yet big Pharma has that covered with their opioids as they make billions [world wide] with an addicted patience.  However that model has a shortened life cycle due to increase tolerance and its eventual lethal dose thus killing off Pharma’s revenue stream.

Big Pharma is now celebrating as they now have found a way to coerce patience [if they want to stay alive] with diabetes, cancer, heart disease etc. to swallow outrageously expensive drugs without the lethal dose as in the case of opioids.  

What is required is a two fold process:   One…Through legislation allows re-importation of drugs thus ending big Pharma’s U.S. price fixing schemes.  Two…Enforce 100 year old legislation on all aspects of the Medical Industrial Complex’s price fixing and monopolies collapsing cost by 75% to 85% [that’s not a typo!].

                                                 9

Sisters

Of

Institutional Change

1.)     End the Federal Reserve

2.)     Repeal 17th Amendment – Reinstate Federal Senators chosen by State Legislators.

1. Term Limits – Constitutional Amendment

A. Two six year terms for Senators

B. Three terms House of Representatives

3.)     Repeal 16th Amendment – Income tax replace with value added tax.

4.)     Pass the Balanced Budget Amendment

5.)     Exit the United Nations

6.)     Reign in the Medical Industrial Complex

a. Enforce Anti-Trust Laws

b. Pass Legislation for re-importation of ethical drugs

7.)     End Federal and Private Student Loans

8.)     Trust Bust Monopolies

               9.)     Reduce & Decentralize the Federal Government

 DYI

Oil

News

$100 Oil Is Back On The Table

Oil prices will rise to $100 per barrel if Saudi Arabia gets its way. 

Only a week ago, news surfaced that Saudi officials were quietly hoping to push oil prices up to $80 per barrel, which would help boost the valuation of Saudi Aramco IPO. But why not $100 per barrel? 

Reuters reports that Riyadh would be fine with prices rising that far, which lends weight to the notion that OPEC will keep the production cuts in place even as its mission to drain surplus oil inventories around the world appears to be largely “accomplished.”

OPEC and its non-OPEC partners are even considering yet another extension that would push the cuts into the middle of 2019. But with inventories back to average levels and expected to fall for the foreseeable future, the production limits would surely push the market into a deficit. The over-tightening, presumably, would lead to higher oil prices…just in time for the Aramco IPO.

 DYI

Media

Hoaxes

Government Propaganda

Video Jamboree! 

Southwest Airlines & Parkland Hoax-idences

Southwest Airlines Ridiculous Community Organizer

Fake Courtrooms – Where Hoax Trials Go To Die

Max Igan Rips Governments a New One on Press TV

Ministry of Defense of the Russian Federation. Statement on Syria. March 13, 2018

Begin at 3:08 

DYI

The

Onion

Satire & Truth!

The People’s Enemies

In order to rally people, governments need enemies; they want us to be afraid, and to hate, to rally behind them.  And if they do not have a real enemy; invent one in order to mobilize us!

Nhat Hanh

U.S. Won’t Rule Out Escalating Defense-Sector Profits From Syria Conflict

WASHINGTON—As the U.S. military awaited a potential response to its recent series of targeted airstrikes, sources reported Monday that the Trump administration would not rule out escalating defense-sector profits from the conflict in Syria. 

“If [Syrian president] Bashar al-Assad decides to retaliate, we won’t hesitate to rapidly scale up the revenue that weapons manufacturers can expect to earn from military action in Syria,” said Secretary of Defense James Mattis, 

adding that the use of over $160 million worth of Tomahawk missiles in precision strikes over the weekend should indicate that the American private defense sector was exceptionally prepared to profit from the conflict if necessary. 

“Our response to the use of chemical weapons in Syria should give corporations in the military-industrial complex and their shareholders the message that we are more than ready to send the value of their stocks soaring. 

The U.S. armed forces will stop at nothing to ensure that companies like Lockheed Martin, Northrop Grumman, Boeing, and General Dynamics remain in the black.” At press time, U.S. officials noted that if rising payments to defense companies for missiles and drones failed to deter Assad, 

they were open to significantly expanding the bottom line of private military contractors that supply ground troops.

DYI:  Obviously Secretary of Defense James Mattis never said anything close to the satire The Onion is telling you but in my mind if he was in truth telling mode this would have been his exact words.  One week after Donald Trump stated the U.S. needs to pull out of Syria Assad chemical attacks his own people?  That makes absolutely no sense.  Unless of course it is nothing more than a false flag staged faked event forwarded by the British.  Sunny old England the British government has been propagandizing their population since the invention of the printing press as illustrated by the BBC known by its sarcastic name The British Brainwashing Commission.  Everything I’ve seen from the BBC or CNN International is war propaganda.  And terribly done propaganda; back to the 1950’s level of competency.

Whether these gas attacks are real or not what imminent or remote threat does Syria pose to the U.S. [England or France]?  Once again it is obvious Syria poses no threat to any of these countries especially the United States.  Since there is no military threat to the Alliance [U.S., U.K., NATO, EU] it is necessary to create a monster out of Assad the leader of Syria.  The Military Industrial Complex is lavished with revenues and the Alliance’s global natural resource corporations sweep in securing oil and gas reserves plus any remaining assets.

 DYI

   

Bubble

News!

Peak Crazy Time & Yield Shock Coming – David Stockman

Former Reagan White House Budget Director David Stockman says look out for the “perfect storm” coming our way. Stockman explains, “I think we are in peak crazy time, really, to launch an attack against Syria based on the flimsy evidence to date, and the likelihood it was another false flag operation. . . . 

Trump declared victory two weeks ago in Syria and said we are coming home, which is exactly the right thing to do and say.  Then, all of a sudden, you have a gas attack and the clamor from the war party to do something, respond and bomb Assad yet one more time, even though those air bases and military bases are populated with Russian military. . . . 

So, let me summarize.  You have a hot war against Russia and the Iranians, which we have no business starting.  You have a trade war brewing, I am afraid will get out of control with China, which is totally unnecessary.  You have a fiscal calamity brewing right before your eyes, and you have a Fed populated by Keynesians, who think they miraculously cured the economy and everything is fixed.  

They [Fed's] are finally going to do what they should have done a long time ago and that is normalize interest rates. . . . The problem is they have waited so long . . .  that by October, they will be shrinking their balance sheet by $50 billion a month . . . while the Treasury is attempting to sell $1.2 trillion a year of new debt. . . . You are going to have, and I am quite certain of it, you are going to have a yield shock like the world has not seen in a long time. . . . 

When yields hit 4%, the proverbial brown stuff is going to hit the fan. 

 It is the proverbial perfect storm of upset, upheaval and really insane kind of developments.  Finally, after kicking the can all these years, it is finally going to come together, and I don’t see what is really going to slow it down.” 

How did the world get into record debt and trade wars? Stockman says, 

“The point is a free market based on honest money would never produce this kind of imbalance. 

Under the old system, when you start to run trade deficits this big . . . there would have been quick adjustment because we would have lost reserves.  Pre-1914, that was gold.  

When you lost financial reserves, gold, that caused the banking system to tighten up and caused interest rates to rise, credit to be curtailed, and the economy slowed down.  Prices adjusted and slowly imports declined and exports recovered. 

We don’t have that anymore. We basically have a bad money system, which allows these kinds of trade imbalances to grow.” 

What Stockman sees is deflation, depression and financial Armageddon. 

Stockman says, “In the bond market, I don’t know any other way to describe it. . . It’s uncharted territory, and we have never been here before. . . . The house of cards is so shaky and so fragile right now that there is the risk of the proverbial black swan event.  We don’t see something coming.  It shocks the system.  It triggers a panic, and the panic soon envelops itself and descends into some sort of doom loop.  That could very easily happen.” 

Stockman says, “Gold and silver are the only safe investments to have . . . you can’t be safe in the stock market, and you can’t be safe in the bond market.”

DYI:  David Stockman’s line of thinking is right along with DYI’s except when it comes to long term Treasuries they will soar in value as compared to high grade corporate bonds [they will sag in value and have ratings drops] and especially high yield junk bonds bombs will be decimated.

It is very possible that we will see Treasury securities go to negative rates as far out as 5 years in maturity.  It is also possible though less so the 10 year bell weather T-bond may go negative as well.

No doubt there are huge imbalances in our economy that will need to be worked off.  Will it come as the big shock as illustrated by our 1930’s Great Depression or will it be the Japanese version of a 20 year bear market for stocks [if bottomed in 2009?].  Who knows for sure?  Valuations are insane for stocks with long term bond yields way below their historical average making those two a very poor compounding tool.  Precious metals [gold] are slightly below fair value making for a modest investment at 29% of our model portfolio along with a small 4% in long term bonds and the remainder 67% in cash.

 Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 4/1/18

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

67% - Cash -Short Term Bond Index - VBIRX

29% -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