Month: October 2012

Looking around the economic and financial world today, I see countless negative developments and virtually no positive developments to speak of.

Just off the cuff, I note that:

• China is entering a hard landing if not an outright economic collapse.
• Europe is facing a recession, banking collapse, sovereign crisis, and a potential break-up.
• The US is in a stagflationary recession.
• Japan is in a sovereign debt crisis, approaching armed conflict with China
• Inflationary pressures are increasing worldwide: new record food prices will hit within the next 12 months.
• The risk of armed conflict is increasing in the Middle East as well as Asia along with food inflation creating civil unrest/ riots.

Against this backdrop, the one remotely positive development as far as the markets are concerned is the belief that Central banks will somehow solve these problems via endless liquidity.

However, even this is now proving to be a false premise.

The problem with this is that the primary driver of stock prices over the last three years has been the anticipation of more monetary stimulus from Central Banks.

Indeed, the New York Fed itself has openly admitted that were it to remove the market moves that occurred around Fed FOMC meetings (the times when the Fed announced new programs or hinted at doing so), the S&P 500 would be at 600 today:

So, by announcing a program that will be on going in nature, the Fed has removed the anticipation of future Central Bank intervention from investors’ psychologies. This could become highly problematic, especially if these latest announcements turn out to be duds.

Sure enough, stocks are actually down since QE 3 was announced on September 13 2012.

So we’ve got over 50% of the global GDP (China, the EU, and the US) in recession, combined with Europe’s banking and sovereign crisis… at the exact time that the Fed appears to have run out of ammo.

It’s truly astounding. I cannot actually remember a single time in which the global economy and financial system have faced this many difficulties. And that includes the build up to the 2008 Crash.

Now more than ever, investors need to get access to high quality guidance and insights. There sheer magnitude of the issues the global financial system is facing is enormous!

For that reason, we are lowering the price of an annual subscription of my Private Wealth Advisory newsletter to just $249 (down from $300).

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Best Regards,

Graham Summers

Since the Financial Crisis erupted in 2007, the US Federal Reserve has engaged in dozens of interventions/ bailouts to try and prop up the financial system. Now, I realize that everyone knows the Fed is “printing money.” However, when you look at the list of bailouts/ money pumps it’s absolutely staggering how much money the Fed has thrown around.

Here’s a recap of some of the larger Fed moves during the Crisis:

• Cutting interest rates from 5.25-0.25% (Sept ’07-today).
• The Bear Stearns deal/ taking on $30 billion in junk mortgages (Mar ’08).
• Opening various lending windows to investment banks (Mar ’08).
• Hank Paulson spends $400 billion on Fannie/ Freddie (Sept ’08).
• The Fed takes over insurance company AIG for $85 billion (Sept ’08).
• The Fed doles out $25 billion for the automakers (Sept ’08)
• The Feds kick off the $700 billion TARP program (Oct ’08)
• The Fed buys commercial paper from non-financial firms (Oct ’08)
• The Fed offers $540 billion to backstop money market funds (Oct ’08)
• The Fed agrees to back up to $280 billion of Citigroup’s liabilities (Oct ’08).
• $40 billion more to AIG (Nov ’08)
• The Fed backstops $140 billion of Bank of America’s liabilities (Jan ’09)
• Obama’s $787 Billion Stimulus (Jan ’09)
• QE 1 buys $1.25 trillion in Treasuries and mortgage debt (March ’09)
• QE lite buys $200-300 billion of Treasuries and mortgage debt (Aug ’10)
• QE 2 buys $600 billion in Treasuries (Nov ’10)
• Operation Twist 2 (Nov ’11)
• QE 3 ($40 billion in MBS monetization per month)

And this is just a brief recap. I’m almost certain I left something out. Indeed, between 2008 and today, the US Federal Reserve has grown its balance sheet from $800 billion to almost $3 TRILLION in size (larger than the economies of Brazil, the UK, and France).

The Fed is not the only bank to engage in such profligate policies either. Thanks to its bond purchases as well as its LTRO 1 and LTRO 2 schemes, the European Central Bank (ECB) has in fact grown its balance sheet even larger than the Fed.

Country	GDP
European Union	$16 trillion
United States of America	$14.5 trillion
China	$5.8 trillion
Japan	$5.4 trillion
European Central Bank	$3.8 trillion
Germany	$3.2 trillion
US Federal Reserve	$2.8 trillion
France	$2.5 trillion
United Kingdom	$2.2 trillion

As a result of this, inflation hedges, particularly Gold have been soaring. Gold was, is, and always will be THE ultimate storehouse of value. Mankind was prizing it long before the concept of stocks, mutual funds, or paper money even existed.

So with world central banks printing paper money day and night it is no surprise that Gold is now emerging as the ultimate currency: one that cannot be printed. Indeed, Gold has broken out against ALL major world currencies in the last ten years. The below chart prices Gold in Dollars (Gold), Euros (Blue), Japanese Yen (Red) and Swiss Francs (Purple):

Now, a lot of commentators have noted that gold is already trading above its 1980 high ($850 an ounce). What they fail to note is that thanks to inflation, $1 in the ‘70s is worth a LOT MORE than a $1 today.

$1 in…	Is Worth Today
1970	$5.49
1980	$2.58

For gold to hit a new all time high adjusted for inflation, it would have to clear at least $2,193 per ounce. If you go by 1970 dollars (when gold started its last bull market) it’d have to hit $4,666 per ounce.

If you do not already have exposure to Gold, consider getting some now. If you do decide to buy, I strongly urge you to buy actual physical bullion because it is not clear that the various Gold ETFs actually own the bullion they claim to

On that note, we just published a Special Portfolio of unique inflation hedges: investments that will not only maintain their purchasing power but will outperform even Gold and Silver as the Fed and ECB debase their respective fiat currencies.

We’re talking about investments of extraordinary value that 99% of investors are unaware of: asset plays trading at massive discounts to their underlying values. The kind of investments that can show you double-digit returns in a very short period.

This portfolio will be made available only to subscribers of our Private Wealth Advisory newsletter. The last time we opened a similar portfolio, we saw gains of 28%, 41% and 42% in a matter of months. We expect similar returns this time around as well.

To find out more about Private Wealth Advisory and get on board for this Special Inflation Portfolio…

Click Here Now!

Phoenix Capital Research

 

My prediction regarding the breakup of the EU was obviously way early.

However, the fact remains that the EU will break up in time. And it will likely be Spain that brings this about.

The reasons? Among other things:

1. Spain’s private Debt to GDP is above 300%.
2. A huge portion of Spain’s banking system (representing over 50% of mortgage loans AND deposits) was totally unregulated up until just a few years ago.
3. Spanish banks are drawing over €400 billion from the ECB on a monthly basis (up from €377 in June) to fund their liquidity needs.
4. Spanish banks are now net sellers of Spanish sovereign bonds (leaving the ECB as the only buyer in the market)
5. Spain’s banking system has lost 18% of its deposits in the last 10 months due to a staggering bank run.
6. The economy of Spain is a disaster with total unemployment over 25% and youth unemployment above 50%.
7. Spain is now facing a constitutional crisis with various regions looking to secede if they don’t receive bailouts from the Federal Government “without conditions.”
8. Spanish banks need to roll over (meaning renew terms on) more than 20% of their bonds this year.

So Spain will suffer a collapse, most likely of its banking system resulting in a sovereign default (barring a bailout). When this happens, some €1 trillion+ worth of collateral (still rated AAA by EU banks) will be sucked out of the system.

This in turn will spur margin and collateral calls on tens of trillions of Euros’ worth of derivative trades.

And the EU Financial System collapses.

This is reality, regardless of who wins the US election. It may take a few months before it hits… but it will hit.

On that note, if you are not preparing for a bloodbath in the markets, now is the time to do so. The reality is that the Central Banks are fast losing their grip on the markets. They’ll never admit this publicly, but I can assure you that Bernanke and pals are scared stiff by what’s happening in the banking system right now.

If you’re looking for someone who can help you navigate and even profit from this mess, I’m your man. My clients made money in 2008. And we’ve been playing the Euro Crisis to perfection, with our portfolio returning 34% between July 31 2011 and July 31 2012 (compared to a 2% return for the S&P 500).

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles.

To find out what they are, and take steps to protect your portfolio from the inevitable collapse…

Click Here Now!

Graham Summers

 

 

 

 

 

 

 

 

I realize that the situation in Europe can be very confusing. Aside from the fact that we’re dealing with over 20 different countries all with their own respective economies and debt issues, we also have the European Central Bank and the numerous bailouts and bailout funds (the LTRO 1 and 2, the EFSF, the ESM and now the OMT) to keep track of.

So for clarity’s sake, I’m going to explain Europe’s problems in simple terms.

The first thing you should know is that European banks, taken as a whole, have far more leverage than their US counterparts. According to the IMF, US banks are leveraged at 13 to 1.

European banks are leveraged at 26 to 1. Put another way, they have $26 in assets for every $1 in equity.

Think of it this way, imagine if had $100K in the bank and you borrowed $2.6 million to buy homes and other items. Do you think you would be in a stable financial condition?

That’s Europe’s banks on the whole.

However, we also know that the IMF only reports based on known assets or the asset levels that the banks admit. How many times in the last few years have we found out that banks were being honest and open about their risk levels?

Never.

So you should use the 26 to 1 leverage level as the minimum. Reality is likely far worse. Which means… European banks are insolvent.

Outside of this, European nations are also bankrupt. I realize that everyone likes to focus on Debt to GDP levels, but the reality is that European banks owe far more when you account for unfunded liabilities.

I know the same is true for the US, but the US’s unfunded liabilities pale in comparison to Europe’s. As far back as 2004, we know that:

Country	Debt to GDP Including Unfunded Liabilities
Greece	875%
Spain	244%
Italy	364%
France	549%
Germany	418%
EU as a whole	434%
US	400%

Source: Cato Institute

So, we have a bankrupt banking system in bankrupt countries.

Now for the zinger…

This entire financial system is based on the assumption that European sovereign bonds are still are risk free.

So you have bankrupt nations, selling bonds to insolvent banks, which then use these bonds to leverage up to over 26 to 1 (by the way, Lehman was 30 to 1 when it blew up).

And that’s the ENTIRE European financial system.

I hope this clarifies why Europe is doomed. It is absolutely 100% impossible for Europe to get out of this mess unless the entire union suddenly started growing its GDP at over 10% for a decade.

That will never happen.

My advice to everyone: trust your gut. All of the accounting gimmicks and bailout ideas will never work for the simple fact that the system in Europe is totally broke. The US’s financial system, while problematic (that’s putting it lightly) is nothing compared to how bad Europe is.

I’ve said this before many times, but it cannot be overemphasized… everything I’ve been writing about for nearly a year will still happen. The fact that I was early and we were stopped out of our Euro Crisis trades because the ECB promised “unlimited” bond buying right before the Fed announced QE 3 doesn’t change the ultimate outcome: the EU breaking up and a global financial meltdown.

On that note, if you are not preparing for a bloodbath in the markets, now is the time to do so. The reality is that the Central Banks are fast losing their grip on the markets. They’ll never admit this publicly, but I can assure you that Bernanke and pals are scared stiff by what’s happening in the banking system right now.

If you’re looking for someone who can help you navigate and even profit from this mess, I’m your man. My clients made money in 2008. And we’ve been playing the Euro Crisis to perfection, with our portfolio returning 34% between July 31 2011 and July 31 2012 (compared to a 2% return for the S&P 500).

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles.

To find out what they are, and take steps to protect your portfolio from the inevitable collapse…

Click Here Now!

Graham Summers

 

 

 

 

 

 

 

 

 

 

As noted earlier in yesterday’s article, the entire European banking and corporate system is over-burdened with debt.

Germany sports a real Debt to GDP of over 200% (this from the former head of the Bundesbank), and the rest of Europe is in even worse shape.

Indeed, Jagadeesh Gokhale of the Cato Institute puts the situation as the following, “The average EU country would need to have more than four times (434 percent) its current annual gross domestic product (GDP) in the bank today, earning interest at the government’s borrowing rate, in order to fund current policies indefinitely.”

Suffice to say, no EU country has that kind of money lying around.

Moreover, the argument that the ECB or Federal Reserve could stop this from happening is misguided. True, the Central Banks have managed to prop up the markets for several years now.

So what makes this time different?

Simple: the Crisis coming from Europe will be far, far larger in scope than anything the Fed or Central Banks have dealt with before.

Let me walk through each of these one at a time. We have several facts that we need to remember. They are:

1)   The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).

2)   The European Central Bank’s (ECB) balance sheet is now nearly $4 trillion in size (larger than Germany’s economy and roughly 1/3 the size of the ENTIRE EU’s GDP). Aside from the inflationary and systemic risks this poses (the ECB is now leveraged at over 36 to 1).

3)   Over a quarter of the ECB’s balance sheet is PIIGS debt which the ECB will dump any and all losses from onto national Central Banks (read: Germany)

So we’re talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.

And all of this is occurring in a region of 17 different countries none of which have a great history of getting along… at a time when old political tensions are rapidly heating up.

To be clear, the Fed, indeed, Global Central Banks in general, have never had to deal with a problem the size of the coming EU’s Banking Crisis. There are already signs that bank runs are in progress in the PIIGS (Spain has lost 18% of deposits this year alone) and now spreading to France.

Thus, the World’s Central Banks cannot possibly hope to contain the coming disaster. They literally have one of two choices:

1)   Monetize everything (hyperinflation)

2)   Allow the defaults and collapse to happen (mega-deflation)

If they opt for #1, Germany will leave the Euro. End of story. They’ve already experienced Weimar and will not tolerate aggressive monetization.

So even the initial impact of a massive coordinated effort to monetize debt would be rendered moot as the Euro currency would enter a free-fall, forcing the US dollar sharply higher which in turn would trigger a 2008 type event at the minimum.

In simple terms, this time around, when Europe goes down (and it will at some point in the no so distant future) it’s going to be bigger than anything we’ve seen in our lifetimes. And this time around, the world Central Banks are already leveraged to the hilt having spent virtually all of their dry powder propping up the markets for the last four years.

I’ve said this before many times, but it cannot be overemphasized… everything I’ve been writing about for nearly a year will still happen. The fact that I was early and we were stopped out of our Euro Crisis trades because the ECB promised “unlimited” bond buying right before the Fed announced QE 3 doesn’t change the ultimate outcome: the EU breaking up and a global financial meltdown.

On that note, if you are not preparing for a bloodbath in the markets, now is the time to do so. The reality is that the Central Banks are fast losing their grip on the markets. They’ll never admit this publicly, but I can assure you that Bernanke and pals are scared stiff by what’s happening in the banking system right now.

If you’re looking for someone who can help you navigate and even profit from this mess, I’m your man. My clients made money in 2008. And we’ve been playing the Euro Crisis to perfection, with our portfolio returning 34% between July 31 2011 and July 31 2012 (compared to a 2% return for the S&P 500).

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles.

To find out what they are, and take steps to protect your portfolio from the inevitable collapse…

Click Here Now!

Graham Summers

 

Europe is heading into a full-scale disaster.

You see, the debt problems in Europe are not simply related to Greece. They are SYSTEMIC. The below chart shows the official Debt to GDP ratios for the major players in Europe.

As you can see, even the more “solvent” countries like Germany and France are sporting Debt to GDP ratios of 75% and 84% respectively.

These numbers, while bad, don’t account for unfunded liabilities. And Europe is nothing if not steeped in unfunded liabilities.

Let’s consider Germany. According to Axel Weber, the head of Germany’s Central Bank, Germany is in fact sitting on a REAL Debt to GDP ratio of over 200%. This is Germany… with unfunded liabilities equal to over TWO times its current GDP.

That’s one thing most invetsors don’t know about Europe.

To put the insanity of this into perspective, Weber’s claim is akin to Ben Bernanke going  on national TV and saying that the US actually owes more than $30 trillion and that the debt ceiling is in fact a joke.

What’s truly frightening about this is that Weber is most likely being conservative here. Jagadeesh Gokhale of the Cato Institute published a paper for EuroStat in 2009 claiming Germany’s unfunded liabilities are in fact closer to 418%.

And of course, Germany has yet to recapitalize its banks.

Indeed, by the German Institute for Economic Research’s OWN admission, German banks need 147 billion Euros’ worth of new capital.

To put this number into perspective TOTAL EQUITY at the top three banks in Germany is less than 100 billion Euros.

And this is GERMANY we’re talking about: the supposed rock-solid balance sheet of Europe. How bad do you think the other, less fiscally conservative EU members are?

Think BAD. As in systemic collapse bad.

Indeed, let’s consider TOTAL debt sitting on Financial Institutions’ balance sheets in Europe. The below chart shows this number for financial institutions in several major EU members relative to their country’s 2010 GDP.

Country	Financial Institutions’ Gross Debt as a % of GDP
Portugal	65%
Italy	99%
Ireland	664%
Greece	21%
Spain	113%
UK	735%
France	148%
Germany	95%
EU as a whole	148%

Source: IMF

As you can see, financial institutions in Germany, France, Italy, Spain, the UK, and Ireland are all ticking time bombs.

Indeed, taken as a whole, European financial institutions have more debt than Europe’s ENTIRE GDP.

And this is only the “official” numbers. When you account for off balance sheet liabilities, bank’s are even more indebted than this!

That’s the second thing most investors don’t know about Europe.

Let’s compare the situation there to that in the US banking system.

Taken as a whole, the US banking system is leveraged at 13 to 1. Leverage levels at the TBTFs are much much higher… but when you add them in with the 8,100+ other banks in the US, total US bank leverage is 13 to 1.

The European banking system as a whole is leveraged at nearly twice this at over 26 to 1. That’s the ENTIRE European Banking system leveraged at near Lehman levels (Lehman was 30 to 1 when it collapsed).

To put this into perspective, with a leverage level of 26 to 1, you only need a 4% drop in asset prices to wipe out ALL capital. What are the odds that European bank assets fall 4% in value in the near future as the PIIGS continue to collapse?

And at that point the entire EU banking system collapses.

To summate, everything I’ve been writing about for nearly a year will still happen. The fact that I was early and we were stopped out of our Euro Crisis trades because the ECB promised “unlimited” bond buying right before the Fed announced QE 3 doesn’t change the ultimate outcome: the EU breaking up and a global financial meltdown.

On that note, if you are not preparing for a bloodbath in the markets, now is the time to do so. The reality is that the Central Banks are fast losing their grip on the markets. They’ll never admit this publicly, but I can assure you that Bernanke and pals are scared stiff by what’s happening in the banking system right now.

If you’re looking for someone who can help you navigate and even profit from this mess, I’m your man. My clients made money in 2008. And we’ve been playing the Euro Crisis to perfection, with our portfolio returning 34% between July 31 2011 and July 31 2012 (compared to a 2% return for the S&P 500).

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles.

To find out what they are, and take steps to protect your portfolio from the inevitable collapse…

Click Here Now!

Graham Summers

 

 

 

 

 

Quite a few articles have been written about the importance of owning Gold and other precious metals as a means of maintaining one’s wealth in the face of rampant money printing by the world’s Central Banks.

Today I’m going to share some ideas on how to actually buy bullion.

As far as precious metals go, you need to:

1)   Own actual Bullion

2)   Store it yourself (not in a bank)

I do not recommend owning a paper gold-based ETF because frankly the custodial risk is high (that is, there’s no telling if the Gold is even there or who would get it if the ETF is liquidated).

In comparison, physical bullion, stored outside a bank, is literally money in hand. You know where it is and you can find out what it’s worth. Compare that to a Gold ETF in which you’re hoping that the bank actually has the Gold and that it could actually send it to you if you requested (fat chance).

In terms of actual gold coins, there are three coins that comprise the bulk of the bullion market. They are Kruggerands, Canadian Maple Leafs, and American Gold Eagles. I’ve been told to avoid Maple Leafs by both a trader and a bullion dealer as they can easily be scratched which damages the gold and reduces the coin’s value.

In terms of silver, the easiest way to get it is via pre-1965 coins (often termed “junk” silver). You can also get silver one-ounce rounds (coin-like medallions) and 10-ounce bars. Or you can buy Silver Eagles coins.

I cannot tell you which dealer to go with, but look for someone who’s been dealing for years (not a newbie).  You should always ask for references from the dealer (former clients you can talk to about their purchases/ experiences).

Some warning signs to avoid are dealers who try to store your bullion. Never, I repeat, never store your bullion with someone else. Always store it yourself. Also, be sure to talk to the dealer for some time and ask him or her numerous questions about the industry, the coins, etc. (feel free to test him or her on the information I’ve provided you with e.g. the three most liquid Gold coins, etc.). If they can answer everything you ask in a knowledgeable fashion, their references check out, and you verify everything they say with a 3^rd party, you should be OK.

On that note, we just published a Special Portfolio of unique inflation hedges: investments that will not only maintain their purchasing power but will outperform even Gold and Silver as the Fed and ECB debase their respective fiat currencies.

We’re talking about investments of extraordinary value that 99% of investors are unaware of: asset plays trading at massive discounts to their underlying values. The kind of investments that can show you double-digit returns in a very short period.

This portfolio will be made available only to subscribers of our Private Wealth Advisory newsletter. The last time we opened a similar portfolio, we saw gains of 28%, 41% and 42% in a matter of months. We expect similar returns this time around as well.

To find out more about Private Wealth Advisory and get on board for this Special Inflation Portfolio…

Click Here Now!

Phoenix Capital Research

For the last year, I’ve steered clear of commenting on the US Presidential election for the simple reason that I wanted us to be closer to the actual date before I went through the process of explaining what’s to come.

The reason for this is that elections by their very nature are conflicting processes. Most people vote based on emotions when we are in fact electing someone to fulfill a role that is economic in nature.

This is evident in the fact that the political hot issues being promoted (abortion, gay marriage, etc.) are in fact peripheral (they directly impact a small minority of the population) while the larger more pressing issues (the US deficit, the debt, the US Dollar, the Fed) receive very little airtime.

I didn’t want to get sucked into this because frankly, there’s no point. The US is facing much bigger issues than whether or not someone wants us to pay for their birth control or whether people of the same gender want to be married.

I apologize if this offends anyone, but this is the truth. Today, the US is running its fourth $1+trillion deficit. Our Deficit to GDP ratio is nearly 10%. Our “official” Total Debt to GDP is well over 100% though when you include the debt hidden in various Government entities and unfunded liabilities we’re well over a Debt to GDP ratio of 300% at this point.

To put these numbers into perspective, Greece had a Deficit to GDP ratio of 12% and a Debt to GDP ratio of 150% when it first entered its sovereign debt crisis. It’s since seen a GDP collapse of 20%: one of the largest economic collapses worldwide in the last 30 years.

Of course, you cannot simply compare economies by just two numbers. The US has many advantages Greece does not, including:

1)   The US has never defaulted on its sovereign debt

2)   The US has its own Central Bank that can print Dollars (Greece’s Central Bank cannot print Euros)

3)   The US is the largest most dynamic economy in the world and the provider of the world’s reserve currency: the US Dollar.

Because of this, the US gets a pass where other countries (Greece, Spain, Ireland, Portugal, Italy and soon France and Germany) do not. However, this will not always be the case. Once the debt implosion finishes in the EU, it will then spread to the UK, China, Japan, and finally the US.

At that point, the US will experience something very similar to what Greece has experienced.

Timing this in advance is virtually impossible. But we get clues as to when it might happen. Last year, the US Federal Reserve monetized over 70% of all debt issuance. The recipe for hyperinflation and a currency collapse has been the same throughout history: the rampant monetization of deficits.

Thus far, we’ve managed to get away with this for the reasons I listed above. However, this will not always be the case. And if the US does not deal with its debt problems now, we’re guaranteed to go the way of the PIIGS, along with an episode of hyperinflation.

That is THE issue for the US, as this situation would affect every man woman and child living in this country.

On that note, if you are not preparing for a US debt collapse , now is the time to do so. The reality is that the Central Banks are fast losing their grip on the markets. They’ll never admit this publicly, but I can assure you that Bernanke and pals are scared stiff by what’s happening in the banking system right now.

If you’re looking for someone who can help you navigate and even profit from this mess, I’m your man. My clients made money in 2008. And we’ve been playing the Euro Crisis to perfection, with our portfolio returning 34% between July 31 2011 and July 31 2012 (compared to a 2% return for the S&P 500).

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the global debt implosion accelerates.

To find out what they are, and take steps to protect your portfolio from the inevitable collapse…

Click Here Now!

Graham Summers

 

 

As I noted previous articles, Spain has essentially three options:

1)   Spain goes the “Greek route” of agreeing to austerity measures in exchange for bailouts (which will implode the economy).

2)   Prime Minister Rajoy refuses to impose austerity measures and is removed/ replaced by an EU technocrat who is pro-austerity measures (like Italy experienced last year)

3)   Spain defaults/ leaves the EU.

Thus far Spanish Prime Minister Rajoy has opted to go for #1. The end result has been riots, protests, and now the threat of Spain as a country breaking up. I’ve long averred that Spain will bring about the break up of the Euro. By the look of things, we’re not far from this.

To whit, as the above article notes, Germany, Holland, and Finland have decided to pull back on the promise of a €100 billion Spanish bank bailout first established in June. These countries are now stating that this bailout should be included as part of the ESM mega-bailout fund’s banking program that could take years to implement.

Spain doesn’t have time for this. As I’ve noted before, Spain is facing a full-scale bank run (Spaniards pulled another €17 billion from Spanish banks in August, bringing the year to date bank run to over 18% of total Spanish bank deposits).

Now add multiple regional bailout requests, as well as 25% total unemployment to the mix and Spain is an absolute disaster. The Spanish Ibex knows it too:

Congratulations Mario Draghi, you promised unlimited bond buying and you bought less than one month’s worth of gains for Spain. If you want proof positive that Central Banks are losing their grip on things, the above chart is it. The moment we take out that trendline again, it’s GAME OVER (what more can the ECB promise?)

Remember, Spain is currently drawing over €400 billion from the ECB.

Let’s put this number in perspective… in June before Spain requested a €100 billion bailout, the country was drawing only €300 billion from the ECB.

Since that time and now, the ECB has promised to provide unlimited bond buying… and even Germany has indicated it would be open to some sort of a Spanish bailout…

And yet, Spain is now borrowing even MORE than it was in June.

This is not progress in any way… if anything it indicates that things are worsening in the EU’s financial system at a staggering pace. The powers that be are keeping things calm until after the election… at which time there will be absolute hell to pay.

“So what?” many investors will ask, “Spain is nothing in the grand scheme of things.”

Wrong.

Spain’s sovereign bond market is $2.1 trillion in size. And Spanish bonds are used as the collateral for hundreds of trillions of Euros worth of derivative and credit trades.

… the global derivative market is over $700 TRILLION in size. And we know that the US only accounts for about $228 trillion of this.

The EU banking system is roughly $46 trillion in size. Total EU sovereign debt outstanding is $13.7 trillion. Assuming that EU derivatives are in the ballpark of $300 trillion or so (a safe assumption), this means that EU derivatives exposure is likely:

• Nearly SEVEN TIMES the size of the entire EU banking system.
• More than 19 times the size of total EU GDP.
• More than 21 times TOTAL EU SOVEREIGN DEBT OUTSTANDING

By now I trust you are beginning to understand why EU politicians and the ECB are terrified of an unorganized EU sovereign default: doing this would result in a significant portion of the collateral for over $300 trillion in trades (remember, I’m only assessing derivatives here) vanishing.

I simply cannot stress this last point enough so I am going to say it again in different terms: EU bonds, including the totally garbage PIIGS’ debt as well as the soon to be garbage debt from France and others are the COLLATERAL for $300+ trillion in trades.

What happens when this collateral is found to be worth much less or potentially even worthless…?

Those hundreds of trillions of Euros worth of trades blow up, there’s nothing backing them, and the banks that made them implode taking everyone’s money with them (think of an MF Global type event across the board for ALL MAJOR EU Banks).

At that point the entire EU banking system collapses.

To summate, everything I’ve been writing about for nearly a year will still happen. The fact that I was early and we were stopped out of our Euro Crisis trades because the ECB promised “unlimited” bond buying right before the Fed announced QE 3 doesn’t change the ultimate outcome: the EU breaking up and a global financial meltdown.

On that note, if you are not preparing for a bloodbath in the markets, now is the time to do so. The reality is that the Central Banks are fast losing their grip on the markets. They’ll never admit this publicly, but I can assure you that Bernanke and pals are scared stiff by what’s happening in the banking system right now.

If you’re looking for someone who can help you navigate and even profit from this mess, I’m your man. My clients made money in 2008. And we’ve been playing the Euro Crisis to perfection, with our portfolio returning 34% between July 31 2011 and July 31 2012 (compared to a 2% return for the S&P 500).

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles.

To find out what they are, and take steps to protect your portfolio from the inevitable collapse…

Click Here Now!

Graham Summers

 

While the media world is abuzz with last night’s Presidential debate, I’d like to cut through the noise and present you with two truly staggering facts that need to be kept in mind as the backdrop for the US Presidential Election

Fact #1: EU leaders have stated point blank that they were asked to keep things quiet until after the election.

Regardless of your party affiliation, social views or the like, we have to ask ourselves “what was promised in return?”

If you’ve been reading me for some time, you know by now that the EU is in massive trouble. Spain is currently drawing over €400 billion from the ECB.

Let’s put this number in perspective… in June before Spain requested a €100 billion bailout, the country was drawing only €300 billion from the ECB.

Since that time and now, the ECB has promised to provide unlimited bond buying… and even Germany has indicated it would be open to some sort of a Spanish bailout…

And yet, Spain is now borrowing even MORE than it was in June.

This is not progress in any way… if anything it indicates that things are worsening in the EU’s financial system at a staggering pace. The powers that be are keeping things calm until after the election… at which time there will be absolute hell to pay.

And we Americans are going to be on the hook in one form or another. Something was promised in exchange for the EU keeping things quiet. And we won’t find out what it is until after November 6

Fact #2: China is facing a severe downturn if not outright collapse.

As I’ve stated many times before, the China economic “miracle” is in fact one colossal Government funded fraud. While the media attempts to spin China as still growing, executives over there have stated that in fact things are far worse than is publicly known.

Many economists expect the Chinese government to announce Thursday that economic growth in the third quarter was barely short of the official target of 7.5 percent. But Chinese business executives said that the reality was worse for many companies selling in the domestic market, leaving considerable room for a rebound.

“All industries are going down, but why aren’t the official statistics going down?” asked Bob Wang, the sales manager of Kralle Tools, a manufacturer in Wenzhou, an eastern city, that makes circular saw blades for lumber mills.

He said he believed that government officials had been underestimating the extent of China’s slowdown to avoid losing face.

http://www.nytimes.com/2012/10/16/business/global/at-trade-fair-chinese-exporters-a-bit-more-optimistic.html?pagewanted=2&_r=2

So… expect the news out of China to get worse and worse once the election is over. How would the world react to news that the “miracle” which supposedly pulled the globe out of recession is in fact collapsing?

Not well.

Europe and China combined account for 34% of the world’s GDP. Throw in the US which has re-entered a recession and 55% of the globe’s GDP is in contraction.

And everyone is waiting on November 6 to see how this will pan out.

For that reason, I’m putting together a One Time Special Report, detailing exactly what a second term for Obama or a Romney Presidency would mean for the US economy, the US Fed, and ultimately the markets.

Not only that, but I’m outlining what investments would perform best under each candidate based on their policies and plans.

All told we’re talking about over 20-pages of intense, hard hitting research to make sure you’ve got all your bases covered going forward.

We’re only releasing 100 copies of this report (a $500 value) to the general public as part of a special offer for Private Wealth Advisory.

So if you sign up for Private Wealth Advisory now, you can reserve one of these 100 copies. If you don’t… and we sell out… then this report will no longer be available.

Already the reservations have been pouring in (not surprising given how important this is). Indeed, I fully expect we’ll sell out before the end of the week.

Ask yourself… “Is my portfolio and my wealth prepared for what may come after November 6?”

To reserve one of the remaining copies of Special Presidential Report… and take out a subscription to my Private Wealth Advisory newsletter…

Click Here Now!!!

Graham Summers
Chief Market Strategist
Phoenix Capital Research

PS. I almost forgot to mention, every subscription to Private Wealth Advisory features a 30 day trial period.

If at any point during the first 30 days you find Private Wealth Advisory is not for you, simply drop us a line and we’ll issue a full refund, no questions asked.

Your copy of my Special Presidential Report is yours to keep… free of charge.

To take out a Private Wealth Advisory subscription…

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We’re introducing a new component to Gains Pains & Capital: politics.

While I’ve stayed out of commenting on the US Presidential elections and politics in general for the most part, at this point so much is riding on public policy globally that we cannot analyze the markets or economy without taking it into account.

This new segment will be located at the bottom of our daily commentary. If you don’t care to read it, please just skip it. But we believe this will bring an added dimension to our work that you’ll find useful.

Now let’s first assess the markets.

We know from various sources that there is a coordinated effort to keep things calm until after the US election. Based on this, we can deduce that QE 3 was due to one of two reasons:

1)   Propping the markets up until November… or,

2)   Something bad is coming down the pike and the Fed wanted to act preemptively.

It’s really a toss up (or could be a combination of both). There is certainly no lack of major issues that all have negative implications for the markets. Among the more pressing are the threat of a sharp global downturn (China, the EU, and the US are all in recession), armed conflict in the Middle East, and the EU’s ongoing banking and sovereign debt crisis.

In light of this, it’s not surprising that the Fed has opted to get more money into the system. What is surprising however is that it’s turned out to be such a dud.

QE 3 was announced on September 13. Since that time the markets have done a whole lot of nothing. In fact, they are barely up since the QE 3 announcement.

We did see a similar correction for about a month following QE 2 in 2010, however after that stocks hit lift off and didn’t look back:

It’s now been a month since the announcement of QE 3. So, if it’s going to have a similar impact to QE 2 as far as stocks are concerned, the markets need to start roaring higher now.

Alternatively, we could indeed have reached the end game for Fed intervention: a time in which the one positive aspect of QE (namely stocks rising) is no longer facilitated by more buying.

If that is the case, then the markets are in big trouble because the negative consequence of QE (higher cost of living) certainly isn’t being held in check, no matter what the Fed claims

So, the multi-trillion Dollar question is:

1)   Has the Fed overdone it? Has it finally used up its toolbox to the point that even an open-ended program has little effect on the markets?

Once the Fed decided to backstop the system, there was always the threat of this occurring. You cannot have the capital markets based on moral hazard/ intervention. It not only confounds the very purpose of the markets (aligning capital with opportunity), but it leads to greater and greater dependence on the Fed’s intervention. And at some point eventually the markets no longer respond to the juice.

Can the Fed hold things together until November? I cannot say. But unless the markets start rallying hard soon, then the Fed’s in big trouble.

Now for the politics.

The outcome of this Presidential election will be of tremendous import for both the markets and the economy. During the first four years of its Presidency, the Obama administration has relied heavily on Bernanke’s Fed to hold the system together (remember, it was Obama who re-appointed Ben Bernanke, paving the way for QE lite, QE 2, Operation Twist, etc).

As a result of this, the recovery has been anemic to say the least. I can tell you point blank that the latest spat of improved economic data is not authentic or accurate. I won’t waste time with the methodology (that would take multiple pages of numbers) but I can say point blank that employment has not in fact fallen as the headline number indicates.

Aside from this, the cost of living has increased dramatically while Obama was in office. One can point fingers as for why this is, but at the end of the day, the reality is that Obama put Bernanke back in office and has never attempted to keep our Money Printer in Chief in check.

Thus, our economy has become one of Central Planning: an economy in which the primary driver of things is Central Bank intervention.

So if Obama wins again, there will be absolute hell to pay down the road. The recipe for hyperinflation has always been the same: Government monetization of a massive deficit. The US has run $1 trillion+ deficits for four years now.  

Today, the Fed accounts for over 70% of all US Debt purchases. The only reason we’ve been able to get away from this is that the US has not totally lost credibility in the bond markets (yet).

However, to assume that Treasuries will always have a bid is a very dangerous assumption. If we continue down this same path of monetizing the US’s deficit via Fed money printing then at some point we will lose credibility in the markets. At that point the US Dollar will collapse and hyperinflation will hit.

There is no indication that the Obama administration has even considered this eventuality. Indeed, I have not heard anyone on the left refer to Bernanke or the poison of his policies at any point in the last few months.

On that note, I’m currently preparing a Special One Time Report devoted to outlining what will happen to both the markets and the economy depending on who wins this election.

In it I will outline the major developments that will occur in terms of monetary policy, the US economy, and the stock market depending on who wins on November 6. I’ll also outline which investments will perform best in a Romney Presidency and which investments will perform best if Obama wins again.

This Report will be given to all of my Private Wealth Advisory subscribers free of charge. It will go live tomorrow after the market’s close. If you’d like to reserve a copy, all you need to do is take out a subscription to Private Wealth Advisory. It’ll then be delivered to your inbox as soon as it’s ready.

To take out a Private Wealth Advisory subscription…

Click Here Now!!

Private Wealth Advisory comes with a 30 day refund policy. So if you decide it’s not for you at any point during the first 30 days, just drop us a line and we’ll issue a full refund.

Best Regards,
Graham Summers

The markets roared from June to September, ever Fed mouthpiece Jon Hilsenrath of the WSJ penned an article calling for more QE in June. Fast-forward to mid-September and the Fed did indeed announce QE3, a plan that will see the Fed monetize $40 billion worth of Mortgage Backed Securities in addition to its plans to Twist $45 billion worth of Treasuries per month: a total monetization scheme of $85 billion.

However, since that time, the Fed’s balance sheet has increased just $3 billion.

Now, it takes several weeks for MBS transactions to settle, so the Fed will announce its MBS purchases since QE 3 started today at 2PM. But if that number is lower than $37 billion (how much the Fed should have bought in the last four weeks) then the Fed lied about QE 3.

In addition to this development, I want to draw your attention to the fact that the Fed balance sheet is DOWN $50 billion year over year. This confirms that the Fed has in fact been engaging in mostly verbal intervention over the last year rather than actual monetary intervention.

The implications of this are of major import.

For one thing, it indicates that the market rally on hopes of more Fed juice is in fact based on a myth. The primary driver of all stock moves has been based on hopes of more liquidity from the Fed and other Central Banks. But the Fed’s balance sheet indicates that this hope is not based on fact. That does not bode well for the bulls.

A second implication concerns the multi-trillion Dollar question: whether the Fed has in fact used up its gunpowder with all of its monetary schemes. After all, the market is roughly break-even since the Fed announced QE 3. Could it be that the market is no longer reacting to Fed action?

If that is the case, then the Bernanke put is over.

These are items to be watching for. We’ll find out the details of the Fed’s actions in an hour or so. But the tide may in fact be turning regarding the success of the Fed’s actions in pushing stocks higher.

If you’re looking for specific investment ideas on how to trade the market, I highly recommend my Private Wealth Advisory newsletter.

Published every other Wednesday after the markets’ close, Private Wealth Advisory outlines the global macro picture combining political policy, macro developments, cultural ideologies and technical analysis.

To learn more about Private Wealth Advisory  and how it can help you navigate the markets…

Click Here

Graham Summers

 

 

 

 

 

 

Is China an economic miracle, or one massive Government-­sponsored fraud?

History has shown us countless times that centrally-­‐planned, command style economies do not produce long-­term economic growth. We’ve seen this will the Soviet Union, the UK, the US-­since the Tech Crash, and today in China.

I realize that many would argue China has adopted free market policies with its “free market zones.” However, even this terminology reveals China is nowhere near a free, dynamic market (a free market is simply a free market, not a “zone.”).

Instead, China should be viewed through the lens of rampant corruption, fraud, and insider dealing that has seen a select handful get rich (usually those with close ties to the ruling party) via paper wealth (real estate and stock prices).

First and foremost, no Chinese economic data is even close to accurate. The reason for this, is that unlike the US in which GDP is measured using final sales, China simply counts any and all economic production as economic growth.

So, let’s say that China built a city. Regardless of whether any of the buildings are ever purchased or leased, China will count the entire city in its GDP growth. As one can imagine, this has highly incentivized China’s government to build “bridges to nowhere” or economic projects that are never actually used.

As a result the country is replete with ghost towns…

China’s ghost towns and phantom malls

“In Chenggong, there are more than 100,000 new apartments with no occupants,” according to the World Bank’s Holly Krambeck.

Designed as an overspill point for nearby Kunming, a city of nearly six-­‐and-­‐a-­‐ half million, Chenggong began to take shape in 2003.

High-­‐rise apartment blocks have mushroomed but today it is still largely deserted after failed attempts by the authorities to attract new residents.

Matteo Damiani, an Italian journalist who worked for seven years in Kunming, has visited Chenggong several times, photographing empty tower blocks that loom over gigantic plazas, peopled only by enormous works of art.

He found a small community of students, workers and security guards but nobody else.

“The suburbs and even the city centre are empty,” he says. “You can find a big stadium, shopping malls and hundreds of buildings finished but abandoned.”

There is even an area for luxury villas that is totally abandoned, he adds. It is said to be one of the biggest ghost cities in Asia. http://www.bbc.co.uk/news/magazine-­‐19049254

…as well as widespread economic fraud and counterfeiting:

Fraud, Culture and the Law: Can China Change?

Counterfeit goods and scams are used to defraud millions of Chinese daily.

This week alone, the country’s state media have reported the arrests of two men for fraud: one a high-­‐profile real estate financier suspected of manipulating bids, the other a sales manager at milk producer Mengniu who reportedly tampered with production dates on milk and yogurt labels.

Those cases follow the announcement earlier this month by police that they had seized more than $182 million in counterfeit pharmaceuticals, including drugs used to treat diabetes and high blood pressure, as part of a nationwide crackdown on fake food and drugs. Drug counterfeiters “are coming up with new schemes, becoming craftier and better able to deceive” police warned in a statement accompanying the news.

The persistence and extent of fraud in China, despite a near constant string of crackdowns and arrests, raises fundamental questions about cultural forces in Chinese society that limit the reach of law…

…The production of counterfeit cigarettes, for example, has been estimated to reach 400 billion cigarettes, although cigarette manufacturing and distribution is supposed to be exclusively state-­‐ owned and controlled. One manufacturer reportedly went so far as build a counterfeit cigarette factory in Fujian designed to look like a military compound, including laborers dressed in second-­‐hand military uniforms who conducted false military drills to complement the masquerade. In Sichuan, meanwhile, police are said to have raided a black-­‐ market cigarette factory that had been disguised as the “Number 1 Block” of a provincial prison.

http://blogs.wsj.com/chinarealtime/2012/08/24/fraud-­‐culture-­‐and-­‐the-­‐ law-­‐can-­‐china-­‐change/

Some more striking evidence of fraud, corruption, and counterfeiting in China:

1)    In 2010, 30 animals died in the Chinese zoo of Shenyang due to malnutrition.

2)    China built the world’s largest mall in 2005. Of the over 2,300 spaces 
available for lease only 47 were rented.

3)    China alone accounted for 73 % of $1.69 billion in counterfeit goods seized in 
the EU in 2011.

4)    Chinese officials have seized over 50 TONS of counterfeit pharmaceuticals.

5)    Raids have seized more than 350,000 counterfeit golf products.

These sorts of issues don’t come out of a free market with a stable regulatory bodies, sound accounting principles, and a legitimate legal structure: they come out of control style economy that are based on fraud and corruption. Indeed, as noted in previous articles:

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

2)  How much these officials stole is unknown. But… 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.

So I fully believe that China is heading for a full-scale economic collapse a la the Soviet Union, not just a hard landing.

Indeed, if you need evidence of just how desperate the Chinese Government has become to maintain control, you should consider that it has launched $1 trillion in stimulus projects:

China’s More Than $1 Trillion Stimulus Will Disappoint, Barclays Says

From the central government and the PBoC to regional governments, spending plans worth approximately more than 11 trillion RMB ($1.74 trillion) have been announced, according to Barclays and Nomura. Analysts at the Japanese bank expect Chinese GDP to hit 7.7% in the third quarter and then rebound strongly to 8.8% in the fourth.

There are reasons to be skeptical of these growth expectations, as China is going through both structural and cyclical changes that will limit the impact, and the breadth, of the coming stimulus, Barclays’ team argues. “This time is different,” they wrote, noting that both in the Asian crisis and in the 2008-­‐9 financial crisis, China suffered massive job losses and deflation.

http://www.forbes.com/sites/afontevecchia/2012/09/17/chinas-­‐more-­‐ than-­‐1-­‐trillion-­‐stimulus-­‐will-­‐disappoint-­‐barclays-­‐says/

To put this number into perspective, China’s entire economy is only $7.3 trillion. So China just unveiled stimulus measures equal to 23% of its entire GDP. This is more than TWICE the size of the 2008 stimulus plan.

Imagine if the US announced a QE program equal to over $3 trillion. That’s the equivalent scale of the recent stimulus programs announced in China. And the Chinese stock market barely reacted to this.

Again, China is beyond a hard landing at this point. Combine this with growing food inflation and it’s possible China may in fact break into several smaller countries in the coming years.

On that note, I’m currently preparing subscribers of my Private Wealth Advisory newsletter for the coming epic global downturn as China, the EU, and even the US experience sharp recessions if not outright depressions.

To find out how we’re doing this, all you need to do is take out a trial subscription to my Private Wealth Advisory newsletter. You’ll immediately be given access to all of our current open trades as well as my three Special Reports titled Protect Your Family, Protect Your Savings, and Protect Your Portfolio.

Collectively, these reports outline critical information for the coming crisis including:

1)   What banks are most exposed to systemic risk.

2)   How, why, and where to buy Gold and Silver bullion.

3)   How much food you need to stockpile, where to buy it and how to store it.

And more!

To take out trial subscription to Private Wealth Advisory…

Click Here Now!!!

Best Regards,

Graham Summers

 

Spain was already experiencing a banking crisis as well as a sovereign crisis. It’s now on the verge of a constitutional crisis (as well as its ongoing sovereign and banking crises).

Secession crisis heaps pain on Spain

Spain lurched further towards a full-­‐blown constitutional crisis as Catalonia announced a snap election potentially opening the way for the country’s most economically important region to declare independence from Madrid.

As police in the Spanish capital barricaded the Spanish parliament against anti-­‐austerity protestors, the government of Mariano Rajoy vowed to stand firm against a drive by Catalonia for secession as the Spanish leader faces the most critical period of his premiership.

“The hour has come to exercise our right to self rule,” said Artur Mas, Catalonia’s president. He called the vote, which is likely to be cast as a proxy referendum on Catalan independence, after Mr Rajoy last week rejected his demands for greater fiscal autonomy, triggering a wave of nationalist sentiment in the northern region.

The political turmoil within Spain came amid signs that a German-­‐led group of eurozone countries were attempting to roll back an agreement reached in June that would free Spain of tens of billions of euros in bank bailout debt.

Under the June deal, Spain’s €100bn bank bailout would be shouldered by the new €500bn eurozone rescue fund, the European Stability Mechanism, rather than the Spanish government.

On paper the ESM will not be given legal powers to take over the bank bailouts entirely until the eurozone politicians have agreed to a federal banking supervision system. But according to senior officials Spain has promised that its bailout will be covered even though it is scheduled to begin in November well before a final agreement.

However, after a meeting between the German, Dutch and Finnish finance ministers on Tuesday, the three said the ESM would not be allowed to take over “legacy assets” recapitalised before the banking supervision system was in place. This calls into question the markets’ assumption that Spain’s bailout and any assets put in the soon-­‐to-­‐be-­‐created Spanish “bad bank” will be covered by the deal.

http://www.ft.com/intl/cms/s/0/901894a6-­‐0722-­‐11e2-­‐b148-­‐ 00144feabdc0.html#axzz27n7hfRTE

As I noted in previous articles, Spain has three options:

1)  Spain goes the “Greek route” of agreeing to austerity measures in exchange for bailouts (which will implode the economy).

2)  Prime Minister Rajoy refuses to impose austerity measures and is removed/ replaced by an EU technocrat who is pro-­‐austerity measures (like Italy experienced last year)

3)  Spain defaults/ leaves the EU.

Thus far Spanish Prime Minister Rajoy has opted to go for #1. The end result has been riots, protests, and now the threat of Spain as a country breaking up. I’ve long averred that Spain will bring about the break up of the Euro. By the look of things, we’re not far from this.

To whit, as the above article notes, Germany, Holland, and Finland have decided to pull back on the promise of a €100 billion Spanish bank bailout first established in June. These countries are now stating that this bailout should be included as part of the ESM mega-bailout fund’s banking program that could take years to implement.

Spain doesn’t have time for this. As I’ve noted before, Spain is facing a full-scale bank run (Spaniards pulled another €17 billion from Spanish banks in August, bringing the year to date bank run to over 18% of total Spanish bank deposits).

Now add multiple regional bailout requests, as well as 25% total unemployment to the mix and Spain is an absolute disaster. The Spanish Ibex knows it too…

Congratulations Mario Draghi, you promised unlimited bond buying and you bought less than one month’s worth of gains for Spain. If you want proof positive that Central Banks are losing their grip on things, the Ibex is it. The moment we take out that trendline again, it’s GAME OVER (what more can the ECB promise?)

“So what?” many investors will ask, “Spain is nothing in the grand scheme of things.”

Wrong.

Spain’s sovereign bond market is $2.1 trillion in size. And Spanish bonds are used to backstop hundreds of trillions of Euros worth of derivative and credit trades.

So when Spain defaults (and it will eventually) all of these assets become worthless. And all of those trades blow up. Imagine Lehman times ten.

On that note, I’m currently preparing subscribers of my Private Wealth Advisory newsletter for the coming European collapse. We’ve already opened to special trades to profit from the continued pain in the EU. I’ve got four more on deck for when things start getting really bad. 

To find out what they are, all you need to do is take out a trial subscription to my Private Wealth Advisory newsletter. You’ll immediately be given access to all of our current open trades as well as my three Special Reports titled Protect Your Family, Protect Your Savings, and Protect Your Portfolio.

Collectively, these reports outline critical information for the coming crisis including:

1)   What banks are most exposed to systemic risk.

2)   How, why, and where to buy Gold and Silver bullion.

3)   How much food you need to stockpile, where to buy it and how to store it.

And more!

To take out trial subscription to Private Wealth Advisory…

Click Here Now!!!

Best Regards,

Graham Summers

 

For the last 80 years or so, financial theory has held that inflation and deflation were mutually exclusive events. We’ve now seen that idea go up in smoke as deflation affects home prices and incomes in the US at the very same time that we experience inflation in energy and food prices courtesy of the Fed’s insane money printing.

Indeed, Ben Bernanke is a disciple of the belief that to battle deflation, one must inflate the financial system/ economy. Never mind that history has shown this to be total bunk (monetization has always inevitably led to higher inflation), Bernanke is an academic and has devoted his life’s work to this misguided belief.

As a result, the man with the greatest control over the value of the US Dollars you own is a man who is so hell-bent on proving his theories that he can and is completely ignoring hard evidence that refutes them.

Case in point, Bernanke and the Fed continually state that inflation is “contained” or “transitory.” This is simply incredible when you consider that food prices, energy prices, rent, and other measures of the cost of living are up double-digit percentage points year over year.

In fact, nothing proves just how insane these people are (either that or they’re pathological liars) than the claim that because iPads are other technological items are becoming cheaper, that overall the cost of living is not increasing much.

Yes, you read that correctly. High ranking members of the US Federal Reserve believe that because a one time purchase of an iPad is cheaper, the increase in the daily cost of food and energy is balanced out.

I bring all of this up, because the Fed is so afraid of de-flation that it is ignoring the clear signs that we are heading towards massive inflation and possibly even hyperinflation.

Throughout history all episodes of hyperinflation have been caused by the same actions: the monetization of debt to fund massive deficits.

This policy works temporarily until the country in question loses credibility in the bond market (bond investors are no longer willing to lend it money). At that point the country enters a currency crisis and experiences hyperinflation.

Sounds familiar, doesn’t it?

Indeed, the US Fed bought 73% of all debt issued last year to fund the US’s deficit. The only reason we’ve been able to get away with this is because the US has the most credibility of any country in the world (we’ve never defaulted on our debt).

However this credibility only goes so far. And we’re on very very thin ice: a 10% deficit and a Debt to GDP ratio over 100%.

I will be blunt here, we are following the precise formula for hyperinflation to a “T.” The only reason it hasn’t hit yet is because the US hasn’t lost all credibility yet. But at this rate, it’s only a matter of time.

So if you’re no preparing for inflation already, you need to get moving now. The Powers That Be are well aware that we’re in big trouble. Consider Mitt Romney’s recent admission that a former head of the NY Fed admitted that as soon as the Fed stops buying all the US debt we’ll have a failed Treasury auction and interest rates will soar.

Make no mistake, the time to prepare for higher inflation is NOW before this happens.

On that note, I’m currently preparing subscribers of my Private Wealth Advisory newsletter for the coming inflationary storm with a Special Inflation Portfolio consisting of unique, unknown inflation hedges that will outperform even Gold and Silver as inflation rips through the financial system.

I’m talking about extraordinary asset plays trading at massive discounts to their real value.

One of them is a junior Gold company with reserves valued at over $9 billion. Today it’s entire market cap is less than $300 million.

Another one is a Silver play currently valued by the market at less than 10% of its known reserves. And it’s already producing (so this is not some “pie in the sky” play on future discoveries)

I’ve got three other plays up my sleeve. I expect all of them will be up in the double digits in the weeks to come.

To find out what they are, all you need to do is take out a trial subscription to my Private Wealth Advisory newsletter. You’ll immediately be given access to my Special Inflation Portfolio as well as my three Special Reports titled Protect Your Family, Protect Your Savings, and Protect Your Portfolio.

Collectively, these reports outline critical information for the coming crisis including:

1)   What banks are most exposed to systemic risk.

2)   How, why, and where to buy Gold and Silver bullion.

3)   How much food you need to stockpile, where to buy it and how to store it.

And more!

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Best Regards,

Graham Summers