The Fed is Beginning to Splinter… What Comes Next?

The following is an excerpt from our most recent issue of Private Wealth Advisory. In it we outline a recent development on the Fed’s Board of Directors. The implications of this will be severe for all asset classes.

To find out more about Private Wealth Advisory and how it can help you stay ahead of the major developments in the market… Click Here Now

The Fed is growing increasingly splintered as an organization.

The media hasn’t really picked up on this issue yet. But once they do things could become quite problematic for the Fed.

Remember, the primary force that has held the financial system together since the Crash of 2008 was the view that the Fed could backstop everything.

However, dissent is now growing at the Fed… which means it will be harder for it to move forward in a unified fashion.

Consider its recent FOMC minutes released on January 3 2013.

With regard to the possible costs and risks of purchases, a number of participants expressed the concern that additional purchases could complicate the Committee’s efforts to eventually withdraw monetary policy accommodation, for example, by potentially causing inflation expectations to rise or by impairing the future implementation of monetary policy. Participants also discussed the implications of continued asset purchases for the size of the Federal Reserve’s balance sheet. Depending on the path for the balance sheet and interest rates, the Federal Reserve’s net income and its remittances to the Treasury could be significantly affected during the period of policy normalization. Participants noted that the Committee would need to continue to assess whether large purchases were having adverse effects on market functioning and financial stability. They expressed a range of views on the appropriate pace of purchases, both now and as the outlook evolved. It was agreed that both the efficacy and the costs would need to be carefully monitored and taken into account in determining the size, pace, and composition of asset purchases.

Source: Fed FOMC minutes

Remember, the Fed only just announced QE 3 in September 2012 and QE 4 in December 2012. At the time of these announcements, the media heralded these moves as indicating that the Fed would act aggressively forever.

And yet, today we find that the Fed was actually conflicted about announcing QE 4 and was questioning the benefits of QE the very day that QE 4 was announced. As we noted in last issue The Great Global Rig of 2012 is Ending, the schemes and policies implemented to hold the system together (including QE) are beginning to lose their effect on the system.

On that note, let us turn our attention to the Fed’s actual activity.

Since September 2011, the US Federal Reserve has announced Operation Twist (extending this beyond its original deadline) as well as QE 3 and QE 4. And yet, in spite of these numerous programs, until January 10 2013 the Fed’s balance sheet was actually smaller than it was the year before (the blue line below).

Throughout this period, the S&P 500 (the red line below) began to disconnect from the Fed’s actual activity. Note how the market continued to rally even when the Fed’s balance sheet was contracting throughout most of 2012.

Why is this?

Because, starting in late 2011 and continuing to the present, the Fed has discovered that verbal intervention has the same impact as actual monetary intervention. Why actually spend the money when you can simply state on TV that you will act if needed and the markets react the same way as if you had announced a new program?

Between the end of QE 2 in June 2011 and the start of QE 3 in September 2012, the Fed resorted time and again to implying it stood ready to act at any time. Despite over eight FOMC meetings in which the Fed didn’t announce QE the markets continued to general push higher on hype and hope of more QE.

Between this, the Fed’s most recent FOMC minutes in which multiple Fed members expressed concern about the efficacy of QE, and the fact that the Fed balance sheet only just eclipsed its previous year levels on January 10 2013 (despite QE 3 and 4 being announced in the second half of 2012), we can draw some very strong conclusions:

1)   The Fed is growing splintered on how to proceed from a policy standpoint.

2)   This splintering will have political implications (Bernanke will likely step down at the end of his term in early 2014, if not before)

3)   This splintering will have major financial implications for every asset class  particularly stocks which have become completely disconnected from economic realities.

This is precisely the sort of “unquantifiable” investment analysis we specialize in with our Private Wealth Advisory newsletter.

With most of the markets dominated by computer programs and Wall Street sharks, the only way to make serious money is by focusing on the opportunities and risks that no computer or group-think Wall Streeter can come up with. If you can do this, you can still making a killing in the markets.

We’re speaking from experience here.

By focusing on investment ideas and portfolio risks that are “unquantifiable” we’ve shown  Private Wealth Advisory a success rate of OVER 80% on our investments.

Put another way, we’ve made money on more than eight out of ten investments. This includes a 74 trade-winning streak (from July 2011-July 2012 we didn’t close a single losing trade).

And this is not some flash in the pan either… Private Wealth Advisory has a history of beating the market and locking in serious gains when others are losing their shirts (we saw a 7% gain in 2008 when the markets fell over 30%)

Indeed, I’m so confident in this newsletter that it comes with a 30-day refund period. If you’re not totally satisfied with Private Wealth Advisory in the first month, simply drop us a line and we’ll refund every cent of your subscription.

You’ll have full access to the Private Wealth Advisory archives in that time. You’ll also receive two new hot off the press issues and very likely several trade signals (it’s getting close to time to close out our 7th and 8th  winners for the year).

To find out more about Private Wealth Advisory and how it can help you beat Wall Street and the market…

Click Here Now!!!

Phoenix Capital Research

 

 

 

 

 

China Just Threatened a Currency War If the Fed Doesn’t Stop Printing

The tension between Central Banks that we noted yesterday continues to worsen. This time it was China and the EU, not just Germany, that fired warning shots at the US Fed.

A senior Chinese official said on Friday that the United States should cut back on printing money to stimulate its economy if the world is to have confidence in the dollar.

Asked whether he was worried about the dollar, the chairman of China’s sovereign wealth fund, the China Investment Corporation, Jin Liqun, told the World Economic Forum in Davos: “I am a little bit worried.”

“There will be no winners in currency wars. But it is important for a central bank that the money goes to the right place,” Li said.

Speaking at the same session, French Finance Minister Pierre Moscovici voiced concern that the euro was becoming overvalued as a result of quantitative easing and other stimulus actions taken by other nations’ central banks.

“Certainly, the level of the euro is high and creates some problem,” he said, attributing the single currency’s recent gains partly to the return of confidence created by the European Central Bank and euro zone governments in starting to overcome Europe’s debt crisis.

http://www.reuters.com/article/2013/01/25/us-davos-currencies-idUSBRE90O10620130125

So first Germany begins pulling its Gold reserves from the US, and now China and the EU are saying publicly that the Fed’s policies are damaging confidence in the US Dollar.

This does not bode well for the financial system. The primary role of Central Banks is to maintain confidence in the system. If the Central Banks begin to turn on one another it is only a matter of time before the system breaks down.

Remember, every time the Fed debases the US Dollar it forces the Euro and other currencies higher, hurting those countries’ exports. The Fed has recently announced it will be printing $85 billion every month until employment reaches 6.5% (obviously the Fed is ignoring the mountains of data that indicate QE doesn’t create jobs).

How long will the other Central Banks tolerate this before they initiate a currency war? Both Germany and China have fired warning shots at the Fed. And we all know that just beneath the veneer of goodwill, tensions are building between the primary players of the global financial system. More importantly, how can investors profit from this? Remember, entire fortunes can be made during times of crises.

This is precisely the sort of “unquantifiable” investment analysis we specialize in with our Private Wealth Advisory newsletter.

With most of the markets dominated by computer programs and Wall Street sharks, the only way to make serious money is by focusing on the opportunities and risks that no computer or group-think Wall Streeter can come up with. If you can do this, you can still making a killing in the markets.

We’re speaking from experience here.

By focusing on investment ideas and portfolio risks that are “unquantifiable” we’ve shown  Private Wealth Advisory a success rate of OVER 80% on our investments.

Put another way, we’ve made money on more than eight out of ten investments. This includes a 74 trade-winning streak (from July 2011-July 2012 we didn’t close a single losing trade).

And this is not some flash in the pan either… Private Wealth Advisory has a history of beating the market and locking in serious gains when others are losing their shirts (we saw a 7% gain in 2008 when the markets fell over 30%)

Indeed, I’m so confident in this newsletter that it comes with a 30-day refund period. If you’re not totally satisfied with Private Wealth Advisory in the first month, simply drop us a line and we’ll refund every cent of your subscription.

You’ll have full access to the Private Wealth Advisory archives in that time. You’ll also receive two new hot off the press issues and very likely several trade signals (it’s getting close to time to close out our 7th and 8th straight winners).

To find out more about Private Wealth Advisory and how it can help you beat Wall Street and the market…

Click Here Now!!!

Phoenix Capital Research

 

 

 

 

 

 

 

Germany Just Fired a Warning Shot at the Fed

Germany has the second largest Gold reserves in the world behind the US. Since the early ‘80s, it has stored the majority of these reserves with the NY Fed (45% vs. 13% in London, 11% in Paris and the remaining 31% in Frankfurt).

With that in mind, everyone needs to be aware that last Monday Germany’s Bundesbank announced it will be moving a major portion of its reserves from the US and all of its reserves from France back to Frankfurt.

Nearly half of Germany’s gold reserves are held in a vault at the Federal Reserve Bank of New York — billions of dollars worth of postwar geopolitical history squirreled away for safe keeping below the streets of Lower Manhattan.

Now the German central bank wants to make a big withdrawal — 300 tons in all.

On Wednesday, the Bundesbank said that it would begin moving some of the reserves, the second-largest stock in the world after that of the United States. The goal is to house more than 50 percent of German gold in Bundesbank vaults in Frankfurt by 2020, up from a little less than a third today, the bank said…

The new policy will include the complete withdrawal of 374 tons of German gold stored at the Banque de France in Paris, about 11 percent of the total. Bundesbank officials were quick to note that the decision was not a reflection of French trustworthiness. Rather, because France and Germany now share the euro, there is no need for reserves as insurance against currency crises

http://www.nytimes.com/2013/01/17/business/global/german-central-bank-to-repatriate-gold-reserves.html

This announcement came with the usual political statements that the decision had nothing to do with a lack of trust between the Bundesbank and the US Fed or Bank of France, but the message is obvious: Germany sees the writing on the wall and is moving to secure its Gold reserves.

Remember, Germany has spent the better part of two years preparing for financial chaos. Since the autumn of 2011, it has:

1)   Implemented legislation that would permit Germany to leave the Euro but remain a part of the EU.

2)   Revived its Special Financial Market Stabilization Funds, or SoFFin for short, allocating 480 billion Euros to the fund (and also providing German banks with a place to dump their Euro-zone Government bonds if they need to).

3)   Implemented reforms that would allow it to close off its borders for as long as 30 days if it needed to (so individuals and capital couldn’t leave Germany)

4)   Created a working group to assess both the economic impact of a Greek exit from the Euro as well as how to manage the impact of a collapse in France.

5)   Pulling all of its Gold from France as well as a major portion of its Gold from the US.

All of these are verifiable facts that the Western Media has avoided talking about. It is very easy to connect the dots here: Germany is implementing a contingency plan to put a firewall around its financial system for when the EU finally breaks down.

A final note here: the tension between the world’s Central Banks just increased dramatically.

Since the Great Crisis began in 2008, the world’s Central Banks have collectively pumped $10 trillion into the global financial system. Every major Central Bank from Germany to the US and China wants to debase its currency to benefit exports and facilitate dealing with its debt load (even China sports a real Debt to GDP north fo 200%).

This competitive debasement has lead to increased tension between the world’s Central Banks. You will never hear their stated outright for the simple reason that the single most important responsibility of the Central Banks is to maintain confidence in the system.

However, underneath the veneer of goodwill and the occasional necessary coordinated intervention, tensions are rising between Central Banks. When the US debases the US Dollar it pushes the Euro higher. This hurts German exports which in turn angers the Bundesbank.

The Bundesbank fired a warning shot at the Fed last autumn when it announced it wanted to have its Gold reserves at the Fed audited. To be clear here: no one of major financial import has ever questioned the Fed’s trustworthiness before. However, at the time of this announcement Germany stated it had no intentions of actually moving its reserves.

Fast-forward to today and Germany has not only audited and checked its Gold reserves at the Fed but it is now moving them. In plain terms, Germany has told the world that A) it does not trust the Fed and B) it is through playing around.

This situation will likely be getting worse going forward. The fact that Germany will be removing all of its Gold reserves from France certainly doesn’t bode well for future German French relations if push ever comes to shove (it’s not as though Europe has a history of getting along well).

Remember, the only thing holding the financial system together is belief in the Central Banks. If the Central Banks (it was Germany’s Bundesbank that is behind the Gold move) stop trusting one another or grow openly antagonistic, then things will get very bad very quickly.

For months now we’ve been asserting that the “improvements” in the global economy and financial system were a mirage. Germany’s move has confirmed this. If the financial system was in fact safe and the global economy was improving, Germany would not feel the need to repatriate its Gold.

Which begs the question, what exactly do German Central Bankers know that we don’t?

This is precisely the sort of “unquantifiable” investment analysis we specialize in with our Private Wealth Advisory newsletter.

With most of the markets dominated by computer programs and Wall Street sharks, the only way to make serious money is by focusing on the opportunities and risks that no computer or group-think Wall Streeter can come up with. If you can do this, you can still making a killing in the markets.

We’re speaking from experience here.

By focusing on investment ideas and portfolio risks that are “unquantifiable” we’ve shown  Private Wealth Advisory a success rate of OVER 80% on our investments.

Put another way, we’ve made money on more than eight out of ten investments. This includes a 74 trade-winning streak (from July 2011-July 2012 we didn’t close a single losing trade).

And this is not some flash in the pan either: we’re currently beating the market handily with out closed trades in 2013. In fact, we just closed another winner last week.

Indeed, I’m so confident in this newsletter that it comes with a 30-day refund period. If you’re not totally satisfied with Private Wealth Advisory in the first month, simply drop us a line and we’ll refund every cent of your subscription.

You’ll have full access to the Private Wealth Advisory archives in that time. You’ll also receive two new hot off the press issues and very likely several trade signals (it’s getting close to time to close out our 7th and 8th straight winners).

To find out more about Private Wealth Advisory and how it can help you beat Wall Street and the market…

Click Here Now!!!

Phoenix Capital Research

 

 

 

 

Is There Such a Thing as The Perfect Trade?

We’ve received a number of emails regarding the long-term performance of The Perfect Trade.

Having already locked in a return on invested capital of 36% in 2013 so far, investors are curious how this newsletter has fared in the past.

The below table should help explain why this newsletter is so extraordinary.

As you can see, The Perfect Trade’s model portfolio has produced MASSIVE returns on invested capital three of the last four years.

The one year that we lost money was in 2012. And that loss was the result of just four trades that we let run for too long. Without them, The Perfect Trade would have once again doubled investors’ money in 2012.

Since this disappointing performance, we’re changed our stop loss policy to make sure this never happens again.

And yet, despite that one terrible year, this newsletter has produced an AVERAGE ANNUAL GAIN OF 46.25% since 2010.

This has crushed the performance of EVERY ASSET CLASS under the sun by MANY multiples.

Since 2010, the S&P 500 has returned an average annual gain of 10%. So The Perfect Trade has returned more than FOUR TIMES the S&P 500 over the same time period.

From 2010 until today, Gold has produced an average annual return of 12%. So The Perfect Trade has outperformed even the precious metal by more than THREE FOLD.

Even Apple, the most popular holding for Hedge Funds and individual investors, has returned an average annual gain of 26% since 2010. The Perfect Trade has nearly DOUBLED THIS.

So with just one trade, made once per week, you could have outperformed EVERY asset class on earth as well as 99% of investing legends and hedge funds.

This is why it’s called The Perfect Trade.

And if you’re an investor looking for the means of producing major income from your portfolio, this is it.

As you can imagine, as word gets out regarding this newsletter and its performance, investors are piling in. However, we cannot allow thousands and thousands of traders to follow these trades while maintaining our performance.

For that reason, we’re only allowing a limited number of slots before we close the doors on this newsletter and simple start a waiting list.

So if you’d like to be one of the investors to snag one of these remaining slots, you need to move quickly.

To take out a subscription to The Perfect Trade… and start seeing kind of investment income most investors can only dream of…

Click Here Now!

Phoenix Capital Research

 

Is China an Economic Miracle or Government Sponsored Fraud? Pt 2

A few months ago, we asked, “is China an economic miracle or one giant government sponsored fraud?” Our views were the latter with corruption as one of the key driving forces for wealth creation and economic growth in China.

Consider the following:

1)   In 2010 alone, 146,000 cases of corruption were launched in China (that’s 400 PER DAY).

2)   Of the 14 cases that were actually reported in the Chinese media, the average amount stolen was 18 MILLION RMB (for perspective, the average college graduate in China earns 2,500 RMB per year).

3)   Between 1991-2011, it’s estimated that between 16,000-18,000 Chinese officials fled China taking 800 BILLION RMB (roughly $125 BILLION) with them. Bear in mind China’s entire GDP was just 2.1 trillion RMB in 1991.

4)   It’s estimated that on average bribes comprise 5-10% of a given project’s costs in China today.

Indeed, things are so corrupt in China, that as soon as the new Government stated it would crack down on corruption, a fire sale of luxury properties began as corrupt officials sought to dump their illegal holdings.

Thousands of Chinese communist officials have been panicked into a fire sale of their illicit properties and billions of pounds have been smuggled overseas as the country’s new leaders intensify a campaign to root out corruption…

It said the volume of deals had intensified by “a hundred times” after Xi Jinping, the incoming Chinese president, warned that corruption could kill the party and put one of the country’s most vigorous and resolute politicians, Wang Qishan, in charge of stamping out graft…

The CDIC report, which was obtained by the Economic Observer newspaper, suggested that nearly 10,000 luxurious homes had been sold by officials in Guangzhou and Shanghai last year.... Li Chengyan, a professor at Peking University, suggested that about 10,000 officials had absconded from China with as much as pounds $US100 billion.

http://www.smh.com.au/world/the-great-china-corruption-fire-sale-20130122-2d3v5.html#ixzz2IobQB27X

These individuals fleeing China have been buying up luxury properties outside of the country. As you likely have noticed, the world has experienced a wave of Chinese buyers for high-end real estate. While some of them are indeed individuals who have made legitimate money from business, many are in fact corrupt officials who have fled the country with vast quantities of loot.

A new wave of buyers from China is snapping up luxury properties across the U.S., injecting billions of dollars into the country’s residential-real-estate market.

The industry is scrambling to court the new buyers. Some developers of new projects are installing wok kitchens, following feng shui principles and putting lucky numbers on choice units; others are packaging property sales with government programs designed to encourage foreign investment. Real-estate agencies are flying representatives to China, and hiring Mandarin-speaking agents.

In Los Angeles, New York and even Miami, buyers mostly from China—and some are from Hong Kong, Singapore and Korea—are radically altering the landscape. Last month, a Chinese couple paid $34.5 million for a Versailles-style mansion on Sunset Boulevard in Beverly Hills, Calif. A year earlier, a Hong Kong businessman paid around $28 million for a nearby estate. Over the last six months in New York, several full-floor apartments in a new Manhattan high-rise called One57, each with a price tag of roughly $50 million, have gone into contract with Chinese buyers, according to two people close to the situation.

http://online.wsj.com/article/SB10001424052702304765304577478573004173212.html

This sort of fraud and corruption is systemic in China but it doesn’t show up in the GDP or other economic figures the country posts. After all, if a poorly constructed bridge collapses China can always build another one and count it twice for GDP growth. And since the Government controls the media, no one is the wiser.

As a final example of how the China story will likely turn out, consider the following:

Caterpillar Inc. believed acquiring China’s Zhengzhou Siwei was a way for the U.S. company to boost its fortunes in a lucrative but challenging market.

Siwei’s sales and profit growth were surging. And the company offered access to China’s mining industry, where domestic companies were prospering.

Siwei, which sells mine-safety equipment, also boasted an American pedigree. Its controlling shareholders were James E. Thompson III, the scion of one of Asia’s most successful expatriate families, and Emory Williams, a former head of the American Chamber of Commerce in China. Caterpillar paid about $700 million in June for Siwei’s parent, ERA Mining Machinery Ltd.

Caterpillar, known for bulldozers, excavators and wheel loaders, will have to write off about $580 million over alleged accounting misconduct at a Chinese maker of mine-safety equipment it bought in June. The WSJ’s James T. Areddy talks about what this means for the big U.S. industrial company.

But now, the purchase has dealt a blow to Caterpillar’s already lackluster performance in China.

The Peoria, Ill., construction-machinery maker on Friday said it would write down ERA’s value by $580 million, blaming “deliberate, multiyear, coordinated accounting misconduct” that was designed to overstate profit at the unit before the deal. The accounting surprise contributed to the departure of a senior Caterpillar executive, a person familiar with the matter said.

http://online.wsj.com/article/SB10001424127887323301104578255740261180404.html

What are the odds that this is an isolated case?

If Caterpillar, one of the largest corporations in the world, with its army of accountants and consultants was duped by a Chinese company run by American executives no less… what are the odds that ordinary investors can accurately value Chinese businesses or the Chinese economy?

This is just one example of how a popular theme in the investment community (in this case that China is a superpower) can in fact turn out to be total bunk. Given how many investment professionals are banking on China leading the world to economic growth again, this trade is extremely crowded on one side.

This is why, smart investors are already taking advantage of the lull in the markets to position themselves accordingly. While everyone else continues to believe the fairytale story spun by the political class and mainstream media, our Private Wealth Advisory newsletter subscribers have already been warned of these issues and are taking action (just as they did in early 2008 when others were bullish, or in 2010 when the EU crisis first began to take off).

Private Wealth Advisory outlined several critical investment strategies, designed to hedge our subscribers from the risks in the market while also alerting them to unique investment ideas that 99% of investors don’t know about.

To find out about these investments and start positioning yourself for what we all know is coming, but no one wants to openly admit, all you need to do is take out a trial subscription to Private Wealth Advisory.

You’ll immediately be given full access to the subscribers’ only Private Wealth Advisory website where you can find the historical archives of this investment newsletter.

You’ll also begin receiving new, hot off the press, issues of Private Wealth Advisory to your inbox every other Wednesday. Running between 20 and 30 pages in length, these intensive newsletters outline an expert understanding of what’s happening in the world, in plain, easy to understand language so our subscribers have the best research presented in the clearest way possible.

In this manner, our clients are always informed about the economy, financial markets, and most importantly, their investments.

To find out more about Private Wealth Advisory and how it can help you and your investments…

Click Here Now!!!

Phoenix Capital Research