Federal Reserve

Signs Of The Time, Part 87

It’s been interesting watching the run-up to the recent carnage on Wall Street.

For some time now, the “crash prophets” who correctly-called the housing market bubble and 2008 economic crisis have been warning the stock market was frothy, if not in bubble territory.

Meanwhile, the Pollyannas who didn’t see either of those events from the last decade convinced themselves that not only had the United States managed to get on solid footing again after the blatant “papering over” of the debacle that reared its ugly head seven years ago, but that U.S equities and their valuations were a fair reflection of an economic “recovery” that was charging “full-steam ahead.”

At the same time, the Pollyannas (with the assistance of the financial mainstream media) ridiculed the “prophets” at any chance they got.

Reminds me a lot of that time period from roughly 2004 to 2008, until the Pollyannas got spanked hard and many of their mouthpieces were put out to pasture.

Make no mistake about it, America’s financial crash is coming.

The powers-that-be can only “kick the can down the road” until the road runs out. And that time is almost here.

Is the recent stock market plunge the event that pushes us over the edge?

I’m not sure it is. That being said, the dive has resulted in some serious financial losses. Steve Goldstein, the D.C. Bureau Chief for the MarketWatch website, wrote this afternoon:

As of March 31, households and nonprofits held $24.1 trillion in stocks. That’s both directly, and through mutual funds, pension funds and the like. That also includes the holdings of U.S.-based hedge funds, though you’d have to think that most hedge funds are held by households.

Using the Dow Jones Total Stock Market index through midmorning trade, that number had dropped to $22.32 trillion.

In other words, a cool $1.8 trillion has been lost between now and the first quarter — and overwhelmingly, those losses occurred in the last few days…

(Editor’s note: Bold added for emphasis)

$1.8 trillion. Whew. After riding the bull for so long, it looks like the Pollyannas weren’t expecting the beast to pull an abrupt about-face… and gore them.


The White Stripes, Conquest (2007)
YouTube Video

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

Source:

Goldstein, Steve. “Households just saw $1.8 trillion in wealth vanish as stocks fall.” MarketWatch. 24 Aug. 2015. (http://www.marketwatch.com/story/households-still-hold-22-trillion-in-stocks-even-after-market-rout-2015-08-24). 24 Aug. 2015.

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Peter Schiff: Sell Dollars, Buy Gold, Gold Stocks, Chinese Stocks

The second “crash prophet” I’ll be blogging about this weekend is Peter Schiff, the CEO and chief global strategist of Euro Pacific Capital. Schiff, who correctly called the housing bust and 2008 economic crisis, appeared on CNBC Asia last Wednesday and shared the following with viewers:

The dollar has had a huge rally based on the anticipation of a normalization of interest rates, of a shrinking of the Fed’s $4.5 trillion balance sheet. All this is wrong. None of this is going to happen. It’s all fantasy. That balance sheet is going to explode when they launch QE 4. So the dollar is a bubble. You should sell dollars. Gold has been suppressed because people have been buying dollars and selling gold. Gold’s a great buy. Gold stocks. And you’ve had a nice correction I think in your part of the world, in Hong Kong. Some of these Chinese shares, I think there’s a lot of opportunities there to look to protect yourself in the equity markets. Because when the Fed unleashes QE 4, that’s going to send a lot of money into the emerging markets. A lot of money is going to leave the U.S. in search of safe havens.


“The Last Thing That Fed Wants is a Rate Hike”
YouTube Video

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Jeremy Grantham Identifies 10 ‘Potential Threats To Our Well-Being’

Jeremy Grantham, the British-born investment strategist and founder/former chairman of Grantham, Mayo, Van Otterloo & Co. (oversees $117 billion in client assets as of June 30, 2015), just released his latest investment letter on the GMO website. Writing about the second quarter of 2015, Grantham, whose individual clients have included current Secretary of State John Kerry and former Vice President Dick Cheney, focused on ten “potential threats to our well-being” (echoing a Morningstar piece I blogged about on July 14). These threats are (in his own words):

1. Pressure on GDP growth in the U.S. and the balance of the developed world: count on 1.5% U.S. growth, not the old 3%
2. The age of plentiful, cheap resources is gone forever
3. Oil
4. Climate problems
5. Global food shortages
6. Income inequality
7. Trying to understand deficiencies in democracy and capitalism
8. Deficiencies in the Fed
9. Investment bubbles in a world that is, this time, interestingly different
10. Limitations of homo sapiens

Grantham talked about each threat in detail. I’ll be focusing on those items I think would interest Survival And Prosperity readers.

Regarding pressure on U.S./developed world GDP growth, Grantham wrote:

Factors potentially slowing long-term growth:
a) Slowing growth rate of the working population
b) Aging of the working population
c) Resource constraints, especially the lack of cheap $20/barrel oil
d) Rising income inequality
e) Disappointing and sub-average capital spending, notably in the U.S.
f) Loss of low-hanging fruit: Facebook is not the new steam engine
g) Steadily increasing climate difficulties
h) Partially dysfunctional government, particularly in economic matters that fail to maximize growth opportunities, especially in the E.U. and the U.S…

On “plentiful, cheap resources” being gone:

All in all I am still very confident, unfortunately, that the old regime of irregularly falling commodity prices is gone forever…

On oil:

Oil has been king and still is. For a while longer… Now, as we are running out of oil that is cheap to recover, the economic system is becoming stressed and growth is slowing…

Grantham added:

The good news is that with slower global growth and more emphasis on energy efficiency and a probability of some carbon tax increases, global oil demand may settle down to around 1% a year for the next 10 to 15 years. At that level of increase in demand, even modest continued increases in recovery rates will keep us in oil even if no new oil is found for the next 15 years.

Beyond 15 years, the resource and environmental news gets better because cheaper electric vehicles and changes in environmental policy will enable steady decreases in oil demand…

On global food shortages, Grantham referred to some recent research. He wrote:

I was completely gruntled by a report last month from the Global Sustainability Institute of Anglia Ruskin University in the U.K. This unit is backed by Lloyds of London, the U.K. Foreign Office, the Institute of Actuaries, and the Development Banks of both Africa and Asia – a grouping with a very serious interest in the topic of food scarcity and societal disruptions to say the least. The team of scientists used system dynamic modeling, which uses feedbacks and delays, to run the business-as-usual world forward 25 years. Without any new and improved responses from us, the results are dismaying: Prices of wheat, corn, soybeans, and rice were all predicted to be at least four times the levels of 2000. (They are currently about double.) The team concluded, “The results show that based on plausible climate trends and a total failure to change course, the global food supply system would face catastrophic losses and an unprecedented epidemic of food riots. In this scenario, global society essentially collapses as food production falls permanently short of consumption.” And you thought my argument on food problems of the last three years was way over the top!

Grantham is still not impressed with the Federal Reserve. He predicted:

And what of the current Fed regime – the Greenspan-Bernanke-Yellen Regime – that promotes higher asset prices and lower borrowing costs, which facilitate stock buybacks amongst other speculative forces? Well, this regime, too, will change. Regression of regime, if ou will. Painfully, politicians, the public, businessmen, and possibly even some economists will recognize the current regime as a failed experiment.

And on the “limitations of homo sapiens”? Grantham observed:

Not only does our species have a strong predisposition to be optimistic (or bullish) – it is probably a useful survival characteristic – but we are particularly good at listening to agreeable data and avoiding unpleasant data that does not jibe with our beliefs or philosophies. Facts, whether backed by 97% of scientists as is the case with man-made climate change, or 99.9% as is the case with evolution, do not count for nearly as much as we used to believe. For that matter, we do a terrible job of planning for the long term, particularly in postponing gratification, and we are wickedly bad at dealing with the implications of compound math. All of this makes it easy for us to forget about the previously painful market busts; facilitates our pushing stocks and markets on occasion to levels that make no mathematical sense; and allows us, regrettably, to ignore the logic of finite resources and a deteriorating climate until the consequences are pushed up our short-term noses.

The take-away from all of the above?

• Grantham forecasts U.S./developed world GDP growth to slow to 1.5 percent
• Investment opportunities may exist in commodities, agriculture, and other things food-related
• The outcome of the Fed’s current monetary policies will be painful
• Human nature- in particular, our unbridled optimism and focus on short-term gratification- will continue to result in asset bubbles and longer-term problems outside of the financial markets/economy/larger financial system

You can read Grantham’s latest investment newsletter on the GMO site here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Peter Schiff: ‘Gold’s Going To Take Off’ When Fed Doesn’t Raise Interest Rates, Starts QE 4

Economist, financial broker/dealer, and author Peter Schiff appeared on the Fox Business Network yesterday. As the price of gold hit a 5-year low, the noted gold bull was asked his thoughts. Referring back to the dot-com bust and gold’s subsequent lift-off into the 2000s, Schiff told viewers:

I think people are making the same mistake again. They have faith in the Fed. They have faith in Yellen. This is the biggest bubble ever. And I think people should be buying gold, but they don’t know enough to do it.

Schiff, who correctly called the housing bust and 2008 economic crisis, added later:

The dollar has been rising on the idea that the Fed is going to raise rates. But I don’t think that it’s actually going to happen. I don’t think the Fed can raise rates. That’s why they’ve been at zero for seven years. This bubble is so big that even a small rate hike will prick it. So I think all the Fed can do is talk about raising rates. They know that they can’t do it. Now, could they do a 25-basis point hike just symbolically to pretend that they’re going to do more? Maybe. But I don’t even think they’re going to do that. I think they’re going to do QE 4, and when the market comes to terms with reality, gold’s going to take off. But when people are going to wake up? I can’t tell you. It’s amazing that they’re so clueless for so long.


“Gold Will Take Off Once Market Comes to Terms With Reality”
YouTube Video

The CEO and chief global strategist of Euro Pacific Capital remarked that he tells people to have ten to fifteen percent of their portfolio in gold, and still stands by the recommendation.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Mike Maloney, Peter Schiff Discuss Next Economic Crisis, Gold

The gold price has fallen to its lowest level in more than five years as talk of a US interest rate rise has led investors to sell the precious metal.

Gold closed 2.5% lower at $1,104.60 an ounce in London, having earlier fallen below $1,100 an ounce for the first time since March 2010.

The gold price is now more than 40% below its August 2011 peak…”

-BBC News website, July 20, 2015

I had to chuckle when I read the above.

“Talk of a US interest rate rise…”

How many months, no, years now has the Federal Reserve been talking about hiking the federal funds rate?

“But Chris, the economy is in recovery mode…”

If the U.S. economy was truly in a recovery, rates wouldn’t still be close to zero.

The Fed knows if they start raising interest rates at this point in the game, the “recovery” is toast and we’re heading back into recession.

So what’s Janet Yellen and the Federal Reserve going to do? If the pressure builds on them to raise rates but there’s no excuses around for not doing so, I suspect we’re looking at a miniscule hike in the near future. Maybe even a few (but not too close together).

At which point, the Fed will proclaim:

We told you we were going to raise rates.

Yeah, right.

Earlier today, I watched a discussion on YouTube.com between two well-known “crash prophets” concerning the state of the U.S. economy/larger financial system and where gold fits into the equation. From the SchiffGold.com website on June 2:

For the first time ever, renowned investment gurus Mike Maloney and Peter Schiff sat down to a frank discussion about the future of the American economy. Together, they analyzed detailed charts and data to show why an even bigger crash than the 2008 crisis is in the making…

Schiff (an economist, financial broker/dealer, and author who heads up Euro Pacific Capital) and Maloney (a precious metals expert, advisor, and author who runs GoldSilver.com) predicted the U.S. economic crisis that reared its ugly head in the fall of 2008, and both are now warning of a more dire situation dead-ahead.

Their observations and arguments make sense to me, as opposed to the position staked out by the economic Pollyannas.

If you have the time, check out the following YouTube playlist of their exchange released last month:

• “Economic Crisis 2015- Peter Schiff & Mike Maloney (Part 1)” (run time 41:40)
• “Is Gold Overvalued? Peter Schiff & Mike Maloney (Part 2)” (run time 4:43)
• “Your Government Will Break Your Legs- Peter Schiff & Mike Maloney” (Part 3) (run time 7:18)
• “Inflation Or Deflation? Peter Schiff & Mike Maloney (Part 4)” (run time 3:43)
• “Gold Vs Debt Default- Peter Schiff & Mike Maloney (Part 5)” (run time 6:27)


YouTube Video Playlist

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Jeremy Grantham Shares Top 10 Issues On His Mind Today

The last time I blogged about Jeremy Grantham, the British-born investment strategist and founder/former chairman of Grantham, Mayo, Van Otterloo & Co. (oversees $118 billion in client assets as of March 31), he warned (once again) in an investment letter released around the start of May:

It seems logical to assume that absent a major international economic accident, the current Fed is bound and determined to continue stimulating asset prices until we once again have a fully-fledged bubble. And we are not there yet…

To remind you, we at GMO still believe that bubble territory for the S&P 500 is about 2250…

(Editor’s note: The S&P 500 ended the day at 2,109)

Grantham, whose individual clients have included current Secretary of State John Kerry and former Vice President Dick Cheney, should be coming out with a new advisory on the GMO website in a couple of weeks. Meanwhile, for readers who can’t get enough of Mr. Grantham’s insights, this afternoon I came across a piece on the Morningstar website entitled “10 obsessions of an investment guru.” Jason Stipp wrote right before the weekend:

Jeremy Grantham is the chief investment strategist at Grantham Mayo van Otterloo (GMO). Before launching into his formal keynote presentation at the 2015 Morningstar Investment Conference at Chicago, Grantham took a moment to tick off the top 10 issues on his mind today.”In my current role, I’m totally free to obsess about important issues that interest me,” he said. And here they are, fleshed out a bit with some quotes from Grantham’s commentaries…

Those who pay regular attention to Grantham will recognize some of those issues, including resource “limitations” and a Federal Reserve that’s forever blowing asset bubbles. However, in the Morningstar piece he also talks about income inequality, corporate (ir)responsibility, and, did I mention investment bubbles? From the article:

10) Investment bubbles. Grantham said we’re not there yet, but we’re well on our way as valuation levels approach the 2-sigma event that creates the sufficient but not necessary environment for bubbles. But every bubble needs a trigger — such as deal mania or mass speculation by individual investors. Those factors are not yet present, Grantham said. “I’m going to be incredibly prudent starting closer to the election,” Grantham added. “I recommend the same to you.”

This is a good read, which you can view in its entirety on the Morningstar website here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Peter Schiff: Gold Still On Course For $5,000 An Ounce Or More

In a recent MarketWatch phone interview, Peter Schiff, President and CEO of Euro Pacific Capital, repeated his call for the price of gold to reach and possibly surpass $5,000. Myra Saefong reported on the financial news website Friday morning:

“You need to be long gold and there is going to be a huge payday,” Schiff said. “Ultimately,” gold will see $5,000 an ounce and it “could go higher.”

Though gold has been range bound since about mid-2013, Schiff said the turning point for the metal would be a close above the high it saw in January. Gold futures peaked at around $1,300.70 that month, according to FactSet.

“That’ll change the current dynamic,” Schiff argues…

(Editor’s note: Bold added for emphasis)

I’ve blogged about that $5,000 number from Schiff before. Back on October 25, 2012, Schiff told viewers of CNBC’s Futures Now TV show:

$1,700? One day we’re going to look back at $1,700 with nostalgia. People are going to be shocked at how inexpensive gold was when it could be snapped up for such a bargain price. It’s not going to take too long. Just in a few years. I mean, we’re talking gold $5,000. That’s not the ceiling. That might end up being the low end of the range that we’re going to be into. Remember, Ben Bernanke has promised to print over a trillion dollars in 2013. I think he’s going to print more than that. It’s not going to revive the economy. It’s not going to create jobs. But it will help destroy the dollar. And that is going to send gold higher…

I think you’re going to see a big move in the next couple of years.

It’s not just physical gold he’s bullish on. Saefong added in that MarketWatch piece:

“I think the upside in gold stocks is phenomenal from here,” Schiff said.

(Editor’s note: Bold added for emphasis)

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

Source:

Saefong, Myra. “Peter Schiff, more bullish than ever, sees gold headed to $5,000 an oz.” MarketWatch. 15 May 2015. (http://www.marketwatch.com/story/peter-schiff-more-bullish-than-ever-sees-gold-headed-to-5000-an-oz-2015-05-15?page=1). 16 May 2015.

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Jeremy Grantham: Fed Hell-Bent On Stimulating Asset Prices Until ‘Fully-Fledged Bubble’ Forms

Jeremy Grantham, the British-born investment strategist and founder/former chairman of Grantham, Mayo, Van Otterloo & Co. (oversees $118 billion in client assets as of March 31, 2015), has just released his latest investment letter on the GMO website. Writing about the first quarter of 2015, Grantham, whose individual clients have included current Secretary of State John Kerry and former Vice President Dick Cheney, focused on U.S. economic growth and the bubble-blowing Federal Reserve. Regarding growth, Grantham wrote:

I am still just about certain about three things: first, our secular growth rate in the U.S. is indeed about 1.5% (at least as stated in traditional GDP accounting, wherein expensive barrels of oil increase GDP; perhaps closer to 1% in real life); second, economists move their estimates slowly and carefully in order to stay near the pack and minimize career risk (despite the recent IMF heroics); and third, that we do not like to give or receive bad news and, when in doubt, we tend to be optimistic…

On the Federal Reserve and asset bubbles, Grantham noted:

In the Greenspan/ Bernanke/Yellen Era, the Fed historically did not stop its asset price pushing until fully-fledged bubbles had occurred, as they did in U.S. growth stocks in 2000 and in U.S. housing in 2006. Both of these were in fact stunning three-sigma events, by far the biggest equity bubble and housing bubble in U.S. history. Yellen, like both of her predecessors, has bragged about the Fed’s role in pushing up asset prices in order to get a wealth effect. Thus far, she seems to also share their view on feeling no responsibility to interfere with any asset bubble that may form. For me, recognizing the power of the Fed to move assets (although desperately limited power to boost the economy), it seems logical to assume that absent a major international economic accident, the current Fed is bound and determined to continue stimulating asset prices until we once again have a fully-fledged bubble. And we are not there yet

To remind you, we at GMO still believe that bubble territory for the S&P 500 is about 2250…

(Editor’s note: Bold added for emphasis)

The S&P 500 finished up today at 2,114.

Back on August 4, 2014, I blogged about Grantham’s second quarter 2014 letter, in which he predicted:

I am still a believer that the Fed will engineer a fully-fledged bubble (S&P 500 over 2250) before a very serious decline…

Grantham’s other forecasts in his latest letter on the GMO website included:

• U.S. Economic Cycle- “Still seems only middle-aged, despite its measured long duration”

• U.S. Housing Market- “In terms of houses built is still way below the old average, and house prices are only around long-term fair value; there is room for improvement in both in the next two years.”

• U.S. Stock Market Correction- “We could easily, of course, have a normal, modest bear market, down 10-20%, given all of the global troubles we have. If we do, then the odds of this super-cycle bull market lasting until the election would go from pretty good to even better.”

As I’ve highlighted on the “Crash Prophets” page, Jeremy Grantham has an incredible knack for identifying changes in the direction of the stock market. He also nailed the economic crisis late last decade. However, I don’t know how what kind of track record he has with correctly-calling the economic and housing cycles. I guess I’ll just have to see how these two pan out.

An update to the “7-Year Asset Class Real Return Forecasts” chart was also provided in “Are We the Stranded Asset?”, which can be viewed in its entirety on the GMO website here (.pdf format; starts p. 7).

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Marc Faber Recommends Equities, Real Estate, Precious Metals To Counter Stock Market Plummet

Swiss-born investment advisor/money manager Marc Faber was on the CNBC TV show Trading Nation yesterday. Speaking by phone, the publisher of the monthly investment newsletter The Gloom Boom & Doom Report reminded viewers of the stock market correction he’s been predicting for some time now. Dr. Faber said:

I think that the market is in a position where’s it’s not just going to be a 10 percent correction- maybe first goes up a bit further. But when it comes it will be 30 percent or 40 percent minimum.

Famous for advising clients to get out of the U.S. stock market one week before the October 1987 crash and for predicting the 2008 global financial crisis, Faber added:

I’m not short the market yet.

Nevertheless, it sounds like the “crash prophet” is prepared. “Dr. Doom” shared with viewers:

I don’t want to be 100 percent in cash for the simple reason that I don’t trust governments, and I don’t trust banks. So I want to own some equities, I want to own some properties, and I want to own some precious metals. And when we talk about stocks, the only group that stands out as great value around the world are gold mining shares.

Faber went on to talk about gold stocks more in-depth.


“Marc Faber talks protection strategies”
CNBC Video

Later on in the show, Dr. Faber added:

If I look at the ignorance of central bankers, and their recklessness of printing money from the U.S. to the ECB to Japan to the Bank of England, I want to own some precious metals.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Peter Schiff: U.S. Headed For ‘Major Economic Crisis’ Centered On Dollar

Euro Pacific Capital CEO/Chief Global Strategist Peter Schiff appeared on CNBC World Monday. Schiff, who correctly-called the housing bubble/crash and financial crisis late last decade, warned viewers:

What people have to understand, is because of the Fed and their prior policy mistakes of keeping interest rates at zero, of all this quantitative easing, they have screwed up this economy so badly, that if the Fed were to raise interest rates at any point, they would precipitate a worse financial crisis than the one they caused in 2008. And so we’re not going to get a rate hike, no matter what they say. We’re going to get QE 4, and the next crisis is going to be a dollar crisis…

I think without another dose of QE the bubble is going to pop and we’ll be back in recession. And so to prevent that from happening, and to postpone the day of reckoning, we will get QE 4…

And if you look at the enormity of the debt on the federal balance sheet, on corporate balance sheets, look at real estate prices, the banking sector. You know, all those banks that we’re too big to fail in 2008 are much bigger now than they ever were and they’re very susceptible to even a slight increase in interest rates, which is why the Fed won’t raise them. But you’re right- it’s not going to go on for another six years. We’re going to have a major economic crisis center around the U.S. dollar long before that six-year time period can expire.


“FOMC Rate Hike Hints are a Bluff”
YouTube Video

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Polls Show Americans More Optimistic On Economy

Despite the significant financial challenges this country faces, a number of Americans seem to be more optimistic about the economy going forward. Jeffry Bartash reported on the MarketWatch website yesterday:

Even though U.S. growth slowed sharply in the first quarter, Americans are more optimistic about the economy now than at any time since President Obama took over the White House in January 2009.

A new CNN poll shows that 52% of Americans view the economy as “very” or “somewhat” good vs. 48% who call it “poor” or “somewhat poor.”

It’s only the second time a majority have expressed a positive view during the Obama presidency — the first time was in December — and it is the highest reading in almost eight years. The last time Americans were as optimistic was in September 2007

(Editor’s note: Bold added for emphasis)

In addition to that CNN poll, a recent Bloomberg Politics poll suggests the American public is more positive about the economy and how Barack Obama and the Democrats are handling it. Margaret Talev wrote on the Bloomberg website last week:

Hillary Clinton’s presidential hopes may be buoyed by a more optimistic feeling about President Barack Obama and the economy seen in a new Bloomberg Politics poll.

Americans are becoming more optimistic about the country’s economic prospects by several different measures. President Barack Obama’s handling of the economy is being seen more positively than negatively for the first time in more than five years, 49 percent to 46 percent—his best number in this poll since September 2009

Thirty-four percent said the national economy will become stronger over the next year, while just 21 percent said it will get worse and 44 percent predicted the status quo. That’s up from last June, when 30 percent said things were getting better…

(Editor’s note: Bold added for emphasis)

Finally, Myles Udland noted in an April 17 piece on the Business Insider website:

Consumer confidence is soaring.

The preliminary reading on consumer confidence from the University of Michigan came in at 95.9, topping expectations for a reading of 94.0.

This is the second highest reading since 2007…

(Editor’s note: Bold added for emphasis)


National Recovery Administration, The Road Is Open Again (1933)
YouTube Video

I’m not sure where all this optimism is coming from. After all, the nation’s economic woes which reared its ugly head by the fall of 2008 have merely been papered over and kicked down the road a few years.

Meanwhile, the Fed depleted plenty of ammunition (see “About” page Fed charts) keeping the whole setup afloat.

As I’ve mentioned before, it’s probably not a bad idea to take advantage of this upsurge in confidence to try and improve one’s resilience to a financial crash I still see coming.

Each person’s circumstances are different. But I, for one, have been focusing on meeting those six “innate survival needs” from my “Project Prepper” series of posts- among other things like increasing income. To recap, those “needs” are:

• Security
• Water
• Food
• Shelter
• Sanitation and Health
• Energy

In order of priority- for me.

Hopefully, these can be taken care of before the “balloon goes up.”

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Bartash, Jeffry. “American optimism about economy highest since Obama became president.” MarketWatch. 21 Apr. 2015. (http://www.marketwatch.com/story/american-optimism-about-economy-highest-since-obama-became-president-2015-04-21). 22 Apr. 2015.

Talev, Margaret. “Bloomberg Politics National Poll Finds Improving Economic Mood.” Bloomberg.com. 16 Apr. 2015. (http://www.bloomberg.com/politics/articles/2015-04-16/bloomberg-politics-national-poll-finds-improving-economic-mood). 22 Apr. 2015.

Udland, Myles. “Consumer confidence soars to second-highest level since 2007.” Business Insider. 17 Apr. 2015. (http://www.businessinsider.com/university-of-michigan-consumer-confidence-2015-4). 22 Apr. 2015.

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Marc Faber Doubts Fed Rate Hike In 2015, Buys Crude Oil Stocks

Swiss-born investment advisor/money manager Marc Faber was recently interviewed by Latha Venkatesh and Sonia Shenoy at CNBC-TV18 (India). The publisher of the monthly investment newsletter The Gloom Boom & Doom Report talked about a number of financial/investing topics- including a potential rate hike soon by the Federal Reserve. From a transcript of the discussion published on the Moneycontrol.com website on April 13:

Sonia: So, you are not expecting a rate hike from the US Fed this year?

A: What I said is in my view the Fed will not increase rates this year unless there is really a very sharp pick up in the economy or there is a colossal pot-hole developing in stocks. But otherwise I doubt it because the dollar has been strong. Okay, it may weaken somewhat, but I do not think it will collapse against the euro and against the yen and the British pound and so forth. So, the dollar is relatively strong. The economy in the US, the latest say, ten indicators that came out were all on the weak side. And under these conditions I doubt the Fed will increase rates. But that is an academic debate. What is important is I think the Feds and other Western Central Bankers will keep interest rates at a very low level for a very long time and will try to keep interest rates in real terms negative. In other words below the rates of cost of living increases.

(Editor’s note: Bold added for emphasis)

Dr. Faber shares the belief of fellow “crash prophet” Peter Schiff concerning an increase in the federal funds rate in the near future. However, Schiff has added that if the U.S. central bank does raise interest rates anytime soon, it will be miniscule.

Faber, who correctly forecast the rise of commodities, emerging markets, and China last decade, shares something else with a different “prophet.” From the transcript:

Latha: Yes, I note your exasperation. Therefore let me come to another asset class: commodities. Do you think they have bottomed or is it that there would be a long trough for this asset class?

A: We have to distinguish because the price of oil has very little to do with the price of orange juice or coffee. So each commodity has its own price dynamics driven by global production and global demand. Now industrial commodities have performed miserably along with emerging markets over the last couple of years because the demand was slowing down especially from China. So, you have prices of iron ore and steel and copper and oil that have collapsed. I happen to think that at this level a lot of commodities are reasonably priced, does not mean they will go up right away. But they come now into a buying rate and I have been buying some oil stocks recently.

(Editor’s note: Bold added for emphasis)

Last Sunday, I noted Yale economics professor Robert Shiller, who spotted the U.S. housing bubble last decade and the dot-com bubble a few years earlier, had purchased a crude oil ETF.

You can read the transcript of the entire exchange between Dr. Faber and CNBC-TV18 on Moneycontrol.com here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Peter Schiff: Coming QE 4 ‘The Lethal Round,’ ‘The Decline Of The Dollar Is Only Just Getting Started’

“Total nonfarm payroll employment increased by 126,000 in March, and the unemployment rate was unchanged at 5.5 percent, the U.S. Bureau of Labor Statistics reported today…”

-U.S. Department of Labor, Bureau of Labor Statistics, “Economic News Release,” April 3, 2015

Euro Pacific Capital CEO/Chief Global Strategist Peter Schiff is out with his latest entry on The Schiff Report YouTube video blog. On April 3, Schiff savaged the latest U.S. jobs report and told viewers:

I think that this is not a one-off fluke, and that all of a sudden we’re going to have another strong jobs report for April and May, and that all the other bad economic data is going to magically improve with the improvement in the weather…

If you’re expecting a big rebound in the second and third quarter, it’s going to have to come from the consumer spending more money he doesn’t have. So I don’t see where all this fantasy is coming from other than just sheer wishful thinking. But the Fed is going to at some point have to acknowledge that the U.S. economy is not as strong as it thought. And I can already hear the calls and the justification for more stimulus, for QE 4, whether they call it that or not, because everybody is going to agree “The problem is, that we just didn’t do enough stimulus”…

We’re going to do another round, and this is going to be the lethal round. This is going to be the overdose on QE. Because the crisis that’s coming is going to be a dollar crisis…

The decline of the dollar is only just getting started. Whether it’s going to continue next week, or it’s going to have to wait a little longer for people to figure this out. But you have this huge speculative bid that’s been in the dollar for months based on this false notion of this legitimate U.S. recovery and a Fed that’s going to be raising interest rates. We have neither. We have an illegitimate recovery. We have a bubble masquerading as a recovery. The air is already seeping out. And the Fed hasn’t even pricked it by raising rates, which is why they don’t want to raise rates, because they don’t want to accelerate the process. In fact, they’re going to do whatever they can to delay it by blowing air back into the bubble with QE 4.


“Job Growth Fades as Excuses Wear Thin”
YouTube Video

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Peter Schiff: ‘We Are Headed For A Huge Day Of Reckoning’

Disturbing words from Euro Pacific Capital’s Peter Schiff in his latest entry on the The Schiff Report video blog on YouTube.com. The man who correctly predicted the U.S. housing bust and economic crisis at the end of the last decade warned March 18:

People think we have a legitimate recovery. We don’t. If we did, the Fed would have already raised interest rates years ago. In fact, Janet Yellen said, that even at this mythical point in the future when the Fed may in fact raise rates, she said that she’s still going to keep them a lot lower than they should be. Why? I mean, why do we have to keep interest rates artificially low? If the economy is really recovering, why does it still need to be stimulated? Six years into a recovery. Because it’s all artificial. You can’t take it away. There is now so much debt, we’re so much more levered up than we’ve ever been, that we need these drugs more than ever. And I think just diminishing the dose is going to bring us into recession. See, as weak as the economy is, we’re teetering on the brink of recession. If the Fed raised rates, they would push us over the edge. But I think just the mere absence of QE 3 is enough to bring us into recession because we need those drugs. And I think the air is already coming out of the bubble- that’s why it’s deflating. That’s why the U.S. economy is decelerating so rapidly. That’s why these numbers are coming out so bad. And it’s only a matter of time before the jobs numbers catch up with everything else…

We are headed for a huge day of reckoning. The fact that that day of reckoning has been delayed for so many years, because so many people still don’t understand the predicament that we’re in, because we’ve been able to borrow so much more money and spend it and speculate with it over these years- that hasn’t stopped it from coming. That just means that there’s that much more to reckon with. And I think it’s that much more important for people who understand this, who have been patiently waiting. While other people have been chasing bubbles and buying dollars, our strategy is to hold on to real assets to foreign assets, foreign stocks, precious metals. The fact that we’ve had to wait so many extra years for the payday, in my mind, it means that the payday is going to be that much bigger because we had to wait so much longer to receive it. Because all of the economic imbalances, all of the problems that caused me to adopt the investment strategy that I did, are now worse than ever. None of the problems have been solved by the Fed- they’ve been exacerbated. And they are going to blow up. There’s a limit to how long the Fed can restrain these market forces. They’re going to try. As long as they can. But you can’t fool all the people all the time.


“Losing ‘Patience’ Does not Mean the Fed has Lost Patience”
YouTube Video

“Teetering on the brink of recession.”

“Headed for a huge day of reckoning”

Remember, Schiff isn’t alone in his dour assessment of the U.S. economy and larger financial system. And unlike most of the “experts” you see in the mainstream media these days, he got those calls on the housing market and financial crisis correct while they didn’t even see it coming.

“It’s only a matter of time before the jobs numbers catch up with everything else”

As I’ve said before, it might be wise to take advantage of a labor market that’s not as lean as it was a few years ago to bolster one’s financial position.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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The ‘Fearmongers’ Will Get The Last Laugh

I haven’t had much to blog about recently when it comes to the “crash prophets”– Marc Faber, Jeremy Grantham, Jim Rogers, and Peter Schiff.

I have noticed one thing though. These individuals appear to be coming under a growing barrage of attacks in the mainstream media and elsewhere lately. Following them as I have for a number of years (anyone remember when I used to be the editor of Investorazzi.com, “Tracking The World’s Greatest Investors,” from 2008 to 2010?), the harsh atmosphere feels a lot like it did in the middle of the last decade, when these four were calling for the bottom to fall out of the housing and stock markets, the economy, and larger financial system- and were subsequently ridiculed for it.

We all know what happened next. And the initial pain could have been a hell of a lot worse if Washington and the Fed hadn’t papered up that debacle and kicked it down the road a few years into the future.

As for their antagonists back then? Well, a particular line from “Grace” the school secretary in the 1986 film Ferris Bueller’s Day Off comes to mind when I think of their fate:

Well, makes you look like an ass is what he does, Ed.

These days, it’s an all-out assault again on Faber, Grantham, Rogers, and Schiff by the financial Pollyannas, emboldened by some positive economic/investment data in an overall lame recovery, historically-speaking. Case in point, a February 26 Yahoo! Finance article in which Jeff Macke wrote:

The Dow Jones Industrial Average made a fresh high, joining its cousin the S&P 500 and now we await the Nasdaq to push above 5,048. Instead of celebrating prosperity here’s what the media is likely to do which is the wrong attitude.

Trot out the usual cast of fearmongers to tell everyone why a biblical crisis is in our immediate future. This week it was Nobel Prize winning Yale Professor Robert Shiller…

I’m not picking on him. Quite the opposite. As fear mongers go Shiller is the best of them. The worst is probably Marc Faber who emerges from a cave in Switzerland periodically to call for “an 1987 level crash”. Faber started making that explicit prediction in spring of 2012 when he said the chances of a global recession that year or 2013 were 100%. He was wrong of course but that was a better call than his 2009 prediction that the U.S. would suffer hyperinflation levels only seen in Zimbabwe. For the record Zimbabwe experienced 231 million percent inflation that year. If Faber isn’t wrong on that call he is very, very, very early…

A couple of things came to mind reading Macke’s piece:

When did high stock prices become interchangeable for “prosperity”? I’d like to see the evidence demonstrating real economic prosperity and a booming stock market go hand-in-hand each and every time. Last I heard, the White House and the Fed were still on their knees praying this happens.
• Robert Shiller a “fearmonger”? If I’m not mistaken, didn’t Dr. Shiller spot both the dot-com bubble and the housing bubble? Fearmonger? Try a damned good economist. And a public servant for warning anyone who would listen about these financial debacles.
• “The worst is probably Marc Faber…” The same Dr. Faber that became well-known for advising clients to get out of the U.S. stock market one week before the October 1987 crash, for predicting the 2008 global financial crisis, for calling the March 2009 U.S. stock market bottom and subsequent rally, in addition to correctly-forecasting the rise of commodities, emerging markets, and China in the 2000s? Yeah, he’s the worst.

“But that was a better call than his 2009 prediction that the U.S. would suffer hyperinflation levels only seen in Zimbabwe. For the record Zimbabwe experienced 231 million percent inflation that year.” Did Dr. Faber predict Zimbabwe-like hyperinflation would strike the U.S. between January 1, 2009, and December 31, 2009 (which seems to be insinuated by the inclusion of that second sentence), or did Faber make this forecast during 2009 that it would eventually occur here? I see the haters have latched on to the former. In which case, produce the evidence he said hyperinflation would strike the U.S. in that particular year.

You see, here are the problems with such attacks on Marc Faber, Jeremy Grantham, Jim Rogers, Peter Schiff, and others.

• First, the “crash prophets” have a pretty solid track record over time when it comes to making correct market/investment calls. Over the years I’ve read material by journalists confirming this. Plus, I’ve catalogued it on the “Crash Prophets” page. That being said, no one’s perfect, and bad calls happen once in a while.
• Second, unless specifically stated, since I started observing Marc Faber, Jeremy Grantham, Jim Rogers, and Peter Schiff a decade ago, I get the impression they take a long-term approach to many of their forecasts. Yet, the attacks often consist of trying to call the outcome of the ball game while it’s still in the early innings, so to speak. I can’t even begin to count how many times I’ve heard/read attempts to discredit these guys because something they predicted still hadn’t materialized. Perhaps it’s because the forecasted event is still unfolding?
• Third, investigating where and from whom the attacks are coming from often reveals the real motives behind the trash-talk. And many times, “where you stand depends on where you sit.” In other words, lots of obvious self-interest out there.

I expect attacks on Marc Faber, Jeremy Grantham, Jim Rogers, Peter Schiff, and other “crash prophets” to intensify as the nation’s “financial reckoning day” grows closer. It’s an evitable consequence of not donning rose-colored goggles and playing ball with the Pollyannas.

But like in the period of time after the housing crash, the “Panic of ’08,” and subsequent “Great Recession,” I’m pretty sure these esteemed investors/money managers will be having the last laugh.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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