crisis

Dec

2015

Is the Bull Market Over? These Charts Say So

For weeks we have been warning not to trust the bounce in stocks. We were worried that a Bear Market had begun.

The most critical item we were concerned with was the fact that the S&P 500, despite its massive bounce, had failed to regain its former trendline. This would suggest a Bear Market was possibly about to begin

As we first noted back in early September, Bear Markets do not happen all at once. EVERY time a major top has formed and stocks have taken out their Bull Market trendline, we’ve had a bounce to “kiss” the line before the Bear Market really took hold.

This is precisely what has happened with the October bounce: stocks rose to “kiss” the former trendline, but failed to reclaim it.
Having failed to reclaim this line twice, the S&P 500 is now turning sharply down. The financial media sees this as a reaction to ECB President Mario Draghi’s failure to do “enough” this morning, but the reality is that this was not to be trust, driven primarily by manipulation with little carry through from REAL buy orders.

In the near term stocks could crater to 1900 in short order. However, what happens in the next few days or even weeks is not the real concern.

The REAL concern pertains to the BIG PICTURE for the markets: the massive monthly rising wedge pattern stocks have been forming since the 2009 bottom.

As you can see in the chart below, the August-September collapse broke this formation. That, in of itself, is not the be all end all. But the fact that stocks have failed to reclaim their former bull market trendline is a MAJOR concern indicating that it is highly likely that the bull market begun March 2009 is OVER. A Bear Market will have begun.

If this is the case, the next Crash has already begun. This would put us at the equivalent of where the markets were in late 2007: just before the whole mess came crashing down in 2008.

Smart investors are preparing now. The August-September correction was just a warm up. The REAL drop is coming shortly.

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Dec

2015

Six Horrifying Facts of the Financial System Today

For six years, the world has operated under a complete delusion that Central Banks somehow fixed the 2008 Crisis.

All of the arguments claiming this defied common sense. A 5th grader would tell you that you cannot solve a debt problem by issuing more debt. If the below chart was a problem BEFORE 2008… there is no way that things are better now. After all, we’ve just added another $10 trillion in debt to the US system.

Similarly, anyone with a functioning brain could tell you that a bunch of academics with no real-world experience, none of whom have ever started a business or created a single job can’t “save” the economy.

However, there is an AWFUL lot of money at stake in believing these lies. So the media and the banks and the politicians were happy to promote them. Indeed, one could very easily argue that nearly all of the wealth and power held by those at the top of the economy stem from this fiction.

So it’s little surprise that no one would admit the facts: that the Fed and other Central Banks not only don’t have a clue how to fix the problem, but that they actually have almost no incentive to do so.

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So here are the facts:

1) The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion.

2) The derivatives market that uses this bond bubble as collateral is over $555 trillion in size.

3) Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.

4) Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP.

5) The Central Banks are now all leveraged at levels greater than or equal to where Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.

6) The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion (back in 2009). Today it’s over $4.5 trillion.

We are heading for a crisis that will be exponentially worse than 2008. The global Central Banks have literally bet the financial system that their theories will work. They haven’t. All they’ve done is set the stage for an even worse crisis in which entire countries will go bankrupt.

The situation is clear: the 2008 Crisis was the warm up. The next Crisis will be THE REAL Crisis. The Crisis in which Central Banking itself will fail.

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Oct

2015

Bail-Ins and Frozen Accounts Are Coming to a Country Near You!

In the last 24 months, Canada, Cyprus, New Zealand, the US, the UK, and now Germany have all implemented legislation that would allow them to first FREEZE and then SEIZE bank assets during the next crisis.

These moves will be sold as “for the public’s good,” when they happen. But the reality is that it’s all about stopping people from moving their capital into actual physical cash.

The whole template for this was set out in Cyprus in 2013. The quick timeline for what happened in Cyprus is as follows:

June 25, 2012: Cyprus formally requests a bailout from the EU.
November 24, 2012: Cyprus announces it has reached an agreement with the EU the bailout process once Cyprus banks are examined by EU officials (ballpark estimate of capital needed is €17.5 billion).
February 25, 2013: Democratic Rally candidate Nicos Anastasiades wins Cypriot election defeating his opponent, an anti-austerity Communist.
March 16 2013: Cyprus announces the terms of its bail-in: a 6.75% confiscation of accounts under €100,000 and 9.9% for accounts larger than €100,000… a bank holiday is announced.
March 17 2013: emergency session of Parliament to vote on bailout/bail-in is postponed.
March 18 2013: Bank holiday extended until March 21 2013.
March 19 2013: Cyprus parliament rejects bail-in bill.
March 20 2013: Bank holiday extended until March 26 2013.
March 24 2013: Cash limits of €100 in withdrawals begin for largest banks in Cyprus.
March 25 2013: Bail-in deal agreed upon. Those depositors with over €100,000 either lose 40% of their money (Bank of Cyprus) or lose 60% (Laiki).

The most important thing I want you to focus on is how lies and propaganda were spread for months leading up to the collapse. Then in the space of a single weekend, the whole mess came unhinged and accounts were frozen.

One weekend. The process was not gradual. It was sudden and it was total: once it began in earnest, the banks were closed and you couldn’t get your money out (more on this in a moment).

There were no warnings that this was coming because everyone at the top of the financial food chain are highly incentivized to keep quiet about this. Central Banks, Bank CEOs, politicians… all of these people are focused primarily on maintaining CONFIDENCE in the system, NOT on fixing the system’s problems. Indeed, they cannot even openly discuss the system’s problems because it would quickly reveal that they are a primary cause of them.

For that reason, you will never and I repeat NEVER see a Central banker, Bank CEO, or politician admit openly what is happening in the financial system. Even middle managers and lower level employees won’t talk about it because A) they don’t know the truth concerning their institutions or B) they could be fired for warning others.

Please take a few minutes to digest what I’m telling you here. You will not be warned of the risks to your wealth by anyone in a position of power in the political financial hierarchy (with the exception of folks like Ron Paul who are usually marginalized by the media).

Moreover, when the Crisis DOES hit, it will be much, much harder to get your money out.

Consider the recent regulations implemented by SEC to stop withdrawals from happening should another crisis occur.

The regulation is called Rules Provide Structural and Operational Reform to Address Run Risks in Money Market Funds. It sounds relatively innocuous until you get to the below quote:

Redemption Gates – Under the rules, if a money market fund’s level of weekly liquid assets falls below 30 percent, a money market fund’s board could in its discretion temporarily suspend redemptions (gate). To impose a gate, the board of directors would find that imposing a gate is in the money market fund’s best interests. A money market fund that imposes a gate would be required to lift that gate within 10 business days, although the board of directors could determine to lift the gate earlier. Money market funds would not be able to impose a gate for more than 10 business days in any 90-day period…

Also see…

Government Money Market Funds – Government money market funds would not be subject to the new fees and gates provisions. However, under the proposed rules, these funds could voluntarily opt into them, if previously disclosed to investors.

http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370542347

In simple terms, if the system is ever under duress again, Money market funds can lock in capital (meaning you can’t get your money out) for up to 10 days. If the financial system was healthy and stable, there is no reason the regulators would be implementing this kind of reform.

This is just the start of a much larger strategy of declaring War on Cash.

Indeed, we’ve uncovered a secret document outlining how the Fed plans to incinerate savings to force investors away from cash and into riskier assets.

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Best Regards

Phoenix Capital Research

Oct

2015

Recession Watch: We’re Back in One

The Fed has now kept interest rates at zero for 81 months.

This is the longest period in the history of the Fed’s existence, lasting longer than even the 1938-1942 period of ZIRP.

And the US economy is moving back into recession. Consider that…

Industrial production fell five months straight in the first half of 2015. This has never happened outside of a recession.

Merchant Wholesalers’ Sales are in recession territory.

The Empire Manufacturing Survey is in recession territory.

All four of the Fed’s September Purchasing Manager Index (PMI) readings (Philadelphia, New York, Richmond, and Kansas City) came in at readings of sub-zero. This usually happens when you are already 4-5 months into a recession. (H/T Bill Hester)

Why do these issues matter?

Because they are happening at a time when interest rates are already at zero.

Never in history has the US entered a recession when rates were this low. And it spells serious trouble for the financial system going forward.

Firstly, with rates at zero, the Fed has next to no ammo to combat the contraction. Some Central Banks have recently cut rates into the negative. But this is politically impossible in the US, particularly with an upcoming Presidential election.

This ultimately leaves QE as the last tool in the Fed’s arsenal to address an economic contraction.

However, at $4.5 trillion, the Fed’s balance sheet is already so monstrous that it has become a systemic risk in of itself. And the Fed knows this too… Janet Yellen, before she became Fed chair, was worried about exiting the Fed’s positions back when its balance sheet was only $1.3 trillion.

Moreover, it’s not clear that the Fed could launch another QE program at this point.

For one thing there is the upcoming Presidential election.

Regardless of one’s political affiliation, it is clear that wealth inequality has become one of the big issues for the election. With numerous media outlets catching on to the fact that QE exacerbates this, the Fed’s hands are tied unless we get a full on market meltdown.

So, the US economy is weakening at a time when the bar is set quite high for the Fed to enact any significant policy changes. With interest rates already at zero, the Fed cannot cut rates. And with Congress breathing down its neck and an election looming the Fed won’t be able to launch another QE program unless we experience a full-scale financial meltdown.

Thus, the Fed’s hands are tied… at a time when the economy is faltering and the stock market is beginning to weaken dramatically.

Another Crisis is brewing. Smart investors are preparing for it now while stocks are still holding up.

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Our FREE daily e-letter: http://gainspainscapital.com/

Oct

2015

Fed Experts Call for NIRP… is a Physical Cash Ban Next?

More and more “experts” are calling for Negative Interest Rate Policy or NIRP.

The US Federal Reserve is obsessed with market reactions to its policies. Because of this, anytime the Fed plans to announce a major change in policy, it preps the markets via numerous leaks and hints… oftentimes for months in advance.

An excellent example of this concerns the Fed’s decision to taper QE back in 2013.

At that time, the Fed had been engaging in two open ended-QE programs… programs that had been running for over six months.

Rather than simply beginning to taper the programs, then-Fed Chairman Ben Bernanke, hinted that the Fed was contemplating a taper in June.

The markets reacted sharply with bond yields rising.

The Fed then spent six months allowing the market to get used to the idea of a taper, before the actual taper finally began in December 2013.

Put another way, the Fed gave the markets a full six months to adjust to a change in policy, before actually implementing said change. This only highlights just how focused the Fed is on market reactions to its policies.

In the simplest of terms: the Fed will NEVER surprise the market. This is particularly true now that the Fed is in the political cross hairs due to ample evidence showing its policies have increased wealth inequality.

If the Fed is planning on something new, particularly something that might have political repercussions, we’ll see numerous hints and suggestions well before the actual policy is unveiled.

With that in mind, we need to consider the number of Fed officials who have recently been hinting at Negative Interest Rate Policy or NIRP.

First we find that a Fed official hinted at NIRP during the Fed’s September 2015 meeting.
Then, on October 9^th, Fed President Bill Dudley stating that negative rates were “an option” though not a “relevant conversation” right now.
This statement was followed up by Minneapolis Fed President Narayana Kocherlakota stating point blank that the Fed should “consider negative rates.”

The Fed has never once hinted at or discussed NIRP during its policy meetings. Then, in the span of three weeks, we’ve not only had an anonymous Fed official state that he or she believes NIRP is coming to the US, but two highly visible Presidents have called to NIRP consideration.

This is simply part of the Fed’s larger War on Cash.

For six years straight, the Fed has been trying to “trash” cash.

First it cut interest rates to zero… making it so that savings deposits produced almost nothing in the way of interest income. Consider that at current rates, a retiree with $1 million in savings earns a measly $2,500 per year in interest income.

The Fed’s hope was that by making it painful for savers to sit in cash, said savers would move into risk assets such as bonds and stocks. This has worked in that stocks are now in one of, if not THE biggest bubbles in history… while bonds are trading at yields never before seen outside of wartime.

However, the Fed overlooked two outlets for investors who didn’t want to be forced into risk. They are: Gold bullion and physical cash.

The Fed has been dealing with bullion via clear manipulation of prices for years (that’s an article for another time). And now it is moving to make physical cash obsolete.

This is just the beginning. Indeed… we’ve uncovered a secret document outlining how the US Federal Reserve plans to incinerate savings in the coming months through NIRP, and possibly even by outlawing physical cash.

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Our FREE daily e-letter: http://gainspainscapital.com/

Oct

2015

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Sep

2015

The Market Has Run Out of Props

The stock market is rapidly running out of props.

First off, corporate sales and profits are rolling over. As Charlie Bilello recently noted, we’ve had two straight quarters of Year over Years drops in corporate revenues.

Moreover, corporate profits are also falling at a pace usually associated with recessions:

Profit growth for the S&P 500 companies is at its weakest point since 2009. That’s because, in fact, there isn’t any profit growth.

S&P 500 earnings for the first half of the year are expected to show a 0.7% contraction compared to a year ago, according to numbers from FactSet research. Growth in the first quarter was a meager 1.1%, but the second quarter is more than offsetting that, expected to contract at a 2.2% rate, FactSet estimates. The last time the S&P 500 saw a year-over-year decline for the first half of a year was 2009, when earnings positively cratered at the depths of the global recession, down 30.9%.

Source: Wall Street Journal

With the fundamentals no longer supporting a stock rally, this leaves the Fed and momentum as the sole providers of support for stocks.

Regarding the Fed, it failed to raise rates for the umpteenth time last week. Despite this, stocks actually FELL on the news.

One by one the various Fed doves are throwing in the towel. Sure, they might refuse to hike rates right now, but we’re a long ways from when Bernanke said that QE was a success because stocks were rallying. The Fed realizes that it is in the political crosshairs because QE has exacerbated wealth inequality.

Fed President Fred Bullard even chastised Jim Cramer for being a perma-bull this morning. This is the same individual who desperately claimed the Fed should hold off ending QE back in October 2014 to prop the stock market up (mind you, he wasn’t even a voting member of the Fed at that time, so this was nothing more than verbal intervention).

In simple terms, the current political climate will not permit the Fed to ease any more unless we enter a full-scale market meltdown. At best there will be verbal interventions, but the Fed is out of the stock juicing business for now.

This leaves the market’s momentum/trend as the sole remaining prop for stocks. Unfortunately both have been broken.

Sure, the markets may bounce here and there (stocks posted eight moves of 16% or greater when the Tech Bubble burst) but we are officially in a very negative environment for stocks. Smart investors should prepare for a bear market and possibly even a Crisis.

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Graham Summers

Chief Market Strategist

Phoenix Capital Research

Our FREE daily e-letter: http://gainspainscapital.com/

Sep

2015

Why What’s About to Begin Will Dwarf 2008

Earlier this week I outlined how the next Crash will play out.

Today we’ll assess why this Crisis will be worse than the 2008 Crisis.

By way of explanation, let’s consider how the current monetary system works…

The current global monetary system is based on debt. Governments issue sovereign bonds, which a select group of large banks and financial institutions (e.g. Primary Dealers in the US) buy/sell/ and control via auctions.

These financial institutions list the bonds on their balance sheets as “assets,” indeed, the senior-most assets that the banks own.

The banks then issue their own debt-based money via inter-bank loans, mortgages, credit cards, auto loans, and the like into the system. Thus, “money” enters the economy through loans or debt. In this sense, money is not actually capital but legal debt contracts.

Because of this, the system is inherently leveraged (uses borrowed money).

The Structure of the Financial System

Consider the following:

Total currency (actual cash in the form of bills and coins) in the US financial system is little over $1.2 trillion.

If you want to include money sitting in short-term accounts and long-term accounts the amount of “Money” in the system is about $10 trillion.

In contrast, the US bond market is well over $38 trillion.

If you include derivatives based on these bonds, the financial system is north of $191 trillion.

Bear in mind, this is just for the US.

Again, debt is money. And at the top of the debt pyramid are sovereign bonds: US Treasuries, German Bunds, Japanese Government Bonds, etc. These are the senior most assets used as collateral for interbank loans and derivative trades. THEY ARE THE CRÈME DE LA CRÈME of our current financial system.

So, this time around, when the bubble bursts, it won’t simply affect a particular sector or asset class or country… it will affect the entire system.

The Bond Bubble is Exponentially Larger Than Stocks

So…. the process will take considerable time. Remember from the earlier pages, it took three years for the Tech Bubble to finally clear itself through the system. This time it will likely take as long if not longer because:

The bubble is not confined to one country (globally, the bond bubble is over $100 trillion in size).

The bubble is not confined to one asset class (all “risk” assets are priced based on the perceived “risk free” valuation of sovereign bonds… so every asset class will have to adjust when bonds finally implode).

The Central Banks will do everything they can to stop this from happening (think of what the ECB has been doing in Europe for the last three years)

When the bubble bursts, there will very serious political consequences for both the political elites and voters as the system is rearranged.

First of all, this bubble is larger than anything the world has ever seen. All told, there are $100 trillion in bonds in existence.

A little over a third of this is in the US. About half comes from developed nations outside of the US. And finally, emerging markets make up the remaining 14%.

The size of the bond bubble alone should be enough to give pause.

However, when you consider that these bonds are pledged as collateral for other securities (usually over-the-counter derivatives) the full impact of the bond bubble explodes higher to $555 TRILLION.

To put this into perspective, the Credit Default Swap (CDS) market that nearly took down the financial system in 2008 was only a tenth of this ($50-$60 trillion).

Moreover, you have to consider the political significance of this bubble.

For 30+ years, Western countries have been papering over the decline in living standards by issuing debt. In its simplest rendering, sovereign nations spent more than they could collect in taxes, so they issued debt (borrowed money) to fund their various welfare schemes.

This was usually sold as a “temporary” issue. But as politicians have shown us time and again, overspending is never a temporary issue. This is compounded by the fact that the political process largely consists of promising various social spending programs/ entitlements to incentivize voters.

In the US today, a whopping 47% of American households receive some kind of Government benefit. This type of social spending is not temporary… this is endemic.

Most Western Nations Are Bankrupt

The US is not alone… Most major Western nations are completely bankrupt due to excessive social spending. And ALL of this spending has been fueled by bonds.

This is why Central Banks have done everything they can to stop any and all defaults from occurring in the sovereign bonds space. Indeed, when you consider the bond bubble everything Central Banks have done begins to make sense.

Central banks cut interest rates to make these gargantuan debts more serviceable.

Central banks want/target inflation because it makes the debts more serviceable and puts off the inevitable debt restructuring.

Central banks are terrified of debt deflation (Fed Chair Janet Yellen herself admitted that oil’s recent deflation was economically positive) because it would burst the bond bubble and bankrupt sovereign nations.

So how will all of this play out?

The bond markets have already begun a revolt in the Emerging Market space. There we are on the verge of taking out the bull market trendline dating back to 2009.

When this hits, capital will fly to high quality bonds particularly US treasuries. However as the bond market crisis accelerates eventually it will envelope even safe haven bonds (including Treasuries).

At that point the bad debts in the financial system will finally clear and we can begin to see real sustainable growth.

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Our FREE daily e-letter: http://gainspainscapital.com/

Sep

2015

These Two Assets Show Us a Crash is Coming

If the foundation of the financial system is debt… and that debt is backstopped by assets that the Big Banks can value well above their true values (remember, the banks want their collateral to maintain or increase in value)… then the “pricing” of the financial system will be elevated significantly above reality.

Put simply, a false “floor” was put under asset prices via fraud and funny money.

Consider the case of Coal.

In the US, Coal has become a political hot button. Consequently it is very easy to forget just how important the commodity is to global energy demand. Coal accounts for 40% of global electrical generation. It might be the single most economically sensitive commodity on the planet.

With that in mind, consider that Coal ENDED a multi-decade bull market back in 2012. In fact, not only did the bull market end… but Coal has erased virtually ALL of the bull market’s gains (the green line represents the pre-bull market low).

Those who believe that the global is in an economic expansion will shrug this off as the result if the US’s shift away from Coal as an energy source. The US accounts for only 15% of global Coal demand. The collapse in Coal prices goes well beyond US changes in energy policy.

What’s happening in Coal is nothing short of “price discovery” as the commodity moves to align itself with economic reality. In short, the era of “growth” pronounced by Governments and Central Banks around the world ended. The “growth” or “recovery” that followed was nothing but illusion created by fraudulent economic data points.

We get confirmation of this from Oil.

For most of the “so called” recovery, Oil gradually moved higher, creating the illusion that the world was returning to economic growth (demand was rising, hence higher prices).

That blue line could very well represent the “false floor” for the recovery I mentioned earlier. Provided Oil remained above this trendline, the illusion of growth via higher energy demand was firmly in place.

And then Oil fell nearly 80% from top to bottom.

As was the case for Coal, Oil’s drop was nothing short of a bubble bursting. From 2009 until 2014 Oil’s price was disconnected from economic realities. Then price discovery hit resulting in a massive collapse.

Moreover, the damage to Oil was extreme. Not only did it collapse 80% in a matter of months. It actually TOOK out the trendline going back to the beginning of the bull market in 1999.

This is a classic “ending” pattern. Breaking a critical trendline (particularly one that has been in place for several decades) is one thing. Breaking it and then failing to reclaim it during the following bounce is far more damning.

In short, the era the phony recovery narrative has come unhinged. We have no entered a cycle of actual price discovery in which financial assets fall to more accurate values. This will eventually result in a stock market crash, very likely within the next 12 months.

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

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Best Regards

Graham Summers

Phoenix Capital Research

Sep

2015

Three Reasons the Fed Cannot Let Rates Normalize

Analysts and commentators remain hung up on whether or not the Fed will raise rates next week.

Certain Fed officials have been stating that the Fed should commence tightening. However, with China’s bubble collapsing, dragging down the Emerging Markets, there are plenty of excuses for the Fed to postpone yet again.

Ultimately, I remain convinced that whenever the Fed does hike rates, it will largely be a symbolic rate hike, say to 0.35% or 0.5%. That will be it for some time.

I say this because the Fed cannot afford raising rates anywhere near historical norms (4%). There are three reasons for this:

The $9 trillion US Dollar carry trade
The $156 trillion in interest-rate based derivatives sitting on the big banks’ balance sheets.
The weak US economy cannot handle rate normalization

Regarding #1, there are over $9 trillion in borrowed US Dollars floating around the financial system invested in various assets. When you borrow in US Dollars you are effectively shorting US Dollars. So if the US Dollar strengthens, you very quickly blow up (carry trades only work when the currency you are borrowing in remains weak or stable).

The US Dollar has rallied over 20% in the last year. It is currently consolidating. But if the Fed were to raise rates significantly, the interest rate differential between the US Dollar and other major currencies (the Yen is at zero, while the Euro is negative) would result in large amounts of capital moving out of the Yen and Euro and into the US Dollar. This would blow up that $9 trillion carry trade leading to systemic risk.

Regarding #2, bonds are the senior most collateral backstopping the derivatives markets. Over 77% of derivatives are based on interest rates. This comes to roughly $156 trillion in interest rate-based derivatives… sitting on the big banks’ balance sheets.

If even 0.1% of this money is “at risk” it would wipe out 10% of the big banks equity. If 1% were “at risk” it would wipe out ALL of the big banks’ equity.

Suffice to say, the Fed cannot afford a spike in interest rates without imploding the big banks: the very banks it has spent trillions of Dollars propping up.

Finally, the US economy cannot handle a normalization interest rates.

This is not the usual “the Fed cannot raise rates ever” nonsense. It is more a structural argument. A sharp drop in business investment is what causes recessions. When businesses stop investing, job growth slows and the layoffs start soon after. This is how a recession begins.

With corporate profits already falling, US corporations already have less cash available to pay off the gargantuan debt loads they’ve accrued in the last six years (courtesy of the Fed keeping rates at zero). A spike in rates would only accelerate the pace at which corporations cut back on investment, as they have to spend more money on debt payments. This in turn would trigger a recession.

At the end of the day, the Fed has failed to implement any meaningful reform. The very issues that caused the 2008 Crisis (excessive debt, particularly in the opaque derivatives markets) are at even worse levels than they were in 2008.

Another Crisis is coming. Smart investors are preparing now.

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

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