Money Flow Trading Method along with Risk Management

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

Authored by Charles Hugh Smith via OfTwoMinds blog,


The Gulag Archipelago is not a distant memory; it lives on in every modern state, cloaked with modern-day technologies and the well-worn tools of suppression.
https://www.zerohedge.com/sites/defa...64a9eef188.jpg


The last thing addicts want to hear is the truth: the only thing more terrifying than the truth is the possibility that they will lose access to whatever they're addicted to: smack, Oxy, coke, alcohol, sex, porn, power, etc.


If we fail to tell addicts the truth, we fail them and ourselves. As long as co-dependents remain complicit in the addict's destructive state, as long as those who know better keep silent because they don't want to deal with the trauma, the addict is free to maintain the illusion that he/she is in control, that his/her secret is safe, etc., and manipulate those around them with lies and victimhood.


Not wanting to deal with the trauma of forcing those in denial to face up to reality is understandable: who wants to deal with the shock, denial, anger and depression that characterize facing up to a terrifying truth?


But we fail ourselves if we're too weak to speak the truth and grind through the denial, anger and depression. If we opt for the easy way out, we're just like the addict, who is also opting for the easy way out, i.e. finding refuge in the labryrinthine Kingdom of Lies.


The status quo is a Kingdom of Lies. "Raw data", i.e. facts collected without regard to future interpretaion, are "processed" into the "right kind of data," i.e. data that supports the status quo interpretation, which is that everything's just fine thanks to the wise leadership of our self-serving elites.

The deeper you dig into the statistical foundation of GDP, the unemployment rate, trade deficits, etc., the more questions arise about the accuracy and agenda behind the headline numbers.

When insiders or hackers reveal the truth, the outrage of the status quo knows no bounds. Truth is intrinsically treasonous, as it undermines those gorging at the status quo's trough of wealth and power.

The status quo exacts a high price from those who reveal the truth. Whistleblowers are hounded from their jobs, threatened by private-sector or government goons and thrown in prison on phony charges.

Complicity is always the easy option. Politicos know this, and their job is to grease the skids of complicity and silence with Savior State benefits and harshly punish whistleblowers.

The Gulag Archipelago is not a distant memory; it lives on in every modern state, cloaked with modern-day technologies and the well-worn tools of suppression. Communist states still prefer the absurd cliche of re-education camps, while so-called democracies use intimidation, limitations on free speech, de-platforming, shadow censorship and the ever-popular charges of treason and "fake-news" to suppress dissent and skeptical inquiry.


In the Kingdom of Lies, everything is spun, massaged, interpreted and fed to the corporate / state media for the benefit of those enjoying centralized wealth and power. But the spin is getting painfully obvious, and the interpretations blatantly self-serving.

For example, steep increases in taxes on diesel fuel are part of a wonderful plan to save the planet (no additional taxes on jet fuel for private jets, because those are our cronies' toys).


If our governments and institutions can no longer tell us the truth because it undermines the ruling elites, they've failed the citizenry. And if we remain complicitly silent, then we've failed ourselves.
https://www.zerohedge.com/sites/defa...sts12-18_1.jpg


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http://traderfeed.blogspot.com/2019/...your-2019.html

WEDNESDAY, JANUARY 09, 2019
How to Make Improvements in Your 2019 Trading
https://1.bp.blogspot.com/-sOebN5SeE...ationHabit.jpg
There are several ways that we can make improvements in our trading:

1) Become a better idea generator; become better at spotting opportunity;

2) Become a better trader/portfolio manager; become better at implementing ideas as favorable risk/reward opportunities and constructing portfolios of trades;

3) Become more consistent in drawing upon best practices; become more grounded in personal and professional processes that keep you in peak performance mode;

4) Become more consistent in recognizing and intercepting your worst practices; become more mindful of triggers and pitfalls that set you up for your worst performances.

In working on any one or all of these, it is important that the efforts are daily. We internalize what we do. The idea is to start our changes with motivation, but continue them with positive habits.

Tomorrow (Thursday, Jan. 10th, 4:30 PM EST), Mike Bellafiore and I will join the good folks atFutures.io to present a free webinar on how you can implement these four areas of improvement in your trading. We are working with developing traders who are making meaningful strides in their trading, so we see what is and isn't working in real time. Our hope is to leave attendees with specific ideas and strategies that they can use to move their trading forward in 2019.

Here is the link for webinar registration; we look forward to seeing you there!

Brett
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https://www.bbc.com/news/business-46800098

World Bank warns of 'darkening skies' for global economy
By Andrew WalkerBBC World Service economics correspondent

1. 8 January 2019

Related Topics

1. Brexit

https://ichef.bbci.co.uk/news/660/cp...0204clouds.jpgImage copyrightBILL CLARK/GETTY IMAGES
Image captionThe predicted slowdown is focused on rich countries, particularly the US
The World Bank is warning of increasing risks, or what it calls "darkening skies", for the world economy.


In its annual assessment of global prospects the Bank predicts continued, though somewhat slower, growth this year and next.


The Bank's forecast for the global economy is expansion this year of 2.9% and 2.8% in 2020.


But overhanging the broadly favourable outlook are rising concerns that could mean economic performance falls short.


There is certainly some good news in this report. While the global economy is slowing down it's likely to be what the Bank's economists call a "soft landing". The slowdown started in the middle of last year and it has so far been "orderly".


The predicted slowdown is focused on the rich countries, particularly the US, although it will continue to expand more rapidly than either the Eurozone or Japan according to the Bank's forecasts.


The US slowdown is the result of the fading impact of President Trump's tax cuts and by 2021 its growth will have almost halved - to 1.6% compared with 2.9% last year.


Change of gear
On the other hand, growth in emerging markets and developing economies is likely to gather pace somewhat despite the continued cooling down in China - a process which began at the start of the decade.

By 2021 growth in China is expected to be 6%, which is still pretty strong, but it is a marked change of gear for an economy that expanded by an average of 10% annually between 1980 and 2010.

Franziska Ohnsorge, a World Bank economist and lead author of the report said in a BBC interview: "In China it's policy engineered, a very deliberate slowdown towards more stable long term growth."

That is what the Bank thinks is the likely performance of the world economy over the next few years. But there are risks that could mean that it doesn't work out so well.


That is reflected in the title of this year's report: "Darkening Skies".


Some of the clouds are familiar ones.

International commerce is already weakening, and conflict over trade especially between the US and China is one of the major risks.
These are the two largest national economies on the planet. The Bank has calculated that 2.5% of global trade is affected by the new tariffs - trade taxes - that were imposed last year, and it would be double that if the further tariffs that have been discussed were implemented.


https://ichef.bbci.co.uk/news/320/cp...hinatrade1.jpgImage copyrightGETTY IMAG

ES
The risk of rising protection remains high, the report says. It could depress economic activity in these two giant economies. Slower growth in China is particularly an issue for developing countries that export industrial commodities, energy and metals, as China is such a big buyer of these products.


Franziska Ohnsorge says between them the US and China account for 20% of global trade and 40% of global GDP. If their economies are both hit she says, "it's something that's felt all around [the world]".


The Bank does not expect a recession in either of these economies, though some commentators are now suggesting the US could be heading for one next year. But if it were to happen the risk of a global recession would increase sharply. In the past, the report says, the risk of a global recession in any one year was 7%. But if the US has a downturn, the probability goes up to 50%.


Brexit risk
Financial markets are also a risk. The chances of disorderly developments have increased. If interest rates are increased again in the US, or if the dollar gains sharply, it could have an impact on emerging and developing economies.


Brexit appears in the Bank's assessment as a possible risk for countries that are especially reliant on selling to Europe. If the UK's exit takes place with no agreement there is a chance of significant economic damage to both the UK and the EU which could then affect countries in Eastern Europe and North Africa which are closely integrated with Europe.


And even in the Bank's central, relatively optimistic, picture there are some depressing prospects for parts of the developing world - which is the group the World Bank exists to help.


For about a third of countries concerned growth in per capita terms won't be enough to restart what the report calls "the catch-up" with the developed world, the narrowing of the gap between living standards.


And in Sub-Saharan Africa per capita growth is likely to be less than 1%, insufficient to drive significant progress in alleviating poverty.

Good Morning

https://finviz.com/futures_charts.ashx?t=YM&p=m5

https://finviz.com/news.ashx?v=2

The first thing that needs to be done today is to determine if we have RISK ON or RISK OFF.

The Trend is 100% down of that there can be no doubt. So the question today for my Forex Trading is which of my 5 Trade Plans do I use. The 5 Trade plans good until March 31, 2019 is as follows;

(1) Short US30 (Dow 30)

(2) Short SP500

(3) Long Silver

(4) Long Gold

(5) Short USD/JPY

I NEVER trade against the trend. So the question is when to establish my trades. The time to make the decision is between 8:30 AM and 10:00 AM when the first news comes out in North America markets. I usually decide also based on what news events will occur during the trading day that I am aware of. For example today the FED chairman has a speaking engagement and one word from him can change the PERCEPTION from RISK OFF to RISK ON.

That is why most Forex traders that trade with charts being the main decider will lose.

I will check in later to continue my remarks and decide what Forex trades I will make today.


Benjaminis
BWM

The ‘Great Game’ Is Up! LaRouche Method Gives Content to Momentum for a New Epoch

Jan. 9 (EIRNS)—As of late Jan. 8, the U.S. delegation to Turkey had departed Ankara, and intense diplomacy is underway throughout the entire region, in support of the withdrawal of U.S. forces from Syria. This is as it should be, given the historic action taken by President Donald Trump in December, to order the pullout of the U.S. military, and thus, to dramatically break with the “endless wars” policy of the dying British Empire, used by it for ages in its attempt to dominate the world. Trump’s action at the same time, broke the “special relationship” Britain has for so long induced the U.S. to accept. The “Great Game” is up.


The Pentagon reiterated yesterday that the U.S. troop pullout from Syria would take place in a “strong, deliberate and coordinated manner.” Leaders in Russia, Turkey and Iran are now in motion to confer on seeing this through. The Iranian special envoy for Syria is in Moscow Jan. 9-10. Turkish President Recep Tayyip Erdogan is expected to meet President Vladimir Putin soon. Russian Deputy Foreign Minister Sergei Ryabkov said today that there are frequent consultations between the U.S. and Russia over Syria, which is not “extraordinary,” he said. “It is not always announced.”


In the course of furthering the implementation of Trump’s decision, consultation is strengthening on the part of the Great Powers—the U.S., Russia, China, India and others—towards going the whole way for a new quality of foreign relations, favoring development and peace. No wonder the British filthy tricks networks are churning out new waves of anti-Trump lines, e.g. that “the Trump Administration is in chaos.” This is everywhere in media headlines this week regarding both Syria and U.S. border security.


Further, there is significant peace momentum in other historic geopolitical conflict zones. In East Asia this week, China’s President Xi Jinping hosted D.P.R.K. Chairman Kim Jong-un and his wife for a 27-hour packed agenda in Beijing. Unofficially, the purpose includes the two leaders conferring on another Trump-Kim “Singapore Model” meeting sometime in the new year.


Even in the urgent situation of Yemen, there is positive motion, though limited. Today the UN Security Council took up the request from Secretary General Antonio Guterres for supplying the logistics for a six-month deployment of UN ceasefire monitoring forces in Hodeidah and two other Yemeni ports. The UNSC took testimony from UN Special Envoy to Yemen Martin Griffiths, about his progress discussing ceasefire with the various parties.


In all these cases, what is needed as the guarantee for success, is the shift in the United States in favor of deliberate economic development—domestically and internationally. This in turn requires the LaRouche “Four Laws,” and collaboration in the New Silk Road process of reconstruction and building for the future—in Southwest Asia, East Asia, Africa, and in the Americas—including Central America, the Caribbean and Mexico. It is this perspective that uplifts the vision of what can be done for U.S. “border security” from fixating on “the wall” (either for or against), to the reality of what must be done throughout the hemisphere, to eliminate the causes of displacement and misery.


President Trump is in the process of conducting a number of actions on border security this week. Today he hosted a White House meeting of Congressional leaders, but ended up walking out on it. Tomorrow, he will visit the border area in McAllen, Texas; on Jan. 8, he gave his first Oval Office National Address, titled, “The Humanitarian and National Security Crisis on Our Southern Border.”


Thus he is supplying motion towards resolution of a policy conflict, including restoring the government, currently in shutdown due to the budget impasse. But content is lacking. This is the task of collaborators with the LaRouchePAC drive, in particular through its current weekly economics class series, as well as the program of the LaRouche “Four Laws”; and with the February Schiller Institute conference, “Let Us Shape a New, More Human Epoch of Mankind!”


We take note of a beautiful cultural expression of a new epoch, in an event in Egypt on Jan. 6 (Coptic Christmas Eve), in the New Administrative Capital (45 miles east of Cairo). On that day, President Abdel Fattah el-Sisi inaugurated two new, beautiful, big houses of worship, the Coptic Cathedral of the Nativity of Christ, and the Al-Fattah Al-Alim Mosque. President Trump tweeted his greetings, “Excited to see our friends in Egypt opening the biggest Cathedral in the Middle East...!”


ENDING THE STRATEGIC WAR DANGER
Turkey’s Cavusoglu Urges Turkey, Russia, and Iran To Cooperate in U.S. Withdrawal from Syria

Jan. 9 (EIRNS)—A number of statements from Asian and Russian leaders mid-week affirm the intention for diplomacy to support to the withdrawal of U.S. forces from Syria. Russian Deputy Foreign Minister Sergei Ryabkov today directly addressed the matter of continuing U.S.-Russia contacts. Speaking on a visit to New Delhi, he told TASS, “The contacts on various aspects of the Syrian issue have not stopped. I don’t see anything extraordinary, sensational or special. These contacts are not always announced. The contacts are underway on different issues, and will be also held on other issues soon.”


Turkish Foreign Minister Mevlut Cavusoglu has proposed that Russia, Turkey and Iran—the “Astana process” guarantors of the ceasefire regime in Syria—cooperate to manage the U.S. withdrawal from Syria. He spoke today to the Turkish Parliament’s Foreign Affairs Committee. He said, as reported in the Hurriyet Daily News and elsewhere, “The United States has been facing several difficulties amid the process of withdrawing troops from Syria. We want to coordinate this process jointly with Russia and Iran, with which we had arranged work in the framework of the Astana process. [It is needed] in order for terrorist organizations not to fill in the void [following the U.S. pullout].”


Turkish President Recep Tayyip Erdogan will visit Moscow soon, according to a report today from Moscow, saying that planning is underway. Kremlin spokesman Dmitry Peskov said that there is no date set, but such a meeting will take place “in the near future,” according to TASS. The talks are to focus on Syria; and in addition, Russia supplying Turkey with the S-400 missile defense system.


Already in Moscow today, is the Iranian special envoy for Syria Jaberi Ansari. He will spend two days, discussing the Syria situation with Russian officials. Ansari has been Iran’s special diplomat at the Astana series of talks.

Last night U.S. National Security Advisor John Bolton left Ankara, which he had visited along with State Department Special Representative for Syria Engagement James Jeffrey and Chairman of the U.S. Joint Chiefs of Staff Gen. Joseph Dunford. Bolton met for two hours with Erdogan’s Chief Foreign Policy Advisor Ibrahim Kalin and Deputy Foreign Minister Sedat Önal. Dunford met separately with Turkish Chief of General Staff Gen. Yasar Güler and Defense Minister Hulusi Akar.


Kalin gave a press conference after the Bolton meeting, in which he said that talks between Ankara and Washington will continue, as the U.S. has not yet completed its withdrawal plan, which would be completed in 120 days.

On Jan. 8 President Erdogan told a meeting of his Justice and Development Party (AKP) that Turkey will not compromise on its position that the U.S.-backed Syrian Kurdish militia, YPG, is a terrorist organization. He also again denounced comments Bolton had made in Israel about guarantees for the security of the YPG. Erdogan said he would have to have another direct telephone discussion with President Donald Trump on the issue of U.S. withdrawal.
Pentagon Confirms Syria Withdrawal Plan, Calls It ‘Strong, Deliberate’


Jan. 9 (EIRNS)—The Hill reported yesterday that the U.S.-led anti-ISIS coalition has now approved a U.S. withdrawal plan that is “conditions-based” and has no timeline. Operation Inherent Resolve “has an approved framework for the withdrawal of forces from Syria, and is now engaged in executing that withdrawal,” Cmdr. Sean Robertson said in a statement. “That framework is conditions-based and will not subject troop withdrawal to an arbitrary timeline. The framework will be influenced by a number of factors, including weather.”

The Pentagon’s latest statement specifies that the United States “will continue to provide support to the Coalition’s operation in Syria while withdrawing troops in a strong, deliberate and coordinated manner in order to ensure U.S. forces’ safety and protection,” The Hill reports. Robertson said that, for operational security reasons, the Pentagon will not discuss actual troop movements, but instead will provide periodic updates “on progress regarding percentages of equipment removed from Syria.”

COMMENTS FROM BENJAMINIS: Since the MSM in North America never reports on important issues it is very necessary to understand the GEOPOLITICAL issues that affect the world financial markets that we trade.

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

https://www.zerohedge.com/sites/defa...?itok=LY4e264-
by Tyler Durden


Thu, 01/10/2019 - 13:55

Authored by Axel Merk via MerkInvestments.com,

The quip, “if you aren’t confused, you aren’t paying attention” needs to be replaced: “with the Fed confused, you better pay attention.” You may want to buckle up. Let me explain...
https://www.zerohedge.com/sites/defa...sical-bear.jpg

It all starts with the Fed...
In assessing our crystal ball for 2019, the starting point is the Federal Reserve (Fed) because they provide an anchor for the price of risk-free assets (Treasuries) around which risk assets are priced. When rates were near zero and the Fed purchased Treasuries, it wasn’t only Treasury yields that were depressed, but the Fed pulled down yields of risk assets as well. Differently said, the Fed made it appear as if risky assets were less risky; this didn’t only affect bonds, but also equities that enjoyed years of rising prices on the backdrop of low volatility. This was the era of compressed risk premia.


Part of the rise in risk premia in 2018 was a direct result of rates moving higher; that said, volatility has come back with a vengeance. Historically, in our analysis, an extended period of low volatility (remember the goldilocks-years ahead of the financial crisis?) is often followed by an extraordinary surge in volatility. As such, to an extent, the elevated volatility we see now is to be expected. Possibly it is also related to algorithms dominating some markets; and/or geo-political events. But could it be that the Fed’s transition from FOMC to FOFC has something to do with it?



FOMC becoming FOFC?
The Federal Reserve Open Market Committee (FOMC) is the body that, under the leadership of its Chair Jay Powell, sets the Federal Funds Rate. The FOFC, in contrast, is the Flip Or Flop Committee. The FOFC appears to be a secret body, as I have yet to see any announcement that it has formally been established. Yet, judging from Fed Chair Jay Powell’s comments in recent weeks, it may have displaced the FOMC.


Joking aside, the Fed had been on a set course to let its large Treasury holdings run off (engage in so-called quantitative tightening or “QT”) and to raise rates. Until last summer, Powell had made it clear that even with the higher rates, the Fed was still “accommodative”; in December, after the 4th 0.25% rate hike of 2018, the FOMC statement stated that the interest rates had now reached what some at the Fed considered to be neutral, implying rates would need to move higher – especially since he had indicated a few months earlier that rates may need to move above neutral. He had also suggested not to touch the QT program, so as to not to confuse the markets with multiple policy tools.


Fast forward and it’s a different story: in a recent panel discussion, Powell implied the path of quantitative tightening is not set in stone, and the Fed would be flexible. Similarly, Powell suggested the Fed can be very flexible, even lower rates on short notice should it be required. What???


Behind the scenes in the markets
The key thing that had changed is that some markets have thrown a tantrum, notably the equity markets. Also, while the Fed talked about raising rates, the markets wanted to hear none of that, pricing in ever fewer rate hikes for 2019 as 2018 was winding down; after Powell’s comments about being willing to reverse course, the markets even priced in a decline in interest rates for later this year.


The tantrum didn’t start in a vacuum. Earlier last year, some emerging market currencies fell sharply versus the dollar. Such stress is not uncommon as many businesses in emerging markets get their funding in U.S. dollar where the cost of borrowing is lower during ‘good times’; however, during ‘bad times’, local currencies suffer, causing strain on those borrowers to service their debt. As the year progressed, there were signs of slowdowns in some international markets.


That said, the Fed is well aware that their mandate is not the well-being of emerging markets, even if some at the Fed periodically point to the rest of the world. More specifically, if I may, the whole point of raising rates is to tighten financial conditions. And while the Fed looks at a whole array of ways of how tight financial conditions are, it’s our understanding that one of the more relevant ones for the Fed to gauge availability of credit is their Senior Loan Officer Opinion Survey (SLOOS):
https://www.zerohedge.com/sites/defa...standards.jpeg


And based on the SLOOS, sure, the wheels may be falling off somewhere in the world, but in the U.S., lending standards have not substantially tightened.

Basically, the rearward looking Fed can see that financial conditions are gradually tightening, but had not reached all areas where it matters. In the meantime, the forward-looking markets were suggesting – at least according to common media interpretation - that the slowdown is coming in earnest.


Behind the scenes at the Fed
I’ve pointed out that Powell is an attorney, not a Ph.D. economist. With that I’m suggesting he does not have an academic agenda that I allege Bernanke (the student of the Great Depression) and Yellen (the labor economist) had. Instead, I assess him as the type of person who will call a committee to make a decision, suggesting he will be re-active rather than pro-active. Greenspan was known for going out on a limb, making pro-active decisions based on his projections. Powell is a different type of Fed Chair.



Separately, while the public has been told QT is on a steady path, this hides the underlying unease at the Fed where as to where QT should lead. In my assessment of discussions at the Fed, there is a general consensus that the Fed’s balance sheet should be shrunk (letting Treasuries run off “shrinks” the Fed’s balance sheet), but there was never consensus as to its exact size, other than it should be larger than the pre-crisis level, amongst others - but not only - because there’s more cash in circulation (which is also part of the Fed’s balance sheet). When Yellen came up with the analogy that QT is akin to watching paint dry on a wall - and the market bough it - folks at the Fed must have been thrilled.

That is, the Fed doesn’t want QT to disrupt markets. Except now markets are having a fit and it is as yet unresolved exactly how small the Fed balance sheet should be. If I’m not mistaken, the Fed thought they have until late 2019 to worry about when to halt QT. Well, the paint on the wall has dried up and the market wants answers.

And the Fed doesn’t have an answer, except that it is wading in a dark room. That may be correct, but isn’t very helpful. Remember, when you walk in a dark room, even when you are careful, you sometimes hit sharp objects.


The Tail Wagging the Dog
As I alluded to in the beginning, the Fed sets the benchmark for the risk-free asset. However imperfect that may be, it’s better to know what the Fed is up. It’s worse not to know. But it’s truly bad if the Fed is wavering based on the whims of the markets.


After Powell flip flopped to suggest the Fed could also be easing, equity markets surged. Does that now mean all is dandy and the Fed can resume tightening? To put it gently, Powell is learning on the job.


While the news media loves to fit the storyline to what’s happening in the market, please consider the following:

1. Based on CFTC data, speculators had been betting aggressively on higher rates through the third quarter of 2018. In many ways, the change in rate expectations may well be a result of a short squeeze (betting on higher rates requires shorting certain instruments) that then took on a life on its own. Meaning: just because the markets are moving doesn’t always mean fundamentals are changing. There’s a reason the Fed’s institutional setup is to act slowly.
2. Let’s not forget why the Fed wanted to raise rates in the first place. It is because unemployment is at incredibly low levels while wage pressures are gradually rising. Incidentally Powell has been increasingly shrugging off rising wage pressures, suggesting they imply higher productivity. While it is correct productivity has been rising, ignoring higher wages is, in my view, irresponsible, as it risks dislodging the market’s tame inflation expectations.

https://www.zerohedge.com/sites/defa...1-phillips.png


Based on my assessment of rising wage pressure, by not taking away the punch bowl, it may have to play catch up later. On a somewhat related note, while corporate America is complaining about slowing global growth (and may well start complaining about wage pressures eroding their margins soon), US consumers are doing just fine; aside from very healthy retail numbers in December, consumers continue to cope rather well with their debt, even with a recent uptick in delinquencies (in assessing the chart below, keep in mind it reflects longer-term moving averages):
https://www.zerohedge.com/sites/defa...nquencies.jpeg


Implications
As you might imagine, my conclusion is that, at the very least, volatility is to remain elevated for all the reasons mentioned above, exacerbated by the Fed’s lack of clear direction.


I agree with most observers that the economic cycle is nearing its end. I disagree, though, that we are at a cliff about to crash. More importantly, given the tight labor market, I believe inflationary pressures will continue to rise, ultimately limiting the Fed’s maneuvering room. As alluded to above, it is perfectly compatible in my view that corporate America is suffering, but that the economy won’t fall into recession – at least not yet.


As we are approaching the end of the economic expansion, will king dollar be de-throned? In favor of a weaker dollar is an expectation of lower rates ahead, especially given the run up in recent years. That said, as indicated earlier, it is by no means assured we have reached the peak in the U.S. rate hiking cycle. In my judgment, though, even as U.S. rates may be moving higher, investors will increasingly focus on the eventual downturn; added to that may be rising U.S. inflationary pressures that will tame real rates.


It’s in this context also that the price of gold has done reasonably well despite rising rates: as gold does not pay a dividend, it competes with any real return available on cash. Late phases of an economic expansion are - in our analysis - often associated with rising inflation (the challenges Powell is faced with are really not new), which may well be another attribute as to why some investors are buying gold. I tend to point out another dimension: diversification.

When rates are up, risk assets face headwinds as their future cash flows get discounted more; with volatility up, valuations can be all over the place. In contrast, gold’s lack of cash flow is a benefit in this context as there is no discounting of a cash flow.

Clearly, the price of gold has historically been volatile, but our analysis shows it has had positive performance in each equity bear market since 1970, with the notable exception of the early 80s when then Fed Chair Volcker raised real interest rates to very high levels.

If my crystal ball is correct, the price of gold may break out further to the upside when we are closer to the end of the rate hiking cycle. As recent history suggests, though, the time to diversify is ahead of the unfolding of actual events.



Looking across the ocean, it’s noteworthy that the Swedish Riksbank, one of the central banks with negative rates, recently raised rates. I mention this because the ECB is also mulling a rate hike later this year. Europe clearly doesn’t act in a vacuum- if your view is that the global economy falls off a cliff, but I wouldn’t underestimate the odds of an ECB rate hike, if for no other reason than ECB chief Draghi may want to tie up loose ends before retiring late this year.

It is also difficult to imagine someone more dovish to take Draghi’s role, thus possibly causing an adjustment higher in the rate path.

All of this doesn’t bode too well for equities. That said, historically, bear markets tend to mostly coincide with recessions. We happen to think we are not there yet. But this doesn’t mean investors shouldn’t be cautious. Most investors have a certain risk tolerance; with volatility elevated and years of a bull market in equities, odds are their portfolios are riskier than they signed up for. That’s why we preached a long time ago already to diversify. The time to diversify is not exactly at the peak of the markets - as that’s extremely difficult to time; instead, in our humble opinion, managing risk consists of stress testing one’s portfolio before the tide turns, then taking initiatives.



Nonetheless, we spend considerable time seeking to identify the peak in the business cycle (please see our research reports at merkinvestments.com/research). Not only is the peak in the business cycle an important reference point, there may also be an opportunity to take advantage of what then may be interest rate cuts, as - historically speaking – future rate cuts are not fully priced in at that stage. You may reach out to us to learn more about how we might be of service to help structure a portfolio to navigate these financial waters.


* * *

Please sign up for our free Merk Insights, explore our chartbooks and follow me on LinkedIn, Twitter, Facebook or Patreon.

Brought to you by Benjaminis

https://www.thepeterboroughexaminer....14DyE.facebook

The Conservative Party letter-writing machine is likely in full force.


In his attack on Kathleen Wynne and Andrea Horwath, 66-year-old Steven Clift from Whitby wrote saying that every Ontario Resident "currently owes $40,000" of the provincial debt and terms it a "wall of debt" that "threatens the prosperity of us all."


What complete and utter rubbish. That $40k of debt seems like a pretty good deal to me. Think of it like you do the mortgage on your house which is likely much higher. For this $40k mortgage, Clift gets: a share in a huge network of provincial roads and highways, GO transit, hospitals, schools, universities and colleges for his kids and grandkids to attend, parks for summer recreation, highway maintenance, provincial policing, free health care and a (albeit weak) social safety net. Clift himself gets free drugs except for a small co-pay. I am sure that there is much more that others can think of.


As for the threat to our future prosperity, he is again off-base. Government debts and deficits (liabilities) are also ASSETS for our relatively prosperous private sector. Therefore, like our mortgaged homes, they are ASSETS (not just liabilities) for our kids and grandkids. As a pensioner, Clift himself is a beneficiary of debts and deficits which are often held by pension plans and insurance companies not to mention the banks in which both he and his pension plans may be invested (see portfolios of mutual funds). If the provincial debts and deficits didn't exist, the private sector would have fewer resources to operate and their debt load would be higher. If public sector debt goes down, private sector debt goes up.


It is time for people to focus on BOTH the asset side of the debt coin AND not just the liability side.

We should be discussing if the debts are assets for the right people.

Herb Wiseman, Peterborough

Comments From Benjaminis: See The Video Below For My Answer...

PLEASE LISTEN FROM THE START... Bill Bonner

https://www.strategic-culture.org/ne...eep-state.html

https://acting-man.com/?p=54019#more-54019

WOW WOW and WOW

https://www.news.com.au/world/europe...a1b108c78f25eb

Yellow vest protesters to withdraw all their euros in massive run on French banks

Furious yellow vests are preparing to withdraw all their euros in a massive run on French banks, as the violent protests spill over to Britain.

Staff reporter and AP, AFP
News Corp Australia Network JANUARY 10, 2019 9:19AM

1. Video
2. Image

Paris riots destroy the country
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Yellow vest activists are urging French citizens to empty their bank accounts and spark a massive run on the country’s banks in their longstanding fight with the government — which could lead to the collapse of its banking system.


The call for citizens to withdraw all their euros come as copycat protests are planned for Britain on the weekend.


The left-wing “People’s Assembly” activist group has invited thousands of people to wear yellow vests at an anti-austerity “Britain is broken” march in central London this weekend.


“See you on the streets and don’t forget your #YellowVests,” the group, which is demanding a general election to end the ruling Conservatives’ program of austerity, wrote on Facebook.
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Riot police stand in tear gas during clashes in Toulouse. Picture: AFPSource:AFP


Meanwhile right-wing, Brexit-supporting activists have signalled their intent to hold demonstrations in British cities, including the capital, under the banner “#YellowVestUK”.


This comes ahead of the ninth straight weekend of protests across France, with yellow vests now issuing calls on social media for massive cash withdrawals from banks.


Protesters hope the move will force the government to listen to their demands, notably their call for more direct democracy through the implementation of popular votes that allow citizens to propose new laws.


Activist Maxime Nicolle called it the “tax collector’s referendum.”


In a video message, Nicolle said “we are going to get our bread back … You’re making money with our dough, and we’re fed up.”
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Yellow vests (gilets jaunes) protesters take part in an anti-government demonstration in downtown Lille, northern France. Picture: AFPSource:AFP


WHAT COULD A BANK RUN MEAN?
If a bank run succeeds, the yellow vests could cause a complete failure of France’s banking system.

Unlike Australia, France operates on a Fractional Reserve System meaning their banking system holds a fraction of money that’s deposited by customers. The rest is used to make loans, creating new money.
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A protester runs from teargas launched by riot police outside Paris. Picture: APSource:AP


The countries banks are believed to have about a quarter of the cash needed to weather a bank run.


If reports are true in saying 70 per cent of the population plans to withdraw all their euros, it means more than 46 million people will be directly revolting against the system.


This could lead to a systemic banking crisis in the country where almost all the banking capital is wiped out.


HOW COULD IT AFFECT ECONOMY?
France has the seventh largest economy in the world and the second largest in Europe, valued at $US2.58 trillion, according to world bank data.


It relies heavily on tourism and agriculture to sustain this — and boasts being the most visited country in the world.


If a bank run leads to widespread financial crisis it can result in a long economic recession for businesses and consumers who don’t have enough money.


During the Great Depression in the 1930s much of the economic damage was caused by bank runs.

A bank run like the one being promoted in France now could potentially paralyse the country’s economy and lead to a collapse in the Euro.
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Anti-government demonstrators set fire to garbage bins in Bordeaux as the yellow vest movement morphs into a mass protest against Macron’s policies. Picture: AFPSource:AFP


FUNDRAISER FOR ‘ORDINARY’ BOXER
Meanwhile, French officials slammed a fundraising drive that brought in more than 100,000 euros ($A160,000) for a former boxer filmed punching police officers during the latest “yellow vest” anti-government protests in Paris over the weekend.


Christophe Dettinger turned himself in to police after videos emerged of him assaulting shield-carrying officers during the demonstrations on Saturday.
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Women wearing yellow vests observes a minute of silence for the victims of the national yellow vest movement in Paris. Picture: APSource:AP


More than 7000 people had pledged a total of 117,000 euros ($A187,000) to help pay legal costs for Dettinger, who remains in custody.


In a video posted on YouTube on Sunday, he described himself as an “ordinary citizen” acting out of anger with what he called the repressive tactics of the police.

“I was tear-gassed, with my friend and my wife, and at a certain point the anger just rose up inside me,” said the 2007 and 2008 champion of France’s light heavyweight division.


His case garnered many pledges of support on social media, with some calling him a hero for defending a movement which has accused police of using excessive force against demonstrators.
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French President Emmanuel Macron is preparing for the ‘great national debate’ in an attempt to defuse tensions. Picture: AFPSource:AFP


The yellow vest movement, originally against fuel tax hikes, has snowballed into a wide protest against the rising cost of living, which prompted French President Emmanuel Macron’s government to announce a minimum wage hike and other financial relief.


Macron swept away France’s traditional parties in 2017 with a grassroots campaign that promised more participative democracy. He is hoping the same tactics will now defuse the biggest crisis of his presidency.


The centrist leader is gearing up what he has termed the “great national debate”, a public consultation to discuss the “essential questions” facing the nation after nearly two months of violence.

The debate is the third prong of the 41-year-old’s strategy for ending the demonstrations.

It will see town-hall meetings held around the country, where citizens will have a greater say in the running of the country, amid accusations that he is too highhanded and distant.
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French Senator Chantal Jouanno has come under fire from yellow vest protesters for earning around $A23,000 per month. Picture: Joël Saget/AFPSource:AFP


But many of the protesters in their now trademark high-visibility vests say the measures are not enough, claiming rural France is paying the price for Mr Macron’s policies that they see as mainly profiting a wealthy Parisian elite.


Their latest bone of contention is the reported 14,666-euro ($A23,000) monthly salary for Chantal Jouanno, who will lead a national debate being organised by the government to discuss living standards and government policies.

“If they want to propose lowering my salary, they are completely free to do so,” Ms Jouanno told France Info on Monday.
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A mural by street artist PBOY depicting yellow vest protesters inspired by Delacroix’s painting Liberty Leading the People. Picture: Philippe Lopez/AFPSource:AFP

Public sympathy for the movement is strong, with a huge mural celebrating the revolt appearing in one of the most traditionally left wing districts of the French capital. Street artist Pascal Boyart created the work, based on Eugene Delacroix’s monumental canvass Liberty Leading the People, which glorified the revolution of July 1830 in which the people of Paris drove King Charles X from power.


He told AFP that the mural was to show his support for the anti-government protests which have shaken France since November.

“Art has always been a means of expression for all political movements,” said the 30-year-old painter.

He has also added a “bitcoin puzzle” to the work, and said the person who finds the key will win 1,000 euros ($A1600).

One of Boyart’s previous works shows Delacroix setting fire to a 100-euro note.
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Protesters clash with riot police in Bordeaux. Picture: AFPSource:AFP
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Several hundred women wearing yellow vests have marched during a rally in Paris and in other cities to give a different image to the movement. Picture: AP Photo//Michel EulerSource:AP


Ten people have died in the revolt and over 1400 have been injured, according to the BBC. But several hundred women wearing yellow vests marched through Paris in a bid to restore a peaceful image to the grassroots protest movement, a day after demonstrations veered once more into violence.


Some women carried yellow balloons, and at one point, they fell to their knees in a minute of silence for the 10 people killed and many others injured since the movement began in mid-November.


Women also marched in other cities around France carrying signs reading “I am your daughter” or “I am your Grandma.”

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COMMENTS FROM BENJAMINIS:

This Could Really Spread Around The World !!! Great Plan !!! Completely Legal and Peaceful.

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

Earnings Season Off To Dismal Start: Warnings, Guidance Cuts, Mass Layoffs
https://zh-prod-1cc738ca-7d3b-4a72-b...?itok=LY4e264-


by Tyler Durden
Thu, 01/10/2019 - 17:46


Earnings season has yet to officially begin when the big banks report next week and it already looks like Wall Street is in for a rude awakening when it comes to corporate profits in both the last quarter of 2018 and the rest of 2019 just one quarter after the best earnings season in history.

The recent warnings, guidance cuts and layoff announcements to date have been nothing short of dismal. Here is a quick summary of what we have observed in just the last week:

1. Apple cut revenue guidance (for the first time in 16 years)
2. Macy's cut profit guidance, sending its shares plunging the most on record
3. Barnes and Noble cut profit guidance
4. FedEx cut profit guidance
5. American Airlines cut guidance
6. Delta cut profit guidance
7. Kohl's reported a plunge in comp store sales
8. Ford announced it will cut thousands of jobs in Europe
9. Jaguar announced it will cut 10% of its workforce
10. Blackrock announced it will cut 500 jobs
11. State Street announced it will cut 15% of its senior management
12. AQR announced it will cut dozens of jobs
13. United Technologies ended sale of Chubb fire-safety as bids were too low.

Virtually every single sector is telegraphing weakness, from transports to techs to autos to retail and finance. Here are some additional details courtesy of Bloomberg:
Transports

The outlook for the U.S. airline sector darkened notably as economic uncertainty threatens demand. American Airlines cut its estimate for a key gauge of pricing power on Thursday after a similar move by Delta at the beginning of the year. And that was before accounting for a partial government shutdown in the country.

Carriers also see a far bleaker 2019: FedEx cut its outlook a few weeks ago - just three months after raising it - reflecting an abrupt change in its view of the global economy. CEO Fred Smith cited trade tensions, especially between the U.S. and China, among its troubles, saying most of the problems he faced were due to “bad political choices.”

Cars
The first drop in Chinese passenger auto sales is reverberating across the globe as the gloom in the auto industry spreads, and within hours on Thursday, Jaguar and Ford Motor Co.announced major cost-cutting programs. Ford took the most aggressive action in Europe, warning it could close plants and fire thousands. It was followed by Jaguar, Britain’s biggest carmaker, which disclosed a plan for 4,500 layoffs, about 10% of its global workforce. The culprits, according to Jaguar: Brexit, flagging demand for diesel-powered vehicles and a downturn in China.

Retail, Luxury Brands
Before today's retail crash, luxury retailers were already moaning about the Chinese economic slowdown, and none more so than brands like Tiffany and Louis Vuitton owner LVMH. Tiffany said last week that its weaker-than-expected sales highlighted a “clear pattern” of Chinese shoppers cutting back on spending when they’re overseas. Then on Thursday, Macy’s and Kohl’s gave the clearest indication so far that the U.S. holiday season might not have been the "record" smash hit many said it was just two weeks ago when "strong retail spending" was cited as the catalyst for the year-end rally. Macy’s darker outlook and Kohl’s disappointing sales compounded concerns that rising interest rates and Chinese trade turmoil could dent consumer spending, a backbone of the U.S. economy.

Finance
With banks on deck to report next week, we already know that asset managers have not been spared as volatility roils markets and investors have piled into funds with low fees. BlackRock was the latest company to announce a reduction in its workforce on Thursday, with a plan to dismiss 500 employees, or 3% globally, in the weeks ahead. That, according to Bloomberg, was BlackRock’s largest headcount reduction since 2016. Quant hedge fund AQR Capital announced job cuts two days ago after a year of poor performance. State Street is also trimming its workforce with the bank cutting 15% of its senior management, as it new chief executive continues with a plan to whittle management ranks.

Industrials
Erratic markets have started to have an impact on financial plans at big corporations. Industrial giant United Technologies said Thursday it has halted the sale of its fire-safety and security business because of recent volatility. The company will focus instead on its broader plan to separate such disparate businesses as jet engines, elevators and climate controls.

Technology
The biggest shock to the upcoming earnings season was Apple’s sales forecast cut on Jan. 3, the first time in almost two decades that the company lowered its outlook. Apple blamed the economic slowdown in emerging markets, particularly in China for a major cut in its projected revenue even though it gave its latest forecast just three months ago. Of course, there were many warning signs, as several key Apple suppliers trimmed their own estimates in the previous months. While the Apple news rippled through the industry, the recent rally driven by a dovish Powell has helped Apple erase many of its recent losses.

* * *

While the rising gloom has already had an impact on analyst expectations, with consensus estimates showing an expectation that S&P profits will rise 7.7%, down from a forecast for a 20% plus increase for all of 2018, the real number may end up being much lower.
https://zh-prod-1cc738ca-7d3b-4a72-b...EPS%202019.jpg

As Bloomberg notes, a market-based analysis of earnings using the dividend discount model suggests equity investors anticipate annual profit growth of 3.7% through 2023, according to Goldman strategists led by David Kostin. The question is just how bad will earnings in 2019, both in the first quarter and for the rest of the year, be if indeed this is the last year before the recession finally strikes?
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COMMENTS FROM BENJAMINIS: The Trend Is Down. The Trend is YOUR FRIEND !!!

https://www.cnbc.com/2019/01/11/brex...awal-deal.html

Good Morning

Please read the following article about Brexit.

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

Brexit Day is less than three months away and never during the process has the UK's fumbling attempt to organize an 'orderly' exit from the trade block looked more fraught with conflict and chaos. After returning from their holiday break this week, MPs promptly rebelled against the government, passing a series of amendments over objections from the government that will make it extremely difficult to run down the clock to force MPs to either hold their noses and accept the deal she negotiated with the EU, or risk the pandemonium that could follow a 'no deal' Brexit.


With circumstances finally starting to shift this week following months of deadlock, murmurs about the possibility of delaying Brexit Day have grown ever-louder. Which is why it's hardly a surprise that, on Friday, an anonymously sourced report in the Evening Standard cited "senior cabinet officials" claiming Brexit Day would likely be delayed sparked a brief rally in the pound.
GBP/USD climbed as much as 0.8% to $1.2851, leaving it on track to strengthen for a fourth-straight week.
https://zh-prod-1cc738ca-7d3b-4a72-b...1.11gbpusd.png

In the report, ES's sources pointed out that the withdrawal treaty isn't the only long-running controversy that must be brought to a conclusion before Brexit Day. There are at least "six essential bills" that must be passed before Britain leaves the European Union.
Heres's a quick rundown of that, and two other controversies that stand in the way of a workable Brexit:

1. Senior ministers told the Standard that a majority of the Cabinet now support the idea of staging indicative votes in the Commons to see if a different Brexit plan is supported, despite Theresa May publicly opposing the idea.
2. Work and Pensions Secretary Amber Rudd refused three times on live radio to deny she would resign if the Prime Minister attempted a disorderly departure from the EU without securing a withdrawal deal.
3. Foreign Secretary Jeremy Hunt warned that “Brexit paralysis” was a risk if MPs vote down Mrs May’s deal on Tuesday but lack a majority for a different deal. He said it was clear that a no-deal Brexit would be blocked by Parliament following the landmark votes earlier this week.

While a delayed Brexit deadline would be positive for the pound, it would not be a "big game changer" due to the lack of clarity around what Parliament wants, said Mikael Olai Milhoj, analyst at Danske Bank.

"Positive as it means lower probability of no-deal Brexit, but should not be a big game changer".
The rally started to fade as Theresa May poured cold water on the reports, saying there is not such plan in place and that the government's policy is not to delay the UK's departure from the EU.

COMMENTS FROM BENJAMINIS: The point that needs to be made and understood is that in this day and age it is impossible to trade Forex and expect to be profitable if you trade in the normal accepted way.

The rumor of a delay in Brexit caused GBP/USD to spike upwards. How can any chart predict this event or any other event that needs to be dealt with on a daily basis ?

Here is a 5 minute chart of GBP/USD.

https://finviz.com/forex_charts.ashx?t=GBPUSD&tf=m5

https://www.zerohedge.com/news/2019-01-10/tragedy-euro

Authored by Alasdair Macleod via GoldMoney.com,
After two decades, the euro’s minders look set to drive the Eurozone into deep trouble. December was the last month of the ECB’s monthly purchases of government debt. A softening global economy will increase government deficits unexpectedly. The consequence will be a new cycle of sharply rising bond yields for the weakest Eurozone members, and systemically destabilising losses in the bond portfolios owned by Eurozone banks
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The blame-game
It’s the twentieth anniversary of the euro’s existence, and far from being celebrated it is being blamed for many, if not all of the Eurozone’s ills.
However, the euro cannot be blamed for the monetary and policy failures of the ECB, national central banks and politicians. It is just a fiat currency, like all the others, only with a different provenance. All fiat currencies owe their function as a medium of exchange from the faith its users have in it. But unlike other currencies in their respective jurisdictions, the euro has become a talisman for monetary and economic failures in the European Union.

Recognise that, and we have a chance of understanding why the Eurozone has its troubles and why there are mounting risks of a new Eurozone systemic crisis. These troubles will not be resolved by replacing the euro with one of its founding components, or, indeed, a whole new fiat-money construct. It is here to stay, because it is not in the users’ interest to ditch it.

As is so often the case, the motivation for blaming the euro for some or all the Eurozone’s troubles is to shift responsibility from the real culprits, which are the institutions that created and manage it. This article briefly summarises the key points in the history of the euro project and notes how the mistakes of the past are being repeated without the safety-net of the ECB’s asset purchases.

The birth of the euro
To swap a number of existing currencies for a wholly new currency requires the users to accept that the purchasing powers of the old will be transferred to the new. This was not going to be a certainty, and the greatest reservations would come from the people of Germany. Germans saved, and therefore risked the security of their deposits in a new money and monetary system. They were reassured by the presence of the hard-money men in the Bundesbank, who had a mission to protect the mark’s characteristics against the weaknesses that would almost certainly be transferred into the new euro from more inflationary currencies.

These anxieties were assuaged to a degree by establishing the ECB in Frankfurt, close to the watchful eye of the Bundesbank. The other nations were sold the project as bringing greater monetary stability than offered by their individual currencies and the reduction of cross-border transaction costs. Borrowers in formally inflationary currencies also relished the prospect of lower interest rates.

It was clear at the outset that the new omnibus euro required new disciplines, and it was here that the system failed from the outset. Having sensibly set out the euro’s parameters in the Maastricht Agreement, political considerations then took over. The raison d’être of the euro, so far as the politicians were concerned, was to further the European Project and getting countries into the new Eurozone became more important than compliance with the terms.
The terms had been set in the Maastricht Treaty in February 1992, which was signed by the twelve members of the pre-existing European Community. To qualify, membership of the euro required an inflation rate no more than 1.5% higher than the average rate of the three lowest member states, a fiscal deficit of no more than 3% at the end of the preceding fiscal year, a ratio of gross government debt to GDP of no more than 60%, membership of the exchange rate mechanism for two years without devaluation, and long-term interest rates no more than 2% higher than the inflation rates of the three lowest inflation rates.
This was sensible stuff but was then ignored by the Maastricht signatories. Only Luxembourg fully qualified for membership under the Maastricht terms.


Even the EU’s sheet-anchor, Germany, failed. Her budget deficit in 1996 was 4% of GDP. France’s was managed (manipulated?) down to 4% from 5%. Greece’s budget deficit after some very creative accounting was shown as 8%, and Italy’s must have had a papal blessing, because it miraculously fell from 8% to 4%.
Germany’s government debt to GDP in 1996 embarrassingly just exceeded the 60% criteria level set at Maastricht. Belgium’s stood at 130%, Italy’s at 124%, and Greece’s (reportedly) at 110%. What debt? We see no debt. Of the original Maastricht signatories, only France and the UK squeezed through on this condition.


Despite this fudge, ten of the twelve Maastricht signatories went ahead and adopted the euro in 1999 and as circulating currency in 2002. The UK had dropped out of the EMU in September 1992, and Greece was so obviously non-compliant its entry was delayed by two years.
Until the Lehman crisis, national interest rates had converged towards Germany’s under the aegis of a common monetary policy. The ECB’s interest rate policy was necessarily a compromise. At one end of the spectrum were the low rates previously enjoyed by the economies with solid savings rates. These were Germany, Luxembourg, Finland, the Netherlands and Austria.


At the other end were the bad boys: notably Greece and Italy. In 1992, when Maastricht was signed, Greece’s overnight lending rate was 28%. By 1996, when the Commission released its first convergence report, it had fallen to 12.8%. When Greece joined the euro in 2001, it had fallen to 3.3%. Italy’s 3-month interbank rate fell from 13% to 9%, and then to 3.4% at these same times.


The ECB’s task was not helped by the careless assumption that savings rates were a drag on consumption. Capital which had originated as credit expansion instead of genuine savings migrated to nations with higher bond yields, first as a trickle but then in increasing quantities as confidence grew that monetary unification under the euro was there to stay. This being the case, it was believed by investors that investing in Italian and Spanish debt was as safe as investing in German and French debt for less return.


The capital flows into these savings-starved nations boosted their asset prices and GDPs. And the more that credit-originated capital flooded into them, the more asset prices and GDPs benefited. This meant that based on improving statistics, the euro was deemed a great success, lifting the Mediterranean nations out of poverty. The reality was that capital flows ended up in malinvestments and government profligacy. No one thought to complain, and Germany’s sound-money men were silenced by those who pointed to Germany’s growing exports to the high-spending euro members.


In this manner, the ECB’s monetary policy gave impetus to localised credit cycles, particularly for the PIGS and Ireland.[iv]Asset booms were turned into bubbles, which finally burst in the wake of the Lehman crisis. The EU’s monetary system was then saddled with trillions of euros of debt that could never be repaid, and the PIGS suddenly found further finance from the markets was unavailable. Interest rate convergence was reversing. Furthermore, the whole Eurozone banking system was threatened with collapse, which always happens when extreme credit bubbles go pop.


Member states had no realistic option but to bail out their banks, and public sector borrowing rocketed, funded by the EU, the ECB and the IMF. The crisis in Greece was worsened when in late 2009 the government was forced to admit it had lied about its budget deficit for years, and finally admitted to a far higher current-year deficit than previously disclosed. Greece’s 2009 budget deficit was doubled from about 7.5% to 15.1%. The rise in bond yields meant Greece was unable to continue to fund her deficits and roll over existing debt and capital fled to supposedly safer Eurozone jurisdictions.


Greece’s corrupt government was replaced in January 2015 by a far-left government, elected because it promised the voters it would reject onerous bailout terms. It turned out that as far as the ECB and Brussels were concerned, Greece’s problems were to stay in Greece, and any hopes that its troubles would be shared with the Eurozone were dashed.


In effect, it appeared that the expense of rescuing a very small member of the Eurozone risked destabilising the others. Yanis Varoufakis, the Greek finance minister, said the reason for the EU’s uncompromising approach was it was protecting the German banks from losses. A sensible compromise to help a member state struggling with debt had been dismissed out of hand.


Dealing with future financial crises
Commentators also argued that the EU and ECB had pursued a hard line on Greece in order to persuade other member states, who were clearly in similar difficulties, not to rely upon help from the centre. This argument makes sense. But worryingly, the Greek episode also exposed the lack of any mechanism to deal with the unexpected. There had been evidence of this at the outset, when the Maastricht conditions were enacted. Lawmakers made no allowance for economic and monetary cycles in 1992, but by 1999’s joining-date there had been three destabilising crises: Russian debt, the LTCM hedge fund crisis, and the Asian financial crisis. These combined to suppress global GDP growth and undermine assumptions about the predictability of national statistics. Dealing with future crises was obviously going to be a problem, and internal ones later arrived on cue, with Ireland, Cyprus, Spain and Portugal. Then there was and still is Italy.


Italy’s finances have many similarities with those of pre-crisis Greece, fuelled by the suppression of borrowing costs until the music stopped in the wake of Lehman. Despite voter rebellions at successive general elections, Italy’s problems are yet to descend into a Greek-style crisis, but that is the direction of travel. And Italy is far more serious than Greece because of its sheer size.


Furthermore, the era of resolving funding problems in government finances by central banks simply printing more money has ended, and global base money worldwide is contracting. Monetary expansion was how the ECB kept bond prices up and deferred unresolved problems. From this month there will be no more asset purchases, so borrowing costs for Eurozone governments are sure to rise from extremely low interest rates.

The more one considers the outlook for the Eurozone, the riskier it appears. Until it ceased in December, about €2,500bn has been invested in government bonds by the ECB. In effect, the ECB has engineered a second period of rate convergence, this time almost exclusively for Eurozone governments, while ignoring commercial interests. The lesson from the first period is it will be followed by a destructive period of rate divergence when the ECB’s steps out of the market, which it now has. Commercial banks have also been supporting their national governments despite artificially low yields, in the knowledge the ECB was underwriting bond prices.

Now that the ECB’s support for bond markets has ceased, either governments collectively stop running budget deficits, or they will have to be funded by other means. They are almost certainly not going to reduce their collective demand for more funds as the Eurozone slips into recession and rates rise against them.
Commercial banks will have to come to terms with the new reality. Having seen euro-bond yields converge then diverge in the first phase of the euro’s life, we are now seeing them diverge again. And as they diverge yet more, confidence that the Euro-system and the politicians at the centre have control of events will quickly erode, as they did last time.

In this context, the Eurozone’s track record of non-adaptability to changing market conditions is worrying. It leaves the prices of longer-term debt somewhat adrift, lacking natural buyers without a sharp steepening of yield curves. A buyers’ strike is beginning to look best-case, which brings us to the greatest risk of all, the pressure on bank credit to contract as banks attempt to reduce their exposure to falling government bond prices in order to preserve their capital.

Eurozone banks simply cannot afford to ride out the effect of falling prices on their core capital bases. The European Banking Commission and other regulators have introduced rules that make it impossible. Assuming a developing funding crisis begins to drive up bond yields, we can be sure that Eurozone banks will find it increasingly difficult to maintain their margins over minimum Tier 1 and Tier 2 capital requirements, as well as capital conservation buffers, countercyclical capital buffers and global systemically important institutions buffers.

There is therefore a growing probability that the withdrawal of the ECB as a buyer of government debt will bring forward the next Eurozone banking crisis, and it has the potential to escalate rapidly. Not only has the money-bubble through the ECB’s asset purchases gone, but there is a growing risk of contraction in the quantity of bank credit available for government bonds at a time when Italy, Spain, France and other smaller states will most need to issue new debt.

The removal of national currencies in 1999 reduced the status of Eurozone states to entities that can become bankrupt in every practical sense, even if not legally. And without the ECB financing them, they will rapidly become insolvent. Taking the Eurozone as a whole, government deficits last year needed a relatively modest €70bn or so increase in bond issuance. Assuming no deterioration in government finances, a similar level of funding could perhaps be achieved by the ECB keeping its deposit rate at minus 0.4% and relying on interest rate arbitrage plus coupon flows to create buyers willing to subscribe for very short-term government debt.

It allows no room for slippage. The signs are that the global economy is slowing, and the widening spreads on commercial loans confirms the process of central bank base money contraction is beginning to undermine business activity world-wide. At this time of the credit cycle the process of continuing debt expansion always falls entirely on the shoulders of governments and their central banks.


The emerging signs of a credit shock that will engulf public finances are everywhere. The Eurozone appears to be at the greatest systemic risk. The only way these dangers can be averted in the Eurozone is for the ECB to reinstate its asset purchase programmes to rig bond markets again. But having just stopped them, the ECB will need very good reasons to start them again. As usual, the order is crisis first QE second.


Following the last credit crisis, governments took over the banks’ liabilities through bail-outs. Since then, bail-in legislation has been enacted in all Eurozone member states. But if they try bail-ins to save just a few banks, they will likely collapse the whole system, because nervous bank bond holders and large depositors will flee the whole Eurozone banking system, rather than risk being forced to accept worthless bank equity.


Equally, the governments of Italy, Greece, Spain, France and others cannot afford the bail-out route, because they will be unable to fund them, and for a second time lifeboats will have to be launched by the EU, ECB and IMF. Only this time, the amounts will be far larger. It was funding failing Spanish banks that took Spain’s debt to GDP ratio from 35.6% in 2007 to 97% today. Just imagine where it goes to on the next credit crisis, and just imagine the demands on the Italians with their debt-to-GDP ratio already at 130%.


The Eurozone is now perilously on the edge of a financial and systemic abyss. The euro itself is not at fault. The institutions behind it failed to understand that converging interest rates in its first decade would lead to debilitating malinvestments, and that interest rate convergence would be followed by destructive divergence. National governments did not understand the full consequences of no longer being able to print their national currencies.

Don’t blame the euro. It is the victim of abuse by politicians who see it as a stepping-stone towards their grand objectives, and a hapless ECB, forced into increasingly destructive monetary policies. We must hope that the rest of the world is not destabilised by contagion from the Eurozone’s failure.

COMMENTS FROM BENJAMINIS: Good Morning

Please read very carefully this excellent article on the Euro. The facts are real and the reality is real. All the while trading Forex not understanding this puts you in a position to trade with no clarity in these currency and geopolitical game changing matters. This then goes to the FLOW of MONEY in the Forex markets which are the biggest and most liquid and volatile market in the world.

Then we move on to the Bond world where Trillions of currencies move around by the second.

Here is a chart of the 10 Year US Bond.

https://finviz.com/futures_charts.ashx?t=ZN&p=d1

Now let us go back as far as 1996.

https://finviz.com/futures_charts.ashx?t=ZN&p=m1

Now look what has happened since December 24, 2018.

https://finviz.com/futures_charts.ashx?t=ZN&p=h1

http://icecapassetmanagement.com/

Now please read the report of December 2018 and you will then understand the Global picture and see what awaits us as Interest Rates must rise after going down for the last 35 years. We now have a SEA CHANGE in the Financial Markets.

http://icecapassetmanagement.com/glo...es-hugh-grant/

1. Post 4,981
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4. Dec 8, 2018 8:48pm | Edited at 9:03pm

1. https://cdn-assets.faireconomy.media...ar392875_1.gif BenjaminIs
2. | Commercial Member | Joined Dec 2014 | 4,357 Posts | Online Now

https://moneymaven.io/mishtalk/econo...EamUMygjJw6CA/

Faith in Central Banks Again in Question: Ominous Implications for Bonds
https://imageproxy.themaven.net/http...m02XBhixrvVW9A
https://imageproxy.themaven.net/http...%3Fversion%3D0
byMike Mish Shedlock1 day[COLOR=rgba(0, 0, 0, 0.38)]-edited[/color]


All eyes are following implications of a yield curve inversion. A crucial portion of the curve signals something else.

I have been tracking, as has nearly everyone else, the constant flattening of the yield curve to the point that portions of the curve are now inverted.

Despite the near-relentless flattening on most portions of the curve. the 30-year to 10-year spread started diverging in July.

I have been watching this for weeks and the 30-year yield is the fastest to rise and slowest to drop on a relative basis. Here are a couple of recent screen shots to show what I mean.

Relative Weakness of 30-Year Bond

https://imageproxy.themaven.net/http...3k-klhF9QGMXUg


This does not happen every day, but on balance it has been happening since July 9.
What's It Mean?

 

1. This is not necessarily easy to decipher, and perhaps it is just random and means nothing at all.
2. However, I suggest the long bond is signaling huge concerns over increasing deficits and mounting debt, now over $21 trillion.

Fed Rate Cuts
The bond market has also signaled the end of rate cuts. I posted charts yesterday in Rate Hike Odds Dive: Any Rate Hikes in 2019? Sucker Rally? Musical Tribute!

Yesterday I asked: Rate hikes coming? Full inversion?

With a tribute to Buddy Holly, here was my answer: Maybe Baby, but I doubt it.
Enter Kudlow
Today we see that White House economic adviser Larry Kudlow expects pause on Fed rate hikes.

Recession Coming 2019, Full Inversion Not
I think a recession in 2019 is now baked into the cake.
If so, and if the Fed does stop hiking, I doubt the 3-month to 30-year yield curve inversion that people seem to expect will occur.

https://imageproxy.themaven.net/http...C0KMplO5w72Cuw


Gold vs 30-Year to 10-Year Spread

https://imageproxy.themaven.net/http...ZkqF55-8j4-4kw


Gold's action roughly matches the direction of the 30-year long bond to 10-year treasury note spread. Bear in mind this just started happening in 2006 following a long pause in the issuance of the 30-year bond.

Faith in Central Banks

https://imageproxy.themaven.net/http...lkmtZmgi4kTDxw


Central Bankers Are Bureaucrats

https://imageproxy.themaven.net/http...EUq_Fauz0Ez7ow


Contemplating the End of the Bond Bull
In recession, I expect long-term yields to drop. How far?
I do not know. But the implications are clear.
Implications

1. The long-bond is signaling a huge warning that the next move down in yields will be the last one.
2. That signal is consistent with warnings over increasing deficits and mounting debt as far as the eye can see.
3. It's also consistent with decreasing faith in central banks, especially the Fed.

The wizards at the central banks are likely to do nearly anything to prevent a credit wipe-out.


Add it up and a strong gold bull market seems highly likely.


Mike "Mish" Shedlock

PLEASE LISTEN !!!

http://theeconomiccollapseblog.com/a...down-continues

Is the mainstream media overhyping the economic impact of the government shutdown for political purposes? Of course they are. Once upon a time the mainstream media in the United States at least attempted to maintain a facade of objectivity, but those days are long gone. In this case, they want to stir up as much public resentment against President Trump as possible in order to try to force him to end the government shutdown. And when NBC News breathlessly declared that the U.S. “would face an economic hellscape” if this shutdown stretches on for an extended period of time, their article quickly went viral all over the Internet.

But will it really be “an economic hellscape”?

Here are some of the things that they say we will be facing in their “doomsday scenario”…

1. 38 million low-income Americans lose food stamps
2. 6 million face an uncertain timetable for collecting tax refunds
3. 2 million without rental assistance and facing possible eviction
4. 800,000 paycheck-less federal employees plunged into dire financial straits
5. Shuttered parks and museums while overstressed airports cause tourism to tank
6. Federal court system slows to a crawl
7. Disaster relief money doesn’t get to storm-ravaged areas

Yes, things would certainly be unpleasant for a lot of people, and there would be a whole lot of anger around the country.

But such a scenario does not qualify as “an economic hellscape”. I would encourage the folks over at NBC News to pick up a copy of The Beginning Of The End if they really want to know what the initial phases of a major economic crisis scenario could look like in this nation.

The most alarming item on their list is the fact that 38 million Americans could soon lose access to food stamps. According to the U.S. Department of Agriculture, that will officially happen by the end of February…

By the end of February, the Supplemental Nutrition Assistance Program, or SNAP, run by the Department of Agriculture, would be out of funding — meaning almost 40 million low-income Americans could find themselves struggling to pay for food, said Joseph Brusuelas, chief economist for the accounting firm RSM US.
Things would certainly be tough for a lot of low income people, and there would be a lot more traffic at shelters and food banks, but nobody would starve to death.

The worst case scenario would be if mobs of angry people started taking to the streets and rioting in large urban areas. That is definitely a possibility, especially if this shutdown lasts for several more months.

But for the moment, most of the focus is on the hundreds of thousands of federal workers that are not getting paychecks right now. We are being endlessly bombarded with sob stories about how much these workers are suffering after missing one paycheck.

If people can’t handle going a couple of weeks without pay, how are they going to handle things when a real crisis erupts in this country?
With no end to the shutdown in sight, some lower paid federal workers have decided that it is time to find a new job…

Transportation Security Agency officers forced to work without knowing when their next paycheck is coming are no longer just calling in sick. Now, 18 days into the partial government shutdown, some are resigning, according to Hydrick Thomas, who heads the TSA Council on the American Federation of Government Employees.

“Every day I’m getting calls from my members about their extreme financial hardships and need for a paycheck. Some of them have already quit and many are considering quitting the federal workforce because of this shutdown,” the official said in a statement posted to the union’s website on Tuesday.
I can’t say that I blame TSA workers too much for quitting. It is an absolutely miserable job, and the starting salary for TSA security officers is somewhere “between $25,000 to $30,000 a year”.


Of course we don’t actually need a TSA at all. Many of us would love to go back to the days before 9/11 when we could get on flights without having someone inspect our private areas.

Another aspect of the shutdown that is horrifying NBC News is the fact that no new beers are being approved right now…

The Alcohol and Tobacco Tax and Trade Bureau is out during the shutdown. That means the federal government will not approve beer labels or process permits, which translates into no new beers.

At this moment there are literally millions of people around the world that actually have nothing to eat and no clean water to drink, and this is what we are whining about?

I have an idea. Why don’t we shut down the “Alchohol and Tobacco Tax and Trade Bureau” permanently and let people make beer without having to get permission from the federal government first?

As I have proposed, we could save enormous amounts of money by simply shutting down useless government agencies that we do not need.
But that would make far too much common sense to work in America in 2019. We live at a time when the American people expect the federal government to protect them from just about every potential danger that you can possibly imagine.

Look, I don’t want to seem completely unsympathetic to the plight of all of these federal workers that are being used as pawns in this game of political brinkmanship. Because 78 percent of all Americans are living paycheck to paycheck, that means that a lot of these federal workers are not going to be able to pay their bills, and that would be extremely stressful for anyone. And at this point, thousands of federal workers have already begun filing for unemployment benefits…

More than 4,700 federal employees filed for unemployment in the last week of December, compared with 929 the week prior, according to the Department of Labor. There is no federal data available yet for the first week of January. Unemployment rules vary by state; generally the government provides benefits to eligible workers who have lost a job “through no fault of their own,” for a maximum of 26 weeks.

But the mainstream media is blowing things way out of proportion when they start using phrases such as “economic hellscape”.

Yes, this shutdown is going to cause some significant pain for a lot of people, but it is definitely not the end of the world.

http://endoftheamericandream.com/wp-...epared-Now.pngAbout the author: Michael Snyder is a nationally-syndicated writer, media personality and political activist. He is the author of four books including Get Prepared Now, The Beginning Of The Endand Living A Life That Really Matters. His articles are originally published on The Economic Collapse Blog, End Of The American Dream and The Most Important News. From there, his articles are republished on dozens of other prominent websites. If you would like to republish his articles, please feel free to do so. The more people that see this information the better, and we need to wake more people up while there is still time.


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"We'll show you. You don't understand the British Empire. Just let me tell you this. We dragged you into two wars, and we'll drag you into the third."—Randolph Churchill to Walter Lippmann on March 6, 1946, the day after Winston Churchill's "Iron Curtain" speech.



Major strategic actions by Presidents Putin and Xi Jinping, followed by President Trump's most recent orders to end the "forever wars" initiated by his predecessors, are setting the stage for finally ending a quarter-millennium's bloody reign of the Anglo-Dutch Empire over mankind.

This has been the latest and what must be the last example of a long history of imperial rule. At the same time that Queen Elizabeth was boasting of her personal rule over one in every three human beings in her Christmas message, President Trump was advocating that Syria and Afghanistan sovereignly negotiate the establishment of peace in their countries with the support of their neighbors, including Russia, and of the United States. As Helga Zepp-LaRouche has said, this is the road toward replacing British-managed wars in South and Southeast Asia with the model of the Peace of Westphalia.


Meanwhile, in East Asia, China's President Xi Jinping is pulling out all the stops to insure the success of the forthcoming summit of President Trump with North Korean leader Kim Jong-Un, which will begin to wind up another big British control and trigger-point. And the most recent U.S.-China trade negotiations in Beijing were characterized by both sides as a qualified success, in as much as every single vital issue is now on the table for discussion—giving hope that a final agreement can be reached before March 1.


The geometry Lyndon Larouche has long fought for, of a Four-Power agreement between the U.S., Russia, China and India, for a New Bretton Woods world credit system, is clearly coming within immediate reach. And who ever understood through the decades that this was even possible? Who fought for it all this time but Lyndon LaRouche and a few around him? Now the New Silk Road or Eurasian Landbridge, which LaRouche proposed as part of his New Bretton Woods, has long become reality. Now the New Bretton Woods agreement must begin to take shape.


Our role remains critical—perhaps more critical than ever. None of this would have happened but for LaRouche's initiatives. It is up to each of us to recreate the necessary ideas within ourselves, as our own original discoveries, and having done that, to recreate them as new discoveries within the minds of others.
One enduring (although ever-changing) element is LaRouche's exposure of the British Empire over the mind. In a sense, this must be understood before anything can be understood—but who understands it but us?


One aspect of that empire over the mind is the problem President Trump is forced to confront at the U.S. southern border as well as elsewhere: Dope, Inc., or what Lyndon LaRouche always calls "Britain's Opium War against the World." This indeed requires border security, but much more, since the cartel will find another entry-point whenever one is blocked. Lyndon LaRouche's famous declaration of War on Drugs in Mexico City in 1985, vividly brings to mind how an alliance of the Four Powers today, which are also the leading space powers, can uniquely win such a war.