Money Flow Trading Method along with Risk Management

Good Day

Thank you for your question. I will answer you in a few days including some of my research and reasons.

Enjoy your weekend.


Benjamin

https://goldswitzerland.com/3-dozen-...-to-hold-gold/

3 DOZEN REASONS TO HOLD GOLD

March 14, 2019

by Egon von Greyerz

The world financial system has been in a euphoric state since 2009. It seems that the Keynesians, like Krugman or the Modern Money Theorists (MMT) are right after all. All asset markets are near the highs and show little sign of changing direction. As Treasury Secretary Mellon said in September 1929: “There is no cause to worry. The high tide of prosperity will continue.” All that is required is more of the same medicine, more credit, more money printing to make a virtuous circle of eternal prosperity.

Clearly the Cassandras are all wrong with their pessimistic forecasts that never happen. The Greek Princess had the ability to forecast the future but her curse was that nobody believed her accurate predictions. (Cassandra article)

We modern Cassandras are in the same position. We are certain that the theories based on spending and borrowing yourself out of the biggest debt bubble in history are totally fallacious. We know that a debt problem cannot be solved by more debt. No one defined it more succinctly than Albert Einstein: “We cannot solve our problems with the same level of thinking that created them.”

THE PARTY IS OVER
But sadly for the world, Cassandra will be right this time also since the party is over. The Time Bomb below says it all. Contained in the red bomb are all the explosive elements that will change the history of the world. Any single one of these risks is sufficient to trigger a collapse of the world economy. The combined explosive nature of all the risks will not only disprove MMT but create a world which will be a lot less pleasant to live in.
http://goldswitzerland.com/wp-conten...19/03/bomb.jpg


This cleansing of a sick financial system and a morally decadent world will be totally necessary to create new green shoots based on real, sustainable values.

But the transition will create great suffering for the whole world.

THE WORLD NEEDS STATESMEN
In the final stages of a major super cycle, there is normally a total lack of clarity in the thinking of world leaders. But not only that, there is also a total lack of leadership. Right now this is exactly what we have. Countries normally get the leaders they deserve. The world is in desperate need of statesmen who can take uncomfortable decisions to get the world out of the mess it is in.

But looking around the world, there is no statesman in any country. There are countries with strong leaders like Putin in Russia and Orban in Hungary but real statesmanship does not exist anywhere.

Look at France where Macron becomes more unpopular by the day. Soon every Frenchman will wear a yellow vest and it is already spreading to other countries. The French economy and financial system are weakening and the inequality between the rich and the poor has the seeds of yet another French Revolution.

Germany has been the biggest beneficiary of a weak Euro but in spite of that, the German economy is now deteriorating rapidly. Merkel’s socialist policies will have disastrous effects on the German economy in coming years, exacerbated by an immigration policy which will create a major economic and social disaster.

When Deutsche Bank (DB) collapses, which is probable, that will have repercussions not only for German banks but for the global banking system. DB’s derivative book of EUR 50 trillion is 15x German GDP. When counterparty fails, the Bundesbank and the ECB will need to print more Euros than during the hyperinflationary Weimar Republic. In addition, the Bundesbank and the German financial system are the biggest guarantors of the ECB and the Target2 lending to Southern European countries which are all likely to default on their commitments.

The UK leadership is extremely weak. Theresa May’s government is irresolute and divisive. They have spent 2 years solely trying to extricate itself from the EU. This issue has totally dominated UK politics at the expense of the economy. With 2 weeks left to Brexit-day, the UK is nowhere nearer an agreement with the Brussels elite who have consistently frustrated the process.

The US is bankrupt with a currency which is living on borrowed time. Trump had good intentions but has been shackled by the Deep State.

When the biggest economy in the world collapses, it will have major repercussions on the world.

Every major country or continent in the world has got problems of a magnitude that will bring the country down. In addition to the above nations, this includes Japan, China, South America and many more.


FINAL SECONDS OF A GLOBAL MEGA BUBBLE
We must understand that the world has never faced risk of this magnitude ever. We are now in the very final seconds of the global mega bubble, the likes of which the world has never seen before. What will happen next will be worse than the fall of the Roman Empire, much worse than the South Sea and Mississippi Bubbles and will create a disaster that will dwarf the 1930s Depression.


GLOBAL DEBT UP 3X SINCE 2000
The problem is simple to define and is all based around debts and liabilities. At the beginning of this century, global debt was $80 trillion. When the Great Financial Crisis started in 2006, global debt had gone up by 56% to $125 trillion. Today it is $250 trillion.
http://goldswitzerland.com/wp-conten...19/03/debt.jpg


Thus, in this century global debt has more than trebled. So far MMT seems to work. Just print and borrow more money and the economy will take care of itself. Einstein said it won’t work and the laws of nature also tell us that this is a saga that will have an unhappy ending.


PROTECTION IS CRITICAL
Rather than trying to figure out what the exact trigger will be, it is much more important to focus on how to protect yourself financially.

Gold has throughout history been the solution to a mismanaged economy based on deficits, debts and money printing. But it must be physical gold, stored outside the financial system in the safest jurisdictions and vaults. It is essential to have direct ownership of the gold and direct access.

ETFs, futures, or part ownership of bars are not proper wealth preservation.


$30,000 GOLD AND $3,000 SILVER
The Krugmans and MMT fans will now get more than they ever asked for. Because the world will soon start the biggest money printing bonanza in history.

Bearing in mind that total debt and liabilities, including derivatives are over $2 quadrillion, we could easily see similar or higher amounts of money printing. A recent KWN article by Lundeen projects $3,000 silver and $30,000 gold. Those are not unrealistic targets and are probably based on normal inflation. With hyperinflation, the future gold price is likely to have many more zeroes.


We must remember that we are holding gold primarily to preserve wealth since it is the best store of value and represents stable purchasing power. But gold is likely to do better than to maintain purchasing power for the simple reason that there will be a massive shortage of physical gold when the gold paper market blows up. This is why it is critical to hold physical gold, bars or coins.

I wrote about the Gold Maginot Line a few weeks ago which is at $1,350. This line has stopped gold since 2013. After a first attempt to break through 3 weeks ago, we are now in a small correction and gold is building momentum to break through the Line. Once through, it will go very quickly all the way through the old high of $1,920. Remember that this high has already been broken in many currencies, so it is not a major hurdle to clear.


3 DOZEN REASONS TO HOLD GOLD AS INSURANCE
For anyone who doesn’t understand the necessity of owning gold, just go through the list of risks in the Time Bomb. And once you have gone through it, go through it again and again and again. The list includes 3 dozen reasons why you need to hold physical gold as protection or insurance against unprecedented global risk.


Anyone who doesn’t own gold today mustn’t wait for the next move up to take place. That could be too late. Once the real move starts, it will be very difficult to get hold of gold at any price. At some point there will no physical gold on offer. The paper gold positions of banks and futures exchanges will see to that.


Central banks will also have major problems. Most of them have covertly sold their official holdings. And most of what they have left, they have leased to the market. That gold has gone to China, India and Russia and all the central banks have left is an IOU from a bullion bank that won’t be honoured.


CHINA’S INSATIABLE APPETITE FOR GOLD
http://goldswitzerland.com/wp-conten...9/03/china.jpg

With a guaranteed absolute mess in the world financial system, resulting panic in the gold market now is the very last chance to be protected.

Gold is today as cheap as it was in 1970 at $35 and in 2000 at $270:
http://goldswitzerland.com/wp-conten...3/usd_gold.jpg


Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management
Zurich, Switzerland
Phone: +41 44 213 62 45

Matterhorn Asset Management’s global client base strategically stores an important part of their wealth in Switzerland in physical gold and silver outside the banking system. Matterhorn Asset Management is pleased to deliver a unique and exceptional service to our highly esteemed wealth preservation clientele in over 60 countries.

GoldSwitzerland.com

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Articles may be republished if full credits are given with a link to GoldSwitzerland.com.


COMMENTS FROM BENJAMIN: Additional Research


Brian Maher

BY BRIAN MAHER

POSTED
MARCH 15, 2019

The Government’s Greatest Con Job

Yesterday we documented our personal frustrations with contemporary technology.
Today we file a protest against contemporary money.

We begin with the “evolution” of United States currency…
We refer you to this $10 bank note, dated 1928:
10 Dollar Bill

In those antique days, a fellow could march into a bank, hand the clerk a slip of paper as illustrated above and demand the denominated amount in gold coin.
The system imposed a hard discipline upon banks… and held inflation in checkmate.

Federal Reserve banks were required to keep a 35% reserve of “gold or lawful money” on hand, lest they make a liar of the United States Treasury secretary — in this case the Hon. Andrew William Mellon.

In effect, the private citizen bound the banking system in golden handcuffs.

But one Great Depression, one New Deal and one world war later… we come now to a 1950 $10 bank note:
10 Dollar Bill

In appearance it is nearly a perfect twin to the 1928 model — with one infinitely telling exception.
Can you sniff it out?

The 1928 note bears this inscription:
“Redeemable in gold on demand at the United States Treasury or in gold or lawful money at any Federal Reserve Bank.”

But reads the 1950 version:
“This note is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury, or at any Federal Reserve Bank.”
The fine print disguises a vast swindle: The gold provision was stricken from the record.

The bankers had broken free of their golden handcuffs… and no longer could a private citizen bring them to honest account.

But what about “lawful money”? What is it?

In 1947, a certain gentleman — A.F. Davis by name — dispatched the following note to the United States Treasury, accompanied by a $10 note:
I am sending you herewith via registered mail one $10 Federal Reserve note. On this note is inscribed the following:
“This note is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury, or at any Federal Reserve bank.”
In accordance with this statement, will you send me $10.00 in lawful money?

The acting treasurer, M.E. Slindee, responded after this fashion:

Dear Mr. Davis,
Receipt is acknowledged of your letter of Dec. 9 with enclosure of one ten-dollar ($10.) Federal Reserve note.

In compliance with your request, two five-dollar United States notes are transmitted herewith.
And so Mr. Slindee began chasing his tail — what the logicians call circular reasoning.


In exchange for his $10 note, Mr. Davis was mailed two $5 bills bearing the same pledge to redeem in lawful money.
But this Davis fellow would not be so easily shooed away.

He returned one of the $5 bills, once again demanding lawful money in exchange:
Finally Mr. Slindee threw up the sponge:

Dear Mr. Davis:
… You are advised that the term “lawful money” has not been defined in federal legislation. It first came to use prior to 1933 when some United States currency was not legal tender but could be held by national banking associations as lawful money reserves.

Since the act of May 12, 1933, as amended by the Joint Resolution of June 5, 1933, makes all coins and currency of the United States legal tender and the Joint Resolution of Aug. 27, 1935, provides for the exchange of United States coin or currency for other types of such coin or currency, the term “lawful money” no longer has such special significance.

The $5 United States note received with your letter of Dec. 23 is returned herewith.
Beginning in 1963, all promises to redeem in lawful money were stricken from United States currency.

Here, in graphic detail, the devolution of American money:
Money
Say what you will of paper money. But in one sense it is redeemable — if you’ll forgive the expression in the present context.

It in tangible. You can hold it in your hand, in your wallet, in your mattress.

It cannot be erased at the stroke of a key.

It is also anonymous. Once out of your hands, it leaves no trace.

None of these happy virtues apply to digital money…
Digital money has no tangible existence. It can disappear at a keystroke. The bank can freeze you out of it. And every transaction goes on your permanent record.

What is more, digital money removes all natural checks.

Even paper money files a claim on Earth’s resources — it is constituted of cotton and linen.


Meantime…
Digital money is the type of money bound to get itself into trouble.

Wispy as fog, slippery as oil, it is conjured into existence… as if by the magician’s wand.

And it can get around the world at electronic speeds.

It is also the ideal money for a government swollen to ghastly dimensions — its issue being unlimited in theory.

If paper money invites abuse… what about digital money?

Thus we speak our piece for lawful money — even paper money.

Regards,
Brian Maher
Managing editor, The Daily Reckoning

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Prof. Václav Klaus, former President of the Czech Republic (2003-13), slammed the European Union as being worse than the Soviet Union's Council for Mutual Economic Assistance (Comecon) that ruled over the economies of EasternEurope between 1949 and 1991. Having lived under communism for 40 years, Klaus said, he has the experience to make such a criticism.
On March 12 Klaus was the featured speaker at the Presidential Lecture Series of the Center for Financial Studies,Goethe University Frankfurt, under the auspices of its President, Prof. Otmar Issing. In his presentation, entitled, "The EU Is Not Europe," Klaus laid out several key policies which have made the EU a most undemocratic union.

First he slammed its environmentalist policies at a time when not one environmentalist party in Europe could come anywhere close to winning an election. He particularly slammed, by name, the Club of Rome. Second, he slammed the climate-change policy as entirely unproven and now promoting a Malthusian agenda. Third, he attacked the so-called information society in which Europe's universities are graduating unemployable degree holders. Fourth, he attacked the euro single currency as having generated mass inequality throughout Europe. He charged that the Eurozone, through the European Central Bank's Target 2 real-time gross settlement (RTGS) system, is already a transfer union but has notbenefitted any of its members. After its 20 years of existence, it has proven to be a failure.

The fifth point he made was a passionate defense of the nation-state and national sovereignty as the only basis fordefending the political and economic rights of the people. He pointed out that a "democracy," by definition, requires a"demos," but it is only the sovereign nation-state, not "Europe," that fulfills the requirements of a demos. The text of hisremarks is posted to his English website,https://www.klaus.cz/clanky/4374.

Given that the city of Frankfurt now considers itself a "European city" and is the headquarters of the European Central Bank, the audience was polite and respectful, but nonetheless hostile, which showed in their questions, which Klaus handled quite well. Asked to comment on Brexit, he expressed the shock at the way the EU dealt with it. He recalled how he, as Prime Minister (1993-97), oversaw the split between Czechia and Slovakia. Although he disagreed with the division of Czechoslovakia, he did implement it, since the Slovaks insisted. The division took only six months and was carried out in the most cooperative and friendly manner; whereas with the Brexit, he said, while the British could have been more clever, the way the EU addressed it was outrageous. He also admitted that, when the Brexit vote occurred, 'we uncorked the champagne bottles.'

When the question of so-called "populism" in Europe came up, he replied that the term is meaningless, and is being used simply to put on a derogatory label on those who disagree with EU policy.
To the last question, asking him to comment on what he believes the future holds for Europe, he referred to a famous Marlon Brando movie, in which Brando's character asks a fortune teller what the cards hold for his future. The fortune teller looks at the cards, and tells him, "You have no future." He said he expected that the EU will collapse after some painful muddling through.

It should be noted that Klaus's economic policy, on which he did not really elaborate in his presentation, is well known to be very free-market-oriented. The hostile atmosphere was so strong, that when asked, after his presentation, about the Belt and Road policy, he thought it was a hostile question and answered that he did not want to get into China-bashing and that the entire topic would take a much longer discussion. When asked by a Chinese journalist about Chinese "investment," he pointed out when he had been in government and met with the Chinese, he had told them that his country did not need investments but wanted to trade with China. It should be noted that he was the first CzechPresident to visit China, making more than one official visit, and he defended his China policy in the face of phony human rights activists.

Prof. Issing, former chief economist and member of the board of the European Central Bank, and a critic of the Eurozone policies, told this author that he had invited his good friend Prof. Klaus in order to bring another view into the debate. He said he felt there would have been more voices in support of Klaus, if not for the tremendous social pressure created by the Europeanists and environmentalists.

On March 11, Klaus gave a very similar, polemical speech at the meeting of the energy firm E.ON, held in Prague, also posted on his English webpage. [DEA]


Václav Klaus: EU is not Europe

ENGLISH PAGES, 13. 3. 2019
Many thanks for the invitation and for the opportunity to address this very distinguished audience. My thanks go especially to Otmar Issing, the President of the Center for Financial Studies, who asked me to deliver this year´s CFS Presidential Lecture. Thank you. It is a great honour for me.

When I looked at the list of the past speakers in this series, I was not at all sure if someone like me who spent the last thirty years in the political arena actually deserves it. Even though I have been all that time an active Professor of Finance at the Prague School of Economics, even though I continued teaching and writing economic texts even during my Presidential era, I am fully aware of the fact that my engagement in politics didn´t allow me to be fully involved in the academic activity and to follow the events in the economic science on every day basis. Nevertheless, I believe in the general validity of the law of diminishing marginal returns even as regards the returns of the new contributions to the economic science. I am, therefore, convinced that the old proven pillars of economics are still there and that most of the new, sometimes very promising, highly appraised, allegedly revolutionary ideas in the economic theory don´t look so great as they pretend to be.

As a side remark, I should say that I am not that often in Frankfurt, in this “bastion” of banking, in this very modern and flourishing city. The wealth of the city is not surprising. The high purchasing power of the bankers who work here and spend their huge incomes in this city is no doubt the main reason behind its prosperity.

We are here at the gathering of economists or of people from the economic, financial and banking community but I will not confine my talk to the narrow field of economics. The topic of my today´s speech is not strictly an economic one. In addition to it, we, the economists, should admit that the economic discourse ceased to be the main and the most relevant issue of the current highly controversial and ideologically divided era. Whether we like it or not, the people in our countries don´t pay that much attention to us[1]. This is partly because the people reflect their relative very high level of affluence and partly because the era of charismatic exponent of freedom and of free markets is over.

In the communist era, travel to the West was almost impossible for someone like me in Czechoslovakia and as a result, it was not until January 1990 that I was allowed to come here for the first time. It was two months after the fall of communism in my country and I was a newly appointed Minister of Finance in the first non-communist government. I was invited by Karl Otto Pöhl to have lunch with the board of the Bundesbank. It gave me a fascinating opportunity to discuss the challenges of the post-communist transition in Central and Eastern Europe, as well as the economic aspects of the forthcoming German unification (Wiedervereinigung) with this highly distinguished group of people.

I remember our very close views as regards the topic of the day, which was the search for the appropriate exchange rate between the two German currencies in case of unification. As some of you remember, the German politicians of that era didn´t listen sufficiently to what the economists had to say. They chose the exchange rate which was neither in conformity with reality, nor with the majority view of German economists. The politicians were, as it is often the case, wrong. I am, however, not sure that the economists used all their arguments and presented them in a strongly enough way.

Let me say that I allowed myself to explicitly warn the German politicians and economists already in January 1990 that the German unification shouldn’t be done as a substitute for the fundamental systemic transformation of the East German society and economy. Based on my strong belief in the economic theory, I was convinced already at that time thatunification without transformation would be very costly and for many East Germans extremely frustrating. I can use many convincing arguments in this respect but let me remind you that the annual fiscal transfers from the West to the East of Germany in the 1990s reached on the average the level of the Czech GDP at that time (in some years were higher)! Many times I found out that not even many German economists are aware of the magnitude of these transfers.[2]

As I said, my first visit to Frankfurt took place still in the Velvet Revolution era. I dare say that some of us in the ex-communist countries were prepared for what happened. We spent decades in the irrational and oppressive communist economic and political system but we tried to use this time at least partly efficiently. Some of us – instead of only criticising the reality – spent these years studying contemporary economics and especially the literature in the field of comparative economic systems.

We also learned a lot by living in such an irrational and inefficient system. We were frustrated by seeing the tragic consequences of the absence of the autonomy of economic thinking and economic decision-making in our part of the world. The politics dictated the topics and principally predetermined the answers to all kinds of economic questions and issues. Due to it, one of our first tasks after the fall of communism was to get rid of the dominance of politics and to establish the autonomy of economic decision-making. Only in such a situation it is possible to think clearly and without understatements. The political compromises are, of course, necessary – but only ex-post, not ex-ante. The thinking has to be done without compromises.

This idea should be repeated again and again because this problem has become relevant in the current era again. These days, in the “brave new world” of the European Union and of political correctness, even more. In my country we were aware of the relevance of this idea since the very beginning and succeeded in making a radical change in this respect very soon. We see now, however, that we have been losing this favourable state of affairs once again.

I would like to be very explicit by stressing that I don´t have in mind the former communist countries in Central and Eastern Europe only or mostly but the whole Western Europe and America. This time, the politicization of economic life has not been organized by the communist apparatchiks or by the emissaries from Moscow. It has arisen from inside, it is a home-made problem. These shifts have been relatively silently, slowly and incrementally growing inside the contemporary Western society during the last decades, especially after the fall of communism.The threat of communism blocked the emergence, the expansion and the dissemination of such views and ideas. The change has come from the West itself this time. It has not been imported (neither officially imported, nor illegally smuggled) from the East now. It is different now.

It hasn´t been accidental. We live in the era of a new authoritarianism of illiberal elites, of neomarxists of the Frankfurter Schule, of so called “experts”, of bureaucrats of international organizations, of IT protagonists and lobbyists[3], of loud and noisy exponents of political NGOs. As a result of it, we are the witnesses of an important institutional change, of a shift in power from elected representatives to permanent functionaries, from local councils to central bureaucracies, from legislators to executives, from national parliaments to Brussels and Strasbourg, from the citizen to the state. The form and substance of political discourse have changed substantially as a result.

Let me once again mention the name of Otmar Issing, one of the most distinguished German economists and bankers whom I have been privileged to repeatedly meet on many occasions at different places of the world in the last thirty years. We sometimes held and expressed similar views on various economic issues but – not to undermine his reputation in the politically correct world of current Germany – I want to say very loudly that he has always been much more pro-European and much more pro-establishment than myself.
In spite of that, the title of my today´s speech – EU is not Europe – was suggested by him. I only accepted it, but I did it with a great pleasure, because the title has a meaning. It sends a very clear message to all those who see these two terms as perfect substitutes. It is a message to the European political elites, to the uncritical admirers of the EU in politics, media and academia as well as to the EU huge and permanently growing nomenclature. All of them behave as if these two terms were identical.

They are wrong, but I understand why – they have a vested interest in pretending the EU and Europe are identical. They want to be the owners of Europe. They want to be recognized as the authentic heirs of all European historic events and achievements. They believe they have a right to authoritatively interpret current events and to decide whether they are European or un- or anti-European. For them the EU is the personification of Europe.

This is, of course, untenable. All democrats should oppose this way of thinking. Europe is a historically evolved cultural and civilizational entity (with more or less widely accepted geographical borders), whereas the EU is a man-made constructwhich has its well-defined beginning and will have – undoubtedly – its glorious or not so glorious end.
The only superficial attention to the European issues leads to the underestimation of the fact that the EU is not a constant structure. It is a moving and variable entity[4]. Every EU summit redefines its substance – some of them only marginally, some fundamentally. The changes go, however, all in one direction. The well-known ratchet effect functions in this field as well as in many others: every treaty or summit takes Europe closer to a centralised European state. This is not surprising because the main goal of the European political elites (and their fellow-travellers) is the dislocation of national sovereignty and the overcoming of the state. These people consider the sovereign nation-state as an obsolete historical anachronism which should be defeated.

Last decades were characterized by the consequences of two such fundamental systemic and institutional restructurings. Both the Maastricht Treaty and the Lisbon Treaty brought about significant changes in the EU (originally EC) arrangements. I have to say quite resolutely that I see it as a very negative development.

We were not yet members of the EU in the moment of the Maastricht Treaty and had no “voice” in European debates then. We couldn´t express our disapproval or disagreement. However, as it is well known, I was the last President of all EU member-states who – under tremendous pressure both at home and abroad – capitulated and signed the Lisbon Treaty. I remember that even Otmar Issing wrote several years ago that “the Maastricht Treaty was the triumph of political ambitions over economic reservations”.[5] This is also my position but I stress the political reservations as well.

Both of these treaties – neither of which was fully democratically approved and implemented – were in my opinion historic mistakes. They transformed the original concept of integration into something else, into unification. They pushed the heterogeneous community of sovereign European states into a union of subordinated regions and provinces (Länder in German terminology). They substantially augmented the power of the bureaucratic central agency in Brussels. They supressed democracy and turned it into a post-democracy (misleadingly called liberal democracy). I agree with John Laughland that these treaties created “a mechanism which allows governments to pass laws for which they would prefer not to argue in public, safely away from the glare of democratic scrutiny and parliamentary opposition”.[6]

By unifying (by means of averaging) important economic parameters (currency, exchange rates, interests rates, all kinds of obligatory non-economic standards, etc.) these two treaties turned some regions of the EU into the position of winners, some into losers. The level of these parameters was advantageous for some parts of Europe only, especially for the North of the continent. They proved to be detrimental for the European South.

Instead of facilitating the mutually advantageous cooperation of European countries, these – economic realities not respecting – unification measures created deep disparities inside Europe. These disparities asked for the unwanted and unplanned emergence of a transfer union, which exists without authentic solidarity and is based on a non-voluntary redistribution.

Another unification measure, the liquidation of internal borders inside Europe, was supposed to facilitate the movements of the Europeans inside Europe and to create a new European Man, Homo Europeus[7]. It had an important side-effect. It led to the mass migration of non-Europeans who mostly didn´t come to Europe as future Europeans or as a labour force, who don’t intend to be assimilated and who don´t want to accept European culture, religion, values, habits, ways of life[8].

I can continue in the same spirit and extend the briefly stated arguments, but I know that we are in an economic institution and should pay more attention to the economic aspects of these processes. The EU – in its doctrine which I call Europeism – builds its policy on the very debatable non-traditional ideas and doctrines and presents them as “undisputable truths”. To oppose them is considered politically incorrect. I will briefly touch upon some of them:

1) One of the most important (and most detrimental) aprioristic prejudices which have been aggressively pushed forward in the EU is the almost religious belief that the environmental imperatives should be put before any economic considerations. It is not relevant that these ideas never succeeded in winning elections. They are presented as eternal truths. This way of thinking has a long tradition, especially here in Germany, but the decisive breaking point was the formation of the Club of Rome fifty years ago and its aggressive denial of long established fundamental pillars of the economic theory and of the economic way of thinking[9].

I will mention – just as examples, without analysing them – the main pillars which have been undermined – the concept of the non-exhaustibility of economic resources, the understanding of the role of prices in any rational decision-making, the role of economic incentives in human behaviour, the proper dealing with externalities, the seeing of the environmental protection as a luxury good, etc. All of them deserve to be discussed in detail and especially they deserve to be returned to their fundamental place in political and economic discourse where they belong.[10]

2) Not less important and not less detrimental is the almost religious belief in the global warming (or climate change) doctrine and the economic consequences of that belief. This doctrine represents the victory of the non-economic thinking by underestimating the information hidden in politically unmanipulated prices and the decisive impact of the long-term growth of income and of technical progress on the outcomes of economic decision-making. This doctrine set us back two centuries to the old Malthusian fallacies.
The arbitrarily chosen size of the discount rate in climatology (both implicitly in the climatologists´ thinking and explicitly in the climatological modelling) denies the role of time and of opportunity costs as the economists see them. By using a low discount rate, the exponents of these doctrines harm current generations. By claiming to fight for future generations, they pursue only their own political agendas. The war against oil, coal and cars impoverishes millions of people in spite of the fact that there is no measurable effect of human production of carbon dioxide on global temperature. All of that are, however, topics for serious lectures.

3) By claiming that we live in a knowledge economy, in an information economy, in an IT world, the EU apostles misinterpret the true sources of economic growth and development, they disregard the Adam Smith´s theory of the causes of The Wealth of Nations and they deny the fundamental contribution of the genuine creative behaviour of the free, unregulated and unmanipulated people to the economic performance. By adoring the role of formal education (and especially of mass high education), they underestimate the role of the quality of the economic system and – as a side-effect – produce the unemployable army of holders of university degrees in useless disciplines (or produce formally overeducated workers). It reminds me of the way of thinking and the rhetoric of the Leonid Brezhnev´s era.

4) By believing that it is possible to have a common currency in a non-optimal currency area, the EU political elites contribute to the evident economic decline of Europe and to the slow economic growth of the Eurozone countries in the last decades. The recent 20th anniversary of the euro was not used as a basis for a serious debate about the advantages and disadvantages of the European common currency. This is inexcusable, because the already 20 years’ long experience gives us sufficient data. One conclusion is clear: the single currency in Europe needs either an explicit or an implicit transfer union.

The explicit transfer union is not politically feasible (for many of us also undesirable), but the euro hasn´t yet collapsed because of the existence of an implicit transfer union in the form of the ECB´s “target balances”. This “union” was very innovatively described by the first Presidential Lecture speaker Hans-Werner Sinn[11] in many of his writings. It is now well-known that – within the current European monetary system – the governments can finance themselves via the European Central Bank. They cannot, of course, directly print euros but can issue their own government bonds which can be bought by the ECB.[12] This is also a transfer union.

5) My last remark relates to the still existing belief in the idealistic hypothesis of the so called “Great Moderation”, in the doctrine about the possibility to avoid economic fluctuations by clever, technocratically, not politically oriented macroeconomic policies. This idea rather surprisingly survived the undisputable reality of the 2008-2009 crisis. The students of Schumpeter should always remind us of the significance of the process of creative destruction.[13] Thanks to Schumpeter, we know that there is no growth without the previous destruction of obsolete equipment, machines, businesses, the whole industries. We witness it currently in the Czech Republic – the lowest rate of unemployment in Europe is not just a victory. It reveals the rigidity of our economy.


Conclusion: The Never-Ending Struggle for Free Economy and Society
I didn´t come here to start a revolution. I am, nevertheless, convinced that Europe needs to be liberated. To be liberated again. The ingenuity of free people should be made possible to bring fruits. We need a change, wir brauchen eine Wende. The dictate of the status quo is very powerful.

It may sound too ambitious but we shouldn´t capitulate to the intellectual trends of the time. I know that it takes political courage to admit that the eventual change will be slow and painful. I know that it is easier to say that in a position of a retired politician whose oversensitivity stems from his life in communism and who sharply sees the signs of the coming dangers. In a position of someone who knows that the growing politicization of economic life increases rent-seeking and creates low growth equilibrium. In a position of someone who is afraid of the consequences of the end of the malignant quantitative easing.

But the change has to be done.

Václav Klaus, CFS Presidential Lectures, Center for Financial Studies, Goethe University, Frankfurt, March 12, 2019
[1] This is also due to the fact that we economists have stopped focusing on big economic issues, on what people really care about. Our science is focused on very partial, esoteric research.

[2] I discussed this issue on the occasion of receiving the honorary doctorate degree at the Technische Universität Dresden 12 years ago, see my “Komparative Analyse der Transformation im Multavialand und Albisland”, Dresden, 2007, https://www.klaus.cz/clanky/15 The economic decline in the former GDR was much deeper than in my country (the output in the former GDR was for about 25 years roughly at the pre-transition level), unemployment has been all three decades substantially higher, etc.

[3] See my recent speech in Vienna, „Europas wirtschaftliche Zukunft in Zeiten der Digitalisierung und Globalisierung“, Wiener com.sult Kongress, Vienna, January 28, 2018https://www.klaus.cz/clanky/4356

[4] Paradoxically, its protagonists claim that the EU development has always been following the commitment to subsidiarity. This concept is close to the communist concept of “democratic centralism”.

[5] The International Economy, Winter, 2014

[6] John Laughland, „European Integration: A Marxist Utopia?“, The Monist, No. 2, 2009.

[7] I discovered recently that I spoke critically about “Homo Europeus” already in my article in The Economist, September, 1994.

[8] See my book “Völkerwanderung” written together with Jiří Weigl, Manuscriptum Verlagsbuchhandlung, Leipzig, 2016. Its English version has a title „Europe all inclusive“, IVK, Prague, 2017.

[9] I have to claim that I saw this new danger very clearly already in the – in many respects hopeless and frustrating – situation in Czechoslovakia after the Warsaw Pact invasion in August 1968 when we had totally different worries.

[10] I tried to do it in my book ”Blue Planet in Green Shackles“, Competitive Enterprise Institute, Washington, D. C., 2008 (The German version ”Blauer Planet in grünen Fesseln“, Carl Gerold´s Sohn, Vienna, 2007).

[11] H. W. Sinn, „Die reale Seite der Krise und der Rettungsschirm der EZB“, CFS Presidential Lecture, Frankfurt, 26 February 2014. More about it in his book „Die Target-Falle – Gefahren für unser Kinder“, Hanser: München, 2012.

[12] My critical views on the European common currency can be found in ” First Five Years since the Outbreak of the Greek Crisis”, Notes for Le Cercle Washington Meeting, The Fairfax at Embassy Row, Washington, D.C., June 28, 2015, https://www.klaus.cz/clanky/3771.

[13] I consider it very important that even Alan Greenspan in his recent book “Capitalism in Amerika: A History”, Allen Lane, 2018, written together with A. Wooldridge, reminds contemporary readers of this concept and says that “the central mechanism of progress has been creative destruction”. I suppose, however, that the banking community here in Frankfurt doesn´t like his recommendation that the capital/asset ratios should be radically increased.

https://www.investmentwatchblog.com/...peration-fish/

In a desperate move to protect the nation’s wealth and ensure the purchase of weaponry from America, newly appointed Prime Minister Winston Churchill and the Bank of England began transferring gold bullion to the Bank of Canada in Ottawa.


They called this Operation Fish.

The move would allow the war effort to continue if London were to fall. Churchill would then run the Commonwealth from Montreal, Canada.

Operation Fish – Moving Gold Across Oceans
England couldn’t spare the aircraft needed for the transatlantic transfer of gold. The move would have to be by boat.

Transferring the Empire’s gold by boat across the Atlantic Ocean at the peak of Nazi naval dominance was not an easy decision to make.

England had tried doing the same thing, during World War 1. But one cargo ship, the SS Laurentic, carrying nearly 1.4 million ounces of gold (USD$1.8 billion in today’s prices), was sunk by mines laid from a U-boat.

And German U-boat technology had improved greatly between the First and Second World Wars.

Right from the onset of the war, in the first month of September 1939, German U-boats sank 50 ships. Operation Fish’s first run, escorted by the ancient WWI battleships HMS Revenge and HMS Resolution, left Plymouth on October 7, 1939.

1. Bound for Halifax, Nova Scotia, the shipment was loaded with over 600,000 ounces in gold bars.
2. At current gold spot prices (USD$1,300 per ounce) that is USD$780 million of gold.

What began as a small secret operation to ensure weapons purchases from America quickly turned into the largest transfer of wealth from country to country in history.

Over the course of the war, over 25% of total Allied shipping capacity had been sunk in the Atlantic. And yet, not a single shipment of Operation Fish had been lost.

1. By 1945, the Bank of England had transferred more than 48 million ounces of gold by boat across the Atlantic Ocean. That is over USD$60 billion at current gold prices.

That’s a lot of effort for a “barbarous relic.” Or at least the Central Bank of England certainly believed so at the time.
Maybe that time has come again?

Central Bank Gold Stockpiles are Growing
Since 2010, central banks around the world have added 152 million ounces to their reserves.
In 2018, central banks added nearly 23 million ounces. That’s up 74% from 2017.

1. This is the highest annual gold purchase rate increase since 1971, and the second highest rate in history.

In 2018, Russia was the biggest buyer of gold. The Russians funded their gold purchases by selling U.S. Treasuries, a process known as “de-dollarizing”. It makes all the sense in the world that the Russians want more gold and less U.S. dollars.

Turkey, Kazakhstan, Hungary, India and Poland rounded out the top six. Below is a chart which shows central bank buying by major gold hoarding nations.
https://katusaresearch.b-cdn.net/wp-...3/CBGR-min.jpg

According to the World Gold Council, an additional 23 million ounces are expected to be acquired in 2019. With this, central banks will hold nearly 1.3 billion ounces, controlling over 10% of the global gold market.

This is a drastic change from just over a decade ago when central banks were a net exporter of gold. According to the World Gold Council central banks dumped over 155 million ounces into the market between 2000 and 2009.

Below is a chart which shows central bank activity in the gold market since 1990. You’ll see that from 1990 to 2009 central banks were net sellers of bullion and since 2010, they have been net buyers.
https://katusaresearch.b-cdn.net/wp-...BAinGB-min.jpg

You don’t have to look far for a reason why gold purchasing has accelerated over the last few years…

Brexit… petrodollar dominance… sanctions… global market instabilities… trade wars…
Cyber wars…

Real wars…

Regardless of the reasons behind it, the question remains:
If central banks are going to continue acquiring record amounts of this “barbarous relic,” where are they going to get it?


Related Posts:
New Gold Discoveries Have Fallen Over the Last Ten Years.
In the chart below you’ll see how many new ounces of gold have been discovered in the past two decades. You can clearly see the downtrend since 2006.
https://katusaresearch.b-cdn.net/wp-...03/AGD-min.jpg


If you look at the major gold producers, both gold reserves and grades have fallen dramatically.
https://katusaresearch.b-cdn.net/wp-...jpg-MJ-min.jpg


The big drop is not solely due to reserve depletion from production. It is also due to asset sales. It’s no secret that many of the major gold producers overspent in the last cycle and they have been forced to unload assets now to pay off their debt.

I’ve published important gold charts to watch in the past. It’s how you make money in today’s stage of the commodity cycle.

I have a saying you need to know – Grade is King, but Metallurgy is Queen. So let’s first explore the Grade conundrum, then explore the metallurgical issues the sector is facing.

Gold Grade is King – The Worst is yet to Come for the Majors
In the chart below, you’ll see cumulative gold resources along with the average grade. While the majors have added over 100 million additional ounces since 2007, the average grade has fallen by 50%.
https://katusaresearch.b-cdn.net/wp-...jpg-MJ-min.jpg


Declining reserve and resource grades are a bad sign. It means that for every tonne of rock mined, the producer is going to extract less gold.
In order to keep production levels stable, producers must increase manhours and expand milling capacity. Both of which are costly and negatively impact cash flow and profits to shareholders.

It’s not just you and I that know the quality of gold reserves and resources are declining. The majors know it too. It’s a key reason why we are seeing consolidation within the gold sector.


Gold Metallurgy is Queen
Even most within the mining sector give me a puzzled look on their face when I state that Gold Metallurgy is Queen. The fact is, the metallurgy of extracting the gold from the rock is getting more complex.


The trend is your friend, and the deeper we go, the more complex the metallurgy of “fresh rock” (sulphides) gets.
This is the “dirty” little secret of the gold industry.

An interesting study I have completed is this. Many of the gold discoveries that make up the higher-grade gold ounces discovered are in fact refractory.
Refractory gold can still be produced. However, it means higher costs to extract the gold from the physical encapsulation of the disseminated gold particles. Roasters aren’t cheap.

Clean, easy to leach oxides are becoming more and more rare. This is why there’s a premium value for oxide projects. Grade will always be King. But without a strong Queen (good oxide projects or clean met from sulphide projects), you will never have an enduring regime.

My last three weeks have been spent on the road. They were filled with meetings with the largest and most innovative gold producers on the planet. And the most high-profile gold developers. The industry is in full transition as most recently seen by the Joint Venture between Barrick and Newmont’s Nevada operations.

I detailed all my thoughts and ideas generated from these meetings to my subscribers this last week. You’ll find all 26 pages in the March edition of Katusa’s Resource Opportunities.

My team and I put every asset from every gold major through the ringer. We laid out all the reserves and production post mergers including all the headline dominators: Newmont, Barrick, Goldcorp, Rangold.

We also speculated further on the Master’s Chessboard. If you’re a gold investor, you need to prepare for the next moves.
Will Kirkland Lake Gold buy out Pretium Resources? If so, at what price?

The coming Commonwealth takeover of the Australian producers of their Canadian counterparts is in full swing as recently seen by this week’s Newcrest purchase of 70% of Red Chris mine in B.C.

Anywhere between $2.5-5.5 billion in gold assets (operating and development) will hit the market this year from divestures from the majors.

This has massive implications. Make sure you’re paying attention.

And don’t forget, Grade is King, Metallurgy is Queen.

Regards
Marin

https://www.forbes.com/sites/nathanl...w#4d46ad1a5624

As we continue to enjoy the "Yellen gold standard," now in its Powell phase -- who knows how long it will last -- let's look at why the gold standard system worked so well for so many centuries, including nearly two centuries of U.S. history before the rupture in 1971, during which time the United States became the wealthiest country in the history of world.

In 1971, the economist Arthur Laffer -- he was the chief economist of the Office of Management and Budget at the time -- was asked what he thought the consequences would be of Nixon's "closing of the gold window," which effectively ended the Bretton Woods period when the dollar's value was fixed at $35/ounce of gold.

"It won't be as much fun to be an American anymore," Laffer reportedly replied. And he was right.

But why? Why is it that the collective intelligence (let's be generous) of today's central bankers, and indeed all the central bankers since 1971, cannot outperform a yellow rock? This probably strikes some as bizarre, but it has always been thus. Way back in 1928, in a book called The Intelligent Woman's Guide to Socialism and Capitalism, George Bernard Shaw declared:


"You have to choose ... between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold."

It's the same today. These things never change. Ninety years ago, intelligent women understood these things.

To understand why gold works, as a standard of monetary value, you have to understand what makes good money. Today's cryptocurrency enthusiasts are rediscovering what monetary thinkers have always known: that the best money is stable money, or, as I like to term it, Stable Money -- money that is stable in value. After learning that Bitcoin and its ilk make splendid devices for gambling (the continued popularity of places like Las Vegas and Macau show that there remains a large interest in such things), but a rather poor currency -- exactly as I said would happen some years ago -- the cryptocurrency engineers are now focusing their energies on developing "stablecoins."

Ideally, a currency would be perfectly stable in value. The market economy is organized via prices, profit margins, returns on capital and interest rates. Changes in the value of the currency derange this process, creating chaos and havoc. John Maynard Keynes described in 1923:
"[Markets] cannot work properly if the money, which they assume as a stable measuring-rod, is undependable. Unemployment, the precarious life of the worker, the disappointment of expectation, the sudden loss of savings, the excessive windfalls to individuals, the speculator, the profiteer--all proceed, in large measure, from the instability of the standard of value."

In The Scandal of Money (2016), George Gilder updated this insight, using the tools of modern information theory:
"Casting a shroud of uncertainty over all valuation, monetary manipulations shorten the time horizons of the economy. In information theory, the dominant science of our age, when a medium sends a message of its own--static on the line--it's called noise. Noise in the channel reduces the channel's capacity to transmit accurate information."

In practice, such idealized perfection is not quite possible, so we have to go with the next best thing. The next best thing is gold: the thing that most closely approximates this ideal of stability of value. President James Madison summed up succinctly:
The only adequate guarantee for the uniform and stable value of a paper currency is its convertibility into specie [gold]--the least fluctuating and the only universal currency.

James Madison understood this.
And the United States became one of the most successful countries in the history of the world because people like James Madison understood it, and adhered to this principle from 1789 to 1971.


In this single sentence, Madison touched on some important political truths. You might argue that, ideally, "smart people" could get together and create some better -- that is, more Stable -- foundation for money than gold. But, you might also notice that nobody actually does this. They don't even try, and never have, in the past five decades of floating fiat money. One reason for this is that they are human: consequently, they crumble to political pressures, while gold does not. Even if you could invent some statistical concoction that is a better measure of Stable Value than gold -- although no human ever has -- arguably, no human institution could ever implement it for any length of time. Just look at how statistical concoctions like the Consumer Price Index have been continually altered, each time in response to political pressures, and to serve political ends. This is one reason why, as Madison asserted, gold remains "the only adequate guarantee for the uniform and stable value of a paper currency."

Related to this is the fact that gold is the "only universal currency." It is the only thing (along with its adjunct silver) that all people have agreed to use as the basis of money, which then allows fixed exchange rates between countries, vastly simplifying trade and investment. In the pre-1914 era, most major governments participated in the world gold standard, which was simply the extension of many centuries of gold and silver coinage used throughout the world. This system was reassembled during the 1920s, and again in 1944, at Bretton Woods. We have had no difficulty establishing world monetary systems based on gold.

Contrary to popular belief, most countries today do not have freely-floating currencies. According to the International Monetary Fund, about half of all countries actively "anchor" their currencies to something else, usually a major international currency like the dollar or euro. In other words, they have fixed exchange rates. Another 25% of all currencies are "stabilized" against a major international currency, which remains the reference although exchange rates are allowed to drift somewhat. Either "anchored" or "stabilized," most currencies today are part of the dollar or euro currency blocs. The only significant difference between the euro currency bloc, and the prior world currency bloc based on gold, is the standard of value: gold, or the floating fiat euro.

Despite this enthusiasm for fixed exchange rates (a form of Stable Money), there is little interest today in establishing a unified world currency bloc. We could, for example, form a world currency bloc around the euro, and the IMF has long promoted such solutions. Then, the world would be free of the difficulties of floating currencies. The dollar/euro exchange rate would be fixed, along with the pound/euro, yen/euro and other exchange rates.

The simple reason is that nobody would trust the European Central Bank. I wouldn't -- because the ECB is subject to political pressures, or other agendas, to which gold is immune. The ECB can also serve as a means of imposing political pressures.

Actually, the world did have a system like this. It was called the Bretton Woods arrangement. The British pound, German mark, Japanese yen, French franc and all other world currencies were nominally linked to the U.S. dollar. The reason why they agreed to this is that the U.S. dollar was also linked to gold, at $35/oz. When the dollar left gold in 1971, nobody was interested in remaining linked to the dollar, and currencies floated. They still float today.

Gold's performance as a standard of Stable Value has been exemplary. It is, actually, a lot better than one might rationally expect. The things that the gold standard made possible -- such as the extraordinary stability of bond yields during the nineteenth century -- have never been replicated under fiat currencies. Just look at those results (achieved without market manipulation), and tell me which central bank wiseguy -- give me a name of a real person -- that you think could accomplish this; and then explain, if that is true, why they haven't done so already.

COMMENTS FROM BENJAMIN: It really amazes me that intelligent humans can be turned into sheep and allow those that they elect and trust and respect turn out to be the criminals that they are and yet the sheep still believe in the Tooth Fairy and Santa Claus and Tinker Bell.

Here comes the Yellow Vests and POPULISM.

https://seekingalpha.com/article/424...ilocks-warning

Summary
Over the last couple of weeks, we discussed the "wild swings" in the market in terms of price movements from overbought, to oversold, and now back again.
Lately, there has been an awful lot of talk about a "Goldilocks economy" here in the U.S.

The problem of suggesting that we have once again evolved into a "Goldilocks economy" is that such an environment of slower growth is not conducive to supporting corporate profit growth at a level to justify high valuations.

This idea was discussed in more depth with members of my private investing community,Real Investment Advice PRO.

Market Review & Recap
Over the last couple of weeks, we discussed the "wild swings" in the market in terms of price movements from overbought, to oversold, and now back again. The quote below is from two week's ago but is apropos again this week.

"Despite the underlying economic and fundamental data, the markets have surged back to extremely overbought, extended, and deviated levels. On virtually every measure, markets are suggesting the fuel for an additional leg higher in assets prices is extremely limited."

Just for visual sake, the chart below compares the last three weeks of wild gyrations.
https://static.seekingalpha.com/uplo...son_thumb1.png

The chart below also shows the short-term reversal of the market as well. Note how in just a few days the market went from overbought, to oversold, back to overbought.
https://static.seekingalpha.com/uplo...519_thumb1.png

Importantly, as I specifically noted last week:
"This short-term oversold condition, and holding of minor support, does set the market up for a bounce next week which could get the market back above the 200-dma. The challenge, at least in the short term, remains the resistance level building at 2,800."

On that analysis, we did increase equity exposure early last week in both our ETF and Equity Portfolios. In the RIA PRO version of this letter, we gave specific recommendations to add exposure, particularly to Healthcare due to the recent sell-off over concerns of "Medicare for all."

Despite the rally, the bounce is still largely at risk for the three following reasons:
1) As noted previously, the market has not reversed to levels which normally signals short-term bottoms. The red lines in the bottom four panels denote periods where taking profits, and reducing risk, has been ideal. The green lines have been prime opportunities to increase exposure. As you will note, these indicators tend to swing from extremes and once a correction process has started, it is usually not completed until the lower bound is reached.

Important Note: This does not mean the market will decline sharply in price. The current overbought conditions can also be resolved by continued consolidation within a range as we have seen over the last two weeks.
https://static.seekingalpha.com/uplo...519_thumb1.png

2) The divergence between stocks and bonds still signals that "smart money" continues to seek "safety" over "risk." Historically, the bond market generally has it right.
https://static.seekingalpha.com/uplo...519_thumb1.png

3) As discussed in "Will The Next Decade Be As Good As The Last," the weekly chart below shows the S&P 500 hitting an all-time high last September before falling nearly 20% into the end of 2018. While the first two months of 2019 has seen an impressive surge back to its November highs, the market is starting to build a pattern of lower highs, and lower bottoms. More importantly, both relative strength and the MACD indicators are trending lower and negatively diverging from the market's price action.

https://static.seekingalpha.com/uplo...9-2_thumb1.png

As John Murphy noted last week for StockCharts:

1. The bull market that ended in March 2000 preceded an economic downturn by a year.
2. The October 2007 stock market peak preceded the December economic peak by two months.
3. The March 2009 stock upturn led the June economic upturn by three months.
4. Historically, stocks usually peak from six to nine months ahead of the economy. Which is why we look for possible stock market peaks to alert us to potential peaks in the economy that usually follow. And we may be looking at one.

If you are a longer-term investor, these issues should be weighted into your investment strategy. While we did add exposure to our portfolios early last week, we are still overweight cash and fixed income.

1. In the RIA PRO Equity Model - we bought Boeing (NYSE:BA) on the initial plunge, and added positions in JPMorgan (NYSE:JPM), Apple (NASDAQ:AAPL) and PPL (NYSE:PPL).
2. In the RIA PRO ETF Model - we added Healthcare (NYSEARCA:XLV), Energy (NYSEARCA:XLE) and Gold (NYSEARCA:IAU).

As always, we start with trading positions which have very tight stop-loss parameters. If our thesis on the position is proved correct, the position size is increased and is moved into a longer-term holding status with widened safety protocols.

This is how we approach linking longer-term views to short-term opportunities. Managing a portfolio of investments is simply measuring risk and reward and placing bets when reward outweighs the potential risk. Tweaking exposure to "risk" over time improves performance tremendously over the long term.


The Goldilocks Warning
Lately, there has been an awful lot of talk about a "Goldilocks economy" here in the U.S. Despite a rather severe slowdown globally, it is believed currently the domestic economy is going to continue to chug along with not enough inflation to push the Fed into hiking rates, but also won't fall into recession. It is a "just right" economy which will allow corporate profits to grow at a strong enough rate for stocks to continue to rise at 8-10% per year. Every year… into eternity.

Does that really make any sense?

Particularly, as we are looking at the longest expansion cycle in the history of the U.S. The problem is in the rush to come up with a "bullish thesis"as to why stocks should continue to elevate in the future, they have forgotten the last time the U.S. entered into such a state of "economic bliss."
You might remember this:
"The Fed's official forecast, an average of forecasts by Fed governors and the Fed's district banks, essentially portrays a 'Goldilocks' economy that is neither too hot, with inflation, nor too cold, with rising unemployment." - WSJ Feb 15, 2007

Of course, it was just 10 months later that the U.S. entered into a recession followed by the worst financial crisis since the "Great Depression."

The problem with this "oft-repeated monument to trite" is that it's absolute nonsense. As John Tamny once penned:

A "Goldilocks Economy," one that is "not too hot and not too cold," is very much the fashionable explanation at the moment for all that's allegedly good. "Goldilocks" presumes economic uniformity where there is none, as though there's no difference between Sausalito and Stockton, New York City and Newark. But there is, and that's what's so silly about commentary that lionizes the Fed for allegedly engineering "Goldilocks," "soft landings," and other laughable concepts that could only be dreamed up by the economics profession and the witless pundits who promote the profession's mysticism.

What this tells us is that the Fed can't engineer the falsehood that is Goldilocks, rather the Fed's meddling is what some call Goldilocks, and sometimes worse.

Not too hot and not too cold isn't something sane minds aspire to, rather it's the mediocrity we can expect so long as we presume that central bankers allocating the credit of others is the source of our prosperity."


John is correct. An economy that is growing at 2%, inflation near zero, and central banks globally required to continue dumping trillions of dollars into the financial system just to keep it afloat is not an economy we should be aspiring to. But despite commentary the financial system has been "put back together again," why are central banks acting? Via Bloomberg:

"Led by the Fed, many central banks have either held back on tightening monetary policy or introduced fresh stimulus, soothing investor fears of a slowdown.

Fed Chairman Jerome Powell says he and colleagues will be patient on raising interest rates again, while European Central Bank President Mario Draghi has ruled out doing so this year and unveiled a new batch of cheap loans for banks.

Elsewhere, authorities in Australia, Canada and the U.K. are among those to have adopted a wait-and-see approach. China, at its National People's Congress this month, signaled a willingness to ease monetary and fiscal policies to support expansion."
https://static.seekingalpha.com/uplo...oad_620x-1.png


Unfortunately, today's "Goldilocks" economy is more akin to what we saw in 2007 than most would like to admit.

Job growth is slowing down.
https://static.seekingalpha.com/uplo...h-1_thumb1.png

Along with economic growth.
https://static.seekingalpha.com/uplo...519_thumb1.png

And recession risks are rising sharply.
https://static.seekingalpha.com/uplo...ike_thumb1.jpg

However, it isn't just the economy that is reminiscent of the 2007 landscape. As noted above, the markets also reflect the same. Here are a couple of charts worth reminding you of.

Notice that at the peaks of both previous bull markets, the market corrected, broke important support levels and then rallied to new highs, leading investors to believe the bull market was intact. However, the weekly "sell signal" never confirmed that rally as the "unseen bear market" had already started.
https://static.seekingalpha.com/uplo...9-2_thumb1.png

Currently, relative strength, as measured by RSI on a weekly basis, has continued to deteriorate. Not only was such deterioration a hallmark of the market topping process in 2007 but also in 2000.
https://static.seekingalpha.com/uplo...9-1_thumb1.png


The problem of suggesting that we have once again evolved into a "Goldilocks economy" is that such an environment of slower growth is not conducive to supporting corporate profit growth at a level to justify high valuations.

It is true that the bears didn't eat Goldilocks at the end of the story… but then again, there never was a sequel.

Simple Actions To Take Now, You Will Appreciate Later

1. Trim positions that are big winners in your portfolio back to their original portfolio weightings. (i.e., take profits)
2. Sell underperforming positions. If a position hasn't performed during the rally over the last three months, it is weak for a reason and will likely lead the decline on the way down.
3. Positions that performed with the market should also be reduced back to original portfolio weights. Hang with the leaders.
4. Move trailing stop losses up to new levels.
5. Review your portfolio allocation relative to your risk tolerance. If you are aggressively weighted in equities at this point of the market cycle, you may want to try and recall how you felt during 2008. Raise cash levels and increase fixed income accordingly to reduce relative market exposure.

How you personally manage your investments is up to you. I am only suggesting a few guidelines to rebalance portfolio risk accordingly. Therefore, use this information at your own discretion.

See you next week.

COMMENTS FROM BENJAMIN: This is the technical view and the Risk Management View from one of the best analysts that comment on the markets.

In my next post you will see and hear the fundamental reasons that we have reached this point in our World History. It has to do with the breakdown of the social and moral fabric of the world and it's need for POWER and CONTROL over the masses. Please listen to the whole video interview of Mark Farber.

Your life may depend on it.

1. Post 6,193
2. Cleanup
3. Quote
4. Mar 13, 2019 2:58pm

1. https://cdn-assets.faireconomy.media...ar392875_2.gif BenjaminIs
2. | Commercial Member | Joined Dec 2014 | 5,207 Posts | Online Now

https://www.zerohedge.com/news/2019-...ops+to+zero%29


Exposing The Fed's CONfidence Game


https://zh-prod-1cc738ca-7d3b-4a72-b...?itok=LY4e264-

by Tyler Durden

Wed, 03/13/2019 - 14:43


Authored by Sven Henrich via NorthmanTrader.com,
The global economic landscape remains weak yet there appears to be no concern on the side of bulls and investors alike, so firm is the belief that the earnings recession that is unfolding is temporary, so firm is the belief that dovish central bankers can once again prevent any downside.



https://zh-prod-1cc738ca-7d3b-4a72-b...confidence.png

I get it, it has worked for 10 years and it’s worked again seemingly since the December lows. Why pretend it is anything but central banks?
After all Jay Powell is rapidly proving to be the market’s biggest thrust driver to the upside in 2019:

https://zh-prod-1cc738ca-7d3b-4a72-b...ges/powell.png

From my variant perch it’s a sign of deep underlying weakness. There is no bull market without central bank intervention or jawboning. Plain and simple.
The underlying premise of it all:

https://pbs.twimg.com/profile_images...aPS_normal.jpgEuropean Central Bank

✔@ecb





Praet: As a central bank, we can create money to buy assets #AskECB
Gianluca Nervegna@Gianluca844


Where did you get the money for the QE? #AskECB








There. They print money and buy assets and in process they distort the entire global price discovery process. Why? Because they have to in order to keep confidence up.
The world is one sell-off away from a global recession because market performance translates directly into consumer confidence and spending. Don’t believe me? Check this out:
In Q4 household financial assets dropped hard for the first time in a long time.

https://zh-prod-1cc738ca-7d3b-4a72-b...households.png

Why? Because markets dropped hard. What else dropped? Retail sales dropped 1.6% in December the biggest decline since September 2009.
Coincidence? You tell me:
Coincidence? You tell me:


https://zh-prod-1cc738ca-7d3b-4a72-b...SPX-retail.png


Is it the economy that’s leading the horse here? Or is it the other way around? Q1 GDP is much worse than Q4 yet retail spending is higher in January. The case can be made that it is market performance and related confidence that leads spending. No accident then that retail sales bounced back a bit in January, after all we saw a massive rally following the big global central bank flip flop.

None of this is new. Indeed if you look at a longer term chart comparing growth in financial assets and growth in retail sales one can observe an apparent correlation:

https://zh-prod-1cc738ca-7d3b-4a72-b...tail-sales.png


The message: Consumer confidence and spending is directly related to how markets perform which is ironic as nearly 90% of stocks are in the hands of the top 10%.

The larger conclusion: If markets drop for an extended time a recession is unavoidable. That’s how closely markets and the economy are now linked. No wonder the Fed always jumps in and quickly so, it is the unspoken prime mandate:

https://zh-prod-1cc738ca-7d3b-4a72-b...images/SPW.png


That’s why ever new highs are needed to keep the construct going. And that’s why ever more debt is needed because without more debt the fantasy does not sustain itself.

It’s the prefect bubble spiral that will eventually collapse under its own weight.

And at what cost? It all comes at a steep price.
Via Holger Zschaepitz:

“Global debt of corporations, governments & households hit fresh record at $178tn. Debt has risen by almost $60tn since the great financial crisis, meaning that the economic rebound of the past decade, which brought a global GDP increase of $20tn, has been bought at a high price. 3 dollars of debt translated into 1 dollar of growth”:

https://zh-prod-1cc738ca-7d3b-4a72-b...ges/debt_4.jpg

It’s inefficient and it eventually comes with enormous consequences.

But for now they keep succeeding in keeping the boogeyman at bay. And it takes ever more debt and ever more accommodative central bankers. No new highs without dovish central bankers. And ever more debt with dovish central bankers. And that’s the big CON in confidence. Because confidence must be maintained at all costs. Or else.

* * *

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Good Sunday - Happy St Patrick's Day

From my post 6221 to this post 6238, I cover everything or almost everything that you should know to become educated to the sickness and rot and evil in our world.

I am not sure if I will post here again unless I have a good reason that gives a benefit to me. I have taken the time to post especially on page 312 of my thread started on December 3, 2016 in the sincere hope that I could help Forex traders to learn how to trade properly and go into a profitable business.

The thousands of hours that I have invested was for my benefit so that I could develop my material and enhance my knowledge for my business and my shareholders.

G-D Bless you all. Take care and be well.


Benjamin
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