Month: July 2017

The following is an excerpt from our weekly investment service, Private Wealth Advisory.

A truly massive scandal is brewing in Big Tech.

This scandal concerns the fact that 60% of advertising “clicks” are in fact NOT coming from humans; they are generated bots or automated algorithms that don’t buy anything. EVER.

If you don’t believe me, and think I’m just making this up, consider what Keith Weed had to say last month.

Weed is head of Marketing for the consumer goods giant Unilever. In this role, he oversees a marketing budget of $8+ BILLION per year. And here are his statements on the impact of bots in digital advertising.

With $8.4 billion in annual ad spend, the advertising industry pays attention when Unilever is unhappy. During the Cannes Lions Festival of Creativity, Unilever’s chief marketing and communications officer Keith Weed outlined the three concerns that “keep him up at night.”

“If you don’t have your ad viewed, you are dead,” Weed told a Cannes audience on Wednesday.

He wants advertisers to “join up the dots in the digital industry.” As Weed sees it, this ecosystem is corrupted. Some 60% of traffic online is bots. “We want to buy eyeballs of viewers not bots,” says Weed. “If it is too good to be true, it probably is.”

Source: Mediapost.

What does this mean?

The Tech Giants, Facebook and Alphabet (formerly Google), make the bulk of their money by charging advertisers a certain amount for every click the advertisers’ ads receive online.

The price that Facebook and Alphabet can charge for advertising space is based on the amount of web traffic that ads receive. The more traffic these ads receive, the HIGHER the prices Facebook and Alphabet can charge advertisers for ad space.

So if 60% of ALL AD CLICKS are in fact BOTS, not HUMANS, the reality is that these ad prices are in fact MASSIVELY overstated.

Again, if you think I’m making this up, consider that another consumer goods giant, Proctor and Gamble cut its online marketing budget by $100 million and found… ZERO IMPACT ON GROWTH.

Procter & Gamble Co. said that its move to cut more than $100 million in digital marketing spend in the June quarter had little impact on its business, proving that those digital ads were largely ineffective.

Almost all of the consumer product giant’s advertising cuts in the period came from digital, finance chief Jon Moeller said on its earnings call Thursday. The company targeted ads that could wind up on sites with fake traffic from software known as “bots,” or those with objectionable content.

Source: WSJ.

Again, Proctor and Gamble cut online advertising by $100 million and had ZERO impact on its results.

These are two massive companies both of which spent BILLIONS in advertising. And both of them are stating point blank that the value of digital advertising via companies like Facebook and Alphabet is MASSIVELY overstated.

What happens if these companies have to begin accurately pricing their ads?

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Best Regards,

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Many commentators are baffled as to why the Fed has suddenly reversed course. Throughout 2017 the Fed has talked repeatedly about raising rates several times as well as shrinking its balance sheet.

Then in the span of a single month, the Fed just about dropped all of this. Fed Chair Janet Yellen, speaking to Congress, confessed that the Fed is just about done with rate hikes and that any balance sheet reduction will NOT be used to drain liquidity from the system.

What happened to cause this change?

The bond market went into revolt with yields on the 10-Year Treasury breaking out of a major downtrend.

Why does this matter?

Globally the world has tacked on some $68 TRILLION in debt since 2007. All of this has been issued based on the assumption that interest rates would remain LOW.

Put simply, if 2007 marked a large debt bubble, today’s bubble is significantly larger with global Debt to GDP now at 327%. In this context, any rise in bond yields (meaning bond prices are falling) represents a systemic threat.

On top of this, there are over $368 TRILLION in derivatives that trade based on interest rates. Over $100 trillion of these are on US bank balance sheets.

Which is why the Fed has completely given up on hiking rates and is going to let inflation continue to percolate in asset classes.

This is going to send Gold and other inflation hedges THROUGH THE ROOF.

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Chief Market Strategist

Phoenix Capital Research

The single biggest trend for the next year or so will be the collapse of the $USD.

The fact is that the Fed will be forced to walk back its hawkishness. Indeed, this process has already begun with Janet Yellen testifying before Congress that the Fed was just about done with rate hikes.

Bear in mind, the $USD had already dropped 8% year to date during a period in which the Fed had hiked rates TWICE.

So what will happen to the $USD when the Fed walks back its hawkishness and slows down the pace of rate hikes… or even STOPS hiking altogether?

Again… the $USD is set to collapse. And as it does, inflation plays will be EXPLODING higher.

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Chief Market Strategist

Phoenix Capital Research

Janet Yellen has confirmed that the ($USD) is going to collapse.

I don’t mean a systemic, going to zero, collapse (though one day the $USD, like all fiat currencies will fail). I mean that the $USD is going to drop hard in the coming 18+ months.

How hard?

I believe we’ll see the $USD in the 80s sometime in 2018. That’s a full 11% lower from where the $USD is today. Put simply, the entire move in the greenback that was driven by the Fed ending QE in 2014 will be unwound.

How do we know this?

Janet Yellen’s testimony to Congress earlier this month was a clear signal.

First, a little context…

For months now, numerous Fed officials have been publicly stating that the Fed was embarking on a significant tightening schedule.

This has been one of the most coordinated and clear Fed PR campaigns in recent history with numerous Fed officials calling for 3-4 rate hikes in 2017 as well as Fed balance sheet shrinking.

Then on Tuesday and Wednesday July 11th and 12th, respectively, Fed Chair Janet Yellen testified in front of Congress that the Fed is just about done with tightening.

Moreover, she stated that the Fed WOULDN’T use its balance sheet normalization as a monetary policy (indicating that it won’t use it to drain liquidity from the system).

The $USD, which was already trending downward in spite of the Fed’s previous hawkishness, promptly collapsed. And Gold erupted higher.

Again, this is a clear signal… Yellen couldn’t even stomach a few months of hawkishness… she knows the US debt markets need the $USD to be WEAK.

Which means…it’s time to get moving into inflation plays.

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Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

 

Very few investors caught on to it, but a few weeks ago the Fed made its single largest announcement in eight years.

First let me provide some context.

For eight years now, the Fed has propped up the stock market. In terms of formal monetary policy the Fed has:

·      Kept interest rates at ZERO for seven years making money virtually free and forcing investors into stocks and junk bonds in search of yield.

·      Engaged in over $3.5 TRILLION in Quantitative Easing or QE, providing an amount of liquidity to the US financial system that is greater than the GDP of Germany.

In terms of informal monetary policy, the Fed has consistently engaged in verbal intervention any time stocks came in danger of breaking down.

For eight years, ANY time stocks began to break through a critical level of support a Fed official appeared to issue a statement about future stimulus or maintaining its accommodative monetary policies.

Put simply, the Fed has invested tremendous capital (both literal and metaphoric) in maintaining the bull market in stocks. Indeed, at various points, both former Fed Chair Ben Bernanke and current Fed Chair Janet Yellen have pointed to elevated stock levels as indicating the “success” of Fed policy.

With that in mind, on June 27^th 2017 the Fed sent a clear and coordinated signal that it is ready for the stock market to fall.

The signal was coordinated in that THREE senior Fed officials (Fed Chair Janet Yellen, Fed Vice-Chair Stanley Fischer and San Francisco Fed President John Williams) made formal statements on the very same day.

The signal was clear in that all three official referenced elevated stock levels/the fact that the stock market is ripe for a correction.

First was Fed Vice Chair Stanley Fisher who pointed our EXPLICITLY that stocks are extremely richly valued at current valuations.

Prices of risky assets have increased in most major asset markets in recent months even as risk-free rates also rose. In equity markets, price-to-earnings ratios now stand in the top quintiles of their historical distributions, while corporate bond spreads are near their post-crisis lows.

~Fed Vice-Chair Stanley Fisher

Source: Federal Reserve website.

This is an astonishing admission by the second most powerful official at the Fed. Fisher is literally admitting the market is richly valued based on earnings (fundamentals).

Then came San Francisco Federal Reserve Bank President John Williams (Janet Yellen’s most trusted advisor) who stated the following:

“The stock market seems to be running pretty much on fumes,” San Francisco Federal Reserve Bank President John Williams said in an interview carried on Sydney’s ABC News affiliate and available on the internet on Tuesday. “It’s something that clearly is a risk to the U.S. economy, some correction there — it’s something we have to be prepared for to respond to if it does happen.” 

~ San Francisco Federal Reserve Bank President John Williams

Source: Reuters.

Yes, a senior Fed official, and one who has a direct line to Fed Chair Janet Yellen, stated that the stock market is running on “fumes.” This degree of bearishness from ANY Fed official is incredible. But for Williams to make a statement like this on the very same day that the Fed Vice-Chair pointed out that stocks are overvalued is like a six sigma event.

This is a CLEAR signal that the Fed is ready to let stocks fall from their lofty levels. But before anyone panicked, Fed Chair Janet Yellen appeared to assure us that the Fed stands ready to halt any financial crisis from occurring when the drop comes.

Fed Chair Janet Yellen said Tuesday that banks are “very much stronger” and another financial crisis is unlikely anytime soon…

She also made a bold prediction: that another financial crisis the likes of the one that exploded in 2008 was not likely “in our lifetime.” The crisis, which erupted in September 2008 with the implosion of Lehman Brothers but had been stewing for years, would have been “worse than the Great Depression” without the Fed’s intervention, Yellen said.

~Fed Chair Janet Yellen

Source: CNBC

If you wanted the Fed to provide the “all clear” that it is ready for stocks to fall, this is it. Yellen is openly stating that not only does she not expect a financial crisis in the near future… she doesn’t expect one to occur “in our lifetime.”

And bear in mind… all three of these speeches were given on the very same day.

This is a clear and coordinated campaign by the Fed to signal to the markets that it wants to deflate the stock market. It marks the first time in EIGHT years the Fed has been openly and publicly bearish on stocks.

With that in mind, I believe the market rig that has been used to prop the markets up will be ending very soon. What’s next won’t be pretty.

A Crash is coming…

And smart investors will use it to make literal fortunes.

We offer a FREE investment report outlining when the market will collapse as well as what investments will pay out massive returns to investors when this happens. It’s called Stock Market Crash Survival Guide.

We extended our final offer on this report by 24 hours. But this is it. No more extensions.

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

The credit cycle is turning for the worse.

Delinquency rates are creeping up in the consumer loan and commercial/industrial loan space. This is a clear signal that both the consumer and the corporate sectors of the economy are beginning to run out of steam.

In response to this, banks are pulling back on lending.

If you want to put the above two graphs together, think of it this way:

The economy is showing signs of stalling, so banks are “pulling the plug.”

The last time both of these issues came to rise was in 2007 as the last major credit cycle turned.

We all remember what happened next, particularly given that stocks were in a massive bubble at the time (just like today).

A Crash is coming…

And smart investors will use it to make literal fortunes.

We offer a FREE investment report outlining when the market will collapse as well as what investments will pay out massive returns to investors when this happens. It’s called Stock Market Crash Survival Guide.

Today is the last day this report is available to the general public.

To pick up one of the last remaining copies…

CLICK HERE!

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Yesterday, the Fed made the single largest announcement of the last 10 years.

The media didn’t catch it. Nor did the markets.

The reason?

Everyone is so busy focusing on whether or not the Fed wants to hike rates, that they’re not looking for other items…

Other items…. such as the fact the Fed has decided it is going to pop the stock market bubble.

I know media doesn’t believe this. Heck, 99% of investors don’t believe it. After all, the Fed has spent eight years pushing stocks higher through liquidity injections and verbal interventions.

In this context, it’s all but impossible to imagine that the Fed wants stocks to fall.

But it does.

In fact, I’m taking the words straight from the Fed’s yesterday FOMC statement.

In the assessment of a few participants, equity prices were high when judged against standard valuation measures.

That is an incredible statement.

It tells us:

1)   The Fed is openly discussing stocks prices.

2)   The Fed is openly discussing whether stocks are in a bubble (when prices are high against standard valuations).

3)   MORE THAN ONE Fed member believes that stocks ARE in a bubble.

Remember, this is THE FED we are talking about; not some fund manager or guru on TV. This is the entity in charge of assessing risks to the financial system. And SEVERAL members have determined stocks are such a risk.

Just how big is the bubble that even THE FED is discussing it?

BIG. As in DWARFING the 2007 Bubble.

A Crisis is coming.

And smart investors will use it to make literal fortunes.

We offer a FREE investment report outlining when the market will collapse as well as what investments will pay out massive returns to investors when this happens. It’s called Stock Market Crash Survival Guide.

We made 1,000 copies to the general public.

As I write this, only 35 are left.

To pick up one of the last remaining copies…

CLICK HERE!

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

Perhaps the single most accurate predictor of the economy has rolled over into recession territory.

I’m talking about tax revenues.

GDP growth, unemployment data, ISM surveys… all of these can and are massaged by statisticians to create a rosier picture of the economy than reality. By way of example, we recently noted that 95% of all net job growth since 2008 was in fact created via an accounting gimmick. In reality, the jobs were never created at all.

Tax revenues, particularly corporate tax revenues, are very difficult to fake. Either the money came in the door, or it did not.

If the economy is booming, corporate tax revenues rise as companies generate greater revenue/income, resulting in them paying more in taxes. And if the economy is rolling over, corporate tax revenues plunge as companies close up shop and stop paying taxes.

On that note, take a look at the chart below.

Source: WSJ

As you can see, state and local corporate tax revenues have rolled over in a massive way. If we were to analyze this chart like a stock, you’d see the “uptrend” of growth was completely broken.

Why does this matter?

Because it serves as a clear signal that the US economy is rolling over in a big way. Indeed, the last time we saw state and local corporate tax revenues roll over like this was in late 2007/ early 2008.

We all know what happened to stocks after that. The only difference between then and now is the 2017 stock market bubble is even larger.

A Crash is coming…

And smart investors will use it to make literal fortunes.

We offer a FREE investment report outlining when the market will collapse as well as what investments will pay out massive returns to investors when this happens. It’s called Stock Market Crash Survival Guide.

We made 1,000 copies to the general public.

As I write this, only 35 are left.

To pick up one of the last remaining copies…

CLICK HERE!

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research