1. China: Paper Tiger

    China’s shock currency devaluation last week begs the following questions: Is China a rising giant of the twenty-first century poised to overtake the United States in wealth and military prowess? Or is it a house of cards preparing to implode?

    Conventional wisdom espouses the former. Yet, hard evidence suggests the latter.

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    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.

  2. Why China’s a Paper Tiger

    Markets are still digesting last week’s Chinese devaluation that sent the Dow crashing over 700 points last Monday.

    And as everyone knows by now, the Trump administration labeled China a currency manipulator.

    The ironic part of it is that China has been manipulating its currency to strengthen it against the dollar.

    Here’s the dynamic you need to understand…

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    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.

  3. The Swiss Battle to Cheapen the Franc

     

    One of the crucial insights in currency trading that many investors fail to grasp is that currencies don’t go to zero, and they don’t go through the roof. That’s a generalization, but an important one. Here are the qualifications:

    This observation applies to major currencies only — not to currencies of corrupt or incompetent countries like Venezuela or Zimbabwe. Those currencies do go to zero through hyperinflation.

    The observation also applies only in the short-to-intermediate run. In the long run, all fiat currencies also go to zero.

    Yet over a multiyear horizon, major currencies such as the dollar (USD), euro (EUR), yen (JPY), sterling (GBP) and the Swiss franc (CHF) retain value and do not go to extremes. Instead, they trade in ranges against each other. That’s the key to successful foreign exchange trading. Trading profits are the result of catching the turning points.

    Read the rest of this article here.

     

    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.

  4. Globalists Caused the Problem and Now Blame Democracy Itself

    When the U.K. voted for Brexit in June 2016, the globalists were stunned. They couldn’t believe it. They’ve been delaying and fighting Brexit ever since, but it now looks set to occur on Oct. 31.

    Then when Donald Trump won the election as president in November 2016, the globalists were even more stunned. They went into complete denial and have had their heads in the sand ever since.

    Yet it kept getting worse for globalists. Austria elected a conservative nationalist, Sebastian Kurz, as chancellor in 2017. Italy elected enough nationalist Five-Star movement members of Parliament in 2018 to allow them to choose the new prime minister. Conservatives won a recent election in Australia. Both China and Russia have become more nationalistic and completely turned their backs on globalism. What’s going on here?

    Globalists have slowly realized that the nationalist trend is not an anomaly but a powerful force that is reversing globalist polices that have been ascendant since 1989. Free trade is on the ropes, currency wars are rampant and geopolitical hot spots like Iran are becoming more dangerous. What happened to globalism?

    The globalist-in-chief is Columbia University academic Jeffrey D. Sachs. He led the charge for “market” solutions in Russia in the 1990s, which backfired into a takeover by oligarchs and the rise of Putin. He led the charge for “opening” China in the early 2000s, which led to the rise of Xi and the strongest form of Communism since the death of Mao Zedong.

    Is Sachs willing to admit any mistakes? No. As shown in this article, he engages in a delusional rant against Donald Trump (Sachs has no psychological training or credentials) and says the problem is democracy itself.

    Sachs wants to abandon traditional voting in the U.S. and U.K. to create a system more favorable to globalists. Sachs is a typical globalist in denial about his failures. When you don’t like the outcome, just change the rules.

    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. Have Stock Prices Ever Been This Inflated? Yes, in 1929 and 2000

    Stocks have enjoyed a great run since the 2018 Christmas Eve Massacre. That one-day meltdown capped a three-month crash of stocks of over 11% from Oct. 1–Dec. 24, 2018. The market turned around on the next trading day, Dec. 26, in the Boxing Day rally and has been going strong ever since.

    The turnaround came because of a pivot by the Federal Reserve. First, the Fed indicated that it would not raise rates for an indefinite period and would give the market advance notice of any future rate increases. This was done by using the world “patient” in a speech by Fed Chair Jay Powell. The market understood that when the word “patient” is removed, rate hikes are back on the table.

    Then by early spring, the Fed went further and indicated it would actually cut rates (which it did on July 31). The Fed also put an early end to quantitative tightening, QT. This amounts to another form of Fed ease.

    But markets are looking for further rate cuts in September like a kid demanding more candy. The market-Fed dynamic is clear as far as it goes. But what about market fundamentals and economic history?

    Here the picture is much less rosy. According to this article, stocks have only been as overpriced as they are today on two prior occasions — 1929 and 2000. The result in 1929 was an 80% crash in major stock markets and the Great Depression. The result in 2000 was an 80% crash in the Nasdaq due to its dot-com listings.

    Stock gains have been driven by earnings, but earnings were boosted by stock buybacks and accounting gimmicks that are running out of steam. The overvaluation metric is computed using the Shiller/CAPE P/E ratio looks at 10-year time series in order to smooth out short-term gimmicks. The CAPE or P/E ratio is 31 today compared with a still-high P/E of 22.5 using more conventional methods.

    The stock market may not crash tomorrow, but it is clearly headed for a slowdown (at best) or a crash (at worst). This is a great time to increase cash and partly diversify out of stocks to bonds and hard assets.

    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. Even JPMorgan Is Forecasting the Decline of the Dollar

    It’s one thing when fringe analysts or even heterodox economists suggest the dollar’s role as the global reserve currency may be in jeopardy. It’s another thing entirely when the entity suggesting a global monetary reset is JPMorgan. But that’s exactly what this article does.

    Written by a top research analyst in JPMorgan’s commodity and foreign-exchange trading division, the article offers a thoughtful history of the rise and fall of global reserve currencies over the past 100 years. It also points out that U.K. pounds sterling were in steady decline as a reserve currency long before the Bretton Woods agreement of 1944 enshrined the U.S. dollar as the dominant form of reserve (along with gold).

    The suggestion is that the dollar may already be in terminal decline; it’s just that we don’t know the year because these transitions can take years to play out and the early signs are not always obvious.

    We have just passed the 105th anniversary of the creation of the Federal Reserve and the 75th anniversary of the original Bretton Woods agreement. Those are fairly long runs in the history of reserve currencies.

    The article issues its warning about the dollar and then suggests alternatives such as other strong reserve currencies (such as the euro) and, of course, gold.

    Diversification is a good idea for any portfolio at any time. It may be an especially valuable strategy as the reign of one reserve currency nears an end and the replacement is not yet on the horizon.

    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. Our Past Crypto Warning Is Now Coming True

    Three years ago, when bitcoin was just starting its bubble phase on the way to $20,000 per coin (before crashing to around $3,000 in early 2018), I pointed out a long list of problems with bitcoin including nonscalability (due to electricity usage), nonsustainability (due to a deflationary cap on issuance), governance problems, rampant fraud in trading, theft of bitcoin and many other deficiencies.

    There has never been a good use case for bitcoin (except criminality) and its main application has been for gambling. Bitcoin is just a way for promoters and fraudsters to take money from naïve newbies. It’s not good for anything else.

    One other problem I highlighted was that when you buy and sell bitcoin at a profit (common in 2016–17), you are required to report the gain on your tax return and pay tax accordingly. I also ventured that most traders were not doing this. They had a “catch me if you can” mentality toward the IRS.

    Well, the IRS may move slowly, but they move relentlessly and now the day of reckoning has arrived. According to this article, the IRS has sent over 10,000 letters to U.S. taxpayers notifying them that they must declare and pay taxes on bitcoin gains.

    A mailing list of this type was not compiled randomly. You can be sure that the IRS got its information from crypto exchange records and other reliable sources. So much for the “anonymity” of bitcoin trading.

    The best advice for bitcoin traders who got the letters (and any others who might owe taxes) is to settle up quickly. The IRS assesses fines, penalties and interest on late payments, which can easily double the taxes due. Beyond that, the IRS will seize assets, freeze accounts and puts liens on income until it is fully satisfied.

    This is just one more reason why the bitcoin ecosystem is not quite the libertarian paradise it is made out to be.

    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. The Gold Sellers’ Cartel Is Dead and Now Everyone’s Buying

     

    Not many have ever heard of the Central Bank Gold Agreement, CBGA, also called the Washington Agreement on Gold, but it’s an interesting side note to the history of government manipulation of gold markets. The agreement was first signed in 1999 and was renewed for five-year terms in 2004, 2009 and 2014.

    The signatories included central banks in France, Germany, Italy, Netherlands and Belgium and the European Central Bank as well as non-eurozone central banks in Switzerland and Sweden. The U.S. was never a member of the agreement, but it did supervise the implementation of the agreement closely as did the Bank for International Settlements (BIS).

    The CBGA is a gold seller’s cartel similar to the notorious “London Gold Pool” of the late 1960s. During the long gold bear market (1980–1999), central banks were active sellers of gold. There was some fear that the selling would spin out of control and hurt the value of remaining reserves more than was already the case.

    The CBGA set limits on total sales and individual sales by member countries as a way to allow some ongoing sales without sinking the entire market. There was only one problem. The sales had largely dried up by the time the agreement was put in place.

    After “Brown’s Bottom,” named after U.K. Chancellor of the Exchequer Gordon Brown, who sold about half the U.K.’s gold reserves at an average price of $275 per ounce between 1999 and 2002, there were few significant sales of gold by the CBGA signatories except for 1,000 tons by Switzerland in the early 2000s and 400 tons by the IMF in 2010. There have been no sales by any signatories since 2010.

    The agreement is up for renewal in 2019, but it has long been a dead letter. Now, as reported in this article, the agreement is being allowed to lapse. Of course, other central banks, including Russia, China, Vietnam, Turkey and more, have been voracious buyers of gold since 2009.

    As of now, the age of central bank gold sales is officially dead and the age of central banks as gold buyers has returned. This is just one more reason why gold prices have been on a tear.

    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.

  9. How Much Bitcoin Trading Is Rigged? Oh, About 95%

    I’ve said for years that the bitcoin market is a rigged game and good only for gambling and criminal activities. There are many ways to rig the market and inflate prices including “painting the tape” (doing high-priced trades on small volume to give the appearance of a market rally), “wash sales” (trading the same bitcoin back and forth at progressively higher prices to attract suckers to what appears like an upward trend) and simple theft and looting through hacking and other fra‌uds.

    All of this (and more) was apparent to seasoned traders through close observation and statistical analysis. This article takes the analysis a step further and looks at actual trading activity on 81 leading crypto exchanges.

    The results of the study show that 95% of all bitcoin trading on exchanges is manipulated and fake. Most of the fake trading was done with wash sales, but other techniques were used also. The fake trading does not only affect pricing but also affects data on spreads, volume and costs.

    Some of the fake trading was done to increase exchange volumes to attract initial coin offering (ICO) listings. Of course, many of the ICOs are themselves fra‌uds.

    All of this frau‌d and manipulation is certain to attract scrutiny from regulators such as the SEC and CFTC as well as the IRS. This pervasive fra‌ud is just one more reason to keep away from cryptocurrencies.

    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.

  10. Elites Blame Fiscal Policy for Their Own Monetary Policy Failures

    The failures of monetary policy in the wake of the 2008 global finan‌cial crisis are manifest. The Federal Reserve took interest rates to zero in 2008 and held them there for seven years before raising them slightly in recent years.

    The Fed also expanded its balance sheet through money printing from $‌800 b‌illion to $‌4.5 tri‌llion from 2008 to 2014. That balance sheet has only been reduced slightly.

    Other central banks including the European Central Bank and the Bank of Japan used negative rates and expanded their balance sheets even more than the Fed. Those negative rates and bloated balance sheets are still in place. These extreme forms of monetary easing were supposed to provide “stimulus” to return the economy to self-sustaining trend growth. Nothing of the sort happened.

    The economy grew, but at the slowest pace of any recovery in history. Europe and Japan have suffered repeated recessions and periodic deflation while the U.S. has suffered below-trend growth and disinflation. None of the central bank policies has produced the desired results and none of the central banks has shown any capacity to escape the low rates and money printing they created.

    Since 2008, we have lived through a massive monetary experiment that has now been shown to be a massive failure. Rather than admit their mistakes, global elites instead seek to blame legislators and policymakers for failing to stimulate further using fiscal policy.

    This article describes how central bankers were disappointed at the inability of fiscal authorities to run larger deficits to stimulate the economy. Now they are afraid that progressive radical solutions to the weak economy, including Modern Monetary Theory, may emerge to discredit both fiscal policy and central banking at the same time. This is a clear-cut case of pointing fingers.

    The fiscal authorities have created multitrillion-dollar deficits even without special stimulus programs. Debt-to-GDP ratios are at the highest levels since World War II and high enough to slow growth independent of monetary policy. The extreme monetary experiments of the central bankers never should have been attempted with or without fiscal policy.

    We are now left to live with the consequences, including uncertainty and slow growth. Worse yet, the central banks will be unprepared to deal with the next crisis since they never cleaned up their mess from the last one.

    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.