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Interest Rates Will Become a Thing of the Past in this Century

Guest Piece by Tom Beck, Senior Editor of Portfolio Wealth Global

It’s true: the U.S. economy is on a roll. Companies are performing very well thanks to low interest rates and because America is still NUMBER-ONE in so many aspects, with technology chief among them.

Trump’s economic policies have brought jobs back, and there’s not a shadow of a doubt that his corporate tax cuts sparked a market boom, but the government CANNOT keep on acting as if deficits don’t matter.

Today, I want to show why central banks around the world are experiencing what I call “PEAK INFLUENCE” and how they stand to have a smaller impact on policy in the 21st century before eventually hanging their jerseys and retiring.

Take a look at this:


Courtesy: Zerohedge.com

A 700-year trend of DECLINING interest rates is very clear. The more our global economy becomes transparent and the risks become evident, the less risk a lender assumes. As a result, we even see loans being made at NEGATIVE rates.

What does President Trump want? Being a daredevil and a pioneer throughout his life, he wants the FED to acknowledge that the Treasury should also issue interest-free debt like Germany, Japan, France, Italy, the Netherlands, Spain, and others are implementing.

Let it sink in: interest rates will become a thing of the past in this century.

The role of fiscal policy, the one that government is in charge of, is much GREATER.

You want to have a man or woman who understands that they hold the magic wand. If the federal deficit can’t reach a sustainable trajectory with ZERO-percent interest rates and in a growth period, what else IS THERE?

Government will have a much more central part in shaping a country’s path than the central bank will. A nation’s economic strategy will be FUNDAMENTAL to its success.

For over 250 years, capitalism, free enterprise, and competition have led the barren North American continent to global supremacy.

This coming election will challenge the resolve of voters to be swayed by socialism, subsidized healthcare, and debt write-offs, but the cost will be GRAVE.

Courtesy: U.S. Global Investors

Gold prices have gone up by 20% since April of last year when the Bank of International Settlements in Basel, Switzerland changed gold into a TIER-1 asset.

Most people don’t understand the importance of it, but what it means is that gold is among the only reserves that banks can’t hold and value at 100% of the open-market price.

In other words, the CENTRAL BANK OF CENTRAL BANKS just told you that they consider precious metals as being the safest assets to hold.

Bigger than that, they’ve also indirectly told the markets that they’re ready to pay up to DOUBLE for their gold compared to before because Tier-3 assets, like gold used to be, were marked down by 50%.

What gold has done since 1971 has been incredible. Back then, had you bought one Eagle coin, you’d part with $35. Today, a bullion dealer would pay you close to $1,550 for that same coin. Had you had put $35 back then in your safe and taken them out in 2020, you’d be shocked to learn that those $35 buy a SIXTH of what they used to.

In other words, $35 in 1971 are $222 in 2020. This is an important data set, because it means that the price of gold has outperformed the rate of inflation!

Where gold stands out DRAMATICALLY is that it has fully retained its monetary role, in the eyes of the world’s largest money managers.

Governments, central banks and large funds already understand its significance, especially when it comes to hedging disruptions in geopolitics, in surprise inflation spikes or in debasement of fiat currencies.

They also understand that serves as a SUPERIOR asset, inversely correlated to their NET-LONG exposure to stocks.

Who owns most of the assets, globally?

The global pie of equity is divided amongst the world’s richest individuals, owning a colossal amount of stocks, real estate and businesses interests, but it is also owned by pension funds, which manage YOUR money.

Baby Boomers, the world over, have a vested interest in seeing stock prices rise, as well as bond prices, because their net worth is reliant upon them.

Therefore, unlike hedge funds and family offices, governments and central banks, which do diversify into gold, most of baby boomers, own NONE.

A downturn is much more risky for the average person, therefore, than to the sophisticated investor.

In case of a market shock, the big players will have gold, as a hedge, while your pension fund or your 401K plan, may not.

If you have IMMEDIATE needs for liquidity, then, as many boomers will, they may sell at a discount, out of stress and pressure.

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Lior Gantz: Stocks are Over-Bought, Time to Hedge With Commodities

Guest Piece by Lior Gantz of Future Money Trends

Every two or three weeks, I see another article published on how Warren Buffett’s holding company, Berkshire Hathaway, is underperforming the S&P 500 and how his cash pile of over $128B is a giant waste – since it could be making his shareholders a fortune, had it been invested in this late-stage bubble surge.

While that’s temporarily true, it is also important to remember that Buffett isn’t a stock investor; he is a business owner who seeks to own portions of businesses, purchasing their equity when the rate of compounding could be uniquely high, holding them forever, not for short periods of time.

For that to occur, for a company that grows at 8%-10% over time and yields a 2%-3% dividend, to compound at a rate of 16%-19% (TWICE as fast as the S&P 500), you have to PAY a fair price or BELOW that. This is what Warren Buffett has succeeded at locating in his 60-yr career – a company that, on average, compounds at 12% will only return 16%-19%, if they buy it CHEAP.

Right now, that’s simply not possible to do. While it is true that if one buys more of the S&P 500 index today, he is almost guaranteed to make money over time and will certainly be able to generate an above-inflation return over a period of 10-15 years, he could also WAIT and make much more.

Sitting on cash isn’t popular or profitable, but if you have REASON TO BELIEVE that stocks are due for a 20%-50% downside crash, Dot.Com-bubble-burst-style or 2008-style, there’s a LEGITIMATE reason to be cashed-up.

Buffett isn’t the only billionaire or the only serially-successful, illuminated investor that is CAUTIONING the average person to stay clear of stocks at the moment. Howard Marks, who wrote the best investment book I’ve ever read, is also publicly warning about the expensive markets.

Here are a number of the charts and data points that they’re watching:

Courtesy: Zerohedge.com

For one, if this analog continues to mirror the 1999-2000 period, in 3-4 months the markets will PEAK, followed by a MORE THAN 50% crash.

The S&P 500 index is currently trading at the highest gap above its 200-DMA since January 2018, right before it underwent a 10% correction. The S&P 500 is now also running on fumes, since for 2 months and 10 days, it hadn’t SUFFERED a -1% daily loss. This very much resembles the 2018 era, right before the -19.2% bloodbath, when that -1% daily loss streak lasted nearly four months.

Not only is the S&P 500 historically OVERBOUGHT, expensive and risky as hell; the NASDAQ is looking like a perfect bubble about to pop!

Take a look: the Relative Strength Index is as ALARMING as it was right before the Dot.Com burst and before the 2016 and 2018 corrections:

Courtesy: Zerohedge.com

The index isn’t comprised of penny tech stocks like back then, but the logic of putting new money into the index right now is, in my book, ALMOST non-existent. The risk/reward setup is totally biased against you.

If this is the case, and if all hedge funds, pension funds and self-managed accounts can see the writing on the wall, why are investors still LONG as they’ve ever been?

Before I get to answering that, notice how COMPLACENT buyers are, on top of being greedy – the VIX is sitting at all-time lows:

Courtesy: Zerohedge.com

The answer is that they’re POSITIVELY CONVINCED that the Federal Reserve, the European Central Bank and the Bank of Japan, as well as the People’s Bank of China, will do ANYTHING – absolutely ANYTHING – to avoid a recession. In fact, the first Wall Street billionaire has officially stated that the FED might even cut rates to ZERO.

This is not a gold bug that has been predicting doom and gloom for 40 years in a row, like a broken clock, and advising to build shelters in the hills; it’s a mainstream investor who is educated with the history and likelihood of such policies.

As I see it, interest rates under the dollar reserve currency system are NEVER going up again!

If we live in a world where bonds don’t generate any interest, then stocks become much more valuable, automatically; this is their main allure. This is the reason that sellers aren’t taking profits – where would they go for returns?

Courtesy: Zerohedge.com

The FED is already STIMULATING in irregular amounts and frequency in the past few months. In essence, it is acting as though it is fighting off a recession, but I remind you that U.S. unemployment rates are at half-century lows, the consumer is enjoying low debt burden and taxes have been cut. Logically, the central bank shouldn’t be embarking on stimulus plans in 2020, but it is.

All I can say is that stocks might be a DEATHTRAP; that is, traditional indices like the S&P 500, NASDAQ and Dow Jones are seriously ON THE PRECIPICE of something ominous.

In all such previous moments, in 2000 and in 2008, the commodities sector was the biggest winner of the HEDGING strategies that smart money implemented.

Courtesy: Zerohedge.com

Bitcoin is already having its BEST START to a calendar year and palladium, the 4th precious metal, is going PARABOLIC as well.

Bottom line, this is the most overbought market in history, which is in this shape – not due to strong fundamentals, but SOLELY thanks to the assumption that central banks will be PERFORMING MIRACLES to keep this from deflating.

It’s your call on how to address these facts and how to make money in a world that has clearly lost all risk aversion. In my case, I will continue to hedge by owning the HIGHEST-QUALITY resource stocks, which have already DOUBLED for us since June 2019.

Expect a very important alert from us this week.

 

That is all.

 

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Investors, Beware: Prepare For the Coming Decade

[Note: We have found the work of Lior Gantz from WealthResearchGroup.com to be excellent and interesting, so we’re sharing his articles with you. Hope you enjoy them and find them useful.]

Today, there is over $17T invested in bonds that guarantee a loss. Think of the madness: You invest $101 today and in 2030 you will receive back $100. While the rate of inflation has been around 1.5% and GDP growth has been 2%-2.5%, owning bonds hasn’t been a bad choice or a lousy decision.

Many bond investors own the bond because of its liquidity and due to the fact that they’ve been able to flip it, selling it to another institution for a profit, so the yield wasn’t a determining factor.

For example, when the U.S. government’s 10-yr bond yields 2.3% and you lend Washington $10,000, the return on the coupon is $230. If six months later, the newly-issued bond yields 1.8%, you’d have to lend the government $12,777, so investors flipping their previously-bought bonds from six months ago just made a stunning 27.77% return.

But who in their right mind bets on lower rates, when the world’s interest-rate policies are already this artificially low? Who can be so CERTAIN that rates won’t rise, that central banks will be able to continue on their path of suppressing inflation? WHO BUYS BONDS AT NEGATIVE RATES?

The level of madness, lunacy and criminality goes to another echelon when you learn that 97% of these government-issued bonds are actually owned by the CENTRAL BANKS and the institutions that facilitate fractional reserve banking in the first place!

President Trump may be calling on Powell via Twitter to lower rates to zero, because BOTH OF THEM are fully aware that in this decade (2020-2029) the compounded growth of the unfunded liabilities and the interest payments on the current national debt will become PUBLIC KNOWLEDGE and part of the debate. Thus far this has been swept under the rug, but the FED is already helping Washington prolong this economic expansion that is financed by ever-growing deficits.

The Federal Reserve is rudderless. It really has no idea what to do next, so it is coming up with all sorts of fantasy schemes, like “letting inflation run higher to make up for lost time” – this is STUPIDITY on the grandest scale.

I’ve never understood this imaginary, totally bizarre target of 2%, which is just a made-up figure that they HAVE NEVER been able to meet.

The Federal Reserve, along with all other central banks, is a financial mafia in $3,000 suits.

Their entire reason for existence is based on a false premise that bank runs won’t occur under their watch and that they know how to keep employment levels steady and inflation in check.

Nothing could be MORE absurd than those claims.

The dollar will continue to be King of Fiat, since the other currencies are now in banana republic mode. The Euro, Yen and Sterling are jokes.

So long as this boom in stocks prevails, we won’t see any inflationary mania, but distrust in institutions is back to WW2 levels. In America, the world’s biggest, most dominant and important market, DISUNITY is at a record high.

Every day, watching from afar, I am astounded at some of these notions brought up by AMATEUR politicians, who have ZERO real-world experience: outlawing billionaires, making healthcare 100% government-subsidized or making college 100% funded by taxpayers.

If there is a downturn in 2020, Trump will most likely lose the presidency to a Democrat. If that happens, the U.S. will begin to resemble Europe and have a quasi-socialistic regime. If Trump wins, he will cut taxes for the middle class and BALLOON the national debt, making the endgame much scarier.

The planet is operating in the wake of a global revolution that’s due to come. GDP growth is now a matter of debt, not productivity.

Gold may be underperforming stocks in 2019 and mining stocks may be underperforming for 3 years, but the paradigm shift will be so quick and the re-pricing so DRAMATIC that being early and looking like a fool for a while is a small price to pay in order to MAKE obscene, life-changing profits on the other side.

Don’t cover your ears. Don’t bury your head in the sand in these wild times we live in. Be a force to be reckoned with!

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