The Future – Putting it All Together

2017 Countdown

Temple of JanusThis is the year of political hell. The question is not about supporting one side or the other. This is a time that calls for us not to be small petty creatures but a case that requires rational human beings, which seems to be more impossible with each passing day. Never did there arise a period that has witnessed any generation devolve into such agitations in political views surrounded by every considerable danger to our way of life and the survival of our government structure. The imprisoned winds of the Romans symbolized by keeping the doors to their Temple of Janus closed during peace and opened during war have indeed been let loose, but this is predominantly for civil war.

CONFIDENCE rules everything. It is critical upon what society believes. With all the turmoil in politics, even with the Congress in the hands of the Republicans, they still lack the votes for major reform. Then there is the rise of the left hell bent upon bringing down Trump at all costs to preserve the elite and status quo. The majority are generally fools. They actually believe the words of politicians to their doom.

IBEUUS-D 3-11-2017

Nevertheless, it is the unsettling disturbance within politics that reflects the crumbling level of CONFIDENCE. With that, all bets are off. Capital becomes confused. Looking at the Euro, the turmoil politically in Europe one would look to sell the Euro and buy dollars. Then we turn and look at the United States and all we see is incredible infighting and a battle waged by the left to prevent any populist reforms whatsoever. We hear politicians and the press demeaning the rise of “populism” as if the people are just fools who are clueless and do not really know what they are demanding. Thus, the political elites take solace, as does the mainstream media, that this too shall pass and they will be back in control. Meanwhile, the Euro flounders and rises to push out the shorts to confound traders as it must do before it can collapse.

Petro-dollar-2Everything Property down - Rhinges upon this uprising in politics. The bitterness that is rising between left and right is the direct cause of the imprisoned wind of political change being unleashed.

The economic question to emerge from all this mess is rather simple. If we do not trust banks, government debt, and commodities remain under pressure from the rise in the dollar with increased production in oil and gold production reaching record highs in Australia during 2016, then where can we turn? While individual may be able to turn to gold, the big money and institutions cannot. Real estate declines in real terms for the majority of regions while it pushes higher in places such as Finland or some cities as foreign capital still tries to get off the grid. All of this contributes to the utter confusion and it really takes a global perspective to comprehend the trend for capital is rushing around the globe like someone blindfolded looking for the pinata.

superbowlThen when we look at entertainment, which typically soars in good times, we see that viewership is declining in sports to Hollywood. This too is a confusing trend to most but it reflects the underlying instability in public confidence. With both sports and Hollywood in decline, the omens do not appear to be bright and sunny looking forward.

Hollywood OscarsTaxes have risen consistently in Europe, but to a greater extent compared to the United States. Yet still, in the USA, the burden of Obamacare, which was really a ploy to help big corporate hospitals by pushing the cost to the people, namely the youth, who the government also handed to the bankers removing all bankruptcy protect for student loans that deprive them of getting ahead to begin with in this economic race to the top.

 

Game DoctorThen we have a meltdown in pensions all because of central banks adopting the elitist view that lowering interest rates will stimulate demand. The arrogance of Larry Summers in proposing that negative interest rates will force people to spend when lower interest rates failed to “stimulate” the economy is only matched by his public admitting that he himself is incapable of forecasting the economy.

The inability of the elite to forecast the economy reduces this entire ting to a game that we say as children – doctor. We just keep taking out body-parts until the patient either dies or we find the cure – normally the former and never the latter.

Summers are crew have simply set the stage for the Pension Crisis. They have undermined this entire economic system and there is no way to put this back together to prevent the next complete economic meltdown. They will respond as always and first try to seize all private pensions to merge with failed government pensions at the state and local levels as if this is going to be some permanent fix.

Fed Excess Reserves

It is really stunning just how naive those who want to rule the world truly are. I argue against conspiracy theories because it elevates these people to a level of intelligence they do not possess. To stimulate the economy, the Fed bought-in 30 year bonds in theory that would lower mortgage rates. But the banks would not lend money. There are now more people working the bank offices and risk departments have done far more damage to the economy preventing business than expanding it. Everything is a risk. So the banks themselves never “stimulated” the economy and begged the Fed to create a facility called excess reserves that reached almost $2.8 trillion. So the money everyone claimed would be inflationary yet gold collapsed, can be easily seen that it never made its way into the economy for the Fed defeated its own QE measures. Then Draghi taking interest to negative territory only resulted in European banks using US branches to ship their funds to dollars and post it at the Fed to collect free money without risk.

Boehner-Obama

Then we have the Obama-Boehner debt ceiling deal that now comes to a head in March. As always, they never solve a problem, they just postpone it. Obama postponed the Cadillac tax in Obamacare until 2017 and the debt ceiling  as well so he would not go down in history for this financial crisis. Those in Washington do not even take this serious. You have the Democrats who will not vote to increase the debt ceiling with any cuts to their social programs. Then you have one segment of Republicans who will not vote to raise the ceiling at all, another group who will vote to raise it only if there is a fig leaf pretending to cut something, and the bulk of Republicans who also love to spend money and are indistinguishable from Democrats. There is simply no way to deal with this issue until the system goes bust. The debt that expires can be replaced without increasing the debt ceiling, but the interest still has to be paid. The Treasury can refuse to pay some things that were funded and shift that money to interest to prevent a bond default. But while this will help a short-term bounce in the Euro, it is by no means a long-term solution.

PE Ratio 1871-2016

Then the question turns to where do we put our money? The majority of people believe the stock market is overvalued. The popular myths are that the PE Ratio at 25:1 says crash and that if interest rates rise, sell stocks. This has kept the majority of people out of the market. Retail participation remains at record lows. So exactly how is a crash supposed to take place when the bulk of the people are not in the market? For whatever reason, the talking heads on TV appear on all the shows because they are drumming up business rather than doing the research to actually provide real forecasts. A simple look at the historical PE Ration reveals that the historical high took place in 2009 – at the bottom of the crisis not the peak in a bull market. When things get bad and you do not trust bonds, government, or banks, where do you go? Real estate is nice for some part of a cash holding, but it is taxed to hold it and it is not liquid. Stocks are the ONLY game in town – but the blue-chips and not speculative issues.

Dow-Bonds

DowIntRates-1929Then the myth of interest rates up and stock down is another classic nonsense theory touted by the talking head of TV. Not a single one of them has ever bothered to check the facts behind this one either. Andrew Melon said Gentlemen buy bonds (not blonds) for traditionally bonds was the place capital would flee to when the stock market declined. However, look closer. The Fed raised interest rates doubling them between 1927 and 1929 and the stock market doubled.

rioters_tipped_car_300_clr_12700The analysis that is put out there on TV by the talking heads is just pathetic. Nothing that these people say seems to have any rational foundation. In politics, everything once to discredit someone else claiming to check facts. Well, that is not the way it is in analysis.

Underlying all these trends in politics and the rising tide of civil unrest, the combination for all of this becomes more and more unstable. Consequently, the economy and capital will respond less for profit and begin to shift seeking safety. The undoing of the EU and the assault to stop any reforms in the Trump agenda, are critical to say the least. Neither the anti-Trump movement allegedly funded in part by Soros and the dictatorial movement in the EU to force federalism upon the continent can return the world to where it was. The systems are collapsing and the people know something is wrong. Those trying to return to pre-2015.75 are delusional at best. There is no going back. All that surfaces from this unrest and political machinations is to undermine the confidence in markets and the economy.