1. China Trade Deal: Why Trump Needs This to Win According to James Rickards

    The U.S. has completed phase one of a trade deal with China, signaling what could be a de-escalation of and even the possible end of the trade wars.

    This is a move that Trump desperately needs for re-election, said best-selling author, James Rickards. “With slow growth I think you’ll see one, maybe two rate cuts, that will give the stock market a boost.

     

    The other thing is calm down the trade wars, it looks like we’re literally just days away from doing that with the Chinese, so if you get good news on trade wars and the prospect of rate cuts, that’s going to keep the stock markets up, and that’s going to help Trump for re-election,” Rickards told Kitco News.

  2. Jim Rickards Ultimate 2020 Financial Forecast

    Next year’s macroeconomic growth forecast will not be strong, but as long as the Federal Reserve remains accommodative, equities can remain high, this according to best-selling author Jim Rickards.

    “Some analysts give recession almost a 0% chance in the next six months, and I agree with that, probably not even more than a 30% chance,” Rickards told Kitco News.
  3. Jim Rickards: Confidence in Fed is Fragile, Are We Doomed for a Crisis?

    The direction the Federal Reserve is taking today with their monetary policy does not inspire confidence and erodes the value of money, said best-selling author James Rickards.

    “You can have a fiat money standard if people have confidence. There are a couple of ways to destroy confidence.
    One, too much debt, and the other one is inflation. Inflation is not much of a problem right now but too much debt is, because it points to inflation as a way out,” Rickards told Kitco News.
    – Source, Kitco News
  4. Apple Could Be a Big Winner in a New Cold War With China

    I’m fairly critical of a number of senior intelligence community leaders who politicized their agencies and operated behind the scenes to derail President Trump before he was even sworn in. These co-conspirators and “bad cops” include John Brennan (CIA), James Clapper (DNI) and James Comey (FBI). But their actions don’t mean that the entire barrel of apples was rotten.

    There are some outstanding leaders in the intelligence community whose views are worth heeding as America faces challenges from China, Russia, Iran, North Korea and others. One such leader is Navy Adm. Michael Rogers, who was both commander of the U.S. Cyber Command and director of the National Security Agency (NSA) until his retirement in 2018.

    Many analysts (myself included) have characterized the current U.S.-China confrontation as a new cold war. In this article, Rogers makes the point that whether you regard the current situation as a cold war or not, the tactics used in confronting China will need to be updated.

    A simple replay of the first Cold War (1946–1991) against the Soviet Union (today Russia) will not suffice. Rogers says that Russia was a political, diplomatic and military threat, but it was never an economic threat.

    Today China is a major economic threat alongside its political and military ambitions. Rogers concludes that containment won’t work because the global economy is too integrated. Instead, we will have to outpace the Chinese through competition and innovation.

    In particular, he praises public-private partnerships that can leverage government resources and private innovation to maintain and extend our technological lead over China. That makes sense. It’s also good news for those companies best able to join with the government in creative ways.

    The defense contractors are obvious candidates. Apple and Intel are well positioned also. Google and Facebook seem bogged down in political correctness and disputes with their own employees, so they are less likely to contribute or participate.

    If Rogers is right (and, in my view, he is), then Apple stands to be a big winner as the New Cold War unfolds.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  5. What’s Worse Than an Asset Price Bubble? Answer: A “Zombie Bubble”

    This article is a bit longer and more technical than the ones we usually highlight, but it’s well worth your time and attention. The author, Jeff Snider, is one of the sharpest analysts of money markets and the associated repurchase agreement (“repo”) market where trillions of dollars of government bonds are financed every day.

    He makes several critical points. The first is that the labor market is not nearly as tight as the Fed and official statistics would have you believe. Yes, the official unemployment rate is at 50-year lows, but the method of calculating that ignores up to 10 million able-bodied men and women between the ages of 25–54 who have dropped out of the labor force.

    Those “unemployed” are not counted as unemployed because they are not actively seeking work. True, some are homemakers or students, but most could find a job with little difficulty. If they were counted, actual unemployment would be 8% or higher, close to depression levels.

    The second point is that corporate earnings are not keeping pace with stock market prices. This means P/E ratios are expanding in anticipation of higher earnings ahead. But there’s no evidence that those earnings will emerge because GDP has been getting weaker all year and is currently estimated at only 1.3% annualized for Q4.

    If employment, earnings and GDP are all weak, what’s holding up stock prices? The answer is the Fed’s easy monetary policy. And what happens if the Fed moves to the sidelines and stops cutting rates?

    Stock prices could crash to more realistic levels almost overnight. This process could start soon as the Fed stands pat at their FOMC meetings and signals that further rate cuts are on hold.

    A resulting stock market crash could make last year’s Christmas Eve Massacre look like a picnic.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  6. If Global Debt Expansion Can’t Go on Forever …. It Won’t

    Herbert Stein, a prominent economist and adviser to presidents Richard Nixon and Gerald Ford, once remarked, “If something cannot go on forever, it will stop.” The fact that his remark is obvious makes it no less profound.

    Simple denial or wishful thinking tends to dominate economic debate. Stein’s remark is like a bucket of ice water in the face of those denying the reality of nonsustainability.

    Stein was testifying about international trade deficits when he made his statement, but it applies broadly.

    This article looks at the nonsustainability of global debt levels. Debt actually is sustainable if the debt is used for projects with positive returns and if the economy supporting the debt is growing faster than the debt itself. But neither of those conditions applies today.

    Debt is being incurred “just to pay the bills” in the form of benefits, interest and discretionary spending. It’s not being used for projects with long-term positive returns such as interstate highways, bridges and tunnels; 5G telecommunications; and improved educational outcomes (meaning pedagogical improvements, not teacher pensions). And developed economies are piling on debt faster than they are growing, so debt-to-GDP ratios are moving to levels where more debt stunts growth rather than help.

    It’s a catastrophic global debt crisis (worse than 2008) waiting to happen. What will trigger the crisis? In a word — rates.

    Low interest rates facilitate unsustainable debt levels, at least in the short run. But with so much debt on the books, even modest rate increases will cause debt levels and deficits to explode as new borrowing is sought just to cover interest payments.

    Real rates can skyrocket even as nominal rates fall if deflation takes hold. (A nominal rate of 1% with 2% deflation equals a real rate of 3%.) The world is on the knife edge of a debt crisis not seen since the 1930s. It won’t take much to trigger the crisis. Simple solutions for investors include cash, gold and Treasuries. Be prepared.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

  7. The Fed Doesn’t Understand How Interest Rates Work and That’s Dangerous

    There’s little doubt that Lael Brainard is one of the brainiest members of the Fed Board of Governors. She’s also the leading expert on the international monetary system, a badly needed bit of expertise in the boardroom.

    I read her speeches and articles with great interest and imagine she must feel like a hostage in board meetings since she’s the only Democratic Obama appointee left (all of the others were either appointed by Trump or, in Powell’s case, is a Republican appointed by Obama and promoted by Trump). Her views are well worth considering.

    Still, this article reveals that even the savviest Fed governors don’t really understand what they’re doing when it comes to interest rates.

    The Fed now looks back on quantitative easing, or QE (2008–2014) as a failure. QE1 may have helped alleviate a liquidity crisis in 2008, but QE2 and QE3 were just madcap experiments by Ben Bernanke that punished savers, hurt bank earnings and inflated a stock bubble that’s now waiting to burst.

    What it did not do was what the Fed wanted, which was to create collateral (at higher valuations) that would stimulate borrowing, spending, velocity and ultimately mild inflation. None of that happened. We got the bubble without the lending and spending.

    Brainard was a big part of this failure. Now she wants “interest rate caps” in the next recession as a “stimulus” tool. In reality, the Fed will be more concerned about interest rate floors, negative interest rates, disinflation and deflation in the next recession.

    Wishful thinking about rate caps to signal a willingness to tolerate inflation won’t cut it.

    Oh, by the way, Jimmy Carter tried “credit controls” (similar to rate caps) in 1980 and it led to one of the fastest and sharpest downturns in U.S. economic history. Brainard might do well to brush up on interest rate history before she writes prescriptions for the future.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

     

  8. If You Act Like a Communist Dictator, Expect to Be Treated Like One

    I grew up during the Cold War (1946–1991) and clearly remember the expectation that the world might end in an exchange of nuclear-armed missiles between the U.S. and the USSR (now Russia). We practiced ducking under our elementary school desks to dodge flying glass and other debris. We practiced tucking our heads under our arms and leaning against walls to protect our eyes from the intense light that comes from a nuclear blast. We built underground fallout shelters lined with lead and concrete and stocked with water and canned food to survive until the radioactive fallout from a blast was cleared away by wind and rain.

    I also remember the leadership of the Soviet Union at the time. After Nikita Khrushchev was forced from power in 1964, he was replaced by a troika consisting of Premier Alexei Kosygin, First Secretary Leonid Brezhnev and Chairman Nikolai Podgorny. The titles were as important as the names.

    “Premier” was a government title something like “president” in the U.S. “First secretary” referred to the leader of the Communist Party. “Chairman” referred to the head of the Presidium of the Supreme Soviet, something like a parliament.

    We understood that the first secretary ran the show because the Communist Party was more important than the government itself. This was borne out over time as Brezhnev gradually forced Kosygin and Podgorny from power to become general secretary of the Communist Party and chairman of the Presidium.

    This ontology has faded from memory, but it’s making a comeback today in China as described in this article. The globalist elites have been referring to the leader of China as President Xi Jinping.

    But “president” refers only to Xi’s title as the head of government. His more important titles are general secretary of the Communist Party and chairman of the Central Military Commission. If you credit China as a legitimate government (I don’t), then President Xi works fine.

    But if you see China as a brutal dictatorship (I do), then it is more appropriate to refer to the leader as “Chairman Xi” or “General Secretary Xi.” That change has now been made official by U.S. Secretary of State Pompeo, who recently referred to Xi as “general secretary,” as reported in the article.

    This is a healthy change and calls China out for what it is. Investors should take the hint and get out of Chinese investments while there’s still time.

    Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.