1. Rickards Doubles Down On USD $10,000/ounce Gold Forecast – Peter Diekmeyer (28/08/2019)

    By Peter Diekmeyer

    August 28, 2019

    James Rickards, who has been warning about fault lines in America’s financial system for more than a decade, is one of the country’s most forward economic thinkers.

    The prolific writer mixes with big bank board members, CIA spooks, and grubby miners in the Val D’Or Quebec pits.

    After four major works—including Currency Wars, The Death of Money, The Road to Ruin, and The New Case for Gold—you’d think he’d run the gamut.

    In his latest book, Aftermath, Rickards updates readers on his thinking and doubles down on his forecast that gold prices, up 25% since we published his initial prognosis in 2016, will hit USD $10,000 per ounce.

    Click here for the rest of this article.

     

  2. Bretton Woods 75th Anniversary

    On the occasion of the 75th anniversary of Bretton Woods, a wide range of thinkers were invited to discuss the future of the international monetary system. Our Chief Global Strategist, Jim Rickards, along with Larry Summers, Benn Steel, Nouriel Roubini and several others were featured in a documentary of the event.

  3. Will Mainstream Economists Ever Learn Their Lesson?

    Mainstream economists did not exactly cover themselves in glory during the 2008 financial crisis. They did not see it coming.

    In early 2007, Ben Bernanke famously said that early signs of distress in the mortgage market would blow over and the economy could easily handle it. He could not have been more wrong.

    Even earlier, Alan Greenspan said in 1999 that derivatives did not pose a danger and they were risk-reducing because they divided risks and put individual slices in strong hands. Wrong again (Greenspan ignored the fact that derivatives can be created in unlimited quantities from thin air so the total risk is increased exponentially even as single slices of risk are put in strong hands).

    Then economists did not foresee how bad the 2008 crisis would get once it did begin. Finally, economists bungled the rescue by propping up insolvent banks and ripping off savers of trillions of dollars with zero interest rate policy to preserve Jamie Dimon’s bonus money.

    After all of that costly bungling, you’d think economists would be a little bit humble and willing to admit that the economics profession needs an overhaul when it comes to flawed models (like the Phillips curve and value at risk) and abysmal forecasting records. Nope. Economists are as arrogant and misguided as ever and are leading the economy to a new recession or something much worse.

    This article addresses the mistakes of the economics profession and the lessons that should have been learned. But if you think that any of these lessons have been learned, guess again.

    The writer says, “The macroeconomics profession has yet to come to terms with the most important lessons of the past decade.” The plain fact is that economists refused to learn any lessons from market crises in 1994, 1998, 2000 and 2008. Since most economists will never learn, the best course of action for investors is simply to ignore them.

    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. A Powerful Institution Warns Investors Not to Underestimate Trade Wars

    President Trump started his retaliation for Chinese trading abuses and theft of U.S. intellectual property in January 2018. Trump imposed U.S. tariffs on solar panels and certain appliances. It was a small start but a clear signal that more was to come unless China agreed to end its abuses.

    I warned at the time that the trade war could continue for years and escalate substantially before any accommodation was reached. Even worse outcomes were possible, including the commencement of a new Cold War between China and the U.S. Wall Street ignored these and similar warnings.

    The view on the Street was that China and the U.S. were just posturing and the two sides would quickly reconcile and both would claim victory with no harm done. As usual, Wall Street had the forecast completely wrong. The trade war has escalated, the damage is far greater than Wall Street expected and there is no end in sight.

    This article illustrates the fact that Wall Street is finally waking up. The chief investment strategist for Blackstone, one of the world’s largest private equity and asset management firms, warns that trade optimism on Wall Street is “excessive” and markets may be heading for a fall once reality sinks in.

    The next round of direct China-U.S. trade talks is in mid-October. We should know in a few weeks if there is real progress, a limited “deal” or further escalation. My estimate is that some limited deal may be achieved to be confirmed by President Xi and President Trump at a summit in Thailand starting Oct. 30.

    Wall Street might breathe a sigh of relief, but the relief would be purely temporary (and designed to help Trump’s reelection chances). The real trade war, including national security issues surrounding Huawei, has far to run and is just getting started.

    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. The Plan to Destroy the Dollar’s Reserve Role Begins

    I’ve written for years about efforts underway by Russia, China and other U.S. adversaries to implement alternatives to the U.S. dollar payment system. Today, the dollar represents 60% of global reserves, 80% of global payments and almost 100% of global energy purchases. That kind of dollar dominance has aggravated friends and foes alike since the 1960s.

    Lately, the annoyance is even worse because the U.S. has weaponized the dollar to pursue geopolitical goals over and above financial goals. The list of countries suffering under U.S. financial sanctions is long and getting longer. Among the most prominent targets are Russia (due to Crimea and Ukraine), China (due to the trade wars), Iran (due to its uranium enrichment program and support for terrorism), North Korea (due to its ballistic missile program) and many others including Syria and Venezuela.

    What all of these sanctions targets have in common is that the U.S. restricts access to dollar payments channels. In the case of Iran, the sanctions go even further to include the denial of access to SWIFT, the international payments system, which includes euros, yen, sterling and other reserve currencies in its facilities.

    While most of the targeted countries have been working on alternatives (including a possible gold-backed cryptocurrency to be jointly launched by China and Russia), actual implementation has been slow in coming. According to this article, that may all be about to change.

    Russia and Iran have announced a new payments channel that avoids both SWIFT and the U.S. payments system. The new system involves secure financial message traffic between the two participants, with possible expansion to include Turkey and others in the near future.

    This still begs the question as to which currency will be used, since Iran is mostly denied access to dollars. But payments could include the Russian ruble or gold that could be converted to dollars through the Russian banking system and held for the account of Iran in veiled custodial accounts. This is a modest step, but it is a beginning with far more pointed attacks on dollar hegemony yet to come.

    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. The Fed Reveals Just How out of Touch They Really Are

    In case you wonder if the Fed knows what they are doing, I suggest you take a look at their forecasting record from 2007–2015. Each year, the Fed projects economic growth on a one-year forward basis. From the 2008 crisis until seven years later, those forecasts were wrong by orders of magnitude.

    They were not off by a little (that’s OK). Sometimes they even got the direction wrong. For example, forecasting growth in 2008 when we actually experienced the worst recession since the Great Depression.

    The Fed kept rates too low for too long from 2001–05 (which led to the housing fiasco) and kept them too low for too long again from 2008–2015 when they should have started to normalize no later than 2010. The list goes on.

    Unfortunately, Fed incompetence seems to be cumulative. The Fed cut interest rates for the second time recently on Sept 18. As shown in this article, Fed Chair Jay Powell insists that this second rate cut is not part of a “sequence” based on current data. This means he might stand pat or possibly even raise rates at a future meeting, depending on growth and inflation data.

    Powell is out of touch. The Fed raised rates too far and too fast in 2018 and nearly caused a recession. The two recent rate cuts are an effort to undo that damage.

    Growth in 2019 has slumped from 3.1% in the first quarter to 2.0% in the second quarter to 1.9% (estimated) for the third quarter. That slowdown is the lagged effect from rate hikes (and balance sheet reductions) in 2017 and 2018.

    If the Fed hikes rates now (or even pauses) they will more or less guarantee the recession they just barely missed. You should expect the Fed to cut rates more and gradually work their way back to zero over the coming year. This is what the economy is telling us even if Jay Powell is the last to know.

    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. After Democrats Take Your Guns and Money, They’re Coming for Your Car

    The political season is in full swing and the promises, platforms and plans are coming thick and fast.

    On the Republican side, Trump promises more of the same on immigration, taxes and regulation and he faces only token opposition from within the Republican Party. His plans are under constant attack by the media and the Democrats and that won’t change between now and Election Day in November 2020.

    The Democrats are the ones who are full of surprises. Their candidate field is still crowded (eight candidates have dropped out, but 19 remain) and there are still eight viable candidates in Joe Biden, Elizabeth Warren, Bernie Sanders, Andrew Yang, Beto O’Rourke, Pete Buttigieg, Kamala Harris and Amy Klobuchar.

    The Democrats are trying to outdo each other to offer the most progressive (and most expensive) agenda possible. This includes Medicare for All, free tuition, free child care, the Green New Deal, gun confiscation and many more big government programs.

    Beto O’Rourke seemed to run off the rails when he said, “Yes, we’re going to take your AR-15, your AK-47.” There are serious constitutional problems with this claim of confiscation, but that didn’t deter O’Rourke from making the threat.

    Just when you think it can’t get worse, along comes candidate Andrew Yang. In this article, Yang says, “We might not own our own cars” in the future and automobile ownership would be replaced by a “constant roving fleet of electric cars that you would just order up.” Yang seems not to realize that automobile trips of 300–1,000 miles are not that unusual for American families and that electric cars cannot go more than about 250 miles, often less.

    When Democrats show up to confiscate your cash, gold and guns, they may want to drive away in your car also. Let’s hope that saner minds prevail in the end.

    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. Have Democrats Learned From 2016 Defeat? Don’t Bet on It

    I maintain a proprietary model that I use to forecast major market and political events. Three days before the U.K.’s Brexit referendum when markets gave a 70% chance to a “remain” vote, I forecast the U.K. would vote to “leave” and recommended a long gold, short sterling position. The U.K. voted “leave” and subscribers made massive profits on that trade.

    In the weeks and days before the November 2016 presidential election when polls and pundits were giving Hillary Clinton a 90% chance of winning, I was traveling around the world doing TV appearances forecasting that Trump would win in a close race.

    Neither of these forecasts (and many others) was a lucky guess. My models give clear guidance as to what the outcome should be and why.

    What are these models saying about the 2020 presidential race? Right now, the model gives Trump a 67% chance of winning reelection. That forecast is based on the likelihood of a recession before the election.

    Since recession odds are 33%, Trump’s chances are the reciprocal, or 67%. Those odds should go up monthly from now on as the chances of a recession diminish as the time to the election declines.

    There are other factors in the model. One of the most important is to ask whether Democrats have learned anything from their defeat in 2016. If the answer is yes, then the odds of Democrats winning go up. If the answer is no, then the odds of Democrats winning go down.

    Unfortunately for Democrats, the answer appears to be no. As this article describes, Democrats are offering voters little more than continued Trump bashing. More to the point, despite his many mistakes and offensive comments, Trump comes off as genuine. He actually means what he says.

    Democrats come off as scripted, calculating and tailoring their message for the progressive wing of the party rather than the broader party and the more broad electorate. There’s still time to change things up, but for now the Democrats appear to have learned nothing and therefore appear headed for a second straight defeat.

    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. Trump Delays Some Tariffs for Two Weeks. It’s All for Show

    Recent news on the trade wars has been uniformly good. As reported in this article, Trump has agreed to postpone tariff increases on certain Chinese exports to the U.S. until mid-October. That’s an important date because it comes after the Oct. 1, 2019, celebration of the 70th anniversary of the Communist takeover of China in 1949.

    The Chinese would like their celebration to go off without acrimony or discord (including demonstrations in Hong Kong), so they are grateful for Trump’s delay. China reciprocated by excluding pork and soybeans from their own list of increased tariffs on U.S. exports to China. At the same time, both sides are preparing for a new round of trade talks tentatively scheduled for mid-October when these tariff and other nontariff barrier-related issues will be addressed.

    The stock market has rallied on this run of good news. Does this mean the trade wars are coming in for a soft landing, as the market seems to expect? Not at all.

    Both sides have selfish reasons for these concessions. As noted, China has its hands full with Hong Kong and would like to avoid further confrontation with the U.S. before the Oct. 1 celebrations.

    Trump is running for reelection in 2020 and relies on a strong U.S. stock market to help his chances. The delayed tariffs should be understood as temporary and cosmetic moves designed to achieve domestic political goals.

    None of the hard trade issues (intellectual property theft, verification processes, direct foreign investment, etc.) has been dealt with at all. Even if these matters are discussed at the mid-October meetings, they are months and possibly years away from resolution, if ever. None of the wider geopolitical issues (South China Sea, Taiwan, Korea) is being addressed in this forum.

    The stock market has a reprieve, but don’t expect it to last. Stock markets have been up and down and back again for almost two years based on the latest good (or bad) news on the trade wars. Expect that pattern to continue. This means getting ready for the next downswing by late October.

    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. Trump Calls for Negative Interest Rates

    As described in this article, Trump recently tweeted that the Fed should lower interest rates immediately and should consider going to “negative” interest rates. We’re a long way from negative rates, but Trump has shown an uncanny ability to read the economy better than the Fed.

    Trump’s call for negative rates may be a much better indicator of where markets are heading than anything from the Fed’s research department. This won’t happen all at once. The Fed moves cautiously and slowly.

    Assuming the Fed keeps up its tempo of 0.25% rate cuts, it would take eight cuts (and therefore eight FOMC meetings) to reach 0% from the current 2% target rate. The Fed meets eight times per year. So assuming one cut at every meeting, it would take at least a year to hit zero.

    The central bank may pause in rate cuts at one or more meetings based on economic data, so the entire process could take more than a year. Still, rates could hit zero before the presidential election in 2020, which is just over a year away.

    Negative rates before the presidential election are unlikely unless the economy tumbles into a recession (also unlikely based on the best available data). But if Trump wins a second term (a 67% probability, according to my models), his pressure on the Fed will continue.

    I recently attended a closed-door, off-the-record session with two senior Fed officials who indicated that negative rates are being seriously considered, even though no final decisions have been made. Rates may seem low today, about 1.85% on the 10-year Treasury note and 2% on the fed funds target rate, but they could go much lower as they already have in Germany, Japan and elsewhere. That means huge capital gains for investors who buy the notes today.

    Trump’s economic forecasts have been highly accurate (better than the Fed’s). This may be yet another example with upside for investors who take heed.

    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.