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Saturday
October 25th
2014

GRANT WILLIAMS on FINANCIAL REPRESSION

 

Douglas French

 

SPECIAL GUEST: GRANT WILLIAMS , Grant Williams is Portfolio and Strategy Advisor for Vulpes Investment Management in Singapore−a hedge fund running $200 million of largely partners' capital across multiple strategies. Grant has 26 years of experience in finance on the Asian, Australian, European and US markets and has held senior positions at several international investment houses. Grant also writes the popular investment blog 'Things That Make You Go Hmmm...'

OPEN ACCESS

 

Published 10-25-14

38 Minutes

Grant has 26 years of trading experience in Asian equity markets, beginning his career with Robert Fleming in 1986 trading Japanese equities and derivatives in both London and Tokyo. Subsequently he has run Asian equity, convertible bond and ADR/GDR trading desks in New York, Hong Kong, and Singapore as well as spending several years trading Australian equities in Sydney. During that time, he spent 6 years with UBS and a further 9 years with Credit Suisse. Most recently he was Head of Asian Equity Trading for Jefferies in Singapore.

This is a 38 minute video discussion between Grant Williams and Gordon T Long on Financial Repression.

FINANCIAL REPRESSION

Grant suggests that the dictionary defines repression as essentially about trying to repress true feelings. Financial Repression is the government’s attempt to steer behavior away from true investments and into those that assist the government to pay down its debts.

“The result is essentially outright theft by borrowers from savers. The pool of savings on earth is the last really untapped pool of capital that government has to go after”.

According to Grant the explosion in credit through removal from the Gold Standard, financial engineering and keeping interest rates low has left a differential between Credit Growth and GDP that has forced governments with no choice but to adopt Financial Repression policies. By debasing their currency and through inflation government create the most insidious type of wealth transfer that most people just don't understand.

Grant believes we are in a trap with no way out.

He makes his point crystal clear by pointing out how truly devastating Financial Repression has been to savers in real terms:

WILLIAMS ADVISES INVESTORS

  • Be Flexible
  • Consider Cash (Short Term) on a Risk / Reward Basis
  • Consider Gold as an Insurance Policy

MESSAGE

  • Be Engaged,
  • Understand What is Happening,
  • Question What You Are Being Told,
  • Be Cautious,
  • Avoid Potentially Large Drawdowns

 

 

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Saturday
October 18th
2014

PHASE SHIFT?

 

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

OPEN ACCESS

 

PHASE SHIFT?

Does the Current Market Volatility Signal A Trend Change in Sentiment?

Published 10-18-14

31 Minutes, 49 Slides

Gordon T Long poses three questions for debate with John Rubino regarding the current Geo-Political Event Risks and Macro Economics developments:

  1. Are the risks in fact bigger and more serious problems than we were seeing while the market was going up?
  2. Could it actually be a matter that investors are reacting differently because underlying mood / sentiment has changed for some reason?
  3. Are we unknowingly now over focusing on the Geo-Political Event Risks and Macro Economics developments as a result of the market going down (maybe for other reasons like reduced liquidity flows that no one is presently talking about - yet)?

John steps the discussion through risks such as: 1-the Islamic State, 2- Ebola, 3- The Strong $$$, 4- Japan & Europe, 5- Junk Bonds and 6- The"October" problem to illustrate that though the problems are more serious the real shift is in perceptions. He suggests that a phase shift occurs when "new headlines suddenly begin to seem both oppressive and really, really numerous, the public starts to feel that maybe we’re not okay after all!“

John suggests that the public is justified in being both confused and nervous because of the degree of market manipulation going on which has distorted price discovery, the pricing of risk and has allowed malinvestment to be hidden by continued roll-overs of every increasing levels of debt. He feels it will end, but it is impossible to know when - just that it will.

Gordon points out that the Federal Reserve still has more ammunition ready to go. He illustrates this with the recent derivatives contract signed between the Fed and the US option exchanges and well as the $300B Reverse Repo account "locked and loaded" in anticipation of any market correction that might ignite a potential cascading collateral collapse. This has the potential to change sentiment from fear to greed once the much needed bond rotation is complete.

Additionally, Gordon feels that though the central bankers are no doubt nervous they have not reached the dangerous point where they panic and pull out all the stops to protect the implosion of an over indebted and financially repressed system.

With the aid of 49 slides, this 31 minute video covers a lot of ground in an easy to follow dialogue.

 

 

 

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Saturday
Oct 4th,
2014

AMERICA'S TERMINAL POLITICAL DYSFUNCTION

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

OPEN ACCESS

with Charles Hugh Smith & Gordon T Long

25 Minutes

Charles Hugh Smith and Gordon T Long continue their discussion on Crony Capitalism in America.

HOW CRONY CAPITALISM WORKS

 -- Private interests influence government spending and regulations with lobbying and campaign contributions: Governance by the highest bidder.

-- The more successful the cronyism, the more money the corporations have to spend on lobbying, which serves to further protect their profits and share of government spending. This feedback loop rewards crony capitalism and limits classical capitalism’s key features: transparent markets and competition.

– An economy dominated by crony capitalism stagnates as competition is suppressed and government enriches those who are “more equal than others” (to borrow a phrase from Orwell)

SPECIAL INTEREST VETO POWER

-- One key dynamic in America’s political dysfunction is the veto power extended to special interests: any reform that costs them profits and/or impacts their share of Federal funds is vetoed.

-- Reform that doesn’t carry political/financial pain is not real reform

-- When every politically potent entrenched interest can veto unfavorable legislation and regulation, real reform is impossible 

ABSENCE OF REAL REFORM

 -- Without real reform, the system stagnates and manageable problems become crises.

-- Since entrenched interests refuse to accept any pain, problems fester for years beneath the half-measures and toothless “reforms” passed for public-relations purposes.

-- The problems (unfunded liabilities, explosive financial risks buried in the shadow banking system, etc.) then blossom into full-blown crises that cannot be resolved.

-- Crisis management leads to politically expedient Band-Aids that mitigate the symptoms without addressing, much less solving, the underlying political/financial diseases.

THE CRONY TRIBUTE SYSTEM

Gordon argues that Crony Capitalism today closely resembles the Roman "Tribute" System also adopted by the Mafia.Crimes being created today are met with fines. Guilty parties do not go to jail but rather the corporation pays a fine. Billion dollar crimes are assessed Million dollar fines. A percentage that closely mirrors a Tribute System. The government makes money through enforcement but not prevention. Corporations make fortunes with confidence that the government will settle for a piece of the fleecing of the people - and the game continues.

Gordon believe,s as the recent tapes released by Carmen Segarra indicate, the US regulatory system has effectively put the "Fox in charge of the Hen House"

 

 

 

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Tuesday
October 1st
2014

DOUGLAS FRENCH on FINANCIAL REPRESSION

 

Douglas French

 

SPECIAL GUEST: DOUGLAS E. FRENCH , Author, Past President of the Ludwig von Mises Institute and Casey Research Contributor

OPEN ACCESS

Douglas French of Casey Research

on FINANCIAL REPRESSION

 

Published 09-30-14

28 Minutes

He received his master's degree in economics from the University of Nevada, Las Vegas, under Murray Rothbard with Professor Hans-Hermann Hoppe serving on his thesis committee. He is the former president of the Mises Institute. He is the author of Early Speculative Bubbles & Increases in the Money Supply and Walk Away: The Rise and Fall of the Home-Ownership Myth. Douglas E. French teaches at Troy University and writes for Casey Research.

This is a 28 minute video discussion between Douglas E French and Gordon T Long on Financial Repression.

Douglas French was a banker for 20 years in Las Vegas during its heady days and has many stories including witnessing sale people selling derivative products. "There is nothing like being on the ground. It is very easy to speculate and second guess people about bubbles (how could you do that!) when you are sitting in the Ivory Tower, but it is a lot different when you are on the ground seeing the bubble from inside out".

"The biggest bubble we have is US Treasuries. The believe you can't get hurt is a quality you always see in a bubble. The idea that lending an entity, that is $17T and going to $18T and beyond in debt, and will never be able to pay that back and the idea that you will get 2.5% for 10 years and it is 'return free risk' is certainly bubble territory!"

FINANCIAL REPRESSION

“You have PhD’s at the Fed trying to create economic growth with inflation and low rates. The repression is that people like you and I won’t ever be able to retire because we won't be able to get any return on our money so we can prop up the government and keep it in business."

This is the overall Macro Strategy of the government but central planning has never worked! ..... They are essentially trying to print their way out of a jam! ....... Because of Financial Repression almost ¾ Trillion dollars has gone to the government that should be in private hands!!!"

FRENCH WARNS INVESTORS

  • People should be worried about their pensions,
  • People should be worried about the Fed's Repo market and primary dealer delivery failures. This will likely be the cause of the next crash. Money Managers are playing musical chairs every quarter to keep this game going.
  • People should be concerned about liquidity seizures which need to be closely monitored as money managers currently scramble for collateral.
  • "Collateral through Rehypothecation has been pledged and pledged, over and over again.... the average person is going to extraordinarily shocked by something they never saw coming because it is something that is hard to explain and hard to understand".

 

 

 

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Tuesday
September 30th
2014

MISH SHEDLOCK TALKS FINANCIAL REPRESSION

 

"Mish" Shedlock

 

SPECIAL GUEST: MIKE ("Mish") SHEDLOCK , Publisher of the Global Economic Analysis Blog.

An espoused self educated Austrian Economist,  Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Read more at http://globaleconomicanalysis.blogspot.com

OPEN ACCESS

MISH SHEDLOCK TALKS FINANCIAL REPRESSION

Published 09-30-14

Mish Shedlock talks Financial Repression with Gordon T Long.

FINANCIAL REPRESSION

“Financial Repression is a set of fiscal & monetary policies for the express benefit of the ruling class – the politicians, the banks, and the already wealthy at the expense of everyone else”

THE GOAL

“It is about coercing the government into doing things that are in the express interest of the ruling class. The already wealthy are the ones who gain the most”

MISH CITES THE FOLLOWING EXAMPLES:

  • Quantitative Easing,
  • Interest Rate Suppression,
  • Bank Bailouts
  • China – They don’t let the Yuan float,
  • China- State Owned Enterprises for the benefit of the ruling class,
  • Europe – ECB with negative deposit rates,
  • Europe – LTRO and the T-LTRO,
  • JAPAN – Abe-nomics
  • Greece Bailout
  • Cyprus Bailout – Wealth got their money out but everyone else had their money confiscated to pay back the predominately German bond holders,
  • Public Unions,
  • Inflation is the Key Financial Repression Idea – It benefits the banks, politicians and wealthy

MISH ON "WAR"

“War is another example of Financial Repression. Who benefits?  The war mongers – the banks, politicians and wealthy. You can’t even get elected if you don’t support war because the whole Military-Industrial Complex is behind it and you will be labeled ‘weak on defense’”

FINANCIAL BUBBLES

“Financial Bubbles are a direct result of all these policies for the benefits of the banks and wealthy …. That is what the Fed does. That is what central banks do. They blow bubbles over time for the benefits of banks and wealthy”

MISH ON KEYNESIAN ECONOMICS

“No one has gone back and proven how idiotic it all is. This idea that you can pay to dig a ditch and then have someone else fill it back up and this will add economic benefit is lunacy! Yet the average Keynesian believes that. A sixth grader would find in inherently ridiculous!”

MISH’S VIEW ON HOW INVESTORS CAN PROTECT THEMSELVES

“Don’t participate in bubbles!! Get out of the financial markets. Buy some Gold and wait."

THE COMING CURRENCY CRISIS

Mish believes a currency crisis is coming which is most likely to start outside the US in likely Europe or Japan.

“This environment fosters banks and the wealthy to speculate. When it ends badly and we have to bail them out the average guy on the street is going to pay for it – again”

KEY MESSAGE

  • If you don’t have money in Gold - Get some!
  • If you are still speculating in financial bubbles – Stop.
  • Look outside the box – Look outside the US

 

 

 

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Tuesday
September 23rd
2014

CARTELS, MONOPOLIES & CRONY CAPITALISM

 

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

OPEN ACCESS

 

CARTELS, MONOPOLIES & CRONY CAPITALISM

Today's new dominating business model.

Published 09-23-14

John Rubino is quite blunt when he states:

"Crony Capitalism is now the dominate business model operating in the US! Most big corporations employ legions of lobbyists and throw millions of dollars at manipulating the political and regulatory process!"

Political office to his trained eye "has become nothing more than an extended job interview" for the high paying lobbyist jobs expected after leaving political office, financed by new corporate competitive strategies.

Rubino places the blame for this unintended consequence primarily on the policy of "Unsound Money" and a consumption based economy. John sees the banks and major corporations becoming more and more powerful to the extent that we no longer have separation. "We now have one big organization, where the big organization becomes dedicated to self perservation. Size and power is now the goal, not serving customers and not necessarily a honest process. They are doing this by taking advantage of the regulatory process."

He spells out why he believes a return to 'Sound Money" is the only way the process can be halted or reversed. The rate of expansion of government and the financialization of the economy suggests the situation is now so serious in the US that the only likely outcome will be a major financial and economic crisis. "It isn't a free market anymore!"

The clear goal of the current expanding monolithic government is nothing more than to "dole out more and more goodies to the people who are able to pay for those goodies!". Though he sincerely hopes the expected crisis will "right the ship", he is highly skeptical. History suggests otherwise to him.

The influence of corporations on government regulations to gain competitive advantage, risk avoidance and financial growth are being driven by the size of the government in the economy and increasing centralized control. Crony Capitalism as a consequence was therefore inevitable and expected by many - though highly undesirable by most.

"Money today is more and more made by people who place bets on the market and use regulations to move the markets in that direction, book a profit and move on. No real wealth is generated, only transferred."

Unfortunately, there are no counter-forces except public awareness and their organized attempts to stop it!

 

 

 

 

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Saturday
September 20th
2014

GordonTLong on WallStrforMainStr.com FINANCIAL REPRESSION

 

 

 

SPECIAL APPEARANCE: GordonTLong on WallStrforMainStr.com

Gordon T Long: Financial Repression Killing Middle Class & Capitalism Itself

WallStrForMainStr Interviews Gordon T Long:

"We have over 250 interviews with top guests in discussion. The Gordon T Long discussion is over an hour long and one of the best ones we've done all year."

 

 

 

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Friday
September 12th
2014

Ronald-Peter Stoeferle on FINANCIAL REPRESSION

 

 

 

SPECIAL GUEST: RONALD-PETER STOEFERLE , Incrementum Liechtenstein

Prior he worked for Raiffeisen Zentralbank (RZB) in the field of Fixed Income/Credit Investments and then later on joined Erste Group Bank, covering International Equities, especially Asia. In 2006 he began writing reports on gold and gained media attention when he expected the price of gold to rise to USD 2,300/ounce when the current price was only at USD 500.His six benchmark reports called "In GOLD we TRUST" drew international coverage on CNBC, Bloomberg, the Wall Street Journal, Economist and the Financial Times. He was awarded "2nd most accurate gold analyst" by Bloomberg in 2011. He also writes reports on crude oil. Mr. Stoeferle is managing two gold mining-baskets and one basket for silver mining-equities. He studied business administration and finance at the Vienna University of Economics and the University of Illinois at Urbana-Champaign. Mr. Stoeferle is also a Chartered Market Technician (CMT) and a Certified Financial Technician (CFTe).

OPEN ACCESS

Published 09-12-14

35 Minutes with Slides

Ronald-Peter Stoeferle is a noted Austrian economist and money manager who believes strongly that “we should expect that financial repression as well as wealth taxes in various facets which will increasingly gain in importance in coming years". He believes "this to be a disastrous strategy, as the redistribution will merely buy time, while the structural problems remain unsolved.”

FINANCIAL REPRESSION

“Financial repression always consists of a combination of different measures, which lead to a significant narrowing of the universe of investable assets for investors. Money which in a more liberal investment environment would have flowed into other asset classes, is channeled in a different direction. The goal of financial repression is an indirect reduction of government debt by means of the targeted manipulation of the cost of government debt, most of the time accompanied by steady inflation.”

"Financial repression is ultimately a government imposed transfer of wealth.”

Developed country governments because of their previous policy stances now have only two monetary options. Financial Repression is the course that has been chosen. This is because it is preferably to have “quiet debt reduction” achieved by :

- Direct or indirect capping of interest rates (especially on government bonds),
- Measures such as forcing domestic investors to invest in domestic capital markets, such as capital controls and regulations forcing institutional investors to hold portfolios with a “home bias”,
- Taxes that make alternative investments more expensive (e.g. transaction taxes),
- Measures that imply a direct or indirect influence of government on financial institutions (macro-prudential regulation),
- Negative deposit interest rates, which increase the incentive for banks to invest in relatively risk-free assets. Banks are thus encouraged to monetize government debt – something that can rightly be called an inflation policy.

 

 

 

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Saturday
Sept 6th
2014

WHY CRONY CAPITALISM IS HAPPENING

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

OPEN ACCESS

with Charles Hugh Smith & Gordon T Long

24 Minutes, 17 Slides

Why has classical capitalism devolved to crony-capitalism/crony-kleptocracies?

In this 24 minute video Gordon T Long and Charles Hugh Smith discuss through the aid of 17 slides the rapid advancement of Crony Capitalism in America. The facts are undeniable, but why is it becoming so obvious and undeniable? Why is it accelerating without any apparent 'checks and balances'? Where have the safeguards against this happening gone?

Understanding Why This Is Happening

1.  Those who control most of the wealth are willing to risk systemic collapse to retain their privileges and wealth.  Due to humanity’s virtuosity with rationalization, those at the top always find ways to justify policies that maintain their dominance and downplay the distortions the policies generate. This as true in China as it is in the U.S.

2.  Short-term thinking: if we fudge the numbers, lower interest rates, etc. today, we (politicians, policy-makers, money managers, etc.) will avoid being sacked tomorrow. The longer term consequences of these politically expedient policies are ignored.

3.  Legitimate capital accumulation has become more difficult and risky than buying political favors.  Global competition and the exhaustion of developed-world consumers has made it difficult to reap outsized profits from legitimate enterprise. In terms of return-on-investment (ROI), buying political favors is far lower risk and generates much higher returns than expanding production or risking investment in R&D.

4.  The centralization of state/central bank power has increased the leverage of political contributions/lobbying.  The greater the concentration of power, the more attractive it is to sociopaths and those seeking to buy  state subsidies, sweetheart contracts, protection from competition, etc.

5.  Any legitimate reform will require dismantling crony-capitalist/state-cartel arrangements. Since that would hurt those at the top of the wealth/power pyramid, reform is politically impossible.

6.  Understood in this light, it’s clear that central bank monetary policy—zero-interest rates, asset purchases, cheap credit to banks and financiers, QE, etc.—is designed to paper over the structural problems that require real reform. 

Japan is a case in point: the Powers That Be in Japan have put off real reforms of the Japanese economy and political system for 25 years, and they’ve enabled this avoidance by pursuing extremes of fiscal and monetary policy that have eroded the real economy and created long-term structural imbalances.

 

 

 

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Friday
September 5th
2014

Jeff Berwick on FINANCIAL REPRESSION

 

 

 

SPECIAL GUEST: JEFF BERWICK is a Canadian entrepreneur, libertarian and anarcho-capitalist activist who founded StockHouse Media Corporation in 1994, one of the most active financial website in Canada. He remained CEO until 2002. In 2013, Berwick announced plans to co-found the world's first Bitcoin automated teller machine (ATM). He presently resides in Acapulco, Mexico and is Chief Editor of THE DOLLAR VIGILANTE

OPEN ACCESS

Published 09-05-14

A 32 Minute PODCAST

THIS IS A PODCAST ONLY

 

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Wednesday
September 3rd
2014

Egon von Greyerz on FINANCIAL REPRESSION

 

 

 

SPECIAL GUEST: EGON von GREYERZ , Founder & Managing Partner, Matterhorn Asset Management AG and GOLDSwitzerland.

OPEN ACCESS

Published 09-03-14

33 Minutes with 35 Slides

A former banker, Corporate Vice Chairman of a FTSE 100 corporation and founder of Matterhorn Asset Management AG, Egon von Greyez “strongly believes there will be massive wealth destruction in the next few years”.

Von Greyerz personally defines Financial Repression in practical terms as the “manipulation and interference by government in the running of the economy and the lives of normal people”. What this will inevitably lead to he feels will be the “total control of the people and a police state – that is the way we are going in some countries!”

He has been worried about what is presently unfolding since the 1980’s and is very troubled about what he has witnessed and what he clearly saw was coming. “All this was inevitable. It is ridiculous for the central bankers to say they didn’t see this coming. Anyone with just a little bit of intelligence could have seen this coming (of course you can’t be a politician who never see things coming and central bankers are politicians)”.


Anything that goes up exponentially will come down very fast - at some point! …. there will be massive fall in inflation, implosion of the monetary system and implosion of assets – and that is to come!”

“The Federal Reserve was created in 1913 by the Bankers for the benefit of the bankers and since then we have had inflation for their benefit. Once the US became the world’s reserve currency the bankers controlled the whole world”.

The reason there is no way out is because “the only policy has been to ‘kick the can down the road’ and only thing central bankers have done is to pass it on to others, hoping they would survive their term and someone else would take over the problems. They can see the problems, they can see the risk. They can’t talk about it. They only have one solution. They have held interest rates at zero which is obviously ridiculous and one example of Financial Repression, and they have printed unlimited amounts of money and has now reached a point where it no longer has an effect.”


There is a lot of things investors can do to protect themselves from Financial Repression which Egon von Greyerz discusses for the listeners.

 

 

 

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Tuesday
Sept 2nd
2014

KFUG 101.FM

Counter Culture Radio

Gordon T Long

 

SPECIAL GUEST: KFUG 101.FM Counter Culture Ratio with Dan Schultz

OPEN ACCESS

Big Changes Coming Soon

with Dan Schultz

KFUG 101.FM

Counter Culture Ratio

AUDIO ONLY: 59 Minutes

 

 

 

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Saturday
August 16th
2014

THE SUB-PRIME ECONOMY

PART - II

 

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

OPEN ACCESS

 

A SUB-PRIME SOCIETY

Delinquency Debt & the Collections Crisis

Published 08-18-14

 

The 2008 Financial Crisis is often attributed to a sudden freeze in liquidity in the Shadow Banking System stemming from borrower default problems within the securitization of Mortgage debt.

Six years later we have an even larger problem which is now associated with a national sub-prime economy securitizing its debt through the same unregulated Shadow Banking System. As prior to the 2008 Financial Crisis, Credit regulations are once again mistakenly being quietly changed to increase credit flows.

As Yogi Berra said: "Its Deja vue all over again!"

A BIGGER "COLLECTIONS" CRISIS

The US collections problem is with little doubt worse than it was six years ago once the government and its' credit pusher lobbyists' 'spin' is removed.

  • 77 Million Americans face debt collectors.
  • 35% of Americans have debt in Collection. Roughly, every third person you pass on the street is going to have debt in collections. The average is $5,178.
  • Roughly 1 out of 20 (5.3%) of people with a credit file are at least 30 days late on a credit card or other non-mortgage account (e.g., automobile loan, student loan).
  • A staggering 70% of census tracts have at least 25% of people with reported debt in collections. This means it is a US wide problem.
  • Health care-related bills account for 37.9 percent of the debts collected, according to a new report commissioned by the Association of Credit and Collection Professionals. Student loan debt represents another 25.2 percent and credit cards make up 10.1 percent, with the rest of the collections going for local governments, retailers, telecoms and utilities.
  • According to a new study by the Russell Sage Foundation, the inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36% decline... Welcome to America's Lost Decade. Simply put, the NY Times notes, it’s not merely an issue of the rich getting richer. The typical American household has been getting poorer.
  • Tow trucks in America no longer have Towing on the side of the trucks but instead has been replaced with TOWING & RECOVERY. Think of it, everyone is driving new cars they can't afford so towing is small business but 'recovery' is now there primary business.

The American family is broke.

Government Policies of Financial Repression have crippled savers and pensioners.

The US middle class which feeds the 70% consumption economy has been 'gutted' with escalating costs in health & education, removal of defined benefits for retirements while have real disposable income shrunk.

THE 70% CONSUMPTION ECONOMY PROBLEM

The government is caught in a trap where it perceives it must increase credit to thereby increase consumption to sustain a 70% consumption economy. It has only so many options available as shown below.

GOVERNMENT's ONLY RESPONSE: Change the Rules

The simple truth is after an initial period of "Extend & Pretend" Policies, then replaced by "Kick-the-Can-Down-the-Road" Policies it has resorted to "Fake It Until You Make It. To do this they are changing the credit rules. When governments get into a problem you can always count on them to change the rules. John Rubino and I in this 30 minute video show how the government is doing this regarding Credit Card FICO scores, Car Loans, Student Loans, Mortgages and HELOCS.

 

WHY IT WON'T WORK

All of this is a waste and won't work. Citi Rob Buckland's lays out the four cycles of credit:

Phase 1: This begins at the end of a recession, when interest rates have fallen, money is cheap, but stocks are still battered.

Phase 2: A bull market sets in during phase 2, when stocks start to rise as easy credit lubricates the economy.

Phase 3: This is the tricky part. Stocks are still flying high, but credits spreads are widening as investors become increasingly unwilling to finance further risk. Corporate CEOs have now experienced a lengthy period of gains and become risk-happy. (And we'd note that central banks are already talking about tightening credit by raising interest rates.) Bubbles can form in Phase 3, Buckland says, as the high-flying stock market ignores the early warning signs of the deteriorating credit market. Hello, tech startup IPOs!

Phase 4: Stocks react to the lack of available credit by collapsing, and we see the kinds of things you get in a recession: "This is the classic bear market, when equity and credit prices fall together. It is usually associated with collapsing profits and worsening balance sheets," Buckland says.

We're in Phase 3 right now, Buckland says, but we may not be very far into it. Here's (Click to see Buckland's checklist of warning signs for Phase 3) .

CONCLUSIONS

60% of the families in America have absolutely no buffer for an emergency except to increase their debt levels. A third have nothing saved for retirement with the private sector no longer having meaningful pension plans.

The whole system is being financed within the Shadow Banking System which is borrowing short and lending out long to the Sub-Prime Economy. It is ripe for someone to yell "fire" and to see short term liquidity implode as it did in 2008.

 

 

 

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Saturday
July 26th
2014

Call on Next Credit Crisis Coming True

 

Gordon T Long

 

SPECIAL GUEST: Financial Survival Network Radio

OPEN ACCESS

Call on Next Credit Crisis Coming True

with Kerry Lutz & Gordon T Long

AUDIO ONLY: 24 Minutes

From the Financial Survival Network:

In our last discussion, Gordon T. Long predicted that another credit crisis was forming. That was nearly two months and sure enough we’re witnessing the start of a sub-prime auto debt bubble. Great call on Gordon’s part. Lately he’s been writing about the stock-buyback bubble. This work is starting to gain traction as well. David Stockman had a recent article about IBM’s rampant buyback’s. Gordon’s work is always ahead of the curve, which is why he’s a regular on FSN.

 

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Saturday
July 19th
2014

MYSTERIOUS BUYING

 

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

OPEN ACCESS

The TAR PIT that is FINANCIAL REPRESSION

with John Rubino & Gordon T Long

30 Minutes, 15 Slides

Macroprudential Policies of Financial Repression have been steadily accelerating since the implosion of the Dotcom Bubble.

Many of the consequences of Monetary Malpractice which Gordon T Long and John Rubino outlined and cautioned about in 2012 are now evident on a daily basis which are chronicled in this 30 minute video.

Alarmingly it is taking more and more draconian and manipulative central planning actions to keep the financial ship afloat.

Unfortunately, both John and Gordon see things getting much worse for very specific reasons which the Federal Reserve has begun subtle signaling.

 

 

 

 

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Monday
July 14th
2014

THE SUB-PRIME ECONOMY

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

OPEN ACCESS

THE SUB-PRIME ECONOMY

Students, Car Buyers & Retail Stores

with Charles Hugh Smith & Gordon T Long

28 Minutes, 23 Slides

GROWING SUB-PRIME POPULATION

In this 28 minute video Gordon T Long and Charles Hugh Smith discuss through the aid of 23 slides the growing sub-prime population in America. It is getting little attention as more and more citizens are effectively being squeezed into the category that was once termed 'sub-prime' but which is now simply the US Economy.

The biggest increases in credit are coming the areas least able to afford increased debt levels, who see themselves as having no other survival choice in modern day America..

1. STUDENTS & THEIR PARENTS

2. INCREASING NUMBER OF CAR BUYERS

3. RETAIL STORE CHAINS

 

BREADWINNER ECONOMY FAILING

The little discussed truth is that fewer and fewer jobs today actually pay a "breadwinner's" salary. 48% of all new jobs being created in America now pay less than $24K/Annum GROSS. Even with both spouses working the numbers don't add up when rents are 1500/Mo, Day Care $1000/Mo and car payments for two cars to commute to fewer jobs are minimally over $500/Mo. Then there are 3 levels of taxes, fees, licenses etc and exploding food, gas, utility, health and education costs. It is any wonder America is now accelerating deeper into a sub-prime economy?

SHADOW BANKING

The problem during the 2008 crisis was sub-prime mortgages which sent shock waves through the Shadow Banking System. A system based on borrowing short and lending long. Today the Shadow Banking system is feeding off Student Loans, Car Loans and REITS. All are being securitized, repackaged and bundled through the Shadow Banking System. Like mortgages prior to the financial crisis, it was delinquencies which started to rise which imploded the system. This is a show which is soon coming once again returning to a theater near you!!

 

 

 

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Saturday
June 28th
2014

GEO-POLITICAL TURMOIL

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

OPEN ACCESS

GEO-POLITICAL TURMOIL

Instability, Fragmentation, Resource Wars

with Charles Hugh Smith & Gordon T Long

21 Minutes, 19 Slides

SOURCES OF INSTABILITY  

FAILED Governments/States
    • North Korea,
    • Venezuela,
    • Pakistan, etc.
      • Weak Institutions & Corruption
      • Failed Political Governance  
        • Failure of Central Planning Model
        • Failure of Neo-Liberal Model of Capitalism
        • Global Supply Chains Under Pressure

    FRAGMENTATION of nation-states assembled in the 20th century by the Great Powers

  • Iraq,
  • Syria, et
ISIS

DIVIDED Geopolitical loyalties of traditional states

  • Ukraine

RESOURCE WARS

  • ENERGY and transport of energy (Ukraine, Iraq, Africa, China-vs-Rest of East Asia, etc.)
  • FEWER resources (food, water, energy)
  • SHORTAGES / RISING PRICES of resources

INSOLVENCY of Nations/Governments due to unpayable debts (Greece, Cyprus, etc.)

OBSERVATIONS  

  • Each source of instability generates regional instability that disrupts other nation-states and attracts wealthy-states/quasi-Imperial interventions that further destabilize the region.
  • The likelihood that all these interlocking sources of instability will go away naturally or be resolved is low.  Predictability is also low as instability is intrinsically non-linear.
  • National and global instability caused by eroding purchasing power of currencies; as currencies lose purchasing power, imports become prohibitively expensive, triggering higher prices and shortages that exacerbate wealth/income inequalities.

 

 

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Tuesday
June 22nd
2014

Iraq About US Dollar, Hyperinflation Trouble in 2015

 

Gordon T Long

 

SPECIAL GUEST ON: USAWatchdog.com

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Iraq About US Dollar, Hyperinflation

Trouble in 2015

Greg Hunter’s USAWatchdog

VIDEO ONLY: 30 Minutes

From USAWatchdog.com

By Greg Hunter On June 25, 2014 USAWatchdog.com

4

Macroeconomist Gordon Long says, “We’re not really running a capitalist system.  We are running a credit system.  Instead of using savings, we are using credit.  Credit, the way we are doing it now, is really a form of counterfeiting.  If you look at the $72 trillion shadow banking system that we have operating right now, that is generating this credit . . . it collapsed in 2008 . . . and now it’s on a hairy edge.   It’s not mortgages and housing this time.  It’s student loans through Sallie Mae.  These students don’t have any hope of paying this back.  We are talking north of $1.1 to $1.2 trillion.  It’s car loans this time because of subprime.  That’s the way to look at car loans, they are sub-prime. . . . And you got these highly leveraged real estate investment trusts also operating through the shadow banking system.  These problems are blatantly evident, and I don’t think the powers that be have any control over them.”

On the next financial crisis, Mr. Long contends, “I think 2008 was an early warning signal of the magnitude of the problem.  We didn’t fix it.  We did extend and pretend.  Dodd-Frank did not solve the underlying issues.  The global swaps market went from $600 trillion to $700 trillion last year, alone.  We’ve watched the shadow banking system push through $72 trillion.  So, we didn’t stop it.  We just, in fact, inflamed it even worse, and we got into even riskier kinds of assets.  Is it imminent?  No, I think we are talking 2015.  I think we have a little bit of a deflation scare before we get into the hyperinflation.  Don’t underestimate the central bankers and the politicians’ ability to kick the can down the road.  They still got some more bullets here.”

Will the crisis in Iraq get out of control?  Gordon Long says, “I happen to think that it probably will because we are not resolving the basic problems.  But the big core issue here is the petrodollar.  It’s not about oil and it’s not about gas.  It’s about what it is bought and paid for in, and that is U.S. dollars.  There is no one that trades any one of those products in anything other than U.S. dollars . . . right now, as of today. . . . As long as the trading continues in U.S. dollars, all those dollars will stay out there and not come back to the United States.  When it comes back to the United States, you will have hyperinflation.  These conflicts need to be seen in the context of they are really going to force groups to trade in other than the U.S dollar.  That’s the problem because they are going to come back.  They are going to say I have a U.S. dollar, and I am going to make a claim on it.  That’s what is going to drive the hyperinflation.  That’s what is going to drive the currency crisis.  This is about trading in the U.S. dollar. . . . We are looking at spring 2015 to Q three.  There is trouble there.”

On government debt and suspicious bond buying in places like Belgium, Gordon Long says the government has to keep finding was to sell Treasury bonds to finance the huge U.S. debt.  Long explains, “They not only have to sustain the buying, but they actually, right now, need a shock to the system, what I will call a bond scare, so money will move out of an over-inflated equity market. . . . And they need that to drive down the interest rates, push up the bond prices and get that financing charge much lower.”  Long goes on to say, “The real game that is going on here is a complex game, but it’s pretty simple, what they are trying to do and that is they are trying to finance the government’s debt.”

Join Greg Hunter as he goes One-on-One with Gordon Long of GordonTLong.com.

 

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Tuesday
June 24th
2014

MYSTERIOUS BUYING

 

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

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MYSTERIOUS BUYING

US Treasuries & Equities

 

with John Rubino & Gordon T Long

28 Minutes, 43 Slides

With the aid of 43 slides, Gordon T Long and John Rubino debate three highly unusual and mysterious buying patterns which have emerged in the US Treasury and Equity markets.

1- THE MYSTERIOUS BELGIUM US TREASURY BUYER

Who is the stealth buyer who is buying US Treasuries through Euroclear in Belgium?

Is it:

  • US FEDERAL RESERVE
  • US TREASURY
  • EU'S ECB
  • CHINA'S PBOC
  • BIS /IMF

What would be their individual motives for buying, why keep it so secretive and where would the funding come from?

2- THE $29.1T IN PUBLIC CENTRAL BANKING BUYING

Why would central banks and public institutions be buying such large quantities of equities?

The FT reports 

“A cluster of central banking investors has become major players on world equity markets." The report, to be published by the Official Monetary and Financial Institutions Forum (OMFIF), confirms $29.1tn in market investments, held by 400 public sector institutions in 162 countries, which "could potentially contribute to overheated asset prices." China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials.

3- THE $1T IN PRIVATE S&P 500 BUYBACKS IN 2 YEARS

Why would corporations buyback nearly $1T of S&P 500 equities over the last two years? This is unprecedented!

THE CONSEQUENCES OF MISPRICING RISK AND FAILED PRICE DISCOVERY

What are the ramifications of the withdrawal of this degree of treasuries and equities from the financial markets?

 

Join Gord and John for a very enlightening, "no holds barred" discussion on all the above questions.

 

 

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Thursday
June 12th
2014

Can Government Kill the Uber App?

 

Gordon T Long

 

SPECIAL GUEST: Financial Survival Network Radio

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Can Government Kill the Uber App?

with Kerry Lutz & Gordon T Long

AUDO ONLY: 36 Minutes

From the Financial Survival Network:

Gordon T. Long was on today talking about the Uber Revolution taking place in Europe. Seems the state-sponsored taxi monopolies are none too happy about the competition that this little app is causing them. Nevermind the employment opportunities for all the unemployed students, it’s undermining the power of the state. And what’s going on with the re-hypothecation scandal in China. Who owns anything anymore? Nonone knows. Just wait till the next crash.

 

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Saturday
May 17th
2014

PARADOX OF INFLATION

 

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

OPEN ACCESS

with John Rubino & Gordon T Long

23 Minutes, 22 Slides

IS A DEFLATION SHOCK COMING?

John discusses his two latest articles: 'Deflation Shock Coming? May 9th and Deflation Shock Coming? Part 2: Even Here May 15th in the context of the Inflation or Deflation debate and the implications for:

  • Asset prices (especially stocks and real estate which look highly vulnerable here) and
  • Policy in 2015 (when most of the major economies should be back to aggressive QE).

PARADOX OF INFLATION

We have two worlds. One in the emerging markets and developing economies who are fighting inflation and in the developed economies who have signs of continued deflationary pressures. Now we are seeing inflation falling rapidly in China and Europe while producer prices just jumped in the US? What is going on?

Gord suggests we will have both in a specific sequence with regional counter-currents with his biggest inflationary worry being food.

FOOD PRICES

Food price increases are politically destabilizing and bring predictable social unrest. The recent rapid rise in food prices should now be a concern.

There is no sure outcome to the debate but many of the signals that give us directional clues are now emerging. Join Gordon and John as they explore the subject.

 

 

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Saturday
May 10th
2014

THE GOLDEN ERA OF LOW HANGING FRUIT

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

OPEN ACCESS

THE NEW NATURE OF WORK

Jobs, Occupations & Careers

with Charles Hugh Smith & Gordon T Long

25 Minutes, 24 Slides

In this 25 minute video Charles High Smith and Gordon T Long discuss the dramatic changes currently underway in the Nature of Work.

Discussed are:

    • NEW AGE
      • OCCUPATIONAL DRIVERS
      • SKILLS
    • VALUE PROPOSITION
    • SELF ACCREDITATION
      • HUMAN & SOCIAL CAPITAL
      • THE MOBILE CREATIVE
    • HYBRID OWNERSHIP

THE VALUE PROPOSITION

HIGH TOUCH WORK

This is work where most of the value is in human interactions. This includes psychotherapy, service in fine-dining restaurants, helping elderly people, running a farmers market, etc.

PROBLEM SOLVING WORK 

Computer programs can only solve known problems, i.e. problems where the solution is already known and can be broken down into processes that can be performed by software or machines.

VALUE CREATION WORK

Doing work that cannot be broken into programmable processes.

HYBRID OWNERSHIP

Also discussed are new collaboration models which are allowing work to operate globally.

 

 

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Saturday
May 3rd
2014

UKRAINE:

Financial Warfare

 

John Rubino

 

SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

OPEN ACCESS

EU: Financial Repression

with John Rubino & Gordon T Long

27 Minutes, 38 Slides

According to John Rubino the EU is being penalized and disadvantaged for attempting a more prudently sound Monetary Policy. Unfortunately the old adage of "Bad Money forcing out Good Money" is occurring and will force the ECB to soon succumb to the pressures of the other, even more monetary spendthrift, developed economies.

A positive current account and falling inflation has kept the Euro strong, which is now undermining further possible EU/ECB recovery efforts. Mario Draghi and the ECB have recently been very vocal that actions will soon need to be taken to weaken the Euro.

This has all the earmarks of escalating Currency Wars as Japan blatantly debases the Yen as a cornerstone of ABE-nomics and The Fed still prints at a rate of $55B/Month (Current TAPER rate).

With the "Baby Boomers" now retiring in Europe (much sooner than the US due to more generous entitlements), the massive unfunded and 'cash accounting' pension and entitlements programs in Europe are hitting fiscal operating budgets. There is little policy alternatives, without unprecedented social unrest, but to rapidly re-expand the money supply in an unsterilized fashion.

FINANCIAL REPRESSION

As a consequence, with little media coverage the EU is stepping up its policies of Financial Repression to combat the soon to explode "in budget" government debt levels which have previously been shrouded in government obfucation and 'creative' accounting.

RACE TO DEBASE

We are now in a global "race to debase" as the developed nations debase their currencies to reduce debt burdens, while the emerging economies traditionally have debased their currencies to gain or maintain export led mercantilism economic strategies.

We are left with the developed economies exporting inflation and the rest of the world exporting deflation. The balance is shifting and the question is which way will it tip?

 

 

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Tuesday
April 29th
2014

It's Beginning to Look A Lot Like 2008

 

Gordon T Long

 

SPECIAL GUEST: Financial Survival Network Radio

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It's Beginning to Look A Lot Like 2008

with Kerry Lutz & Gordon T Long

AUDO ONLY: 26 Minutes

From the Financial Survival Network:

Gordon T. Long joined us today for a discussion about the rapidly growing fissures in the worldwide credit markets. Cars sales are up but so are sub-prime auto loans. People can afford auto lease payments, but they can’t afford to handle the huge repair bill at the end of the warranty period. China’s credit bust is here and you better watch out for what’s next.

 

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Saturday
April 26th
2014

TREACHEROUS MARKETS AHEAD

 

Richard Duncan

 

 

SPECIAL GUEST: RICHARD DUNCAN , Economist, Author & Publisher of RichardDuncanEconomics.com.com

OPEN ACCESS

ABOUT RICHARD DUNCAN

Richard Duncan is the publisher of Macro Watch, a video-newsletter that analyzes trends in credit growth, liquidity and government policy in order to anticipate their impact on asset prices and economic growth.

He is also the author of three books on the global economic crisis.  The Dollar Crisis: Causes, Consequences, Cures (2003); The Corruption of Capitalism (2009); and, The New Depression: The Breakdown Of The Paper Money Economy (2012).

Since beginning his career as an equities analyst in Hong Kong in 1986, Richard has served as global head of investment strategy at ABN AMRO Asset Management in London, worked as a financial sector specialist for the World Bank in Washington D.C., and headed equity research departments for James Capel Securities and Salomon Brothers in Bangkok.  He also worked as a consultant for the IMF in Thailand during the Asia Crisis.

Richard has appeared frequently on CNBC, CNN, BBC and Bloomberg Television, as well as on BBC World Service Radio.

TREACHEROUS MARKETS AHEAD

The Fed Taper is Presently Too Tight

SPECIAL GUEST:

Richard Duncan

33 Minutes, 34 Slides

According to global economist Richard Duncan, there are treacherous markets ahead in 2nd half 2014 and investors need to be on heightened alert.

TREACHEROUS MARKETS AHEAD

The reasons for caution is that the liquidity drain in 2nd half 2014, due to the Federal Reserve's Policy implementation of Taper, will potentially take the floor out from under US equity markets. Because of this Richard Duncan strongly believes the Fed is highly likely to reverse policy when equity markets inevitably begin weakening.

WHAT NOW MOVES CURRENCY MARKETS

Quantitative Easing within the global fiat currency regime has ushered in a new methodology for determining currency changes that is not fully appreciated.

CHINA'S ECONOMIC CRISIS

Richard is extremely concerned about China and feels its growth model of export-led and investment-driven is now in crisis. He illustrates why the current distortions in gross fixed capital formation and investment are unsustainable and the precarious position it leaves modern China in.

There is a lot to consider in this 33 minute video supported by over 34 originally researched slides.

 

 

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Saturday
April 19th
2014

PART II

What the Technicals Are Telling Us

 

Bert Dohmen

 

 

SPECIAL GUEST : BERT DOHMEN , Publisher of The Wellington Letter and President Of Dohmen Capital

OPEN ACCESS

DOHMEN: What the Technicals Tell Us!

Part II

with Bert Dohmen & Gordon T Long

13 Minutes, 22 Slides

Bert called the recent market weakness and sell off on CNBC Asia on March 23rd. He said it was going to be a race between Wall Street getting the backlog of IPO's out and the market caving in. He was very specific in identifying the extreme warning signals in the NASDAQ and Small Cap stocks and the identification of a key reversal on March 21st in the S&P. A key reversal day which he feels is always seen at major tops.

Though Bert feels a near term bounce is likely the week of April 14th he doen't believe it will be sustained. The smart money has been and will continue to take full advantage of any market strength to exit.

Bert had taken full advantage of the prior parabolic run-up with a strategy of buying those stocks with no earnings as he believed those stocks would rise the "fastest and mostest". That period he feels is now over for the year. He exited all long positions on March 24th which is an unusual position for Dohmen Capital to take but they feel so strongly about the degree of risk now at hand.

THREE PEAKS AND A DOMED HOUSE

Last November at a webinar Bert warned of what he referred to as Three Peaks and a Domed House (below). He felt it was eerily similar to 1929.

Join Bert Dohmen and Gordon T Long as they assess the risk presently inherent in the US equity markets.

Bert Dohmen cautions that global government's are not yet finished their attempts to keep assets prices up and therefore investors must be 'on the alert'.

 

 

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Saturday
April 19th
2014

PART I

Baltic Freight, Shipping Credit and China

 

Bert Dohmen

 

 

SPECIAL GUEST : BERT DOHMEN , Publisher of The Wellington Letter and President Of Dohmen Capital

OPEN ACCESS

BALTIC FREIGHT, SHIPPING CREDIT

& CHINA

Part 1

with Bert Dohmen & Gordon T Long

23 Minutes, 37 Slides

Bert Dohmen who recently authored "The Coming China Crisis" is now warning about Chinese shipping credit and what he sees in oversea freight rates. He believes there was a major dividing line that was crossed in June 2013 when overnight bank lending rates abruptly tripled. Though government actions quieted things down on the surface (at least temporarily), below the surface an avalanche of credit issues has ensued.

CHINA

Bert predicted much of what is currently occurring in his book and describes it as China hitting the "Great Wall of Communism". As an export led economy being capital investment driven it is now time for innovative entrepreneurs to take over, but they can't. 41% of Chinese GDP is primarily foreign capital investment which has slowed and new investment from investment savings is not occurring. "It has gone as far as it can go!" according to Bert Dohmen.

The basic reason is mal-investment due to corruption and the unregulated and massive shadow banking system which has taken hold of the Chinese economy. With $21T of loans outstanding the unregulated shadow banking system has funded half of these loans and is now facing escalating levels of default.

Most troubling is the level of corruption and the control that the government owned "SOB" exercise. Only recently has the scale of the corruption began to made visible outside of China.

BALTIC FREIGHT RATE & SHIPPING CREDIT

Chinese government economic numbers are manipulated and therefore shipping levels and their rates are the actual measure of the real global trade which investors need to study.

The Chinese private sector is in recession and has been for some time which can be seen in the 40% decline in one month in the Baltic Freight rates. This was made clear last month when 300 tons of Soybeans could not get a shipping letter of credit. Additionally, financial leverage being employed regarding the use of imported commodities as loan collateral became public.

The shipping credit 'canary' is very reminiscent of exactly what preceded the 2007 global financial collapse.

US ECONOMIC "DEMAND ENGINE" IS STALLED

China's export lead and investment driven economy has been powered by the US consumer. However US and European retail sales and real disposable income is sending an unambiguous message that slowing growth and even contraction lay ahead. US Money velocity has been steadily falling as US businesses continue to resist investment. This does not bode well for for an already tenuous problem in China.

Bert sees turbulent times directly ahead as the realities of slowing global trade come home to roost in China.

 

 

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Saturday
April 15th
2014

THE GOLDEN ERA OF LOW HANGING FRUIT

 

Charles Hugh Smith

 

 

Regular Co-Host: CHARLES HUGH SMITH , Author & Publisher of OfTwoMinds.com

OPEN ACCESS

THE GOLDEN ERA of

LOW HANGING FRUIT

with Charles Hugh Smith & Gordon T Long

26 Minutes, 36 Slides

The US and China may have both passed their Golden Era's where the low hanging fruit of prosperity has been picked. Though very different situations with different challenges, both global industrial powerhouses exhibit some surprising similarities. Also, both face challenges and hurdles that may not be surmountable without great social readjustment.

USA - A Former Export Led and Now Consumption Driven Economy

The 1950s/60s in the US should not be considered as "normal"-- but rather as a one-off, extraordinary anomaly. The era was extremely unique. Unfortunately, many unsustainable assumptions became inculcated into the fabric of American culture based on false expectations. This has subsequently led to massive distortions as a result of futile fiscal and monetary attempts to sustain a society consuming more than it produces.

The distortions are now in plain view as the Wall Street financial engine and its financialization has completely disconnected 'Wall Street' from the realities of 'Main-Street America'.

CHINA - An Export Led but Investment Driven Economy

China's problems may be different but their unprecedented growth of credit is not.

When China's economic (in purchasing power parity (PPP) or nominal dollars) GDP was $500 billion, an expansion of $50 billion equated to 10% a year. Now that China's PPP gross domestic product is around $13 trillion, a 10% growth rate would require an expansion of $1.3 trillion--roughly the entire GDP of Spain or Canada.

Obviously, fast growth is easy when low-hanging fruit was abundant, but becomes progressively more difficult to maintain as the economy expands. This is especially true when you realize that China's GDP has been investment driven. The investment growth now required is no longer mathematically possible as is the rate of moving to a more consumption led growth. The Chinese people are savers, not the consumers that Americans are.

Chinese savers and investors have historically, instead of consuming, invested heavily in housing. Unfortunately, Chinese housing is showing major signs of cracking. Both Charles and Gordon see the Shadow Banking system as the commonality which is being used to sustain the imbalances and distortions - at least temporarily.

It is clear the Chinese and American economies are facing new era's where the low hanging fruit is gone and the 'heavy political lifting' lies ahead.

 

 

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Saturday
April 5th
2014

MARKET DISTORTIONS:

Buybacks & Dividends

 

Lance Roberts

 

Special Guest: LANCE ROBERTS Lance’s investment strategies and knowledge have been featured on Fox 26, CNBC, Fox Business News and Fox News. He has been quoted by a litany of publications from the Wall Street Journal, Reuters, The Washington Post all the way to TheStreet.com as well as on several of the nation's biggest financial blogs such as the Pragmatic Capitalist, Zero Hedge and Seeking Alpha.

OPEN ACCESS

MARKET DISTORTIONS : Buybacks & Dividends

with Lance Roberts & Gordon T Long

23 Minutes, 31 Slides

Corporate stock buybacks and dividends are great strategies to drive up stock prices and rewards shareholders, but there is a dangerous downside when this is primarily the result of temporary cheap money and 'manufactured earnings' from creative accounting magic.

Lance Roberts and Gordon T Long with the aid of 31 charts highlight why this is happening, how reported earnings are disconnected from the underlying economy and the risk to investors that has emerged as a consequence. Lance categorizes this period as the biggest 'reverse Robin Hood effect' in history with wealth over the last 5 years being transferred from the middle class to the upper wealthy class.

Stagnate sales growth in the top line is a direct result of low levels of corporate capital. The capital investments being made are primarily targeted at cost reductions in labor. With labor at historic lows, as a percentage of record profits, corporations may be ill prepared to maintain current levels of earnings, dividends and buybacks.

In this wide ranging conversation on the future of buybacks and dividends, the subjects explored include:

  • Productivity and exploding automation advances in the service sector,
  • A slowing rate of global aggregate demand growth,
  • Shrinking real disposable income levels,
  • Current corporate cash flow levels but falling EBITDA flows,
  • Off balance sheet borrowing for buybacks and dividends,
  • Asset to Debt levels showing the degree of growth in leverage to manufacture earnings.

Consumption doesn’t create a strong economy. Wealth doesn’t come from consumerism.

Wealth is created as a result of capital spending which has plummeted!

Both Lance and Gord believe strongly that more deflation is still ahead before broad based inflation takes hold. Money velocity continues to fall with wage inflation frozen and commodity price inflation showing only in pockets.

The global economic slowdown we are presently seeing will put pressure on corporate earnings and their ability to maintain current buyback and dividend levels.

Lance warns of risk and how important and little appreciated "Loss of Capital" and "Loss of Time" is to most individual investors.

 

NOTE: 24 hours after this show was taped, Trim Tabs announced that new stock buybacks in Q1 2014 fell to $134.4B from $214.4B in Q4 and were the lowest in 5 quarters.

"Corporate actions have turned less supportive of stock prices. The decline in the volume of buybacks is a cautionary sign, as buyback volume and the S&P 500 have a high positive correlation."

TrimTabs Chief Executive David Santschi

 

 

 

 

 

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