Money Flow Trading Method along with Risk Management

Thank You very much. I have invested 16 years of my time. Great Trading. Your first trade was a winning one with one open position. Look at your platform.

Best regards


BWM

https://www.armstrongeconomics.com/a...-2019-in-rome/


Tickets are now on Sale for the World Economic Conference in Rome May 3-4, 2019, Friday-Saturday


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This year we are preparing for a profound change in the world economy come January 2020. We can all “feel” something is just not right. The press has declared an all-out war on Trump to drive him from office in 2020. As I have warned, 2020 is more likely to be the most violent election cycle since the 1960s. Neither side will accept a loss. Worse still, neither side has anyone to offer other than the usual career politician. This political battle will be so profound for we are looking at the prospect of the destruction of Western society in the clash of economic philosophies.

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President Trump has come out saying that the former Starbucks CEO Howard Schultz “doesn’t have the ‘guts’ to run for President!” He has come out and said he is considering a run for President but as an Independent. I have shown the forecast array on 3rd Party activity for the office of President. We have a Panic Cycle in 2021 and in 2024. We are moving in this direction BECAUSE people have had enough of career politicians. Those in Washington do not want to admit that they have a problem. But in the polls, members of Congress are at the absolute bottom of trust. Even a used car salesman has more trust than a member of Congress.


In an interview that aired on the CBS, Howard Schultz said he was considering mounting an independent bid for president. The businessman, a Democrat, criticized his party and the GOP for what he called a “reckless failure” of constitutional responsibility. He is absolutely correct in that respect. The government shutdown illustrated that the Democrats are no longer capable of managing the economy or government. This has all been reduced to just party politics and nothing more.


Schultz also told CBS “I think, like most people, I’ve become bored with President Trump and his tweets.” That is a fair statement for Trump was a breath of fresh air at first, but that may have grown old.


The Democrats fear Schultz because they think he would split their vote and Trump would win in 2020. What nobody is considering is that an Independent could even win.


We have a lot on the agenda for the May WEC. The politics of Europe will be an important focus as will the impact upon the Euro that will cascade through the world economy. So get ready. We are about to embark on a whole new trend.

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

6 Reasons Why Goldman Is Betting On An Imminent VIX Surge
https://zh-prod-1cc738ca-7d3b-4a72-b...?itok=LY4e264-
by Tyler Durden


Tue, 01/29/2019 - 11:08


Traders are becoming increasingly jittery about a potential risk spike in the coming days.

One day after Nomura's Charlie McElligott timed the potential day of max pain for longs as Jan 31, when some $7.5BN in MBS will roll off the Fed's balance sheet, an event which historically been accompanied by acute drops in the market...

https://zh-prod-1cc738ca-7d3b-4a72-b...20jan%2030.jpg

... an unexpected new member has joined the bear brigade.
In an overnight note from Goldman's derivatives team, John Marshall and Rocky Fishman tell the bank's clients that they "recommend buying short-term options to benefit from an increase in equity volatility this week."

Specifically, Goldman lists a number of macro and micro catalysts which the bank believes has the potential to move the market more in any one day than the 1.6% that is priced into SPX straddles for the next four days, as shown in the chart below.
https://zh-prod-1cc738ca-7d3b-4a72-b...VIx%20move.jpg


To justify their bearish thesis, Goldman's strategists note that over the past three months, the S&P has moved more than 1.6% intraday in 90% of rolling four-day periods, and has moved more than 3.2% in 51% of four-day periods.

Further, Goldman believes that options prices are far too low in the context of elevated realized volatility, as shown in the chart below...
https://zh-prod-1cc738ca-7d3b-4a72-b...tual%20vol.jpg


... coupled with challenging liquidity and continued global growth uncertainty, all of which will be accentuated by 6 key developments in the coming days:

1. Biggest week of the quarter for Earnings: This week is the biggest week of earnings for S&P 500 companies with 37% of the market cap of S&P 500 companies reporting earnings with a particularly large focus on Energy (56% of mkt cap, XLE), Communications (53%, XLC), Industrials (52%, XLI) and Technology (52%, XLK). Earnings day moves have been a bigger source of volatility than normal this quarter as the average S&P 500 stock has moved 4.6% on its earnings day vs its historical average of 3.1%.
2. Macro data delayed by shutdown will be released: Goldman economists note that the Census Bureau and Bureau of Economic Analysis will likely begin to release backlogged data this week as the government resumes normal operations. This data may include New Home Sales, Retail Sales and Wholesale Inventories which traditionally are significant drivers of volatility in macro markets over time. This data could provide increased confidence to bulls or bears as the debate regarding US economic growth continues. Further, the end of the shutdown could allow for an increase in equity and credit issuance; while good for corporate liquidity, an increase in issuance may have mixed implications for secondary markets.
3. China-US trade talks (Jan 30-31): Trade talks will continue this week in Washington. Our economists believe that trade policy risks have receded somewhat overall and US-China negotiations look likely to result in a continued pause of tariff escalation. In Friday’s note they provided an update on the trade war’s impact on trade flows, US economic activity, and global equity markets
4. FOMC statement and press conference (Jan 30): Our economists expect the FOMC to emphasize its intent to be patient and data dependent. Given the large moves in December and January on comments from Chairman Powell, we expect investors to be focused on the press conference.
5. Payrolls and Unemployment (Feb 1): The SPX was up 3.4% on last month’s big Payrolls surprise, although the unemployment rate ticked up on a higher participation rate. Given last month’s report was the largest beat since May 2009, we expect there to be increased focus on this data point from macro investors. We acknowledge that last month’s Payrolls release coincided with the Powell/Yellen/Bernanke press conference, but we believe the Payrolls impact was significant given the market had risen 1.7% prior to the start of the press conference.
6. ISM manufacturing (Feb 1): The SPX was down 2.4% on the ISM release in early January which showed the largest drop in new orders in years. Given the importance of the ISM as a leading indicator of industrial activity and in the context of fewer macro data releases this month (due to shutdown), we believe this data point will be a more important indicator for macro tactical traders than normal. We acknowledge that half of the Jan 2nd 2.4% SPX decline occurred prior to the 10am ISM release (likely driven by AAPL preannouncement), but believe that quantitative models that estimate the importance of last month’s catalyst will find it difficult to disentangle this factor.

Yet despite this barrage of potential risk events, Goldman notes that 1-week implied volatility in the SPY has been cut in half over the past month, showing that investor fears have relaxed significantly, and largely for just one reason: an increasingly dovish sentiment from central banks and increased stimulus by China.


And while Goldman notes that it is not taking "a strong directional view this week", it believes options prices are too low in the context of the recent moves on macro catalysts. To wit, the abovementioned SPY 1-Feb straddles cost 1.6%, below the 1-day moves on the most recent ISM (2.4%), Payrolls (3.4%) and only slightly higher than some other 1-day moves over the past few months.


For perspective, Goldman also looked back over the past three months at each of the rolling 4-day periods, and concludes that if an investor bought SPY straddles for 1.6% on each night’s close, the intraday volatility on the subsequent 4 days would have been enough for the premium to more than double in 51% of the periods.


Meanwhile, the bank also points out that one of the key reasons for sticky high vol, namely low liquidity, persists and remains challenged for macro products. While the "top-of-book depth" in S&P futures has improved modestly over the past week, it remains below its 25th percentile relative to the past year; it is this low liquidity that has been a factor in the increased volatility of the past few months, Marshall and Fishman warn, and the decline in liquidity "has not yet reversed."

Goldman also expects options prices to rise as investors focus on the upcoming ISM and Payrolls catalysts, and beyond the S&P 500, the bank's derivatives team sees options on XLK, XLI, and FXI as particularly attractive in the context of the catalysts this week and recommends buying options to implement views.

Benjaminis, can I ask you questions about forex trading here, or do you want me to PM you??

It is very important for anyone that really wants to find out if they can become very wealthy and a professional trader to post all their questions here.

If you are a lurker please register so that you can post.

The above is a SCREENSHOT of your Forex trades today. You should log on to your platform and follow along because next week you will be doing your own Forex trades on your platform. Post any and all questions here on our thread. That way we all learn together.


BWM

here are few questions sir, would you mind answering one by one, some of them may be a newbie questions, I hope you ignore it.

 

1. I know forex is 4+ trillion market nowadays, who controls it?? where is the headquarter??
2. There is ONLY one live market in forex, then what is the use/benefits of different Time Frame?
3. Currencies are always in pairs, like USD/CAD, USD/JPY, EUR/USD, my question is why not CAD/USD, JPY/USD, USD/EUR???
4. Do you follow/watch Candle, Bar, or Line charts??
5. We know forex is 24 hrs market, which market you play, NY open, Tokyo, London, Sydney or else??
6. What is your criteria putting Stop Loss??
7. Do you use indicators??
8. Do you believe Buy low, Sell high logic?? If

here are few questions sir, would you mind answering one by one, some of them may be a newbie questions, I hope you ignore it.

 

1. I know forex is 4+ trillion market nowadays, who controls it?? where is the headquarter??

Forex is a 6 Trillion Currency Market each day.

1. There is ONLY one live market in forex, then what is the use/benefits of different Time Frame?

The only benefit is that as people start trading in each time zone the Forex markets are open. It closes at 5 PM in New York each Friday and opens again around 3 PM in Wellington New Zealand. There is always some small volume so it actually is always open.

1. Currencies are always in pairs, like USD/CAD, USD/JPY, EUR/USD, my question is why not CAD/USD, JPY/USD, USD/EUR???

That is because the First one is the LEAD currency such as USD/CAD and since the Euro is worth more than the US Dollar it then is EUR/USD.

1. Do you follow/watch Candle, Bar, or Line charts??

I only use the Candle charts myself.

1. We know forex is 24 hrs market, which market you play, NY open, Tokyo, London, Sydney or else??

The best time to trade is at the start of Frankfurt Germany at 2:00 AM New York Time and at 3:00 AM when the CAC and the DAX and the FTSE opens.
That is the second best time to trade. The best time is between 9:30 AM New York Time when North America Equities trade. Then at 11:30 AM when Europe equity markets close
The next best time is between 2 :00 PM to 5:00 PM New York Time.

From 5 PM to 2:00 there is no trading for me as not that much volume in the Japan open or in Asia.

1. What is your criteria putting Stop Loss??

A MAXIMUM STOP LOSS of 100 PIPS. - $1000 US dollars.

1. Do you use indicators??

No ....

1. Do you believe Buy low, Sell high logic?? If

Of course however you can never get the perfect top or bottom and ALWAYS only Trade With The Trend. Never against it !!!


BWM

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

With activist central banks once again backstopping markets during the recent bear market scare, which prompted Fed Chair Powell to turn from a hawk to a "patient" dove in just a few weeks, markets, traders and economists have turned their attention to the biggest driver of risk, namely the Fed's balance sheet, which after expanding for the better part of the past decade has been shrinking at an "autopilot" pace of roughly $36 billion per month ever since it hit its "peak shrinkage" in Q4 of 2018...
https://zh-prod-1cc738ca-7d3b-4a72-b...s%20actual.jpg


... and prompted a barrage of media coverage in recent days including the following:

1. from Reuters: Powell faces early reckoning on Fed's $4-trillion question
2. from the WSJ: A $4 Trillion Scapegoat for Market Volatility: the Fed’s Shrinking Portfolio
3. and from Bloomberg: Fed Balance-Sheet Fracas Highlights Confusion Over Market Impact

It is therefore hardly a coincidence that just over a week ago, JPMorgan's head quant Marko Kolanovic said that there is one chart that "traders tape to their screens, blogs and email chains", namely the complete QT calendar consisting of past and projected Fed Balance sheet QT weekly periods, such as the one shown below courtesy of Nomura's George Goncalves. The reason why this schedule matters, is because - whether due to a self-fulfilling prophecy or some other liquidity soaking market dynamic - on days when the Fed's balance sheet shrinks whether due to Treasury or MBS maturity, think of it as a reverse POMO, risk assets are hit.
https://zh-prod-1cc738ca-7d3b-4a72-b...019%202019.jpg


Adding fuel to the dovish fire was a Friday article in the WSJ which said the Fed is considering a quicker end to its balance sheet runoff which has caused so much market anxiety and volatility. According to the WSJ, Fed officials "are close to deciding they will maintain a larger portfolio of Treasury securities than they’d expected when they began shrinking those holdings two years ago, putting an end to the central bank’s portfolio wind-down closer into sight." The article also added that "officials are still resolving details of their strategy and how to communicate it to the public" however, "with interest rate increases on hold for now, planning for the bond portfolio could take center stage."

So with so much of the market attention once again falling on the the Fed's balance sheet especially in the aftermath Powell's recent dovish U-turn, there is a palpable expectation that tomorrow the Fed will announce it is nearing a decision on when to end the reduction of balance-sheet holdings, essentially a pause in the quantitative tightening cycle.

However, as Bloomberg's Vincent Cignarella warns, the difference in what the Fed says and what the markets hear may once again be on display during Wednesday's press conference. Indeed, the Fed has previously said the fed funds rate is the central bank’s primary monetary policy tool, not the balance sheet. As such, if the Fed holds to this mantra, investors looking for comments curtailing the balance sheet runoff may be "massively disappointed" according to the Bloomberg macro commentator.

He is not alone. In a note released by Bank of America overnight, the bank's strategist expect the Fed to deliver a message of patience on Wednesday, but they are "skeptical it will be as dovish as the market expects."

While the bank expects the Fed to remove the perceived calendar guidance of "further gradual increases" and replace it with more data-dependent language during tomorrow's meeting, which will not have an update of the Fed's Summary of Economic Projections (SEP), BofA does not expect Powell to make any formal announcements during his press conference on the balance sheet, "which risks disappointing some market participants."

At a minimum, Powell will reiterate his recent comments that the Fed is willing to be flexible with the balance sheet if it was seen as interfering with the normalization process or if economic conditions were to warrant an adjustment. He may also address the technical reasons for adjusting the path of balance-sheet normalization. Powell will have to balance how much additional detail to provide on the balance-sheet framework based on the progress of internal deliberations, however that's as far as he will go, and will stop well short of validating the WSJ story of an imminent halt in QT.

So how should markets adjust their expectations?

One of the first questions to address according to BofA is whether the Fed has embraced an "abundant reserve" regime (aka a floor system), which would imply a relatively large balance sheet vs the pre-crisis "scarce reserve" regime. Based on recent FOMC meeting minutes, Fed officials are leaning toward a floor system, and Powell may confirm this preference in his press conference, but note the Committee is still deliberating key balance-sheet details with the intention to provide more guidance at upcoming meetings. The market has already signaled to the Fed an expectation that it will need to maintain a relatively abundant reserve regime and that the unwind likely will not last beyond 2020 with around $1tn in reserves...
https://zh-prod-1cc738ca-7d3b-4a72-b...0at%20halt.jpg


... which however is a problem as it suggest at least another $1 trillion, or a little under two more years of rolloff.
Where the market may be especially disappointed is in its expectations for additional detail on balance sheet (1) cessation conditions and thresholds and (2) composition in the longer run. A few thoughts from BofA on each:

1. Cessation conditions and thresholds: the two conditions that could cause the balance-sheet unwind to end will be material (1) deterioration in economic conditions and (2) tightening in money or broader financial markets (i.e. the Powell Put). However, the thresholds for these considerations are uncertain.
2. Longer run balance-sheet composition: the Fed has already suggested it prefers a portfolio of mainly Treasury securities (ie, not MBS) but has provided limited guidance on what this composition might look like. BofA expects the Fed will look to reduce the maturity of its Treasury portfolio to be in line with outstanding Treasury debt or to be similar to pre-crisis levels. Either way, the shortening of its UST holding tenor should favor a steeper UST and flatter spread curve all else equal.

The other key detail the market is looking for on the Fed's balance sheet is how the FOMC will ultimately transition to stopping the portfolio unwind. Specifically, the market would like to know if the Fed is going to taper its monthly reductions or stop cold turkey, a question that featured prominently in recently declassified deliberations from 2013 FOMC meetings. This question will likely depend on how willing the Fed is to stop the balance sheet early and take potential political criticism for being too accommodative to markets. If the Fed wanted to taper its reductions it would likely consider reducing the caps on its monthly redemption amounts for USTs and MBS or potentially just stop the UST portfolio reduction while allowing ongoing MBS redemptions. The Fed is likely to eventually lean toward this tapering approach since it is likely very uncertain as to the appropriate level of reserves in the banking system.

* * *
Besides providing details on the end of QT, one other place where the rates market may be disappointed is in just generally dovish the Fed would sound. One look at the latest Fed Funds shows that the rates market is widely expecting the FOMC to keep rates on hold at the January meeting and send dovish signals on both the outlook for rates as well as the balance sheet. However, BofA believes that the "Fed will be challenged to deliver a sufficiently dovish message to the market that risks a flatter curve and lower long-end rates."

While it is true that Fed policy maker communications have taken a decidedly dovish shift over the intermeeting period, most commentators doubt the Fed is yet ready to fully abandon its plans for further rate hikes later this year. If the Fed retains a soft hiking bias in the policy statement as discussed above, the market will likely need to assign higher odds to a Fed rate increase later in 1H19 beyond the current 5bp of hikes priced through July. These communications would also likely send long-end nominal and breakeven rates lower due to policy error concerns. Overall, the Fed is likely to retain some optionality to raise rates later in 2019, which risks sounding less dovish vs market expectations.


Going back to the balance sheet, BofA also believes that the Fed may disappoint market expectations here too. Based on the bank's reading of the December FOMC meeting minutes, the Fed likely has a number of important decisions it needs to make before it is willing to signal an imminent end of the balance sheet reduction. As such it is unlikely that the Fed is ready to adjust anything in writing around the balance sheet, which suggests no material language changes on the balance sheet in the FOMC statement, implementation note, or policy implementation plans and principles. This will likely disappoint those who interpreted the WSJ article as a signal from the Fed that the end of the balance-sheet unwind is rapidly approaching. As a result, BofA suspects that "risk assets may react negatively to the lack of balance-sheet guidance and contribute to a further flattening of the rates curve."


To summarize: the Fed will likely be challenged to deliver a sufficiently dovish message vs market expectations, which risks a sharply negative reaction in stocks, a flatter rates curve and a risk off USD reaction.

* * *
The above should make intuitive sense: after all, the Fed engages in either dovish jawboning or actual easing only when risk assets are sufficiently depressed to merit it, such as when the S&P was trading just above 2,300 after the "Mnuchin Massacre" last Christmas Eve. Now, with the S&P is 300 points higher, there is no need for any "emergency" intervention by the Fed, either verbal or otherwise.

And in keeping with the reflexive nature of the market which has rebounded sufficiently in recent weeks to push rate hike odds for 2019 back into the green, and away from an expected rate cut...
https://zh-prod-1cc738ca-7d3b-4a72-b...20vs%20spx.jpg


... Nomura's Charlie McElligott provides yet another reason why the Fed may disappoint markets tomorrow, and it has to do with the ongoing "standoff" between markets and monetary policy:
As the data stabilizes (which it is currently attempting now, with Citi U.S. Economic Surprise Index pivoting back “positive” to+1 from -25 on Jan 3rd) or even accelerates higher, we re-enter that "tighter financial conditions" negative feedback loop, as the Fed is ultimately forced back-into the picture;
Conversely, if the data were to again slow further from here, it confirms that “glass half-empty” current investor view that “the best is behind us” and that we have “overtightened ourselves into a slowdown”


Essentially, for the Fed to "get more dovish" at this point - which also includes potentially conceding on balance sheet tapering - it would require a major downdraft in U.S. economic data or another market volatility spasm—which is NOT something that is going to help the mood. BofA agrees with this, and notes that "a broader decline in risk assets could also cause the Fed to reconsider its balance-sheet plans, particularly if it believes that the balance sheet policy is a culprit for market stress."


Stated simply, for the Fed to be ready to announce a pause, or end, to Quantitative Tightening, stocks have to tumble once again, just so they can then be then rescued again by the Fed during the next sharp market drop.

https://www.oftwominds.com/blog.html

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Musings My Books Archives Books/Films


So You Want to Get Rich: Focus on Human Capital
January 29, 2019
Wealth is flowing to those who earn money from their human capital and enterprise.

So you want to get rich: OK, what's the plan? If you ask youngsters how to get rich, many will respond by listing the professions the media focuses on: entertainment, actors/actresses, pro athletes, and maybe a few lionized inventors or CEOs.

The media's glorification of the few at the top of these sectors masks the statistical reality that those who attain wealth in these pursuits number in the hundreds or perhaps thousands, not in the millions. As in a lottery, the odds of joining such a limited group are extremely low.

There are 330 million Americans and 150 million people reporting income, so statistically, the odds of getting rich improve significantly if we focus on joining the ranks of the 11 million people who are getting rich from their human capital rather than on the few thousand people earning big bucks in music, film, sports, etc.

As I noted yesterday in The "Working Rich" Are Not Like You and Me, the nature of work and capital is changing. Markers that were once scarce--college degrees, for example-- are now abundant, and have lost their scarcity value. What's scarce isn't credentials--what's scarce are skills that generate productive problem-solving: human capital.

Work has been commoditized, that is, sliced and diced into processes that can be semi-automated or performed by workers anywhere in the globalized economy. Just as college degrees have been commoditized, so has the work the graduates are qualified to perform. The scarcity value of commoditized credentials and skills is low, and as a result, wages for commoditized work are low.

As noted yesterday, wealth is flowing to those who earn money from their human capital and enterprise: the income going to business owners dwarfs that going to the relative handful of highly paid CEOs or passive owners of stocks.

There are 11 million enterprise owners, and 1.1 million of these are reporting substantial incomes. These owners aren't passively receiving dividends and interest; they're running enterprises. When they retire or die, the profits of their company drop by 75%. It wasn't the physical or financial capital they owned that was making the big money, it was their skills, values and experience.
I've described human and social capital at length in my book Get a Job, Build a Real Career and Defy a Bewildering Economy.


It's very tough to make money competing against global corporations and cartels, and so it's no surprise that many of the most successful business owners are in sectors that place a premium on skilled labor, i.e. labor that cannot be completely automated or commoditized.


As the research mentioned yesterday explained, having control of how your income is taxed is extremely advantageous. Employees earning big money in states with high income tax rates may be paying almost half of much of their wages in taxes: 7.65% in Social Security and Medicare taxes, 32% or 35% federal taxes and state income taxes of around 10%. (The details are in yesterday's post.)

Business owners can elect to pass through some of their income as profits, which are taxed at roughly half the rate of total taxes levied on wages (20% compared to 40%). That 20% reduction in tax burden adds up, and is a key reason why business owners get rich while high-wage employees struggle to get ahead.

There's another advantageous strategy to getting rich that is not politically correct, so it must be mentioned in whispers: marry someone who is highly skilled, ambitious, thrifty, kind and who has productive values. Getting rich on one income is much more difficult than getting rich on two incomes, especially if the savvy couple lives on one income and invests the other income in their own high-skill enterprise.
https://www.oftwominds.com/photos201...-rich-poor.jpg




Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print): Read the first section for free in PDF format.


My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF)
My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.


https://www.oftwominds.com/covers/POD-250.jpg(Kindle ebook $6.95, print $12 )


America teeters on the precipice: our government is now captive to special interests and big money, twin cancers that threaten our democracy. This accelerating crisis is exacerbated by a toxic social media-fueled tribalism that has replaced “what do you think?” with “which side are you on?”

Our crisis isn’t just political—it’s structural:as the pace of change explodes from gradual to non-linear, the organizations that dominate our economy—centralized corporations and government—become destined to fail. We see this failure in both the soaring inequality that has hollowed out the American Dream as well as in the rising tide of social and political disunity.

To prevent the fall of our democratic republic, we must transform our economy and society from the ground up. As we enter a new era of rapid, unprecedented tumult, it is we citizens who will need to save our democracy. For our political and financial elites will cling to their centralized power, doing more of what’s failed, even as civil society unravels.

All is not lost--yet. Our way forward starts with understanding the fatal flaws of our brittle, self-serving status quo and embracing this basic truth: better options are available if we’re willing to explore.

To pathfind our way to a better destiny, we must create new localized structures optimized for resilience and adaptability—a flexible, decentralized, sustainable, democratic, opportunity-for-all nation.
Read the first section for free in PDF format.
Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic(ebook $6.95, print $12)


Recent entries:
So You Want to Get Rich: Focus on Human Capital January 29, 2019
The "Working Rich" Are Not Like You and Me--or the Oligarchs January 28, 2019
A Recession Survival Guide January 25, 2019

https://moneymaven.io/mishtalk/econo...E2CqBedSJI22g/

https://www.zerohedge.com/news/2019-...aganda-machine

Via Disobedient Media
With the latest US-backed coup underway in Venezuela and Roger Stone's arrest as much an exercise in theater as the rest of his political career, one may wonder what a critique of Media Bias Fact Check (MBFC) and similar sites could contribute to the conversation in our tempestuous news cycle.


We examine the issue now, as attacks made on the credibility of independent media outlets damage the ability of independent journalists across the board to have their voices heard.


In order to provide context for this report, we must reintroduce Disobedient Media's recent report on multiple attacks against this outlet stemming from proxies of the Integrity Initiative. The Integrity Initiative was revealed to have been a front organization for British intelligence, and partnered with groups including the Atlantic Council in order to push neo-McCarthyist propaganda.


Within days of this outlet's coverage of the Integrity Initiative, the website 'Media Bias Fact Check' produced an updated page appraising Disobedient Media as right-leaning, supportive of conspiracy theories, and "supportive of Guccifer 2.0." In characterizing Disobedient Media as a hard-right news source, a smear lands on not only the writers producing work with this outlet, but also those whose stories this outlet has covered.


The first article cited by Media Bias Fact Check in its report on Disobedient Media is a clearly-labeled opinion piece authored by this writer, which focused on the multiple unprosecuted felonies committed by former Broward County Elections Supervisor Brenda Snipes, and the unaddressed election-rigging of the congressional race in Florida's 23rd district. In MBFC's opinion, an opinion piece which decries documented crimes that have cheated progressives of a voice is an example of hyperbole. MBFC omits the fact that the article in question and many other opinion pieces penned by this author have shown clear support for progressives and greens, not the right-wing.


In other words, the same articles MBFC finds fault with actually contradict their own verdict on Disobedient Media's "right-wing bias." Apparently, anyone who publicly discusses the corruption within the Democratic Party is now an alt-right Putin troll.

Later in the page, Media Bias Fact Check writes: "DM is a staunch defender of Julian Assange, Wikileaks, and Guccifer 2.0. All of which have known and factually proven ties to Russia. In multiple articles they claim that Guccifer is not a Russian operative, or is being framed as such, when multiple factual sources, such as Ars Technica, have verified that not only did the files they shared came from Russian sources, but that Guccifer is actually a persona run by GRU, the Russian Intelligence Service." [Emphasis Added]

Most readers will not need reminding that Disobedient Media has never "defended" Guccifer 2.0, but has published ground-breaking coverage of research on the subject for over two years. The ongoing analysis coveredand produced by this outlet has thoroughly deconstructed the Guccifer 2.0 persona. In addition to never having "defended" Guccifer 2.0, this outlet has neither published nor supported any analysis that claims Guccifer 2.0 was "framed."

That Media Bias Fact Check would outright lie in this manner might at first seem to be the result of faulty research or lazy editing. However, the placement of WikiLeaks in the same sentence with Guccifer 2.0, followed by the claim that WikiLeaks, Assange, and Guccifer 2.0 have "factually proven ties to Russia," reaches beyond bad research, amounting to deliberate propaganda designed to create a false link between WikiLeaks and Russia.


The false representation of WikiLeaks by MBFC is not limited to its report on Disobedient Media. At the time of writing, Media Bias Fact Check has labeled WikiLeaks a "center-right" leaning outlet. Unbelievably, the site also assesses WikiLeaks's accuracy rating as "mixed," despite the organization's unparalleled record of 100% accuracy.

Lest we forget, WikiLeaks has never had to retract a single document, much less an entire publication. In direct contrast, outlets like The Guardian have a history of publishing altered documents and entirely fabricated stories, the latest of which has yet to be retracted or explained.

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In the opinion of many, The Guardian's track record reveals a bias so strong that it would be better appraised as a mouthpiece of UK intelligence interests than a news service. Astoundingly, despite this record, Media Bias Fact Check rates The Guardian's factual accuracy as "high." Again: MBFC rates The Guardian, who just published an entirely false story that has yet to be retracted, as more accurate than WikiLeaks, an organization that has published millions of documents, none of which have been fraudulent.


What explains this discrepancy between reality and the Media Bias Fact Check's appraisal of various outlets? While some news sources may be represented fairly by MBFC, a single instance of clear and irrefutable dishonesty on the part of MBFC rends their credibility as a reliable judge of bias completely.
Most readers are by now aware that the Atlantic Council is not simply a biased news source, but a mouthpiece for Western intelligence interests and specifically aimed towards the ministration of propaganda to the public. Mintpress News described the Atlantic Council as a: "leading geopolitical strategy think-tank seen as a de facto PR agency for the U.S. government and NATO military alliance."


Media Bias Fact Check's page devoted to Disobedient Media sources in part from none other than the Atlantic Council's "Defense Research Lab" to substantiate lies put forward in its hit-piece. As Mintpress News reported, the same DFRlab has partnered with Facebook on the latter's censorship policy.
As previously mentioned, the Atlantic Council was recently reported to have been a partner with the Integrity Initiative, a front for UK intelligence and a vehicle of anti-Russian hysteria. Absurdly, Media Bias Fact Checkalso describes the Atlantic Council as totally unbiased. One should not need to belabor the absurdity of this categorization being applied to the Atlantic Council when contrasted with the description of WikiLeaks as right-leaning and of "mixed" accuracy on the same platform.


Though this article has focused on MBFC's manipulative representation of Disobedient Media as an illustrative example and for the sake of brevity, the point stands for all independent journalists and non-corporate news outlets. Likewise, Media Bias Fact Check is not the first and will not be the last self-described arbiter of bias that deserves heightened scrutiny as we witness escalating establishment-backed efforts to discredit independent media sources. Many journalists, including Caitlin Johnstone, have observed this ongoing phenomenon.


Newer organizations like NewsGuard have rightly drawn criticism in this regard over recent weeks, and Disobedient Media's Adam Carter previously covered attempts by "Hamilton 68 Dashboard" to misconstrue domestic social media activity as the work of Kremlin-controlled bots. We've also seen the ongoing editing of Wikipedia pages to reflect establishment-endorsed lies about a variety of voices outside the corporate-news-bubble.


Overall, such fallacious attacks on outsider-opinion represent an effort to strangle social discourse from the top down. In this writer's opinion, sites like Media Bias Fact Check constitute a desperate retaliatory measure in the wake of the legacy media's loss of collective attention, and seek to reinforce narrative control in the hands of organizations like the Atlantic Council while smearing reliable sources of scientific journalism like WikiLeaks.

For this reason, addressing the conflicts of interest and clear, factually obvious inaccuracies put forward by organizations and websites which purport to accurately categorize bias is crucial if free-thinking opinions and non-corporate media sources are to continue to be heard.

https://www.armstrongeconomics.com/a...-inflationary/

54
Blog/Economics
Posted Jan 30, 2019 by Martin Armstrong
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QUESTION: It seems the Left Wing Progressives in the US House (opponents of Pelosi) have adopted the Money Market Theory of Prof. Stephanie Kelton of U of MO.-Kansas City to justify unlimited deficit spending of the US Govt. OK as the Govt. can finance its deficits by unlimited currency printing.
Would you please comment.
Thanks and keep up the good work.
MP.
ANSWER: Actually, there would be no issue if the government simply created money to fund its normal expenditure. Historically, that will produce very modest inflation. The crisis is when you borrow to fund that deficit spending. In 2019, interest expenditures may now exceed the cost of defense. It is far cheaper to create the money needed than borrow and keep rolling the deficits forever. Then the cumulative interest keeps rising and crowds out all other expenditures. This is what is happening.
The process underway creates DEFLATION, not INFLATION, because the governments keep raising taxes to fund the deficits and that reduces the disposable income. This is why we see riots in France. Yes, people earn more, but they are being left with an eroding disposable income base. Governments need to fund themselves so they raise taxes. But the interest expenditures keep rising and consume all other areas of spending. It becomes a self-defeating process that leads to the crash and burn.

Categories: Economics
Tags: Deflation, government spending

https://www.armstrongeconomics.com/m...estate-market/

44
Blog/Interest Rates

Posted Jan 30, 2019 by Martin Armstrong
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I have warned that the entire Student Loan Crisis has significantly altered the economy thanks to the Clintons courting the New York bankers making Student Loans the exception to bankruptcy. In Florida, like many other states, if you are in default on your student loans, the medical license to obtained is suspended. The Florida State Board of health has stated that some 900 healthcare workers were in danger of losing their license over the past two years because they were in default of their student loans. The board clarified it worked out repayment plans with most of those workers. It estimates the actual number of health care license suspensions is between 90 and 120 since November 2016. We may yet see the Yellow Vest Movement erupt in the United States over Student Loans.


The situation with student loans has gone from bad to worse. Bankers will try to get the parents to still co-sign for their child – DO NOT DO SUCH A THING!!!!!

The degrees are worthless in most fields except health and law. The bankers have circumvented all your legal rights because the student loan is the exception to bankruptcy so they can take your house and you cannot even argue fraud.


Then there is the fact that even death does not relieve a parent of a student loan. Marcia DeOliveira-Longinetti’s son was killed, and after death, the remaining balance of his federal student loans were written off, but not by the state of New Jersey. The state told his mother, “Your request does not meet the threshold for loan forgiveness.” What the Clintons did to students is really horrible. Even Zillow’s research, the big realtor, has reported that student debt has impacted the real estate market in many ways reducing future buyers.


https://d33wjekvz3zs1a.cloudfront.ne...-Blankfein.jpgFOX News reported that the U.S. Marshals Service in Houston was arresting people for failing to pay their outstanding federal student loans. Actually, Paul Aker, the subject of the Fox News report, failed to appear in court so the court sent U.S. Marshals to his home where he was arrested for a $1500 federal student loan he received in 1987. Of course, when they arrest anyone, the reason is irrelevant. Everyone is treated the same. If he ran, they would have shot him in the back and killed him on the spot and they would NEVER be prosecuted.


After seven U.S. Marshals burst into Aker’s home with guns drawn, they took him to federal court where he had to sign a payment plan for the 29-year-old school loan. Thank you, Hillary. I honestly do not know how anyone could have possibly voted for her. This is totally insane. The judge could just as easily thrown him in prison on contempt of court and not release him until he pays the $1500. It’s all about a judge’s power to act as if he still represents a king.


The Student Loan Crisis is serious. The US census showed that one-third of children over 30 were still living with their parents. This is also taking place in Britain thanks to rising taxes which lower disposable income. There are greater odds of your children living with you until they are 35.

The real shocking number is that 40% of millennials are still dependent on mom and dad. The excuses seem endless. Student Loan debt can make buying a home IMPOSSIBLE! This is part of the reason real estate has been in a bear market since 2007 when we look at the average home.
https://d33wjekvz3zs1a.cloudfront.ne...RealEstate.jpg


The entire Student Loan Crisis has altered the real estate market significantly. While the High-End rallied into 2015 as capital was trying to get off the grid, as one friend in the real estate business put it, if prices ever got back to 2007, 50% of the State of New Jersey would go up for sale. The average market for homes has been declining overall. There are pockets where houses have risen, but these upon close inspection are the destinations where people are fleeing to from states like California, Illinois, New Jersey, New York, and Connecticut among others.


The real estate profile has another weight dragging it down – TAXES. Real Estate is IMMOVABLE and as states go broke, they keep raising property taxes.

The states with NET declines in population because the smart people have been fleeing, leaving behind people who are not paying attention and become trapped because there are no buyers. One friend here in Florida moved from New Jersey and rents out his home back there because he cannot sell it. He rents it at this stage just to pay the taxes.


The states with no income taxes are a net migration seeking refuge from other places. Florida seems to get New Jersey, New York, and Connecticut. Nevada and Texas are getting those fleeing Illinois and California. Nonetheless, the overall view of real estate looks rather grim into 2032 insofar as scoring REAL gains over the depreciation in the purchasing power of a currency. Then add the rising interest rates and you will discover that bankers are no longer willing to lend money at fixed rates for 30 years.



Categories: Interest Rates, Real Estate
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https://www.zerohedge.com/news/2019-...ops+to+zero%29

Authored by Eric Margolis,
An ancient Hindu prayer says, ‘Lord Shiva, save us from the claw of the tiger, the fang of the cobra, and the vengeance of the Afghan.’
https://zh-prod-1cc738ca-7d3b-4a72-b...fghanistan.jpg


The United States, champion of freedom and self-determination, is now in its 18th year of colonial war in Afghanistan. This miserable, stalemated conflict is America’s longest and most shameful war. So far it has cost over $1 trillion and killed no one knows how many Afghans.


This conflict began in 2001 on a lie: namely that Afghanistan was somehow responsible for the 9/11 attacks on the US. These attacks were planned in Europe and the US, not Afghanistan, and apparently conducted (official version) by anti-American Saudi extremists. This writer remains unconvinced by the official versions.


We still don’t know if Osama bin Laden instigated the attacks. He was murdered rather than brought to trial. Dead men tell no tales. However, Mullah Omar, leader of Afghanistan’s Taliban movement, told my late friend journalist Arnaud de Borchgrave that bin Laden was not involved in 9/11. Who benefited?

Certainly not the Afghans. They have been at war for the past 40 years.

As I wrote in my first book, ‘War at the Top of the World,’ Afghanistan’s Pashtun tribal majority were fierce fighters and were incredibly brave. Their Taliban movement was a tribal-nationalist-Islamist force devoted to fighting communism, drug dealing and foreign influence. Taliban stamped out the Afghan opium trade and had just about crushed the drug-dealing Russian-backed Tajik northern alliance – until the US invaded in 2001. The Afghan drug lords quickly became US allies and remain so today.


Taliban was not a ‘terrorist movement,’ as western war propaganda falsely claimed. Twenty years earlier their fathers were hailed ‘freedom fighters’ by President Ronald Reagan when they were fighting Soviet occupation. Taliban’s Pashtun warriors wanted all foreigners out of their nation and the right to run their own affairs according to Islamic principles.


The US has savaged Afghanistan, one of the world’s poorest countries. US B-52 and B-1 heavy bombers are razing tribal villages, predator killer drones attack most road movement, US-paid Afghan puppet forces, many former Communists, routinely torture and murder. All this while the US-installed yes-man regime in Kabul does nothing to halt massive drug dealing and human rights abuses.
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In fact, dealing in opium and morphine is the primary business of Afghanistan.This cash crop could not be exported to Pakistan, India, Iran and Russia without the connivance of the Kabul regime and its US military protectors. When the full truth about the war is finally written, the US will be in the deepest shame over involvement in the drug trade.


Washington, which has done as much as the former Soviet invaders to ravage Afghanistan, has no clear idea what to do next. President Trump announced withdrawal of some of the 14,000 US troops (and large numbers of mercenaries) from Afghanistan. But then the pro-war neocons at State and the Pentagon sought to veto the president’s statement. Meanwhile, desultory talks are droning on in Doha, Qatar, between the US and Taliban, led by the US ‘special envoy’ (read proconsul) Zalmay Khalilzad, a neocon who played an important role in promoting the invasion of Iraq.


Why is the US still at war in Afghanistan after 18 years?
First, because the politicians and generals involved won’t accept responsibility for a defeat and its huge cost. There is nothing more wasteful than a lost war.

Second, because imperial-minded circles want to keep bases in Afghanistan to menace China, Iran and Pakistan. There are huge profits to be made from this endless war with its $400 per gallon gasoline trucked in from Karachi and 24-hour on call air support. Plus the bases and fleet that support the war and promotion for the senior officers involved.

To keep this useless war against lightly armed Pashtun tribesmen going, the US must massively bribe Pakistan to maintain the military’s supply routes into that isolated nation.


The absurd waste of US money in Afghanistan and Pakistan has been fully documented by the US government’s audit agencies.


President Trump is right to talk about ending this ignoble conflict. But the neocon fifth column he has foolishly helped install keeps thwarting his aspirations.


Trump should order the fighting ended and all US troops out of Afghanistan within 90 days. End US involvement in the drug trade. Tell India to butt out of Afghanistan. That would be statesmanship. Afghanistan must be allowed to return to its former obscurity.

COMMENTS FROM BENJAMINIS: The GEOPOLITICAL SIDE OF THE ECONOMY
and things such as this article provide a view not seen in most places. This affects the economy and many other issues so being aware allows you to have a glimpse into the FUTURE !!!


BWM

http://globalintelhub.com/main-page/

http://globalintelhub.com/economic-r...e-accordingly/

http://www.marketoracle.co.uk/Article64078.html

Will 35th Recession Bring A Swift Return To Zero Percent Interest Rates?


Interest-Rates / US Interest Rates

Jan 28, 2019 - 04:08 PM GMT
By: Dan_Amerman
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Many people view the seven years of zero percent interest rates experienced in the United States between 2008 and 2015 as being safely in the past, with normal times having returned.


As explored in this analysis, so long as the business cycle of expansions and recessions has not been repealed - then we are highly likely to see a swift return to a potentially protracted bout of zero percent interest rates with the next major downturn in the economy.


Indeed, even the staff of the Federal Reserve itself expects more frequent episodes of zero percent interest rates in the future, and for those episodes to be on a more protracted basis.

This just may change everything when it comes to the financial plans of retirement and other long term investors. Zero percent interest rates don't just eviscerate the ability of retirees to earn interest income, but they also fundamentally change stock, bond, housing and precious metals prices, moving them to places that are outside of the historical averages.

This analysis is part of a series of related analyses, an overview of the rest of the series is linked here.


A Change In The Cycles
As reviewed in the previous analysis in this series, which is linked here, the United States has experienced 34 cycles of expansion and recession since 1854. As explored in that analysis, the business cycle is an extremely reliable night and day cycle.

The sun has gone down 34 times, with those sunsets being the onsets of recessions. The sun has come up 34 times, with those sunrises being the beginnings of the expansions.
http://www.marketoracle.co.uk/images...ionCyclesA.jpg


However, as can easily be seen - the left side of the graph is very different from the right side. There was a major change after the Great Depression and the end of World War Two: the recessions grew less frequent and less severe, and the expansions became longer.


What happened was not random, but has been the result of an ongoing series of Federal Reserve interventions, which have transformed the business cycle relative to what it was before the Great Depression and World War II.


The 100% Reliable Way In Which The Fed Responds To Recession

The business cycle has changed because the Fed uses modern monetary policy to actively intervene in the business cycle, with the attempt to shorten recessions and to extend the economic expansions. There's some different aspects to it but the core for how the Federal Reserve has been containing recessions in the modern era and how they change the cycle can be seen in the graph below.
http://www.marketoracle.co.uk/images...onCyclesA4.jpg


The graph shows Fed Funds rates and recessions from 1977 to 2018, a period of a little over 40 years. There's a pattern that can be very easily seen: every single time that there is a recession, the Federal Reserve slashes interest rates.


The core of the policy is for the Federal Reserve to very rapidly force short term interest rates downwards in the attempt to jolt the economy out of recession. Now, the timing can be a little bit different because sometimes the Federal Reserve acts preemptively when they think a recession coming, but they turn out to be unable to prevent it. Sometimes they are a little bit late in the recognition that a recession has occurred - the starting dates of recessions are not known in real time, but are assigned afterwards when all the data is available for study.


The Federal Reserve often continues the cycle of reducing interest rates well after the official end of the recession, first because they are not sure the recession has ended yet, and then more importantly, because they are trying to make sure the economy has reliably and robustly moved into the next expansion, so that there is no backsliding into recession.


When we review each one of these cycles of recession and the modern monetary response of Federal Reserve - which is to slash interest rates - then we can see how this has worked in process over the last four or so decades.


For the recession of 1980, the decline started a little bit late as the Fed tried to overcome the persistent stagflation of the late 1970s, but Fed Funds rates were eventually forced down from a peak of about 17.5% (rounded monthly averages) to about 9%, which was a decline of about 8.5% in three months. Now that's a major reduction in interest rates!


When we look at the 1981 recession, there was an even bigger reduction, as the Fed dropped rates from the approximately 19% level - which they had raised them to in the attempt to break the back of inflation - down to about 8.5%, which was a decline of about 10.5%.

For the 1990 recession, the peak had reached about 9.8% before the Fed paused the increasing interest rate cycle then in process, because it appeared that the economy was in trouble. The trough after the end of the official recession was about 2.9%, so the total reduction in interest rates was just a little less than 7%.


When we look at the 2001 recession, rates had reached about 6.5% before the Fed paused. The Fed then forced rates down to just below 1% by the end of the cycle in the attempt to jolt the economy out of recession, so that was a reduction in interest rates of about 5.5%.


The Great Recession began at the end of 2007. Rates had reached about 5.25% the last time that the Fed had to pause a cycle of increasing interest rates.

Because rates started so low, not yet having recovered from the reduction needed to overcome the 2001 recession, the Fed had to slam interest rates down to about zero percent, so the reduction was about 5.25% (and that was not nearly enough by itself, as we will be covering in the next analysis in this series).



Over the last forty years and five recessions, the Federal Reserve has forced short-term interest rates down by an average of about 7.25% per recession.

This response to recession of rapidly decreasing interest rates has been 100% reliable in the modern era for a simple reason - that this is the policy. Slamming interest rates downwards is the very heart of what the Federal Reserve does when it recognizes a recession or the imminent danger of a recession. It does it every time, without exception.



The Coming Return To Zero Percent Interest Rates

In the last approximately 20 years the Fed has moved to a very different place than where they were for most of the post-World War II era. The last two recessions have been different, they have been worse than most, and they were each at least partially precipitated by asset bubble collapses. Having an asset bubble collapse which leads to major investment losses and reductions in household net worth that create persistent spending issues is not a normal feature of the typical business cycle recessions seen between the 1940s and the 1990s.


The tech stock asset bubble collapse precipitated the 2001 recession and because interest rates started from such a low point, the Fed had to knock rates all the way down to a 50 year low, as can be seen below.
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The graph above shows Fed Funds rates that fall in the range experienced between 1975 and 2000 in green and blue, and interest rate outliers - Fed Funds rates that are entirely outside of that range - in gold. As can be seen by the red numeral 1, in response to the 2001 recession the Federal Reserve knocked interest rates far down into the outlier range.
http://www.marketoracle.co.uk/images...RErbA4L123.jpg


When the Fed slammed Fed Funds rates down to a 50 year low, it also brought mortgage rates down into an outlier range, as can be seen by the red numeral 1 in the graph of 30 year mortgage rates above. Indeed, as explored in the analysis linked here, one of the primary reasons that the real estate bubble formed was the extraordinary low interest rates created by the Fed's response to the 2001 recession.


When that real estate bubble collapsed, it helped to precipitate the Great Recession. Unfortunately, Federal Funds rates started at an even lower level than they had been before 2001, and the Fed knocked interest rates down to zero percent in order to exit that recession, as can be seen below.
http://www.marketoracle.co.uk/images...RErbA4L123.jpg


Now, let's take another look at our graph of recessions and Fed Funds rates, and compare the right side graph - which is where we are right now - to the rest of the graph. Look at how low interest rates are right now, before a potential recession hits, and how different this is from where rates were before any prior recession.


We're starting at a less than a 2.5% Fed Funds rate, and it's a little uncertain what the Fed will do between now and a possible recession in the next 1-2 years. There is now quite a bit of discussion that the Fed will indeed "pause" in 2019, with no further rate increases. If rates do go up - the chances currently look very high that they will not go up by more than 0.5% or so, perhaps 1% at the maximum. Anywhere within that range, from no increase up to a 1% increase, would mean going into the next recession with much lower starting interest rates than with any prior recession in the last four decades.


It is very difficult to make definitive statements with regard to the economic future, but if there is one statement that can be made with close to 100% confidence, it is that if there is another recession, then the Fed will quickly slam interest rates right back down to zero percent (or less).


Many investors view zero percent interest rates as a bizarre anomaly which never should have happened, but are now safely in the past. However, if we look at history, and we then look not just history but we look at the source of that history which is what Federal Reserve policy is, then given that the average reduction in interest rates over the previous 5 recessions is about 7.25%, with a minimum of about 5.25%, and given that we are likely to start with a Fed Funds rate in the 2.25% to 3% range, perhaps 3.5% at the outside - those Fed Funds rates are almost certainly going straight back to zero percent.


What Federal Reserve history and policy shows us is that so long as the cycle is not broken, so long as there is a 35th iteration of recession, so long as we have night following day yet again, then interest rates will immediately move right back to zero percent (if not lower).



This cycle has radical consequences for investment prices, as well as profits and losses. Indeed there's extraordinary information value there because if there is a 35th iteration of recession followed by 35th iteration of expansion, then we're going to see a series of some of the biggest investment price changes that we have seen since 2006, and these changes are likely to impact every investment category.
http://www.marketoracle.co.uk/images...RErbA2L123.jpg


One example is housing prices as explored in the analysis linked here. When we had the golden outliers in terms of Fed Funds rate changes and mortgage rate changes, those in turn created the gold outliers above for housing price ranges - including those seen today, in the second "golden spike".

The real world investment side effects of the Fed's monetary policies has been to create an entirely different price range for housing, where almost every price has been a historical outlier, relative to the markets before the Fed's heavy-handed interventions. Rephrased, while "monetary policy" might sound hopelessly abstract, every house on every street in every neighborhood might have a value that is 20% to 40% different today than it would have been in the past (in inflation-adjusted terms), specifically because of extraordinary monetary policy interventions.


This then means that home prices are far more subject to rapid change with recessions and changes in monetary policy than they used to be. Volatility is up sharply: housing prices used to fluctuate in a band of about +10%/-10% relative to the inflation-adjusted mean, but now the volatility in housing prices is 4X to 5X as great.


So, just using the example of housing, if there is a 35th recession, and the Fed continues with the policies it has used every time since World War II, and Fed Funds rates do go right back down to zero percent - that is likely to again translate to outsized housing losses - and housing gains - in a way that can't be seen by studying the long term historical averages.


These same principles also hold true - with widely varying specifics - for bond prices, stock prices and precious metals prices. When the recession hits, all prices move, and when the Fed slams rates back down to zero percent in response - all prices move, and in a manner that is different than what we have seen in the past. This means that the common practice of expecting the investment statistics of the 20th century to endlessly repeat themselves could potentially lead to some dangerous mistakes.


The graphic below is something that I've been using in my analyses to help communicate the framework for what can happen to prices and returns in all categories, with each turn in the long established night and day historical cycles of recession and expansion, that are now being amplified by our modern heavy-handed Federal Reserve interventions.


The essence is that every time we have a change in the economic cycles (the columns), we also have potentially radical changes in each of the investment categories (the rows). Using a logical framework and an understanding of how the Fed's interventions have changed the markets, we can better identify where the risks are in each investment category, and where unusual opportunities may be available on a cyclical basis as well.
http://www.marketoracle.co.uk/images...dBlackCweb.jpg


An explanatory analysis for the matrix is linked here.

While parts of this analysis may sound negative - and there are indeed some major issues to be concerned about - there will also be many opportunities in these exaggerated cycles. As covered in the previous analysis, over the last 164 years we have seen 34 iterations of the sun going down and nighttime, and 34 iterations of sunrises and the day times that have followed. In both cases there can be extraordinary opportunities from an investment perspective for people who are aware of what is happening.



There is another source when it comes to the likelihood of future rounds of zero percent interest rates. Consider this excerpt from the August 2018 minutes for the Federal Open Market Committee (there is a much more in-depth discussion in my 2019 Cycles Overview):
"...spells at the ELB could become more frequent and protracted than in the past, consistent with the staff’s analysis."


The ELB in this case is Fed-speak for the Effective Lower Boundary for interest rates, which is zero percent. When the Fed staff looks at the future, the current low levels of interest rates, and the ongoing iterations of the business cycle - it doesn't only see zero percent rates in the past. It also sees them in the future, on a more frequent basis than in the past, and possibly on a more protracted basis with each iteration as well.


This may sound radical - but it is the opposite. This is very center of the current conventional wisdom when it comes to monetary policy. If anyone understands the dilemma posed by the business cycle and the current very low level of interest rates, it is the Fed themselves, and they know exactly what is likely to happen when it comes to running up against the boundary in the event of recessions, over and over again.


When we carry through to the investment implications - the cycles will still be with us, but many of the other aspects of investment performance are likely to be transformed. The key is to understand what is coming right now - rather than waiting to be blindsided by it - and hopefully this analysis has been helpful for you in that regard.


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


Read the 2019 Cycles Overview brochure.
Read the investment strategies for crisis and the containment of crisis DVD course brochure.
Read the Spring 2019 workshop brochure.
Daniel R. Amerman, CFA


Website: http://danielamerman.com/

http://www.marketoracle.co.uk/Article64078.html

Will 35th Recession Bring A Swift Return To Zero Percent Interest Rates?


Interest-Rates / US Interest Rates

Jan 28, 2019 - 04:08 PM GMT
By: Dan_Amerman
http://www.marketoracle.co.uk/images...s/interest.gif


http://www.marketoracle.co.uk/images/diamond.gif

Many people view the seven years of zero percent interest rates experienced in the United States between 2008 and 2015 as being safely in the past, with normal times having returned.


As explored in this analysis, so long as the business cycle of expansions and recessions has not been repealed - then we are highly likely to see a swift return to a potentially protracted bout of zero percent interest rates with the next major downturn in the economy.


Indeed, even the staff of the Federal Reserve itself expects more frequent episodes of zero percent interest rates in the future, and for those episodes to be on a more protracted basis.

This just may change everything when it comes to the financial plans of retirement and other long term investors. Zero percent interest rates don't just eviscerate the ability of retirees to earn interest income, but they also fundamentally change stock, bond, housing and precious metals prices, moving them to places that are outside of the historical averages.

This analysis is part of a series of related analyses, an overview of the rest of the series is linked here.


A Change In The Cycles
As reviewed in the previous analysis in this series, which is linked here, the United States has experienced 34 cycles of expansion and recession since 1854. As explored in that analysis, the business cycle is an extremely reliable night and day cycle.

The sun has gone down 34 times, with those sunsets being the onsets of recessions. The sun has come up 34 times, with those sunrises being the beginnings of the expansions.
http://www.marketoracle.co.uk/images...ionCyclesA.jpg


However, as can easily be seen - the left side of the graph is very different from the right side. There was a major change after the Great Depression and the end of World War Two: the recessions grew less frequent and less severe, and the expansions became longer.


What happened was not random, but has been the result of an ongoing series of Federal Reserve interventions, which have transformed the business cycle relative to what it was before the Great Depression and World War II.


The 100% Reliable Way In Which The Fed Responds To Recession

The business cycle has changed because the Fed uses modern monetary policy to actively intervene in the business cycle, with the attempt to shorten recessions and to extend the economic expansions. There's some different aspects to it but the core for how the Federal Reserve has been containing recessions in the modern era and how they change the cycle can be seen in the graph below.
http://www.marketoracle.co.uk/images...onCyclesA4.jpg


The graph shows Fed Funds rates and recessions from 1977 to 2018, a period of a little over 40 years. There's a pattern that can be very easily seen: every single time that there is a recession, the Federal Reserve slashes interest rates.


The core of the policy is for the Federal Reserve to very rapidly force short term interest rates downwards in the attempt to jolt the economy out of recession. Now, the timing can be a little bit different because sometimes the Federal Reserve acts preemptively when they think a recession coming, but they turn out to be unable to prevent it. Sometimes they are a little bit late in the recognition that a recession has occurred - the starting dates of recessions are not known in real time, but are assigned afterwards when all the data is available for study.


The Federal Reserve often continues the cycle of reducing interest rates well after the official end of the recession, first because they are not sure the recession has ended yet, and then more importantly, because they are trying to make sure the economy has reliably and robustly moved into the next expansion, so that there is no backsliding into recession.


When we review each one of these cycles of recession and the modern monetary response of Federal Reserve - which is to slash interest rates - then we can see how this has worked in process over the last four or so decades.


For the recession of 1980, the decline started a little bit late as the Fed tried to overcome the persistent stagflation of the late 1970s, but Fed Funds rates were eventually forced down from a peak of about 17.5% (rounded monthly averages) to about 9%, which was a decline of about 8.5% in three months. Now that's a major reduction in interest rates!


When we look at the 1981 recession, there was an even bigger reduction, as the Fed dropped rates from the approximately 19% level - which they had raised them to in the attempt to break the back of inflation - down to about 8.5%, which was a decline of about 10.5%.

For the 1990 recession, the peak had reached about 9.8% before the Fed paused the increasing interest rate cycle then in process, because it appeared that the economy was in trouble. The trough after the end of the official recession was about 2.9%, so the total reduction in interest rates was just a little less than 7%.


When we look at the 2001 recession, rates had reached about 6.5% before the Fed paused. The Fed then forced rates down to just below 1% by the end of the cycle in the attempt to jolt the economy out of recession, so that was a reduction in interest rates of about 5.5%.


The Great Recession began at the end of 2007. Rates had reached about 5.25% the last time that the Fed had to pause a cycle of increasing interest rates.

Because rates started so low, not yet having recovered from the reduction needed to overcome the 2001 recession, the Fed had to slam interest rates down to about zero percent, so the reduction was about 5.25% (and that was not nearly enough by itself, as we will be covering in the next analysis in this series).



Over the last forty years and five recessions, the Federal Reserve has forced short-term interest rates down by an average of about 7.25% per recession.

This response to recession of rapidly decreasing interest rates has been 100% reliable in the modern era for a simple reason - that this is the policy. Slamming interest rates downwards is the very heart of what the Federal Reserve does when it recognizes a recession or the imminent danger of a recession. It does it every time, without exception.



The Coming Return To Zero Percent Interest Rates

In the last approximately 20 years the Fed has moved to a very different place than where they were for most of the post-World War II era. The last two recessions have been different, they have been worse than most, and they were each at least partially precipitated by asset bubble collapses. Having an asset bubble collapse which leads to major investment losses and reductions in household net worth that create persistent spending issues is not a normal feature of the typical business cycle recessions seen between the 1940s and the 1990s.


The tech stock asset bubble collapse precipitated the 2001 recession and because interest rates started from such a low point, the Fed had to knock rates all the way down to a 50 year low, as can be seen below.
http://www.marketoracle.co.uk/images...RErbA8L123.jpg


The graph above shows Fed Funds rates that fall in the range experienced between 1975 and 2000 in green and blue, and interest rate outliers - Fed Funds rates that are entirely outside of that range - in gold. As can be seen by the red numeral 1, in response to the 2001 recession the Federal Reserve knocked interest rates far down into the outlier range.
http://www.marketoracle.co.uk/images...RErbA4L123.jpg


When the Fed slammed Fed Funds rates down to a 50 year low, it also brought mortgage rates down into an outlier range, as can be seen by the red numeral 1 in the graph of 30 year mortgage rates above. Indeed, as explored in the analysis linked here, one of the primary reasons that the real estate bubble formed was the extraordinary low interest rates created by the Fed's response to the 2001 recession.


When that real estate bubble collapsed, it helped to precipitate the Great Recession. Unfortunately, Federal Funds rates started at an even lower level than they had been before 2001, and the Fed knocked interest rates down to zero percent in order to exit that recession, as can be seen below.
http://www.marketoracle.co.uk/images...RErbA4L123.jpg


Now, let's take another look at our graph of recessions and Fed Funds rates, and compare the right side graph - which is where we are right now - to the rest of the graph. Look at how low interest rates are right now, before a potential recession hits, and how different this is from where rates were before any prior recession.


We're starting at a less than a 2.5% Fed Funds rate, and it's a little uncertain what the Fed will do between now and a possible recession in the next 1-2 years. There is now quite a bit of discussion that the Fed will indeed "pause" in 2019, with no further rate increases. If rates do go up - the chances currently look very high that they will not go up by more than 0.5% or so, perhaps 1% at the maximum. Anywhere within that range, from no increase up to a 1% increase, would mean going into the next recession with much lower starting interest rates than with any prior recession in the last four decades.


It is very difficult to make definitive statements with regard to the economic future, but if there is one statement that can be made with close to 100% confidence, it is that if there is another recession, then the Fed will quickly slam interest rates right back down to zero percent (or less).


Many investors view zero percent interest rates as a bizarre anomaly which never should have happened, but are now safely in the past. However, if we look at history, and we then look not just history but we look at the source of that history which is what Federal Reserve policy is, then given that the average reduction in interest rates over the previous 5 recessions is about 7.25%, with a minimum of about 5.25%, and given that we are likely to start with a Fed Funds rate in the 2.25% to 3% range, perhaps 3.5% at the outside - those Fed Funds rates are almost certainly going straight back to zero percent.


What Federal Reserve history and policy shows us is that so long as the cycle is not broken, so long as there is a 35th iteration of recession, so long as we have night following day yet again, then interest rates will immediately move right back to zero percent (if not lower).



This cycle has radical consequences for investment prices, as well as profits and losses. Indeed there's extraordinary information value there because if there is a 35th iteration of recession followed by 35th iteration of expansion, then we're going to see a series of some of the biggest investment price changes that we have seen since 2006, and these changes are likely to impact every investment category.
http://www.marketoracle.co.uk/images...RErbA2L123.jpg


One example is housing prices as explored in the analysis linked here. When we had the golden outliers in terms of Fed Funds rate changes and mortgage rate changes, those in turn created the gold outliers above for housing price ranges - including those seen today, in the second "golden spike".

The real world investment side effects of the Fed's monetary policies has been to create an entirely different price range for housing, where almost every price has been a historical outlier, relative to the markets before the Fed's heavy-handed interventions. Rephrased, while "monetary policy" might sound hopelessly abstract, every house on every street in every neighborhood might have a value that is 20% to 40% different today than it would have been in the past (in inflation-adjusted terms), specifically because of extraordinary monetary policy interventions.


This then means that home prices are far more subject to rapid change with recessions and changes in monetary policy than they used to be. Volatility is up sharply: housing prices used to fluctuate in a band of about +10%/-10% relative to the inflation-adjusted mean, but now the volatility in housing prices is 4X to 5X as great.


So, just using the example of housing, if there is a 35th recession, and the Fed continues with the policies it has used every time since World War II, and Fed Funds rates do go right back down to zero percent - that is likely to again translate to outsized housing losses - and housing gains - in a way that can't be seen by studying the long term historical averages.


These same principles also hold true - with widely varying specifics - for bond prices, stock prices and precious metals prices. When the recession hits, all prices move, and when the Fed slams rates back down to zero percent in response - all prices move, and in a manner that is different than what we have seen in the past. This means that the common practice of expecting the investment statistics of the 20th century to endlessly repeat themselves could potentially lead to some dangerous mistakes.


The graphic below is something that I've been using in my analyses to help communicate the framework for what can happen to prices and returns in all categories, with each turn in the long established night and day historical cycles of recession and expansion, that are now being amplified by our modern heavy-handed Federal Reserve interventions.


The essence is that every time we have a change in the economic cycles (the columns), we also have potentially radical changes in each of the investment categories (the rows). Using a logical framework and an understanding of how the Fed's interventions have changed the markets, we can better identify where the risks are in each investment category, and where unusual opportunities may be available on a cyclical basis as well.
http://www.marketoracle.co.uk/images...dBlackCweb.jpg


An explanatory analysis for the matrix is linked here.

While parts of this analysis may sound negative - and there are indeed some major issues to be concerned about - there will also be many opportunities in these exaggerated cycles. As covered in the previous analysis, over the last 164 years we have seen 34 iterations of the sun going down and nighttime, and 34 iterations of sunrises and the day times that have followed. In both cases there can be extraordinary opportunities from an investment perspective for people who are aware of what is happening.



There is another source when it comes to the likelihood of future rounds of zero percent interest rates. Consider this excerpt from the August 2018 minutes for the Federal Open Market Committee (there is a much more in-depth discussion in my 2019 Cycles Overview):
"...spells at the ELB could become more frequent and protracted than in the past, consistent with the staff’s analysis."


The ELB in this case is Fed-speak for the Effective Lower Boundary for interest rates, which is zero percent. When the Fed staff looks at the future, the current low levels of interest rates, and the ongoing iterations of the business cycle - it doesn't only see zero percent rates in the past. It also sees them in the future, on a more frequent basis than in the past, and possibly on a more protracted basis with each iteration as well.


This may sound radical - but it is the opposite. This is very center of the current conventional wisdom when it comes to monetary policy. If anyone understands the dilemma posed by the business cycle and the current very low level of interest rates, it is the Fed themselves, and they know exactly what is likely to happen when it comes to running up against the boundary in the event of recessions, over and over again.


When we carry through to the investment implications - the cycles will still be with us, but many of the other aspects of investment performance are likely to be transformed. The key is to understand what is coming right now - rather than waiting to be blindsided by it - and hopefully this analysis has been helpful for you in that regard.


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


Read the 2019 Cycles Overview brochure.
Read the investment strategies for crisis and the containment of crisis DVD course brochure.
Read the Spring 2019 workshop brochure.
Daniel R. Amerman, CFA


Website: http://danielamerman.com/

http://www.marketoracle.co.uk/Article64078.html

Will 35th Recession Bring A Swift Return To Zero Percent Interest Rates?


Interest-Rates / US Interest Rates

Jan 28, 2019 - 04:08 PM GMT
By: Dan_Amerman
http://www.marketoracle.co.uk/images...s/interest.gif


http://www.marketoracle.co.uk/images/diamond.gif

Many people view the seven years of zero percent interest rates experienced in the United States between 2008 and 2015 as being safely in the past, with normal times having returned.


As explored in this analysis, so long as the business cycle of expansions and recessions has not been repealed - then we are highly likely to see a swift return to a potentially protracted bout of zero percent interest rates with the next major downturn in the economy.


Indeed, even the staff of the Federal Reserve itself expects more frequent episodes of zero percent interest rates in the future, and for those episodes to be on a more protracted basis.

This just may change everything when it comes to the financial plans of retirement and other long term investors. Zero percent interest rates don't just eviscerate the ability of retirees to earn interest income, but they also fundamentally change stock, bond, housing and precious metals prices, moving them to places that are outside of the historical averages.

This analysis is part of a series of related analyses, an overview of the rest of the series is linked here.

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

Authored by Doug Casey via InternationalMan.com,
It’s well-known that you have to make a declaration if you physically transport $10,000 or more in cash or monetary instruments in or out of the US, or almost any other country; governments collude on these things, often informally.
https://zh-prod-1cc738ca-7d3b-4a72-b...-Coins-Map.jpg


Gold has always been in something of a twilight zone in that regard. It’s no longer officially considered money. So it’s usually regarded as just a commodity, like copper, lead, or zinc, for these purposes. The one-ounce Canadian Maple Leaf and US Eagle both say they’re worth $50 of currency.
But I’ve had some disturbing experiences over the past couple of years crossing borders with coins. Of course, crossing any national border is potentially disturbing at any time. You might find yourself interrogated, strip searched, or detained for any reason or no reason. But I suspect what happened to me crossing a few borders in recent times could be a straw in the wind.


I’ve gradually accumulated about a dozen one-ounce silver rounds in my briefcase, some souvenirs issued by mining companies, plus others from Canada, Australia, China, and the US. But when I left Chile not long ago, the person monitoring the X-ray machine stopped me and insisted I take them out and show them to her. This had never happened before, but I wrote it off to chance. Then, when I was leaving Argentina a few weeks later, the same thing happened. What was really unusual was that the inspector looked at them, took them back to his supervisor, and then asked if I had any gold coins. I didn’t, he smiled, and I went on.


What really got my attention was a few weeks later when I was leaving Mauritania, one of the world’s more backward countries. Here, I was also questioned about the silver coins. A supervisor was again called over and asked me whether I had any gold coins. Clearly, something was up.


I haven’t seen any official statements about the movement of gold coins, but it seems probable that governments are spreading word to their minions. After all, $10,000 in $100 bills is a stack about an inch high; it’s hard to hide, and clearly a lot of money. But even at currently depressed prices, $10,000 is only nine Maple Leafs, a much smaller volume. Additionally, the coins are immune to currency-sniffing dogs, are much less likely to be counterfeit, and don’t have serial numbers. And if they’re set aside for a few years, they won’t be damaged by water, fire, insects, currency inflation, or the complete replacement of a currency. Gold coins are in many ways an excellent way to subvert capital controls. And I think they’ll become much more popular in that role.
That’s because, all over the world, paper cash is disappearing. People are moving away from paper cash. That’s partially because there are fewer and fewer bank branches where you can cash a check, and ATM machines are costly to use. And partially because everybody has a cell phone and they’re starting to use them for even trivial purchases, like a cup of coffee. Governments are encouraging this because if all purchases, sales, and payments are made electronically, they’ll know exactly what you’re doing with your money.


From their point of view, the elimination of cash will have several major benefits:It decreases the opportunity for tax evasion, it decreases the possibilities of “money laundering,” it eliminates the expense of printing currency, it obviates counterfeiting, and it gives the state instant access to all of any individual’s cash. From an individual’s point of view, however, the safety and freedom offered by a stack of paper cash will disappear.
Much of the safety and freedom offered by foreign banks and brokerage accounts has already disappeared. Few people seem aware of the fact that not so long ago, there was no limit to the amount of cash you could transfer in or out of the US without reporting. Or that you didn’t have to report the existence of offshore bank or brokerage accounts (although you did have to report taxable income from them).


That changed in 1970, first with the passage of USC 3156, and then the perversely-named Bank Secrecy Act. The 1986 Tax Reform Act made it highly inconvenient, and largely uneconomic, to invest in passive foreign investment companies (PFICs). In 2010, the Foreign Account Tax Compliance Act (FATCA) required every foreign financial institution in the world to report info on US persons to the US government. The enormous regulatory burdens and potential penalties it imposes now make it very hard to find a foreign institution that will even open an account for an American.


These are all de facto capital controls. In the US, banks are starting to notify customers that they’re not responsible for the storage of cash, or gold, in their safe deposit boxes. When I was in New Zealand a while back, I was surprised to see that the suburban branch of a major bank was closing down its substantial safe deposit box department.


When I inquired why, the manager only knew that it was a new policy and if I wanted a box, I’d have to go to the main branch. This seems to be another worldwide trend. If there isn’t a safe place to store paper cash or gold, then people will be less likely to possess them.

But it’s getting worse. In recent times, a bill was passed that allows the US to deny issuance, or cancel, the passport of anyone who is simply accused of owing $50,000 or more in taxes. After all, it clearly states on your passport that it’s government property and it must be turned in on request. People are actually the most valuable form of capital. Emigration has always been nearly impossible from authoritarian regimes.

So what’s next? I expect, as the subtle war on both cash and the transfer of capital across borders gains momentum, that gold coins are going to become the next focus of attention. So I suggest you act now to beat the last minute rush.

Have a meaningful percentage of your net worth in gold coins.

Have a significant number of those coins stored outside the country of your citizenship.

Concentrate your future purchases in small coins that are indistinguishable from loose change. Things like British sovereigns (.23 oz of gold) or their continental equivalents (French, Swiss, German, Danish, Russian, etc., pieces of generally .18 oz of gold). Not only is gold cheap now, but all of these are currently at only a few percent above melt. Happily, they have collectible value, and they resemble common pocket change to an X-ray machine.


Also, do this: Put a bunch of silver Eagles in your brief case the next time you travel internationally and let me know if your experience resembles my own.

* * *

Clearly, there are many strange things afoot in the world. Distortions of markets, distortions of culture. It’s wise to wonder what’s going to happen, and to take advantage of growth while also being prepared for crisis. How will you protect yourself in the next crisis? See our PDF guide that will show you exactly how. Click here to download it now.


Benjaminis
BWM