Phoenix Capital Research

The market continues to track the same pattern it performed going into the failed debt ceiling talks of July 2011. As you’ll recall, then as is the case now, US politicians failed to reach a credible solution to the US’s debt problems. What followed was a credit rating downgrade and a market collapse:

Here’s the S&P 500’s recent action:

Here’s the S&P 500’s action going into the failed debt ceiling talks of 2011:

Here’s what followed:

Be forewarned. As noted earlier this week there are no political incentives for the GOP or Democrats to propose a real solution to the fiscal cliff. So it is highly likely we will be going over the cliff.

Another item holding up the market is hype and hope of more QE from the Federal Reserve at its December 10-11 meeting. I have to admit, I find this proposal completely baffling. Macroeconomics 101 dictates that it takes a full six months or more before a change in monetary policy by the Fed will be fully digested by the system. The Fed just announced a new program three months ago. So the academics at the Fed aren’t even drinking their own Kool-Aid anymore.

Since the Great Crisis began, the Fed has on average funneled some $40+billion per month into the system (even when no official program was in place the Fed was still juicing the markets this much, typically during options expiration weeks).

QE 3, which may as well be called QE infinite because it is open ended (will never end), combined with the Fed’s Operation Twist 2 program has the Fed currently putting $85 billion into the system every month. On an annualized basis this is over $1 trillion. This means that at this pace, by the end of 2013 the Fed’s balance sheet would be $4 trillion. The entire US banking system is $13 trillion.

And somehow pumping more money would work?

At some point some group in the political class needs to actually ask the Fed the following: “You’ve had four years of implementing any policy you like without political consequence. Four years. During that time you’ve spent well over $2 trillion.  And the Crisis has not been fixed. Why on earth should we give you more time or money?”

I believe this will happen in 2013. As the US economy takes a nose-dive and the Sovereign Crisis moves into hyperdrive, the triumvirate of the financial system (the Fed, Wall Street, and Washington DC) will begin to increasingly point fingers at one another to divert blame for the fact that we’ve spent trillions of Dollars and things haven’t really improved.

This process has already begun with the Fed firing the first shots: it has sued Goldman Sachs while Bernanke has told Congress that it’s their fault the US is so indebted and facing fiscal ruin.

This process will accelerate next year. At that point I expect Congress and Wall Street to enter the fray more aggressively targeting the Fed. And that’s when things could get very ugly.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US going over the fiscal cliff… then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 74 out of our last 88 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m about to alert Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the we go over the fiscal cliff in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

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…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 74 out of 88 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

The primary market forces remain in play.

The markets are holding up on hopes of additional stimulus from the Central Banks. Some bulls are even calling for QE 4 at the upcoming Fed meeting, despite the fact that QE 3 was launched a mere three months ago and was open-ended (meaning it would not end until the Fed deemed it time).

This is extraordinary and proves point blank my concern that we’d reach the point at which additional monetary stimulus would no longer having a significant impact. This was always the End Game for the Fed’s response to the financial crisis: that by intervening as much as it did, eventually we’d get to the point that even extreme interventions had little if any impact.

Given that the Fed has been the primary driver of stocks for the last four years (even the NY Fed admits the S&P 500 would be at 600 without Fed intervention) this is a major red flag that we could be due for a sharp correction to the downside.

Against this backdrop of hopes for more intervention, the ugly fundamentals continue to worsen. As I indicated in yesterday’s missive, there is little if any political incentive for the Democrats or the GOP to address the fiscal cliff. Consequently we are very likely going over it.

In Europe, the great banking crisis continues to worsen. The EU has definitively lost one of its primary AAA supports when France was downgraded. Moreover, the mega-bailout fund, the ESM, has been downgraded as well.

The implications of this are mainly pertinent to the banks. Sovereign bonds are the primary collateral backstopping hundreds of trillions of Euros worth of trades at the large EU banks. With France no longer AAA and the ESM losing a rating as well, a scramble for AAA collateral is underway. This will be beneficial to Treasuries, bunds, and other high-grade bonds (high grade relative to non-AAA rated collateral). It will be bad for low-grade collateral bonds (Spanish, Greek, Italian, etc.).

Thus, stocks continue to seesaw. The fundamentals want to pull stocks down while the hope of more intervention from Central Banks pushes stocks up.

The one thing that trumps this is the fiscal cliff. Since there is little likelihood of a solution, we are likely to see heavy selling from institutions in the coming weeks (see Apple’s recent action) as they close out positions before the tax increases.

This will put selling pressure on the markets. Combined with the ongoing EU debacle, this makes for a potentially very ugly sell-off into year-end.

After that, we’ll see… but 2013 is shaping up to be an absolutely hellacious year. We have:

1. The EU’s banking crisis.
2. A global economic contraction.
3. The implosion in corporate profits.
4. Heightened inflation from the Fed’s money printing.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US going over the fiscal cliff… then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 74 out of our last 88 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m about to alert Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the we go over the fiscal cliff in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

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…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 74 out of 88 trades in the last 18 months)… and gain access to all my Special Reports…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

I’m going to lay out everything you need to know about the fiscal cliff negotiations. After reading this, you can ignore all of the media’s coverage of this topic as well as various politicians’ announcements pertaining to this subject.

All you need to know consists of just one sentence.

Politicians are in charge of this issue.

These are the same folks who haven’t even produced a budget in four years. The same folks who have run $1+ trillion deficits for four years. The same folks who rarely if ever leave office as a result of their fiscal mistakes.

In simple terms, none of the people in this group will likely suffer any consequences if we do go over the cliff. Indeed, as far as options go, their best option would be for us to go over the cliff and then implement some targeted tax breaks in late 2013 early 2014 as they go into the 2014 Congressional elections.

Let’s take the side of the Democrats.

Obama was largely re-elected based a solid turnout for the Democrats and a lack of voter turnout for the GOP. If you want to argue about voter fraud the fact remains that if there was widespread voter fraud the GOP let the Democrats get away with it. So for simplicity’s sake, Obama won based on a strong turnout while the GOP lost based on a weak turnout (Romney took less votes that McCain!).

With this in mind, Obama and the Democrats can easily argue that they have the mandate of the people for their policies. If the GOP proves unwilling to go along with their proposals, Obama and the Dems can simply take us over the cliff, increase taxes on the wealthy (which would appease their voting base) and blame the failure to reach a solution as well as the ensuing economic mess on the Republicans (much as the Dems and Obama have blamed the terrible economy on Bush).

So, truth be told, Obama and the Dems really have very little to gain politically from solving the fiscal cliff.

On the GOP side, there is little incentive to solve the fiscal cliff either. If they kowtow to Obama’s wishes, they’ll infuriate their base. And there’s no chance that they’ll convince Obama and the Dems to meet their demands of cutting spending (they sure haven’t done anything of this nature in the last two years). So the best thing they can do is simply refuse to address the problem, go off the cliff and then maintain a “we fought the best we could against insurmountable odds” stance.

So… neither the Dems nor the GOP are incentivized to solve the fiscal cliff.  Both parties are best off from a political standpoint having us go over the cliff and then fighting for some kind of tax breaks/ tax relief for their bases sometime in late 2013/ early 2014.

With that in mind, we’re very likely going over the cliff in a month’s time. The whole situation has echoes of the failed debt ceiling talks and subsequent market collapse of 2011.

Indeed, the market’s action today looks virtually identical to its moves going into the Debt Ceiling talks in July/August 2011.

Here’s the S&P 500’s recent action:

Here’s what the market looked like going into the Debt Ceiling talks of 2011.

Here’s what followed:

I highly suggest preparing in advance.

If you’re an active investor looking for investment ideas on how to play this, I’ve recently unveiled a number of special investments to Private Wealth Advisory subscribers designed to produce outsized gains when we go over the fiscal cliff.

These are the exact same investments we used to lock in gains of 14%. 16%, even 18% in a matter of days during the Debt Ceiling debacle in 2011.I believe we’ll see even larger gains this time around.

To find out more about Private Wealth Advisory (a bi-weekly investment advisory that focuses on the global economy and outlines which investments will do best in various environments)… and learn more about my fiscal cliff trades…

Click Here Now!

Best Regards

Graham Summers

 

During the its first term, the Obama Administration thus far has proven itself in favor of increased Government control and Central Planning. That is, the general trend throughout the last four years has been towards greater nationalization of industries (first finance, then automakers and now healthcare and insurance), as well as greater reliance on our Central Bank to maintain our finances.

Now that Obama’s won a second term, there is no indication that this trend will end. We must recall that regardless of what is said, it was Obama who re-appointed Ben Bernanke as Fed Chairman. And it was under Obama’s watch that QE lite, QE 2, Operation Twist 2, and now QE 3 were launched. It was also under Obama’s watch that the US reached a Debt to GDP ratio of over 100%.

Indeed, at no point in history has the US had this much debt during peacetime. And the fact that we’re overspending by this amount at the exact time that other countries are showing signs of shunning US Treasuries is a formula for disaster.

With that in mind, it is highly likely that the US will enter at the very minimum a debt crisis and quite possibly a currency crisis during Obama’s second term. In preparation for this, investors will want to focus on the following investment themes:

1)   Inflation hedges based on continued spending and money printing.

2)   Gold and Silver as an alternate currency based on the US Dollar falling further.

3)   Productive assets (foreign real estate, apartments in specific markets, businesses, essentially anything that produces cash).

4)   Preparing for an eventual US Debt Default.

Regarding #1, there are several areas to consider. They are:

1)   Precious metals (bullion)

2)   Natural resources, particularly timber

3)   (last and least) Blue chip businesses or companies with pricing power that can maintain profits during periods of inflation

As far as precious metals go, you need to:

1)   Own Bullion

2)   Store it yourself (not in a bank)

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

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

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

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

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

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

In terms of other natural resources, the best assets to own are the actual resources themselves. However, not everyone can go out and buy timberland or a lead mine. So this means looking at various commodity and natural resource ETFs.

As far as stocks go, I suggest looking at large cap blue chips stocks that are able to pass on rising costs to consumers (at least in part). I’m talking about well-defined brands that offer goods and services which consumers are willing to pay more for as prices rise due to increase operational costs and commodity prices.

This inevitably leads to defensive non-cyclical industries: tobacco, beverages, medicine, energy, etc. In the large-cap space, the following are worth consideration.

Company	Symbol	Industry	Price to Cash Flow	Dividend Yield
Kraft Foods	KRFT	Food	10	N/A
Nestle	NSRGY	Food	15	2.6%
Coke	KO	Beverage	17	2.6%
McDonalds	MCD	Fast Food	13	2.9%
Exxon Mobil	XOM	Oil	8	2.2%
Clorox	CLX	Cleaning Supplies	16	3.2%
Colgate-Palmolive	CL	Oral Health	18	2.2%

Smaller companies I would consider if you need to remain long in the stock market are:

Company	Symbol	Industry	Price to Cash Flow	Dividend Yield
Smith and Wesson	SWHC	Guns	10	N/A
Sturm, Ruger & Company	RGR	Guns	14	2.3%
WD 40	WDFC	Lubricant	22	2.2%
Hormel	HRL	Spam	17	1.9%

I want to stress that even though these companies all have considerable pricing power, during an inflationary collapse all companies will be hit as costs rise. This is why stocks are listed as the last inflation hedges from our list at the beginning of this issue: they do not offer the same protection against inflation as bullion, and natural resources assets/ companies do.

I am not recommending any of these companies here. But if you need to have exposure to stocks to the long side, these are some of the companies I would consider. As always be sure to do your own diligence before investing in anything

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

So if you’re looking for someone to help you navigate the markets and protect your wealth from Obama’s various fiscal nightmare policies, I can help with my bi-weekly investment service, Private Wealth Advisory.

To whit, my clients made money in 2008. And during the Euro Crisis, we outperformed the S&P 500 by over 12%.

And now, with Obama set for a second term, we’re setting ourselves up to profit handsomely from his policies of higher taxes, greater spending, and inflation.

We’re doing this with a handful of carefully picked inflation hedges, a unique investment that could double when the US debt implosion begins, and my targeted Crisis trades which explode higher whenever the markets collapse.

To find out about these investment strategies, all you need to do is take out a trial subscription to Private Wealth Advisory.

You’ll immediately be given access to all of my premium investment analysis. You’ll also start receiving my real time buy and sell alerts telling you the minute it’s time to buy or sell an investment to maximize your gains.

All of this for just $299 per year. All in all we’re talking about over 500 pages of research per year, and an average of 40+ trades with a success rate of over 70%.

To find out more about Private Wealth Advisory…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

 

 

 

 

 

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The following is an excerpt from a recent issue of Private Wealth Advisory. In it I reveal that Germany has in fact already implemented a working group to assess the cost of Greece leaving the EU. Moreover, numerous multinationals are now preparing for this outcome as well.

If you’ve looking for investment ideas on how to profit from this collapse (the gains will be even bigger than those produced during the 2008 Crash) Private Wealth Advisory can show you how. We already have a handful of EU Crisis Trades open, all of which are moving up fast.

To find out more about Private Wealth Advisory and how it can help you navigate the coming crisis… Click Here Now!!!

I believe we are at a major turning point for the financial system.

For nearly four years, the entire financial system has been held together (just barely) by extraordinary interventions on the part of the world’s Central Banks.

These interventions have resulted in capital fleeing the markets (hence the low trading volume), moral hazard becoming the norm and a marketplace in which hope of more intervention has a greater impact than the actual intervention itself.

The problem with this, from day one, was that eventually we would reach the point at which additional intervention no longer had any effect. This would come about due to:

1)   Investors having grown so accustomed to Central Bank intervention that they no longer respond to additional measures.

2)   Central Banks facing a problem so massive that it is beyond their power to stop it.

Few people understand just how close we came to #2 early this past summer. Indeed, there was a brief period there, where we were literally on the verge of systemic collapse courtesy of the Spanish banking system imploding.

It all started with the collapse of Spain’s Bankia in May 2012. Bankia was formed by merging seven smaller bankrupt banks. In early May 2012 Bankia had to be nationalized. This was a potential Lehman moment that kicked off a massive bank run and resulted in the ECB putting the entire Spanish banking system on life support to the tune of over €300 billion Euros (the entire equity base for every bank in Spain is only a little over €100 billion).

At that time, the Spanish Ibex (stock market) broke out of its 20-year bull market and nearly took down all of Europe with it.

The one thing that held the system together was ECB President Mario Draghi promising that he may provide unlimited buying (which would give Spanish banks a chance to dump their assets in exchange for cash to fund liquidity needs… they were in that bad a shape). That pulled the system back from the edge and things rallied.

The ECB did indeed announce an unlimited bond buying program on September 6 2012. The Federal Reserve then announced an open-ended QE program a week later on September 13 2012.

And that’s when everything changed.

Instead of blasting off into the stratosphere, stocks fell soon after this announcement. That was the first sign that the game has changed: after every other announced program in the past four years, the markets fell briefly but then rallied hard and didn’t look back.

Not this time.

And so we experienced the first item I listed above (investors grew accustomed to Central Bank intervention that they no longer respond to additional measures).

We now are also experiencing #2 (Central Banks are facing a problem so massive that it is beyond the power to stop it). That problem is the fiscal cliff which Bernanke himself has admitted that the Fed cannot contain. “I don’t think the Fed has the tools to offset [the fiscal cliff].”

This is Ben Bernanke, arguably one of the most powerful if not the most powerful man in the Western financial system, admitting that the Fed doesn’t have the tools to address an issue. This has never happened before. For every single issue that has arisen going back to 2006, Bernanke claimed he had things under control.

Not this time.

So, we have investors now so accustomed to Central Bank intervention that even the promise of unending intervention doesn’t appease them… at the exact same time that an issue so great (the fiscal cliff) appears that even the Fed has admitted it cannot manage it.

No one is picking up on this because everyone is focusing on Black Friday and the Santa rally which I mentioned in last issue. But things have changed. And they have changed in a big way.

And no one has a clue how to deal with what’s coming.

If you’re an active investor looking for investment ideas on how to play this, I’ve recently unveiled a number of back-door plays designed to produce outsized gains from Europe’s next leg down. They’re available to all subscribers of my Private Wealth Advisory newsletter.

To find out more about Private Wealth Advisory (a bi-weekly investment advisory that focuses on the global economy and outlines which investments will do best in various environments)…

Click Here Now!

Best Regards

Graham Summers

Spain’s financial system is at truly apocalyptic levels.

If you’ve been reading me for some time, you know that Spain has already experienced a bank run equal to 18% of total deposits this year alone (another story the mainstream media is avoiding). However, what you likely don’t know is that an on annualized basis, Spain has experienced portfolio and investment outflows GREATER THAN 50% OF ITS GDP.

To give this number some context, Indonesia only saw outflows equal to 23% of its GDP during the Asian Financial Crisis. Spain is experiencing more than DOUBLE this.

I’ve long averred that Spain will be the straw to break the EU’s back. By the look of things this is not far off. The country’s regional bailout fund has only less than €1 billion in funding left. As the below chart shows, this will barely make a dent in the regions’ debt problems:

Indeed, things are far far worse than is commonly know. Valencia for instance owes its pharmacies over €500 million. In some areas there is no longer insulin.

In the region of Andalusia some government workers haven’t been paid in eight months and are working for free while begging for food.

And Catalonia is pushing to secede from Spain entirely. Indeed, its pro-secessionist leader, President Artur Mas, just won the most recent election. And over 1.5 million of Catalonia’s 7.5 million inhabitants turned out for an independence rally in September.

Again, Spain as a country is finished. Things are so bad that British Airways (many wealthy Brits vacation in Spain) is putting a contingency plan for SPAIN to leave the Euro.

Worst of all, it is clear EU and Spanish leaders have no clue how to deal with any of this. Their latest plan is for the country to cut the balance sheets of three nationalized banks by 50% sometime in the next five years. How will they do this? By dumping their toxic property assets into a “bad bank.”

The idea here is that somehow someone will want to buy this stuff. Spain already had to postpone the launch of the bad bank by a month because no one wanted to participate in it (despite the mainstream media claiming that the idea was popular which is untrue).

So, here we have Spain proposing that it can somehow unload a ton of garbage debts onto “someone” even though there is no “someone” to buy them. And the whole point of this exercise is to meet conditions so that Spain would qualify for another €40 billion in aid.

€40 billion in aid... when  Spain has experienced portfolio and investment outflows of more than €700 billion.

Indeed, things are so bad that the ECB has put the entire Spanish banking system on life support to the tune of over €400 billion Euros. To put this number into perspective, the entire equity base for every bank in Spain is only a little over €100 billion.

Oh, and the country needs to issue over €200 billion in debt next year.

If you’re an active investor looking for investment ideas on how to play this, I’ve recently unveiled a number of back-door plays designed to produce outsized gains from Europe’s next leg down. They’re available to all subscribers of my Private Wealth Advisory newsletter.

To find out more about Private Wealth Advisory (a bi-weekly investment advisory that focuses on the global economy and outlines which investments will do best in various environments)…

Click Here Now!

Best Regards

Graham Summers

 

 

Meanwhile, as Greece continues to distract the markets, France, the other primary prop for the EU besides Germany, is now experiencing an economic contraction on par with that of 2008-2009.

Indeed, France’s September’s auto sales numbers were worse than those of September 2008 (the month Lehman collapsed). The country’s PMI reading is back to April 2009 levels. Even the French Central Bank, which would hold off as long as possible before unveiling bad news, has announced the country will re-enter recession before year-end.

Over the past few weeks, an extraordinary cry of alarm has risen from chief executives who warn that the French economy has gone dangerously off track. In an interview to be published on Nov. 15 in the magazine l’Express, Chief Executive Officer Henri de Castries of financial-services group Axa (CS:FP) warns that France is rapidly losing ground, not only against Germany but against nearly all its European neighbors. “There’s a strong risk that in 2013 and 2014, we will fall behind economies such as Spain, Italy, and Britain,” de Castries says.

On Nov. 5, veteran corporate chieftain Louis Gallois released a government-commissioned report calling for “shock treatment” to restore French competitiveness. And on Oct. 28, a group of 98 CEOs published an open letter to Hollande that said public-sector spending, which at 56 percent of gross domestic product is the highest in Europe, “is no longer supportable.” The letter was signed by the CEOs of virtually every major French company. (The few exceptions included utility Electricité de France, which is government controlled.)

            http://www.businessweek.com/articles/2012-11-14/french-ceos-help

We get additional confirmation that France is in big trouble from its partner in propping up the EU, Germany.

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

France will be a bigger problem than Spain or Italy for the EU?!?! That is one heck of an admission from a German official. If France deteriorates then it’s game over for the EU.  The current bailouts mean Germany is already on the hook for an amount equal to 30% of its GDP. If France tanks the amount will balloon astronomically. At that point it’s game over.

If you’re an active investor looking for investment ideas on how to play this, I’ve recently unveiled a number of back-door plays designed to produce outsized gains from Europe’s next leg down. They’re available to all subscribers of my Private Wealth Advisory newsletter.

To find out more about Private Wealth Advisory (a bi-weekly investment advisory that focuses on the global economy and outlines which investments will do best in various environments)…

Click Here Now!

Best Regards

Graham Summers

 

 

The following is an excerpt from a recent issue of Private Wealth Advisory. In it I reveal that Germany has in fact already implemented a working group to assess the cost of Greece leaving the EU. Moreover, numerous multinationals are now preparing for this outcome as well.

If you’ve looking for investment ideas on how to profit from this collapse (the gains will be even bigger than those produced during the 2008 Crash) Private Wealth Advisory can show you how. We already have a handful of EU Crisis Trades open, all of which are moving up fast.

To find out more about Private Wealth Advisory and how it can help you navigate the coming crisis… Click Here Now!!!

The US Presidential election is over and the world has woken up from the political rhetoric and propaganda to realize that the problems it faced before November 6 are still in place. Indeed, one could very well make the case that the US Presidential Election distracted most people from the fact that things were in fact getting markedly worse in the financial system.

Let’s start with Europe.

Greece has managed to get through its latest budgetary crisis (a €5 billion bond redemption due the Friday before last) by the skin of its teeth. In this case, the ECB permitted Greece to redeem asset-backed-securities (read: total and complete garbage) in exchange for funds.

This deal occurred commensurate with the usual promised budgetary cuts on the part of Greek politicians (none of which will be met as usual) along with the Greek populace rioting in Athens. This has been and will remain the deal in Greece right up until someone cuts off funding. At that point Greece will leave the EU, default or both.

Timing this will be quite difficult, but Germany has already given us clues that it is preparing for a Greek exit.

         Debt crisis: German finance ministry examines cost of Greek exit

A special working group, led by deputy finance minister Thomas Steffen, is working on scenarios in the case that Greece is forced to withdraw from the 17-nation bloc, the Financial Times Deutschland reported on Friday.

“Colleagues are making calculations about the financial consequences [of an exit] and are considering how a domino effect on other euro member states might be prevented,” it quoted a finance industry source as saying.

The ten-member working group, which is made up of officials from various finance ministry departments, wanted to be fully prepared for a possible “negative scenario,” the source added.

Last week, German finance minister Wolfgang Schaeuble said it would be “stupid” not to make contingency plans in case Europe’s rescue efforts failed, adding that the debt crisis must not become a “bottomless pit” for Germany.

http://www.telegraph.co.uk/finance/financialcrisis/9496397/Debt-crisis-German-finance-ministry-examines-cost-of-Greek-exit.html

This news story received almost no coverage from the mainstream media, despite its import.

Firstly, this is the first time Germany has officially moved to prepare for a Grexit. Germany has certainly threatened to kick Greece out, but it has never actually taken formal, official steps to prepare for this.

Since August 24 2012, it has.

There is good reason for this and we get clues from German Finance Minister Schauble’s “bottomless pit” comments in the above article.

Schauble made this comment once before back in February 2012 before the second Greek bailout:

Schaeuble pointed out that German opinion polls show a majority of Germans are willing to help Greece.

“But it’s important to say that it cannot be a bottomless pit. That’s why the Greeks have to finally close that pit. And then we can put something in there. At least people are now starting to realize it won’t work with a bottomless pit.”

Schaeuble said Greece would be supported “one way or another” but warned the country needed to do its homework on improving its competitiveness and hinted it might have to leave the euro zone to do that.

http://www.reuters.com/article/2012/02/12/us-germany-greece-idUSTRE81B05N20120212

Note that in reference to Greece being a bottomless pit, Schauble was already hinting that Greece may leave the EU even before the second Greek bailout occurred.

The fact that Schauble has now formed a working group to measure the impact of a Grexit while again referring to Greece as a “bottomless pit,” shows clearly that he is about done with propping up Greece… and for good reason.

Currently Germany is on the hook for €751 billion in EU backstops. The German economy is only €2.5 trillion. Put another way, Germany is on the hook for an amount equal to of its GDP.

Anyone who believes Germany will actually pony up this cash is dreaming. The single largest transfer payment in history was the German Marshall Plan, which was $13 billion at a time when US GDP was just $200 billion.

This constituted a transfer of slightly over 6% of US GDP.

That is the single largest transfer in history… and Germany is going to bailout Europe by an amount equal to over FIVE TIMES this?

This is simply not going to happen. Germany will play ball with the EU by signaling its efforts to keep things together, but the German’s have in fact been implementing a contingency plan for nearly one year now.

I broke this story in February 2012. I haven’t seen it mentioned anywhere else. I wrote:

…Germany has put into place a contingency plan that would permit it to leave the Euro if it had to.

As a brief recap, this contingency plan consists of:

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

2)    The revival of its Special Financial Market Stabilization Funds, or SoFFin for short, to which Germany has allocated 480€ billion Euros to in the case of a banking crisis (the fund will also permit German banks to dump their euro-zone government bonds if needed).

This occurred back in February. And Germany now has a formal working group assessing the cost of a Grexit? The EU is on borrowed time. I mentioned earlier this year that German tourism companies have put contingency plans for the return to the Drachma in the contracts for their Greek subsidiaries. However, now even large US-based multinationals are implementing contingency plans for a Grexit.

The list includes JP Morgan, Bank of America Merrill Lynch, Visa, PricewaterhoursCoopers, Boston Consulting Group, Juniper Networks, and others.

Buckle up, things are about to get ugly.

This is why I’ve been warning that 2008 was just the warm-up. What is coming will be far far worse.

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

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles. Already three of our picks are up more than 5% in the last week.

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

Click Here Now!

Graham Summers

This is going to be a very special holiday season. The reason? It’s the last hurrah before things get very very ugly.

Just off the cuff, you need to know that:

1)   China, the EU, and the US (comprising over 50% of Global GDP) are in recession already. The EU has already announced this. Look for the formal announcements concerning the US and China to hit the airwaves next year.

2)   Some data points concerning these nations indicate that this recession will be on par with that of 2007-2008.

A rising tide raises all ships. Similarly, a sinking tide lowers everything. Bear this in mind as a global economic contraction will have severe implications for everything.

Beyond the global economy, we now face sovereign and banking crises in Europe.

Regarding the sovereign crisis, the whole issue boils down to where the money will come from. The ECB has pumped the system full of liquidity to help sovereigns meet their funding needs, but unless real capital shows up (not piling just more cheaper debt onto of old debt).

The ECB cannot make capital appear. And the various bailout funds (the EFSF and ESM) all need Spain and Italy, neither of which have any money to spare, to contribute 30% of their funding. So they’re not an option either.

This leaves Germany, which couldn’t pick up the tab for the EU even if it tried. If Germany were to agree to fund things as they are (assuming nothing worsens in the EU), it would amount of over 30% of its GDP.

Never in history has one country issued a transfer of that amount to another. The single largest transfer in history (on a GDP basis) was the German Marshall Plan, which represented only slightly over 6% of US GDP (hat tip to Dr Malmgren for pointing this out).

So forget about Germany writing the check. There will be political machinations and games played to maintain the house of cards that is the EU… but when push comes to shove, Germany will leave before it foots the bill for everything.

As for the EU’s banking crisis, again the matter is one of capital. The EU banking system has over $46 trillion assets making it nearly four times larger than that of the US. And while US leverage levels are just 13 to 1 (this is across the board, the large Wall Street banks are far more levered), the EU banking system is leveraged at an astounding 26 to 1.

To put this in context, Lehman Brothers was leveraged at 30 to 1 when it went bust. Moreover, at a leverage level of 26 to 1, even a 4% decrease in asset values wipes out your entire capital base.

So, unless EU banks raise over $1-2 trillion in capital in the near future (they won’t), they’ll go the way of Lehman. This is just basic common sense. It doesn’t matter how many bailout funds or crazy schemes the EU bureaucrats come up with, unless someone ponies up actual capital to fund the banks and bring down their leverage levels, they’ll got bust.

All of this stuff (a global economic contraction, EU sovereign crisis, and EU banking crisis) will be hitting the fan in 2013.

This is why I’ve been warning that 2008 was just the warm-up. What is coming will be far far worse.

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

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles. Already three of our picks are up more than 5% in the last week.

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

Click Here Now!

Graham Summers

 

With most of Wall Street on vacation, those few traders manning their desks are taking advantage of the low volume to push the market sharply higher. This, combined with a large move up by the Euro has pulled the entire risk trade up forcing the US Dollar lower.

This move was to be expected on some levels. Since 2002, there has been a rally from just before Thanksgiving until the second week of December. This year is shaping up to replay this move. Stocks and other risk assets were certainly oversold from the preceding week and needed a breather.

However, from a larger perspective there is no shortage of truly horrible developments in the world. EU budget talks failed to accomplish anything. This comes on the heels of failed Greece debt talks from last week (there is another meeting next week on this).

Meanwhile, France has lost its AAA credit rating, Spain’s bad bank plan has been dropped due to lack of interest. And then there is Cyprus Portugal and soon to be Italy’s issues to deal with.

At the end of the day, the whole issue in the EU boils down to whether or not Germany will foot the bill for everything. The fact of the matter is that it won’t. If Germany were to agree to fund things as they are (assuming nothing worsens in the EU), it would amount of over 30% of its GDP.

Never in history has one country issued a transfer of that amount to another. The single largest transfer in history (on a GDP basis) was the German Marshall Plan, which represented only slightly over 6% of US GDP.

So forget about Germany writing the check. There will be political machinations and games played to maintain the house of cards that is the EU… but when push comes to shove, Germany will leave before it foots the bill for everything.

And then of course there is the fiscal cliff in the US: the single largest tax hike increase in US history (on a % of GDP basis). Ignore the media’s spin on this, no one has a clue how to fix the problem, largely because math is not partisan and we’ve been living beyond our means for far too long to fix this with one deal.

The reality is that what we are witness today is the collapse of the welfare states of the developed world. The real solutions (defaults both sovereign and on social spending plans) are completely unsavory from a political perspective, so politicians will do all they can to avoid what actually needs to happen.

In simple terms, the great debt implosion has begun. It will likely take several years to complete, but what’s coming will make the 2008 debacle will seem like a picnic.

This is why I’ve been warning that 2008 was just the warm-up. What is coming will be far far worse.

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

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles. Already three of our picks are up more than 5% in the last week.

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

Click Here Now!

Graham Summers

We hope all of you are enjoying a day of family and friends with good food, even if you don’t necessarily celebrate this holiday!

Thank you for reading!

Over the last week I’ve introduced the concept of collateral: the little known basis for the entire financial system. We’ve also addressed why any EU sovereign default would bring about an epic meltdown as EU bonds, particularly those of Spain and Italy are the collateral underlying hundreds of trillions of Euros worth of trades for EU banks.

Again, the most important issue for the financial system is the search for high quality collateral.

Indeed, it is the search for high grade collateral that has caused such periodic spikes in Treasuries, German Bunds, French sovereign bonds, and Japanese bonds (all of these have yielded 0% or even negative yields in the last five years). Big banks are moving away from PIIGS bonds into safer havens.

This is also why the Fed isn’t touching Treasuries with QE3 and why it won’t touch short-term Treasuries with Operation Twist 2 (this program sees the Fed selling short-term Treasuries to buy long-term Treasuries): the Fed wants to keep as much good quality collateral in the system as possible (long-term Treasuries are problematic because institutions know it’s highly likely the US will default within the next 30 years).

However, even this move is problematic because much of the Treasury market is locked up with governments both foreign and domestic.

Total US Sovereign Debt	$16 trillion
Foreign Nation holdings	$5 trillion
Intergovernmental holdings	$4.8 trillion
US Federal Reserve	$1.5 trillion
Remaining	$4.7 trillion

Again, this is why clearinghouses (which oversee the derivatives markets) are now allowing Gold as collateral: they know that eventually sovereign bonds will be worth less or even worthless. And they want access to their clients’ Gold for when this happens.

With that in mind, the countries that will ultimately be considered safe havens when the BIG collapse starts are those with the largest Gold reserves.

Country	Gold Holdings	% of Foreign Reserves in Gold
The US	8,133 tonnes	75.1%
Germany	3,395 tonnes	71.9%
Italy	2,451 tonnes	71.3%
France	2,435 tonnes	71.6%
China	1,054 tonnes	1.6%
Switzerland	1,040 tonnes	14.2%
Russia	918 tonnes	9.2%
Japan	765 tonnes	3.1%
Netherlands	612 tonnes	60.2%
India	557 tonnes	9.8%

I’m not going to get into the issue of whether this Gold exists still (many commentators claim that Central Banks have in fact sold much of this) as I have no way of proving it. The key issue is that the financial elite are now trying to get their hands on Gold as collateral because they realize that sovereign paper based collateral from the EU will soon be worth much less or even worthless.

It is no coincidence that Germany floated the idea of accepting other EU nation’s Gold in exchanged for bailouts back in May 2012 when Europe teetered on the brink of collapse:

Europe’s debtors must pawn their gold for Eurobond Redemption

Southern Europe’s debtor states must pledge their gold reserves and national treasure as collateral under a €2.3 trillion stabilisation plan gaining momentum in Germany.

The German scheme — known as the European Redemption Pact — offers a form of “Eurobonds Lite” that can be squared with the German constitution and breaks the political logjam. It is a highly creative way out of the debt crisis, but is not a soft option for Italy, Spain, Portugal, and other states in trouble.

http://www.telegraph.co.uk/finance/financialcrisis/9298180/Europes-debtors-must-pawn-their-gold-for-Eurobond-Redemption.html

It’s also not coincidental that Germany is performing an audit of its Gold holdings today, either.

Bundesbank Says NY Fed to Help Meet Gold Audit Request

The Bundesbank said the Federal Reserve Bank of New York will help it meet auditing requirements related to its gold reserves that were demanded by Germany’s Audit Court.

“We have been in discussions with the Federal Reserve Bank of New York about the Bundesbank’s holdings of gold,” the Bundesbank said yesterday in a letter to the German parliament’s budget committee. “The discussions have been fruitful and the Federal Reserve has expressed a commitment to work with the Bundesbank to explore ways to address the audit observations, consistent with its own security and control processes and logistical constraints.”

The agreement is part of a compromise between the German central bank and the Audit Court, which has called on the Bundesbank to take stock of its gold holdings outside Germany, saying it has never verified their existence.

The Bundesbank distributed the letter to reporters after board member Carl-Ludwig Thiele and the Audit Court’s head Dieter Engels testified to budget committee lawmakers in the lower house of parliament in Berlin.

http://www.bloomberg.com/news/2012-10-25/new-york-fed-to-help-bundesbank-meet-gold-audit-requirements.html

I realize that the last few essays have been pretty dense. So I’ll summate everything here:

1)   The #1 issue for the financial world is too little quality collateral backing too many trades.

2)   The search for good collateral has lead investors to seek high grade sovereign bonds (Treasuries, German bunds, French bonds, Japanese bonds) as a safe haven between 2008-the present.

3)   The folks who monitor the derivatives market (the large clearing houses) realize that sovereign bonds are not going to be a safe haven for much longer and so are looking at Gold as a new form of collateral for trades (this has NEVER been the case before).

4)   Germany and other nations will be increasingly looking to audit and accumulate their Gold holdings.

Keep all of this in mind at all times going forward. This is the BIG picture for the financial world.

This is why I’ve been warning that 2008 was just the warm-up. What is coming will be far far worse: the collateral crunch that will ensue when Spain or Italy defaults (they have €1.78 trillion and €1.87 trillion in external debt respectively) will be absolutely massive. At a minimum it will be multiples of times larger than what followed Lehman’s bankruptcy.

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

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles. Already three of our picks are up more than 5% in the last week.

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

Click Here Now!

Graham Summers

The following is an excerpt from a recent issue of Private Wealth Advisory. We are reprinting it here because no one is addressing the real reason why Europe is such a huge problem for the financial system. You need to know this.

If you’ve looking for investment ideas on how to profit from this collapse (the gains will be even bigger than those produced during the 2008 Crash) Private Wealth Advisory can show you how. We already have a handful of EU Crisis Trades open, all of which are up.

To find out more about Private Wealth Advisory and how it can help you navigate the coming crisis… Click Here Now!!!

Last week I outlined the issue of collateral and how it is the most critical issue in the financial system today. For a review of that article, click here now.

If you want further evidence that the financial elites are already preparing for a default from Spain and a collateral crunch, you should consider that the large clearing houses (ICE, CEM and LCH which oversee the trading of the $700+ trillion derivatives market) have ALL begun accepting Gold as collateral.

Gold as Collateral Acceptable for Margin Cover Purposes

From 28 August 2012 unallocated Gold (Loco London) will be accepted by LCH.Clearnet Limited (LCH.Clearnet) as collateral for margin cover purposes.

This addition to acceptable margin collateral will be subject to the following criteria;

Available for members clearing OTC precious metals forwards (LCH EnClear Precious Metals division) or precious metals contracts on the Hong Kong Mercantile Exchange. Acceptable to cover margin requirements for all markets cleared on both House and ‘Segregated’ omnibus Client accounts.

http://www.lchclearnet.com/member_notices/circulars/2012-08-21.asp

CME Clearing Europe to Accept Gold as Collateral on Demand

CME Clearing Europe will accept physical gold as collateral, extending the list of assets it’s prepared to receive as regulators globally push more derivatives trading through clearing houses.

CME Group Inc. (CME)’s European clearing house, based in London, appointed Deutsche Bank AG (DBK), HSBC Holdings Plc and JPMorgan Chase & Co. as gold depositaries. There will be a 15 percent charge on the market value of gold deposits and a limit of $200 million or 20 percent of the overall initial margin requirement per clearing member based on whichever is lower, Andrew Lamb, chief executive officer of CME Clearing Europe, said today.

“We started with a narrow range of government securities and are now extending that,” Lamb said in an interview today. “We recognize there will be a massive demand for collateral as a result of the clearing mandate. This is part of our attempt to maintain the risk management standard and to offer greater flexibility to clearing members and end clients.”

http://www.bloomberg.com/news/2012-08-17/cme-clearing-europe-to-accept-gold-as-collateral-on-demand-1-.html

Is it coincidence that this began ONLY when the possibility of a sovereign default from Greece or Spain began? Nope. This actions show that the large clearinghouses see the writing on the wall (that defaults are coming accompanied by a mad scramble for collateral) and so are moving away from paper (sovereign bonds) into hard money.

The reason?

They know that when Spain defaults the system will be rocked even harder than it was with Lehman in 2008. And they are doing everything they can get access to real collateral (Gold) when paper collateral (Spanish bonds) becomes worthless.

Remember, history has shown us time and again that defaults come in waves. So when Spain defaults, it will be only a matter of time before the rest of the PIIGS, the UK, Japan, and then the US do as well.

However, for now Spain is the biggest issue. As a result of this, Treasuries, Japanese bonds, German bunds and even French sovereign bonds remain attractive to the big banks as collateral… for now.

Indeed, it is the search for high grade collateral that has caused such periodic spikes in Treasuries, German Bunds, French sovereign bonds, and Japanese bonds (all of these have yielded 0% or even negative yields in the last five years). Big banks are moving away from PIIGS bonds into safer havens.

This is also why the Fed isn’t touching Treasuries with QE3 and why it won’t touch short-term Treasuries with Operation Twist 2 (this program sees the Fed selling short-term Treasuries to buy long-term Treasuries): the Fed wants to keep as much good quality collateral in the system as possible (long-term Treasuries are problematic because institutions know it’s highly likely the US will default within the next 30 years).

However, even this move is problematic because much of the Treasury market is locked up with governments both foreign and domestic.

Total US Sovereign Debt	$16 trillion
Foreign Nation holdings	$5 trillion
Intergovernmental holdings	$4.8 trillion
US Federal Reserve	$1.5 trillion
Remaining	$4.7 trillion

Again, this is why clearinghouses (which oversee the derivatives markets) are now allowing Gold as collateral: they know that eventually sovereign bonds will be worth less or even worthless. And they want access to their clients’ Gold for when this happens.

This is why I’ve been warning that 2008 was just the warm-up. What is coming will be far far worse.

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

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles. Already three of our picks are up more than 5% in the last week.

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

Click Here Now!

Graham Summers

 

 

 

 

The following is an excerpt from a recent issue of Private Wealth Advisory. We are reprinting it here because no one is addressing the real reason why Europe is such a huge problem for the financial system. You need to know this.

If you’ve looking for investment ideas on how to profit from this collapse (the gains will be even bigger than those produced during the 2008 Crash) Private Wealth Advisory can show you how. We already have a handful of EU Crisis Trades open, all of which are up.

To find out more about Private Wealth Advisory and how it can help you navigate the coming crisis… Click Here Now!!!

This is not going to be your usual investment newsletter.

This week I am going to devote this entire issue to explaining how the global financial system really works. Before we delve into things, I have to warn you in advance that what follows will be both extremely dense as well as extremely worrisome.

I am doing this because you need to know the real risks being posed to your wealth today. However, in order for you to understand this, you first need to understand how the financial system really works. Over 99% of people, including investment professionals do not understand what I am about to write. But I can assure you, that before this issue is done, everything that’s happened in the world since 2007 will make a lot more sense.

So let’s buckle up and get started.

Everything that has happened since 2007, every Central Bank move, ever major political decision regarding the big banks, every trend, have all been focused solely on one issue.

That issue is collateral.

What is collateral?

Collateral is an underlying asset that is pledged when a party enters into a financial arrangement.  It is essentially a promise that should things go awry, you have some “thing” that is of value, which the other party can get access to in order to compensate them for their losses.

You no doubt are familiar with this concept on a personal level: any time you take out a bank loan the bank wants something pledged as collateral should you fail to pay the money back. In the case of property, the property itself is usually the collateral posted on the mortgage. So if you fail to pay your mortage, the bank can seize the home and sell it to recoup the losses on the mortgage loan (at least in theory).

In this sense, collateral is a kind of “insurance” for any financial transaction; it is a way that the parties involved mitigate the risk of their deal not working out.

As many of you know, our entire global financial system is based on leverage or borrowed money. Collateral is what allows this to work. Without collateral, there is no borrowed money. And without borrowed money, money does not enter the financial system.

In this sense, collateral is the “reality” underlying the “imaginary” or “borrowed” component of leverage: the asset is real and can be used to back-stop a proposed deal/ trade that has yet to come to fruition.

On a consumer level, our bank deposits (cash), homes, and other assets are the collateral pledged when we borrow money from a bank to finance something. This applies to everyone in the US all the way up to the multi-billionaire bracket.

How Larry Ellison Actually Funds His Lavish Lifestyle

One of the mysteries surrounding Larry Ellison is how he can afford so many mansions, islands, yachts and planes, all while retaining his shares in his company.

Yes, the Oracle CEO is one of the richest men in the world, worth over $30 billion. Yet he sells only small amounts of stock under a schedule stock-sale plan. And last I checked, yacht builders don’t take Oracle stock for payment.

Now we have some clues as to how Ellison funds his acquisitive lifestyle.

According to Oracle’s proxy, filed this month, Ellison has pledged 139 million shares “as collateral to secure certain personal indebtedness, including various lines of credit.” In other words, he’s got over $4.2 billion worth of stock pledged for personal loans.

http://www.cnbc.com/id/49194482/How_Larry_Ellison_Actually_Funds_His_Lavish_Lifestyle

On a corporate level, companies pledge various assets as collateral for their corporate loans. For manufacturing firms, this might be the actual steel inventory they own. For property companies, it’s portions of their real estate portfolios.

And for financial firms, at the top of the corporate food chain, it’s sovereign bonds.

Modern financial theory dictates that sovereign bonds are the most “risk free” assets in the financial system (equity, municipal bond, corporate bonds, and the like are all below sovereign bonds in terms of risk profile). The reason for this is because it is far more likely for a company to go belly up than a country.

Because of this, the entire Western financial system has sovereign bonds (US Treasuries, German Bunds, Japanese sovereign bonds, etc) as the senior most asset pledged as collateral for hundreds of trillions of Dollars worth of trades.

The “hundreds” of trillions of Dollars of trades stems from a 2004 SEC ruling in which the SEC ruled that broker-dealers with capital bases above $5 billion (think Goldman, JP Morgan, etc) could increase their leverage above previously required levels while also abandoning market to market valuation methods (a methodology through which a security was priced at the value that a market participant would pay for it).

So, after the 2004 ruling, large broker dealers were permitted to increase their leverage levels dramatically. And because they could value their trades at whatever price their in-house models chose (what are the odds that these models were conservative?), the broker-dealers and large Wall Street banks are now sitting on over $700 trillion worth of derivatives trades.

Now, every large bank/ broker dealer knows that the other banks/dealers are overstating the value of their securities. As a result, these derivatives trades, like all financial instruments, require collateral to be pledged to insure that if the trades blow up, the other party has access to some asset to compensate it for the loss.

As a result, the ultimate backstop for the $700+ trillion derivatives market today is sovereign bonds.

When you realize this, the entire picture for the Central Banks’ actions over the last five years becomes clear: every move has been about accomplishing one of two things:

1)   Giving the over-leveraged banks access to cash for immediate funding needs (QE 1, QE 2, LTRO 1, LTRO 2, etc)

2)   Giving the banks a chance to swap out low grade collateral (Mortgage Backed Securities and other crap debts) for cash that they could use to purchase higher grade collateral (QE 1’s MBS component, Operation Twist 2 which lets bank their long-term Treasuries and buy short-term Treasuries, QE 3, etc).

By way of example, let’s first consider Greece.

Lost amidst the hub-bub about austerity measures and Debt to GDP ratio for Greece is the real issue that concerns the EU banks and the EU regulators: what happens to the trades that are backstopped by Greece sovereign bonds?

Remember:

1)   Before the second Greek bailout, the ECB swapped out all of its Greek sovereign bonds for new bonds that would not take a haircut.

2)   Some 80% of the bailout money went to EU banks that were Greek bondholders, not the Greek economy.

Regarding #1, the ECB had just permitted EU nations to dump over €1 trillion worth of sovereign bonds onto its balance sheet in exchange for immediate financing needs via its LTRO 1 and LTRO 2 schemes dated December 2011 and February 2012.

So, when the ECB swapped out its Greek bonds for new bonds that would not take a haircut during the second bailout, the ECB was making sure that the Greek bonds on its balance sheet remained untouchable and as a result could still stand as high grade collateral for the banks that had lent them to the ECB.

So the ECB effectively allowed those banks that had dumped Greek sovereign bonds onto its balance sheet to avoid taking a loss… and not having to put up new collateral on their trade portfolios.

Which brings us to the other issue surrounding the second Greek bailout: the fact that 80% of the money went to EU banks that were Greek bondholders instead of the Greek economy.

Here again, the issue was about giving money to the banks that were using Greek bonds as collateral, to insure that they had enough capital on hand.

Piecing this together, it’s clear that the Greek situation actually had nothing to do with helping Greece. Forget about Greece’s debt issues, or protests, or even the political decisions… the real story was that the bailouts were all about insuring that the EU banks that were using Greek bonds as collateral were kept whole by any means possible.

Now, Greece was always the small player in this mess. It’s entire sovereign bond market is a mere €300 billion.

Spain and Italy, by comparison, have €1.78 trillion and €1.87 trillion in external debt respectively.

I do not have an exact figure for how much of the derivatives market uses Spanish and Italian sovereign bonds as collateral, but I can create an estimate using the US bank data I have available.

In the US, we know that the top four banks have over $222 trillion in derivatives exposure with just $7 trillion in total assets. So the leverage here is roughly 31 to 1.

Using this as a ballpark estimate for derivatives leverage, it is very possible that Spain and Italy’s sovereign bonds are pledged as collateral for well over $100 trillion worth of derivatives trades ($1.78 trillion X 31 + $1.87 trillion X 31).

This is why Spain is dragging its feet about asking for a bailout: the mess of trying to sort out the collateral issues for €1.78 trillion in collateral that is backstopping what is likely tens of TRILLIONS of Euros’ worth of trades is capable of causing systemic failure.

This is why I’ve been warning that 2008 was just the warm-up. What is coming will be far far worse.

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

Indeed, during that entire time we saw 73 winning trades and only one single loser. We’re now positioning ourselves for the next round of the Crisis with several targeted investments that will explode higher as the EU crumbles. Already three of our picks are up more than 5% in the last week.

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

Click Here Now!

Graham Summers

 

 

 

 

Countless pages have been written about why Lehman caused the system to almost implode. However, the reality is that Lehman nearly took down the entire financial system for two reasons:

1)   Lehman’s $155 billion worth of bonds were used as collateral in hundreds of billions of Dollars’ worth of trades.

2)   Lehman’s 8,000 clients who were all using Lehman to make trades saw the collateral that they had placed with the firm (to backstop their portfolios) frozen.

Lehman’s client list included some of the biggest names in the financial world. Remember that before the 2008 collapse, the big broker-dealers (Lehman, Merrill, etc) were all standalone entities (the Merrill/ BofA merger and the others had yet to happen). So all of the big banks, with few exceptions, had their collateral parked with broker dealers like Lehman.

The below story reveals that both Bank of America and Dubai’s sovereign wealth fund both saw collateral frozen when Lehman went bust. I can assure you many other big names were caught in a similar situation.

Lehman: One Big Derivatives Mess

It turns out that Lehman, like other big dealers, was running a perfectly legal but highly risky game moving money from firm to firm. It used the collateral from one trading partner to fund more deals with other firms. The same $100 million collected in one deal can be used for many other transactions. “Firms basically can use [the money] as their own collateral for anything they want,” says Kenneth Kettering, a former derivatives lawyer and currently a professor at New York Law School. But when the contracts terminate as the result of bankruptcy, the extra collateral is supposed to be returned.

As part of those transactions, buyers had put up collateral in the event of losses. But weeks after Lehman’s demise, large sums of leftover collateral have yet to be returned to the trading partners. Bank of America (BAC) executives tried several times to persuade Lehman officials via e-mail and phone calls to fork over funds, according to a suit. But BofA was rebuffed. In one e-mail exchange, a Lehman employee wrote to BofA: “All activity has been suspended until further notice.”

Nasreen Bulos, a lawyer for one of Dubai’s sovereign wealth funds, got the same chilly response. The Global Strategic Equities Fund of Dubai, part of the gulf state’s $12 billion investment portfolio, gave Lehman $40 million in June as part of a deal pegged to energy giant BP’s (BP) stock. According to an affidavit, Bulos started contacting Lehman on Sept. 15 to get back $27 million in collateral. Four days later, Lehman told Bulos it would not honor the request or say anything further on the matter.

http://www.businessweek.com/stories/2008-10-07/lehman-one-big-derivatives-mess

Normally, a client’s collateral would be unfrozen soon after the bankruptcy of a broker dealer. In Lehman’s case it wasn’t. And that, combined with Lehman’s $155 billion worth of bonds becoming worthless, created a severe collateral shortfall in the system.

This is why the market held together for a little over a week after Lehman went bust: the players who had collateral with Lehman thought they’d get the money freed. When they didn’t, the system imploded as collateral calls were issued. What followed was widespread liquidation as banks did everything they could to free up capital to meet funding needs or to buy new higher grade collateral (hence the skyrocketing rally in Treasuries at the time).

This is the reality of what happened in 2008, though few know it. And this is why a default in Spain or Italy (whose €1.78 and €1.87 trillion in sovereign bonds are collateral for likely more than €100 trillion in trades) would bring about a collapse that would make Lehman appear minor in comparison.

Remember, if Spain goes bust, they over €1 trillion in collateral would vanish triggering a chain reaction in at least €50 trillion if not €100+ trillion in trades at the large banks/ financial institutions.

Again, and I cannot stress this enough: when Spain defaults (and it will) the system will experience a collateral crunch that will be exponentially higher than that which occurred following the Lehman bankruptcy.

This is why I’ve been warning that the 2008 was just a warm-up. It’s why the Powers That Be in Europe are absolutely terrified of what’s happening there. And it’s why those investors who do not prepare in advance for what’s coming will lose everything.

If you do not want to be one of them, you need to get moving.

We have produced a FREE Special Report available to all investors titled What Europe’s Collapse Means For You and Your Savings.

This report features ten pages of material outlining our independent analysis real debt situation in Europe (numbers far worse than is publicly admitted), the true nature of the EU banking system, and the systemic risks Europe poses to investors around the world.

It also outlines a number of investments to profit from this; investments that anyone can use to take advantage of the European Debt Crisis.

Best of all, this report is 100% FREE. You can pick up a copy today at:

http://gainspainscapital.com/eu-report/

Best Regards,

Graham Summers

PS. We also offer a FREE Special Report detailing the threat of inflation as well as two investments that will explode higher as it seeps throughout the financial system. You can pick up a copy of this report at:

http://gainspainscapital.com/gpc-inflation/

 

Modern financial theory dictates that sovereign bonds are the most “risk free” assets in the financial system (equity, municipal bond, corporate bonds, and the like are all below sovereign bonds in terms of risk profile). The reason for this is because it is far more likely for a company to go belly up than a country.

Because of this, the entire Western financial system has sovereign bonds (US Treasuries, German Bunds, Japanese sovereign bonds, etc) as the senior most asset pledged as collateral for hundreds of trillions of Dollars worth of trades.

The “hundreds” of trillions of Dollars of trades stems from a 2004 SEC ruling in which the SEC ruled that broker-dealers with capital bases above $5 billion (think Goldman, JP Morgan, etc) could increase their leverage above previously required levels while also abandoning market to market valuation methods (a methodology through which a security was priced at the value that a market participant would pay for it).

So, after the 2004 ruling, large broker dealers were permitted to increase their leverage levels dramatically. And because they could value their trades at whatever price their in-house models chose (what are the odds that these models were conservative?), the broker-dealers and large Wall Street banks are now sitting on over $700 trillion worth of derivatives trades.

Now, every large bank/ broker dealer knows that the other banks/dealers are overstating the value of their securities. As a result, these derivatives trades, like all financial instruments, require collateral to be pledged to insure that if the trades blow up, the other party has access to some asset to compensate it for the loss.

As a result, the ultimate backstop for the $700+ trillion derivatives market today is sovereign bonds.

When you realize this, the entire picture for the Central Banks’ actions over the last five years becomes clear: every move has been about accomplishing one of two things:

1)   Giving the over-leveraged banks access to cash for immediate funding needs (QE 1, QE 2, LTRO 1, LTRO 2, etc)

2)   Giving the banks a chance to swap out low grade collateral (Mortgage Backed Securities and other crap debts) for cash that they could use to purchase higher grade collateral (QE 1’s MBS component, Operation Twist 2 which lets bank their long-term Treasuries and buy short-term Treasuries, QE 3, etc).

By way of example, let’s first consider Greece.

Lost amidst the hub-bub about austerity measures and Debt to GDP ratio for Greece is the real issue that concerns the EU banks and the EU regulators: what happens to the trades that are backstopped by Greece sovereign bonds?

Remember:

1)   Before the second Greek bailout, the ECB swapped out all of its Greek sovereign bonds for new bonds that would not take a haircut.

2)   Some 80% of the bailout money went to EU banks that were Greek bondholders, not the Greek economy.

Regarding #1, the ECB had just permitted EU nations to dump over €1 trillion worth of sovereign bonds onto its balance sheet in exchange for immediate financing needs via its LTRO 1 and LTRO 2 schemes dated December 2011 and February 2012.

So, when the ECB swapped out its Greek bonds for new bonds that would not take a haircut during the second bailout, the ECB was making sure that the Greek bonds on its balance sheet remained untouchable and as a result could still stand as high grade collateral for the banks that had lent them to the ECB.

So the ECB effectively allowed those banks that had dumped Greek sovereign bonds onto its balance sheet to avoid taking a loss… and not having to put up new collateral on their trade portfolios.

Which brings us to the other issue surrounding the second Greek bailout: the fact that 80% of the money went to EU banks that were Greek bondholders instead of the Greek economy.

Here again, the issue was about giving money to the banks that were using Greek bonds as collateral, to insure that they had enough capital on hand.

Piecing this together, it’s clear that the Greek situation actually had nothing to do with helping Greece. Forget about Greece’s debt issues, or protests, or even the political decisions… the real story was that the bailouts were all about insuring that the EU banks that were using Greek bonds as collateral were kept whole by any means possible.

Now, Greece was always the small player in this mess. It’s entire sovereign bond market is a mere €300 billion.

Spain and Italy, by comparison, have €1.78 trillion and €1.87 trillion in external debt respectively.

I do not have an exact figure for how much of the derivatives market uses Spanish and Italian sovereign bonds as collateral, but I can create an estimate using the US bank data I have available.

In the US, we know that the top four banks have over $222 trillion in derivatives exposure with just $7 trillion in total assets. So the leverage here is roughly 31 to 1.

Using this as a ballpark estimate for derivatives leverage, it is very possible that Spain and Italy’s sovereign bonds are pledged as collateral for well over $100 trillion worth of derivatives trades ($1.78 trillion X 31 + $1.87 trillion X 31).

This is why Spain is dragging its feet about asking for a bailout: the mess of trying to sort out the collateral issues for €1.78 trillion in collateral that is backstopping what is likely tens of TRILLIONS of Euros’ worth of trades is capable of causing systemic failure.

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

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

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

Click Here Now!

Graham Summers

 

 

 

 

 

 

 

 

 

 

 

 

The US Presidential election ended November 6, 2012. Since that time, the market has fallen 3%.

There are a multitude of reasons for this, but the primary one is the fact that the markets is beginning to realize two key items:

1)   Everything that was a problem in the run up to the US election is still a problem (in fact many issues are now worse than they were a few months ago).

2)   Having engaged in pre-emptive and extreme actions to keep things calm in the run up to the election, the US Fed and ECB have run out of effective monetary bullets.

Regarding #1, according to the ECRI, as of June 2012, the US is back in recession. The ECRI has proven far more accurate and timely in predicting recessions than the NBER. And now that the election is over I expect other US data (the ISM, LEI, and employment numbers) to start moving towards reality (bad).

By the way, the US just hit a new record for food stamp usage.

Across the pond, the European banking and sovereign debt crisis continues to worsen: Greece has to redeem €5 billion worth of bonds on Friday. The country just managed to pass its latest budget proposal (which undoubtedly the country will fail to meet… just like all the others) but the troika has yet to issue its latest report on Greece.

Germany has stated point blank that without the troika report, Greece won’t be getting more funds. Is Germany finally ready to let Greece fail? It’s hard to say. But Germany did put together a special advisory panel to focus exclusively on assessing the cost of a Grexit back in August.

Elsewhere in the EU, Spain continues to implode. The mainstream financial media notes that people are now killing themselves when evicted from their homes. However, things are in fact worse than that. My contacts in the country inform me that in some regions the government hasn’t even paid its pharmacies in six months. Indeed, the region of Valencia owes its pharmacies an insane €500 million.

This is nothing short of a societal shut down. Expect the civil unrest and economic implosion to accelerate in the coming weeks and months.

And finally, France’s private sector is falling to pieces. September’s auto sales numbers were worse than those of September 2008. The country’s PMI reading is back to April 2009 levels. And the French Central Bank has announced the country will re-enter recession before year-end.

Again, nothing has been fixed in the last six months. In fact, things have gotten much much worse.

As for #2, it is now clear that the ECB and US Fed used up their last remaining effective bullets this summer in their efforts to aid the Obama re-election campaign (Romney stated he would fire Bernanke, hence the Fed’s decision… while various EU officials admitted the Obama administration requested that they keep things calm in the build up to November).

Indeed, stocks are now sharply down since QE 3. Gold and Silver, in contrast are up. If this dynamic does not change immediately then the positive consequence of the Fed’s actions (namely stocks rising) is now obsolete while the negative consequence (higher inflation) is about to hit lift off.

What would the market look like without the Fed’s aid? According to the business cycle the S&P 500 would be closer to 1,000.

In the EU, the ECB announced a plan to make unlimited bond purchases for EU nations that meet various reforms and “conditions.” The problem with this is that none of the countries that need money (namely Spain and Italy) want to meet any conditions as their economies are already imploding without additional austerity measures (see the information on Spain above).

Thus, the ECB promise has in fact turned out to be a colossal bluff. At the end of the day, Mario Draghi can say whatever he wants, but unless Germany is willing to go along with the ECB, he can’t do much of anything. Germany demands “conditions” therefore so does the ECB.

So… the global economy continues to slow. Europe is burning (literally in some countries). And the primary Central Banks (the Fed and the ECB) are out of ammo.

Buckle up… things are about to get messy.

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

Private Wealth Advisory is my bi-weekly investment advisory service tailor made for individual investors who want to stay informed of the real story in the global economy and outperform markets.

To whit, my clients made money in 2008. And we’ve been playing the Euro Crisis to perfection, with our portfolio returning 34% between July 31 2011 and July 31 2012.

And this incredible newsletter is now on sale at $249 for the next 12 hours (until tonight at midnight).

So if you’ve been holding off on subscribing to Private Wealth Advisory for whatever reason, this is your one chance to subscribe now, and lock in a price of $249 for the lifetime of your subscription.

To take advantage of this Special Offer… and start receiving my hard hitting, global market investment commentary delivered to your inbox every other Wednesday…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

 

 

 

 

 

 

 

 

We have just completed a series of videos detailing some of the risks posed to the financial system by the Federal Reserve as well as the European banking crisis.

These videos are free and available at:

www.abovethecrash.com

Best Regards,

Graham Summers

In case you missed it, something of major import occurred today.

That something is the Bank of England announcing that it is suspending its QE efforts because of questions relating to its “potency.”

This is a heck of a statement from a Central Bank. And it’s coming from the one that has even outdone Bernanke’s QE efforts.

Since the crisis began, the BoE has announced QE efforts equal to $598 billion. The UK’s GDP is $2.43 trillion. So the BoE has engaged in QE equal to over 20% of the UK’s GDP. By way of comparison, the US Fed has announced QE equal to about 12% of the US’s GDP (I’m not counting Twist here).

Despite this massive amount of QE, 2.53 million people are out of work today in the UK, up from 2 million at the start of the Great Crisis in 2007. Similarly, the UK’s GDP remains well below its peak.

In simple terms, QE fails to generate economic growth or jobs. End of story. The BoE spent 20% of the UK’s GDP on QE (a truly staggering amount) and more people are unemployed now than when it started. And GDP has yet to get even close to its pre-Crisis highs.

And yet, the US Federal Reserve continues to believe that QE is the answer to our economic prayers. At this point they’re not only ignoring history, but they’re ignoring real world examples (the UK), which show that QE fails to aid the economy or jobs in any meaningful way.

Meanwhile, the cost of living continues to spike around the world. Workers have demanded wage hikes everywhere from Chicago to Germany to China. Food prices continue to rise as does energy.

There is a word for this… it’s called stagflation. And it never ends well. Which is why I strongly urge everyone to prepare for tings to get much much worse before they get better.

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

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

Private Wealth Advisory is my bi-weekly investment advisory service tailor made for individual investors who want to stay informed of the real story in the global economy and outperform markets.

To whit, my clients made money in 2008. And we’ve been playing the Euro Crisis to perfection, with our portfolio returning 34% between July 31 2011 and July 31 2012.

And this incredible newsletter is now on sale at $249 for the next 12 hours (until tonight at midnight).

So if you’ve been holding off on subscribing to Private Wealth Advisory for whatever reason, this is your one chance to subscribe now, and lock in a price of $249 for the lifetime of your subscription.

To take advantage of this Special Offer… and start receiving my hard hitting, global market investment commentary delivered to your inbox every other Wednesday…

Click Here Now!!!

Best Regards,

Graham Summers

 

 

 

 

 

 

 

 

 

 

 

The Obama Administration has won its second term. And now that the election is over we can come to grips with the fact that nothing has been fixed and that the math is impossible both in Europe and here.

First and foremost, Greece is out of money… again.

The country is currently embroiled in a new 48 hour strike to protest the next wave of austerity measures which will be voted on today in order for Greece to qualify for the next round of bailout funds.

The bailout in question, €31.5 billion, was actually due five months ago but was not paid as Greece has failed to meet budgetary requirements. Without this money the country will run out of funds by November 16. We’ll see how this pans out but suffice to say the same issues (Greece is broke and will remain in the EU as long as it gets money) are still in play. None of them are good.

Then of course there is Spain, which continues to present impossible ideas to deal with its impossible economic situation. The country currently has just €37 billion in cash lying around. With this, it somehow plans on buying €60 billion worth of bad bank assets.

This is doable over time… provided that Spain doesn’t have a single other problem occur. Unfortunately, we’re up to five regions requesting bailouts leaving just €3 billion in funds available for any other regions that face a shortfall (there will be more).

Meanwhile, Spanish banks continue to draw over €400 billion from the ECB… up from €300+ in June. And on top of this, the country needs to raise €207 billion next year while keeping rates low.

And then of course there is the US…

The US re-entered recession in June 2012. And we are now facing the fiscal cliff again with the threat of tax hikes hitting in early 2013. We also have $16 trillion in debt and are running our fourth $1+ trillion financed by the US Federal Reserve which bought over 70% of all US Treasury issuance last year.

Speaking of the Fed, Obama’s win means Bernanke’s job is secure at least until he decides he wants to step down… which if he has any sense he’ll do so that the disaster waiting to unfold can happen on someone else’s watch.

That someone else will likely be Janet Yellen, the current Vice Chair of the Fed, who is an even bigger dove/fan of money printing than Bernanke (she said that QE 3 would “benefit the world,” a truly staggering claim given the increase in inflation both in the US and especially in emerging markets).

What does this mean?

Simple… the very same problems that the world faced on November 5, 2012 remain in place. And we now know that those in power (Bernanke and Draghi) favor money printing over everything else. So the cost of living/ inflation will continue to rise and the world will lurch ever closer to the great debt implosion that will eventually take down the financial system.

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

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

Private Wealth Advisory is my bi-weekly investment advisory service tailor made for individual investors who want to stay informed of the real story in the global economy and outperform markets.

To whit, my clients made money in 2008. And we’ve been playing the Euro Crisis to perfection, with our portfolio returning 34% between July 31 2011 and July 31 2012 (compared to a 2% return for the S&P 500).

And this incredible newsletter is now on sale at $249 for the next 12 hours (until tonight at midnight).

So if you’ve been holding off on subscribing to Private Wealth Advisory for whatever reason, this is your one chance to subscribe now, and lock in a price of $249 for the lifetime of your subscription.

Because tonight at midnight, the price is going back up to $299 and will stay there for good.

To take advantage of this Special One Time offer… and start receiving my hard hitting, global market investment commentary delivered to your inbox every other Wednesday…

Click Here Now!!!

Best Regards,

Graham Summers