Day: June 25, 2015

Stocks rallied yesterday on the announcement (what is this, the 105^th?) that Greece’s problems had finally been solved.

The whole charade is tiresome. I say charade because the ECB doesn’t give a hoot about Greece other than the fact that some of its bonds are used as collateral by large European banks for their derivatives trades.

Put it this way, the ECB is a lot more concerned with Deutsche Bank’s €54 TRILLION in derivatives exposure than it is with the state of malnutrition for Greek children or any other number of appalling data points coming out of Greece.

On that note, Greece accepted a bailout extension. It never really had a choice in the matter. With billions of Euros fleeing the country’s banking system, Greece’s choices were A) accept the ECB’s offer or B) face complete systemic financial collapse.

Interestingly, the Euro fell on the news. One would think that the Euro remaining together was Euro positive. One would be wrong. Either the market doesn’t believe the Greek deal is legit, or something else is at work here.

The whole mess really feels like a sideshow to the fact that stocks are now beyond nosebleed territory as far as valuations are concerned. And they are just completing a six-year bearish rising wedge pattern at a time when earnings are collapsing at a pace not seen since 2009 when the financial system was in a meltdown.

The completion of this pattern will take time to unfold. But it predicts a MASSIVE collapse in stocks.

Smart investors should take note of this now. It is a MAJOR red flag to be watched closely.

If you’ve yet to take action to prepare for this, we offer a FREE investment report called the Financial Crisis “Round Two” Survival Guide that outlines simple, easy to follow strategies you can use to not only protect your portfolio from it, but actually produce profits.

We made 1,000 copies available for FREE the general public.

As we write this, there are less than 50 left.

To pick up yours, swing by….

http://www.phoenixcapitalmarketing.com/roundtwo.html

 

Best Regards

 

Phoenix Capital Research

 

 

 

 

 

 

The 2008 crash was a warm up.

Many investors think that we could never have a crash again. The 2008 melt-down was a one in 100 years episode, they think.

They are wrong.

The 2008 Crisis was a stock and investment bank crisis. But it was not THE Crisis.

THE Crisis concerns the biggest bubble in financial history: the epic Bond bubble… which as it stands is north of $100 trillion… although if you include the derivatives that trade based on bonds it’s more like $500 TRILLION.

The Fed likes to act as though it’s concerned about stocks… but the real story is in bonds. Indeed, when you look at the Fed’s actions from the perspective of the bond market, everything suddenly becomes clear.

Bonds are debt.  A bond is created when a borrower borrows money from a lender. And at the top of the financial food chain are sovereign bonds like US Treasuries.

These bonds are created when someone lends the US money. Why would they do this? Because the US SPENDS more money than it TAKES IN via taxes. So it issues debt to cover its extra expenses.

This cycle continued for over 30 years until today, when the US has over $11 TRILLION in size. Because we never actually pay our debt off (or rarely do), what we do is ROLL OVER debt when it comes due, so that investors continue to receive interest payments but never actually get the money back… because the US Government doesn’t have it… because it’s still spending more money than it takes in via taxes.

This is why the Fed cut interest rates to zero and will likely do everything in its power to keep them low: even a small raise in interest rates makes all of this debt MORE expensive to pay off.

This is also why the Fed had the regulators drop accounting standards for derivatives… because if banks and financial firms had to accurately value their hundreds of trillions of derivatives trades based on bonds, investors would be terrified at the amount of leverage and the margin calls would begin.

The bond bubble is also why the Fed started its QE programs. Because by buying bonds, the Fed put a floor under Treasuries… which made investors less likely to dump bonds despite bonds offering such low rates of return.

This is also why the Fed is terrified of deflation. Deflation makes future debt payments more expensive. So the Fed prefers inflation because it means the dollars used to pay off debt down the road will be cheaper than Dollars today.

 

Again, when look at the Fed’s actions through the perspective of the bond market… everything becomes clear.

The only problem is that by doing all of this, the Fed has only made the bond market even BIGGER. In 2008, the bond market was $82 trillion. Today it’s over $100 trillion. And the derivatives market, of which 80%+ of all trades are based on interest rates (Treasury yields), is at $700 TRILLION.

The REAL Crisis will be when the bond bubble bursts. When this happens, it will be clear that real standards of living have been falling since the ‘70s and that sovereign nations have been papering over this through social spending and entitlements (a whopping 47% of US households receive Government benefits in some form).

Imagine what will happen to the markets when the Western welfare states finally go broke? It will make 2008 look like a picnic.

If you’ve yet to take action to prepare for this, we offer a FREE investment report called the Financial Crisis “Round Two” Survival Guide that outlines simple, easy to follow strategies you can use to not only protect your portfolio from it, but actually produce profits.

We made 1,000 copies available for FREE the general public.

As we write this, there are less than 50 left.

To pick up yours, swing by….

http://www.phoenixcapitalmarketing.com/roundtwo.html

Best Regards

Phoenix Capital Research

 

 

 

 

 

 

If you want to see in stark contrast why “top down” Government programs cannot fix the US economy take a look at the recent developments regarding school lunches.

In case you missed it, in 2012 the US public school system implemented a series of reforms to mandate what students should eat based on a healthier diet.

The program was spearheaded by First Lady Michelle Obama, who, despite not being a nutritionist or having any sort of medical degree, has decided she knows what’s best for children in terms of their diets.

As a result of the reforms, the cost of school lunches has risen and the quality has gone down. And students don’t like it. In fact, many of them have begun protesting the reforms saying that they’re hungry and the food portions are not enough.

However, the far more interesting development concerns students who have begun a black market of selling condiments to other students.

Children are creating their own black markets to trade and sell salt due to First Lady Michelle Obama’s school lunch rules.

During a hearing before the House Subcommittee on Early Childhood, Elementary, and Secondary Education, chaired by Rep. Todd Rokita (R., Ind.), a school administrator told Congress of the “unintended consequences” of the Healthy, Hunger-Free Kids Act.

“Perhaps the most colorful example in my district is that students have been caught bringing–and even selling–salt, pepper, and sugar in school to add taste to perceived bland and tasteless cafeteria food,” said John S. Payne, the president of Blackford County School Board of Trustees in Hartford City, Indiana.

Kids Create Salt Black Markets in Cafeterias Due to Michelle Obama’s Lunch Rules

Bear in mind, SAT verbal scores just hit their lowest levels since 1972. And this is after the test was dumbed down several times.

What’s my point with all of this?

That high school students, even those who are borderline-failing their SATs, have a better understanding of economics and job growth than Washington bureaucrats.

Welcome to the USA.

The reason the US rose to power was due to Democratic Capitalism of innovation and entrepreneurialism, NOT the Government running things. In the recent case of school lunches, the Government has gotten involved, prices have gone up, and students are unhappy. As a result, other students have stepped in, creating a sub-economy for lunches in the schools.

This has also been the case with Government run insurance, and Government run everything. Amtrak has never turned a profit and has been called a massive “failure” by its founder. In DC, they just spent over $200 MILLION to build a 2.2 mile trolley track… that’s a cost of $17,217 per FOOT of track.

And on and on.

Want to fix the economy? Get the Government out of the way and start pushing for people to start their own businesses. Not apps or social media gadgets but actual businesses. Fix this chart, and you fix the economy.

Sincerely

Phoenix Capital Research