Phoenix Capital Research

Feb

2013

Europe’s Fine… Just Ask Depositors Who Saw Their Savings Go to ZERO

Anyone who wants to get an inside look at both the European banking system and the politicians in charge of fixing it need to only look at Spain’s Bankia.

Bankia was formed in December 2010 by merging seven totally bankrupt Spanish cajas (regional banks that were unregulated). The bank was heralded as a success story and an indication that European Governments could manage the risks in their banking systems.

Indeed, in 2011, Bankia even reported a profit of €41 million. And in April 2012, it was proposing paying a dividend. Then, in the span of two weeks, the bank revised its 2011 profit to a €3.3 billion LOSS, requested a formal bailout from Spain, and had to be nationalized.

What’s striking about this sequence of events is that throughout it, Spain’s Prime Minister Mariano Rajoy was claiming that Spain’s banks were in great shape. Indeed, on May 28 2012, (after Bankia had already requested a €19 billion bailout, the single largest bailout in Spanish history), Rajoy stated , “there will be no rescue of the Spanish banking sector.”

Bear in mind, Spain itself was just days away from requesting outside aid from the EU.

The timeline says it all:

May 9^th: Bankia requests €4.5 billion loan, Spanish Government states that the bank is “solvent.”
May 21^st: Spain meets Bankia’s request for loan and takes a 45% stake in the bank thereby instigating a partial nationalization.
May 23^rd: Bankia’s bailout needs grows to €11 billion/ Rajoy retorts to France’s Hollande, “Hollande does not know the state of Spanish banks.”
May 24^th: Bankia’s bailout needs grow to €15 billion
May 25^th: Bankia’s bailout needs are now €19 billion (2011 profits revised to €4 billion loss)… the Spanish Bailout Fund has just €5 billion in cash.
May 28^th: Rajoy comments, “there will be no rescue of the Spanish banking sector.”
Weekend of June 8-10^th: Rajoy texts to his finance minister: “Aguanta, we are the fourth European power. Spain is not Uganda… If they want to force the rescue of Spain, they need to start getting ready €500 billion and another €750 billion for Italy, which will have to be rescued afterwards.”/ Spain informally asks for €100 billion bailout/ EU Finance Ministers OK the bailout.
Sunday June 10^th: Rajoy states that the bailout is a “victory” before commenting, “This year is going to be a bad one: Growth is going to be negative by 1.7 percent, and also unemployment is going to increase.”

Thus, in just one month’s time, Spain implements the largest bank nationalization in its history and requests €100 billion from the EU to recapitalize its banks. And yet, throughout this time, Spanish politicians maintain that Spain’s banking system is “solvent” or in great shape… right up until they get the €100 billion at which point the truth comes out: “This year is going to be a bad one.”

Also note that Rajoy sealed the deal and which he proclaimed a “triumph” (along with the above statement about 2012 being a bad year) before hopping a plane to watch Spain’s soccer team play Poland.

Fast forward to December 2012, and Bankia is again in the news, this time with Spain revealing that despite receiving the largest bailout in Spanish history, the bank still had a NEGATIVE value.

Bankia’s shareholders have received a nasty new year’s surprise. They may lose most of their investments or even all of them says the Spanish bank rescue fund in its latest report.

According to FROB, the Fund for Orderly Bank Restructuring, Bankia has a negative value of 4.2 billion euros, and its parent group BFA is 10.4 bn in the red.

Valuation is key in the recapitalisation of Spain’s banking system, weighed down by massive bad loans accumulated in a property bubble that burst in 2008. Bankia/BFA is set to receive 18 bn euros of European aid, and become the country’s biggest bailout recipient.

http://www.euronews.com/2012/12/27/bankia-worthless-says-new-report/

At this point the following is obvious:

1) Europe’s banks are in far far worse shape than anyone publicly admits

2) The political class in Europe has no idea how to solve this mess

3) No one has quantified the bank’s actual losses or their capital needs

4) Everyone is lying about just about everything related to Europe’s financial system

You could honestly end the story here and know everything you need to about Europe. But then you’d be missing out on Bankia’s newest achievement: setting the record for corporate losses in Spanish history.

Nationalised Spanish lender Bankia is expected to reveal a €19bn loss next week, the largest in the country’s corporate history.

On Thursday Bankia will report full-year earnings, including a €12.6bn provision taken at the end of last year. The writedown is a result of the lender moving assets into Spain’s “bad bank” at heavy discounts.

Bankia, which is seen as a symbol of Spain’s financial woes, was created through the merger of seven smaller savings banks before being listed on Madrid’s stock exchange. When the company failed, hundreds of thousands of people who had been sold shares saw their savings wiped out. The collapse forced Spain to ask Europe for a bailout for its banking sector, which has meant the lender is subject to tight controls.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9887116/Bankia-to-reveal-largest-loss-in-Spanish-corporate-history.html

It’s a little known fact about the Spanish crisis is that when the Spanish Government merges troubled banks, it typically swaps out depositors’ savings for shares in the new bank.

So… when the newly formed bank goes bust, “poof” your savings are GONE. Not gone as in some Spanish version of the FDIC will eventually get you your money, but gone as in gone forever (see the above article for proof).

This is why Bankia’s collapse is so significant: in one move, former depositors at seven banks just lost virtually everything.

And this in a nutshell is Europe’s financial system today: a totally insolvent sewer of garbage debt, run by corrupt career politicians who have no clue how to fix it or their economies… and which results in a big fat ZERO for those who are nuts enough to invest in it.

Be warned. There are many many more Bankias coming to light in the coming months. So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We’re literally at most a few months, and very likely just a few weeks from Europe’s banks imploding, potentially taking down the financial system with them. Think I’m joking? The Fed is pumping hundreds of BILLIONS of dollars into EU banks right now trying to stop this from happening.

I’ve already alerted Private Wealth Advisory subscribers to 6 trades that will all produce HUGE profits as this mess collapses all of them have soared this week. And I expect BIG GAINS in the coming months.

We’ve also taken steps to prepare our loved ones and personal finances for systemic risk with my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports.

With a total of 20 pages, these reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

I can do the same for you. All you need to do is take out a subscription to my Private Wealth Advisory newsletter.

You’ll immediate be given access to the Private Wealth Advisory archives, including my Protect Your Family,Protect Your Savings, and Protect Your Portfolio reports.

You’ll also join my private client list in receive my bi-weekly market commentaries as well as my real time investment alerts, telling you exactly when to buy and sell an investment and what prices to pay.

So you get my hard hitting market insights, actionable investment recommendations, and real time trade alerts, for one full year, for just $299.99.

To take out an annual subscription to Private Wealth Advisory now and start taking steps to insure your loved ones and personal finances move through the coming storm safely…

Click Here Now!!!

Best Regards,

Graham Summers

Feb

2013

The Wal-Mart Indicator: We’re Heading for a Stagflationary Disaster

In the second half of 2012, the media, Federal Reserve, and various Governmental economic bean counters engaged in what we call Great Global Rigging of 2012 in an effort to make the US economy look better to help the Obama campaign re-election bid.

Now that the election is over, the ugly economic realities have begun to creep out from where they were swept under the rug. And while the official economic data is bad (a negative GDP in the fourth quarter of 2012), it’s nothing compared to what real-time indicators are showing:

Wal-Mart Stores Inc. (WMT) had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.

“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal- Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.”

Wal-Mart and discounters such as Family Dollar Stores Inc (FDO). are bracing for a rise in the payroll tax to take a bigger bite from the paychecks of shoppers already dealing with elevated unemployment. The world’s largest retailer’s struggles come after executives expected a strong start to February because of the Super Bowl, milder weather and paycheck cycles, according to the minutes of a Feb. 1 officers meeting Bloomberg obtained.

http://www.businessweek.com/news/2013-02-15/wal-mart-executives-sweat-slow-february-start-in-e-mails

Here’s Wal-Mart, the single largest retailer in the US, reporting that it just had the single worst start to any month in over seven years. Indeed, the company missed just revenues expectations as families adjust to a “reduced paycheck and increased gas prices.

The increased gas prices is most important. Inflation is already seeping into the system in a big way. Indeed, if you account for real inflation (not the Fed’s phony CPI measure), the US economy contracted by over 1% last quarter.

Make no mistake, we are heading into a stagflationary collapse. The time to prepare is NOW before stocks “get it.”

So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We’re literally at most a few months, and very likely just a few weeks from the economy taking a massive downturn, potentially taking down the financial system with them. Think I’m joking? The Fed is pumping hundreds of BILLIONS of dollars into financial system right now trying to stop this from happening.

I’ve already alerted Private Wealth Advisory subscribers to 6 trades that will all produce HUGE profits as this mess collapses.

We’ve also taken steps to prepare our loved ones and personal finances for systemic risk with my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports.

With a total of 20 pages, these reports outline:

And more…

I can do the same for you. All you need to do is take out a subscription to my Private Wealth Advisory newsletter.

You’ll immediate be given access to the Private Wealth Advisory archives, including my Protect Your Family,Protect Your Savings, and Protect Your Portfolio reports.

So you get my hard hitting market insights, actionable investment recommendations, and real time trade alerts, for one full year, for just $299.99.

To take out an annual subscription to Private Wealth Advisory now and start taking steps to insure your loved ones and personal finances move through the coming storm safely…

Click Here Now!!!

Best Regards,

Graham Summers

Feb

2013

Spain Just Issued a Warning: The System is Blowing Up Again

At this point it is clear that Europe is totally finished. The house is burning. It’s just a matter of time before it collapses.

Indeed, we get a clear signal of this from Spanish Prime Minister Mariano Rajoy, who just announced the following: “It is not enough, there are no green shoots, there is no spring.”

To understand the significance of this statement, you need to know a bit more about Rajoy and European politics in general.

Rajoy is the same political leader who, throughout 2012, stated time and again that the Spanish banking system was in great shape. Indeed, he was still claiming, “there will be no rescue of the Spanish banking sector,” a mere week before Spain’s entire banking system collapsed.

Rajoy then demanded a €100 billion bailout from the EU (Spain’s entire banking market cap is just a little over this). It was only then that he admitted that 2012 would be a “bad year.” Of course, he also claimed that the bailout was a “triumph” and celebrated by hopping a plane to watch Spain’s soccer team play Poland, but that’s a story for another time.

Given that Rajoy has only admitted Spain is screwed at times when the entire system is going under, we have to ask ourselves… How BAD are things that he just admitted, “there are no green shoots, there is no spring”?

The short answer: HORRIFIC.

Spain only just squeaked through 2012 by using 90% of its social security fund to buy Spanish debt. The country now has over €200 billion in new debt to issue in 2013.

Where on earth Spain will get this money from remains to be seen, given that even Spanish banks became net sellers of Spanish debt last year as they sold assets to return money to fleeing depositors.

Indeed, the country now is attempting to find idiots, I mean investors, in the US, by offering a Dollar-denominated bond. After all, who wouldn’t want to invest in a country where the formal bailout fund is tapped dry, social security is tapped dry, and banks still have negative value?

At the end of the day, we all know how this mess will end: Spain will default which will suck several hundred billion Euros worth of collateral out of the system at which point we’ll experience a Lehman-type event times ten.

What happens between then and now is anyone’s guess. But the fact that Rajoy is admitting “there are no green shoots, there is no spring” indicates that things are likely about to get very ugly once again.

You can choose to ignore this and believe that Europe’s Crisis is fixed just as EU political leaders claim. But Europe in general is out of options in terms of solving its debt crisis. The only thing that held things together in 2012 was the promise of unlimited bond buying by ECB President Mario Draghi… but then again this “buying” would only come with a formal request for a bailout, rampant austerity measures, and a look at the books for any country requesting it

Trust me, Spain doesn’t want ANYONE taking a closer look at its books.

So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We’re literally at most a few months, and very likely just a few weeks from Europe’s banks imploding, potentially taking down the financial system with them. Think I’m joking? The Fed is pumping hundreds of BILLIONS of dollars into EU banks right now trying to stop this from happening.

I’ve already alerted Private Wealth Advisory subscribers to 6 trades that will all produce HUGE profits as this mess collapses.

We’ve also taken steps to prepare our loved ones and personal finances for systemic risk with my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports.

With a total of 20 pages, these reports outline:

And more…

I can do the same for you. All you need to do is take out a subscription to my Private Wealth Advisory newsletter.

You’ll immediate be given access to the Private Wealth Advisory archives, including my Protect Your Family,Protect Your Savings, and Protect Your Portfolio reports.

So you get my hard hitting market insights, actionable investment recommendations, and real time trade alerts, for one full year, for just $299.99.

To take out an annual subscription to Private Wealth Advisory now and start taking steps to insure your loved ones and personal finances move through the coming storm safely…

Click Here Now!!!

Best Regards,

Graham Summers

Feb

2013

If Europe Were a House… It’d Be Condemned….

One of the primary focal points of our writing is the corruption that has become endemic to the political and financial elites of the world. When we refer to corruption we are referring to insider deals, cronyism, lies and fraud. Since the Great Crisis began in 2008, these have become the four pillars of the financial system replacing the pillars of trust, transparency, truth and reality that are the true foundation of capitalism and wealth generation.

As we regularly note, corruption only works as long as the benefits of being “on the take” outweigh the consequences of getting caught. As soon as the consequences become real (namely someone gets in major trouble), then everyone starts to talk.

This process has now begun in Spain.

MADRID — Spain’s governing Popular Party was drawn deeper into a web of corruption scandals this past week, after the Swiss authorities informed the Spanish judiciary that the party’s former treasurer had amassed as much as 22 million euros, or $29 million, in Swiss bank accounts.

The treasurer, Luis Bárcenas, resigned from his job in 2009, after being indicted in the early stages of an investigation, which is still ongoing, into a scheme of kickbacks and illegal payments allegedly involving other conservative party politicians…

Nonetheless, the revelations have brought a fast-growing list of corruption investigations, which have unspooled across Spain, to the doorstep of the conservative government of Prime Minister Mariano Rajoy, who has so far remained silent. About 300 Spanish politicians from across the party spectrum have been indicted or charged in corruption investigations since the start of the financial crisis. Few have been sentenced so far.

http://www.nytimes.com/2013/01/19/world/europe/corruption-scandals-widen-in-spain.html?_r=0

Outside of Spain, corruption scandals have also erupted in Greece. There it was revealed that the very Greek political parties that were negotiated the Greek bailout had received over €200 million in loans from the Greek banks.

Greek prosecutors have ordered the two main ruling parties to testify in an investigation into more than 200 million euros in loans they received from banks, officials said on Friday.

The investigation – which is examining whether the loans are legal and whether any wrongdoing was involved – could embarrass the fragile conservative-led government, which relies on aid from the European Union and the International Monetary Fund.

Last year a Reuters report revealed the conservative New Democracy and the Socialist PASOK parties were close to being overwhelmed by debts of more than 200 million euros as they face a slump in state funding because of falling public support.

http://www.reuters.com/article/2013/02/01/us-greece-parties-idUSBRE91010O20130201

Here again, we find that politicians were “on the take” via questionable if not illegal funds. The fact that this story is coming out now does not bode well for Greece, which is barely holding together as a country.

The consequences of this discovery will not be positive for the Greek political class:

Greece’s finance minister was sent a bullet and a death threat from a group protesting home foreclosures, police officials said on Monday, in the latest incident to raise fears of growing political violence.

The package was sent by a little-known group called “Cretan Revolution”, which warned the minister against any efforts to seize homes and evict homeowners, police sources said. The group sent similar letters to tax offices in Crete last week.

http://news.yahoo.com/greek-finance-minister-sent-bullet-mail-165717734.html

Italy is also facing a major scandal implicating key political figures including the biggest player for European financial system, ECB President Mario Draghi:

Back in mid-January, Bloomberg’s Elisa Martinuzzi and Nicholas Dunbar reported that Deutsche Bank helped Italy’s third-largest bank, Monte Paschi, cover up a 367 million euro loss at the end of 2008 with a shady derivative deal. That swap helped the bank look better than it really was just before taxpayers bailed it out—echoes of Goldman Sachs’s deal to hide Greece’s national debt.

The Italian papers followed Bloomberg’s scoop days later with news that Nomura had structured a derivative for Monte Paschi along similar lines. The Italian central bank then disclosed Monte Paschi executives had concealed documents on the trades from them. Reuters reported that JPMorgan also did a sketchy derivative for the bank.

But the scandal only continued to grow. So far, the bank may have lost a billion dollars on the deals, and it turns out that the Bank of Italy knew about the allegedly fraudulent deals back in 2010, when Mario Draghi was its chief. Draghi is now head of the European Central Bank, and has been critical in tamping down the euro crisis in the last several months.

Now, the scandal threatens to change the course of Italian national elections being held later this month, giving a leg up to Silvio Berlusconi…

http://www.cjr.org/the_audit/bloomberg_unearths_an_italian.php

The key item in the above story is Mario Draghi’s involvement. As head of the European Central Bank, Draghi is arguably the most powerful man in Europe. Indeed, it was his promise to provide unlimited bond buying that stopped the systemic implosion of Europe last summer.

In this sense, the entire EU has been held together by Draghi’s credibility as head of the ECB. The fact that we now have a major scandal indicating that he was not only aware of fraudulent deals in 2010, but gave them a free pass will have major repercussions for the future of the Euro, the EU, and the EU banking system.

We hope by now that you see why we have remained bearish on Europe when 99% of analysts believe the Crisis is over. The only thing that has the EU together has been the credibility of politicians who we are now discovering are all either corrupt, inept or both.

To use a metaphor, if Europe were a single house, it would be rotten to its core with termites and mold. It should have been condemned years ago, but the one thing that has kept it “on the market” was the fact that its owners were all very powerful, connected individual. We are now finding out that the owners not only knew that the home should have been condemned but were in fact getting rich via insider deals while those who lived in the house were in grave danger.

As we stated at the beginning of this issue, corruption only works as long as the benefits of being “on the take” outweigh the consequences of getting caught. As soon as the consequences become real (in that someone gets in major trouble), then everyone starts to talk.

The above stories about Greece, Spain, Italy reveal that we have entered the stage at which people have begun to talk about Europe’s corruption.

013 is going to be a very interesting year for Europe.

I’ve already alerted Private Wealth Advisory subscribers to 6 trades that will all produce HUGE profits as this mess collapses.

We’ve also taken steps to prepare our loved ones and personal finances for systemic risk with my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports.

With a total of 20 pages, these reports outline:

And more…

I can do the same for you. All you need to do is take out a subscription to my Private Wealth Advisory newsletter.

You’ll immediate be given access to the Private Wealth Advisory archives, including my Protect Your Family,Protect Your Savings, and Protect Your Portfolio reports.

So you get my hard hitting market insights, actionable investment recommendations, and real time trade alerts, for one full year, for just $299.99.

To take out an annual subscription to Private Wealth Advisory now and start taking steps to insure your loved ones and personal finances move through the coming storm safely…

Click Here Now!!!

Best Regards,

Graham Summers

Feb

2013

What Happens to a Financial System When Its Two Biggest Pillars Collapse?

Those EU leaders who have yet to be implicated in scandals are not faring much better than their more corrupt counterparts. In France, socialist Prime Minister Francois Hollande, has proven yet again that socialism doesn’t work by chasing after the wealthy and trying to grow France’s public sector… when the public sector already accounts for 56% of French employment.

France was already suffering from a lack of competitiveness. Now that wealthy businesspeople are fleeing the country (meaning investment will dry up), the economy has begun to positively implode.

The first sign of this came actually came from Germany. As we noted a few months ago, Germany had prepared a working group to examine the impact of an economic collapse in France.

German Finance Minister Wolfgang Schaeuble has asked a panel of advisers to look into reform proposals for France, concerned that weakness in the euro zone’s second largest economy could come back to haunt Germany and the broader currency bloc.

Two officials, speaking on condition of anonymity, told Reuters this week that Schaeuble asked the council of economic advisers to the German government, known as the “wise men”, to consider drafting a report on what France should do…

“The biggest problem at the moment in the euro zone is no longer Greece, Spain or Italy, instead it is France, because it has not undertaken anything in order to truly re-establish its competitiveness, and is even heading in the opposite direction,” Feld said on Wednesday.

“France needs labour market reforms, it is the country among euro zone countries that works the least each year, so how do you expect any results from that? Things won’t work unless more efforts are made.”

http://uk.reuters.com/article/2012/11/09/uk-germany-france-economy-idUKBRE8A80MN20121109

This German concern has proven to be well founded, as the recent spate of French economic data has been truly horrific.

Auto sales for 2012 fell 13% from those of 2011. Sales of existing homes outside of Paris fell 20% year over year for the third quarter of 2012. New home sales fell 25%. Even the high-end real estate markets are collapsing with sales for apartments in Paris that cost over €2 million collapsing an incredible 42% in 2012.

Since the EU Crisis began in 2008, France and Germany have been the two key countries backstopping the implosion. The fact that France is now facing an economic implosion does not bode well for the future of the Euro or the EU.

The other sovereign backdrop for the EU, Germany, is also experiencing an economic slowdown.

The German economy was hit hard by the euro zone crisis in the final quarter of last year, shrinking more than at any point in nearly three years as traditionally strong exports and investment slowed, the Statistics Office said on Tuesday…

Gross domestic product shrank by 0.5 percent in the final three months of 2012, the worst quarterly performance since Germany fell into a recession during the global financial crisis in 2008/2009 and only the second contraction since it ended.

The parlous fourth quarter pushed overall growth for the year down to 0.7 percent, a sharp slowdown from the 3.0 percent registered in 2011 and a post-reunification record of 4.2 percent in 2010. The 2012 figure was a tad below a Reuters consensus forecast for growth of 0.8 percent.

http://www.reuters.com/article/2013/01/15/us-germany-gdp-idUSBRE90E09Q20130115

Thus, we find that Europe’s primary political market props (EU leaders including ECB head Mario Draghi) are coming unraveled at the precise time that EU banks are showing warning signs and the most important EU economies are heading sharply south.

2013 is going to be a very interesting year for Europe.

I’ve already alerted Private Wealth Advisory subscribers to 6 trades that will all produce HUGE profits as this mess collapses.

We’ve also taken steps to prepare our loved ones and personal finances for systemic risk with my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports.

With a total of 20 pages, these reports outline:

And more…

I can do the same for you. All you need to do is take out a subscription to my Private Wealth Advisory newsletter.

You’ll immediate be given access to the Private Wealth Advisory archives, including my Protect Your Family,Protect Your Savings, and Protect Your Portfolio reports.

So you get my hard hitting market insights, actionable investment recommendations, and real time trade alerts, for one full year, for just $299.99.

To take out an annual subscription to Private Wealth Advisory now and start taking steps to insure your loved ones and personal finances move through the coming storm safely…

Click Here Now!!!

Best Regards,

Graham Summers

Feb

2013

It’s Time For Name That Insolvent Banking System!

Let’s play a little game.

The game is called “Name That Insolvent Banking System.”

The way you play the game is by trying to guess which the countries whose Bank Assets to GDP ratios are in the below chart. There are only seven countries and I’ll tell you that they’re all western economies in the developed world.

If you win this game, you win the knowledge of knowing which countries’ banking systems are leveraged beyond any credibility. You can then invest accordingly, sheltering your assets from these banking system disasters. You can also ignore the tripe being spewed by the various political leaders and Central Bankers about everything being great in the global financial system.

Ready? Let’s play!

As you can see, the seven counties listed here have banking asset to GDP ratios ranging from 90% to an incredible 400%. Five of the seven have banking asset to GDP ratios above 250%, which is simply extraordinary given the implications of this horrific metric.

Having trouble?

OK, I’ll give you a hint, one of these countries is the US. We’re often cited as the debt nightmare of the world, which makes all other countries look good in comparison. So which one is the US?

Did you guess number 6?

Wrong!

OK, here’s another hint, the other six countries are all based in EUROPE.

Give up? Here’s the answer:

As you can see, the US’s banking system is in fact dramatically smaller relative to its GDP than the big players in Europe. As much grief as I and others have given our financial system about being overleveraged and filled with toxic debts, the US is NOTHING compared to Europe, including the allegedly rock solid banking system of Germany.

It’s also worth noting that France, which is considered to one of the essentially sovereign backstops of the EU is in fact one of the worst offenders when it comes to having a totally out of control banking system. Remember this when you hear French politicians talking about the EU crisis being “over.”

So… the next time you hear someone on the TV talking about great things in Europe are, remember the above chart and ask yourself… how can a country be in great shape when it’s banking system is over 200% larger than its economy? Just what are all these “assets.”

And the multi-trillion Euro question: how much of them are in fact garbage?

I’ve already alerted Private Wealth Advisory subscribers to 6 trades that will all produce HUGE profits as this mess collapses.

We’ve also taken steps to prepare our loved ones and personal finances for systemic risk with my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports.

With a total of 20 pages, these reports outline:

And more…

I can do the same for you. All you need to do is take out a subscription to my Private Wealth Advisory newsletter.

You’ll immediate be given access to the Private Wealth Advisory archives, including my Protect Your Family,Protect Your Savings, and Protect Your Portfolio reports.

So you get my hard hitting market insights, actionable investment recommendations, and real time trade alerts, for one full year, for just $299.99.

To take out an annual subscription to Private Wealth Advisory now and start taking steps to insure your loved ones and personal finances move through the coming storm safely…

Click Here Now!!!

Best Regards,

Graham Summers

Feb

2013

Europe is Fixed? Just Like Wall Street Was “Fixed” in May 2008, How’d That Turn Out?

In 2008, as the financial crisis picked up steam, one by one the big bank Wall Street CEOs came forward to assure everyone that “everything is fine” and that their banks were “well capitalized.”

Anyone who did a bit of actual research knew this was not the case. But a large component of corporate (and political) leadership is to maintain confidence and calm no matter how bad things get.

As a result of this, in May 2008 alone, executives at Citigroup, Goldman Sachs, JP Morgan, Lehman Brothers, and Merrill Lynch all stated that the worst was over for financials. That’s right, in just one month executives at ALL of these firms issued proclamations that everything was just dandy for the banks.

The market took about five months to realize the truth, at which point these firms imploded taking the market with them.

I bring this up because we’re seeing this same game played out on a much larger scale in Europe today. Starting in November, various political bigwigs from the EU, whether it be Germany’s Finance Minister Wolfgang Schauble, France’s Prime Minister Francois Hollande, of Spain’s Prime Minister Mariano Rajoy have all stated that the EU Crisis is either over… or that at least the worst of it is over.

It’s rather incredible when you consider the complete and utter failure of these folks to solve the debt problems for a country as small as Greece (which makes up only 2% of the EU’s GDP).

Greece entered a crisis in 2010. Three years later, its major banks are STILL insolvent, the Greece economy has contracted over 20% (the sort of collapse Argentina saw in 2001 when its entire financial system failed), and nothing has been fixed.

So… the EU, with the help of the ECB, IMF, and the US Fed (QE 2 and 4 were basically EU bank bailouts in disguise), COULDN’T SOLVE GREECE’S PROBLEMS. And we’re supposed to believe that these folks can solve Spain, Italy or even France’s!?!

Let’s cut through the crap here.

The European banking system is a complete and total disaster. Remember how bad Wall Street was in 2008? Europe’s banks are many multiples worse than that. The US at least recapitalized its banking system after the Crisis.

Europe hasn’t. At all. That’s right, the banks in Europe have not raised capital to bring down their leverage rations, which is why the ENTIRE EU BANKING SYSTEM IS LEVERAGED AT 26 TO 1.

Lehman, which was a total sewer of garbage debt, was leveraged at 30 to 1. Europe’s ENTIRE SYSTEM is leveraged at 26 to 1.

Let’s take Spain by way of example.

In the run up to the Spanish banking crisis, Spain sported a housing bubble that DWARFED the US’s. Spain is the DARK blue line in the chart below. The US housing bubble is the little green lump below it.

How does a housing bubble get that out of control? By banks lending to anyone with a pulse. Indeed, a little know fact is that the banks sitting on 56% of the Spanish mortgage market were TOTALLY unregulated up until about 2010. As bad as US lending standards leading up to our housing bust, Spain had us beat by many multiples as the above chart illustrates.

The Spanish Government’s solution to this mess was to merge one garbage bank with another. They’ve been doing this for three years… but the Spanish banking system remains screwed up beyond anyone’s comprehension.

Take Bankia for example.

Bankia was formed in December 2010 when the Spanish Government merged seven bankrupt smaller banks in

The bank was touted as a success story, posting a profit in 2011 and even considering paying a dividend. Then the following happened in 2012…

May 9^th: Bankia requests €4.5 billion loan, Spanish Government states that the bank is “solvent.”
May 21^st: Spain meets Bankia’s request for loan and takes a 45% stake in the bank thereby instigating a partial nationalization.
May 23^rd: Bankia’s bailout needs grows to €11 billion
May 24^th: Bankia’s bailout needs grow to €15 billion
May 25^th: Bankia’s bailout needs are now €19 billion (2011 profits revised to €4 billion loss)…
December 27^th: Spanish bailout fund announces that Bankia still has a “negative value of €4.2 billion” and will need another €13.5 billion in capital
January 2^nd (2013): Bankia shares halted on Spanish stock exchange.

As a summary… Bankia was considered profitable in 2011… it was actually talking about paying out a dividend in April 2012. And in the following eight months, it was discovered that the bank was not only un-profitable, but completely and totally insolvent.

Today, nine months later, the bank has swallowed up over €19 billion in bailouts and still has a NEGATIVE value. With the additional €13.5 billion Spain claims it needs (assuming that is the actual limit… which I doubt) the bank will have consumed over €32 billion in bailouts.

If you think Bankia is an isolated incident, you’re out of your mind.

The point of this? Europe’s banks are totally insolvent and have not been fixed. No EU leader is going to tell you this because their jobs depend on convincing people that everything is fine. Bankia was supposedly “fine” right up until the truth came out. Just like the Wall Street banks were “fine” going into 2008.

Just like Europe is “fine” today.

I know the markets have yet to fully realize this…the S&P 500 is approaching its all-time highs. But back in late 2007, the last time the markets were at this level… did stocks get what was coming then too? Nope. And by the time stocks “got it” things moved VERY quickly.

I’ve already alerted Private Wealth Advisory subscribers to 6 trades that will all produce HUGE profits as this mess collapses.

We’ve also taken steps to prepare our loved ones and personal finances for systemic risk with my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports.

With a total of 20 pages, these reports outline:

And more…

I can do the same for you. All you need to do is take out a subscription to my Private Wealth Advisory newsletter.

You’ll immediate be given access to the Private Wealth Advisory archives, including my Protect Your Family,Protect Your Savings, and Protect Your Portfolio reports.

So you get my hard hitting market insights, actionable investment recommendations, and real time trade alerts, for one full year, for just $299.99.

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Best Regards,

Graham Summers

Feb

2013

WARNING: The EU Crisis is BACK and Will Be Getting Worse in the Coming Weeks

I want to issue a major warning to investors: the EU Crisis is going to get worse in the coming months.

I realize that most investors and analysts believe that the EU Crisis is over. Then think that because the S&P 500 is closing in on its all-time highs that things are fine in the system.
They are wrong.

The only item that held Europe together in 2012 was the credibility of EU politicians and ECB President Mario Draghi. Please note that nothing fundamental improved for the EU’s financial system: EU GDP has since re-entered a recession and EU unemployment has a hit a new record.

Indeed, the only reason things even looked better was because various Government engaged in massive interventions. In the case of Spain, this included raiding 90% of their social security fund to buy Spanish bonds so that yields would fall.

So… when you entire financial system is held together by the credibility of the political class… corruption scandals can implode the system.

Source: NY Times

The above story illustrates some key elements that all investors need to be aware of:

1) EU politicians are so corrupt they make their US counterparts look clean by comparison.

2) Having been put off for years, investigations into corruption are now reaching the point at which the rich and powerful are actually at risk of serious consequences.

Note in the above story that former Spanish Treasurer Luis Bárcenas has been under investigation since before 2009. The fact that the real smoking gun (his hidden Swiss bank account containing over $29 million) is only just coming to light should give you an idea of how corrupt the system in Europe has become (there is no way on earth it would take four years to find this information).

That this information is coming out now also tells us that things are getting so bad in Spain that heads are going to start to role. As we stated earlier, corruption only works until the consequences outweigh the benefits of being “on the take.” The above story tells us that we have finally reached that point in Spain. It’s taken five years for this to happen (the Crisis begin in 2008). But the system has finally reached the inflection point at which key players will face real consequences for their corruption.

With that in mind we can expect more and more such cases to begin to emerge in Europe. The fallout from this will be major both for the political class and for the financial markets.

Indeed, later in the same story we find the following tidbit:

On Wednesday, amid another property investigation, the president of Madrid’s regional government, Ignacio González, revealed that he and his wife purchased a penthouse last month in the holiday resort of Marbella for 770,000 euros, or more than $1 million. Mr. González, who earns 4,800 euros a month, about $6,380, is denying any wrongdoing, as well as any link between his acquisition and the property investigation undertaken by a local judge.

A regional President, earning less than $80K a year just bought a $1 million penthouse in a country where youth unemployment is above 50%, workers have gone over six months without being paid, and pharmacies are running out of medicine due to having not been paid some €500 million by the government.

The reason this is so important is because politics, not economics, drives everything in Europe. Please note that the entire EU banking system was pulled back from the brink of collapse last summer by Mario Draghi and other EU officials promising to do whatever it takes to end the crisis.

Since that time, the economy has actually worsened in Europe. Unemployment has hit a new record and the vast majority of the EU has re-entered recessionary territory. Thus, it has been the credibility of various EU officials, not any fundamental improvement in things that has made the whole system work

Now that major corruption scandals are breaking out regarding key EU figures, it’s going to be increasingly difficult for the EU political class to continue to convince the markets that the “everything is OK.”

Indeed, it’s time that we get really honest about things and state that Europe is done. Finished.

The powers that be over there are rapidly losing control of the system. Spain’s banking system is collapsing at a rate worse than that of the Asian nations during the Asian Contagion of the late ’90s. Italy’s bonds are imploding. Germany is finding its economy teetering on the edge of a cliff. And France is seeing auto sales and apartment deals collapse at a rate just as bad as that of 2008.

And that’s just the tip of the iceberg.

The debt contagion has now spread to Spain, Italy, and even France: all three of them are countries too big to be bailed out.

Which means… it’s the End Game. No matter what, the defaults are coming and the Euro will implode.

This is the reality for Europe. The whole system will be going down, it’s only a matter of time. And when it does collapse, it’s going to make Lehman Brothers look like a joke.

I’ve already alerted Private Wealth Advisory subscribers to 6 trades that will all produce HUGE profits as this mess collapses.

We’ve also taken steps to prepare our loved ones and personal finances for systemic risk with my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports.

With a total of 20 pages, these reports outline:

And more…

I can do the same for you. All you need to do is take out a subscription to my Private Wealth Advisory newsletter.

You’ll immediate be given access to the Private Wealth Advisory archives, including my Protect Your Family,Protect Your Savings, and Protect Your Portfolio reports.

So you get my hard hitting market insights, actionable investment recommendations, and real time trade alerts, for one full year, for just $299.99.

To take out an annual subscription to Private Wealth Advisory now and start taking steps to insure your loved ones and personal finances move through the coming storm safely…

Click Here Now!!!

Best Regards,

Graham Summers

Feb

2013

The Fed is Beginning to Remove the Punchbowl… Are You Ready For What’s Coming?

A month ago, we noted that the Fed was becoming increasingly splintered about how to proceed with its monetary policy. At that time we noted that the latest FOMC minutes indicated that the Fed was in fact conflicted about QE 4 despite its public appearance of being unified:

Consider its recent FOMC minutes released on January 3 2013.

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

Source: Fed FOMC minutes

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

Instead, the Fed was actually quite conflicted about QE 4. And we just got yet ANOTHER major warning sign that the Fed is changing tactics.

Indeed, Fed uber-dove, Charles Evans, who called incessantly for more QE throughout 2011-2012, just stated that the Fed may in fact END QE BEFORE unemployment falls to 7%.

Charles Evans, president of the Federal Reserve Bank of Chicago, said today the central bank may stop its asset-purchase program before unemployment falls to 7 percent.

“I tend to think it might be possible to turn off the quantitative easing,” Evans said in a CNBC interview. “We might be able to stop before 7 percent” assuming momentum builds and keeps going.

Federal Reserve Bank of Chicago Chief Executive Officer Charles Evans said that quantitative easing would continue until it’s clear the labor market outlook has improved.

http://www.bloomberg.com/news/2013-02-07/fed-s-evans-says-qe-could-stop-before-drop-to-7-jobless.html

The bulls and mainstream media are ignoring the implications of this. But this is a serious sign that the Fed will be changing course going forward.

Understand that the Fed has blown a yet another bubble in stocks and cannot simply remove the stimulus punch bowl all at once without risking a total collapse in the market. So the Fed is going to begin managing expectations downward gradually.

The fact that Evans, a man who has called for nothing but more stimulus for more than two years, is now stating point blank that the Fed may end QE before it reaches its target for unemployment is a major warning sign. Do not ignore it.

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

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

We’re speaking from experience here.

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

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

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

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

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Phoenix Capital Research

Feb

2013

The European House of Cards is About to Collapse

The following is an excerpt from our most recent issue of Private Wealth Advisory. In it we outline how the EU’s economy is beginning to collapse again, at the precise moment that Spain, Italy and Greece are becoming embroiled in major corruption scandals.

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

The house of cards that is Europe is close to collapsing as those widely held responsible for solving the Crisis (Prime Ministers, Treasurers and ECB head Mario Draghi) have all been recently implicated in corruption scandals.

France was already suffering from a lack of competitiveness. Now that wealthy businesspeople are fleeing the country (meaning investment will dry up), the economy has begun to positively implode.

The first sign of this came actually came from Germany. As we noted a few months ago, Germany had prepared a working group to examine the impact of an economic collapse in France.

http://uk.reuters.com/article/2012/11/09/uk-germany-france-economy-idUKBRE8A80MN20121109

This German concern has proven to be well founded, as the recent spate of French economic data has been truly horrific.

The other sovereign backdrop for the EU, Germany, is also experiencing an economic slowdown.

http://www.reuters.com/article/2013/01/15/us-germany-gdp-idUSBRE90E09Q20130115

2013 is going to be a very interesting year for Europe.

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

We’re speaking from experience here.

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

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

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

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Phoenix Capital Research

Feb

2013

These Guys “Made” 2% of Their Country’s GDP Last Year

Over the last 30+ years, the Chinese government has maintained control of the economy by gradually implementing reforms that permit greater economic freedom to its citizens.

The citizens in turn have gone along with this scheme because they believed that the system would permit them a greater quality of life and the potential of getting rich before they got old.

In broad brushstrokes, the data supported this view: starting with the re-opening of formal trade arrangements in 1971, China has undergone a near unprecedented level of economic transformations. The country’s per-capita income doubled from 1978 to 1987 and again from 1987 to 1996.

In those 20 years, official statistics indicate more than 300 million Chinese ascended out of poverty with accompanying dramatic changes in lifestyle, professions, and diet: between 1985 and 2008, average Chinese meat consumption more than doubled from 44 pounds to 110 per year.

Moreover, the China consumer (which most analysts believe has been suppressed) saw a tremendous change in habits, with consumer spending rising an average of 9% a year for 30 years. Even high-end luxury goods manufacturers such as Burberry and Tiffany’s opened stores there during the boom.

However, this all came to a screeching halt in 2008. As the global economy collapsed, China found its export driven manufacturing economic model was terribly flawed. The Government, in a panic, unleashed a stimulus program equal to nearly 18% of China GDP.

This plan worked until two items developed:

1) The Global Central banks let the inflation genie out of the bottle.

2) The Chinese population began to notice that while it was suffering, many ruling party officials were living high on the hog.

Regarding #1, with nearly a third of its population living off less than $2 per day, any bump in food prices hits China much harder than the US and other developed nations. With food prices hitting record highs in 2008 and then again in 2011, China began to face massive civil unrest.

Regarding #2, China’s government has a history of rampant corruption. 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. By way of perspective, imagine if members of US Congress fled the US taking $2 trillion+ with them (US GDP was roughly $7 trillion in 1991).

This corruption continues today. If anything it’s gotten worse:

The CDIC report, which was obtained by the Economic Observer newspaper, suggested that nearly 10,000 luxury homes had been sold by government officials in Guangzhou and Shanghai alone last year.

It also claimed that an astonishing $1 trillion (£630 billion), equivalent to 40 per cent of Britain’s annual GDP, had been smuggled out of China illegally in 2012.

Economists and experts cast doubt on the figure, but said the flow of money from China was dramatic. Li Chengyan, a professor at Peking University, suggested that a total of roughly 10,000 officials had absconded from China with as much as £100 billion.

http://www.telegraph.co.uk/news/worldnews/asia/china/9815998/Chinas-Communist-party-cadres-launch-property-fire-sale.html

Let’s provide a little perspective on the more conservative number in the above article. £100 billion translates to roughly $157 billion. China’s entire GDP is $7.3 trillion… so Chinese officials stole an amount equal to roughly 2% of China GDP in 2012 ALONE.

An equivalent case for the US would be if it were discovered that members of Congress fled the US taking $300 BILLION with them last year. Bear in mind, if you added up the total net worth of every politician in Washington you wouldn’t come even close to $300 billion.

And Chinese officials stole the equivalent of this in ONE YEAR. Not over the course of a decade but in a single year.

In a country where the average college grad makes $2,500 per year, this kind of corruption is a MASSIVE problem for the Chinese government. Which is why those betting on China continuing to grow at a breathtaking pace are overlooking some of the larger cultural problems the People’s Republic is facing today. With inflation on the rise and corruption becoming more and more apparent, China has MAJOR problems on its hands. And massive stimulus will only exacerbate them.

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

We’re speaking from experience here.

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

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

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

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

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Phoenix Capital Research

Feb

2013

The EU’s Systemic Corruption Makes Solving the Crisis Impossible

The single most difficult aspect about analyzing market moves in Europe is the impact of the political class on just about everything.

Worldwide, politicians are not exactly famous for honesty. However, Europe is a very special case… where just about everyone is lying on just about everything involving the economy and banking system.

This notion is illustrated wonderfully by Spain’s Prime Minister Rajoy, who was recently embroiled in a scandal in which he and many of the politicians in his party were receiving illegal payments for decades via a slush fund.

Rajoy himself allegedly received roughly $34,000 per year… from 1997-2008. This doesn’t bode well in any country, least of all one that has broken down to the point that pharmacies are running out of medicine and over 50% of youth are unemployed.

Rajoy first denied all of the allegations… then this morning stated that, “I repeat what I said Saturday: everything that has been said about me and my colleagues in the party is untrue, except for some things that have been published by some media outlets.”

At this point, why would anyone listen to what Rajoy had to say about anything?

Those investors who can remember back to last May, before Europe was fixed (by another massive lie, this one from Mario Draghi), Spain’s banking system was on the verge of collapse. What’s striking is that as late as May 28, Rajoy continued to maintain that Spain would not need a outside funding, stating, “there will be no rescue of the Spanish banking sector.”

At this point, Bankia had already requested its bailout and Spanish banks’ shares were in a free-fall. Moreover, Spain itself was just days away from requesting outside aid from the EU.

The timeline says it all:

May 9^th: Bankia requests €4.5 billion loan, Spanish Government states that the bank is “solvent.”
May 21^st: Spain meets Bankia’s request for loan and takes a 45% stake in the bank thereby instigating a partial nationalization.
May 23^rd: Bankia’s bailout needs grows to €11 billion/ Rajoy retorts to France’s Hollande, “Hollande does not know the state of Spanish banks.”
May 24^th: Bankia’s bailout needs grow to €15 billion
May 25^th: Bankia’s bailout needs are now €19 billion (2011 profits revised to €4 billion loss)… the Spanish Bailout Fund has just €5 billion in cash.
May 28^th: Rajoy comments, “there will be no rescue of the Spanish banking sector.”
Weekend of June 8-10^th: Rajoy texts to his finance minister: “Aguanta, we are the fourth European power. Spain is not Uganda… If they want to force the rescue of Spain, they need to start getting ready €500 billion and another €750 billion for Italy, which will have to be rescued afterwards.”/ Spain informally asks for €100 billion bailout/ EU Finance Ministers OK the bailout.
Sunday June 10^th: Rajoy states that the bailout is a “victory” before commenting, “This year is going to be a bad one: Growth is going to be negative by 1.7 percent, and also unemployment is going to increase.”

So… Spain’s economy is lead by a man who denies that its banks are in trouble (despite one of the largest already being nationalized), then demands €100 billion for a bailout, calls said bailout a “triumph” before flying to watch a soccer match… all the while sitting on over €300,000 in illegal payments that he received in the decade leading up to the crisis.

There can be absolutely no trust in a system like this, nor can there be any transparency. The EU Crisis will not end until this sort of corruption and fraud is cleared from both the political class and the banking system (Spain itself recently admitted that several of its biggest banks have negative value).

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

We’re speaking from experience here.

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

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

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

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Phoenix Capital Research

Feb

2013

By Printing Money Central Banks Have Already Begun the Next Stage of Warfare

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 Fed kicks 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 reshuffles $400 billion of the Fed’s portfolio (Oct ’11)
QE 3 buys $40 billion of Mortgage Backed Securities monthly (Sept ‘12)
QE 4 buys $45 billion worth of Treasuries monthly (Dec ’12)

The Fed is not the only one. Collectively, the world’s Central Banks have pumped over $10 trillion into the financial system since 2007. This money printing has resulted in a massive expansion of Central Bank balance sheets, spread inflation into the system, and done nothing to address the key solvency issues that lead up to the great crisis.

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

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

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

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

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

Look for increased tension to grow between the world’s Central Banks in the coming months and years. This tension will likely result in:

1) Economic warfare (see the recent situation in Iran)

2) Political infighting

3) Key players being sacrificed

Given that the financial system and economic “recovery” have been built on a house of cards, these political developments will have major impacts on the financial markets.

Outside of internal dissent, the power players in the global economy (the US, China, Japan, and Germany) are showing increasing signs of tension both internal (China and the US) as well as external (China vs. Japan, Germany vs. the US, the US vs. China).

These tensions will lead to economic warfare and very likely physical warfare in the coming years.

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

We’re speaking from experience here.

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

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

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

Click Here Now!!!

Phoenix Capital Research

Jan

2013

The Fed is Beginning to Splinter… What Comes Next?

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

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

The Fed is growing increasingly splintered as an organization.

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

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

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

Consider its recent FOMC minutes released on January 3 2013.

Source: Fed FOMC minutes

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

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

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

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

Why is this?

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

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

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

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

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

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

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

We’re speaking from experience here.

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

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

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

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Phoenix Capital Research

Jan

2013

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

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

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

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

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

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

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

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

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

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

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

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

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

We’re speaking from experience here.

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

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

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

Click Here Now!!!

Phoenix Capital Research

Jan

2013

Germany Just Fired a Warning Shot at the Fed

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We’re speaking from experience here.

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

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

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

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

Click Here Now!!!

Phoenix Capital Research

Jan

2013

Is There Such a Thing as The Perfect Trade?

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

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

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

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

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

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

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

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

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

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

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

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

This is why it’s called The Perfect Trade.

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

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

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

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

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

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Phoenix Capital Research

Jan

2013

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

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

Consider the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What are the odds that this is an isolated case?

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

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

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

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

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

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

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

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

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

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Phoenix Capital Research

Jan

2013

These Popular Delusions Could Cost Investors Fortunes in 2013

The markets are closed today in observance of Martin Luther King, Jr. day.

With that in mind, we’re stepping back from our usual daily analysis of the markets to address the big picture for the investment landscape in 2013.

The following is an excerpt from a recent issue of Private Wealth Advisory. In it, we outline three popular investment delusions pertaining to China, Japan and the US. As was the case in 2007, many investors are investing based on misguided theories. We outline three of the biggest here.

Private Wealth Advisory subscribers are already gearing up for the next round of the great crisis with several back-door trades that will profit enormously as the investment herd gets slaughtered. To find out their names, symbols, and how to buy them… Click Here Now!

Popular Delusion #1: The investment world believes China will engage in another massive round of stimulus.

This will not be the case. China’s new ruling party has stated point blank that the country will not be engaging in rampant stimulus (for the obvious reasons of rising inflation):

This may sound like an oxymoron, but China‘s new Communist government is turning away from financial stimulus to help its slow-moving economy.

During the party’s two-day Central Economic Work Conference this weekend, party leader Xi Jinping said the country would essentially not be pursuing high growth rates through stimulus. That doesn’t mean that Beijing has turned sour on fixed asset investments on things like roads, bridges and subways. They’re still going through with major urbanization projects. But whenever the economy is slowing, the new leaders say they will be less likely to prime the pump.

Source: Forbes

China’s market has rallied over 16% in the last month on the belief that China will engage in another large-scale stimulus plan… despite China’s leaders stating they will not. This has the makings of a very nasty correction.

Popular Delusion #2: Japan’s new leadership will be able to kick off an even more aggressive monetary intervention.

Truth be told, Japan is on the cusp of the mother of all debt implosions. Case in point, Japan’s Yen is thought to be a safe haven. With that in mind, it’s critical to note that when the EU Crisis hit in mid-2012, the Yen fell. Indeed, it has now taken out its trendline:

Indeed, it is interesting to note that political leaders Japan, like those in Europe and the US, have begun to use verbal intervention as a primary tool. Prime Minister Shinzo Abe took office urging the Bank of Japan to act even more aggressively, even threatening to strip the bank of its independence.

Since that time, the Nikkei has erupted higher. The Japanese Government got what it was looking for, and Japanese Economic Minister Amari announced that the Yen was correcting in line with fundamentals.

Take note, this series of events indicate that Japanese leaders will likely engage in verbal intervention to get what they want. It’s worked for the EU and US.

Popular Delusion #3: The US bond bubble will burst in 2013.

It’s become increasingly common to see calls for the US bond bubble to implode this year. To be clear, the US’s financial situation is terrible. But it is nothing compared to the financial situation in Europe, Japan, and China.

Europe has not recapitalized its banks. Many of its countries’ entire banking systems are insolvent. The EU banking system as a whole is leveraged at 26 to 1 (Lehman was at 30 to 1 when it went bust). Even Germany’s banking system is in worse shape than the US’s (the US recapitalized its banks following the 2008 crisis. Europe. including Germany, has not).

China’s true Debt to GDP is over 200%. Already in a hard landing, the country is now facing several major problems, namely looming water and agriculture crises, food inflation and accompanying civil unrest, and the potential of armed conflict with Japan.

Moreover, the belief that China will shift over to a consumer economy is misguided. Consumption has increased by 9% per year in China for 30 years now. The China consumer is not somehow dormant. And as more and more manufacturing firms leave China for more stable markets (Apple, Ford, GE, Bridgestone, have all announced they are moving facilities back to the US), China will be facing rising unemployment.

Finally, and most critically, financial institutions are desperate for high-grade collateral in the form of quality sovereign bonds. Say what you will about the US, it remains the most liquid market for debt in the world. And if you had a choice between lending money to the US, Japanese, any European, or the Chinese Government, the US is the obvious answer.

This is not to say the US is in great shape. Instead, we would argue that the US is the least ugly of the major debt markets. The US bond bubble will burst at some point. But it will likely not do so in 2013.

To conclude, the world Central Banks and EU politicians have done everything imaginable to postpone the EU crisis. They’re now out of options. The EU crisis will very likely erupt anew in the first half of 2013. Meanwhile Japan is waiting in the wings. And China has its own issues to contend with.

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

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

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

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Phoenix Capital Research

Jan

2013

The Ticking Trillion Dollar Debt Bomb

Since the EU Crisis went into overdrive in 2010, EU politicians have largely resorted to political posturing rather than implementing any actual financial solutions to the EU’s debt and banking crisis.

To clarify that statement, we view a “real solution” as one that A) cleared bad debts from the system, B) brought debt levels down to manageable levels, and C) got the troubled country’s economy back on track.

By way of example, real solutions would involve outright debt defaults, bank failures, and very likely one or more countries leaving the Euro. However, no major EU leader ever seriously promotes any of these ideas because doing so would akin to committing political suicide as the rest of the political class would blame them for what followed.

As a result, EU politicians continue to kick the can down the road with half-measures such as austerity measures in exchange for bailouts. The end result is that nothing is ever solved as those in charge of the decisions that matter have no incentives to actually do anything beneficial for their countries’ economies. See Greece whose economy has completely imploded to the point that children are being admitted to hospitals every week for malnutrition… and it will still have a Debt to GDP of 120% in 2022!

It is now obvious that US politicians have seen this work well for their European counterparts (nothing gets fixed, not tough choices have to be made and almost no one gets kicked out of office), and are now adopting this strategy on this side of the pond.

Consider the fiscal cliff issue, which our political leaders discussed endlessly for over a month, only to then pass a “deal” which both raised taxes AND failed to cut the deficit or debt.

Again, nothing solved, but plenty of posturing and blame.

Expect more of this. Today, the top story for the US is gun control even though we will officially breach the debt ceiling in roughly one month’s time. The last time we did this the US lost one of its AAA ratings from a credit agency and the markets imploded wiping out over a trillion dollars in household wealth in a matter of days.

This time around, things will be far worse if nothing is solved. If the US loses another AAA rating, then the financial markets could face systemic risk. The reason for this is that US Treasuries are one of the senior most forms of collateral used by the banks to backstop the $600+ trillion derivatives market.

As any trader who trades on margin can tell you, when the value of your collateral is called into question, those on the other side of the trade come looking for you to put up more capital on your trades. This can result in assets being sold en masse (similar to what happened after Lehman failed) and things can get very ugly very fast.

Another consequence of the US losing another AAA rating would be a potential spike in interest rates as a result of us having a lower credit rating. A 100 basis point move higher in interest rates means the US paying another $100+ billion in interest payments on its debt. The US is slated to pay some $300+ billion in interest payments in 2013. This amount could explode higher if interest rates rose.

We already have a Debt to GDP ratio of over 100%. Our deficit to GDP is nearly 10%. These are Greece type levels. And while the US has several advantages Greece does not (it produces the reserve currency of the world and is also the largest economy), the bond markets can be very unforgiving of fiscal profligacy.

But US politicians don’t care. They know that the US economy is a disaster and will be getting worse. The issue for them is not fixing this, but shifting the blame for what’s coming onto the other party.

Bottomline: the US debt situation is not going to be brought under control. We’ll either breach the debt ceiling or pass some hurried bill to raise it. Neither of these will help our credit rating or our fiscal issues.

Buckle up, 2013 is going to be an “interesting” year.

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

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

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

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Phoenix Capital Research

Phoenix Capital Research

Europe’s Fine… Just Ask Depositors Who Saw Their Savings Go to ZERO

The Wal-Mart Indicator: We’re Heading for a Stagflationary Disaster

Spain Just Issued a Warning: The System is Blowing Up Again

If Europe Were a House… It’d Be Condemned….

What Happens to a Financial System When Its Two Biggest Pillars Collapse?

It’s Time For Name That Insolvent Banking System!

Europe is Fixed? Just Like Wall Street Was “Fixed” in May 2008, How’d That Turn Out?

WARNING: The EU Crisis is BACK and Will Be Getting Worse in the Coming Weeks

The Fed is Beginning to Remove the Punchbowl… Are You Ready For What’s Coming?

The European House of Cards is About to Collapse

These Guys “Made” 2% of Their Country’s GDP Last Year

The EU’s Systemic Corruption Makes Solving the Crisis Impossible

By Printing Money Central Banks Have Already Begun the Next Stage of Warfare

The Fed is Beginning to Splinter… What Comes Next?

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

Germany Just Fired a Warning Shot at the Fed

Is There Such a Thing as The Perfect Trade?

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

These Popular Delusions Could Cost Investors Fortunes in 2013

The Ticking Trillion Dollar Debt Bomb

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